Gevo, Inc.

that applies broadly to tracking environmental attributes for any supply chain. As we develop this business, we expect to add more customers and partners. We will continue to inform you all and eventually put forth revenue projections. Final note, the VCS business model is a capitalized business model. VCS is developing software, tools, and providing business system advice, engineering, sustainability consultant services, and creating the carbon insets. Ultimately, we'd expect that the carbon insets can be monetized one way or another, and that we'd share in that value with our customers and our partners. Before I turn to the staff projects, I want to make very clear an important point. We are primarily project developers, licensors, and business developers. We may indeed invest equity into projects, but our cost of capital is expensive. and we will be prudent with our cash. We expect to secure third-party debt investment for our net zero projects. We also expect to secure third-party equity. We expect to make money through development, fees, licenses, and what commonly is called a carry in the project. A carry means that we expect to receive an equity interest in the project without necessarily making a cash investment per se. The SAF and hydrocarbon markets are so big, We want to enable as many projects as possible and make money while we're doing it. In addition to playing the role of enabler and project developer, we expect that for certain projects, we can provide operation, maintenance, engineering, and even training services or other support as necessary. Now, turning to our net zero SAF projects, specifically NZ1, since our last call, there have been several things that have impacted our thinking. First, interest rates are high and expected to go higher. After discussions with potential equity investors, we believe that the right approach is to secure financing using the DOE loan. This is expected to be the lowest cost source of debt and require the least amount of equity. However, this would delay the timeframe for financial close, pushing financial close into 2024 based on current expectations and assumptions. The DOE has a lengthy and time-consuming process that must be followed. A 2024 close would mean the earliest possible plant startup for NZ1 would be in 2026. In any event, the schedule and timing of NZ1 will be driven by our ability to obtain third-party financing, both debt and equity. What does this mean for GEVO? This means that recovery of our development costs and fees for NZ1 will be delayed until the financial close of NZ1 expected in 2024. As a result of this delay, we are reducing our spend of capital for NZ1 to better align with the timing of the DOE loans. Said differently, we're being prudent and careful with our cash given the timing of the DOE loan and the volatile macroeconomic conditions in the world today. Another issue that we're watching closely is the rulemaking regarding Section 45Z for SAF in the Inflation Reduction Act, or IRA law. What is weird is that Section 45Z refers to Corsia, which it just turns out isn't even a method of counting carbon. CORSEA is a policy framework, not a scientific method to measure carbon intensity. We note that according to ICAO's website, they're the sponsors of CORSEA. CORSEA, quote, moves away from the patchwork of national and regional regulatory initiatives and offers a harmonized way of reducing emissions from international aviation while respecting special circumstances and respective capabilities of ICAO member states. Having CORSEA cited in this bill for counting carbon It doesn't make practical sense. It isn't a method of counting carbon. However, applied correctly as a framework and taking into account modern U.S. data and the gold standard for counting carbon, that is the argon-grit model, I could see how it could work. Contrast this to the sections of 45Z regarding transportation fuel that are specifically called out to use the argon-grit model. So something strange is going on in the SAF section that needs to be resolved through rulemaking. I know it is, of course, the government, so I do expect some sausage making. It will eventually come clear the world needs SAF, and the world really does need to use these excess carbohydrates to make it happen. But enough of that. So to be really clear, for SAF, we do not have a traditional build, own, operate business model. We are pursuing a capital-like project developer role that is projected to give an attractive return on our investments. such as in the P66 ADM deal. The idea that GEVO puts up all the money or is obligated to put up the billions of dollars needed to build the plants is wrong, wrong paradigm. We expect to play the role of market developer, project developer, technology developer, licensor, and all the while managing our cash wisely. When we bring projects to financial close, we would expect to recover our project development costs and keep that carry interest in the project. Capital light mob. Now, we may choose to invest in particular projects along the way too, but it'll depend upon our view at the time of what's the best use of cash in our balance sheet. What generates the greatest potential for GEVO? In this difficult economic environment, we are glad that we have a very strong balance sheet. We expect to have multiple routes to generate cash for this balance sheet going forth. These routes are expected to include R&G business, priority business solutions, our project development businesses, licensing, and eventually our retained interest or equity in the projects that we develop. We're just beginning. Now I'll pass it off to Lynn to talk through the operations and numbers.

Thanks, Pat. To start off, we have moved our R&G business into normal operations, and I'm pleased to report that we have revenue that exceeds expectations for the quarter on R&G. Given consistent uptime and strong RIN generation driven in part by a catch-up of RINs received for production in the fourth quarter of 2022, our revenue from operations was $4 million. We received some LCFS revenue in Q1, and we'll continue that going forward based on a default temporary CI score of negative 150 until we receive the final pathway approval from CARB expected early next year, which should improve to something like negative 350. We're off to a great start in Iowa, and I expect continued improvement as our capacity and expansion from 355,000 MMBTU to 400,000 MMBTU is implemented later in the year. We ended the first quarter of 2023 with a strong liquidity position of 453 million in cash, restricted cash, and other liquid investments. Restricted cash totaled 77.8 million and is associated with the Northwest Iowa RNG bonds and certain collateral related to the development of net zero one. Long-term debt outstanding of 67 million is related to the Northwest Iowa RNG project. Our corporate span, that is SG&A, was approximately 6.2 million for the quarter, net of non-cash stock-based compensation of 4.6 million. During the first quarter of 2023, we invested and capitalized $11.4 million cash in capital projects comprised of $8 million into Net01, $1.5 million into the Northwest Iowa RNG project, and $2 million into other projects. We intend to finance the majority of construction capital at the NZ1 subsidiary level with project finance debt and third-party equity. We have strong interest from several potential equity investors based on the amount of due diligence they are doing, although the macro issues Pat talked about are on everyone's minds. We do, however, expect to secure one or more investors, and we are working through the due diligence process with a number of premier infra funds. It's also worth mentioning that while the DOE loan is the primary track to secure the debt, we are running a second commercial debt track as we want to keep our options open. I'll turn the call back over to Pat.

Thanks, Lynn. Let's open it up for questions.