Gevo, Inc.

Welcome to GVO's second quarter 2021 earnings conference call. My name is Liz, and I will be your operator for today. 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 will now turn the call over to Jeffrey Williams, GVO's Vice President, General Counsel, and Secretary. Please go ahead, Mr. Williams.

Good afternoon, everyone, and thank you for joining Givo's second quarter 2021 earnings conference call. I would like to start by introducing today's participants from the company. With us today is Patrick Gruber, Givo's chief executive officer, and Carolyn Romero, Givo's chief accounting officer. Earlier today, we issued a press release that outlines the topics we plan to discuss. A copy of this press release is available on our website at www.givo.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 GIVA'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 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 earlier 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 GVO's Net Zero One project and our operating activities for the remainder of 2021 and beyond. These forward-looking statements are based on management's current beliefs, expectations, and assumptions and are subject to significant risks and uncertainties, including those disclosed in GVO's Form 10-K for the year ended December 31, 2020, that was filed with the U.S. Securities and Exchange Commission and in our subsequent reports and other filings made with the SEC by GVO, including GVO'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 Jibo 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 the discussion of Jibo's business developments. Carolyn will then review Jibo's financial results for the second quarter of 2021. And following the presentation, we'll open up the call for questions. I'll now turn the call over to Patrick Gruber. Pat?

Thanks, Jeff. Today I'm pleased to be able to report an update on our engineering work and financial projections for NET-01. The results are good. We are on track to complete the next phase of engineering work, the next iteration, if you will, by the end of December this year. This next iteration will tighten up the capital estimates further. Of course, this is all in preparation for the debt deal getting done in the first half of 2022. Now, hydrocarbon capacity is sold out. In fact, it's oversubscribed based upon our take-or-pay contracts already in place. This is very, very good. We did decide to change the scope of Net Zero One a little bit because we figured out how to potentially make more money sooner. We have added capacity for increased amounts of isobutanol, about 44 million pounds per year, which we plan on selling as a specialty chemical. In addition, we are planning to increase our production of nutritional products like protein and animal feed by 40 million pounds per That brings us to a total of 340 million pounds of those products. And then we plan on making 46 million gallons per year of hydrocarbons, resin 45, and we still expect to produce about 30 million pounds of corn oil. Now, as a result of that change scope and with updated pricing assumptions based upon the pricing in our existing contracts, the net zero one project revenue is currently projected to be approximately $340 to $350 million per year. This includes the hydrocarbon products, the carbon values, the nutritional product value, the corn oil value, and the revenue from IBA that we expect to produce in excess of what is needed for the feedstock for the hydrocarbon capacity. Now, the really good part is that the current projected EBITDA for the Net Zero One project is approximately $150 to $160 million per year. Now, that's an increase of approximately $50 to $60 million compared to what we had previously discussed or previously had told investors. That's really good news. The current projected levered IRR to Jibo is approximately 18% to 20% and includes all the revenue streams, and that's the distributable cash, the OEM fees, and all the rest. The distributed cash to Jibo from the Net Zero One project after debt service and major maintenance is currently projected to be approximately $80 to $90 million once the plant is up at steady state. And that's based upon an assumed 65% debt load. The capital cost projection is currently expected to be approximately $720 million for equipment and build-out. Those are the installed hard costs. Now, on a fully financed, fully installed basis, fully deployed, and paying for all the provisional interest during construction, debt reserves, and all the rest, That brings it up to a total of $980 million. Now, included in these costs are the increased capacity for the hydrocarbons, additional capital for more IBA capacity to serve the specialty markets, infrastructure to facilitate an easier capacity expansion, and then adoption of certain unit operations to facilitate greenhouse gas reduction more efficiently, and then, of course, the increased cost of steel and equipment based on the latest data in the market. Wastewater treatment and on-site biogas production are currently planned to be a separate project with separate funding and anticipate a cost of capital commensurate with infrastructure returns using a third-party build-on-operate model. On-site biogas production is expected to meet the thermal demand for the plant. It may be that we choose to finance the water treatment plant. That is a future decision. A separate but related wind power project is being developed to meet the majority of the Net Zero One electricity demand. The wind project would be wired directly to Net Zero One. The wind project would be a separate project with separate funding, again, anticipated lower cost of capital using a build-own-operate model. We also plan on making green hydrogen. Current scope of CapEx includes the capacity of hydrogen we need for our products. We are still determining if and how much excess to make for the marketplace and the corresponding economic benefit to GEVO. Now, we know the world wants green hydrogen. Since we are developing the capability to make it, we are working to figure out the best ways to make excess quantities and take it to market. Now, I'm extremely pleased with these results. We are continuing to optimize and try to figure out ways to bring more cash and profit back to GEVO sooner while reducing risk in our operations and business systems as we get Net Zero One operational. Now, for more information, please see our updated investor presentation that is available on our website at www.jibo.com. We're also planning to do a fireside chat on Wednesday, August 18th at 4 p.m. Eastern Daylight Time with Chris Ryan, our President and COO, and Lynn Small, our CFO, who will together take questions and discuss the Net Zero One project and give a little more detail as to what's going on there and how we're thinking about it. Please join Chris and Lynn if you can. We expect to be announcing the location and customers for our second net zero project in the near future. Our discussions with potential customers have shifted. They are much, much, much larger. And you'll see that in the updated deck and looking at it. The customer pipeline is now approaching about $20 billion of contracts and discussion. That's quite something. And we are working out then how to figure out how to grow capacity much faster so we can achieve many hundreds of millions of gallons of production and sales within five years. There are a lot of moving parts. The game has changed. It's bigger and faster. That's what we're driving for. That's what I'm driving my team for at GECO to achieve. Switching gears to RNG, I am pleased to report that our RNG project is on track in terms of construction. We expect it to start up on time and begin producing gas early next year. I'm pleased to work with BP to sell the RNG that will be produced. On Monday of next week, we expect to publish our first ESG report on our website. This ESG report is, I think, well done. In it, you will see our thinking, and if you invest in us, please read it. Overall, we have an excellent quarter, and we continue to make progress on our goals for this year. Now I will turn the call over to Carolyn, who will take us through the financials. Carolyn?