Gevo, Inc.

Welcome to GEVO's third quarter 2021 earnings conference call. My name is Gigi, and I will 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.

Good afternoon, everyone, and thank you for joining GEVO's third quarter 2021 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 Small, GEVO's chief financial officer, and Paul Bloom, GEVO's chief carbon and innovation 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.jiva.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 Jiva'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 Net-01 project and GEVO's 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 GEVO's Form 10-K for the year ended December 31, 2020 that was filed with the U.S. Securities and Exchange Commission, and in 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 GVO 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 GVO's business developments. Lynn will then review GVO's financial position, and Paul will finish up with a discussion of verity tracking. Following these prepared remarks, we will open up the call for questions. I'll now turn the call over to Pat.

Thanks, Jeff. As everyone paying attention to us knows and has seen our presentations or press releases of the videos, They know we're on a crusade in the pursuit of net zero drop-in fuels. We have learned that we can convert renewable carbon into gasoline, jet fuel, SAF, and diesel fuel, as well as the building block chemicals to make most plastics and other larger volume chemicals. The technologies work. The key to driving out the fossil footprint in all of these products is renewable electricity and alternatives to fossil-based natural gas. If we reduce and eliminate fossil energy from our production systems, We should be able to achieve net zero fossil footprints of our products as measured across the whole of the business system. That means all the way from carbon capture to tailpipe or the exhaust of a jet engine. We are in the business of transforming renewable energy into energy-dense liquids like SAF and motor fuels. When we look at our business, we have some similar issues that are confronted by EVs and hydrogen companies. That is, what's the source of electricity? Is it fossil or not? What's the source of energy to produce hydrogen, fossil or not? It turns out we're all aligned regarding infrastructure. If our business system has access to renewable energy, then it shouldn't surprise anybody that the fossil footprint could be reduced and potentially eliminated. So EV folk, the hydrogen folk, and companies like us all need improved access to renewable energy. I'm glad to see the emphasis of this in public policy, infrastructure. I'm glad to see that bill got passed. Because of the size of our renewable energy need and the ability to achieve economies of scale, we expect that our business system could further catalyze development of renewable energy. We are finding that there are many parties interested in building out renewable energy infrastructure. They need a big customer, someone like us. I'm also glad that our products drop into existing pipelines and enhance existing markets. I'm glad our products are dropping at the consumer level. There is a benefit if no one needs new airplanes, cars, or trucks to reduce or even eliminate the fossil fuel greenhouse gas emissions footprint from combustion engines. I expect that we will have the opportunity to help the EV and hydrogen people, too, as we expect to generate excess energy, excess renewable energy, electricity, and even hydrogen and supply to the marketplace where they wouldn't otherwise have it or couldn't do it. Our Net Zero One plant design is unusual for the following reasons. We are designing it with the carbon footprint in mind from the get-go. We are working with Juul Energy on a wind farm that would be wired directly to the plant. We are planning to install a wastewater treatment plant that has the ability to generate water for use in the production process, sure. But equally as important, it is expected to produce enough bio-based methane to run the plant. We also plan to install electrolysis units to produce green hydrogen from wind. So it's a different set of paradigms about how to install energy and manage it across the whole. Of course, we get excited that we can prove, using the world-leading Argonne National Laboratory's GREET model, that by substituting the energy sources, getting it away from fossil-based sources, and by using carbohydrates from sustainably grown corn, that the system we are building should be able to achieve a net zero fossil carbon footprint across the whole of the life cycle from carbon capture to tailpipe or exhaust to a jet engine. Think about it for a second here. Jet fuel has roughly a fossil footprint of about 90 using a carbon score index. That means a 90 is a fossil-based score. RSAF, when burned, according to the Argonne Green Model, is expected to be zero. That means that our SAF sitting in a tank or a rail car before it's been burned is at least a negative 90 CI score, negative 90. If we never burned it as a fuel, it would just be sequestered carbon in a tank. That's an interesting paradigm. When the fuel such as SAF is burned, it does release CO2, so then the carbon scores back up from minus 90 to near zero. Renewable energy in a tank, with all the advantages that that infrastructure provides to take it to market, and all the vehicles, the planes, they all exist and can be used without change. That's pretty amazing. It's really a new game to think about what can be done. So for a minute, suppose our building blocks produced at a net zero plant were used to make plastics rather than making SAF or motor fuels. These building blocks would result in the same plastics made from petroleum. except that we would have swapped out the fossil carbon for renewable carbon captured from the atmosphere. The technology works. So imagine car bumpers or tires made from our stuff. They'd be sequestered carbon, captured from the air, transformed into durable goods. The carbon score of that bumper or tires could be expected to be massively negative because we're not burning the products. They're being made into durable goods. Of course, it would depend upon the content of those plastics or rubber derived from our net zero type of ingredients. Looking forward and in the future, we expect to add geological sequestration to the decarbonization mix. Of course we can do that. Others can. We can do it too. That should make our footprint even more negative, more negative in a big way, that according to GREET, we'd expect the possibility of a negative 30 to 40 CI score from where we are today. That's even after the fuel is burned. If we add some new techniques in agriculture, it can even be more negative across the whole of the life cycle. How could it be so negative? Because our business system would be the cause of carbon sequestration, for instance, in the soil or in geological formations. In addition, by using the latest processing techniques for corn, higher value protein products and corn oil can be produced and sold into the food chain. This is really important. We believe that it's possible to use land to produce food and generate raw materials for energy simultaneously, and many improvements still can be made. We're not done yet. Of course, we can also use carbohydrate feedstocks derived from wood, biomass, molasses, and other carbohydrate sources. Any of these are fair game for us as we grow our business. The sustainability of each feedstock would need to be proven, and it must be cost-effective before we take it on. Now, we've been making... Excellent progress on the business front. So first, Chevron. The MOU with them outlines the basic deal where they would take up to 150 million gallons of hydrocarbon fuels and correspondingly invest in the production assets to produce those fuels. Good. That means that if we did six net zero one style plants, each with a capacity of about 50 million gallons, and if they took 50% of the capacity, then the MOU contemplates them investing in 50% of the capital in each of the plants. We've still got to convert the MOU to definitive agreements, and there could be some twists and turns along the way, but we like Chevron's commitment and their energy that they bring to getting this done. Ethanol to jet is a new thing for us. We've been working on it quietly for years, and then we announced that we signed a deal with Axons of North America that gives GEVO the exclusive license to develop ethanol to jet in North America. Axons is the licensing arm of the French National Research and Engineering Laboratory called IFP. IFP focuses on applied research and engineering. They do a lot of work over the years, over the decades, on refining technology, chemical plant technology, and many, many other technologies. They're a really well-known research and engineering outfit. Their capabilities are truly immense. We were just visiting there in the last month. They're quite impressive. We got to know them. We got to know Accent. Because of our work on NET-01, we are co-engineering the process to convert isobutanol into jet fuel and renewable alkali. We get along really well with them. And as we got to know them, we learned that they have more than 60 patents and 25 plants commercially operating with the technology to convert ethylene into fuels and chemicals. Now, we know how to decarbonize alcohols. And we know how to convert alcohols into olefins. Ethylene is an olefin. And so... Together, it occurred to us that, you know what, we've got a really clear path to take ethanol as a feedstock using commercially proven technology and convert ethanol to SAF in proven processes. It's pretty impressive. They have done these technologies using petrochemical-based feedstocks. What's new here? Bringing ethanol in, converting it to ethylene, and taking the ethylene onward into the well-proven processes. So we struck a strategic alliance with them. And we believe that ethanol to jet is going to be important. And we see it as synergistic with the isobutanol to hydrocarbon routes. In fact, there's many opportunities to add value to each. It should give us the opportunity to produce more products, a wider slate of products, as Tim Cesarick likes to say. We can do diesel fuel, jet fuel, gasoline products, and many other building blocks for the chemical industry. and ultimately achieve a higher renewable content in fuels. In other words, it makes it easier. We have more building blocks to work with so we can make a more complete fuel over the long run. It's also worth noting that actions will provide process performance guarantees for the alcohol to SAF and motor fuels technologies. And, of course, that's really useful in financing production facilities at the project level. We signed an MOU with ADM with the intent of converting 900 million gallons per year of ethanol into about 500 million gallons of SAF and hydrocarbons, and along with that to build IBA to hydrocarbons, particularly in Decatur. ADM has some of the most economical ethanol plants on the planet. Starting with low cost ethanol is a really good idea when converting it into SAF. The work with ADM is expected to result in a JV with them and other investors. ADM indicator has been a pioneer in geological sequestration, too. It's an exciting opportunity, and I expect that they will be a good partner. I know everybody is interested in the customer pipeline. It's growing. We are still on the tack of obtaining financial offtake agreements. The pipeline of potential contracts is now well over a billion gallons per year. We are negotiating these contracts. The interest in SAF has definitely increased, especially since the White House meeting a couple months ago. We expect to announce the next agreement that sells out Net Zero Two and beyond soon. We acquired the Butamax patent portfolio. We now have about 600 or so patents covering the biotechnology, fermentation, production processes, converting alcohols into hydrocarbons. It adds value to have all these patents under one roof. I'm glad to have that cleaned up. Our Net Zero One project is on track. Kiewit, one of the world's largest and most capable engineering and construction firms, is a great addition to our team. Kiewit has tremendous horsepower and the capability to build multiple plants at once. This ability is really important to us since that is the situation I think we're going to find ourselves in, that is needing to build more than one plant at once. They have a reputation of delivering on time and on budget. In addition, they're really good people. We'll have the next round of engineering done around year end. Then we'll be moving to a more detailed phase. We expect to have the EPC wrap completed around the end of the first quarter, maybe early second quarter, and then work to complete the project debt deal. If this timing all holds up, we expect to get the plant up and running in 2024. Our Northwest Iowa Renewable Natural Gas Project is on track. It's expected to start up in the first part of next year. It's gone very well so far. I like the experience we are getting because renewable methane, biogas, and RNG are all going to be really important to us as we work to defossilize the hydrocarbon production systems like alcohol and alcohol hydrocarbons. As I already mentioned, one of the big issues that creates the footprint from these plans is The fossil-based natural gas and fossil-based electricity, eliminating these things, makes everything more green. As a last key point, we are changing our ambitions. We believe that it's possible to bring online a business that delivers and sells one billion gallons of capacity or more per year using the combination of IVA and ethanol as feedstocks to hydrocarbons to serve SAF and motor fuels markets by 2030. We call this a Billion Gallon Initiative. Simple, a billion gallons or more by 2030. This is what we're working on, and I believe the pieces are falling into place. Net zero one is the first step, and we need to get it right. But we see that the potential is large, and we can achieve fast growth beyond net zero one. We see that Chevron, ADM, Axins, and others all could be part of making this happen. Now, Lynn Small is here with me today. We decided to change the format and content of our earnings calls. Rather than read the financial details that are already disclosed in our earnings press release and Form 10-Q, we figured it would be far more useful for Lynn to just talk about Jeevo's financial position and what his thoughts are in larger, more general terms. Lynn?