Q3 2025 Aemetis Inc Earnings Call
Speaker #1: Welcome to the Metis . Third quarter 2020 Earnings Review conference call . At this time , all participants are on a listen only mode .
Speaker #1: A question and answer session will follow the formal presentation . If anyone should require operator assistance during the conference , please press Star Zero on your telephone keypad .
Speaker #1: As a reminder, this conference is being recorded. Joining us on today's call are Eric McAfee, the Chairman and CEO of Aemetis, Inc.
Speaker #1: Andrew Foster , the president of Metis Advanced Fuels and Todd Waltz , the chief financial officer of Imeds . It is now my pleasure to introduce your host , Mr. Todd Waltz , the Executive Vice President and Chief Financial Officer of AEMETIS, INC .
Speaker #1: Mr. Waltz , you may begin .
Speaker #4: Thank you , Matthew , and welcome everyone . Before we begin , I'd like to remind everyone that during this call , we'll be making forward looking statements within the meaning of the private securities Litigation Reform Act of 1995 .
Speaker #4: These statements are based on our current expectations and beliefs and involve risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such statements.
Speaker #4: These risks and uncertainties include , but are not limited to , those factors discussed in our earnings release issued today and in our most recent form 10-K and 10-q filings with the Securities and Exchange Commission .
Speaker #4: Under the caption Risk Factors and Management Discussion and Analysis of Financial Condition and Results of Operation , as well as in our other filings with the SEC .
Speaker #4: We undertake no obligation to publicly update any forward looking statements , whether as a result of new information , future developments or otherwise , except as required by law .
Speaker #4: Please refer to our earnings release and our SEC filings for a more detailed discussion of the risks and uncertainties. Full financial details can be found in our third quarter 2020 earnings release and the Form 10-Q available on the website.
Speaker #4: And Edgar , I'll briefly highlight the key items . Revenues were 59.2 million , up by approximately 7 million from the second quarter of 2025 , primarily due to the fulfillment of biodiesel orders with oil marketing companies in India and stronger performance from ethanol production and sales .
Speaker #4: Pricing in California . We saw production rate of 14.7 million gallons as margins allowed for higher grind rates . California Dairy natural gas recognized $4 million of revenue from 12 operating digesters during Q3 , using the Carb approved Lcfs pathway for seven of the digesters .
Speaker #4: As we'll discuss later , section 45 tax credits from the production of dairy , renewable natural gas were not included in a third quarter since our recognition is based upon when credits are sold .
Speaker #4: India Biofuels posted $14.5 million of revenues . A new India CFO with IPO experience joined the company during the third quarter , continuing to build out the management team to target a public listing in 2026 .
Speaker #4: Operating loss improved sequentially on higher volumes and lower SG&A interest expense remained steady at around 13 million during the quarter . Cash at quarter end was 5.6 million .
Speaker #4: After making 4.1 million of investments into carbon intensity reduction and dairy renewable natural gas production expansion during the quarter . We expect multiple income streams from India , Lcfs credits and federal tax incentives to ramp up during the fourth quarter , positioning us for a strong exit to the year 2025 and increasing 45 Z income streams during 2026 .
Speaker #4: As new projects are completed . With that , I'll turn the call over to Eric McAfee , chairman and CEO of AEMETIS, INC , Eric .
Speaker #4: Thank you, Todd. I'll start with the business segment update, followed by updates on future projects and a regulatory update in our dairy RNG business.
Speaker #4: We significantly increased biogas production capacity at the end of the third quarter with a new multi-dairy digester coming online in September. That increased RNG production capacity by more than 30%.
Speaker #4: As planned , we expect to reach more than 500,000 BTUs of renewable natural gas production capacity by the end of this year and grow to a 1 million MMBtu annual run rate by the end of 2026 .
Speaker #4: We are now operating or building digesters to process waste from 18 dairies funded by $50 million of USDA guaranteed financing , with 20 year reach payment terms and attractive interest rates , as well as equity and revenues from operations .
Speaker #4: Seven of our dairy digester low carbon fuel standard pathways were approved by the California Air Resources Board during the second quarter of this year, at an average -384 carbon intensity score.
Speaker #4: These pathway approvals increased our Lcfs credit revenue by 160% . For these dairies , starting in the third quarter of this year , compared to dairy digesters with the negative 150 default pathway score .
Speaker #4: While pathways are pending approval, more LCFS pathways are currently under review at CARB and are expected to be approved under the faster Tier 1 pathway process that was adopted by CARB in the July 2025 extension of the LCFS program.
Speaker #4: Additionally , these dairy RNG facilities qualify for federal section 48 investment tax credits . To date , we have sold $83 million in investment tax credits related to our RNG facilities and received more than $70 million in cash since January 1st , 2025 .
Speaker #4: We've been generating transferable Section 45 production tax credits, but we do not show the cash received from these credits in our financial reports until the 45 credits are sold.
Speaker #4: Currently, we have $12 million in investment tax credits and $10 million in 45 production tax credits in the sale process. Please note a significant upside.
Speaker #4: The Department of Energy has not issued the updated 45 spreadsheet that allows the correct calculation for dairy RNG , so the amount of 45 income is expected to increase significantly when the Doe issues the updated calculation .
Speaker #4: This Doe update could occur at any time , but is definitely expected for the implementation of the one Big beautiful Bill in January 2026 , allowing us to generate and sell additional 45 production tax credits for year 2025 .
Speaker #4: If the calculation correctly utilizes the greenhouse reduction model to comply with law . Collectively , molecule revenues lcfs credit sales , D3 rent sales , and the sale of 45 production tax credits are expected to generate strong positive cash flow from operations in the fourth quarter of this year , and expanding operating cash flow in 2026 as new dairy RNG production comes online .
Speaker #4: Forty-five calculations are issued by the Department of Energy, and LCFS credit prices continue to rise at our ethanol plant. Our fully financed $30 million mechanical vapor recompression system is completing equipment fabrication and is planned to begin on-site construction in Q4 of this year, with completion expected in Q2 of 2026.
Speaker #4: We are very pleased with the professionalism and expertise of the team at the NPL subsidiary of Century that is providing construction, management, and other support for the project.
Speaker #4: We have been awarded about $20 million in grants and federal section 48 tax credits to fund the MVR system . The project is expected to reduce natural gas use by 80% and add an estimated $32 million in annual cash flow starting in mid 2026 .
Speaker #4: Ethanol pricing has improved since earlier this year as lower corn prices improved , margins . The legislative approval of 15% ethanol blending in California last month is expected to increase demand for ethanol by more than 600 million gallons per year , equal to about ten of our ethanol plants , which is expected to support pricing and drive demand for more ethanol production nationwide .
Speaker #4: We had decreased production during the spring of 2025 . In order to optimize ethanol margins , but increased ethanol production during Q3 and continued in Q4 to support ethanol demand and to participate in higher margins in India , we resumed biodiesel deliveries to government oil marketing companies in April .
Speaker #4: In April of this year , following a six month pause in OMC purchasing , we are targeting an IPO of our India subsidiary in early 2026 and recently appointed a new chief Financial officer at Our India subsidiary to lead the process .
Speaker #4: We are also actively seeking to expand into biogas and ethanol production in India , which are strongly supported by government policies and pricing .
Speaker #4: Let's look at our future projects for our sustainable aviation fuel and renewable diesel project . We have received the authority to construct air permits and conditional use permit for our 90 million gallon per year SAF and renewable diesel facility at the riverbank site in California .
Speaker #4: When operated solely for SAF capacity , will be approximately 78 million gallons per year . We are in active discussions on financing structures and are awaiting further clarity on the 45 production tax credit and biofuels mandates to support project financing for our carbon capture project at our riverbank site .
Speaker #4: We have completed initial site work and conductor installation for our geologic characterization . Well , the data we obtained from the next phase of drilling will support our class six CO2 sequestration permit application .
Speaker #4: Once permitted , the site is expected to sequester up to 1.4 million tons of CO2 per year . Our riverbank , California site near Modesto is a 125 acre former US Army ammunition production facility with 710,000ft² of existing buildings , including seven production lines that are more than 600ft long , 45ft wide and about 30ft tall .
Speaker #4: A 20 megawatt on site power substation connected by an on site high capacity power line to the 350 megawatt Hetch Hetchy Hydroelectric Power Station , an on site , high capacity natural gas pipeline and two fiber data links already at the site .
Speaker #4: The CO2 sequestration well at the riverbank site is planned to generate revenues while decreasing the carbon intensity of electricity produced from natural gas , such as fuel cells , which produce a pure form of CO2 .
Speaker #4: Compared to gas turbines , our dairy RNG is also available via utility pipeline to reduce the carbon intensity of electricity produced from natural gas at the site .
Speaker #4: In addition to a recent recent expansion of tenants at the riverbank site , including a new facility built by a recycling company from England to extract precious metals from electronics , we are currently negotiating agreements to utilize the unique capabilities of the riverbank site to provide lower emissions , lower cost and lower carbon intensity power and other infrastructure to users .
Speaker #4: Let's review some regulatory events that support a strong growth outlook for AEMETIS, INC and the biofuels and biogas industries . Amidases position to benefit from a range of federal and state policies that directly enhance the value of its low carbon biofuel and biogas operations .
Speaker #4: The California Low Carbon Fuel Standard Amendments, adopted by CARB, establish a 20-year framework for reducing transportation fuel emissions. This regulation became effective on July 1st of this year.
Speaker #4: In response , Lcfs credit prices rose by more than $0.25 . Since the I'm sorry , 25% since this summer and are expected to continue to increase as credit supply tightens and credit demand increases .
Speaker #4: We expect further strengthening for the foreseeable future of the current LCFS credit price, up to the cap of $268, which continues to increase each year.
Speaker #4: The federal Renewable Fuel Standard , the sale of renewable natural gas qualifies for D3 , Rins , adding about $19 per MMBtu in value at today's prices .
Speaker #4: Section 45 production tax credits , effective January 1st , 2025 , the new federal section 45 Transferable tax credits support low emission ethanol and RNG production .
Speaker #4: We are currently applying Treasury guidance to calculate market credits for both our keys plant ethanol production and our RNG sales, with additional clarification from the DOE and Treasury expected later this year.
Speaker #4: In addition to any further clarification in 2025 , the section 45 credits will increase in 2026 under the recent One Big Beautiful Bill , which removed removes indirect land use from the ethanol plant calculation and requires dairy specific carbon intensity scores for RNG .
Speaker #4: This will more than double the 45 credits in 2026 for each business, even with no further changes to the current Treasury guidance.
Speaker #4: Section 48 investment tax credits: Aemetis received $19 million in cash proceeds in Q1 2025 from the sale of solar and biogas related ITCs.
Speaker #4: We expect additional sales of both investment and production tax credits in Q4 2025 and in Q1 2026 for the balance of 2025 . Production tax credits plus additional sales of both PTC and Itcs for the next four years .
Speaker #4: E15 ethanol blend expansion in California. The recent E15 approval of the 15% ethanol blend is expected to decrease fuel prices at the pump by $2.7 billion per year when fully adopted, according to a UC Berkeley study.
Speaker #4: While increasing the ethanol market by more than 600 million gallons per year , the US EPA has approved temporary summer use of 15% ethanol and 49 states , and new legislation is advancing to allow year round use , including the matching California E15 approval .
Speaker #4: In all 50 states, we would expand the potential U.S. ethanol market by more than 6 billion gallons per year, from the current 14 billion gallons per year, while lowering fuel prices for consumers with legislation passed at the federal and state levels.
Speaker #4: We are now in the slow process of regulatory adoption of these policies with the 45 production tax credit , 15% ethanol blending and the significantly increased demand for Lcfs credits as primary examples of supportive policies that will increase revenues and or cash flow from operations starting in the fourth quarter of this year .
Speaker #4: We are very pleased with the progress on our projects as well as California and federal policies made during year 2025 to date and believe that a metis is positioned for significant growth in revenues and improved cash flow through year end and throughout 2026 .
Speaker #4: Our India IPO continues to expand the opportunities in India to diversify our business and attract new investors into a large, growing market.
Speaker #4: Our new projects at the riverbank site are exciting and to a large extent unexpected in their size and potential for a positive financial impact .
Speaker #4: Starting in 2026 . Now , let's take some questions from our call . Participants . Matthew .
Speaker #1: Thank you , Mr. McAfee . We will now conduct a question and answer session . If you'd like to ask a question , please press star one on your telephone keypad .
Speaker #1: A confirmation tone will indicate your line is in the question queue . You may press star two . If you'd like to remove your question from the queue for participants using speaker equipment , it may be necessary to pick up your handset before pressing the star keys .
Speaker #1: One moment, please, while we pull for questions. Your first question is coming from Matthew Blair from TF. Your line is live.
Speaker #5: Great , thanks . Thanks for taking the question . I had two questions on the ethanol segment in the quarter . The first is , you know , it does look like your corn costs came down quarter over quarter , but they're a little bit higher than our modeling .
Speaker #5: So could you talk about any sort of issues with basis . Like were there any challenges there . And and overall what what kind of ethanol EBITDA did you generate in in the third quarter ?
Speaker #5: And then, second, regarding the opportunities around California E15, it sounds like there's a lot of upside. I think you mentioned 600 million gallons a year of incremental ethanol demand in the state.
Speaker #5: But but this depends on retailers offering E15 instead of E10 . So maybe could you talk about whether whether that will actually happen , whether retailers will indeed switch over to E15 and and what are the mechanics there ?
Speaker #5: Thank you .
Speaker #4: Certainly . Thanks , Matt . We appreciate all your work . Ethanol , corn ethanol industry in general benefited from lower corn costs as as corn volumes this year were substantial .
Speaker #4: And because of sort of global supply demand balance , we have excess corn here in the United States . We do have transportation that delivers it to California transportation actually gave us a slight benefit during the quarter as well .
Speaker #4: So lower corn costs and attractive , relatively attractive , I should say a rail . We're benefits corn bases did have an effective of offsetting it a bit as corn farmers were reacting to low corn prices and they held the corn in their bin rather than releasing the market .
Speaker #4: So although the spot prices on on nimax appear to give you one number , the actual physicals of of prompt delivery had a a benefit to farmers as they held back and that that that's probably where your model was slightly different than the market was the corn bases moved around quite a bit during the third quarter .
Speaker #4: We don't have a business that's designed to be the low cost corn feedstock plant because of the , the , the , the demand for ethanol in California .
Speaker #4: It actually is cheaper to move ethanol in California than it is to move corn. So, we actually see it as a disadvantage of our model: we have higher corn costs and we have higher power costs in California.
Speaker #4: But we also have a decarbonized grid in California . California has a commitment to a zero carbon intensity , grid driven by solar and wind , and hydroelectric and nuclear and we have that as a sustainable benefit .
Speaker #4: So we have changed our operational strategy at the ethanol plant to change from petroleum , natural gas feedstock and convert , as we know , with mechanical vapor compression to almost completely removing , using any petroleum , natural gas in our plant that decreases our carbon intensity , significantly decrease our cost of energy completely , and takes advantage of the fact we're physically in a in a market where low carbon intensity electricity can offset the higher corn costs of the Midwestern supply chain .
Speaker #4: We also have completed a $12 million solar project on site . Of course , that's solar energy , zero CI again , and we have carbon negative dairy , renewable natural gas directly connected to our ethanol plant .
Speaker #4: I haven't done a count on this, but us and the one other ethanol project in California, I think, are among the few dairy RNG projects in the United States that actually can monetize through the 45Z channel of an ethanol molecule, rather than having to fill trucks.
Speaker #4: I haven't done a count on this, but us and the one other ethanol producer in California, I think, are among the few dairy RNG projects in the United States able to calculate for ethanol. It is a unique opportunity that we expect to use more in 2026 than we're currently using.
Speaker #4: But it buffers us from the the absolute necessity of having to have trucks to consume our RNG . So for a variety of reasons , we think that our plant is has distinctive competencies that will be sustainable over a long span of time and will overcome our corn and rail cost disadvantage .
Speaker #4: So we'll be talking about this more over the course of the next two quarters . As our Nvr's adopted , and try to provide more clarity about how we believe we'll have a sustainable margin advantage over pretty much any other producers in the US .
Speaker #4: The second one is E15 in California. The $0.20 per gallon is just a competitive advantage for anybody that uses E15, and the legislature stepped in to adopt E15 permanently.
Speaker #4: October 2nd when it was signed by the governor . And that's because California prices are completely out of control . 17% of oil refining capacity for gasoline will be going offline in the next 12 months .
Speaker #4: And market demand is increasing . Certainly , it's not decreasing as people had projected as electric vehicles would be adopted and the cancellation of the $7,500 federal tax credit for electric vehicles has reduced electric vehicle sales by 50% in the last month , according to national statistics .
Speaker #4: So California is going to require a lot of gasoline for for a long time , and ethanol is really the only way to reduce the cost of gasoline .
Speaker #4: All the other factors are increasing the cost of gasoline . So we we anticipate that retailers will starting largely with independent retailers . And the truck stops , the travel stops , national chains who are already structured with their infrastructure to be able to to get this increased margin by a rapid adoption of 15 .
Speaker #4: We think the competitive environment will cause pretty much every retailer to adopt E15 as rapidly as they can . Otherwise , the guys on , you know , across the street are down the street , will be getting their customers from them with a 20 cent cost advantage .
Speaker #5: Great. Thanks for your comments.
Speaker #4: Thanks , Matt .
Speaker #1: Thank you. Your next question is coming from Derek Whitfield from Texas Capital. Your line is live.
Speaker #6: Good morning , Eric , and thanks for your time .
Speaker #4: Hello , Derrick .
Speaker #6: For my first question , I wanted to start with a top down look at your business . As you think about the impact , the inflection and the credit markets will have on your US RNG and ethanol business and the IPO of your India biofuels business .
Speaker #6: Could you paint the picture for your EBITDA profile net to a medicine 2026 and how this could lead to improved access to lower cost capital and allow you to pay off some of your third eye credit facilities and notes ?
Speaker #4: Yeah, that's a very good top-down because you actually hit what I believe to be the biggest business opportunity that we're pursuing right now.
Speaker #4: We are in the middle of a refinance of our most expensive debt. Third Capital has some very inexpensive debt, about $118 million at an effective interest rate of about 5.1%.
Speaker #4: But we also have a chunk of debt with them . That is pretty expensive . And so we are in the process of negotiating the refinance of that expensive debt supported by the 45 Z production tax credit revenue , which we've been generating since January .
Speaker #4: It hasn't shown up our financial projections yet . But as we monetize this into cash , the the the favorable impact of that over the next four years , is resulting in , in ability to refinance our most expensive debt .
Speaker #4: I do not anticipate that it's going to close this quarter. I think it's a first half 2026 event as lenders get comfortable with the ongoing nature of our 45Z sales.
Speaker #4: But we do anticipate we'll be doing 45 sales on a on a quarterly basis . We have multiple buyers that want to sign up with multi-year offtakes for our 45 Z production tax credits , and we have existing buyers of our investment tax credits that have already told us they want to buy all of our 2026 Itcs and for the foreseeable future , and that particular buyer has capacity to take whatever we need to , to offtake to them .
Speaker #4: So I think the investment committee , community , as well as the lender community will see this ongoing quarterly flow of of of 45 Z production tax credits for both biogas as well as ethanol and a steady drumbeat of ITC sales that are in federal law now .
Speaker #4: And continue on for the next four years at least . Personally , having been in Washington , D.C. a lot , I think we've got 20 , 31 to 20 , 30 , 35 .
Speaker #4: So we we have up to a nine year span of this 45 Z activity continuing on . So I anticipating to see a refinance of that expensive debt as the fundamental quarterly profitability of the company becomes much more clear .
Speaker #6: Terrific. And that's my follow-up, Eric. I just wanted to touch on the government shutdown and get your thoughts on expectations around when we will get the final RVO and 45Z policy.
Speaker #6: And also ask if you think the administration . Is receptive to increasing the D3 , D7 , rvo given the strength of recent rent generation reports .
Speaker #4: Let's talk RVO for a second. RVO is a fight between the oil industry and the ethanol industry, with independent oil refiners being very successful in their strategies of walking away from our RVO obligations.
Speaker #4: Just last week, CVR, run by Carl Icahn, was able to benefit to the tune of $488 million by avoiding the purchase of the obligated party RINs that they were required to buy. Their strategy, historically, has been to simply not buy them, then complain to the government, declare bankruptcy, or take whatever action they're going to take to avoid them.
Speaker #4: And they've been very successful at that strategy . And Carl Icahn just received another half $1 billion from them , from the biofuels industry from from that kind of behavior .
Speaker #4: Now , in my view , the large integrated oil refineries , certainly Valero is at the top of that list are on both sides of the equation .
Speaker #4: They're suffering when the D4 or D5 doesn't reflect the actual market value because they operate the largest renewable diesel assets in the U.S.
Speaker #4: P 66 marathon . Valero . It even put Montana refining on that list . Our traditional refiners that have migrated into renewable diesel and have interests that are very substantial in the success of the renewable diesel business .
Speaker #4: And so, I think the Trump administration has a problem, and that problem is that the political cost of ignoring farmers hits about 28 states, where the U.S. senators and congressmen literally have to have the corn and soybean vote. You don't get a corn and soybean vote when you are supporting oil refiners and thrashing the Renewable Volume Obligation with waivers.
Speaker #4: So I hate to tell you , but I cannot really handicap this one . Well , I've spent , you know , over a dozen trips to Washington , DC .
Speaker #4: There's very strong support for the Rvo among the 28 AG states and the 56 senators from those states . I think what we're seeing here , unfortunately , is there are other issues that are more important to the administration that domestic and foreign issues that they've been spending time thinking about .
Speaker #4: And that the events of yesterday or the day before yesterday, the Democratic wins across the slate are going to bring back into clarity the need for the votes of Midwestern corn and soybean states.
Speaker #4: And I think that , you know , I hate to say it this way , but the Democrat Democratic sweep , including proposition 50 , in California , is a wake up call for Republicans to pay attention to domestic policy , including energy prices , which kind of drove a couple governors into their seats by declaring war on utility prices .
Speaker #4: So I think the Rvo will suddenly become a much more interesting topic because of the Democratic votes that happened this week . It's strange , but it's all politics .
Speaker #4: And that had a real wake up call . And I hope that the senators we talked to directly will be more effective now with the white House regarding 45 , the Department of Energy has been focused on the January 1st , 2026 adoption of the one big beautiful bill .
Speaker #4: There's been no real appetite to take up 2025, except for the fact that the industry is making a tremendous amount of noise about the need for 2025 calculations to be completed.
Speaker #4: And we have really until September 15th of 2026 to get that done . And continue to be very organized . It's an industry to have the political and regulatory support to the Doe finally gets around to doing what they should have done in January of 2025 , but the new leadership at the Doe is , I mean , still not in place .
Speaker #4: Robertson , the head of it , still isn't in her job . And so the response we get from many regulatory agencies is that the person who's in charge of making decisions is still pending .
Speaker #4: Senate approval, and we should all just be patient and understand that politics takes time. So we're sitting here in November with something that should have been adopted in January under the previous administration.
Speaker #4: I do think it will get figured out. I do think that there's a range of outcomes, some of which I'm pleased with and many of which I'm not.
Speaker #4: But we, as an industry, are united in getting the Argon 45 CF green model to reflect the Argon overall Greek model and not be manipulated, which is what had happened in January with the artificially inserted -51.
Speaker #4: So I have a lot of confidence in industry is united on the 45 topic . Our company has a tremendous I mean , tens of millions of dollars of additional tax credits in year 2025 that are waiting for this calculation to come out .
Speaker #4: So I'm there will be some upside . I just don't know whether it's going to impact 2025 or we're gonna have to wait until January 2026 to start seeing the actual new calculation .
Speaker #6: And Eric , just maybe to follow up on one point of the question , just on the D3 , D7 , Rvo , do you think there's an appetite to increase that just given the strength of recent reports , which would suggest the market slightly oversupplied ?
Speaker #4: The market's clearly oversupplied . There is a broad need to to answer the soybean farmers need to sell soybean oil and the corn farmers need to sell corn oil .
Speaker #4: And right now I think that's a the only real solution to that is to increase biofuels markets . Both ethanol , which takes corn starch , as well as renewable diesel and even potentially SAF .
Speaker #4: There's a movement afoot to go back to the $1 . 75 under a new tax bill for for SAF . So I think the pendulum swung against the the corn farmer and soybean farmer during the middle of 2025 .
Speaker #4: And there has not been enough of a reaction by the federal government and direct subsidies are one reaction . Another reaction is simply create new markets .
Speaker #4: And so a domestic market of biofuels for for D4 and D5 , which are largely R&D , renewable diesel and SAF , as well as D6 , which is ethanol , are clear needs .
Speaker #4: What I personally am focusing on is a D3 . The D3 cannot be replaced by any one or the other molecules , and so you end up with a cellulosic waiver .
Speaker #4: Credit is really the only solution to to to , to over mandating D3 and the message I would like the industry to communicate is that the Rvo should start with a very strong D3 , so that you don't have an overflow of D3 into D4 , and then d4's into d5's and d5 and d6 , because that's the weakness of the rbo .
Speaker #4: If you don't start with a strong D3 , essentially overshooting what dairy RNG producers are going to achieve , then whatever you mandate for D4 and D5 are going to get get reduced , and that's going to be upsetting to a lot of soybean farmers .
Speaker #4: And then D6 is upsetting to a lot of corn farmers . So it's a very simple solution to a very large problem , which is how do you take care of 160 million acres of US farmland that produces only two crops , corn and soybean , and that is increasing biofuels market demand by having a stronger rvo , starting with the D3 , rin .
Speaker #4: So this is a message we've been taking as an industry . I serve on the board of the Renewable Fuels Association , representing the Corn ethanol industry , but also the RNG coalition representing the dairy RNG and other RNG producers .
Speaker #4: And I think the biofuels industry has done an excellent job of making the case. But the administration's attention has been elsewhere, and they've solved some very big issues in the Middle East and elsewhere.
Speaker #4: And now I think they're going to have Snap. Their head back to paying attention to domestic industry. And this is a big one.
Speaker #4: The rvo strengthening is a really big opportunity . They have to to help under 60 million acres in 28 states .
Speaker #6: Understood. I appreciate your time, Eric. I'll turn it back to the operator.
Speaker #4: Thank you . Derek .
Speaker #1: Thank you. Your next question is coming from Amit Dial from H.C. Wainwright. Your line is live.
Speaker #7: Thank you . Good afternoon everyone . So , Eric , I think they were expectations that , you know , some of these 4548 tax credits would be monetized in third quarter .
Speaker #7: Was there any push out ? And then , you know , going forward , I know you are trying to make this a bit more consistent in the future , but what are the sort of steps that are being taken to make that come to fruition ?
Speaker #4: There are the actual physical things that happened in the third quarter that caused us delays in the fourth quarter, specifically the expansion of production capacity by about 30% that occurred in the middle of September.
Speaker #4: So we literally had 11 days to sell ITC's . If we're going to do it in the in the second quarter , because you have to do a cost segregation and insurance policy and other things that that's just really not possible .
Speaker #4: So it was it was the completion of the project in the in-service date that that that drove the ITC's to the fourth quarter on 45 .
Speaker #4: It's much easier for us to sell larger volumes . And if the dough calculation would come out and it was the right number , we'd have almost $40 million of 45 to sell for 2025 .
Speaker #4: And selling a part , and then later selling more has some technical complications to it . It's not impossible , but it's just a it's difficult and it's a pain in the rear .
Speaker #4: So, we've been trying to sell the correct number the first time rather than go back and do it twice. And that has caused us to be reluctant to sell the smaller numbers.
Speaker #4: I mentioned $10 million of 45 Z with a sale in the fourth quarter . It should be . It should be $40 million for the year .
Speaker #4: So it's unfortunate , but that's where we are . And the government shut , I think , was the final nail in the coffin that caused us to conclude that we should just go go forward and we'll get more tax credits later for 2025 .
Speaker #4: We'll just sell them later . It's disappointing , but that's that's what's happening in the world and that's what we're going to do , honestly .
Speaker #7: Thank you for that color . With respect to the India IPO , I mean , it looks like you are close enough now in the first quarter .
Speaker #7: 26 is not too far . Any high level sort of indications for maybe , you investors in terms of what you think the valuation range could be for that business and how much you are looking to sort of , and how much you might offload .
Speaker #7: .
Speaker #4: Honestly , the second question first , we're looking to sell between 20 and 25% of the subsidiary . So we retain ownership of more than 75% .
Speaker #4: We'd still be consolidated revenues and cost of goods sold and everything else onto our financial statements . And just so , a show a minority interest in other income as we as we declare what our earnings are , the valuation which will drive how much capital we can we can raise is it's a wide gap because we're expanding our footprint in India pretty significantly .
Speaker #4: So over the course of the next quarter , we expect to be finalizing what the valuation looks like . And certainly by the end of the first quarter , we're looking to to have a number that we could report that that we're pretty settled in on .
Speaker #4: But as of right now, it's a fairly wide band, anywhere from $100 million to $200 million would be the range we're looking for.
Speaker #4: If I can expand it to 300 million , I can assure you that we have a business opportunity that that would justify that kind of support for the company .
Speaker #4: And we're going to push for that as much as possible . So if we can sell 20 to 25% of company for 300 million , we absolutely will .
Speaker #4: And the business expansion we have in India , I think , supports that kind of valuation . We're just looking to see whether the the market is in agreement with us about the exciting growth opportunities we have in India .
Speaker #7: So thank you for that . This last one , you know , there's 266 million in debt issuing as current a little bit of an overhang on the stock .
Speaker #7: It feels like I know you are working on it , but is there maybe an update on the timeline by when you think this , could , you know , get negotiated and done ?
Speaker #4: The refinancing is is in process . The 45 Z revenues is what's really delayed . That process . We're looking for 45 Z to be a quarterly predictable drumbeat of after tax cash and income to the company .
Speaker #4: That will go on for the next four years and probably for the next 7 or 8 years , because the way these things get extended and so that was supposed to start at June .
Speaker #4: It's supposed to have started January of 2025 . But as we all have learned , the the Treasury , upon departing for the prior administration , threw out an artificial number of -51 carbon intensity .
Speaker #4: Our California carbon intensity is -384 . So the current calculation does not allow us to to to generate about 90% of the revenue from 45 Z .
Speaker #4: And that has delayed our refinancing . Let's call it completion as we've had to say to the lenders , okay guys , it's in process .
Speaker #4: This is what the law says . But we don't have the calculation yet . We have legislation . We have regulation . We don't have the dough calculation .
Speaker #4: And so when we drop in the calculation , I think since we have a good solid off takes for 45 Z as well as ITC's , I think our business becomes much more understandable and predictable as we start showing those revenues on quarterly basis .
Speaker #4: And that drives the refinancing .
Speaker #7: That's all I have , Eric , thank you so much .
Speaker #4: Thank you. I appreciate it.
Speaker #1: Thank you . Your next question is coming from Dan Storms from Stonegate . Your line is live .
Speaker #8: Morning, and thank you for taking my questions. Just to start, morning. I want to start with the dairy digesters. Right now, it looks like you sold about 114,000 BTUs in the quarter on an annualized run rate.
Speaker #8: That's a little shy of the 550,000 goal you have set for the end of the year. I guess my question is, what will it take to get the run rate up to that number?
Speaker #8: I know there's a typical seasonality as the winter slows that down. Is there anything else we should be keeping in mind here?
Speaker #4: The 30% production capacity increase that I discussed happened 11 days from the end of the first of the third quarter . So so it did not have a significant impact on the 90 days of the third quarter .
Speaker #4: And so that that's a primary driver of what we're doing here in the fourth quarter to exit with a higher capacity . We also have multiple digesters under construction right now .
Speaker #4: And so it’s an overlapping process where we’re building additional digesters at the same time we’re completing the in-service dates for existing digesters.
Speaker #8: Understood . That's very helpful . Thank you . And then turning to the India plant , you mentioned . Now that you're hoping to bring online biogas and ethanol production there , I guess , what are the logistics to getting that up and running and any timelines we should have in our mind ?
Speaker #4: Yeah , there's two things in India . Number one is we have an 80 million gallon plant that's fully operational in fully maintained , ready to do 80 million gallons a year .
Speaker #4: And the oil marketing company tender process continues along. We have a tender in process right now that's publicly available to everybody. We should be able to announce our allocation from that as quickly as in the next week.
Speaker #4: And that would be for the the next four months . We expect , however , that there's some policy enforcement by the the India government that is being brought to fruition .
Speaker #4: There's a just a piece of litigation at the Supreme Court that this month the government is having to justify what they haven't adopted a a penalty for diesel gallons that do not have biodiesel .
Speaker #4: And this was a penalty that was passed in legislation a couple of years ago, but they've been postponing it several times and have not quite adopted it yet.
Speaker #4: That litigation is for the enforcement of that penalty. Virtually every gallon of diesel in the country will have biodiesel in it.
Speaker #4: If the Supreme Court determines that the enforcement of that legislation is is going to have to start . So there's also some contracts that were issued to us , $58 million had about $18 million profit in it , that the oil marketing companies , because a tariff was changed by the government , determined that they would not perform any of those contracts .
Speaker #4: It's a contract breach by the oil marketing companies. That is a part of that legislation. So we are targeting a resolution of the government's position and maybe some strengthening in the tenders, as well as perhaps a resolution in this contract allocation that we received.
Speaker #4: And if we can get one or both of those , that's going to be very strongly positive for our biodiesel business . And really timed well for the IPO .
Speaker #4: Our diversification into other businesses will include at least one acquisition of an operating facility, and for a variety of reasons, we're extremely well positioned there.
Speaker #4: So we'll we'll see some transactions happening either prior to or at the time of the IPO , driving us into these new lines of business .
Speaker #4: We have a very talented management team and an extremely talented CEO , an extremely talented CFO , and looking forward to that team .
Speaker #4: Continue to build an exciting business in India that , by the way , is diversifying . It's it's going to have lines of business that might be differentiated from the parent company because they're responding to the needs in the India market , which is a expanding market all by itself .
Speaker #8: That's great. Thank you for the color, and good luck with you for.
Speaker #4: Thank you, Tim. I appreciate it.
Speaker #1: Thank you. Your next question is coming from Ed Wu from Ascendant Capital. Your line is live.
Speaker #9: Yeah. Thank you for taking my questions. And congratulations on all the progress, and also on the India IPO as it is progressing.
Speaker #9: And you know, for a possible IPO next year, have you given further thought to what you're going to do with the proceeds?
Speaker #9: Either you know , take it back to the US and use it as part of your refinancing plan ? Or will it be stayed in India to develop these new business lines that you are talking about ?
Speaker #4: A portion of the IPO proceeds is definitely planned to be utilized in the U.S., and if we have not completed the U.S. refinancing, I can assure you it will be a part of that.
Speaker #4: But the process we have currently is a refinancing without India IPO funds included. It just makes it easier. Of course, if the amount we are refinancing is smaller, we are anticipating that the IPO would also provide substantial growth funding in India.
Speaker #4: Essentially, fully funding a very strong revenue increase. And because of our intention of having 75% or more ownership by the parent company, all those revenues would drive top-level growth in the United States.
Speaker #4: So we we expect to refinancing as well as top level and bottom line growth to come from the India IPO .
Speaker #9: That sounds good . And just a clarification . Again , India doesn't have any debt right now . Right ?
Speaker #4: That is correct. Yeah. Other than when it.
Speaker #10: Buys when it buys when it buys inventory. Of course.
Speaker #4: It has to pay for the inventory.
Speaker #9: Great . Well thank you . And I wish you guys good luck . Thank you .
Speaker #4: Thank you .
Speaker #1: Thank you . We have reached the end of the question and answer session . I'll now turn the call over to management for closing remarks .
Speaker #4: Thank you to Ahmed . Stockholders , stock analysts and others for joining us today . We look forward to talking with you about your participating in the growth opportunities at AEMETIS, INC .
Speaker #4: Todd, thank you for attending today's earnings conference call. Please visit the investor section of our website for more information.
Speaker #11: The website , where we'll post a written version and an audio version of this . A meta earnings review and business update . Matthew .