Welcome to Gevo’s Inc, Q4 2016 Earnings Conference Call. My name is Ashley and I will be your operator for today's call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. Please note that this conference is being recorded. I'll now turn the call over to Geoff Williams, General Counsel. Mr. Williams, you may begin.

Good afternoon, everyone and thank you for joining Gevo's fourth quarter 2016 earnings conference call. I'd like to start by introducing today's participants from the company. With us today is Pat Gruber, Gevo's Chief Executive Officer; and Mike Willis, Gevo's Chief Financial Officer. Earlier today we issued a press release, which outlines the topics that we plan to discuss. A copy of this press release is available on our website at www.gevo.com. I would like to remind our listeners that this conference call is open to the media and we are providing a simultaneous webcast of this call to the public. A replay of today's call will be available on Gevo's website. On the call today, 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 and 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 operating activities for 2017 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 annual report on Form 10-K and in subsequent reports and other filings made with the SEC by Gevo including our 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 Gevo 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 developments. Mike will then review Gevo's financial results for the fourth quarter of 2016. Following the presentation, we will open up the call for questions. I'll now turn the call over to Pat.

Thank you, Geoff and thank you all for joining us today. I am going to focus on three things today. Number one, summarizing 2016 in terms of what we accomplished and what it means going forward. Two, painting a picture of what I believe it's going to take to make Gevo profitable and three, what we are planning to do in 2017 and why our goals for this year are important to achieving our future profitability. So then, as I look back in 2016, the best way to sum up 2016 is that it was a year of commuting customers, partners and ourselves that the isobutanol production technology fundamentally works on a consistent, repeatable basis in a commercially sized production line. We also continue the process of developing our markets, so they will ultimately be able to absorb at strong profit margins, larger isobutanol and hydrocarbon volumes, as we look to ramp up our production levels in the future. Recall that last year, we completed the installation of a full isobutanol production line that allowed us to produce finished product on site at Luverne, while keeping the rest of the plant producing ethanol. Once we learned to run this production line effectively, we were able to hit our throughput and variable cost targets. In short, the production systems worked as we expected them to. Earlier this year, we issued a press release describing some key operational highlights from Luverne in 2016, including in the fourth quarter we produced approximately 190,000 gallons of isobutanol, the highest quarterly production level in Gevo's history and we produced approximately 440,000 gallons for the year, that was also a record. In the fourth quarter, we produced a record number of batches in that quarter since switching Luverne over to a side-by-side motor production, achieving our…

Thank you, Pat. Gevo reported revenue in the fourth quarter of 2016 of $5.8 million as compared to $7.3 million in the same period in 2015. The decrease in revenue during 2016 is primarily a result of the production and sale of approximately $5.3 million of ethanol, isobutanol and distillers grains at the Luverne plant as compared to $6.5 million in the fourth quarter of 2015. This decrease in revenue was mainly due to lower ethanol production and distiller grain prices in the fourth quarter of 2016 versus the same period in 2015. During the fourth quarter of 2016, hydrocarbon revenues were $0.5 million, $0.2 million higher than the same period in 2015, principally as a result of the shipment of more isooctane during the quarter. Gevo also generated grants and other revenue of $44,000 during the fourth quarter of 2016, down $0.5 million as compared to the same period in 2015. The decline was primarily due to the completion of our project with the Northwest Advanced Renewables Alliance or NARA in the third quarter of 2016, which culminated in the successful flight with Alaskan Airlines that we announced last year, that used our ATJ derived from our isobutanol, using wood-based sugars as a feedstock. Cost of goods sold was $8.2 million in the fourth quarter of 2016 versus $9 million in the same period in 2015. Cost of goods sold included approximately $6.6 million associated with the production of ethanol, isobutanol and related products and approximately $1.6 million in depreciation expense. Gross loss was $2.3 million for the fourth quarter of 2016 versus $1.7 million for the fourth quarter of 2015. R&D expense was $1.5 million in the fourth quarter of 2016, which was relatively flat compared to the $1.6 million reported in the fourth quarter of 2015. SG&A…

Thank you. We'll now begin the question-and-answer session. [Operator instructions] And from Rodman & Renshaw we have Amit Dayal.

Thank you. Good afternoon, Pay and Mike. Congrats on all the progress you've been making in getting Gevo to commercialization. In regards to this [Agri-Energy] facility, is most of the CapEx related to capacity expansion here already taken care of or is there any additional spending required here?

In order to build out the capacity for this isobutanol do you mean?

Yes.

We would have to add new fermenters and we would have to add a new beer well and the distillation column modify the distillation columns and that would require us new capital spending.

Okay. And this is for the Silsbee facility right.

No. No. This is in Luverne.

Oh! This is part of the Luverne effort. Okay. Got it.

We already have, so we already have the GIFT columns installed and so we can leverage those. We have a bunch of the infrastructure installed and the grind installed. And so, what we would be doing is using the grind capacity of Luverne to produce exclusively isobutanol and to do that, we need to add a couple fermenters, couple free fermenters.

Got it. Can you break down these 500,000 gallons of isobutanol that you are targeting for 2017? Can you breakdown which segment these are going to or maybe customers these are going to?

Yes, ballpark wise, what this will go to is we have the capacity of Silsbee is collectively about 70,000 gallons and that's between jet fuel and isooctane. That's a ballpark number. So that would probably take closer to about 100,000 gallons of isobutanol headed that direction to Silsbee. The rest would be sold into the gasoline blend stock market.

Got it. And in regards to the HCS agreement, you're looking to sell $2 million to $3 million worth of product to them. Is the pricing for this already set or are you still in the process of negotiating these things?

It's set. So, one of the -- the approach that we take when we do these LOIs is that we spend quite a lot of time working with the customers on the pricing to make sure that there's absolutely no missed expectation. So often we see people promise on all sides. We see people promised but just simply it can't be done. It's not real. So, we focus on that and then the ranges of the volume and so both Lufthansa and the Haltermann Carless agreements have those things pin down and of course Haltermann Carless already has been buying product from us from our hydrocarbon plant Silsbee.

Got it. And then going back to the 8,000 gallons again, if you see demand that exceeds this volume, will it be captured in terms of our capacity or will they be really deliver additional quantities depending on the demand environment?

We could. We can make more. Our capacity for the plant, we've already proven it individual unit operations. We've actually tested them up to 1.5 million gallons per year. Collectively we run them at about a million gallons per year. We did that in the last quarter as we just discussed in the presentation. So, we can run it quite a lot more. The problem is that because of the fixed cost nature of the plant, we lose more -- we burn more cash with the more volume that we produce. So, it's one of the balancing acts that we'll have to work through. We want to develop the markets, that's the most important thing is to make sure that we have enough of the product seated in multiple markets so that as we add capacity, it can grow quite rapidly. That's what we're shooting for. If someone wants to pay a higher price for it, then yeah, we could produce a lot more. So that's not the limiting factor, is the standard production capacity issues in any way. This is simply a case of doing the balancing act of what do we need to do to be commercially successful, feed the markets, grow the business without burning too much cash.

Understood. So, I guess the margins potentially getting back to if we sell beyond the 500,000 gallon volume levels, but you have probably a good handle of the margins up until the 500,000 gallon limit I guess.

No, I would say it's that we have a good handle. It's a batch-wise process and so overall, we have a good handle on the margins all the way through. It's just simply that we cover the variable costs that we believe the pricing covers the variable cost. It does not cover -- the selling prices do not cover all the fixed cost that we would have allocated to that. And so, what happens is that it's just simply a case of we can -- it's a balance -- it's just simply a balancing act we have to choose along the way.

Understood. All right. Those are the key things I had. I'll take my other questions offline. Thank you so much, guys.

Thanks Amit.

Thank you. [Operator instructions] And we have no further questions at this time.

All right. Thank you, everybody. Thanks for joining us on the call today.

Thanks, everyone. Bye, bye.

Thank you, ladies and gentlemen. This concludes today's conference. Thank you for participating. You may now disconnect.