Good day and thank you for standing by. Welcome to the Gevo's Fourth Quarter 2022 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Mr. John Richardson, Investor Relations. Please, go ahead.

Good afternoon, everyone. This is John Richardson, Gevo's Director of Investor Relations. Thanks for joining us to discuss Gevo's fourth quarter results for the period ended December 31, 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, our agreements, our 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 certain non-GAAP financial information on this call. The relevant definitions and GAAP reconciliations may be found in our earnings release and 10-K, 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're providing simultaneous webcast to the public. A replay will be available via the company's Investor Relations page at www.gevo.com. I’d 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 are filing our Form 10-K today, and we ask that you refer to it for more detailed information after this call. You've probably read that Carol Battershell has joined Gevo as its newest member of our Board of Directors. Carol has had a long and successful career in the energy industry and provides our Board with additional depth in the field of federal energy regulatory policy. Carol was Principal Deputy Director in the Office of Policy at the Department of Energy. She spent 10 years at the DOE. She also spent over 24 years at BP. Her last role at BP was Vice President of Policy and Strategy in their Alternative Energy division. We are very glad that Carol could join our Board, and I expect she'll be able to contribute greatly. We successfully commissioned our Northwest Iowa RNG project. It's been up and running since the third quarter of 2022. We’ve worked through the start-up issues, and we're able to achieve greater than design raw gas production from the digesters in late fourth quarter 2022. We made the decision to expand the capacity of our system to 400,000 million BTU used per year. That's up from 355,000 million BTUs. The digesters have already been optimized to achieve that capacity, and we are expanding the gas upgrading system at the pipeline injection site to be able to inject that 400,000 million BTUs. This expansion should be completed by, or in the third quarter of 2023 and operational in the fourth quarter. We have already RIN approval from the EPA. And, of course, we've already applied for the temporary pathway from carb for the LCFS credits. This approval would apply to all the gas we produced to…

Thank you, Pat. We did the fourth quarter of 2022 with a strong liquidity position of $482.8 million in cash, restricted cash and other liquid investments. The restricted cash component of that number was $78.3 million and is associated with the Northwest Iowa RNG bonds and certain collateral we've had to post related to the development of Net-Zero 1. Long-term debt outstanding was $67 million and is related to the Northwest Iowa RNG project. Our corporate spend that is SG&A was approximately $7.3 million for the quarter, net of non-cash stock-based compensation of $3.4 million. During the fourth quarter of 2022, we invested and capitalized $15.6 million cash in the capital projects comprised of $8.6 million into Net-Zero 1, $5.3 million into Net-Zero 2 and $1.7 million into the Northwest Iowa RNG project. We are progressing our Net-Zero program and are in the process of seeking debt and equity partners for NZ1 and projects beyond flagship projects. Third-party debt and equity financings for the program are currently being structured at the Net-Zero 1 subsidiary level rather than at the Gevo, Inc. level. The equity outreach is going well with substantial market interest and we expect to secure one or more investors as a result of those efforts. The NZ1 debt process is underway with fuel tracking of commercial debt sourcing and DOE guaranteed loan sourcing, both tracks are progressing well, and we expect to secure debt for the plant construction late this year. 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 full construction financing. Now I'll turn the call back to Pat.

Thanks, Lynn. And with that, we can open up for questions.

Thank you. [Operator Instructions] Our first question comes from Dushyant Ailani from Jefferies. Your line is open.

Hi, team. How are you? Thank you for taking my question. Good. I want to quickly ask if you're seeing any inflation on the long-lead items that you guys are planning to purchase. Maybe just kind of remind us of the overall CapEx budget for NZ1?

The overall, we'll probably spend about in the next year or so, about $100 million or something like that of getting the project going and putting the money in on long lead equipment. And it may go -- we'll have to see how it goes along the year. We're not finding big delays on long lead equipment. We don't have anything super fancy. So far, things are looking pretty good. A lot of this will be in deploying capital about the site development and the early construction of our balance sheet. And I think within a year. Yes, so we'll see it. We had -- I don't -- there's nothing on our critical list that's popped up at the big ticket item that we got to lay money down now except for the hydrogen modules that we already did.

Got it. Thank you. And then I guess, so you talked about roughly $100 million for 2023. And I just wanted to understand your total CapEx for 2023 and then how do we think about next year as well?

Lynn?

Well, as we disclosed in the 10-K, we expect that the next 12 months for NZ1 will involve somewhere between $100 million and $200 million. The reason why the range is wide is because we're managing through the EPC contracting process and limited notice to proceed in the time frame of the project spend. But that's the range that we feel comfortable with.

Understood. Thank you.

Thank you. One moment. We have a question from Derrick Whitfield from Stifel. Your line is open.

Thanks, and good afternoon, all

Hey, Derrick.

Regarding your capital raising efforts for NZ1, how should we think about your equity ownership of the project and its production streams as you advance the private capital market solutions? And more specifically, is there a minimum or maximum ownership you'd want to maintain?

Well, it's hard to say because it's a – the discussions have ranged, believe it or not, from people saying, "Hey, we want to do all equity to -- we want to do this partnership. And we got to collect everybody and see what we can get done. The one thing that's interesting is in a pure developer model, if we were to go a pure developer model, what would happen is then we get a retained interest, okay? That's a possibility here. We have to go play it out and see what happens. To retain interest means we don't have to invest, we still get equity in the deal. That's not a bad thing. It's a very efficient use of capital, allows us to use more money for developing other products, collecting more retained interest. That's a possibility. It may be that we invest the capital straight away, it will be whatever percentage of money pursuant to how much -- or related to how much money we have on our balance sheet that we feel comfortable with. Now, we have multiple projects to develop. This isn't a one-and-done deal on NZ1. So, that's the balancing act and it will depend a lot on what our partners say, what they want to do. They want to -- some of the folks want to invest in multiple plants. We just got to pin everybody down and get on with it.

Terrific. And regarding Net-Zero 2, are you seeing the potential for capital synergies if the project is designed to be 3x the size of Net-Zero 1?

-- there is?

Any that you can elaborate on just to give us a feel for how that scales?

Not at this time. It would be premature, but there's advantages in these processes and economies of scale. And the site that we've selected is it's a good site. It's a really good site and we'll be saying more on it pretty soon. But after seeing that at Chicago, it's a very practical place to be then for us in where we're putting this thing. And we have a good solution for the de-fossilization as well. We'll talk more about it when we're at liberty to fully disclose everything.

And Pat, if I may, just maybe one build on that comment. While the ink is still dry on the Illinois SAF Tax Credit bill, could you offer a perspective on the degree at which airlines -- or I suppose the degree you expect they will be willing to share with the industry SAF Tax Credit?

Everybody is cooperative. So, what's being done on the -- so what we're talking about here for everyone who doesn't know, is said there's $1.5 tax credit for SAF in the State of Illinois, so makes it a good place to be. And everybody understands they need to have SAF. They want it in large scale. We have a lot of customers who work out of hair, and they are friends and partners in this. And so everybody has that perspective and is very open-minded.

Perfect. Thanks for your time.

Thank you. Our next question comes from Manav Gupta with UBS. Your line is open.

Hi guys. I actually just want to deviate a little and talk a little bit more about your RNG business. Is this something you can grow? Is this something you want to keep? Is this something you can monetize to fund some of the other developments. We've seen some attractive investments in RNG. So, what's the path forward for your RNG business here?

All right. So, to step back on why we started RNG in the first place. It was -- it is that we are the belief that biogas and RNG are going to be really important in the long run to displace fossil-based natural gas, if you want to really de-fossilize something and achieve low CI scores. And that also is true as we apply it to supplying a plant like ours of NZ1 or one of our other plant sites in the future. That's how come we got into this. And we're -- it's very practical to put it to a pipeline and distribute it through BP into the transportation market in California because you can make money at that in the near-term. However, it also makes money to send it to our plans. I view that solving the natural heat problem implants is one of the bigger problems we have in general. So, for us, you can anticipate that we'll be involved in other RNG projects. It isn't lost on us that people are interested in it. You see that we're expanding it already. As you've been operating a year, we're already expanding it. And there'll be other opportunities for us to do more, love to make the decisions about what we would do in the future investments, based upon what balance sheet we have and other capital commitments that are in play. I can tell you that, doing RNG is -- we did three dairies connected by pipeline that we build to an upgrading unit. Getting these things to stabilize and run, we took a lot of effort to do it and get it right and get it working right. And now we're expanding it. Now we're getting some good expertise here. That expertise is going to be hard fought for other people, so it hasn't lost on us either. So in front of us is the decision of how much more do we invest in RNG, when. We're going to continue to go down the path of learning and working to develop sites that benefit our other plant locations for NZ plants, the jet fuel plants. That's how we think about it. So we aren't doing it just to do transportation fuels in California. That's not the game of foot. The game of foot is to be fossilized ethanol plants, who can supply ATJ plants and decarbonize ATG plants themselves. Does that make sense?

Absolutely. A quick follow-up here. I know you're in the middle of raising financing for NZ1 and maybe NZ2 one day, from like looking out there, one of the companies I cover, [indiscernible], they got a deal of lifetime from Eni, walked in $7 a gallon CapEx, fully refunded the project. I'm wondering if a European major or US major walks up to you and says, okay, I want 50% of NZ1 or 50% of NZ2, and here is all the money off of the CapEx, would you be open to that?

We had, yes -- those are -- that's very similar to the discussions that we're having. It's along those lines. And so, that is -- we got to pin down all what's real. Right now, we see lots of people learning from us. They see what we're doing. They're validating everything, their fits -- the signals are strong and positive. And we got to go through -- finish the work with them and their diligence and then bring home the investment. And people recognize that Gevo has -- we think differently about how to do all this whole business system. Now, I think you would find that people will say this publicly about us, as we think about the whole value chain from agriculture, the defossilization of the plants, the defossilization of the ethanol, how do you integrate ATJ Axens. They just did a road show talking about our relationship and the things we're doing together. And that's what they think is special about us to. And of course, then we collaborate with Axens anyway on the hydrocarbon stuff and improvements. And so, it makes for a pretty strong story. And I think we're going to see people who want to grow. They want bigger plants. And then we have other ones that are going to want to have it more -- smaller plants are okay, but they're going to be more keen on driving the CI score down even further and faster. So I think it's going to look something like that. A couple -- and there might be multiple investors here. I would -- in fact, I'd be surprised if there wasn't.

Perfect. We are rooting for you, and we hope you get the best deal just like [indiscernible] did.

Thank you.

Thank you.

Thank you. And we also have a question from Amit Dayal with HCW. Your line is open.

Hey. Good afternoon, Pat, Lynn. How are you doing?

How are you doing?

Thank you for taking my questions. With respect to the DOE loan guarantee Pat, could you provide some additional color on maybe what the process is in terms of where the differences are relative to going to typical project financing lenders? And then, in addition to that, is there a cap on the amount for the loan from DOE?

Well, I'll comment on the CAF part and the amount of money that's available from DOE, and then Lynn can talk about the process because that's his live these days. Overall, one of the good things about IRA is it funded the DOE well. So this program is super well funded. So there's not a limit like that. In fact, there'll be money available, I think, for multiple plants, which isn't lost on us either. And so we're in pretty good shape on that front. And that would have been an issue prior to the IRA bill potentially, but we're in good shape. Lynn, you can talk about the process comparison.

Sure. In terms of process, DOE is a very well-laid out process. We are in part two now, and that's a key milestone because that starts the clock ticking on their DOEs due diligence that they engage consultants and begin to engage in earnest with the financing process. The terms and conditions -- let me comment first on the commercial debt funds, those are mostly private equity run funds, maybe some institutionals, but a lot of PE run debt funds who do infer debt. They're a little more nimble. Their terms are not going to be as good as DOE terms. The terms that we had to request in our part two are long-term fixed rate debt construction plus term, and we’re seeking a pretty good debt deal out of that. We'll see where we end up. But if we were to get that, it would probably be better than what would be available in the commercial markets, which would likely be construction plus a short-term and a balloon. So what's known as a mini perm say, two years construction plus three to five years term with a balloon and a refinancing need at the end of that balloon. But we'll have to trade the two off, because I think the commercial debt will be faster if we have a bird in hand, we'll have to look at that vis-à-vis where we're at with DOE and how much longer it may take and what the economic benefits will be to distributions ultimately to equity between the two options.

Understood. Thank you for that. That, sort of, leads to my follow-up question on this. Now that you have the DOE as well as a potential financing option, from the substantial close aspect, it's understandable that time line for that could be moved around a little bit depending on how DOE comes in or not. But should we assume that the project timeline itself, given that you have the capacity to fund some of the initial development requirements from your own balance sheet, the project timeline for completion should still remain in line with what you have indicated previously, right?

That's right. You've thought about it correctly. And that's one of the big challenges. A lot of folks ask questions about hey, what's going on, and we want to see these rigid milestones. That's not how the real world works. It's about keeping the whole thing on track to doing the balancing act. And you're exactly right. We may take longer, but it might be the right the answer, economically, right. So that's part of it. And the same thing is true about doing these deals that we're talking about earlier. We could do a deal now that's bad, but we've got multiple parties long here. We should work through -- we got to work through the process of doing it in a disciplined way. So we're getting the right deal done for us because it's not just NZ1, it's NZ1 plus the other plans. And then finally, this last thing that I really want to emphasize again and was in my comments, I'm going to emphasize it again, a lot of times, I'll get questions and people have this paradigm that we're somehow just got to wait to see revenue from NZ1 in whatever year that is, 2025 or 2026 or 2027, whatever they assume, right? Oh, gee, how are they going to do that? What are they going to do in the meantime? Well, hey, look, we plan on growing the R&D business. We talked about that. That brings in cash. We're doing a model that is a developer model, too, so we can take cash back out of these projects and recycle, let's get to change our ownership percentage. But as a developer, we can also get and expect to carry that is possible as we develop projects – that means we don't have to invest to get a percentage of the project, we might invest more than that carry, we'll do that. That's a choice. And then the other thing I mentioned was the licensing and facilitation – that's another rev. That's another potential revenue stream – revenue stream, too. We just got to get our deals done, put the numbers together, that people paint the picture for people, but not going to be, I think, pleasantly surprised. I hope so.

Understood. Thank you, Pat. And then just on the Verity Tracking solution, who are we sort of targeting as near-term customers? And is this product ready to launch? And are you building the sales pipeline for this right now?

Yes. So the Farm to Flight grant that we got from the USDA and the final strokes are getting it finalized, but that's in support of developing this whole Verity Tracking. Verity Tracking is the technique of paying attention and documenting what happens on a field and then how something is manufactured and then taking it off to the marketplace. And put it in using DLT technology, which is the stuff that's underneath the blockchain type stuff. To be able to make digital – think of it as digital quality certificates or digital sustainability or carbon certificates that can be transferred to another party. But in DLT technology, you guys all understand that all the data stays attached to it the whole way through with smart contracts. So that's part of what we're doing here and developing. It's far along. We've already made tokens. So we already know that it can be done. We've already had interest in tokens. So now it is in the midst of working through the commercialization steps. We'll commercialize it first with other people because we don't have – our NZ1 plan isn't running. So we're going to – we're setting it up to get that done with other people. We'll talk more about that. Paul Bloom is in charge of that business. He's got to decide when he wants to talk publicly about it more. But that is something that's pretty exciting. And it's a way of bringing value to farmers, to sharing value across the whole supply chain. And remember, we're going to be making immutable, documented, bullet-proofed validation of carbon savings. It applies for other fuel products. It could also apply to food products. So we'll be working with a variety – expect us over time to work with a variety of folks on this outside of what we do ourselves. It's bigger than us in this case. It will be interesting to see. It's getting traction already. And so we've got to go through the commercialization of it.

All right. Thank you, Pat. That's all I have. Appreciate it.

Yeah.

Thank you. At this time, this concludes our question-and-answer session. I would now like to turn the call back over to Dr. Gruber for his closing remarks.

Thanks all for joining us. It's an exciting time for us at Gevo. We're bringing in – we're in working on these partners and stuff. It's going to be very interested to see how this all comes together. I'm glad that, we're able to share a little more color than we have in the past, talking about how we see commercialization of these multiple plants actually occurring. And I look forward to being able to talk about it a whole lot more as all the pieces come together. Thank you for joining us.

Thank you. This ends our presentation. Thank you for joining us today. You may now disconnect.