Gevo Q3 2023 Earnings Call Transcript

Quartr
Provided by Quartr
November 13, 2023

There are 8 speakers on the call.

Operator

Good day and thank you for standing by. Welcome to the Gevo Incorporated Q3 2023 Earnings Conference Call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer session. Please be advised that today's conference call is being recorded.

Operator

I would now like to turn the conference over to your speaker for today, Doctor. Eric Frey, Vice President of Finance and Strategy. You may go ahead.

Speaker 1

Good afternoon, everyone. This is Eric Fry, Vice President of Finance and Strategy. I'm responsible for Investor Relations here at Gevo as well. Thanks for joining us to discuss Gevo's 3rd quarter results for the period ended September 30, 2023. I I'd like to start by introducing today's participants from the company.

Speaker 1

With us today are Doctor. Patrick Gruber, Gevo's Chief Executive Officer and Lynn Small, Gevo's Chief Financial Officer. Earlier today, we issued a press release that outlines the topics we plan to discuss. A copy of this press release is available at our website atwww.gevo.com. Please be advised that our remarks today, including answers to your questions, contain forward looking statements within the meaning of the Private These forward looking statements are subject to risks and uncertainties that could cause actual results to be materially different from those currently anticipated.

Speaker 1

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. We disclaim any obligation to update these forward looking statements. In addition, we may provide certain non GAAP financial information on this call. The relevant definitions and GAAP reconciliations may be found in our earnings release, which can be found on our website at www.gvo.com in the Investor Relations section. Following the prepared remarks, we'll open the call for questions.

Speaker 1

I would like to remind everyone that this conference call is open to the media and we are providing a simultaneous webcast to the public. A replay will be available via the company's Investor Relations page. I'd now like to turn the call over to the CEO of Gevo, Doctor. Patrick Gruber. Pat?

Speaker 2

Thanks, Eric. Good afternoon, everyone, and thanks for joining us on our call. We are filing our 10 Q today and we ask that you refer to it for more detailed information after this call. On our last earnings call, I explained what we have been investing in, what it means, how we think about further investments, our use of capital and progress against milestones. We remain focused on that execution plan.

Speaker 2

Today, I would like to focus on recent events in the Q3 and provide an update 1st, our net 0 1 alcohol to jet staff plant is 3 months into the formal due diligence and term sheet negotiation Phase for a U. S. Department of Energy loan guarantee. We said in August that it would take up to 12 months to complete the process and based Upon the positive progress we have made this quarter, we believe we are on track. 2nd, our dairy manure RNG business completed its expansion to 400,000,000 BTUs per year of capacity.

Speaker 2

RNG is generating positive standalone adjusted EBITDA. This is in spite of the fact that California LCFS prices are low in the $70 to $80 per metric ton range versus around $200 per metric ton a couple of years ago. It is also in spite of the fact that we are operating under our temporary LCFS pathway of Negative 150 carbon intensity. So we expect our RNG cash flows to improve next year when we get Our anticipated permanent pathway of a minus 350 carbon intensity. We also expect RNG cash flows to improve as we ramp up volumes and debottleneck the plant.

Speaker 2

3rd, let's talk about Verity Carbon Solutions. Last quarter, we entered into an agreement with our 3rd ethanol producer customer, bringing our total customer capacity to over 300,000,000 gallons per year That's about 2% of the entire U. S. Ethanol market. That's good work considering we've Our first customer agreement was announced in March and so that's lots of progress that the Verity team has made.

Speaker 2

Verity is Gevo's measure report VERIFI or MRV business for carbon tracking. This also falls under the industry nomenclature of Software as a Service or SaaS. This is a rapidly growing capital light business of ours where we see a lot of potential on its own in addition to being strategically complementary to our net 0 alcohol to jet projects. Finally, We are pleased to announce some key new members of our team last quarter. Doctor.

Speaker 2

Angelo Amarelli was appointed to our Board of Directors. Angelo recently retired from BP where he held innovation roles for 35 years focused on development of clean fuels of all types. He's a Cambridge University graduate and holds a PhD in chemistry. He's a fellow of the Royal Society of Chemistry. He's actually an expert in all types of renewable businesses and technologies.

Speaker 2

He's a great addition to our Board. We're pleased to have him. Andy Schaeffer joined us as our Chief Marketing, Customer and Brand Officer. Andy previously worked as leader in the biobased polymers company now known as NatureWorks. A number of us here at Gevo worked with Andy when we invented Polylactic acid or PLA, which use fermentation technology and chemistry to produce sustainable bio based substitute to fossil based products From and we track it all the way from the farm to the end customer.

Speaker 2

It's very much like what we're doing today at Gevo, except for our Gevo course, we're doing Sustainable Aviation Fuel. It's a pleasure to have Andy with us again. He gets it. He knows what the problem is. He knows how to work with the customers.

Speaker 2

Now I'll pass it off to Lynn to talk through the operations and the numbers.

Speaker 3

Thanks, Pat. Teva's Q3 combined revenue and interest was $9,800,000 with the interest income benefiting from higher interest rates. Our corporate spend, that is SG and A, was 6 point $4,000,000 for the quarter, excluding non cash stock based compensation of 4,100,000 which is a $300,000 decrease from Q2 as a result of our cost control efforts. Debt related to the Northwest Iowa RNG project was $67,800,000 consisting of $68,200,000 face value less unamortized $400,000 premium and issuance costs. We ended the Q3 of 2023 with a Strong liquidity position of $401,300,000 in cash, restricted cash and other liquid investments.

Speaker 3

The restricted cash portion is associated with our Northwest Iowa RNG bonds and certain collateral related to the development of Net01 and totaled $77,800,000 During the Q3 of 2023, we invested and capitalized $12,000,000 cash and capital projects comprised of $8,700,000 into net01, dollars 1,700,000 into the expansion of our Northwest Iowa RNG project, dollars 1,400,000 into other net zero projects and $200,000 into our hydrocarbon skid. We also invested $19,900,000 of capital with a 6 related BIE to allow the purchase of wind and hydrogen equipment On Net01, we are working to derisk the project to non recourse standards to obtain the DOE loan guarantee and attract The 3rd party equity capital necessary to finance the construction budget and all the project finance elements such as interest during construction, Various reserves and transaction costs. The infrastructure and energy transition private equity market as well as certain strategic investors are reacting well to the process of delivering an investment package that is financeable. The equity process will ramp up next year from the current information sharing and preliminary due diligence to full due diligence and negotiations, which we expect will occur in parallel with closing in on the DOE loan guarantee terms.

Speaker 3

Our dairy RNG project in Northwest Iowa has been injecting into the pipeline since June of 2022. During Q3 2023, we sold 81,271,000 Btu of RNG. Revenue of $4,500,000 for the quarter included RNG sales of $200,000 $4,300,000 net proceeds from the sale of environmental attributes. During the quarter, we also completed our previously announced expansion to 400,000 MMBtu per annum of capacity. And I'm pleased to tell you that we have proven that annualized run rate.

Speaker 3

We are now working through optimization of the whole system And we expect the operational improvements we're making will further increase production, increase reliability and reduce O and M cost. Finally, I'd like to emphasize a comment from the last earnings call. We see a pathway to positive cash flow for the company. This is independent from and in addition to Net01 being financed and operating. This is based on our view of the growth of our RNG business And our Verity business, our cost trimming and our flexibility on the pace of discretionary growth related spending.

Speaker 3

It is too soon to provide exact guidance and timing, but we look forward to doing so when we have our permanent carbon intensity pathway at Northwest Iowa RNG and when we have more information around Verity. Now I'll turn the call back over to Pat.

Speaker 2

Thanks, Lynn. Let me wrap up our prepared remarks by saying, even though it feels slow while we're waiting for the IRA rules to be clarified, We are not sitting idle. We're making progress. We're moving ahead. We're laser focused on being good stewards of our capital.

Speaker 2

We believe Gevo was undervalued given our balance sheet and growth potential. It's frustrating. However, we know we are living through A once in a generation transition of our entire economy towards a focus on carbon abatement and Gevo is one of the companies on the forefront of that energy transition. For this reason, we have been seizing the moment to deploy well placed capital into the net zero plant designs for ATJ and ethanol, which Gevo owns, and of course, we've been developing site locations because we plan on growing We are also executing complementary strategies that will create value for us long term such as Verity and RNG And Ethanolto Olefins, or Eto, which not only support our net 0 ETJ strategy, but have potential to generate maximum value for shareholders separate than SAF opportunities. As Lynn alluded to, we recognize the importance of being good stewards of our cash and getting to positive cash flow as a company.

Speaker 2

We can do more than one thing at a time. So even as we are pushing ahead on net01, which we All believe will unlock substantial long term value for us. We are also pushing the development opportunities, RNG and Verity, which we expect would get us to positive cash flow long before NZ1 comes into operation. And of course, that should unlock value as well. Let's open it up for questions.

Speaker 2

Operator?

Operator

Thank you. The first question for the day will be coming from Derrick Whitfield of Stifel. Your line is open.

Speaker 4

Thanks and good afternoon, Pat and team and congrats on your progress with the North

Speaker 2

Thanks.

Speaker 4

Starting on SAF more broadly, Given the benefit of your completed FEED study and the reset we've experienced in RIN pricing, could you share your thoughts on the economics of bringing an SAA project to market And the current environment, I know that net01 will be focused on SAP and that's better than R and D. But again, I'd love your thoughts on that more broadly.

Speaker 2

Yes. Well, the big question around the economics of SAP is all around the ruling for the IRA deal under Section 40B and 45 Z, and those rules aren't out yet, because that's the part that actually will describe how it is that the IRS is supposed to take into account the carbon reductions from CI score of $0.50 and less. And remember, it's $0.03 per CI point per gallon. So we're waiting to see with that. Everything else is transient.

Speaker 2

It will go up and down, the RINs will go up and down and stuff, but we got to see what that rule looks like. And it's been overdue almost a year already. And so We're waiting to see what happens and then we'll be able to adjust from there. The thing that's interesting about SAF is that it is a full drop in. It's proven to work, airlines need it.

Speaker 2

And so we believe we have the lowest cost route to make SAF And with particularly when you take into account the CI score. So we know there's a market here for our stuff. We just got to be able to finalize pricing. We'll be able to do that until we see that IRA bill rule. So it's not about RINs at all.

Speaker 2

It's about the IRA bill.

Speaker 4

And Pat, maybe just stay on that point because when you think about the IRA build and the importance of decarbonization via CCUS, That should inherently make a greenfield project in some ways more economic than a brownfield. Is that a fair assessment?

Speaker 2

It is. So the way to think of it is that carbon capturing what we're talking about is carbon capturing of the CO2 Directly off the fermentation of the alcohol, that's worth about 30 CI points. 30 CI points It is quite a lot there. Now for us in our net zero one design, we would hope you will take full advantage of that. And it's very helpful, throw money.

Speaker 2

And there's it's a competitive marketplace in the states. So a lot of states We're for sure going to have CCS. And there's lots of discussion in other states as to what should happen and how should it happen. But CCS is going to be important in the long run game and it matters economically. Now here's the thing about ethanol plants.

Speaker 2

If you have an existing ethanol plant, You don't have access to CCS. You have zero chance, I believe, producing a jet fuel saff With a low CI score. The reason for that is most ethanol plants are probably in the, I don't know, 70 CI score range. So knocking off 30 points It's helpful, but it doesn't get you over the hump of what it takes to make competitive staff. So you have to do something about decarbonized energy.

Speaker 2

Well, of course, that's what we did in this approach we took up with Net Zero 1 where you range the wind, that's why you see us doing the green hydrogen too And doing biogas. So we have multiple levers, multiple shots on goal. And that's how we would approach a brownfield plant as well. And so when we look at There are several of those opportunities that we see and we would look at them for their full ability to be decarbonized of which CCS is a part.

Speaker 4

That's great. And maybe staying on, again, part of the question, but maybe shifting that over to Verity. When you think about the outlook for ethanol to Jet, what's that near and long term value proposition look like for Verity?

Speaker 2

Well, it's interesting. There's actually several. And the one way to think of Verity is just the proof And really super documented proof that in fact there really was a carbon abatement and it tracks it all the way across the whole of the business system, all the way from Cash free carbon in a field at a farm through the production facilities all the way out to the wing of an airplane, actually all the way out to the seat at an airplane. So someone who's buying that seat Could, in theory, when the product is fully implemented, you could know what it is that The exact carpet abatement pathway throughout. That's the beauty of this technology uses blockchain or DOT technology.

Speaker 2

We've already got it working In the field and production facilities. So it's pretty darn interesting for the whole SaaS chain. Think of it as a really super Sustainability certificate that's bulletproofed and that's valuable. That's going to be valuable and key because That's the proof that in fact you got what you paid for. Now when it comes to ethanol, we also we have been working with these ethanol plants, One of the public ones we announced was SIR, but we've done 2 others is that we're working on verifying their data, taking their process instrumentation data, Transforming it into the data that's used for calculating the CI scores, so that they can actually see what's going on in their plant.

Speaker 2

That's also valuable because then we can use it to lower CI score of ethanol and measure it and monitor it. The team is working now to There's another part of this, which is around the field attributes. We have a $30,000,000 grant from the USDA and that is all about documenting fields, fields not farms, not regions, Fields. And we actually have a tool that's working with farmers out in the fields, which has been in operation now, development and operation for 3 years and we just got it onto the handheld form. And farmers can tell field by field what's different.

Speaker 2

That's a huge deal because that allows them to have the information available to them We say make better different and hopefully better decisions about how to improve the sustainability on their farm. It's in those avenues that we see the potential and there'll be multiple ways of making money from it. Some of it would be Providing a service, some of it will be profit share, some of it might be actual tokenization of carbon or something like that in the future.

Speaker 4

That's helpful. Thanks.

Speaker 2

And it's a big it's a huge potential market. The potential market we're told, we just had McKinsey in here doing a study and it's in the billions. So we're going to do a little more work on this. I got to see the exact business plan. So when Lynn is referring to the guidance of what should happen and when should it happen, the team, they're doing a good job.

Speaker 2

This is a huge project and it's a software and a data collection Field work, a bunch of things. It's definitely not heavy duty capital, but the market potential we're being told is really big. So we like that a lot.

Operator

Thank you. One moment for our next question. Our next question will be coming from Sameer Joshi of H. C. Wainwright.

Operator

Your line is open.

Speaker 5

Hey, Pat, Lynn. Thanks for taking my questions. So On the DOE loan process, I know it seems to be on track, but will you be providing any like No milestones or any deliverables that happened during the quarter, how should we look at it in terms of tracking it?

Speaker 2

No, we won't. We don't plan on it. The thing that we're watching for is getting to the close or the I guess there's a final notice That they're going to give you the money. That'll take a while to get to that. But doing the little details, I don't want to no.

Speaker 2

There's just too many things. They have to go do the diligence. They have their own Consultants are on their timeline. They control the timelines. We control nothing.

Speaker 2

All we do is help and provide information and input. So I can't see any kind of a win that's constructive for shareholders here Because they're continuing to make progress and we'll report on it. That's the very best thing.

Speaker 5

And So part of the reason for that question is how will the equity partners or strategic partners that you are working with now Track that. Are you sharing information? Will you be sharing information with those kind of partners?

Speaker 2

We are and have been, yes. There's a quite a long queue of them and stay in touch with us. And so the big variables that we have here are the same as we've talked about before. Everyone wants to know what the 45z is going to say. We need a number.

Speaker 2

You know what, any number is better than no number because then we can get on with figuring out The margin and what's going on and what the gaps are and how to fill the gaps. So that's just we got to have that. And then The DOE program, our project is solid. We've done more engineering. We have never in my life in many of the projects that I've ever been involved with my guys have ever been involved with have we done this much engineering on a project to pin and this is partly because we're in inflationary environments, we're always having to update stuff.

Speaker 2

But it's like never have we done this much engineering. And so it's as derisked as we can possibly make it on every front you can think of. And We'll plug through it and get it done.

Speaker 5

Understood. On the ETO, the ethanol coalescence, What is the development work that is going on? Like is there like what exactly is happening on that front?

Speaker 2

Sure. So that's we've licensed the technology to LG and they're a partner with us and helping to develop it. And their particular interest is they want to make propylene For polypropylene, that's a plastic. It goes in all the way from diapers to car bumpers and consumer goods and the whole bit, right? And the proposition would be Massively negative polypropylene and people are interested in chemicals and so that would be pretty cool.

Speaker 2

No one was ever seen a polypropylene With this kind of negative carbon values. So that's what's interesting about it. We'll not go through the discovery of how How much people will pay and all that kind of stuff. But they're a great partner. They're doing a lot of work on doing development right now.

Speaker 2

I was in Korea here with Paul Bloom Recently. And you know what, these guys are making great progress. They're really good at the catalysts and things. And of course, Those proprietary catalysts are really important and this is stuff that we have our patents filed on. So it's all really good.

Speaker 2

And then also that technology, We believe cuts out large quantities of capital from making jet fuel from ethanol and it also cuts operating cost. Now it won't be ready in time for Net01, so we're going to go ahead with Net01 anyway. Maybe it's ready for Net02. I don't know. We'll see.

Speaker 2

We have to go through the work and find out what it is we don't know yet. We're scaling it up. So to answer your question directly, the next stage is to get those catalysts scaled up. That's part of it. And then scale up the process itself.

Speaker 2

And we'll be doing that over the next 6 months, 8 months, something like that. No doubt, we're running into something we don't know yet and then we'll have to overcome that. But it's looking pretty good and we'll also bring in other partners To help develop it and get it implemented fast because the potential is huge.

Speaker 5

Got it. Thanks for that. And one last one and this is a clarification. The 100,000 MMBtu per quarter, Is that the capacity or the actual production that will be achieved by the year end? Just wanted to make

Speaker 2

sure. Well, they've already demonstrated for running through several weeks at that run rate.

Speaker 3

So the

Speaker 2

system is capable of it. Now there's other things we're looking at to see whether bottlenecks and equipment and whatever needs to be adjusted. So we're doing some of that. So I think I would expect that like, I don't know, probably winter is never easy to run one of these plants. But Let's say, next year, I'd expect that to be more of the run rate of 100,000,000 BTUs.

Speaker 2

Got it. We should hit our targets. This year, we'll hit our targets for what we had projected, at whatever it was, above 300,000,000 BTUs. We'll accomplish that goal.

Speaker 5

I think it was.

Speaker 2

Yes. And it may be that there was a hiccup with there was like if a freeze gets us or something, that can happen and that might You know, dang it, but we'll be in there. We'll be right in there.

Speaker 5

Got it. Thanks and good luck.

Speaker 2

Thanks.

Operator

Thank

Speaker 2

you.

Operator

Our next question will be coming from Sean Severson of Water Tower Research. Your line is open.

Speaker 6

Great. Thank you. Pat, I wanted to go back to Verity for a moment and try to understand Is there another is Verity sort of the de facto solution then that would be used for this? I mean in other words for an ethanol plant To use to count any of the feedstock in terms of their CI score and how it's coming in, Was they going to have to use Verity in order to quantify that and be able to use it in their CI calculations?

Speaker 2

As far as calculating a CI score, people can do that In multiple different ways, what we're trying to do is bring together incredibly high quality data along with the methodologies that are incredibly high quality. And then it's put on to DLT Technology. Now DLT Technology is the technology that's behind blockchain. It allows it so no one can mess with it at all. It's auditable, traceable, completely detailed and you can't mess with it.

Speaker 2

It's put down on data, you can't change it. So there's no game playing involved here. That's what makes it attractive. So there's 2 parts in an ethanol plant. There's the plant there's the part that when you're running a plant itself, How one does CI reduction or carbon reductions or call it they might have choices about Whatever they're doing in their plant, that's part of what needs to be documented.

Speaker 2

And then of course, it's documented the feedstock that comes in. The way that we view this is that these make for very high quality carbon credits insets that people are willing to pay for, they tell us. Well, we got to go prove that out, See if they really are willing to pay for these high quality inset credits. Inset credits versus an offset credit. Inset credit means it's something directly related to supply chain that you're involved in and offset would be you fly an airplane and you go plant a tree, that's an offset.

Speaker 2

This is actually insets that are done in the supply chain. That means that you're tracking it all the way to gasoline and things like that. So there's lots of interesting things that can be done on carbon and different plants have different CI scores. This goes into great detail about those things and allows it to be documented and it makes them such a high quality that people appear to be willing to pay for it. This also is true then of the agricultural system.

Speaker 2

Remember in an agricultural system like we have, you have the farms And we want people doing sustainable agricultural practices. It's our premise that if farmers get rewarded and paid for improving Sustainability of their farm, including the carbon reductions or carbon capture in their soil, that benefits the whole of the supply chain by bringing forth a corn That is very low carbon score, but it is also producing protein and oil as well. And so And we like it because it takes away the arguments that we hear from so many environmental groups that say, oh, farming is bad. I got news. We got data that says farming is very, very, very good.

Speaker 2

And so we should reward the farmers that do very, very well. There's lots of interest in this. Now the technique That we're doing, it applies not just to corn farming, it applies to beans, it applies to not just an ethanol plant, it applies to any Biofuel plant. And so Verity is interesting on all of those fronts. And it's not so it's way bigger that way bigger potential than just what we're doing, What ethanol plants are doing, it also includes biofuels and also can track into the food markets with protein and such.

Speaker 2

But we'll have to stay focused And get this thing commercialized. I want to see the money. I want to see people pay us for the products itself. I get we'll get paid for services. I want to see the product, the carbon reduction value.

Speaker 6

How much can sustainable farming practices reduce that CI score if you look at the value chain? Obviously, you're most familiar With yours in ethanol and staff, but is it a material impact that the farming practices can have on the CI score and hence the value?

Speaker 2

About that is it's kind of mind boggling of what's possible. So one of the assumptions that whenever you're seeing these people I mean broadly espouse about row crops and crops are bad and blah, blah, blah. They're using really outdated data and they have no they're out of touch with what really is done In real life in modern farming, there's equipment nowadays where like John Deere has a

Operator

Thank you. One moment for the next question.

Speaker 2

Excuse me, I was answering Sean's question. So, yes, Sean. So what happens is that imagine the potential is that Right now, we're at about we've seen farms with positives in They increased carbon incrementally. We've seen very negative carbon. There's all kinds of new techniques that are available to drive carbon score down.

Speaker 2

And we've seen things that have potential like minus 100. And so we're at the very beginning, I think of an evolutionrevolution in farming as we get better and better at looking at the data, collecting the data, managing the data, paying people To drive the carbon abatement down. And you get other benefits too in the whole sustainability arena. So for example, I was mentioning a that you get a When your John Deere has a tractor that can go it has cameras on it for herbicide and it's an herbicide plier. You drive along at 15 miles an hour and the machine recognizes a particular kind of weed and sprays the particular kind of herbicide on that weed At 15 miles an hour.

Speaker 2

So guess what, huge amount of reduction in the amount of herbicide that's applied to that field. That's huge. And same thing you do that with fertilizer and all the rest. So the techniques, people have misunderstood The Earth thought that agriculture is mature, it's not mature. There's a data revolution, equipment revolution occurring.

Speaker 2

And we're paying attention and that's what our Verity

Operator

Okay, thank you. One moment for the next question. And our next question will be coming from Habib Sinha of North Land Capital Markets, your line is open.

Speaker 7

Yes. Hi. Thanks for taking my question. If you could remind us How much capital do you need actually right now to build the project? And How much do you actually expect from DOE?

Speaker 2

Lynn, you want to take that one?

Speaker 3

Sure. Our hard costs for the projects are tracking as we do the detailed engineering and work Through the remainder of the year and into Q1 to finalize lump sum pricing tracking at about $1,200,000,000 $1,300,000,000 for the hard cost. As far as the DOE loan, that's a function of the debt service coverage ratios and other terms, the maturity of the offtakes. And we're modifying certain features of the project to allow for a higher debt capacity. We've applied for $950,000,000 of debt and we think we'll succeed at that level.

Speaker 3

But there are other costs associated with a project financing like you have to pay you have to prepay or Sorry, provide for the interest during construction and other reserves associated with the debt. So that adds to the total financed installed cost.

Speaker 7

Got it. And like how much have you really invested in the financing and securing the equipment and materials? And how much more you think is required? And when do you expect that capital to be deployed?

Speaker 3

Well, we've spent about $100,000,000 to date on the development of Net01. Out of that $100,000,000 it's comprised Site control permitting, a lot of engineering, which is not a hard asset, but it's IP. And then a certain amount That is equipment deposits. So by the time we get to financial close, we could be $150,000,000 in including more equipment deposits. And we would then choose depending on the structure of the equity whether how much of that We leave in the project as equity in kind, but we don't I think the total financed install cost That I just mentioned will be substantially more than $100,000,000 or $150,000,000 So we have to go get 3rd party capital for that.

Speaker 3

That's why we're in process with the DOE and third party equity investors at the project level.

Speaker 4

Sure.

Speaker 7

Got it. And like, I mean, in terms of your project financing, I mean, you have to get the EPC wrapped up. And then I'm trying to understand like to get EPC wrapped up, you have to get the lump sum turnkey pricing, right? And when does that I mean, if I need to Put my hat on like where exactly I need to put like in terms of where should we latch on like where do we get lump sum Tridentronkey pricing by when should we achieve that?

Speaker 3

So now you're asking questions that sort of is another track of what was asked earlier in terms of milestones, And I don't think we're prepared to talk a lot about those in detail yet. We'll assess a key milestone as it occurs and disclose that. But I don't want to update on those activities.

Speaker 2

Yes, I'd say it's one of these things we can't win at this. And from a standpoint of communicating those kind of milestones Publicly because they're going to change. Everything changes because we find something different. There's, I don't know, like It's an inflationary environment anyways. You're constantly updating things.

Speaker 2

You've got the DOE over here with their questions and we have to adjust to them and we have equity people That we're working with too. And so it's coming together. McDermott's been a very good partner, I can tell you that much. And we've already negotiated the contract. We got to finalize the numbers.

Speaker 2

Volumes and numbers depend upon timing and we're working through it, keeping it updated. They're going through extra details. We're looking at the scope of the project and stuff. But It's all going along on a good schedule. And so we like what we see.

Speaker 2

We're trying to bring it all together, but the rate limiting step is DOE right now.

Speaker 7

Sure. Thanks, Scott. Last one, if I could please, like have you I mean, have you heard anything All right. Had anything changed in terms of your portfolio of Oftego agreement? I mean, are you getting any questions from those guys?

Speaker 7

Has anything changed in terms of Doug, you mentioned there?

Speaker 2

No. The airlines that we work with, they're all cooperative partners for us. They recognize that timelines will have to change. Some of them had Conditions precedents at the end of the year and stuff, but they're all everyone is cooperative and working on extending, modifying them and whatever. They recognize that ATJ is a very low cost route to make jet fuel.

Speaker 2

That matters in this space. It also is the most scalable one, More so than any other technology that's out there, we believe, and I think they will too. We'll be out talking more about this with people more Publicly, we just wrapped up a study that we do with McKinsey here for the last few months and they verify what we thought they did independently. We like that. And so we just got to there's so much noise in this space.

Speaker 2

There's only a few things that can work. You think about it, you got to have something that's cost effective, check. You got to have something scalable, check. Something that's leverages existing infrastructure, right, drop in, Green stock wise and on the product side, check and check. So getting everyone to understand this, that this is the game afoot And HEFA is a that's the stuff that's made from oilseeds or from waste fats and oils that's made from renewable diesel.

Speaker 2

That has potential too, but it's got its own issues because it takes away from renewable diesel or competes and it adds cost to renewable diesel in order to make SAF And it's limited on feedstock supply. So it's a ATJ is a really, really good product and we're more confident about it every single day about that.

Operator

Thank you. At this time, there are no more questions in the queue. I would like to turn the call Back over to Pat Gruber for closing remarks. Please go ahead.

Speaker 2

Well, thanks for everybody's support. And I'll tell you, it's been it has been frustrating. I mentioned that in the prepared remarks, But it's a it has been frustrating waiting for 45 gs. I never believe it would take this long, but we need to know the numbers so we can get on and figure out the rest of the details for the projects. And overall, the pieces are here.

Speaker 2

They're coming together. You heard me just talk about us doing a study of really looking ourselves In the mirror is do we have it right? Do we have it thought that we had to bring in the consultants and stuff? Yes, we're convinced we have it right. And it's the right thing.

Speaker 2

I really this Point that Lynn made in his prepared remarks about we are not going to be we're not going to wait to be profitable until NZ1 is up. We're going to try to be profitable long before that. That's our duty and responsibility and that's we're going to try to make happen. So it's not a one trick pony betting all over. It's not a one trick pony.

Speaker 2

So anyway, we are keep an eye on us. It's an exciting time. This Verity is particularly exciting. RNG, we like that a lot. And You know, it's I think we have all the pieces here.

Speaker 2

It's just getting it down and put them in the right places and get on with it. Thank you everybody for joining us.

Speaker 6

Thank

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Earnings Conference Call
Gevo Q3 2023
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