Gevo, Inc.

Welcome to GVO's fourth quarter 2021 earnings conference call. My name is Kevin, and I'll be your operator for today's call. At this time, all participants are on a listen-only mode. Later, we'll be conducting a question-and-answer session. Please note that today's conference is being recorded. I will now turn the call over to Heather Manuel, GVO's Vice President of Investor Relations and Communications. Please go ahead, Ms. Manuel.

Good afternoon, everyone, and thank you for joining GEVO's fourth quarter 2021 earnings conference call. I would like to start by introducing today's participants from the company. With us today are Patrick Gruber, GEVO's chief executive officer, Lynn Small, GEVO's chief financial officer, and John Richardson, GEVO's investor relations manager. 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.jivo.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 Jivo'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. Reconciliations 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 but not limited to projections about GEVO's Net Zero One project and our operating activities in 2022 and beyond. These forward-looking statements are based on management's current beliefs, expectations, and assumptions that are subject to significant risks and uncertainties, including those disclosed in GEVO's Form 10-K from the year ended December 31, 2021, that will be filed with the U.S. Securities and Exchange Commission and its subsequent reports and other filings made with the SEC by GVO, including GVO's quarterly report 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 GEVO's business development. Lynn will then review GEVO's financial results for the fourth quarter of 2021. Following the presentation, we will open up the call for questions. I'll now turn it over to Pat.

Thanks, Heather, and thank you all for joining us. We have had a great and very busy quarter. You know what? I like everything but our stock price. Today, I'll be using a slide deck. Please refer to it, and I'll let you know when to turn the pages as I go through it. And we'll start on slide number three. Recently, we've had some very important announcements. Today, I'll be talking about how these announcements fit together towards our goal of profitably producing 1 billion gallons of sustainable fuels by 2030. A lot of what we will discuss today will focus on achieving that goal while de-risking the strategy as much as possible. The Actions Ethanol to Sustainable Aviation Fuel Technology, or SAF, that alliance is all about accents exclusively licensing their ethanol to SAF technology to GEVO United States. The ADM MOU is about converting large scale capacity for ethanol into SAF. The Colmar supply agreement is about firm demand for SAF and other hydrocarbons. GEVO's RNG project in Northwest Iowa is about execution of an energy transition project that is expected to bring in meaningful revenue starting later this year. Now, before we get into the details of those announcements, I want to take a minute and refresh everyone on GEVO's overall business and how investors should view it. Please turn to slide four. GEVO is focused on profitably converting renewable carbohydrates into SAF and other renewable hydrocarbons. GEVO has been one of the leaders in these technologies over the years. In the U.S., it's a vertically integrated system that includes primary processing of corn, a fermentation to alcohol, process and a chemical process to make renewable hydrocarbons like SAF. Vertical integration should allow a net zero plant to achieve a very low or even potentially negative carbon intensity or CI score for SAF using the scientific Argonne-Greate model for measuring carbon emissions. Being vertically integrated from primary processing of corn to fermentation to hydrocarbon production provides an advantage for driving carbon scores down due to integration of systems. For example, integrating wastewater and generating biogas on site is expected to enable the displacement of fossil-based natural gas that we would use to power the facility. Setting a plant where we can have de-fossilized electricity is critical because of the large footprint that grid electricity would mean to a CI score. By working with farmers, we believe we can enhance Soil carbon capture, which should translate to improve CI scores. So by reducing and eliminating fossil-based energy in GEVO's business system in particular, and by choosing feedstocks wisely, GEVO believes it can achieve a net zero SAP, meaning net zero from capturing CO2 at the farm to the exhaust of a jet engine. To provide the transportation industry with real decarbonizing options, it is critical that we offset the exhaust emissions fully with the carbon absorbed. in the fuel production process. We have established and are developing a business called Verity Tracking that uses blockchain technology to track carbon and other sustainability attributes from renewable carbon sources through the end use. We expect that we will separate Verity Tracking out as a standalone company at some point, perhaps as early as in 2022. We think that the way to deal with all controversy around sustainability is to just document facts, use science and be transparent. And that's what Verity Tracking is all about. Moving on how we are developing a profitable business. Remember that we have set a goal of a billion gallons of capacity and sales for GEVO's business system by 2030. Let's go to slide five. We struck what we believe a good financial offtake agreement with Colmar. This agreement brings us to nearly 100 million gallons per year of offtake agreements. We expect to get more offtake contracts done relatively soon. Our contract pipeline, where we are negotiating terms, is greater than 1.5 billion gallons per year. As SAF contract momentum picks up, we need more production capacity and likely sooner. govern the airline industry, and airlines themselves have made bold statements about needing SAF. I believe them. The chart on the upper left shows that SAF dwarfs the California renewable diesel market. By 2030, assuming a 10% SAF blend level, the market would be roughly 13 billion gallons per year. We believe that the economics work for investment, and the pricing GEVO can offer works for customers. Now, it's all about building out production capacity to scale to match the offtake agreements we have in place and the offtake agreements that we expect to ink in the future. Please turn to slide six. In the fourth quarter of last year, we did a deal with AXINS that grants GEVO the exclusive license in the U.S. to develop and commercialize their technology to convert ethanol to SAF and other hydrocarbons. Now, we had been working with AXINS on GEVO's isobutanyl hydrocarbon production process. As we got to know each other, it became clear that there was a lot of synergy. We know how to decarbonize feedstocks and production plants and alcohols using our net zero concepts, and Action had proven technology to convert ethanol and other alcohols into hydrocarbons, including SAF. Action is well known in the chemical refining industries as an outstanding technology and engineering company. The hydrocarbon process technology to make jet fuels from olefins has been commercialized in the petrochemical industry many times. It's really a strategic relationship. We complement each other. In addition to greenfield plants we're developing, we see the opportunity to convert certain existing ethanol plants to net zero SAF. We'll work together with actions to try to make that happen. We all want to grow and faster. We have made the decision to use ethanol as the building block for SAF rather than IBA at our net zero one plan. We believe we can make more money, produce more SAF, and have a complete engineering package that would work with existing ethanol plants. Currently, the capital cost for a net zero plant is projected to be about $900 million fully installed in a non-recourse project financed. The net zero one project EBITDA estimates are approximately $150 to $200 million per year based on the current assumptions of commodities and all the rest. Ethanol plants are well known in terms of cost and operating reliability. on the hydrocarbon process. ACCENS is doing the engineering and will provide certain process guarantees for converting the ethanol into hydrocarbons. This is a de-risk production system, as much as we can make it, and in the current more cautious environment for financing, the right way to move forward. The engineering designs, modules, integrations are planned to be cookie cutter for deployment at other sites and ethanol plants. A great deal of the engineering work and designs that we already have completed for NZ1 will be utilized for NZ1 using ethanol accents technology. The fermentation section of the plant will be smaller and we will have to add additional equipment as part of the chemical processes. We expect NZ1 to be mechanically complete in 2024 and operating in 2025. We expect to order long lead equipment in 2022 and begin site preparation work later this year. Please turn to slide seven. Many of you may recognize this chart. It's basically the same as before, although the amounts of product mix have changed. There's more SAF being produced. The total capital expenditure has remained about the same. The IRR is projected to be better using ethanol rather than isobutanol. Deploying renewable energy and infrastructure to drive down CI is still critical to success. Please turn to slide eight. The actions relationship in our plans to grow help to put the ADM MOU announcement into perspective. ADM has some of the biggest and most efficient ethanol plants in the world. We think there's an opportunity to convert those plants into SAF plants and other hydrocarbons. ADM and Decatur has one of the few operating CO2 sequestration sites in the U.S. We're in the midst of figuring out the how-to with them. We expect that we'll be able to leverage the engineering work we are doing with actions for MZ1 into any transaction that we would do with ADM. We are also exploring other opportunities with existing ethanol plants, and we are currently in discussions with several plant owners. The idea here is that we can bring our decarbonization partners like Joule Energy, the SAF plant designs, and our offtake contracts to the table. The value proposition for the ethanol plant owner is simple. they would make more money more reliably by feeding ethanol to a SAF plant. They also would need to be decarbonized along the lines of a net zero plant. We have a very open business model and look forward to working with many ethanol operations over time, but we would stress that net zero one is our priority. Ultimately to reach our 1 billion gallon goal, we expect to build multiple greenfield sites. We have several sites in development already. They're at least as good, if not better than the Lake Preston site. The advantage of greenfield sites is that we can optimize the key parameters for long run success. In addition to raw material costs, we also take into consideration access to the fossilized energy and potential for carbon capture sequestration. In a strategic sense, it is always good to have options. For example, the plant layout that we have developed for Lake Preston could be used at another piece of land of similar size. We believe that the site we select would require minimal changes to the engineering work. Please turn to slide nine. We announced that we have begun the startup of GEVO's RNG project in Northwest Iowa. When our RNG project comes fully online, it's projected to be the fifth largest dairy RNG project ever done in the US. This project has over 20,000 cows and is expected to produce 355,000 million BTUs annually or thereabouts. There are three dairies involved at this point. You can see the pictures of the digesters at each of the dairies. The upper right picture is the gas upgrading and injection site. The picture in the middle shows the relative locations of the digestion systems that we've built and our GEVO pipeline that connects them to the upgrading system. We expect that the RNG project EBITDA would be approximately 16 to 22 million per year Across the year of 2023, I give a range because the RNG project EBITDA will depend upon a variety of assumptions, including how CARB scores the CI for each of the dairies. Now, to get a CI score, we have to achieve a steady state, send in an application, wait for the approval to get the full value from CARB in California. We'd expect to get those scores in late 2022 or early 2023. CARB is backed up these days with lots of applications. RNG provides an exciting opportunity for GEVO. We see it as strategic for GEVO because we have to decarbonize our SAF plants, and we do like the idea of being able to take RNG up to our net zero one plant and drive our CI scores lower if we so choose. We like having RNG and biogas in our portfolio as an option. In the meantime, we can make good money meeting demand in California through our partner, BP. Please turn to slide 10. This is a rendering, an engineering rendering of our hydrocarbon plant currently built by Praj in India. We expect that this plant will be delivered to our production facility in La Verne, Minnesota in the latter part of 2022. We are currently making isobutanol La Verne. This hydrocarbon plant could convert isobutanol, into a variety of hydrocarbon products. We also expect it to be able to produce or to take ethanol in and make various hydrocarbon products. We expect to use Laverne as a development site for new products and to improve and refine the IBA production processes. We may deploy isobutanol in a side-by-side configuration in the future, for example, as an add-on to a net zero plant. Now I'll turn it over to Lynn.