Q4 2024 Gevo Inc Earnings Call
[inaudible]
Speaker Change: Good Day, and thank you for standing by. Welcome to the Gevo Incorporated, Q4 2024 Earnings Conference Call. At this time, all participants are listening only mode.
Speaker Change: After the speaker's presentation, there'll be a question and answer session. To ask the question during the session, please press star 1-1 on your telephone. You will then hear an automated message advising your hand is raised.
Speaker Change: Good afternoon everyone, and thank you for joining us on today's call to discuss to you a fourth quarter and full year 24 results, as well as the business update and new corporate investor presentation that we've published on March 7th.
Eric Frey: I'm Eric Frey, Vice President of Corporate Development, Gevo. With me today we have Patrick Gruber, our Chief Executive Officer, Lynn Small, our Chief Financial Officer, Chris Ryan, our President and Chief Operating Officer, and Paul Bloom, our Chief Business Officer.
Eric Frey: Earlier today, we issued a press release that outlines our fourth quarter at full year 2024 results. In addition, on March 7th, we released a business update that outlines the topics we plan to discuss.
Eric Frey: A copy of these press releases are available on our website at www.gevo.com You can also find a copy of our industrial presentation on our website.
Eric Frey: Please be advised that our remarks today, including answers to your questions, contain forward looking statements within the meeting of the Private Security's Litigation Reform Act.
Eric Frey: These forward-looking statements are subject to risks and uncertainties that could cause actual results to be material and different from those currently anticipated.
Eric Frey: Those statements include projections about the timing, development, engineering, financing and construction of our sustainable aviation fuel projects, our recently executed agreements, our Renewable Natural Gas Project, and other activities described in our filings with the Securities and Exchange Commission, which are incorporated by reference.
Eric Frey: We display many obligations to update these four of the proceedings. In addition, we may provide certain non-dap financial information on this fall. The relative definitions and gap reconciliation may be found in our earnings release, which can be found on our website at www.gevo.com in the Investor Relations section.
Eric Frey: Asia, and we are providing a simultaneous webcast to the public a replay of this call and other past events will be available via the company's Investor Relations page at Www Dot two dot com.
Patrick: I'd like to turn the call over to the CEO of Patrick.
Eric Frey: Patrick Gruber Pat.
Speaker Change: Thanks, Eric Good afternoon, everyone and thanks for joining us on our call. We have filed our Form 10-K today and we ask that you refer to it for more detailed information after this call.
Speaker Change: We're here to talk about our results from the fourth quarter and for the full year of 2024 and to discuss the business update that we released on March seven there's lots to talk about we want to leave some time for questions. So let's get at it.
Speaker Change: 224, with a big year for Jabil is set us on a path we believe for substantial growth. This year targeting positive adjusted EBITDA. We explained this in our business update and our press release earlier today and Youll also see these ideas laid out visually.
Speaker Change: Investor presentation on our website. Please go take a walk it's pretty darn interesting.
Speaker Change: First Opdivo, North Dakota acquisition, and Richardson, North Dakota is a game changer for us and it's already contributing.
Speaker Change: <unk> is one of the two low carbon ethanol plants with operational carbon capture and sequestration or Ccs.
Speaker Change: That are operating today it captures over 160000 tons of Biogen, a carbon dioxide a year and has one of the lowest carbon intensity scores in the industry.
Speaker Change: The Ci score.
Speaker Change: Hugo North Dakota, as an estimated 21 grams of Cotwo equivalents per Mega Joule over the argon greed 45 Z model, that's not including any benefits from regenerative agriculture practices. That's a big deal because it means we can start monetizing carbon abatement and a 45 day tax credit immediately.
Speaker Change: We're already working on this asset alone has the potential to generate $30 million to $60 million of adjusted EBITDA annually.
Speaker Change: Depending upon the price of ethanol the paint upon.
Speaker Change: The full bags for the 40, <unk> and all the rest and returns.
Speaker Change: It's very very interesting opportunity for us.
Speaker Change: Our R&D, we saw a strong production growth in 2024.
Speaker Change: We're on track to produce over 40 400000 million Btu's in 2025, and with a bio gas 45, the tax credit that business is shaping up to be a solid contributor as well, we expect adjusted EBITDA in the 9% to $18 million range in the year 2025.
Speaker Change: From this project due to operational improvement securing their provisional.
Speaker Change: California Air Resources Board or carb net carbon intensity score and the monetization of biogas Fortifies the tax credits and we're excited that <unk> published our comment for a low carbon fuel standard pathway application and it has a weighted ci score of around minus $3 39.
Speaker Change: So that's right in line with what our expectations were feeling pretty good about that next year, we should get that any day now.
Speaker Change: Okay.
Speaker Change: Our South Dakota project, which we're now calling albacore alcohol to jet 60, or <unk> 60 that means we're talking about alcohol to jet 60 million gallons is progressing last year, we received a conditional commitment for a loan guarantee with disbursements totaling 1.46 billion, excluding the capitalized interest during construction from the US department of energy.
Speaker Change: <unk> D E loan program office for our Atg 60 project with capitalized interest during construction.
Speaker Change: The theory loan facility has a borrowing capacity of 163 billion.
Speaker Change: We're pleased with our continued collaboration with the <unk> office as we move forward to achieve financial close for the project now.
Speaker Change: The questions about what happens is were there any changes during the transition for the president and his his new administration, well I got to say.
Speaker Change: We haven't seen much of a slowdown I see there I know I see all these press reports, but theyre not correct data, we are seeing a slowdown there plugging away.
Speaker Change: We are plugging away to do on our end as well now one good pizza news that I can point to that isn't there I think it's worthwhile set at cera week in Houston, a couple of weeks ago Secretary write that in his presentation that the TV non office the LPL would be ARINC the commitments made by them and that's good because I think that was his first wide public statement of that.
Speaker Change: We are watching with summit pipeline issue with interest I would like to see what does the extra guarding the pipeline before we finalize the economics for our project.
Speaker Change: While we do have our own sequestration site with our North Dakota at our Richardson plant we.
Speaker Change: We can capture the Ccs bring it there and put it down hole and capture value from it.
Speaker Change: We could do that if we went this route the project returns for South Dakota plant would still be attractive. However.
Speaker Change: Doing that transfer.
Speaker Change: Without a pipeline Hertz back couple of.
Speaker Change: IRR points.
Speaker Change: Now some it tells us that they still believe strongly that the pipeline is going to get done and I do know this that Ccs and <unk> are part of the energy infrastructure CRT you absolutely needed in North Dakota for enhanced oil recovery in the Bakken getting more out of the Bakken strikes me as a priority now take years to build that infrastructure. So we will see what happens here.
Speaker Change: Is it going to get incorporated in part of the overall energy infrastructure I'm interested to see how this all unfold.
Speaker Change: We also need to pin down some tweaks to off take agreements with airlines to make them more compatible with project financing requirements put up by or put on us by the Dnb loan office, we want underpinned carbon value outside of the regulatory value, we're making progress on this front, we will announce details after it's done.
Speaker Change: Now recall that the jet fuel.
Speaker Change: That will produce is valued as a commodity like parcel Jed its just jet fuel has to be that way for it to be a drop in now.
Speaker Change: Now Theres certainly is a regulatory value like returns or the state level and we expect 45, okay. All good that adds value. In addition to that it's this voluntary carbon value that is worthwhile, we want to make sure that were getting paid properly for the carbon value. So we're reworking some of the contracts some of the deals some of the approaches to make sure that we aren't giving money away.
Speaker Change: We're working on it.
Speaker Change: In addition to <unk> paid in capital as we develop this project, we're going to need to raise roughly about $800 million of equity.
Speaker Change: And to a special purpose vehicle, whose mission is to build that plant and operate that plant. This SPV would be a project level company.
Speaker Change: Yeah.
Speaker Change: With that and it would not be dilutive to G. Though it's not raising money at a <unk> level, it's at a.
Speaker Change: A special purpose vehicle level project level classic project financing for the rebound.
Speaker Change: We are targeting financial close for our project level capital raise.
Speaker Change: By 2025 year end.
Speaker Change: That includes the view, we loan our project level equity capital raising and then the start of construction.
Speaker Change: The facility in order for us to get to financial close we expect that we will need to spend maybe $44 million of development Marty inclusive of the whole year of 2025 actually to get all the way to <unk>.
Speaker Change: EBIT could stretch further.
Speaker Change: Once we get the financial close we'll be off to the races building. This plant South Dakota, it'd be heavily modularized and it wouldn't require any further capital from <unk>, that's a pretty big deal to bake into the memory.
Speaker Change: We're also doing the engineering work for Atg plant at our North Dakota site. This one's on the fast track because we can leverage the work that was done for our Atg <unk> North Dakota is extremely friendly business state we have great ethanol plant there we've already got Ccs and there seems to be a lot of interest in this plant.
Speaker Change: So I'm going to try to move along very fast leveraging what we have already done so.
Speaker Change: So more more come on this as we progress. We also have two other plants in concept development based on what we're doing in North Dakota. So what's interesting is I think we're getting a small modular station model pinned down here's how we can replicate things copy paste is how Paul blum likes to refer to it sometimes copy added pace, but we're getting interest from around the world on this.
Speaker Change: No.
Speaker Change: Let's see what comes through in the future, we won't lose focus on getting.
Speaker Change: The plant.
Speaker Change: Kenny Ourself the EBITDA.
Speaker Change: Positive, but then also getting the CTG plant in North Dakota to getting the one South Dakota deployed.
Speaker Change: Now.
Speaker Change: Stepping back for a second the reason that we have interest in our plant in technologies that we can produce this drop in jet fuel and that on a production cost basis can be competitive with.
Speaker Change: Fossil based jet fuel that is a big deal in terms of concept.
Speaker Change: It's not that it's one or the other or reducing the carbon footprint you can actually make.
Speaker Change: Jet fuel from renewable resources like cornstarch that are competitive with on our production cost basis with fossil based jet fuel as a big concept. It's the capital that is the issue of our plant was paid off maybe just compete head to head no subsidy or tax credits required, but we do have capital to payback.
Speaker Change: Now to payback the capital and generate robust returns the tax credits for SaaS.
Speaker Change: They are certainly useful we.
Speaker Change: We are bringing this new attribute to market. So we're spending a lot of work.
Speaker Change: Effort to make sure that were hybrid capture value from carbon abatement.
Speaker Change: That's separate than tax credit and rents there are people.
Speaker Change: There is a market that people will pay for the carbon to be reduced.
Speaker Change: A project like our Atg 60 could it be 500000 to 600000 tons of carbon annually I wonder how many dollars per ton can we get for that and I wonder if there'll be different fractions that we might be able to market to add value.
Speaker Change: Bottom line is it's not that the strategy isn't about carbon reduction at any cost, it's about making a cost competitive jet fuel and caf regard for the new attribute we bring which is the carbon abatement carbon reduction done cost effectively.
Speaker Change: So we are going to sort this out it takes work.
Speaker Change: And I would tell you that we add it all up you add up the tax credits you add up the Reds you added the voluntary market you add up the fact that it's.
Speaker Change: Drop in jet fuel it makes for exciting project.
Speaker Change: That's why we're getting such broad support across the board and I think it's that.
Speaker Change: I think that.
Speaker Change: There arent that many approaches that can do this we happen to have one of them ATCA is going to be part of the product mix in the future.
Speaker Change: We see now turning my attention to a little bit to 45 Z as common question, we get asked.
Speaker Change: I can tell you we see a lot of bipartisan support for 45 day extension 45 D is set up so that it is truly a pay for performance right now I'm only aware of two plants.
Speaker Change: In the country that could qualify for a 40 <unk> tax credit.
Speaker Change: As of today, both of our North Dakota widen as ours.
Speaker Change: So that's good and I think as Ccs becomes more widely available there might be some other plants.
Speaker Change: Et cetera that can be done, but it's not a government giveaway at all you've got to do something for it that's creative it helps set up infrastructure. When it comes to jet fuel jet fuel is now referred to by the New administration as synthetic aviation fuel resin sustainable aviation fuel I think that's actually I think that's it.
Speaker Change: Actually closer to the name of it was originally called synthetic heresy that actually is what it's called in the ASTM certification.
Speaker Change: So great. It's one of the other.
Speaker Change: They're on their list.
Speaker Change: And so I think 45 Z is relevant for that and it's exciting because 45 Z.
Speaker Change: SaaS.
Speaker Change: Allows.
A new market for ethanol, that's a big deal at four or you try to develop our economy.
Speaker Change: So when we do add atg plants about energy security real economic development impact of commodity prices and jobs all of that stuff together now.
Speaker Change: We did a study done by Charles River Associates looking at 860, <unk> South Dakota.
Speaker Change: We expect to create for us its 100 direct jobs 700 indirect jobs right in the region you have more than a thousand highly paid construction jobs during the build out period of three years it would be expected to generate when it's operating a $100 million plus per year.
Speaker Change: Regional economic development rate there in South Dakota for as long as the plant exists and operate that's a huge economic impact it lifts the prices of the commodities it's like.
Speaker Change: It makes it cost competitive.
Speaker Change: Record cost competitive fuels.
Speaker Change: And the <unk> 60 planet draw corn from roughly 2% or 30 farmers would help them. They would expect to see the price rise in their corner because were buying locally and we are a business system that we expect will be able to capture value from the agricultural practices will be able to differentiate it and this is what <unk> is all about tracking and tracing taking a fourth of the marketplace as the attributes that we can find.
Speaker Change: Those people who value at.
Speaker Change: And the other thing of Charles River's Associates did is that the.
Speaker Change: The estimated that for every $1 tax credit of 45, <unk> returned to the Treasury could we expect to be up to six box six Bucks six box for every dollar of tax credit $6 back to.
Speaker Change: To the treasury, so even if you're a big skeptic would say that all those things that they take into account and all those sorts of things even the hard things.
Speaker Change: Still going to get a couple three bucks back to treasury per dollar of tax credits.
Speaker Change: This matters this is where the economic developments all about using government money wisely.
Speaker Change: But you've got to pay for performance you guys deliver something jobs.
Speaker Change: Energy security.
Speaker Change: Cost competitive products.
Speaker Change: Address a new market.
Speaker Change: So it's all about add jobs that guy for borrowers economic development, delivering the drop ins compared with fossil based jet fuel and the debates carbon gas cost competitive and carbon abatement are possible at the same time.
Speaker Change: Im excited for the future iron what's possible now imagine cookie cutter versions of our ATCA plants. This is actually the approach that we're taking and so what we want to do it's why we're pursuing the monetization approach is roughly a 180 ethanol plants currently operating in the U S imagine the impact by converting a chunk at ease into ATCA plants. They get the jobs created think of the ethanol.
Speaker Change: Think about how the ethanol market is it current overcapacity, we could sop up that overcapacity turned into jet fuel at lyft ethanol prices and lift corn prices.
Speaker Change: It would be a good deal actually yes, I think everybody would benefit.
Speaker Change: And of course, all of this while we're adding to energy security producing more jet fuel and of course whenever we say Jack that we can also produce diesel fuel to these plants can do either one and these can be cost competitive with fossil based fuels.
And don't forget these business systems would produce about <unk> <unk>.
Speaker Change: Three tons of protein and feed products for the food chain for every ton of jet fuel produced so it is not.
Speaker Change: Food versus fuel or anything like that it's up it's about doing both wisely and economically and making the overall business system better the economy better.
Speaker Change: And there is also no more need.
Speaker Change: To drive more land for agriculture in fact, we're finding and the farmers doing great. They can increase productivity. There is a lot of room to grow im aware that they already have so all of this talk that we occasionally hear about oh, it's going to take so much more or less no. That's wrong, let's go get data.
Speaker Change: An exciting time.
Speaker Change: For us.
Speaker Change: I really really like President Trump's executive order call declaring a national emergency.
Speaker Change: The job catch that Biofuels are listed right there with oil that ethanol in aviation fuel are listed right there with refined products as priorities. That's very cool very very good for us I also like the executive order calls unleashing American energy. This one talked about clearing the roadblocks for infrastructure deployment. It also call for renewable political bias and assess.
Speaker Change: <unk> and models.
Speaker Change: That's huge because that's how that's been a problem in the past with its hard buyer groups do they say hey, Here's a really cool thing. We can do this the government will get a really cool thing we're going to make this new thing or then also under 50.
Speaker Change: And rules that make it impossible to take any action good let's get rid of that stuff a lot of those rules are putting their brand buyer groups otherwise raise these issues with no data.
Great, let's get rid of it look at the data and the facts I'm all I'm all about that.
Speaker Change: The thing that I'm interested in this.
Speaker Change: This new administration is interested in leveling the playing field at the EU level.
Speaker Change: Good.
Speaker Change: Penalizes agricultural products in United States.
Speaker Change: They do that they do it either modeling in their scoring of carpet and all the rest good that's better issue I want to see it get addressed.
Speaker Change: So all in all I'm very optimistic and want to see what these guys can deliver.
Speaker Change: They say it can be very very good for all of us.
Speaker Change: Now before I turn it over to Lynn I wanted to give you some context as to what we're doing with actions no doubt you saw a press release about that and wonder.
Speaker Change: It comes out of this we announced that we're broadening the relationship with accidents they've been a good partner, we started working with access to several years ago, because they have proven technology unit operations that can convert ethanol into jet fuel. There are several steps involved they did have in the petrochemical industry. So by working together, we can put the.
Whole process together.
Speaker Change: The thing about them is that these technologies. The unit operations have been operated prisons ethylene to make beauty than beauty is to make the thing Thats just real close to jet fuel they've been operating for decades on a commercial basis in the petrochemical industry. They didnt make it from <unk>.
Speaker Change: <unk>.
Speaker Change: We've got directly from a different source.
Speaker Change: So.
Speaker Change: Thats why we can clear the technical diligence for the day, we launched showing improving to their independent engineers.
Speaker Change: He's independent engineers, who are be paid to prove things.
Speaker Change: To say no we.
Speaker Change: We can prove to them that these technologies work.
Speaker Change: That's why we were able to achieve this the access is the only company with <unk>.
Speaker Change: Each of the critical unit operations commercialized, albeit with fossil fuels, except where they have a project in that does ethanol the aggravation of ethylene in Japan.
Speaker Change: Having technologies for unit operations is only one piece of the puzzle however, and that's where <unk> comes in we know how to put it altogether with renewable energy and how to integrate ethanol plant that dry bulk cost NCI down the overall plant designs we own.
Speaker Change: Those are our property our intellectual property, we have we have the patents on how to achieve a very low Ci footprint, we filed those patents.
Speaker Change: We also know how to track and trace carbon as well as a deep understanding of the developing market.
Speaker Change: The copy that needs the jet fuel is necessarily the ones who needs the carpet might be somebody else in the value chain. We also have roughly over 100 patents covering the whole business system of ethanol to jet from end to end. They are technology. We have technology, we have quite a lot of it. So it makes sense to partner to offer a more complete business offering to potential custom.
Speaker Change: Those who want to build plants and remember we see ourselves as a.
Speaker Change: Developing plants or even selling plans were.
Speaker Change: Probably down the road on this will be a developer and a licensure leveraging what we learned in our South Dakota project Libra.
Speaker Change: We believe that the market for alcohol to hydrocarbons will continue to increase funding fundamentally economically sound.
Speaker Change: We've also licensed our E tail technology to accident, so they've become a licensor from us taking a license from us.
Speaker Change: That's very significant the reason is this the access technology and by <unk> in the first generation processes, but once we are planning to use for our <unk> 60 plant and therefore, our North Dakota Atg plant. They wanted a Nobel prize for the critical step.
Speaker Change: Converting ethylene to mixed beauty. This is a long time ago. This is like 40 years ago. They wanted that staff was a great breakthrough that's why they are the only ones.
Speaker Change: They've led the way in that technology in the petrochemical industry.
Speaker Change: We see a lot of startups try to do this tech and theyre going to fail or they will fail or theyre going to fail.
Very very difficult step that's why we.
Speaker Change: Finally got access to work with us after trying for 10 years.
Speaker Change: Actavis has proven it out it works for us.
Speaker Change: No question about it.
Speaker Change: Now.
Speaker Change: I take great pride that that these people with the Nobel Prize there break ground I think that our <unk> technology is a breakthrough on is converting a ethylene ethanol ethylene ethylene into that jet system.
Speaker Change: And that is simplified steps it is expected to lower capex or opex by a ballpark of about 30%.
Speaker Change: Beating their technology.
Speaker Change: That makes me feel like maybe we're onto something here. So together, we're going to finish it out.
Speaker Change: Scale it up probably take about 18 more months, depending upon what we learn as we go or roadblocks.
Speaker Change: Roadblocks, we run into you got to go through scale up this kind of these kind of technologies.
Speaker Change: So.
Speaker Change: For all these reasons together technology businesses that make for a great partnership.
Lynn: Alright that Lynn it's over to you.
Lynn: Thanks, Pat let's go over some key numbers.
Lynn: We ended Q4 2024 with $259 million in cash cash equivalents and restricted cash.
Lynn: And bind the operating revenue and other net income was $8 9 million for the fourth quarter and $32 7 million for the full year.
Lynn: Our R&D subsidiary generated $15 $8 million in revenue during the year, we are working towards securing a final lcs's carbon intensity score from carb, which we expect in the first quarter of 2025.
Lynn: Pat.
Lynn: Any day now.
Lynn: That will unlock more value and better margins for the R&D project Compass.
Lynn: Company wide loss from operations was $19 6 million last quarter with a non-GAAP adjusted EBITDA loss of 11 3 million.
Lynn: Given that the acquisition of <unk>, North Dakota has closed and the ethanol 45 Z and biogas Fortifies. The tax credit is expected this year and other factors as Pat mentioned.
Lynn: We see a clear path to a positive run rate adjusted EBITDA in 2025, that's a major shift in our financial trajectory and the updated investor presentation on our website provides more information on that topic.
Lynn: We continue to be disciplined with our capital.
Lynn: We project $40 million of spend on the <unk> project development from January one this year until we reach financial close.
Lynn: We expect total development cost at financial close to be well under previously announced high end potential Atg 60 development spend.
Lynn: At the start of last year, we said we plan to achieve first revenue at Baird, Our software as a service business for tracking and tracing of regenerative agricultural products.
Lynn: We achieved that in 2024, and we expect to grow the customer base in 2025.
Lynn: Too early to provide specific guidance, but we have a unique software platform that provided provides much needed accuracy transparency and quality that is poised to grow into a very large total addressable market.
Chris: With that I'll pass it over to Chris.
Chris: Thanks Lynn.
Chris: You'll find a summary of our GMO North Dakota acquisition, and our press release and pad also made some comments. So I'll just provide a brief update on that.
Chris: Our operations team at the plant they are doing a great job keeping the processes running smoothly there producing about 67 million gallons a year of low carbon ethanol, which includes 2 million gallons of ultra low carbon intensity corn fiber ethanol.
Chris: We're capturing carbon and sequester it on site, which gives us an important competitive advantage in the ethanol industry, while we generate valuable carbon dioxide removal credits otherwise known as <unk>.
Chris: To put some carbon score numbers on this.
Chris: Our British Columbia carbon intensity is about 19 grams of Cotwo Mega Joule.
And our Ci score calculated according to the argon R&D greet model is about 21 grams Cotwo Mega Joel before we take into account the regenerative AG practices from corn farmers that are supplying us.
Chris: For those who are familiar that's nearly the lowest carbon intensity in the ethanol industry.
Speaker Change: As a result, as Pat mentioned this acquisition immediately strengthened our ability to generate and monetize carbon reduction even without any major capital investments.
Speaker Change: In the longer term, we believe it's a great site to look at potentially converting that low carbon ethanol into synthetic aviation fuel or SaaS.
Speaker Change: In March a group from Jabil management spent the afternoon with many of the farmers that supplier plant in Richardson.
Speaker Change: We start with these farmers about our vision for growth at the site, including the potential for an atg plant, which represents a whole new use for American agricultural products.
Speaker Change: We listened to the farmers talk about the regenerative AG practices that they're already using there and.
Speaker Change: And we've talked about ways those practices may translate into more value for them.
Speaker Change: These pharma relationships are critical for the success of our plants and we all walked away feeling our interests were aligned with them.
Speaker Change: We're excited about what this means for <unk> future with <unk>.
Speaker Change: That I will turn it over to Paul.
Paul Blum: Thanks, Chris I'll be brief as well regarding guarantee we're growing fast.
Paul Blum: We're currently generating revenue and growing our customer base with.
We doubled our growers program acreage since the second quarter of 2024.
Paul Blum: And tracked over 200000 acres.
Paul Blum: In 2024.
Paul Blum: We signed agreements with five ethanol producers and to soy crush plants and have more on the way.
Bernie: Bernie aims to help the industry measure and verify sustainable attributes from the field to final products made from corn soybeans and other agricultural feedstocks for food feed fuels and industrial products.
Bernie: The growing unmet demand for traceability in agriculture, and energy is real and Verity is proving to be a valuable tool.
Bernie: Regarding our patented ethanol to all of a sudden or Ito technology as Pat mentioned, we expanded our strategic alliance with accidents to develop commercialize and license this technology globally for fuels.
Bernie: We also align our technology business system, and Knowhow with actions to drive alcohol to jet commercialization under a new Alliance agreement.
Bernie: We arent just building our own atg projects, we have a robust IP portfolio to license technology and engineered solutions to the whole industry.
Bernie: In addition, we continue to make good progress with our ethanol to oilseeds joint development agreement with LG Chem.
Bernie: Biobased chemicals, including propylene, which is a key building block in the petrochemical industry today.
Bernie: The market opportunity here is large and could create more demand for U S agricultural products.
Bernie: We're talking about technologies that can take corn and ethanol and convert into low carbon drop in fuels and materials that match petroleum to help make all kinds of products from diapers to durable parts for our cars to jet fuel.
Bernie: We are using our technology and business system to bring agriculture and energy together to drive growth for Rural America.
Pat: Back to you Pat.
Pat: Thanks, Paul and with that let's open it up for questions.
Pat: Thank you so as a reminder, if you would like to ask a question. Please press star one on your telephone. We also ask that you wait for your name and company would be to be announced before proceeding with your question one moment for the first question.
Speaker Change: And our first question will be coming from the line of Matt Deyoe of H C. Wainwright. Your line is open.
Matt DeYoe: Thank you good afternoon.
Matt DeYoe: Thanks for taking my questions.
Pat: Yes.
Pat: So Pat with respect to the.
Pat: The SPV side of.
Pat: The net zero one.
Pat: <unk> opportunity.
Pat: Who.
Speaker Change: The equity Investor options in front of you are these potentially strategic thoughts are already in that value chain or are these typical financial investors, who are you speaking to right now.
Pat: Any color on what those options in front of you are.
Pat: Yes, it's a normal it's a normal set of characters across off ranging from strategics, especially funds to those classic financial funds.
Pat: Whole spectrum up one.
Pat: <unk>.
Pat: You just got to work through it and see who is who is going to.
Pat: What's real and will make it happen.
Pat: Okay.
Pat: Does some of this needs to be arranged.
Pat: To close the deal any loan or given that come later when you start tapping into.
Pat: Our drawing down on that one now this would be a prerequisite.
Pat: Okay.
Pat: As a prerequisite to have the commitments to get to it would all come together at once.
Pat: So then in that context like what is the timeline to complete sort of this side of the process.
Pat: I think.
Pat: The best specs.
Pat: We're not supposed to talk about.
Pat: The details of the <unk> process still but I think it's to say that we get it done in 2025, that's what we're targeting and its in that timeframe that we would come together, we've already been engaged obviously and wall Street and talking to funds.
Pat: Or do you have a sense of interest.
Pat: And we have a sense of things the economics can work I think at this point that we made about <unk>.
Pat: Hitting down some of the carbon value of that market is growing.
Pat: The voluntary carbon market.
Pat: One is called pre emissions is pretty interesting. So we are tweaking some of our contract because it makes it.
Pat: Better project and so we're doing that.
Pat: So we don't want to get that done, but it's just a.
Pat: Practical reality is this is going to be later in the year.
Pat: Get it all done.
Pat: Okay understood.
Pat: Sure.
Pat: Then with respect to the carbon capture expansion opportunity.
Speaker Change: The Dakota.
Speaker Change: Going forward as you increase capacity over there what are the options to monetize that when you have any sort of participating more carbon trading market or is there sort of a different monetization strategy that is maybe easier and more.
Speaker Change: <unk> provides a better visibility.
Speaker Change: Thanks.
Speaker Change: Paul I will let you answer that this is your realm as the chief business officer, and you're busy on carbon.
Speaker Change: Yes sure no problem. So we've got a couple of options here on how to monetize obviously, we can put that value from the Ccs.
Speaker Change: Into an approved pathway with the with the renewable fuel so.
Speaker Change: Think about it.
Speaker Change: Including that all bundled together, but then separately if we if we don't do that we can take that ccs value into a market call.
Speaker Change: <unk> and Chris mentioned, this which are carbon dioxide removal credits and these are permanent carbon dioxide removals rate theyre going to be there for 100 thousands of years.
Speaker Change: As we saw that <unk> that used to be in the atmosphere.
Speaker Change: And that's a market that's developing today and so we're actively participating there and working on how do we market carbon either with the fuel or separately from the fuel enter into those markets. So more to come on that.
Speaker Change: Understood. Thank you.
Speaker Change: Just last one for me.
Speaker Change: The expansion on the R&D front I know you were looking to.
Speaker Change: Increased volumes et cetera.
Speaker Change: Is that already done or are you still in the process.
Speaker Change: Executing on that well, we've already expanded as far as the capacity 400000 million btu's or push it up further how far we go beyond that we've put in some additional equipment and such so we have to go do that work.
Speaker Change: Okay Alright.
Speaker Change: All I have guys I will take my questions offline. Thank you.
Speaker Change: Okay.
Speaker Change: One moment for the next question.
Speaker Change: And our next question will be coming from the line.
Speaker Change: Of Nate Pendleton.
Speaker Change: Texas capital.
Speaker Change: Open.
Speaker Change: Good afternoon, specifically looking at your first plant.
Speaker Change: Can you share your perspectives on how recent tariff announcements are impacting potential costs. There as you approach the financial close.
Speaker Change: Do you mean, you mean for the Atg <unk> and South Dakota.
Speaker Change: That's correct, Yeah, Hey, Chris you want to comment on if Thats your bailiwick.
Speaker Change: Thanks, Eric.
Speaker Change: Impacting that was the question.
Speaker Change: Not impacting our project at all.
Speaker Change: Okay.
Speaker Change: Yes, we've got.
Speaker Change: When you look at say project cost for example.
Speaker Change: Most of the project really wouldn't be subject.
Speaker Change: Subject to that.
Speaker Change: Okay understood. Thank you.
Speaker Change: And then shifting over to the ethanol the olefins technology that you touched on in the prepared remarks can you lay out future milestones that the market should be watching as that business scales.
Paul Blum: Paul you want to take that one.
Speaker Change: Yes sure.
Paul Blum: As Pat mentioned.
Paul Blum: His remarks.
Paul Blum: Right now we've got the development.
Paul Blum: We are in the development phase of that with Axis. So active project.
Paul Blum: We've been through my first.
Paul Blum: First pilot stage, so that was a real first milestone that we made after getting through our lab phase and now we're really in this stage.
Paul Blum: Can we get this done in 12 months can we get it done in 18 months, it's all about Derisking that technology. So we're very comfortable with moving to scale. So that's kind of the timeframe that we're looking at to have our next milestone which is really getting this.
Paul Blum: Ready for commercialization.
Paul Blum: I'll add that is typical this chemistry.
Paul Blum: Converting these what are called all offense into these fuel products.
Paul Blum: When you're doing when you think about them at really large scale things that our ppm.
Paul Blum: Parts per million.
Paul Blum: Because youre doing millions and millions of pounds.
Paul Blum: And so what builds up what happens.
Speaker Change: Do you really understand in detail. This is a mistake that is classically made over and over and over people will take something from the lab and just rush it into scale up in these catalytic systems, either catalytic systems, not fermentation systems catalytic systems and they get burned by that stuff doesn't work plugs. The columns are the catalysts just don't work the way. They thought this is the beauty of what <unk>.
Speaker Change: Actions done in the past and why it's fun to work with them because they have seen lots of these things between us we have we've been working on these these catalytic technology. Since 2007, I think people have forgotten that we were the first to do ethanol.
Speaker Change: Jet fuel back and even in 2007 2008 timeframe. We did it it was just very practical case.
Speaker Change: At that point accident didn't want a licensed their technology to us.
Speaker Change: And because they didn't believe you could get to a low carbon zero carbon footprint, while we were pursuing isobutanol, which is a way of skipping the steps and then we had ito.
When everyone got focused on the jet fuel SaaS SaaS jet fuel that it was back then.
Speaker Change: <unk> been working with us on the Isobutanol to jet and gasoline because we thought gasoline was going to be the big driver. While the market is centered on SAP will then together we said they learned.
Speaker Change: With us that Mike actually you really can get to zero and below footprint on a ci score. So they license it to us I wish we had done it sooner even further ahead.
Speaker Change: On the ethanol front.
Speaker Change: So the E tail thing is a breakthrough it looks really good yeah. This is classic.
Speaker Change: Case of we.
Speaker Change: We don't know fully what we don't know and we're going to look for things that go wrong and scale it up and Thats. The approach you take on these kinds of scale ups try to figure out what breaks the system.
Speaker Change: That's we have to go do and when we learn something then we'll adjust the condition. So I hate to say, here's a hardened fast milestone other burn go through the scale ups.
Speaker Change: By the way. This is the same technology that we're already working on scale up with LG Chem.
Speaker Change: Kim for propylene as a variance of the technologies, we already have pretty good confidence that it works at reasonable size scale, but we need giant enormous scale for.
Speaker Change: For fuels.
Speaker Change: Chemical products only need kind of medium size scale fuels ginormous scale.
Speaker Change: Got it I appreciate that detail and then just one last one for me if I may regarding your Laverne facility can you provide any thoughts around how you may leverage that asset in the future.
Speaker Change: Yes.
Speaker Change: I think it's a.
Speaker Change: For us running it as an ethanol plant doesn't make sense. So we have we have some ideas here. So you'll have to stay tuned, but I'd say we are.
Curt: Got some really good ideas that are in play as Curt.
Curt: Talk about things yet.
Curt: Alright, well thanks for taking my questions you bet.
Andrew: Thank you Andrew.
Andrew: A reminder, if you would like to ask a question. Please press star one on your telephone lines.
Andrew:
Andrew: One moment please.
Ethan Singer: The next question that we have is coming from Ethan singer.
Andrew: <unk>.
Andrew: Opco.
Andrew: One moment please.
Andrew: And your line is talk about them.
Speaker Change: Hi, Good afternoon, guys can you talk about what's been holding up the process.
Speaker Change: What the timeline is what does it mean, the obstacles and what have you accomplished and what's still left to be done.
Speaker Change: Please.
Speaker Change: <unk> one and then the second question is you mentioned needing to raise $800 million of equity one of the other questioners asked who the targets.
Speaker Change: In terms of.
Speaker Change: The potential investors I'm interested to know whose banking that for Ya, who is helping your bank debt, which what's your investment bank. So you're working with have you engaged anybody on that and where does that stand. Please.
Speaker Change: Hey, Pat.
Speaker Change: Can you guys hear me.
Speaker Change: Got you.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: Alright, Thanks, a lot.
Speaker Change: Hey, Ethan.
Speaker Change: It's the same things we've been same things we've talked about in the past is that we have to go through and do some of the environmental stuff. That's required for the <unk> program that has to be done that was.
Speaker Change: Was slowed down probably by the transition I just wanted people there to sign off on things that have to happen. We're tweaking some of these contracts.
Speaker Change: Certainty around the pipeline isn't helpful and that we just got to know which way, it's going which we're exploring we're still going to plan on that.
Speaker Change: The economics for the whole project work.
Speaker Change: But none of us really want to.
Speaker Change: Take a hit of a couple of percentage points on the irr's, so that matters, especially for equity.
Speaker Change: So.
Speaker Change: Slower on this.
Speaker Change: A month or two.
Speaker Change: I want to see what happens.
Speaker Change: Some are going to do next I really would like to note that because it's a question that always comes up I always have to answer. It. This other thing that is interesting that I mentioned is the carbon markets by by we have already talked that we're tweaking contracts. We've said this many earnings calls that we're tweaking contracts part of this is that if you just rush.
Speaker Change: And two.
Speaker Change: Kind of a project finance contract.
Speaker Change: Like the all wave just whatever you're giving away a huge amount of value I think it's really stupid.
Speaker Change: So we're tweaking staff to make sure the project economics work in our favor.
Speaker Change: All those things added up.
Speaker Change: Plus the practical timing of things.
Speaker Change: Just say that it will get done sometime this year.
Speaker Change: For US we think the project is going to get done. It's just a question of when and it will be fine.
Speaker Change: In terms of the bankers, we're still working at Guggenheim at Citi.
Speaker Change: Okay.
Speaker Change: Thank you one moment for the next question.
Speaker Change: And our next question is coming from the line of Peter.
Speaker Change: Get rich of water Tower research your line is open.
Speaker Change: Yes. Thank you excuse me Peter gastric here. So thanks for the presentation today and congratulations to the team on executing their strategy just a couple of questions from me. The first one is on Ret trail.
Speaker Change: Just in terms of cash coming from carbon credits. There has that started from day, one and are you able to give any color on the broad assumptions for that $30 million to $60 million adjusted EBITDA expectation.
Speaker Change: What the contribution of carbon credits might look like at that range more of the results our commodity variable.
Speaker Change: You have a range in credits in there as well thank you.
Speaker Change: Eric I think you are probably in the best position to describe this as your chart is probably looking at Peter is probably looking at.
Speaker Change: Sure Peter.
Speaker Change: Just to give you a sense.
Speaker Change: Carbon intensity.
Speaker Change: Point in time.
Speaker Change: You don't want to come back.
Yes.
Speaker Change: About 25 Gram.
Speaker Change: Graphical illustration equivalent perpetual.
Speaker Change: Matt.
Speaker Change: Perhaps a tax credit marks.
Speaker Change: Basically two cents.
Speaker Change: GAAP net tax credit.
Speaker Change: <unk> client.
Speaker Change: Okay.
Speaker Change: So at <unk> the industry.
Speaker Change: Carbon intensity.
Speaker Change: Carbon capture.
Speaker Change: Yes.
Speaker Change: Actual operating carbon capture I think Pat mentioned.
Speaker Change: Basically two.
Speaker Change: Okay.
Speaker Change: Catastrophe losses.
Speaker Change: 67 million gallons per year.
Speaker Change: And it's somewhat true.
Speaker Change: The tax credits.
Speaker Change: Elements of the launch.
Speaker Change: Great.
Speaker Change: Okay.
Speaker Change: All of that to happen.
Speaker Change: Capital.
Speaker Change: Sure.
Speaker Change: That's a large range.
Speaker Change: To kind of.
Speaker Change: Our experience in Europe.
Speaker Change: Sure.
Speaker Change: Yes.
Speaker Change: Thank you.
Speaker Change: You can see that just that tax credit.
Speaker Change: 20 <unk> century.
Speaker Change: Good morning.
Speaker Change: Chris This is Jeff.
Speaker Change: Sure.
Speaker Change: That's kind of a home.
Speaker Change: Sure.
Speaker Change: Okay.
Speaker Change: Great. Thanks, Thanks, Eric Eric could you go ahead, sorry, Peter could you understand them.
Speaker Change: I got most of it but.
Peter Gastric: But yes. It was it was not a good line, we can follow up afterwards as well, yes. So the short version is this ethanol margins there are low right now.
Peter Gastric: So they should come back in the summer time like always we'll follow the normal cycle about but also that would be the normal contribution you would expect from a 67%.
Peter Gastric: Gallon per year ethanol plant no there'll be the normal to US there and then I think that a large part of what you see on that slide.
Peter Gastric: Is the monetization of the 45 C. Its a fascinating thing there is a marketplace for the 45 is he's already even though there is still.
Peter Gastric: The third law they have to do them.
Peter Gastric: And so.
Peter Gastric: People are betting on that already and so it is very interesting and large part of that is the 40 <unk>.
Peter Gastric: Okay, Great got it. Thank you very much for that and just a second question.
Peter Gastric: I just noticed in your 10-K that there is a disclosure about some weakness in controls.
Peter Gastric: Could you just expand on this and what exactly is meant by the auditor. There. Thank you. Yes. This is one of these ones.
Speaker Change: As we're going through the end of the year stopped with the auditors and then also ourselves on our internal audit we had a pattern of mischaracterizing.
Speaker Change: We're treating a transaction as expenses, where they should have been capitalized. So for me. This is one of those ones that I find it very frustrating because.
Speaker Change: Just categorize it thinking there was it was.
Speaker Change: Couple of contracts and so I'm just transaction expenses for capital are for projects that should have been capitalized. So it turns out it doesn't hurt our cash it doesn't hurt our.
Speaker Change: Our earnings per share got better stock got capitalized and so it's one of these very frustrating things, where we would make we made mistakes on.
Speaker Change: The technical.
Speaker Change: The tech that call interpretation of the rules.
Speaker Change: What it is we got it wrong and so.
Speaker Change: That's just part of it.
Speaker Change: It's irritating, but that's what that was about.
Speaker Change: We're already on the path to remediation part as well.
Speaker Change: But that's about training as you saw on the K then you saw it's about training people.
Speaker Change: Getting the right people et cetera.
Speaker Change: Okay. Thank you very much Matt.
Speaker Change: Yes.
Speaker Change: Thank you one moment for the next questions.
Speaker Change: All right.
Speaker Change: And our next question will be coming from the line of James Alright of Morgan Stanley. Your line is open.
James Alright: Hi, guys. Thanks for taking my question here.
James Alright: I was wondering about the verity portion of.
James Alright: The business and I guess I'm.
James Alright: I'm curious about.
James Alright: Do you guys have any projections about revenue I know that that would be.
James Alright: Forward looking and.
James Alright: Nothing in concrete.
James Alright: Concrete, but any like maybe a three year and a five year projection about what kind of revenue that that could bring in.
Paul Blum: Yes, Paul.
Speaker Change: How about that.
Paul Blum: Yes, it's a good question.
Paul Blum: I mean, the good news is we got first revenue last year like we said, we're going to do and so now what we see is that I don't have the three and the five year projections for Ya.
Paul Blum: We're signing up more customers, which come with typical subscription fees software as a service.
Paul Blum: And then some of the agreements that we have in place have a profit share, which we've talked about in the past profit and revenue share. So some of those can be pretty sizable as we think about how this is going to grow and go forward.
Paul Blum: But yes, it's still too early to say a lot of the same things when we think about calculating carbon values and doing carbon accounting and profit shares that we've got built into some of those.
Paul Blum: Those agreements.
Paul Blum: Gotcha. Thank you.
Paul Blum: Okay.
Paul Blum: If you would like to ask a question. Please press star one on your telephone one moment. Please.
Paul Blum: At this time.
Paul Blum: One moment.
Paul Blum: Okay. We have another question coming from Karen Mcginnis.
Speaker Change: Yes, good afternoon.
Karen Mcginnis: Yes. Good afternoon I had a quick question given there is a number of issues around while we got to achieve for the Doa alone how long does that commitment stay open.
Speaker Change: It depends.
Karen Mcginnis: That's up to them I would say.
Speaker Change: Extended for years, So we'll see.
Speaker Change: Let's say you got to the way we view this as there is we're going to.
Speaker Change: We have <unk>.
Speaker Change: For us we don't view this as a binary thing and a lot of shareholders, who I don't view it that way it's not binary.
Speaker Change: This project makes a lot of sense it'll happen in the diary lawn makes a lot of sense project financing in the meantime, I got other projects to build to get those built and we will do them a little bit differently than our classic project finance, So it's not a.
Speaker Change: Binary outcome.
Speaker Change: Our game plan is to be profitable irrespective of.
Speaker Change: That's around one so the <unk> paradigm that people have that somehow we have to have that it's going to be a miracle and then hot.
Speaker Change: And why are we better good cash flow from it when you think about the timelines.
Speaker Change: So our whole game is to not have to raise money again, except for very accretive reasons.
Speaker Change: That's our whole game plan here. So it is not at all that paradigm, one thing or the other I am keen setting the right precedent in the market setting the right price points setting the right all the precedence of value I'm very keen on that because that sets the stage for.
For going forward.
Speaker Change: Thank you.
Speaker Change: Second question.
Speaker Change: Just a simple question.
Speaker Change: Just listening to the call. There's a lot of moving pieces here and there seems to be a lot of a lot of different directions. What do you see as kind of the top two or three priorities as the CEO of the company.
Speaker Change: Are you Kidding me this.
Speaker Change: Are you Freaking Kidding me what do you think they are.
Speaker Change: Really we're unclear have you been read our presentations go look at our documentation route to <unk>.
Speaker Change: First.
Speaker Change: We're developing the marketplace for alcohol center hydrocarbons and commercializing those products, we're establishing the carbon value for those same products and along the way we're building our network infrastructure and our property portfolio. So we have a serious competitive advantage and what we got a strong balance sheet those are the <unk>.
Speaker Change: Crystal clear they are spelled out in our documents.
Speaker Change: Okay.
Pat: Thank you that does conclude our Q&A session for today and I would like to turn the call over to Pat for closing remarks. Please go ahead.
Speaker Change: It's been interesting times during the transition with the New administration. The number of questions that we're getting from the press is amazing I think I've got something like 55 interviews with press usually they have the wrong information about things and so what I find is.
Speaker Change: The noise is going to have to settle down and I think we'll see money flow back into our sector. It has gone away because people don't know what to make of anything that's all part of it. So I think we're in great shape, our balance sheet strong our technologies are strong our capabilities are strong.
Speaker Change: Continue to make progress in the marketplace. This carbon value that we talked about is real and it's separate that just regulatory value that is the ultimate game is to make sure that you have technologies that are competitively.
Speaker Change: <unk> products on a cost basis, and there is a value added attribute and its carbon.
Speaker Change: So thanks for participating thanks for listening in.
Speaker Change: Thank you all for participating in today's conference call you may now disconnect.
Speaker Change: Okay.
Speaker Change: [music].
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: [music].