Gevo, Inc. (NASDAQ:GEVO) Q3 2020 Earnings Conference Call November 10, 2020 4:20 PM ET

Company Participants

Geoffrey Williams – General Counsel and Secretary

Pat Gruber – CEO

Carolyn Romero – VP and Controller

Lynn Smull – CFO

Conference Call Participants

Shawn Severson – Water Tower Research

Amit Dayal – H.C. Wainwright

Poe Fratt – NOBLE Capital Markets

Disclaimer: *NEW* We are providing this transcript version in a raw, machine-assisted format and it is unaudited. Please reference the audio for any questions on the content. A standard transcript will be available later on the site per our normal procedure. Please enjoy this timely version in the interim.

Operator

[00:00:01] Welcome to the third quarter 2020 earnings conference call. My name is Catherine and I’ll be your operator for today’s call. At this time, all participants are in a listen only mode. Later will we 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, Gevalt, vice president, general counsel and secretary. Please go ahead, Mr. Williams.

Geoffrey Williams

[00:00:29] Good afternoon, everyone, and thank you for joining us. Third quarter Twenty Giralt earnings conference call. I would like to start by introducing today’s participants from the company. With us today is Patrick Gruver, juvies, chief executive officer Lynn Snell, Cuba’s chief financial officer, and Carmen Romero, Cuba’s vice president and comptroller. 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.YOUTUBE.COM. I’d 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 Java’s website on the call today and on the webcast, you will hear discussions of certain dongarra financial measures. non-GAAP financial measures should not be considered in isolation from or as a substitute for financial information presented in accordance with Gath. Reconciliation of these NYGÅRD financial measures to the most directly comparable Gap 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 Chiba’s business development plans and operating activities for the remainder of Twenty dungaree and beyond.

[00:01:58] 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 Jimbo’s form. 10K for the year ended December 31, 2013. That was filed with the US Securities and Exchange Commission and in subsequent reports and other filings made with the S.E.C., AIG, including juegos quarterly reports on four in 10 Q. Investors are concerned 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 will begin with a discussion of diverse business developments when they discuss the status of the Citigroup financing process. And Carolann will then review Jebus financial results for the third quarter of twenty Jebu’s. Following the presentation will open up the call for questions. I’ll now turn the call over to Pat.

Pat Gruber

[00:03:06] Thanks, Jeff, this past quarter was extremely significant for us. We now have about 40 million gallons per year of GAAP offtake agreements in place, representing approximately one point five billion dollars across the life of those contracts, which are run about six to seven years from the start of full scale production. 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 and facility, our business is now changed our demand for our products and with contracts that justify more than one production facility. The burden 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 Leyburn. That’s important because people want to see platforms of projects. Not only that, potential investors in the project see clearly that we have the funds to fully pay off lightbox before we raise money this past quarter. There have been a real question of how we deal with white box. White box for 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 Kevo assets, the physical and intellectual property. Well, now we have the money, the bank to pay off white box and remove the leads people to 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.

[00:05:04] 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. Yeah, you heard me right. While we haven’t announced who are potential equity investors are, we are working with several potential. Partners, then we’ll talk more about the Citigroup financing project in a couple of minutes. 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. That’s great, but we need the details. Good 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 million gallons per year of plant projects that are already under the contracts, I expect in the near future. We will announce the names of the engineering firms that will be using to engineer and build the projects so that for the first time in many years and this is a big deal, we are 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 secure to build multiple projects. With that, I will turn the call over to land to provide more details on the project finance process with Citigroup.

Lynn Smull

[00:06:48] Lynn, thank you for that. The Citigroup process to assist you in securing financing to build out our production capacity is going well. Recall that we’re trying to raise about 700 million dollars at the project level, which would finance three plant construction projects to supply about 70 million gallons per year. We anticipate that this financing would require about two hundred million in equity and 500 million in debt. Citigroup is helping us with both the debt and the equity. The 700 million in funding would be invested in special purpose project entities that are nonrecourse to Gevo. We anticipate the Gevo will be a minority equity holder in the PVS. By raising money at the project level, we avoid a couple of issues. First, it’s not dilutive to Gevo 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 a 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 forma 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 finalize an equity investment terms, the timeline for diligence typically takes months.

[00:08:39] Even if we weren’t in a covid world despite covid we’ve become pretty adept at dealing with covered 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 million gallons per year under contract. The city projects contemplate 70 million gallons per year. We don’t have to do all 70 million 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 will also turn 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 Jebus projects. Stay tuned. Now turn the call over to Carolyn, who will take us through the financials. Carolyn, thank you.

Carolyn Romero

[00:10:08] Lynn Gevo reported revenue in the third quarter of 2020 five point two dollars million as compared to six point one million in the same period in twenty nineteen during the third quarter of 2020 hydrocarbon revenue one point one million, compared to two point six billion in the same period in twenty nineteen. Hydrocarbon sales decrease because of lower shipments of finished products from our demonstration plant at the Southhampton Resources Facility in Silsbee, Texas, during the third quarter of 2020 revenue derived at the Luverne facility from ethanol sales and related products was point two million, compared with five point six million during the same period in twenty nineteen. As a result of covid-19 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 with two point three million in the third quarter of 2020 versus nineteen point nine dollars million in the same period in twenty nineteen.

[00:11:21] Cost of goods sold included approximately eight point nine million associated with the production of AIBA and related products and the maintenance of the and facility, and approximately one point four million in depreciation expense. The gross loss was two point one dollars million for the third quarter 2020 versus three point eight million for the third quarter of twenty nineteen. Research and development expense decreased by point nine million during the third quarter of 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 two point eight million during the third quarter of 2020, compared with the same period in twenty nineteen, due primarily to an increase in personnel consulting and insurance expenses and then professional fees offset by a decrease in investor relations expense for the third quarter of 2020, we reported a loss from operations of six point one million, compared to eight point eight million for the same period in twenty nineteen in the third quarter of 2020 cash EBITDA loss. A non gap measure that is calculated by adding back depreciation and non-cash stock based compensation to get lost from operations was 4.0 million, compared to five point eight million in the same quarter of twenty nineteen interest expense for the third quarter of 2020 one point five million, a slight decrease compared to the same period in twenty nineteen as a result of lower amortization of original issue discount and debt issuance costs and the conversion of two point eight million of the 2020 twenty one notes to common stock during July of 2020 for the third quarter 2020 we reported a net loss of six point eight million or loss of nine cents per share based on a weighted average shares outstanding of seventy seven million forty nine thousand eight hundred ninety six shares.

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[00:13:31] This compares to a loss of eight point six million in the third quarter of twenty nineteen, or a loss of sixty six cents per share based on a weighted average share outstanding of twelve million nine hundred sixty eight thousand two hundred sixty five shares in the third quarter 2020. We recognize net non-cash gain totaling point two million 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 2020, we incurred a point five million loss related to the conversion of two point eight million of the 2020 twenty one notes into common stock during July 2020. Adding back these non-cash losses resulted in a non cap adjusted net loss of six point five dollars million in the third quarter, 2020 or nine gap adjusted net loss per share of eight cents based on a weighted average shares outstanding of seventy seven million forty nine thousand eight hundred ninety six shares. This compares to a non-GAAP adjusted net loss of eight point six million in the third quarter of twenty nineteen, or a nine gap adjusted net loss per share of sixty six cents based on weighted average shares outstanding of. Twelve million nine hundred sixty eight thousand two hundred and sixty five shares, no oh, turn it back over to Pat to wrap things up.

Pat Gruber

[00:15:03] Thanks, Carolyn. I’ve got a couple of other points to touch upon. Price continues to make progress. Recall that they are working to license and license and build plants in India with the idea that the 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, the 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 continue to work on getting to 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 our 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 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 to be very glad to tell you about that to. We’ve heard from some of you that you may have noticed more activity up at our Laverne’s site. Well, you’re right, there’s more going on there. We’re in the midst of running a campaign to produce isobutanol to replenish our inventory. We use the isobutanol that we produce there as a feedstock for the hydrocarbon plant down in Texas. Halterman 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.

Question-and-Answer Session

Operator

[00:17:17] Thank you, ladies and gentlemen, if you have a question at this time, please, press star, then one on your touchtone telephone. If your question has been answered or you wish to remove yourself from the queue, please press the pound key to prevent any background noise. We ask that you please place your mind on you. Your question has been stated. Our first question comes from the line of Shaun Syverson with Watertower Research. Your line is open. Please go ahead.

Shawn Severson

[00:17:41] Thanks. Good afternoon, everyone. It’s keeps getting a little more color on who you’re talking to and specifically address the strategic versus financial investors and maybe compare and contrast, I guess, which won’t be preferred by you and why.

Pat Gruber

[00:18:00] Well, what’s interesting about what we’re doing, if you stop and really look at it, is we’re capturing renewable energy. It happens to be in there. We’re putting it renewable energy into the form of a liquid fuel. It’s our liquid fuels can be used in the gasoline sector for automobiles, dumper trucks, of course, for airplanes, we’re using wind energy. Biomass gas, energy photosynthetic energy, which touches on agriculture. So you start thinking about hydrogen, too, because if you have excess wind, you could do something with it will 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 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. Businesses like ours allows and enables the capture of all the different things and packs that energy into 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, different kind of different groups of people are interested in these things. And then as far as the individuals, whether the companies, whether they’re 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 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. Yeah, that kind of thing there. They have to do something and there’s no more scaping.

Shawn Severson

[00:19:53] You just have a follow up on looking at liquid fuels, I guess, and kind of comparing that as a renewable solution, I mean, relative to when the bio and fuel cell fuel cell, electric vehicles, renewable natural gas, you know, a lot of different a lot of different technologies. And and obviously, you know, sometimes, like liquid fuels gets just left by the wayside a bit. But can you sort of can you compare and contrast how that fits in to the renewable future?

Pat Gruber

[00:20:23] Sure. You know, when you look at projections of energy for the future and actually what vehicles are being sold and you look out 20, 50, it’s pretty much the same kind of energy profile that we have today, although there is a bigger component of renewable attached. 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 a new vehicles, kind of batteries. You’ve got to be able to have a good supply of batteries that got 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 it isn’t one or the other. We’re going to need them all because the amount of fuel that has to be replace the possibly stuff is so enormous that we got to it’s going to take any and all solutions. So I think it’s a question of, you know, in some places it’s going to be terrific sense to have any 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 and I mentioned earlier, you know what? We had wind towers and we’re making excess wind because the wind is blowing and I don’t need it for the plant. You know what? I think maybe I ought to make just out of it and maybe we turn it into something and play in that market sector, too. So what 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 to everyone into buying a new vehicle. You know what gives you the same old vehicle? Lower your carbon footprint by using her products directly. People haven’t thought of it much because we’ve been unaware of these types of things. They just don’t know yet. They’re still and they still look at us and go, what you do in gasoline? You mean ethanol? No, we’re not doing ethanol. Ethanol is like the 10 percent. We’re doing the other 90. But you can do that. And we run into this all the time. People are still learning that it’s possible. So it’s interesting. But of course, this is what Tropica did sign up with us because they get it, college gets it, and there’ll be others to get it as well.

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Shawn Severson

[00:23:07] Thanks. And my last question about is, is on cash flow, is this quarter a pretty good proxy going forward for cash burn or is there going to be any other changes or investments you think you need over the next next couple of quarters?

Lynn Smull

[00:23:24] I think it’s pretty typical they’re going to creep up incrementally a little bit, as you know, because we had reduced staff and so we got to bring back a few more people. So it should be pretty typical. We’re going to have chunks that get spent at various times for engineering projects. So these aren’t like your typical, you know, R&D burn type thing. So you’re going to be now 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 don’t 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 with them, you know, and that might be that might be useful, but that’s down the road sometime.

Operator

[00:24:31] Thank you. And our next question comes from the line of Amit Dayal with H.C. Wainwright. Please go ahead.

Amit Dayal

[00:24:39] Thank you. Good afternoon, everyone. Appreciate your taking the questions. Great to see, you know, the little pieces coming together on these plans forward. So did I hear it correctly, the that you have equity investors for forty eight million gallons already in place. The trying to see if you can get additional investors to come to that 20 million gallon. No, that doesn’t come in within a certain timeframe. You are happy to move forward with this 48 million gallon financing that is shaping up to be.

Pat Gruber

[00:25:15] Actually, it’s slightly different than that we actually have equity investors who are willing to put up the equity for all 70 billion gallons. However, will you probably try it because we have the contract to take or pay contracts in place for forty eight billion gallons. And so 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 want to locate a plant in Illinois, wants a little bit of the decision, but we already have the equity players. We have two sheets from them for the you know, to do the whole build out of the first three plants.

Amit Dayal

[00:25:51] Ok, and just 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 team will be?

Pat Gruber

[00:26:10] Well, it’s it’s yeah, we have ah, you know, we have our lead horse and we’re already engaging him and we have to go through, you know, there’s initial step of engineering they have to do and then want to do the lot, the whole turnkey project. There’s a couple other people whose names have surfaced lately that we have to look at. So it’s about, well, 1000 at the appropriate time. We’re definitely engaged and we’re definitely engaged. It’s about you, there’s two there’s so there’s like an engineering part and then they’re saying, here’s the here’s who’s going to build out the whole giant plant or the two plants with whatever turnkey project. Those are two separate things. Right.

Amit Dayal

[00:26:54] So so based from this commentary, is any of this sort of news flow coming potentially going to come before the end of 2020, or should we expect announcements around this to happen in early 21?

Pat Gruber

[00:27:11] Don’t know yet. It’s like, you know, it’s not like I don’t do stuff when it’s signed and, you know, the engineering stuff like I think is more in our control. The site selection’s more in our control. So those could happen sooner rather than later. But we’ll 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 sort of regarding the customers I have. This is one of these ones where, you know. I see it growing, so I see the list of people who want product is growing and I see that the contracts are being negotiated. There’s a couple of contracts that I thought have been done by now, but they got caught up in stuff with the other company that had nothing to do with us and nothing to do with our product is 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, the stuff is still moving forward. I don’t know. You know, it’s just a little. This is here somewhat unpredictable anyway. Before I even hate making predictions, but in terms of the engineering firm, in terms of site selection, that’s stuff I’d expect to happen sooner rather than later. But I’ll announce it when it’s ready to announce based on, you know, how all this sort of frozen breeze is set by the first half of London at that point, you know, going into the second half of 21, do you potentially start getting paid for development work that you will be putting into this?

Amit Dayal

[00:28:49] Right. So the way that this should unfold is that we do the development work up front and we get reimbursed for it. If the things hold the schedule, we should start to see some of that money coming back to us late in twenty, twenty one.

Pat Gruber

[00:29:03] So in the late meeting, the latter half don’t know exactly when. Depends upon how things get done and their timing. We have a couple of these partners want to go faster rather than slower, which of course that suits us too. So what should happen is we’ll announce the terms, announce the sites with thousands of customers. We’ll announce then who it is that these equity partners are in. The project will announce who it is that how we’re doing. The debt side simultaneously, as we mentioned then, will 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 and 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 on our balance sheet that EBITDA takes longer. We’re still in good shape. So I don’t have any reason to think it would take longer other than, you know, the practical reality of stuff sometimes does. But you know what they’re working through. Well, the next milestone for the equity on the Project for the Plant Project front is to get those equity investors locked down.

[00:30:10] Now, I also mentioned the guess in my comments. The bogus thing is interesting because bio gas is a we need it. We want it for feeding our boilers at our plant because it gets us off natural gas partially, and that reduces our carbon schaus. And of course, we get paid for carbon score. It matters, however. Yes. What we also can sell that to California and that we’ll be doing that and we expect it. And that should start up in the latter half if things go right. 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 or two. It should be. So we’re going to have, I would expect, a couple of revenue streams we haven’t seen before. And of course, if ethanol ever does come back to do something where it’s profitable, we can always turn that back on to.

Amit Dayal

[00:31:07] Ok, understood. And then, you know, with this timeline that you now have, there’s a lot more clarity, which is maybe even last quarter on this. Are you comfortable that you will be able to sort of, you know, meet your agreement with Trafigura for the 25 million gallons a year by the 2020 timeline? And then with respect to sort of the, you know, fifty thousand production that is ongoing right now from south, which customers is this product going through? Is it all going to go to one or two customers or are these multiple times that to.

Pat Gruber

[00:31:58] Yes, so what we’re doing is remember the capacity for our plans, Don Silsbee Texas is about a hundred thousand gallons per year. Right. And we have the ability to move the output from jet fuel to gasoline, the renewable gasoline, haltzman. Carlos, would they always want it always seems to be that they want more hydrocarbon, more isooctane, and there’s other people like them. The isobars is particularly interesting, jet fuel. Sure. People are want to use it and test it, but we don’t have enough capacity to move the 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 buying it. We just aren’t allowed to say who it is, the what we’re running now up in the air. And so we discover Luverne plant up. It’s not running ethanol, it’s running a butanol. And we’re running a campaign to make isobutanol gallons so that we can feed them down into our plant in Texas.

Amit Dayal

[00:33:02] Understood, those are my questions, but thank you.

Pat Gruber

[00:33:08] Yeah, it’s kind of fun to be running our isobutanol again because, you know, how often do I get asked, why can’t we do this? We can do this. We need renewable, isobutanol, so we’ve got to make it ourselves. And we have a team in place to do that.

Operator

[00:33:27] Thank you. And our next question comes from the line of Paul Freda with Noble Capital Market. Your line is open. Please go ahead.

Poe Fratt

[00:33:34] Thank you. Good afternoon. People in England and the rest of the team, busy quarter last quarter, it looks like this quarter is going to be the big event is going to be the payoff of the white box that at the end of the quarter was when you talk about the polygraph before about a certain amount. And can you remind me of the amount of that potential equipment and then what the timing might be?

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Lynn Smull

[00:34:08] It will 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 and contrasting with us. We have to decide, does it make sense or not? I hope it does. But, 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 want to I don’t I don’t want to speak out of turn. It’s not. Huge capital. Though in any case, so, you know, it’s like, you know, fifteen million dollars would be the full equity amount if we had to pay it.

Shawn Severson

[00:35:02] But I don’t think it’ll be OK.

Pat Gruber

[00:35:06] Yes, when I 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 IRR. And so there is that real question, we’re going to have a look at ourselves and say maybe we want that money for ourselves because I might want cash flow. So that’s the kind of stuff that we have to evaluate yet. I just don’t know. And then we talk about just the you know, the term interacting with the financial and the strategic equity players, I think was unclear because we talked about him. Our hands on to plant location is the strategic ring, potentially another plant location, replacing one of those Alawi’s that need to sort of talk about, you know, the allies that we previously had on plant locations and then also potentially when you expect to move on with the lines. So so we got to kind of this first on our you know, we’ve got the term sheets from equity investors. They definitely have ideas about where they want product, how they want to do it, how how fast they want to go, can we accelerated stuff like that. OK, 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 going to be interesting. Now, as we add in more gallons, yet we continue our search and continue to look at other sites for taking over an ethanol plant or building a side by side isobutanol hydrocarbon plant. We have several players who are there. Interesting in that we could do it on their sites. They’re open to it. We have Alawi’s we have them already in. 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.

Shawn Severson

[00:37:24] Ok, and then when we looked at the record, the of the majority interest to Len alluded to the debt structure has been finalized. Can you share with us the final terms on the downside? And then also what potentially more the interest level you might be reporting on the SUV model?

Pat Gruber

[00:37:56] Well, what’s interesting is I’ll answer the last part. First kind of that is I don’t want I’m not sure that I know 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 thout raising any more. So there’s a question of do we do that or not? So that impacts then how big are 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 in for us. And if we make money, as Gevo remember, we get money from a license fees or operating fees because who’s going to operate these plants can be Gevo. We can pay to operate these things. So out of that, before the project pays off returns to the investors, we’ve 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 going to do it? Could it be subject to change still? Yeah. So I don’t want to give a specific percentage interest rate, you know, with the specific terms, because, you know, this all depends upon who plays how they play. We did it do we tried it. 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 said to me 50 billion emails on what you said, this is not ready for yet granted. And then if you talk about the plans, it sounds like, you know, it’s to say you have the seed, you know, the seed player in place already works under way.

Shawn Severson

[00:40:03] And then and then once that’s finalized, then we’ll go to EPS contractor. When is it EPS contractor, financial close in their final Pequots. Could you click that up? OK, and then I think we before we talk about financial growth in the first half of 2021, you know, towards, you know, later, probably later rather than sooner. Of course, that was in twenty one.

Pat Gruber

[00:40:39] It would be the timing looks like this feed. So feed is for everyone else. Feed means the full engineering work is it’s kind of an acronym we all use and you need that done. Gives you a final engineering then and then you turn around to add EPS contractor or engineering firm who builds the plant, constructs it and stuff like that. We are working on feed right now. We’re going to get that pin down. The people we’re working with could be could be the EPS. 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. You know, contracts are in the hundreds of millions. So then we denounce those things. There’s going to be a the financial close. The plant actually gets built after financial close. The equity partners would be announced long before the equity, the long before the equity close. We’re going to have to tell people about it. That’s just the reality of it, because it won’t be we won’t be able to hide it. We’re going to have to put it out there and tell everybody that what I’d expect in the first half of the year to 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 clothes. And these projects are are onerous in terms of the amount of detail and work that they take and, you know, the amount of diligence 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 year. It comes a little later than before. Well, you know, actually 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 takes one year even to do in the gas from on the project to get something to close. But we talked about doing the financial closable. Yes, I would expect in the first half of the year.

Poe Fratt

[00:42:41] And you know, any comment on what potentially happened, renderers, good, bad or indifferent on the road by the administration?

Pat Gruber

[00:42:53] 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. There’s they got a 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 say, how do you capture carbon in soil that does come into play? People are waking up to the fact that it isn’t food. You growing stuff isn’t necessarily healthier because I just do it. But we’ve known that for years. I’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, you know, we got to see what happens in Georgia. You know, does the whole thing turn blue or, you know, or is it going to be more incremental if the Senate stays red? So, you know, overall, it’s got to 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, 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 say, they’re going to be about, you know, chemicals and materials. Good. The building blocks for those, too. So let’s go. Let’s get on with it.

Poe Fratt

[00:44:25] Ok, great. Thank you so much. You bet you.

Operator

[00:44:31] Thank you, and I’m showing no further questions at this time, and I would like to turn the conference back over to Patrick for any further remarks.

Pat Gruber

[00:44:40] 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 having that, you know, how are we going to 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 going to happen. We’re moving forward on these engineering projects, moving forward at bio gas.It’s good. We’re going to 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 to how he’s got to get him over the line on everything. So thanks for your support. Thanks for joining us. Have a great evening.

Operator

[00:45:33] 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.



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