Good day, and thank you for standing by. Welcome to the Gevo Third Quarter 2022 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to our speaker today, John Richardson. Go ahead, John.

Good afternoon, everyone. This is John Richardson, Gevo's Director of Investor Relations. Thanks for joining us to discuss Gevo's third quarter results for the period ended September 30, 2022. I would like to start by introducing today's participants from the company. With us today are Dr. Patrick Gruber, Gevo's Chief Executive Officer; and Lynn Smull, Gevo's Chief Financial 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.gevo.com. Please be advised that our remarks today, including answers to your questions, contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act. These forward-looking statements are subject to risks and uncertainties that could cause actual results to be materially different from those currently anticipated. Those statements include projections about the timing, development engineering, financing and construction of Gevo's sustainable aviation fuel projects, its sales agreement, its renewable natural gas project and other activities described in our filings with the Securities and Exchange Commission, which are incorporated by reference. We disclaim any obligation to update these forward-looking statements. In addition, we may provide some non-GAAP financial information in this call. The relevant definitions and GAAP reconciliations may be found in our earnings release and 10-Q, which can be found on our website at www.gevo.com in the Investor Relations section. Following the prepared remarks, time permitting, we'll open the call to your questions. I would like to remind everyone that this conference call is open to the media, and we are providing a simultaneous webcast to the public. A replay will be available via the company's Investor Relations page at www.gevo.com. I would now like to turn the call over to the CEO of Gevo, Dr. Patrick Gruber. Pat?

Thanks, John. Good afternoon, everyone, and thanks for joining us on our call. We filed our Form 10-Q earlier today, and we ask that you refer to it for more detailed information. It's been a tumultuous year so far in the financial markets, and there will likely be more to come over the next few quarters. Although our stock price is disappointing to me and to our shareholders, our balance sheet is in great shape, and Gevo's team is focused on pushing forward with our net zero development plan, which I'll talk about shortly. I'm confident that the value of what we are doing will begin to be reflected in Gevo's stock price as we continue to move forward with the growth of our business and the deployment of our net zero plants, starting of course, with Net Zero 1. In the meantime, our business development team continues to see strong demand for low-carbon drop-in fuels from the commercial airline industry as well as from trading arms of some large integrated oil and gas companies. And it doesn't look like there is enough supply coming in the future, based on the publicly announced projects that we know of. I believe the airline industry will need every gallon of low-carbon drop-in fuels that can be produced, and more, as demand will like to grow exponentially over the next few years. Scalability, substantially, derisked the low-cost technology and verifiably low greenhouse gas emissions across the value chain are what's important, and we have all that at Gevo. It's a strong position to be in. As we noted in our company update several weeks ago, Gevo has more than 375 million gallons per year predominantly take-or-pay fuel supply agreements in place with high-quality third parties. These agreements represent approximately $2.3 billion in expected…

Thanks, Pat. We ended the third quarter of 2022 with a strong liquidity position of $500.4 million in cash, restricted cash and other liquid investments. Restricted cash totaled $76.9 million and is associated with the Northwest Iowa RNG bonds and certain collateral related to the development of Net-Zero 1. Long-term debt outstanding of $67 million is related to the Northwest Iowa RNG project. Our corporate spend, that is SG&A, was approximately $7.5 million for the quarter, net of noncash stock-based compensation of $3.6 million. During the third quarter of 2022, we invested and capitalized $22.5 million in cash in capital projects, comprised of $15 million into our Net-Zero 1 project, $7.3 million into the Northwest Iowa RNG project and approximately $0.2 million into other capital projects. Earlier in the year, we began the process of suspending production at the Luverne facility in order to focus our attention on the net zero program planning, design and financing. During the third quarter, Luverne was idle and place in a care and maintenance status to be used for marketing, testing and R&D purposes. This change, combined with Luverne's history of operating losses, drove an accounting requirement to perform an impairment testing on the value of the asset. Those tests indicated that an impairment existed and required that the assets be written down to their estimated fair value. For the 3 and 9 months ended September 30, 2022, the $24.7 million impairment charge represents a large portion of the basic and diluted net loss per share, accounting for $0.10 and $0.11, respectively. We are progressing our net zero build program and are in the process of seeking debt and equity partners for Net-Zero 1 and projects beyond the flagship project. Third-party debt and equity financings for the program are being structured on a nondilutive basis at the asset level rather than at Gevo, Inc. The equity outreach is going well with a substantial market interest, and we expect to secure one more investors as a result of those efforts. The Net-Zero 1 debt process is underway with a dual tracking of commercial debt sourcing and DoE guaranteed loan sourcing. Both tracks are progressing well, and we expect to secure nonrecourse debt for the plant construction sometime around mid-2023. As Pat mentioned, we continue to spend development and engineering capital to progress the project and maintain its time line in advance of securing the debt. Now I'll turn the call back to Pat.

Thanks, Lynn. Operator, please open the call for Q&A.

[Operator Instructions] Our first question comes from the line of Derrick Whitfield from Stifel.

For my first question, I wanted to ask if you could offer a general update on the ADM and Chevron partnerships.

Sure. So with Chevron, we've had the discussion, we extended the contracts with them or the letter of intent with them. And so that will be an ongoing discussion. We just didn't want to put it out there as a public advise, given the turmoil that's going on and all the rest, plus we don't want to get boxed into it. So those are still ongoing discussions. Regarding ADM, same kind of thing. We're working with those guys and making progress on things. And those projects are really big, and so we can't do that by ourselves. And so that one is going to be slightly more complicated to do, but it's plugging along and making progress. Our fate doesn't depend upon either one of those. It isn't intended to. Our fate depends upon NZ1, NZ2, building those out, along with the other sites where we work with brownfield ethanol plants. And there's a number of those that are attractive. So we look at it as a point of view of those big ADM assets are great, love to see them happen. But you know what? Those are giant projects, and I'm not betting the ranch on those because of the time frames of things. I got to go get stuff built. We have actually close to 400 million gallons of contracted take-or-pay jet fuel. And you know what? We got to go get her done and get it built out and play with people who are going to get it done their time for the networks.

Terrific. And as my follow-up, I wanted to ask on the Summit Carbon Solutions agreement. Are there any general economic parameters you could share with us on your take of the environmental attributes, inclusive of the IRS 45Q?

I don't think it's appropriate to comment on it because they've done so many deals with so many people, and I don't want anything misinterpreted, but it's a good deal. It's a fair deal for us. And satisfies our needs to make sure that we have the CI scores and the value associated with that, that we need. It works out economically, it's attractive. So for both of us, both them and us.

Our next question comes from the line of Shawn Severson from Water Tower Research.

Pat, I was wondering -- I know you can't talk about specifics, but can you give some color on how the strategic reviewing is? And as you're looking for investors and the asset side, and even on the debt side, what's the bus interest on this versus financing?

Well, we have -- one of the very important points that I want all shareholders to understand is that we don't like our stock price up here at Gevo. And I don't want to do more dilution, right? So how do you skin that cat? Yet, we have to raise a bunch of money to go build out plans and projects. Well, the good news is, is that we have lots of demand for the product that's firm and committed in these offtake agreements. We intend to raise money at what we call a platform level. It's beneath Gevo, it's a private company level. There, we would take funds into a private company. And that private company beneath us would go about building these projects and adding debt to each project. Guggenheim and Citi are co-leads on this banking exercise. We're in the midst of the process. it's going good. There's lots of interest. It gives great comfort to everyone, that we're working with Axons, which is some of the most proven technique alcohol into Jet. They like how we think about it with how to drive the carbon scores down and even negative and operating the partnerships together. They all can see -- those people interested can see the pipeline of sites and the potential economics, which are attractive. And so I think, I predict we're going to be successful at this and raise money and bring in some really good partners. And the debt solutions, we'd expect these people to participate in Net Zero 1 to a degree. And we'd also -- we're making progress on the debt as well. We've brought in bankers in addition to Citi for that.

Citi and Nomura Green Tech.

Yes, Nomura Green Tech. And that's going well, too. So there's lots of interest in the space. People don't know what to do with their money. There aren't that many solutions that can work. It's about showing that it all can be properly derisked, put into a project format, getting the financing. And as I said, this isn't selling stock at the Gevo level. That's not what this is. This is about investing down beneath Gevo in projects or groups of projects.

My follow-up to that is when you look at the equity side on the NZ1 going forward. Is this something that we should expect to have small equity partners? Or does this seem like you will have one big check written from or whoever are they going to be composed of 2 or just the nature of what the testing these waters.

Well, I think that would be the check -- I don't know exactly how we'll structure that yet. But I think it would come from the platform company. So we pushed some of our money down to the platform company, the other investors in the platform company. Collectively, they push money down to the project of NZ1. That's why I think it will work.

Right. And that's, I guess, what I'm trying to understand is you put your equity in and then would you expect to have like 2 or 3 other partners per plant? Or do you think this goes with very strategic writing big checks along what you do at the plant level? Or the equity?

I think what it would be is the platform itself, a platform company, as investors, we're committed to investing in NZ1 and additional NZ projects. And how that mix of capital goes in, how much actually gets spent, specifically how much is ours versus theirs and how many people participate, well, that's part of the sausage-making that we're doing. So I said, gosh, we got to build out 400 million gallons over the next 5 years. And that's like, what 8, plants the equivalent size of NZ1. That's 1 heck of a lot of money. That's going to take not just one partner, that's going to take multiple partners working together to go and deploy that.

Maybe. Yes. I think it's estate's going to say it's $3 billion to $4 billion or $3.5 billion of equity. The parties we're talking to, many of them can certainly write a check Net Zero 1 on their own. But we have a -- we're getting quite a bit of interest. So we'll have to accommodate as many people as we can on terms that work for us.

[Operator Instructions] Our next question comes from Amit Dayal.

Pat, just in terms of the cash outlay for the next, say, 12 months, how should we think about your needs on that front coming up? And what are your plans in terms of the cash usage over the next few quarters?

I'm going to have then ask that question. So then would you address look, what are the rough expected cash spending would be on NZ1 and in corporate to --

Yes. corporate, it would be something in the order of -- we're running at a rate of about $33 million a year of run rate for corporate burn. We'll also invest some in Verity in the growers program, although the bulk of that investment will come with our DoE -- or sorry, USDA grant, which will help defray a lot of the cost of the development of Verity and program that supports Net Zero 1 to start, and other projects down the line. RNG is completed. So that shouldn't be a cash drag. It should start generating cash. Then we get to Net Zero 1, and I believe that we'll -- because we'll probably enter into a limited notice to do detailed engineering and further site work to take us to the expected close date, the debt and third-party equity close date, I could see us putting another probably $90 million or so into Net Zero 1 to take it to financial close. Now we don't intend to leave all of that in the project. We intend to be reimbursed by the project sources of funding for a portion of our development expense so that we -- what we're leaving in the project is a smaller percentage of the total equity of the project. But that's kind of the equity needs for Net Zero 1. We're also going to be spending money on Net Zero 2, possibly Net Zero 3 development work, engineering and such. That don't -- it's a little too early to know exactly the pace and the quantities around those 2 projects. So it's about 2 and 3.

So the levers we have to moderate things is that we're going to wind up driving hard for NZ1, get it all derisked, get the engineering cold schedule, get the site work going, make sure we're getting equipment order that needs to be ordered and moving it ahead, so we hold the overall time lines and get ourselves in close kind of the midyear of 2023. In that, while a decision to take how much money do we take back out of that project because we'll have quite a lot in given what we spent so far over the years, plus what we're about to spend; or do we leave it in there, let it ride, we can do either one. It depends upon how we're feeling about the world at the time. And then Lynn's right. We got to do development work on NZ2. We've already begun that. We've already spending real money on that. because we based it, and we have -- we know that other people are using in it. And so we'll make that happen, too. And there's other sites that we have to do, too. This is about -- when you think about our problem that we have, a good problem, is that we have lots of demand that's contracted with take-or-pay contracts. We've got to go fulfill those. We got to go build it out. And they're ripe for project financing. We just got to go get that whole system figured out, of how we go about doing that with the EPC firms and the financing and the debt layerd on there. And then the flavor that Gevo takes is that we tend to -- we're going to look more and more like a developer and licensor, which is good. Those are good. They give higher returns for dollars. And maybe someday, the world will change and we could have money up at our corporate balance sheet. But the reality is we're going to use our money wisely and leverage it, and leverage the heck out of it, with others and attempt to grow. That's what we're going to go do.

Understood. Just 1 final 1 for me. With respect to the RNG revenues and cash flows, should we assume 2023 is where you can get that $12 million to $16 million that you have been expecting from this deployment?

Well, that's an annualized run rate expectation of EBITDA because of the delay in receipt of cash through the LCFS in particular because CARB is pretty slow and the pathway takes time. That annualized run rate probably won't be fully realized in 2023 because of that delay.

So we won't see all that money at it will be the full annualized run rate -- so we'll see a chunk of it. We just -- we don't have a clear view as to how much of the chunk that we'll see. -- in 2023. It will be -- it's going to contribute. It will be noticeable. That's what I would expect. But it's not going to be the full amount 2023, given the timing of everything and the way that all the accounts work on the group -- for the LCFS.

[Operator Instructions] We have Derek Whitfield again asking for another question.

I wanted to ask another question just on the offtakes and the contractual obligation associated with those agreements. Given your commercial success in signing those, what are your thoughts on the progression of plan NZ1? The investor would have -- would it make sense to scale the second plant beyond the size of NZ1 once you derisk the first plant?

Yes. So here's how I think about it is our problem is how do we grow big hub -- and there's lots of these partners that we're negotiating with who want it to even grow faster. So it makes for an interesting time. And remember, the point of view of everybody is like, look, you all know how to make the ethanol. You know how to decarbonize that. You show that how to do it. And the ATJ, it looks like that's derisked technically. This is all about capital deployment and growth, how do we do that best? And you still -- they got the issue go build things first and all that. NZ1, it's based on 100 million-gallon ethanol plant design. It's going to be a modified ethanol plant where we've really decarbonized the ethanol plant to lower the CI score through all kinds of little techniques, that trade secret, know-how stuff that we're doing. It's integrated to the ATJ plant that's based on the access design that we're modifying and that all looks really good. But you know what? That's going to be designed as a cookie-cutter. You could go apply that plant design right straight to any other 100 million-gallon plant. However, that other 100 million-gallon ethanol plant at some other site would also need to get decarbonized because ethanol plants generally are not decarbonized. But we have that design. So think of it as a turnkey type plan that we could deliver we can just talk with engineers today about how to build that in modules in such a way that we can do that sort of thing, build it really quickly. So that's one path these things take. But the trick is, you got to have people, got to partners then on the ethanol side…

And Pat, just on that 3x design. Is there capital efficiency gains to be had with that incremental scale that you guys can quantify at this point?

No, it's not worth it because whatever I say, I'm going to be wrong, everyone's going to go, Pat said this, and it's wrong. And so yes, there is. It's not worth -- a few standard engineering rules, you can figure it out. But ballpark, but it will come down to details of how we do it. And -- but the answer is yes, there is. It's going to be advantaged and it gives very attractive economic returns.

In general, I think the ATJ portion scales better than ethanol. Methanol has got some efficiencies, but ATJ has substantial efficiency.

All right. Thank you all the time we have for questions right now. So I would like to turn it back over to Patrick Gruber for closing remarks.

Sure. Thanks. Yes. So thanks again for joining us this afternoon, and I look forward to seeing you folks crossing paths with you at the conferences in the coming quarters. It will be Lynn and I in the road along with John Richardson talking to folks and educating people. It's going to be very interesting to see how our platform fundraising turns out. There's lots of interest. There's been a lot of money sitting on the sideline. Hopefully, people get it -- go on and get it deployed. Our NZ1 product is making very good progress. The engineering is coming together, the engineering firms are all working well with us. So I feel really good about that. And our -- where I turn my attention is to how do we grow big? And how do we play big? And who are we playing with and what strategic to play? What financial strategic to play? So it's a very interesting game that we have to sort out. That's what's in front of us, got to go make happen. It's bigger than little old Gevo. It's got to go play the game, and we are lucky and fortunate, and we did a good job, in getting ourselves in a position where we have very good technologies to make the SAF, and they're proven, and that will hold up security to anyone. So we feel really good about all of that and what we can get out of it. So I look forward to seeing you guys in person wherever we can. And then with the outset of holiday season directly ahead. I wish you all happy early -- happy holidays, I know it's a little bit early. And in the meantime, if you have further questions, please reach out to John Richardson, John, Kim, Lynn or myself, and we'll follow up with you if needed. And with that, we conclude the conference call. Thank you.