Gevo - Earnings Call - Q3 2020

Transcript

Speaker 0

Welcome to the Gevo's Third Quarter twenty twenty Earnings Conference Call. My name is Kathryn and I'll be your operator for today's call. At this time all participants are in a listen only mode. Later we will be conducting a question and answer session. Please note that this conference is being recorded.

I'll now turn the call over to Jeffrey Williams, Gevo's Vice President, General Counsel and Secretary. Please go ahead Mr. Williams.

Speaker 1

Good afternoon, everyone, and thank you for joining Gevo's third quarter twenty twenty earnings conference call. I would like to start by introducing today's participants from the company. With us today is Patrick Gruber, Gevo's Chief Executive Officer Lynn Smull, Gevo's Chief Financial Officer and Carolyn Romero, Gevo's Vice President and Controller. Earlier today, we issued a press release that outlines the topics we plan to discuss today. A copy of this press release is available on our website at www.gevo.com.

I would like to remind our listeners that this conference call is open to the media and that we are providing a simultaneous webcast of this call to the public. A replay of today's call will be available on Gevo's website. On the call today and on this webcast, you will hear discussions of certain non GAAP financial measures. Non GAAP financial measures should not be considered in isolation from or as a substitute for financial information presented in accordance with GAAP. Reconciliation of these non GAAP financial measures to the most directly comparable GAAP financial measures is contained in the press release distributed today, which is posted on our website.

We will also make certain forward looking statements about events and circumstances that have not yet occurred, including but not limited to projections about Gevo's business development plans and operating activities for the remainder of 2020 and beyond. These forward looking statements are based on management's current beliefs, expectations and assumptions and are subject to certain or significant risks and uncertainties, including those disclosed in Gevo's Form 10 ks for the year ended December 3139 that was filed with the U. S. Securities and Exchange Commission and in subsequent reports and other filings made with the SEC by including Gevo's quarterly reports on Form 10 Q. Investors are cautioned not to place undue reliance on any such forward looking statements.

Such forward looking statements speak only as of today's date, and Gevo disclaims any obligation to update information contained in these forward looking statements, whether as a result of new information, future events or otherwise. On today's call, Pat will begin with a discussion of Gevo's business developments. Lynn will discuss the status of the Citigroup financing process, and Carolyn will then review Gevo's financial results for the third quarter of twenty twenty. Following the presentation, we'll open up the call for questions. I'll now turn the call over to Pat.

Speaker 2

Thanks, Jeff. This past quarter was extremely significant for us. We now have about 48,000,000 gallons per year of take or pay offtake agreements in place, representing approximately $1,500,000,000 across the life of those contracts, which would run about six to seven years from the start of full scale production. These take or pay contracts are being used to secure the funding to build plants. Not that long ago, we were working hard just to sell out the capacity of our Luverne facility.

Our business has now changed. We now have demand for our products and with contracts that justify more than one production facility. Luverne is not big enough to service the contracts we already have signed. The increased demand is significant because it shows potential investors that our plant projects offer significant growth potential beyond just La Verne. That's important because people want to see platforms projects.

Not only that, potential investors in the project see clearly that we have the funds to fully pay off White Box. Before we raised money this past quarter, there had been a real question of how we deal with White Box. White Box, from a potential investor point of view, complicated future deals because White Box, by the way, has been an outstanding partner over the last seven years, has a senior secured position in all of GIVO assets, the physical and intellectual property. Well, now we have the money in the bank to pay off white box and remove the liens. Being able to pay them off clearly is a big deal.

Nothing can prevent that from happening by year end. We also now have the money to do the required project engineering and development work necessary to secure project financing. In fact, we've already started to move forward on this. We are in the midst of choosing additional plant sites. Our choice of plant sites is impacted by the ideas of our potential equity investors.

Yes, you heard me right. While we haven't announced who our potential equity investors are, we are working with several potential partners. Lynn will talk more about the Citigroup financing project in a couple of minutes. On the business development front, we are expecting to secure additional large offtake agreements. Negotiations are progressing, albeit not fast enough for my taste.

I would prefer to announce them already, but they aren't inked yet. We have more players in the mix wanting more volume, and that's great. But we need the details pinned down, the contract signed so we can then pin down additional plant sites as well as the total number of plants. In the meantime, we are getting on with the engineering for the 48,000,000 gallons per year of plant projects that are already under the contracts. I expect that in the near future, we will announce the names of the engineering firms that we'll be using to engineer and build the projects.

So for the first time in many years, and this is a big deal, we aren't in the mode of having to raise money just simply to stay alive. Now it's all about project execution and growth. It's about leveraging our technology, the marketplace development that we already have in place and getting the project financing secured to build multiple projects. With that, I will turn the call over to Lynn to provide more details on the project finance process with Citigroup. Lynn?

Speaker 3

Thank you, Pat. The Citigroup process to assist Gevo in securing financing to build out our production capacity is going well. Recall that we're trying to raise about $700,000,000 at the project level, which would finance three plant construction projects to supply about 70,000,000 gallons per year. We anticipate that this financing would require about $200,000,000 in equity and $500,000,000 in debt. Citigroup is helping us with both the debt and the equity.

This $700,000,000 in funding would be invested in special purpose project entities that are non recourse to Gevo. We anticipate that Gevo will be a minority equity holder in the SPVs. By raising money at the project level, we avoid a couple of issues. First, it's not dilutive to Gevo Inc. Stock.

And second, it allows us access to capital from companies and funds who may have limitations on investing in Gevo stock and may have preferences for specific project exposures. On the equity side, we have several term sheets that are more than enough to cover the equity needed. Each of these potential investors is deep into diligence. This isn't like investing in penny stocks where people buy them knowing nothing. In project finance, investors go through every detail.

They hire experts who have to vet the information from technology to commercial structure to pro form a financial results. Project investors, both debt and equity, require a complete understanding of the risk return proposition. After they complete their diligence, we would move to finalizing equity investment terms. The timeline for diligence typically takes months even if we weren't in a COVID world. Despite COVID, we've become pretty adept at dealing with COVID by increasing our use of video conferencing.

Once the diligence phase is complete and we've agreed on financial terms, we would enter into binding agreements for the investments and advance the work to meet typical project style conditions precedent to financial close. On the debt front, Citigroup has been figuring out the best options and we believe we have a clear path to a debt format and structure that should appeal to investors. The debt to build out the plants doesn't get into place unless the equity commitment is assured and vice versa. These closings are essentially simultaneous. We're also paying attention to timing.

We have approximately 48,000,000 gallons per year under contract. The city projects contemplate 70,000,000 gallons per year. We don't have to do all 70,000,000 gallons at once, which is why Pat said we are moving forward on the first two plant sites now. As we pin down the next set of customer contracts and their volumes, we'll also pin down a third site and begin development work in engineering for that site as well. We have strong players who have strong strategic and financial reasons for wanting to invest in Gevo's projects.

Stay tuned. Now I'll turn the call over to Carolyn who will take us through the financials. Carolyn?

Speaker 4

Thank you, Lynn. Gevo reported revenue in the 2020 of $200,000 as compared to $6,100,000 in the same period in 2019. During the third quarter of twenty twenty, hydrocarbon revenue was $100,000 compared to $600,000 in the same period in 2019. Hydrocarbon sales decreased because of lower shipments of finished products from our demonstration plant at the South Hampton Resources facility in Silsbee, Texas. During the third quarter of twenty twenty, revenue derived at the Luverne facility from ethanol sales and related products was $20,000 compared with $5,600,000 during the same period in 2019.

As a result of COVID-nineteen and unfavorable commodity environment, we terminated our production of ethanol and distillers grain in March 2020, which resulted in lower sales for the third quarter. Cost of goods sold was $2,300,000 in the 2020 versus $9,900,000 in the same period in 2019. Cost of goods sold included approximately $900,000 associated with the production of IBA and related products and the maintenance of the Luverne facility and approximately $1,400,000 in depreciation expense. The gross loss was $2,100,000 for the 2020 versus $3,800,000 for the third quarter of twenty nineteen. Research and development expense decreased by $900,000 during the 2020 compared with the same period in 2019 due primarily to a decrease in personnel and consulting expenses.

Selling, general and administrative expense increased by $800,000 during the 2020 compared with the same period in 2019 due primarily to an increase in personnel, consulting and insurance expenses and then professional fees offset by a decrease in investor relation expense. For the third quarter of twenty twenty, we reported a loss from operations of $6,100,000 compared to $8,000,000 for the same period in 2019. In the third quarter of twenty twenty, cash EBITDA loss, a non GAAP measure that is calculated by adding back depreciation and non cash stock based compensation to GAAP loss from operations was $4,000,000 compared to $5,800,000 in the same quarter of 2019. Interest expense for the 2020 was $500,000 a slight decrease compared to the same period in 2019 as a result of lower amortization of original issue discounts and debt issuance costs and the conversion of $2,000,000 of the twenty twenty-twenty twenty one notes to common stock during July. For the third quarter twenty twenty, we reported a net loss of 6,800,000.0 or a loss of $09 per share based on a weighted average shares outstanding of 77,049,896 shares.

This compares to a loss of $8,600,000 in the 2019 or a loss of $0.66 per share based on a weighted average share outstanding of 12,968,265 shares. In the third quarter twenty twenty, we recognized net non cash gain totaling $200,000 due to changes in the fair value of certain of our financial instruments such as warrants and embedded derivatives. Also during the third quarter of twenty twenty, we incurred a $500,000 loss related to the conversion of $2,000,000 of the twenty twenty-twenty twenty one notes into common stock during July 2020. Adding back these non cash losses resulted in a non GAAP adjusted net loss of $6,500,000 in the 2020 or a non GAAP adjusted net loss per share of $08 based on a weighted average shares outstanding of 77,049,896 shares. This compares to a non GAAP adjusted net loss of 8,600,000.0 in the 2019 or a non GAAP adjusted net loss per share of $0.66 based on weighted average shares outstanding of 12,968,265 shares.

Now I'll turn it back over to Pat to wrap things up.

Speaker 2

Thanks, Carolyn. I've got a couple other points to touch upon. PRASH continues to make progress. Recall that they are working to license and build plants in India with the idea that the Indian Air Force would be the ultimate customer. I have a suspicion that other airlines might become customers too.

That will continue to make progress over the coming months and over the next year. We are also continuing the development of our biogas projects. These projects are financially attractive, offering significant cash flows and returns. We have the development engineering money needed to secure project financing, so we're moving forward with that rather than being stuck having to raise development expense capital. And we also have the equity needed to move forward.

We have to work on and we continue to work on getting the debt terms, arranged. That's a nice project. It generates nice cash flows. Now looking forward, I expect I will soon announce the engineering firms and additional plant sites. These things, more rather than less, are timing that we can influence.

I expect that we will soon have additional customer contracts to announce and that they should be substantial, and they're being worked on. We are always faster than the big companies we're negotiating with, and timing is in their hands. As I said before, their contracts are progressing. It just isn't fast enough for me. Finally, I expect that as we finalize the equity investors in our plant production projects and get those deals done to the point where they are allowed to be visible, we're going be very glad to tell you about that too.

We've heard from some of you that you may have noticed more activity up at our Luverne site. Well, you're right. There's more going on there. We are in the midst of running a campaign to produce more isobutanol to replenish our inventory. We use the isobutanol that we produce there as a feedstock for the hydrocarbon plant down in Texas.

Haltmann and others want the products. We still see no reason to run ethanol. They would just lose money. So with that, let's open up the call for questions. Operator?

Speaker 5

Thank Our first question comes from the line of Sean Severson with Water Tower Research. Your line is open. Please go ahead.

Speaker 6

Thanks. Good afternoon, everyone.

Speaker 7

Pat, can you just give a

Speaker 6

little more color on who you're talking to and specifically on addressing strategic versus financial investors and maybe compare and contrast, I guess, which won't be preferred by you and why?

Speaker 2

Well, what's interesting about what we're doing, you stop and really look at it, is we're capturing renewable energy. It happens to be in that we're putting that renewable energy into the form of a liquid fuel. It's our liquid fuels can be used in the gasoline sector for automobiles. It can be done for trucks, of course, for airplanes. We're using wind energy, biogas energy, photosynthetic energy, which touches on agriculture.

And so when you start thinking about and hydrogen too, we can because if you have excess wind, you could do something with it. We'll be involved with hydrogen as well. So you start to look at that and who might be interested. It makes for a different slate of people than one might expect because the whole game that is the whole greenhouse gas issue that needs to be solved is how do we get off of coal, fossil based natural gas, fossil based electricity? A business system like ours allows and enables the capture of all those different things and packs that energy into, you know, a fungible fuel in the form of a liquid hydrocarbon, which, of course, can be taken to any market.

That's interesting. So it's a different kind different groups of people are interested in these things. And then as far as the individuals of whether the companies, whether their funds or strategics, is that because the I think that carbon is more valuable reductions of carbon are more valuable to strategics because they have to do something about it. So that's what we're seeing in the midst of all this investment, like, in renewable diesel. And you have all these big energy companies who, not that long ago, you said, no way would they ever invest in such things.

And now that's what they're starting to do. You have that kind of thing. They're they have to do something, and there's no more escaping.

Speaker 6

I just have a follow-up on, looking at liquid fuels, I guess, and kinda comparing that as a renewable solution, I mean, relative to, you know, wind and bio and fuel cell, fuel cell electric vehicles, renewable natural gas, a lot different technologies. And obviously, sometimes I think liquid fuels gets left by the wayside a bit. But can you sort of can you compare and contrast, you know, how that fits into the renewable future? Sure.

Speaker 2

You know, when you look at projections of energy for the future and actually why vehicles are even being sold and you look out to like 02/1950, it's pretty much the same kind of energy profile that we have today, although there is a bigger component of renewable cash. So think of it this way, the growth gets taken up by renewable energy. And of course, we have growth because economies are planned on developing still. But we still wind up with the same kind of a size of a fossil fuel need unless something changes. Now when you think about trying to use electricity, you've got to have new vehicles, you've got to have batteries, and you've got to be able to have a good supply of the batteries.

They have to work long enough. You actually have to have renewable electricity to deliver to those batteries, and it has to be done in a concentrated way so that you can get the bang for the buck in terms of vehicles. You think of it this way with ours. We're taking that renewable energy, packing it into a liquid fuel, and then it uses all the existing infrastructure. There's no change required on the part of the consumer.

No change required on the part of a fleet owner. It's just a different game to play. And so it isn't one or the other. We're gonna need them all because the amount of fuel that has to be replaced, the fossil based stuff, is so freaking enormous that we gotta it's gonna take any and all solutions. So I think it's a question of, you know, in some places it's gonna make terrific sense to have ED.

Other places not so much, you know, like in a rural place. Or it might be that you think about, you know, I mentioned that, for instance, you mentioned fuel cells, I mentioned hydrogen earlier. You know what? If we have wind towers and we're making excess wind, you know, because the wind's blowing and I don't need it for the plant, you know what? I think maybe we ought to make hydrogen out of it and maybe we turn it into something and play in that market sector too.

So when I think I look at the future, I see that it's going to take multiple solutions. We have an interesting one because we're not hung up with infrastructure. We can leverage existing infrastructure. We're not hung up with having to get new fleets and talking everyone into buying a new vehicle. You know what?

Just use the same old vehicle. Lower your carbon footprint by using our products directly. People haven't thought of it much because they've been unaware of these types of things. They just don't know yet. They still look at us and go, what?

You're doing gasoline. You mean ethanol? No. We're not doing ethanol. Ethanol is like the 10%.

We're doing the other 90. What? You can do that. And then we run into this all the time. People just don't they they're learning that it's possible.

So it's interesting. But, of course, this is why Trapagura did sign up with us because they get it. Halter and Carlos gets it. And there'll be others who get it as well.

Speaker 6

Thanks, Tom. My last question, step out, is, is on cash flow. Is this quarter a pretty good proxy, going forward, for cash burn, or is there gonna be any other changes or investments you think you need over the next next couple quarters?

Speaker 2

I think it's pretty typical. They're gonna creep up incrementally a little bit as you know, because we had, you know, reduced staff, and so we gotta bring back a few more people. So it should be pretty typical. We're gonna have chunks that get spent at various times for engineering projects. So these aren't like your typical, you know, R and D burn type things.

You're gonna be you know, we're we're doing engineering work, paying it to a company to deliver on a project, and we expect to be reimbursed as the project closes. So we'll have some of those types of expenses, and we'll be able to give more color on those. So in terms of your basic burn, we're in pretty good shape. What's interesting about this is the question I get most asked is, hey, when are you going to raise money again? Why not have plans to raise money anytime soon?

Although I do recognize that as we get these projects deployed and we have a good partnership with equity investors, it might behoove us to invest because it makes with them, and that might be useful. But that's down the road sometime.

Speaker 3

All right. Thanks, Pat.

Speaker 5

Thank you. And our next question comes from the line of Amit Dayal C. Wainwright. Your line is open.

Please go ahead.

Speaker 8

Thank you. Good afternoon, everyone. Appreciate you taking the questions. To see the final pieces coming together on moving these plans forward. So did I hear it correctly, Pat, that you have equity investors for 48,000,000 gallons already in place?

You're trying to see if you can get, you know, additional investors to come to that 20,000,000 gallon number. If that doesn't come in within a certain time frame, you are happy to move forward with this 48,000,000 gallon financing that is shaping up for you?

Speaker 2

Actually, it's slightly different than that. We actually have equity investors who are willing to put up the equity for all 70,000,000 gallons. Okay. However, we probably tranche it because we have the contract, the take or pay contracts in place for 48,000,000 gallons. And so we can that's clear.

We can move on with it. And then depending upon who takes that next tranche, and there's a couple of them who could do it, then that would dictate where we might wanna locate a plant, and it'll influence a little bit of the decision. But we already have the equity players. We have turn sheets from them for the you know, to do the whole build out of the first three plans. Okay.

Understood.

Speaker 8

So that's a really big development. And alongside that, you are finalizing the engineering firms, or have you already sort of finalized it and you are waiting for certain catalysts before you announce who the engineering firm will be?

Speaker 2

Well, it's it's it's yeah. We have our, you know, we have our lead horse, and we're already engaging him. And, we have to go through know, there's initial step of engineering they have to do. And then when to do the lock the whole turnkey project, there's a couple other people whose names have serviced lately that we have to look at. So it's about we'll announce them at the appropriate time.

We're definitely engaged, Amar. We're definitely engaged. Okay. It's about Do you It's a there's two there's so there's, like, an engineering part, then they're saying, here's here's who's gonna build out the whole giant plants or the two plants with whatever turnkey project. Those are two separate things.

Speaker 8

Right. So so so based on

Speaker 2

this

Speaker 8

commentary, is any of this sort of news flow coming potentially gonna come before the end of twenty twenty, or should we expect announcements around these to happen in early twenty one?

Speaker 2

Don't know yet. It's like, you know, it's not my I I don't I'll I'll do stuff when it's signed. And, you know, the engineering stuff, like, I I think it's more in our control. The site selection's more in our control, so those could happen sooner rather than later. But they will we'll do them when we'll announce them when they're ready to announce, but they could be sooner.

So I would expect those to be sooner. Regarding the customers, I had this is one of these ones where, you know, I I see it growing. So I see the the list of people who want product is growing, and I see that the contracts are being negotiated. There's a couple contracts that I haven't thought have been done by now, but they got caught up in stuff with the other company that had nothing to do with us or nothing to do with our product. It was just their their whole, what's going on with them in the world.

And, it'll get done eventually. And so those could take a little bit longer. But, no, this stuff is still moving forward. I don't know. You know, it's just it'll it'll this year is somewhat unpredictable anyway, so I even hate making predictions.

But in terms of the engineering firms, terms of site selection, that stuff I'd expect to happen sooner rather than later. But I'll announce it when it's ready to announce.

Speaker 8

Because based on, you know, how all this sort of falls in place, you know, and if it happened to fall in place, say, the first half of twenty one, at that point, you know, going into the second half of twenty one, do you potentially start getting paid for development work that you will be, you know, putting into this?

Speaker 2

Right. So the way that this should unfold is that we do the development work upfront, then we get reimbursed for it. If the things hold to schedule, we should start to see some of that money coming back to us late in 2021. So in the late meeting, the latter half, I don't know exactly when, depends upon how things get done and their timing. We have a couple of these partners wanna go faster rather than slower, which, of course, that suits us too.

So what should happen is we'll announce you know, the engineering firms announce the sites. We'll announce to digital customers. We'll announce then who it is that these equity partners are in the project. We'll announce who it is and how we're doing the debt side simultaneously, as Lynn mentioned. Then we'll be moving it forward to the financial close.

And the financial close, then we get reimbursed for the money we just spent on the engineering and the other stuff licensing fees and things like that. And so, yeah, that should matter a lot, and it's material. And the good news is we have enough money in our balance sheet that if it takes longer, we're still in good shape. So I don't have any reason to think it would take longer other than other than the, you know, the practical reality of stuff sometimes does. But you know what?

They're working through well, the next milestone for on the equity on the on the project front, the plant project front, is to get those equity investors locked down. Now I also mentioned the biogas in my comments. The biogas thing is interesting because biogas is a we need it we want it for feeding our boilers at our plant because it reduces gets us off natural gas partially, and that reduces our carbon scores. And of course, we get paid for carbon score. It matters.

However, guess what? We also can sell that to California, and that we'll be doing that initially. We expect it, and that should start up in the latter half if things go right. We still got work to do on the financing front there on the debt side. But, we should that should be generating revenue, you know, maybe late next year too.

It should be. So we're gonna I would expect a couple revenue streams we haven't seen before. And, of course, if ethanol ever does come back to be something where it's profitable, we can always turn that back on too. Okay. Understood.

Speaker 8

And then, you know, with this time line that you now have, you know, there's a lot more clarity versus maybe even last quarter or all of this. Are you comfortable that you will be able to sort of, you know, meet your agreement with Trafigura for the 25,000,000 gallons per year by the 2023 timeline?

Speaker 3

Yes.

Speaker 8

Okay. Understood. And then with respect to sort of the, you know, 50,000 production that is ongoing right now, from Southampton, you know, which customers is this product going to? Is it all going to for the one or two customers, or are these multiple clients that you're paying?

Speaker 2

Yeah. So what we're doing is remember the capacity for our plant down in Silsbee, Texas is about a 100,000 gallons per year. Right? Yeah. And we have the ability to move the output from jet fuel to gasoline, these you know, the renewable gasoline.

Ultimate Carlos would they always want it always seems to me that they want more, hydrocarbon, more isooctane, And there's other people like them. The isooctane is particularly interesting. Jet fuel, sure. People wanna use it and test it, but we don't have enough capacity to move a needle anywhere except for some corporate aviation stuff that someday I hope to be able to announce because people will find it interesting as to who's been mining it. We just aren't allowed to say who it is.

The, what we're running now up at Luverne so we did start our Luverne plant up. It's not running ethanol. It's running isobutanol. And we're running a campaign to make isobutanol gallons so that we can feed them down into our, plant in Texas. Okay.

Understood.

Speaker 8

Yeah. Those those are all my questions, Matt. Thank you.

Speaker 2

Yeah. It's kinda fun to be running our isobutanol again because, you know, how often do I get asked? Well, y'all can't run it. Yeah. We do.

It's just we've been doing this you know, we we need renewable isobutanol, so we gotta go make it ourselves. And we have a team in place to do that.

Speaker 5

Thank you. And our next question comes from the line of Paul Fratt with Noble Capital Markets. Your line is open. Please go ahead.

Speaker 7

You. Good afternoon, Good afternoon, Lynn, and the rest of the team. Busy quarter last quarter. You know, looks like this quarter is gonna be, the big event is gonna be the payoff of the white box, debt at the end of the quarter. What, when you talk about the biogas investment, Panic, you've talked before about a certain amount.

And can you remind me of the amount of that potential equity investment? And then what the timing might be?

Speaker 2

It it'll depend upon having the debt side. I think the best answer to this is it's not an outrageous investment. I don't know the amount that we'll have to put in because there's been some equity players player players who have indicated some interest in co investing with us. We have to decide does it make sense or not, and, you know, I hope it does. Although, you know, although I do like the returns from this project.

So it's a, and then there's the debt side. So I think this is one where because I have moving parts, I don't wanna I don't I don't wanna speak out of turn. It's not huge capital, though, in any case. So, you know, it's like, you know, $15,000,000 would be the full equity amount if we had to pay it.

Speaker 7

But it'll I don't think like it'll it'll be a fraction of that.

Speaker 2

Yeah. I just wanna guess, but I just don't know. You know? And this is, again, strictly a financial return. A project like this has financial returns that are ridiculously high IRRs.

And so there is that real question we're gonna have to look at ourselves and say, maybe we want that money for ourselves because I might want the cash flow. So that's the kind of stuff that we have to evaluate yet. I just don't know.

Speaker 7

And then can we talk about just the, you know, the term sheets that are outstanding with the both the financial and the strategic equity players? I think this on previous calls, you talked about having LOIs on two plant locations. Is the the the strategic bring potentially another plant location replacing one of those LOIs? Can you just sort of talk about, you know, the LOIs that you previously had on plant locations and then also potentially when you expect to move on those LOIs and queries?

Speaker 2

Oh, okay. Okay. So two separate things. So we got two two let's let's deconvolute this first. On our, you know, we got the term sheets from equity investors.

They definitely have ideas about where they want product, how they wanna do it, how how fast they wanna go, can we accelerate it, stuff like that. Okay? And that influences how we think about things. And it'll be interesting for people once we can actually talk about it clearly and openly. It's gonna be interesting.

Now as we add in more gallons, we continue our search and continue to look at other sites for, you know, like taking over an ethanol plant or building a side by side isobutanol hydrocarbon plant. We have several players who who are they're interesting in that we could do it on their sites. They're open to it. We have LOIs. We have them already.

And so we could do that. It's a question of which one makes the most economic sense in light of who it is that we're working with on the equity side of the project. So we have multiple sites already that we could use. We think there's a better one.

Speaker 7

Okay. And then when we look at, you know, the nonrecourse SPDs that you structured and then, you know, you'll retain a minority interest, can you talk I guess Lynn alluded to that the debt structure has been finalized. Can you share with us the final, you know, terms on the debt side? And then also what potentially minority interest level you might see Jivo retain on the s at the STD level?

Speaker 2

Well, what's interesting is, I'll answer the last part first, kinda. That is I don't want I'm not sure of the minor what our minority interest will be exactly because it depends upon how much we invest. We have enough cash in our balance sheet to make a good investment in those projects, and that would lift our our portion of that project. And the returns on these projects are attractive. So that would be good for us in a cash flow sense.

We already have money that we could invest without raising anymore. So there's a question of do we do that or not? So that impacts then how big our minority interest is. Of course, just by being a developer and licensing technology and all the rest, we would expect to get some, you know, minority interest, typical of what would be market in a developer, although we're also a licensor. And for us, and as we make money as Gevo, remember, we get money from a license fees or operating fees because who's going to operate these plants?

It's going be Gevo. We get paid to operate these things. So out of that before the project pays off returns to the investors, we got to get paid to operate the plants and do those kind of things. So that's all part of this overall equation. And then the debt structure itself, it is we have a very clear view of how to do it, what to do, who's gonna do it.

Could it be subject to change still? Yeah. Like so I don't wanna give a specific percentage interest rate, you know, with the specific terms because, you know, this all depends upon who plays, how they play. Do we did it? Do we tranche it?

You know, did what do we do? So there's a bunch of things that still could move around. I just don't want, you know, someone sending me 50,000,000,000 emails on, well, you said this. I'm just not ready for it yet.

Speaker 7

Okay. Granted. And then if you could talk about the engineering plans, it sounds like that you you know, it's two phase. You have the seed, you know, the the feed, player in place already. You know, the design works underway.

Mhmm. And then and then once once that's all finalized, then you'll go out and get it to a, you know, full EPC contractor. When do is the EPC contractor is that potentially done at financial close or near financial close? Or potentially, do you put that out to bid to you okay. Then

Speaker 2

are you

Speaker 7

still in I think we before, we've talked about financial close in the first half of two thousand twenty one, you know, towards the, you know, later probably later rather than sooner, you know, closer to mid two thousand twenty one.

Speaker 2

No. It would be yeah. Yeah. Yeah. Yeah.

Timing works like this. FEED. So FEED is for everyone else. FEED means the full engineering work. It's it's kind of an acronym we all use, and you need that done.

It gives you a final engineering. So then and then you you turn around to an EPC contractor or engineering firm who builds the plant and constructs it and stuff like that. We are working on feed right now. We're gonna get that pinned down. The people we're working with could be could be the EPC.

We'd expect them to. They're certainly capable of it. But there's other people who maybe have a sweeter deal, and they're perfectly capable of it too. This is partly what you do when you're negotiating contracts that are in the hundreds of millions. So then we'd announce those things.

There's gonna be a the financial close. The plan actually gets built after financial close. The equity partners would be announced long before the equity long before the equity close. We're gonna have to tell people about That's just the reality of it because it won't be we won't be able to hide it. We're gonna have to put it out there and tell everybody.

That would I'd expect in the first half of the year. The close itself, it depends on how all the pieces come together when all the site work is you know, everything is completed, all the everything is done and buttoned up, and we can get to a project financial close. And these projects are are onerous in terms of the amount of detail and work that they take, and and, you know, the amount of diligent stuff that goes into it and the amount of reports and expert stuff that has to be done. And so we plan for that in the second half of the

Speaker 7

Okay. Yeah. That seems a little later than than what, was contemplated before, but, you know, still with Well, actually,

Speaker 2

it's the same. Yeah. Yeah. Actually, it's the same. If you go back and look, we talked about it being the second half of the year.

It takes one year even in doing the gas from on the project to get something to close. But we talked about doing the financial close for biogas, I would expect, in the first half of the year.

Speaker 7

Okay. And you know, any comment on, you know, what potentially happens under good, bad, or indifferent under a Biden administration?

Speaker 2

That's interesting to see. Yeah. So that should be interesting. It should bode well for us. I would think so.

You know? Because, this is a chance for some of the, you know, greenhouse gas stuff to get put into policy. Hopefully, it'll be done in a good constructive way. There's a they gotta win over the Midwest. The Dems do.

And so that's good for agriculture. There's a whole bunch of new techniques called regenerative agriculture. But it's a how do you capture carbon in the soil? That does come into play. People are waking up to the fact that it isn't food for you know, growing stuff isn't necessarily food for the earth.

That's how you do it. But we've known that for years. We've been talking about it. Good. People are listening.

And, so I think overall, you know, it's good for us. There's no question about it. It's just that, you know, we gotta see what happens in Georgia. You know? Does the whole thing turn blue?

Or, you know, or is it gonna be more incremental if the if the senate stays red? So, you know, overall, it's gotta be good for us. Right? Because we happen to have one of the few technologies, maybe the only one that I'm aware that can be scaled up to deal with gasoline itself, you know, the hydrocarbon portion of gasoline. And, of course, we have the ability to make the jet fuel or diesel fuel tool.

Plus, you know, if the people are as aggressive as they they say they're gonna be about, you know, chemicals and materials, good. I have a building block for those too. So let's go. Let's get on with it.

Speaker 7

Okay. Great. Thank you so much, Pat.

Speaker 2

You betcha.

Speaker 5

Thank you. And I'm showing no further questions at this time, and I would like to turn the conference back over to Patrick Gruber for any further remarks.

Speaker 2

Great. Thank you all for joining us. It's an exciting time for us. It's quite a different position that this company is in now. It was not that long ago, right, when we were, you know, having to bear you know, how are we gonna live through the year?

I'm looking forward to paying off white box and getting out from under that debt. I've heard from many of you that, you know, that's an important thing, and it's crystal clear that that's gonna happen. We're moving forward on these engineering projects. We're moving forward on biogas. It's good.

We're gonna you know, there's like, it's interesting, and, momentum seems to be going in our favor across the board and including with the election. And so we're pretty darn excited about what's going on, and our partners seem to be too. We just gotta get them, you know, over the line on everything. So thanks for your support. Thanks for joining us.

Have a great evening. Bye.

Speaker 5

Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program, and you may all disconnect. Everyone, have a great day.