Green Plains Partners LP

Good morning, and welcome to the Green Plains Inc. and Green Plains Partners' fourth quarter and four-year earnings conference call. Following the company's prepared remarks, instructions will be provided for Q&A. At this time, all participants are in the listen-only mode. I will now turn the conference over to your host, Bill Boggs, Senior Vice President, Investor Relations and Treasurer. Mr. Boggs, please go ahead.

Thank you, and welcome to Green Plains, Inc. and Green Plains Partners' fourth quarter 2020 earnings call. Participants on today's call are Todd Becker, President and Chief Executive Officer, Patrick Simpkins, Chief Financial Officer, and Walter Cronin, Chief Commercial Officer. There is a slide presentation available, and you can find it on the investor page under the events and presentations link on both corporate websites. During this call, we will be making forward-looking statements, which are predictions, projections, or other statements about future events. These statements are based on current expectations and assumptions that are subject to risks and uncertainties. Actual results could materially differ because of factors discussed in yesterday's press releases, in the comments made during this conference call, and in the risk factors section of our Form 10-K, Form 10-Q, and other reports and filings with the Securities and Exchange Commission. We do not undertake any duty to update any forward-looking statement. Now I'd like to turn the call over to Todd Becker.

Thanks, Phil, and good morning, everyone, and thanks for joining our call today. The fourth quarter and the opening weeks of 2021 have been exciting for our company. We have continued to optimize and rationalize our asset portfolio while pursuing strategic investments. What is most exciting for our shareholders is our partnership with Osprey and funds and accounts managed by BlackRock to acquire fluid-quipped technologies and expand the use of their technology on a global basis. The partnership not only validates our strategy but helps secure Green Plains' transformation and and creates a leading ag tech powerhouse team. We are continuing to execute on opportunities for expanding ultra-high protein and renewable corn oil production through deployment of Fluidquip's patented MSC system. In addition, we expanded our production of specialty alcohols by completing our 50 million gallon USP upgrade and are further expanding to GNS. And finally, we are beginning to install Fluidquip's clean sugar technology at our York Innovation Center campus. All of these initiatives are part of the pivot we are making to transform our business and our future earnings power, and I'll compete back to each of these initiatives later in the call. Turning to our financial results for the quarter, we reported and adjusted net loss of $18.3 million, or 53 cents negative a diluted share, when adjusting for $22.9 million of non-cash related to the sale of Hereford Ethanol Facility and an $8.4 million tax valuation allowance. While we're not happy with the bottom line results, driving demand due to COVID has still not recovered, so we can focus on what we can control and how we manage risk. We reported $9.4 million in adjusted EBITDA for the quarter, and our consolidated crush margin was $0.06 a gallon. Another quarter of positive margins, partly due to our risk management strategies and a slight benefit from our industrial alcohol and protein businesses. As in prior quarters, margins were impacted negatively by having some assets idled. Our liquidity position is strong and growing, and we are well positioned to execute on our transformation plan. We ended the year with $275 million in cash, as well as $45 million remaining on our delayed draw term loan with MetLife. The proceeds from the pending sale of Ord will also provide an estimated $37 million to Green Plains at its close, as well as an additional $27 million to Green Plains partners that will be used to reduce their debt. Additionally, we just completed a $125 million mezzanine note facility with funds and accounts managed by BlackRock, providing additional financing to accelerate implementation of ultra-high protein technology. While mezzanine debt is not our only or best choice, obviously the relationship we've cemented is an extremely important factor. Combined with other financings and available alternatives, our blended cost of capital remains very beneficial for our shareholders. The combination of these financing initiatives enable us to accelerate capital to our higher returning initiatives. More importantly, is our partnership resulting from this financing relationship as we look at other opportunities in the future to build, acquire, and grow the company. From an operational standpoint, we are nearing completion of the Mount Vernon Project 24 upgrade, which will start up during the first quarter. Our Madison location is expected to be completed during the third quarter. At this time, we have deferred the decision to continue Project 24 at Atkinson and York in order to pursue higher returning projects such as GNS Great Alcohol at York. Atkinson is under consideration to be our first clean sugar location, but a final decision has not been made yet. Our Project 24 plans have reduced energy and water usage, lowering operating costs, and more importantly, resulted in a better carbon footprint. Once Madison is completed, we anticipate we will achieve operating costs below $0.24 a gallon across our field-varied plants, even without Atkinson. During the quarter, we produced 214 million gallons of ethanol, which equates to a 76 percent utilization rate. Contributions from protein, distillers, grains, and renewable corn oil have benefited margins as we are seeing our thesis play out that the world is demanding additional protein and vegetable oils. The weekly EIA data continues to reflect an imbalance as production has remained above 930,000 barrels per day range while overall gas demand has remained suppressed, and inventory stocks have been consistently over 23 million barrels. With that said, 2020 exports were better than expected, and when the U.S. consumer returns to driving, we expect margins to recover nicely, especially if China truly returns to buying ethanol from us. The rest of the world recovery will be helpful as well. Green Plains partners continue to generate stable cash flows, protected by long-term minimum value commitments. As of December 31st, $30 million has been repaid on the debt since it was refinanced last June, including $10 million from the Hereford transaction. Now I'd like to turn the call over to Patrick to review both Green Plains, Inc. and Green Plains Partners' financial performance, and I'll come back on the call to talk more specifically about our ongoing initiatives and how FluidQuip fits into our transformation plan.

Thank you, Todd, and good morning, everyone. Consolidated revenues were $478.8 million in the fourth quarter, down $236.9 million, or 33.1%, from the same period a year ago, with the change being driven by both lower production run rates and ethanol prices, as well as lower export volumes in our ag and energy segment. For the quarter, our run rates were 75.7% of capacity compared to an 84.5% run rate for the same period a year ago. For the fourth quarter, Green claims realized a net loss of $49.6 million, or $1.43 per share, inclusive of a $22.9 million non-cash loss related to the sale of our Hereford's facility and an $8.4 million charge related to an increase in our valuation allowance on deferred tax assets. Accounting for these items, our adjusted net loss was $18.3 million, or 53 cents per share, relatively unchanged to an adjusted net loss of $18.6 million, 53 cents per share, for the fourth quarter of the prior year. Adjusted EBITDA, which excludes the loss on the sale of assets, was $9.4 million for the fourth quarter, down slightly from an adjusted EBITDA of $11.2 million for the same period a year ago, as improvements in the consolidated crush for 2020 compared to the prior year were offset by a decline in ag and energy contributions, and the sale of our cattle business. For the quarter, our SG&A cost of all segments was $22.8 million, which was $2.2 million higher than the $20.6 million reported in Q4 of 2019, driven primarily by higher insurance costs and slightly higher property taxes and professional fees. Consolidated interest expense for the company was $10.5 million, which was higher by $1.8 million compared to the $8.7 million in Q4 of 2019 due primarily to a higher interest cost related to GPP financing and our utilization of our delayed draw term facility to finance protein construction at our Wood River plant. On slide nine of our investor deck, we provide a summary of our balance sheet highlights. We had $302.8 million of cash and net of working capital financing, at the end of the fourth quarter compared to $275.3 million for the prior year quarter. Our liquidity position at the end of the quarter consisted of $274.8 million in cash, cash equivalents and restricted cash, along with approximately $332 million available primarily under our working capital revolvers and delayed draw term loan. This amount also includes $5 million available under the current credit facility of the partnership. CapEx for the fourth quarter was $19.1 million, including $3.9 million of maintenance CapEx, with a balance of $15.2 million being allocated to growth capital, primarily for our high-protein and Project 24 initiatives. For the year, we invested $106.4 million in capital, with approximately $18.1 million supporting maintenance CapEx and the balance going to fund our high-protein technology construction and Project 24 build-out. As we look at capital allocation for 2021, we are focused on completing Project 24 initiatives and accelerating our protein technology build-out with the announced protein projects and the anticipated rollout to additional sites during the year. For 2021, depending on market conditions and construction timing, our CapEx is projected to be between $200 and $225 million, including the completion of protein technology at Wood River the start of projects at Obeyan and Mount Vernon, as well as two additional sites. Maintenance CapEx for the year is expected to be approximately $20 million. For Green Plains partners, we had 215 million gallons of throughput volume at our ethanol storage assets during the quarter, which was down 25 million gallons, or 10%, from the fourth quarter of 2019 as a result of lower production rates at Green Plains plants. However, as a result of minimum volume commitment contracts with Green Plains Trade, the partnership billed Trade Group at the MVC level, which was amended to 232.45 million gallons of throughput after the sale of Hereford. Accordingly, the partnership reported an adjusted EBITDA of $13.8 million for the quarter, up slightly from the $13.3 million reported in the quarter of 2019. mainly due to a 6% increase in throughput rates charged by GPP, offset slightly by other ancillary costs. For the partnership, distributed cash flow was $11.3 million for the quarter, compared to $11.2 million for the same quarter of 2019. On a last 12-month basis, adjusted EBITDA was $54.2 million, distributed cash flow was $45.4 million, and declared distributions were $11.4 million, resulting in a 3.99 times coverage ratio for the trailing 12 months and a 3.98 coverage ratio for the fourth quarter. Our coverage ratio excludes any adjustment for required principal payments amortized during the period. Now I'd like to turn the call back over to Todd.

Thanks, Patrick. So we've been talking for some time now about Green Plains 1.0 and Green Plains 2.0, and our actions over the past several months are beginning to demonstrate the acceleration of our total transformation plan to achieve that vision. Joining with Osprey in funds and accounts managed by BlackRock in acquiring a majority in fluid-equipped technology truly sets the stage for every aspect of the plan. With the recent Harvard-led studies indicating that corn-based ethanol reduces greenhouse gas emissions by 46% compared to gasoline, this is just the start of the carbon revolution for this industry and our platform. There are several carbon mitigation initiatives that our company is exploring to implement as we emit 99% pure and clean CO2 used in the carbon cycle to grow crops, but now can be sequestered, and not to only significantly lower carbon intensity, but now actually have true low-carbon ingredients in food and feed. Our focus going forward is across four key areas. First, expanding and producing sustainable ultra-high protein ingredients that for the pet, dairy, poultry, and aquaculture markets. The results we are seeing at Shenandoah and the innovations we are working on with our strategic partners are remarkable. The recent strategic actions in our portfolio and additional financing we have secured serve to accelerate our ability to quickly deploy FluidQuip's MSE technology to multiple additional locations. We continue to see initial margins at an incremental 15 to 20 cents a gallon which applied across our capacity, applies a baseline opportunity of $140 to $190 million of annual EBITDA from the protein initiative once it's completed and before we see the benefit of higher protein securities as we move up the J curve. The protein market has seen massive price increases lately and continue to support our overall thesis that the world is protein deficient. With FluoEquips technology, we have the opportunity to deliver much-needed protein into the market without expanding land use. The construction on our Wood River facility to add high-protein technology is in full swing, and we expect its completion by early of the third quarter. O'Brien's ultra-high-protein project is just getting underway, but we expect it to be completed in early 2022. Additionally, work on our Mount Vernon location, as supported by the recent financing, will begin soon, with startup anticipated in early 2022 as well. We will likely be back again in the near future to make further announcements about additional locations. Our protein product is now being shipped to four distinct species. The most interesting thing is that it plays different roles depending on the need of the customer. In pet foods, The customer sees the benefits of a high yeast product while getting the added high protein to the diet. In dairy, our customers can displace very expensive diets while taking advantage of an increase in milk yields and milk protein levels and 20% more intestinal digested protein than comparable soy bypass products. In poultry, we're just getting started, but there there are two initial benefits. We are a key ingredient to the all-veg diet for poultry producers to sell a clean label product. Second, and even more exciting, is that demand for post-MSC distillers grains, which has better consistency and performance than traditional products, is gaining traction. We also believe our ultra-high protein is the perfect aqua feed, especially when combined with our Hayashi-Kani partnership to provide super-clean aqua feeds producing better taste profiles and yields. And this is all just the tip of the iceberg. Influencing each of these areas, we have an exclusive partnership with Novzymes. We are working in every species to tailor the yeast portion of ultra-high protein to express specific amino acids or other targeted characteristics in short supply. All of our partnerships are being combined into one single innovation engine, and our York Innovation Center is being utilized as I speak to work on and develop these potential breakthroughs. One second area of focus is expanding renewable corn oil to reduce carbon intensity of global liquid fuels. One of the critically important side benefits of implementing FluidClips protein technology is that it extracts and liberates additional renewable corn oil. We are seeing a 50% increase in corn oil yield at Shenandoah and anticipate similar results elsewhere as it's rolled across our platform. This is an exciting opportunity for Green Plains as we witness the rising demand for global veg oils from the rapidly expanding renewable diesel industry. While an increase in yields was originally part of our protein economics, the impact of increased pricing in the market was not. As we complete the protein initiative, the opportunity grows to $40 million of incremental EBITDA, or about 4 cents a gallon, to the consolidated crush for every 10 cents per pound increase in vegetable oil pricing. We are seeing these moves in the market today, and it could run much higher as competition to secure veg oils intensifies. At 75 cents a pound, at 1.2 pounds per bushel yield post-MSC rollout across our platform, that adds an incremental $140 million of margin. We believe structurally long-term veg oil prices are moving higher, if not significantly higher, than where we are today. Third, our specialty alcohol business achieved a key milestone recently in with the completion of the USP upgrade at York. We are now capable of producing 50 million gallons per year of USP-grade alcohol, and the initial feedback from our customers has been outstanding. Our project to further upgrade the site to be capable of producing grain-neutral spirits is ongoing, and we expect that to be completed late in the second quarter or early in the third. While we missed the primary consumer products procurement cycle for 2021, We are still seeing good demand for USP, and we'll focus on 2022 for the full payback results. Over the long run, we believe margins in this space, particularly with the upgrade to GNS, could be $1 to $1.50 per gallon over fuel ethanol and contribute $75 to $110 million of annual EBITDA in future years with added USP capacity at Woodrow. And then finally, one of the most exciting strategic initiatives we have relates to clean sugar technology, that we have access to through our joint ownership of FluidQuip. The opportunity to convert a dry mill biorefinery to produce clean, low-CI dextrose and glucose broadens our ability to produce innovative ingredients to support the growing demand from the biochem, synthetic biology, and biotech industries. We are in the process of completing and starting up our fully scalable CST system at our York Innovation Center right now, which will enable us to deliver commercial quantities to customers for the use in testing and validation, as well as utilizing it for commercial products. As we improve our ability to supply clean sugars from a dry mill process, we will quickly look to execute this on a larger scale by selecting one of our existing facilities to convert to clean sugar production. The great thing about this technology is that it adds flexibility to the locations that install it, replacing ethanol with dextrose or glucose as the primary product produced. leaving the remaining ultra-high protein, renewable corn oil, and post-MSC distiller's grains. The end markets for clean sugars are expanding quickly, creating opportunity for innovative solutions that can utilize our existing capacity. While today these markets are largely supplied by existing wet mills, we are anticipating significant growth, especially as customers demand products with a reduced carbon intensity. This is the key reason why we are so excited about the IP FluidQuip provides, as it allows us to produce additional innovative agreements ingredients from our biorefineries, further decoupling us from the volatility of past economics. The economics are far superior for clean sugar, better than anything else we have talked about today. We will work very hard to protect the IP for all the fluid portfolio and have a strong partnership in place to do that. We believe the proliferation of low-carbon fuel standards in new states and countries will continue, driving additional demand for ethanol and but more importantly, renewable corn oil we recover at each of our biorefineries. We expect this demand to increase exponentially in the coming years as a nationwide LCFS is not out of the realm of possibilities. So, if I were to summarize the Green Plains EBITDA opportunity for 2023 and 2024 and beyond, I would look at it like this. Once completed, we believe our base sustainable ultra-high protein platform will produce $150 million of EBITDA before we begin to move up the J curve with higher protein purities and improved characteristics previously discussed, and we are already starting to see some of those. Our renewable corn oil platform has significant upside. A $0.10 per pound move would add $35 to $40 million when all protein construction is completed. Our specialty alcohol business at York and Wood River could at least provide $75 million of baseline EBITDA And finally, developing two commercial clean sugar systems converting 150 million gallons of ethanol capacity, which we believe could be in place by 2025, could add a baseline $100 million or more of EBITDA. This is at a conservative 15 to 16 cent per pound glucose dextrose pricing, yet the market trades higher than that today for certain qualities and quantities. We expect the cost of these systems to be below $1 per gallon equivalent, and the returns are very compelling. We anticipate beginning to design and engineer our first large-scale system over the next several months. One thing that is really important is that prior to the FluidQuip acquisition, they already had a larger scale, 25,000 bushel per day CSP system in operation for crude dextrose, and we are using York to validate the scale-up as our smallest location is at least double that size. So it's not really a matter of if, but a matter of when. We also believe the IP has significant value. On top of all that, we expect our initiatives around growing optimal aqua, carbon mitigation, and fluid clips traditional business could add additional upside. When you add all these up, I can make the case that in 2024 and beyond, we believe we could have a baseline EBITDA of near $300 million to over $400 million and going higher with no contribution from our fuel business, which would be unlikely as demand will recover and expanded blends, like the governor of Iowa just announced, will be more prevalent. We have also mapped out where we can see an upside case significantly higher than what we just laid out, driven by upside in protein and clean sugar. As we look back on 2020 and the challenges we have overcome, we are well-positioned to accelerate our transformation of Green Plains 2.0 and beyond. Through the efforts of our dedicated employees, we have accomplished much. We are actively redefining the margin opportunities as achievable at Green Plains as we transform our biorefineries to produce innovative new low-carbon and sustainable ingredients that matter to a growing world. Thanks for joining in the call today and we'll start the Q&A.

Thank you. To ask a question, you will need to press star then one on your telephone. To withdraw your question, please press the pound key. Please limit yourself to no more than two questions at a time. If you wish to ask additional questions, please rejoin the queue. Please stand by while we compile the Q&A roster. Our first question comes from the line of Craig Irwin with Roth Capital Partners. Your line is now open.

Good morning, and thanks for taking my questions. Thanks, Craig. Hey, Todd. Congratulations on the progress recently. One thing that really caught my attention, and I want to make sure I heard this perfectly clearly, is your CapEx Guide 200 to 225 this year. We've been talking about Wood River and Obion for a while. But adding Vernon and two additional sites to the HyPRO plan, it seems like you are pulling this forward, moving a little bit faster now that you have the capital or the financing to move forward. And is it fair for us to think that there's probably around another 50 to 70 million to complete those additional locations in 22? Yeah.

We're going to move as fast as we can. And it's going to be subject to, obviously, availability of contractors, general contractors, equipment, and all of what we can achieve in the quickest amount of time. Our goal is to have five to seven of these units under construction. And with our recent announcement yesterday, as well as the additional opportunities that we're seeing, we want to try to accelerate as quickly as we can, and that's what we're working on. So 220 is the baseline. If we can move faster than that and start others up, then I would say we would go after that opportunity. But, again, it takes between engineering, design, and build, it's about a year total of construction and design time.

And, Craig, that would leave about 140 left to go. So that would really bridge 2022-23. Got it. Got it.

Okay. Excellent. So then, you know, this fluid clip acquisition, you know, congratulations. It seems that it's really allowing you to move faster and do a lot of really interesting things. Can you comment about whether or not this is one of the key factors that's allowing you to move forward on these additional plans? Is there any technology development that you're maybe seeing earlier that you could be adopting here? What are the synergies that you're seeing from FluidClip at this point? And how does this inform the strategy of rolling out the rest of the platform?

FluoClip's IP portfolio is very strong, and it's strong in multiple aspects, which is why we're moving as fast as we can. It starts with protein. The demand for protein is so massive around the world and continues to grow every year that we want to make sure that we move as fast as we can to get the baseline earnings in line with the what we have previously indicated to the market. On top of that, we're moving fast with our partnerships to add value in multiple different ways to this product. As we said, one of the things is we believe it's one of the most perfect aqua feeds that have been developed in many years. And with that, what we want to be able to do is use our partnerships effectively strategic partnerships between Novozymes and Hayashi Kani to increase the value of the product. Novozymes isn't just all about protein purities. Novozymes is about enhancing the ability to have this product be designed for different needs of the different consuming species. For example, we've met with a group of pet food customers, Novozymes, Green Plains, and pet food customers to ask them and look for what are they short and deficient in the feed and how do we use the yeast to express those shortages or deficiencies, and we're making progress there. We've met with dairy customers for the same reason. Let's go after the amino acid expression of things that they're short, not things that are readily available, and we're making progress there. On the Hayashi Connie side, by adding that ingredient to our overall product, we can really start to drive taste profiles and yields in land-based aquaculture systems, which are just starting to gain traction in the United States, but it's the fastest-growing protein consumed in the world today. So when we look at that, that's the first reason. The second reason is really driving up using that technology to go after and liberate more of the corn oil that's available in the kernel. If you think about it, The corn oil in the kernel, there's 1.8 pounds of oil per bushel of corn, which is 56 pounds. Today, a traditional ethanol plant usually liberates about 0.8 pounds. With a FluidQuip system, we immediately start to liberate up to 1.2 pounds, and FluidQuip is working very hard on adding technology to go after all of that available corn oil up to 1.8 pounds, and we think we're going to make progress there. In addition, lastly, on protein, at least from that perspective, 3.5 pounds per bushel was a baseline. We can go after more protein as well. And so we want to get our plants up and running. But we know that our technology, while keeping the remaining product intact and valuable, can go after up to four or five pounds per bushel and make more and more high-quality proteins. And so bringing them in-house is really able, allows them to go after more and more development of their IP and and allows us to move very fast to roll these out, while also building other plans for other customers of FluEquip. So I think that's very important, is that we are a customer of FluEquip as much as we are a shareholder of FluEquip. FluEquip has many customers around the world, from Poland to Canada to South America to China to the United States, and their portfolio has been rolled out across the world. We're going to look to see that continue even in protein technologies in South America. Between that and obviously the clean sugar, which we think is very exciting, it's been very beneficial and synergistic to become a large shareholder of the company.

Great. More protein is a good segue into the next question I wanted to ask. Shannon Doe, you've been operating in that, I guess, roughly 10 months at this point. Originally you told us you were aiming for 50% or better. You started at 51%. Last call I think you said you were averaging around 53%. You know, have we climbed higher? Are we potentially in the 54 range now? And can you maybe share with us any other key developments at Shenandoah as we look for, you know, the opportunity to improve the economics of this technology going forward?

Yeah, we've consistently been in that range because what we wanted to do is get consistent production on a daily basis of 52% to 53% protein with the yields that we don't want to achieve to achieve maximum initial payback. You can assume that we are continuing our development to achieve higher protein purities and move up the J curve, as well as add other nutritional characteristics through expression in yeast and also then bring in ingredients to change taste profiles as well. More to come on that. I think we're making some advances as we speak, and as we get more and more results, we will have to bring those to you, but you can assume we are working very hard to get up the J curve.

Great, and then lastly, Novozymes. This is the exciting technology side that I guess maybe gets us into aquaculture in the future. Can you maybe share with us the breadth of development programs that you're looking at with Novozymes? What's the general status What's the timeline before we start seeing things visibly as investors looking to understand the potential here?

Yeah, this is a very powerful partnership. When you take a look at all of the partnerships that we've put together around this IP, whether it's the ownerships in FluEquip and the shareholders that have come in to this powerful platform, and if you think about ag tech, look at the powerful partnerships. shareholders we've put together, because this is true ag tech. And Novozymes, on the other side, as a partner, has been really an incredible opportunity for both companies. And so we are working very hard with them on several initiatives. We are doing joint meetings on several different species. We're using the York Innovation Center as we speak to look at several opportunities as well, And as we have successes, which we're starting to see some come to fruition, we'll be able to report those back to you. But I can tell you that everything we expected out of this partnership and more is beyond our expectations at this point. And, you know, I think we'll have some exciting announcements in the future on that.

Great. Congratulations on the put forward of Hypro. Thank you.

Thank you. Our next question comes from the line of Adam Samuelson with Goldman Sachs. Your line is now open.

Great. Thank you. Good morning, everyone. Good morning. Good morning. So, Todd, a lot of ground covered there going through the strategic plan and the opportunity set. I just want to think about maybe first in the near term, we do still have a market that's not particularly well-balanced and we didn't get a lot of color on kind of your view of the ethanol market this year. And maybe just first to help us think about how you're, how you're seeing things as they stand today and kind of where opportunity could exist in the back half of the year of driving miles, get better exports to China, improve, um, maybe just start there.

Yeah. Look, as, as we know, the ethanol market last year with COVID and reduced driving, uh, has definitely suffered. coming off of a year where demand or that margins were low prior to that. So we've got work to do as an industry to rationalize or balance ourselves relative to demand. I think what we saw today with a big draw on stocks was a nice to see, but we have a lot of work to do. And we remained last year to have a pretty good export program in 2020. although we could have certainly used a lot more than that. And so while we're coming into 2021, continue to be oversupplied, margins continue to remain under pressure. There's some positives. Obviously, driving should recover. We get into summer driving season. We're looking forward to that. The vaccine, while certainly is slow to roll out, ultimately over time should be helpful to driving demand and then obviously returning of the export program. And while we saw the first 200 million or so gallons sold to China, hard to say whether that's a program or not or whether that's an opportunity. But when they finally have come back into the market, obviously we're excited for that as well. So if we see like for like this year versus last year relative to what we're able to sell in a COVID year, hopefully exports go higher. It's really going to come down to when does the consumer drive more. And I think that's really what we're waiting for. And margins will probably remain under pressure for that. But look, I think we've set ourselves up very well. We got through 2020. We got through 2019. We have less debt than we had before we got to 2019. And we're in a better balance sheet capacity today. We have plenty of liquidity today. And we continue to structure ourselves very well and manage risk aggressively and try to at least get out of the way of some of this margin volatility.

Okay. That's all really helpful. And so maybe going back to the strategic plan, we think about kind of where you get to in 24. You gave the CapEx number for this year. If I'm looking through the way you presented this, between what's left to spend on high protein and, And the investments in clean sugar, we're talking about 400 to $500 million of capital to spend between now and I guess the end of 23, really, um, depending on how quickly the clean sugar, um, progresses. Um, as we think about kind of the balance sheet where it sits, um, cash, you got the, you got the two, two financing arrangements. You've got cash in the door from the, from the plant sale. and you've got potential cash flow between now and then. So what do we think the right, how do we think about the capital structure as we get to this new baseline and move forward? That's one of the depths on your books today is to convert. So just to make sure, I'm trying to think about the balance sheet and what we look like when we get to the 10 states.

Yeah, our goal is not to have the debt levels that we've had in the past, obviously, you know, with over a billion dollars of debt in the past, I don't see ourselves doing that again. You know, our goal is obviously, you know, funding has been a strategy through partnerships, through divestitures, through monetizations, and using cash. And I think we've done a pretty good job to lay out at least getting through protein. Now, if sugar is successful in New York and we decide to to build those first two plants. Obviously, that's not in our funding plan yet, but the payback is much quicker on that than it is on protein. And so, I don't think we'd have any problem from that perspective, whether construction financing or some type of partnership financing to get those built because they're very fast paybacks. And so, that's not in our capital plan yet today, but obviously in 2020, we're very confident we'll be successful. So, That's probably the next stage of our capital plan. I don't see us really changing our portfolio mix too much today on what we have. We kind of did what we needed to do in terms of monetizing assets. And what we have left, I think, is – especially since we put all the money into Project 24, getting through finishing that and having a platform that operates at a very high level in this industry, I think, is a key factor. And then from there, obviously, gives and takes will have to be considered, but overall – I'd say protein is just about funded, notwithstanding other things that can come into play. Sugar would need to be obviously come to a funding plan there. But overall, I don't see us exploding our balance sheet with a bunch of debt to get that done because I don't think it takes that either. And then obviously cash flows from these projects start to kick in and help pay as well.

Okay, great. That's all really helpful, Colin. I'll pass it on. Thank you.

Thank you. Our next question comes from the line of Jordan Levy with Truist Securities. Your line is now open.

Good morning, guys. Todd, you talked on this briefly, but, you know, knowing the larger macro demand for protein, could you just kind of touch on the demand you're seeing from your customers for your products specifically in markets you're currently in, like PET, and then also in the markets that you're exploring, dairy, poultry, aqua, and that sort of thing, and and how that kind of ties into the potential for offtake agreements down the road as you get these plants online?

Yeah, I mean, this is about substitution, replacement, and adding value. And that's what we're trying to do with working with customers. We could sell every bit of our protein out today. If we want to just sell it as a generic soybean meal equivalent protein, I can have that sold out in under 10 minutes. But that's not really where we believe we fit into the value chain because our product isn't just protein. It's protein and yeast. Our product is 25% yeast. And so when you think about the price of yeast, by adding our product into many of these species, you're getting additional advantages. And that's really what we're working with the customers. So in each of the species, obviously pet, very important. We're in our second year of our pet program, Pet Offtake, where They continue to increase their volumes, not decrease them. Our customers continue to change formulations, and we're in the middle of a palatability study as well on higher protein purities from the initial start. So we're doing a lot of work around PET, and we think that'll be a key cornerstone market for us. As exciting as that, though, is we are now starting to work with large dairies, some of the largest in the United States, who are now using our product. And that's probably new since the last conference call is where we really weren't in dairy at the time. But we have seen in our dairy studies, as well as working with our customers, enhanced yields, milk yields, enhanced quality, enhanced performance. And we're in very early stages with working with our customers. But that's a new vertical for us that we really just started shipping last quarter. But now we are in dairy. We are in aqua as we speak. Our fish are being fed today, and customers' fish are being fed today with our products, driven by our relationship on innovation with Novozymes and our relationship on feed quality and taste profiles with Hayashikani, and really creating a cleaner, better-tasting, healthier fish. And that's kind of what we're going after with our partners and getting them the characteristics that they want as well by using these technology partnerships. So we're in aqua today, and we're expanding relationships there, both domestically and globally. We're working very hard to do that. And then lastly, in poultry, not just around using it for all veg, we're starting to see characteristics come in play there. But even more exciting, again, as we talked about, is our post-MSC DDGs. And that's the product that we're making after the process. that is a more consistent, better quality, less variability around that market as well. So we're making great advances. But again, if we just want to commoditize it, sell it as high-protein soybean meal, that's 12 to 15 cents a gallon right there anyways. We can make that phone call and probably get multiple years of our product sold in under 10 minutes at high-protein soybean meal prices, which, by the way, is a great return as well. That's still under a three-year payback on the project. Our goal is to move up that J curve as rapidly as we can.

That's great, Culler. And just for my second question, knowing that Clean Sugar is still in the really early innings of its build-out and you guys looking into that. You mentioned in yesterday's release that you've got 40-plus discussions going on with different parties. Could you just discuss kind of how you see that market playing out over the next few years and where you see the opportunity set and how that fits into the overall 2.0 strategy?

Yeah, so I think what the market should be clear is that Clean sugar has been done with Fluquip before. They did it at a much larger scale than we're doing it at York. In fact, they did it at a 25,000-bushel-a-day scale, which is about half of a 50-million-gallon plant. And it ran very well, and they made crude dextrose. So they didn't have to make refined. They didn't have to make food grade, but they did make crude dextrose. So all you have to do after that is refine it and make it a better product. But they have run much bigger systems. And what we wanted to do is bring it back to York, which is a – a facility that has literally a mini ethanol plant in there that you can transform into a clean sugar system. So we're going to bring it back so we can engineer a larger system. So we're further down the road on our development, and probably some people understand because of their stuff they did before we became partners with the team and brought in other partners, which is why I think the value of this IP portfolio has yet to be you know, I think action realized by people looking at what we've been able to do here with our partners. So, you know, that's very exciting. And then, you know, when you look at the 40 or, you know, even more partners that we're working with, it's everybody from food to industrial chemicals to anything regarding fermentation all the way into, you know, green chemicals and industrial biotech and synthetic biology. And, you know, you can probably start to guess some names, but which we're not going to give out, but as well as confectionery. You know, that's another market that we've already shipped clean sugar to in the past who have made products that are on the shelves today with our refined dextrose. And so, This isn't really going to be a matter of if we can make it. It's just a matter of scaling it and when we're going to make it at scale. And obviously, it's what a wet mill does today, and the margins are healthy relative to making fuel. And we have very strong IP around that, and we will protect that IP as well.

Great. Thanks so much, Todd.

Thank you. Appreciate it.

Thank you. Our next question comes from the line of Ben Bienvenu with Stevens, Inc. Your line is now open.

Hey, good morning, everybody. Good morning. I want to ask, you know, clearly the pace of the transformation is accelerating, and the financing and partnerships, you know, augment the pace of the transformation. Todd, if you snapped your fingers and had unlimited capital, would that further accelerate the pace of the transformation or their You mentioned engineering, operational, bandwidth dynamics that we need to be mindful of as well. Kind of help us think about rank ordering, the constraints around accelerating the transformation that's underway.

Yeah, obviously unlimited capital would accelerate everything because you can certainly push harder and push faster. And we're always managing between 1.0 margin volatility and 2.0 capital needs. but we still have to manage through that and manage our business accordingly because we always want to have strong liquidity and a strong balance sheet. And if you go back and look at the 12 or 13 past years of Green Plains, we always had strong liquidity and a strong balance sheet to manage through margin volatility. So we always have to take that into consideration on how fast and how hard we press. But unlimited capital at this point, obviously at the right price because that's important as well, could accelerate us and – probably get us into maybe save six months off the timeline, but I'm not sure that it's going to make a dramatic effect at this point. I think we have a good plan. And as we need capital, as we develop the plan further, whether it's through the expansion in clean sugar or enhanced oil recoveries or other things like that, obviously we'll have to develop financing structures and strategies around that. But I'm not sure you can go much faster just because of the constraints on the system at this point.

Okay, great. And then my second question, you made some comments around the national LCFS program. And forgive me for not knowing this, but I'm curious to know, you know, how active are you in selling into LCFS markets today, like California with your product portfolio? And, you know, by extension, obviously a national LCFS program or even, you know, state-by-state LCFS programs that are being – Give us a sense of how accretive that would be to your kind of margin per gallon equation.

Yeah, so obviously we sold our Hereford plant, which was a low-carbon plant, but it didn't fit with our overall strategy in protein, oil, and sugar at the time. And it was the right thing to do, and we got to participate in the future through the earn-out of reducing CO2 their CI scores by sequestering carbon. I think we're going to see the spread of a California model across several states, if not across the United States, and nationally and globally as well. And this is just the beginning of it. And I think that's where the re-rating of ethanol plants and what we do and how we do it, I think sequestering carbon from an ethanol plant is not a... if it's going to happen, but when it's going to happen. And reducing our CI scores significantly from in the 60s and 70s into the 20s and the 30s and the 40s is very possible, if not all the way down to net zero carbon for what we do because of other things that ethanol plants are doing these days. And so when we look at our participation today, for us, we are focused on something a little bit different today than just LCFS markets. You know, we have a plant that ships into California. We have a couple plants that actually ship into California today and can take some advantage of that, but we really need more volume, bigger programs, national rollouts, and more states to do it. And really a scheme around, you know, what does it mean when an ethanol plant gets to 30 carbon, 30 CI scores, and what does it mean when an ethanol plant gets to zero or negative CI, which I think is coming as well in our industry. And so, you know, I think that We're on the path of that. And I think it's going to be somewhat of a surprise to the outside looking in at traditional Gen 1, 1.0 ethanol that they have the capability and we have the capability to sequester carbon at such a rate. And I think the important thing is what we've looked at is that it can meet the gold standard. When you look at what we do, we can meter every single ton of carbon in that we sequester, and we can monitor it and measure it, and it's not just a dream. I mean, you can truly, and you're seeing ethanol companies do that in the United States, producers, that if they can sequester it, you can actually monitor it, measure it, and have real impacts to what the market's looking for. So, you know, I'm optimistic, and I think it's going to happen. I think that you're going to see red states and blue states all kind of move to some of these standards and potentially move to a national standard. Okay, great.

Thanks for the color and best of luck. Thank you.

Thank you. Our next question comes from the line of Lawrence Alexander with Jefferies. Your line is now open.

Hi, everyone. It's Dan Rizzo on for Lawrence. Thanks for taking the question. On the new high-protein platform, can you quantify even roughly the amount shipped to date and the average sales price and the amount expected to ship over the next couple of quarters in a reasonable range for the average sales price?

Yeah, that's not something we typically give out in quantity and price, except to say that we're achieving significant premiums as expected. We are working with customers on ASPs, and depending on the protein we ship or the use of the product, ASPs may fluctuate a bit, but we are achieving our initial goals that we thought, and we are achieving our initial production volumes that we indicated or that we thought would happen as well.

Okay. Thank you very much.

Thank you. Our next question comes from the line of Eric Stein with Craig Hallam. Your line is now open.

Good morning. Thanks for all the details. I do apologize if you've already touched on this, but just on the clean sugars side of it, you mentioned that Atkinson would likely be the first, and I think in your 2025 outlook that you plan to have two. I mean, is that something we should look at as a baseline, you know, something that potentially comes in higher than that given the economics? And I believe it's, you know, kind of the typical capex. Is it a dollar a gallon? Is that how we should think about it?

Yeah, I mean, we're definitely looking at Atkinson. It's a small plant. It's a good location. The only thing, it's lacking rail, but it does have all truck capacity, which a lot of stuff gets shipped out in totes. And it's a plant in a good location to procure the inputs. But again, that decision hasn't been made yet. I would say when we look at, it'll be one of our smaller plants and one of our larger plants will be, that we're looking at for the 2025 number would be a 50 or 60 million gallon plant and 120 million gallon plant for conversion. And that's kind of how we're thinking about that.

Got it. And maybe just lastly, I mean, you've touched on a lot of stuff here, but on alcohol, I know you're up at York and Wood River. It sounds like you missed kind of the window for 2021. As you get towards the end of this year and signing those contracts for 2022, is that something that you think you expand, or do you think that you stick with what you've got in terms of USP at those two locations? Because obviously you've got your hands full and you're focusing hard on high pro and also clean triggers.

Yeah, obviously York, as we always said, we're fortunate. It's a bit of a unicorn. The quality is so high that we produced there, whether it was FCC, now USP, going to GNS. I think that's what's really important is that we want to hit the GNS moniker by end of the second quarter and be able to catch the ball procurement cycle of 2022 in consumer products companies, especially around GNS and very high quality alcohol. And then obviously upgrade Wood River to USP from FCC, which is something else as well. And we are working with all the major consumer products companies that buy product like this. But again, they buy it towards the end of the year and their normal procurement cycle. And without us having a USP product operating at the time. They didn't know what our quality would be. Now they do. Everybody's very excited about our quality. It's a full-scale USP system. It's not just running it over some carbon filter and thinking you're making a good quality product. This is actually a full-scale distillation system that we put in place to make what we believe is one of the highest qualities out there. And so it's just now just a matter of time to get into the sales cycle and think like that. Again, It's not going to be a huge focus in terms of the strategy, but it's a big focus because our quality is so good and the customers really like the product. And so while certainly not the absolute part of our strategy, it's a great contributor to our 2022, 23, 24, and 25 projects. earnings once everything's live, especially when we get to GNS. So very exciting, and we think we've developed, as previously announced, relationships with some of the top brands in the United States, and that's really paying dividends for us now as we execute on better qualities. Okay. Very helpful.

Thanks. Thanks.

Thank you. Our next question comes from the line of Ken Zaslow with Bank of Montreal. Your line is now open.

Hey, good morning, guys. I have really two quick questions. We've covered a lot. One is, did you say that the spread between ethanol and corn will become relatively irrelevant by 2024 for you and that all your profitability will come from the other parts of the corn?

No. I mean, our view is that when we give you our 24-25 outlook, we're going to put zero contribution in for ethanol, and then obviously we can decide what to do with that later. And so what we didn't want to do is cloud the fact of any margin volatility and just say, hey, this is going to be our baseline earnings on all of our initiatives, and then ethanol will be obviously a contributor or could take some of that away at times as well. But I think when you look at the wet mills in the United States, they don't talk about ethanol, but they make it because they split the same corn kernel up into 200 different products, and we split it up into under 10 different products, and we're going after some of those high-value products. So Our goal is to leave it in the rearview mirror, and while we certainly will give you guidance in the future on where the ethanol margin is, you'll see less and less of that, hopefully, as we roll out higher-value, higher-margin products.

And then the second follow-up is, did you allude to the fact that you don't truly believe that maybe one of your peers or competitors who indicated that those 200 million gallons of demand from China is real? It just sounded like You seemed a little bit more skeptical than that. Is that the read that I got? And then I'll leave it there.

No, no, that was actually real demand, and we were happy to see it. Now we want to see more. So the question you have to ask yourself, is it a program or was it a purchase? And that's really what we're trying to figure out is are they coming back for more? The window's open. When you look at corn prices in China and you look at ethanol prices in China and actually plants are shutting down because of corn prices in China, the window's open to import a lot more ethanol into China But I think there's got to be more of a program than just a purchase. And so I'm always, you know, anybody that knows that's been listening to our calls for many years, China's always a nice to have, and I hope they buy a lot more. But, you know, I can't build my business plan around that, but it's a fantastic thing that they bought 200 million gallons. And I think they'll, you know, hopefully they continue that through 2021. One, because the window is wide open for them to import more from a price perspective, even with the tariffs.

How will you be able to assess if it is a program or if it's just a one-off buy? Obviously, in hindsight, you will be. But what are the markers that you're looking for to maybe give you confidence one way or the other way? And I'll leave it there.

Yeah, we have, obviously, relationships in China with the importers. We have relationships in China on the policy side. And the question really is, When does it become a policy? When does it get published? Is it just a one-time, we'll let you import it and then we'll see how it goes? And it's really going to be around what do we see on policy changes? Obviously, they are still focused on carbon emissions. They are still focused on their blending strategy, even though a couple years ago it kind of got pushed to the side. It seems to be that that's starting to rear its head again. And it's really about hearing more about policy than it is just about opportunistic purchases. And so that's what we're waiting to see to get more excited. But don't get me wrong. It is a great thing to sell 200 million gallons, which is, what, four or five million barrels that potentially in an oversupplied market. And maybe that's one of the reasons we saw some draws this week.

Great. Thank you very much. Have a good day.

All right. Thank you.

Thank you. There are no further questions. I would now like to turn the call back to Todd Becker for closing remarks.

Yeah, thanks, everybody, for coming on the call. Obviously, a lot going on. We appreciate your support. You can see that what we're doing is trying to create a lot of value. We're really focused on getting through the next couple of years, getting to 23 and 24 and starting to get a baseline opportunity for ourselves. And we think it's possible. We think it's probable. And we think the value of the portfolio that we're putting together is obvious. And the value of the partnerships we're putting together is even more obvious. and giving us great affirmation and great validation of what we're doing. So appreciate your support, and we'll talk to you next quarter.

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.