Aemetis Q4 2023 Earnings Call Transcript

Quartr
Provided by Quartr
March 7, 2024

There are 8 speakers on the call.

Operator

Good day, and welcome to the Aemetis 4th Quarter and Year End 2023 Earnings Review Conference Call. At this time, all participants are in a listen only mode As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Mr. Todd Waltz, Executive Vice President and Chief Financial Officer of Aemetis Inc. Mr.

Operator

Waltz, you may begin.

Speaker 1

Thank you, Ali. Welcome to Aemetis 4th quarter year end 2023 earnings review conference call. Joining us for the call today is Eric McAfee, Founder, Chairman and CEO of Aemetis and Andy Foster, President of Aemetis North America. We suggest visiting our website at aemetis.com to review today's earnings press release, the Aemetis corporate and investor presentations, filing with the Securities and Exchange Commission, recent press releases and previous earnings conference calls. The presentation for today's call is available for review or download on the Investors section of the aemetis.com website.

Speaker 1

Before we begin our discussion today, I'd like to read the following disclaimer statement. During today's call, we'll be making forward looking statements, including without limitation, statements with respect to our future stock performance, plans, opportunities, expectations with respect to financing activities and the execution of our business plan. These statements must be considered in conjunction with the disclosures and cautionary warnings that appear in our SEC filings. Investors are cautioned that all forward looking statements made on this call involve risk and uncertainty and that future events may differ materially from the statements made. For additional information, please refer to the company's Securities and Exchange Commission filings, which are posted on our website available from the company without charge.

Speaker 1

Our discussion on this call will include a review of non GAAP measures as a supplement to financial results based on GAAP because we believe these non GAAP measures serve as a proxy for the company's source or use of cash during the period presented. A reconciliation of the non GAAP measures to the most directly comparable GAAP measures is included in our earnings release for the 3 year ended December 31, 2023, which is available on our website. Adjusted EBITDA is defined as net income or loss plus to the extent deducted in calculating such net income, interest expense, loss on extinguishment, loss on lease termination, USDA cash grants, income tax expense, intangible and other amortization expense, accretion expense, depreciation expense, gain on litigation and share based compensation expense, less income tax benefit. Let's review the financial results for the Q4 year end of 2023. Results for the 3 months ended December 31, 2023, revenues were $70,800,000 for the Q4 of 2023, an increase from $66,700,000 for the Q4 of 2022.

Speaker 1

The ethanol gallons sold increased from 13,400,000 gallons during the Q4 of 2022 to 15,000,000 gallons during the Q4 of 2023. Biodiesel sales of 18,300 metric tons were recorded during the Q4 of 2023 at 11 $57 per metric ton. Our California Ethanol segment accounted for $45,000,000 of revenue and our India Biodiesel segment accounted for $22,000,000 of revenue during the period. Cost of goods sold increased from $67,900,000 during the Q4 of 2022 to $69,900,000 during the Q4 of 20 23 due to an 18% increase in feedstock costs from the incremental sales in our India Biodiesel segment, coupled with an increase in corn ground from 4,300,000 bushels during the Q4 of 2022 to 5,200,000 bushels during the Q4 of 2023, offset by a 33% decrease in the average delivery cost of corn. Gross profit, selling, general and administrative expense and operating loss were consistent between the Q4 of 2022 2023.

Speaker 1

Net loss was $25,400,000 for the Q4 of 2023, compared to a net loss of $22,400,000 for the Q4 of 2022. Cash at the end of the Q4 of 2023 was $2,700,000 compared to $4,300,000 at the end of the Q4 of 2022. The financial results for the 12 months ended December 31, 2023. Revenues were 187,000,000 dollars for the 12 months ended December 31, 'twenty 3 compared to $257,000,000 for 2022. During 2023, dollars 77,200,000 Our revenues were generated by the India Biodiesel segment, $55,500,000 of revenue were generated by the California Renewable Natural Gas segment and $104,300,000 of revenue were generated by the California Ethanol segment.

Speaker 1

We idled the plant during the 1st 5 months of 2023 due historic and unexpected high energy costs and took advantage of this period to lead a variety of maintenance and plant efficiency projects. Gross profit for the 12 months ended December 31, 2023 was $2,000,000 compared to a gross loss of $5,500,000 during the same period in 2022. Our India Biodiesel segment accounted for $9,000,000 of gross profit from sales of biodiesel for the year ended December 31, 2023. Selling, general and administrative expenses increased to $39,300,000 during the 12 months ended December 31, 2023 compared to 28 point $7,000,000 during the same period of 2022 attributable in part to the reclassification of expenses from cost of goods sold during the extended 5 month maintenance and upgrade cycle for the Keyes plant in early 2023. Net loss was $46,400,000 for the 12 months ended December 31, 2023 compared to a net loss of $107,800,000 during the same period in 2022.

Speaker 1

Investments in our low carbon initiatives increased property, plant and equipment by $33,000,000 while debt repayment of $51,300,000 were made to our senior lender during the 12 months ended December 31, 2023. Now, I'd like to introduce the Founder, Chairman and Chief Executive Officer of Aemetis, Eric McAfee for a business update. Eric? Thanks, Todd. We released the updated Aemetis 5 year plan about 2 weeks ago, and we encourage investors to closely review the extensive information provided in the presentation, which is available on the homepage of the Aemetis website.

Speaker 1

Before discussing the many milestones that we achieved in 2023, let's talk about financing. Since the understanding of how Aemetis plans to continue to grow rapidly in the current market environment is a key part of our 5 year plan. The first important point regarding the Aemetis funding plan is that the financing of our projects is being completed on a project finance basis for each subsidiary. So the debt position of the Aemetis parent company does not impair our funding of new projects. I make this point to clarify any suggestion that our well established financing relationship with Third Eye Capital is somehow constraining our project financing or the growth of our company.

Speaker 1

In fact, the opposite is true. 3rd Eye Capital has been integral to our success in providing project development funding and then obtaining long term project financing from our other lenders, enabling Aemetis to receive $50,000,000 of 20 year financing in just the past year. We expect more than $100,000,000 of 20 year financing for Aemetis Biogas Capital expenditures to close in the current year in addition to other significant project financings that are in process now. Thurmani Capital is a primary beneficiary of the long term lower interest rate project financings provided by other lenders as the excess cash flow from these new projects are expected to continue to reduce the amounts outstanding to Third Eye Capital. Rather than being a hindrance to the growth of Aemetis, for the past 15 years, Third Eye Capital has been funding the growth of our initiatives and continues to support Aemetis in attracting 20 year financing from other lenders for new projects that create new revenues, new cash flow and new debt repayment capabilities.

Speaker 1

The second important point about financing at Aemetis is our long relationship with the U. S. Department of Agriculture, which is a major provider of loan guarantees that enable 20 year financing for projects. Over nearly 2 decades, Aemetis has built strong and productive relationships with a number of top leaders at the USDA as we share similar goals of strengthening the agricultural sector by creating new energy markets for ag and ag waste products. And our Board member for the past 15 years, Jack Block, a former Secretary of the USDA, has been extremely helpful in this shared vision and collaboration.

Speaker 1

Our positive relationships with the USDA are key to our confidence in USDA programs, such as the Renewable Energy for America program known as REAP that support renewable fuels projects. These USDA programs have already guaranteed funding of 20 year financing for the Aemetis Renewable Natural Gas Business, but also can provide government guarantees and 20 year financing for sustainable aviation fuel, the conversion of our ethanol plant to use electricity instead of petroleum natural gas for power and our carbon sequestration projects. A third important point about financing at Aemetis is that we have already fully repaid our long term debt at our India plant and have been generating strong positive cash flow from India biodiesel production operations over the past 2 years under cost plus pricing with oil refineries owned by the India government. This strong financial position has allowed the India business to internally fund expansion to 60,000,000 gallons per year from ongoing positive operating cash flow and now has positioned our India subsidiary for a planned initial public offering onto the India Stock Exchanges. Our India business is highly attractive as an IPO company onto the fast growing India Stock Exchanges since we are one of the largest biodiesel suppliers in the booming India economy.

Speaker 1

We have no long term debt. We sell biodiesel on a cost plus pricing formula to government owned oil marketing companies. And we are in a rapidly growing market that has more than 5,000,000,000 per year of growth to meet the biodiesel blending targets set forth in the 2022 India National Biofuels Policy. It only took 15 years for Aemetis to become an overnight success in India by building and operating a production plant, paying off all of our long term debt and then expanding production capacity. Our strong financial foundation in India and $150,000,000 of current biodiesel supply contract allocations is only the beginning of our planned growth.

Speaker 1

We plan to expand our biodiesel production capacity in India using cash flow from operations, but a primary use of funds from a potential IPO onto the India stock markets would include the production of sustainable aviation fuel to meet growing global airline demand for SAF. The India plant can be expanded to supply SAF for airlines in India as well as international markets, such as the existing 10 airlines that have signed $3,800,000,000 of agreements with Aemetis for delivery of SAF in California. The 4th important point about financing growth at Aemetis is the attractiveness of our projects to lenders and preferred investors. The sophisticated investors and lenders in our projects understand that our risks are mitigated by using bonded contractors, technology guarantees and even cost plus pricing to provide confidence that debt obligations will be paid. The markets for our new projects in dairy, renewable natural gas, sustainable aviation fuel and carbon sequestration are rapidly growing, supported by regulatory policy and uniquely positioned to generate positive margins.

Speaker 1

The final point I'd like to make about financing related to Aemetis projects is the design of our business model in which our existing cash flow from operations supports future capital expenditures to reduce the need for debt as we grow. In 2023, we generated positive cash of $32,700,000 from adjusted EBITDA plus tax credit sales. This positive cash generation from operating the business is expected to continue to expand allowing us to fund future interest and principal reductions on debt as well as fund a meaningful amount of our capital expenditures from our growing operational positive cash flow. Let's review our 5 businesses. In the India biofuels business in late 2023, we announced a $150,000,000 1 year allocation for biodiesel from the 3 oil marketing companies under a cost plus contract structure.

Speaker 1

We started deliveries under this contract in October 2023 and have achieved excellent production performance during the 4 months of winter fuel specifications that require higher cost feedstocks. Beginning this month, the summer fuel specification allows lower cost feedstock to be used. The positive impact of cost plus pricing that is now being used by the India oil marketing companies to purchase biodiesel is expected to continue for the foreseeable future. The India business is debt free and now funds its own operations without outside long term financing. Our India plant expanded to 60,000,000 gallons per year of capacity during the Q3, entirely funded by the positive cash flow from operations.

Speaker 1

We continue to expand the production of capacity of biodiesel using an enzymatic process, a technology developed by Aemetis at our India plant that allows lower cost, lower grade feedstock to be used to produce high quality biodiesel. Aemetis believes that our India biodiesel plant is the largest capacity producer in the world using Novozymes enzymes to convert low cost feedstocks into biodiesel. To meet rapidly expanding demand for biodiesel by the government owned oil marketing companies, we are continuing to expand production capacity in India with a plan of 100,000,000 gallons per year of capacity in 2025. The India market is about 25,000,000,000 gallons of petroleum diesel and the government has set a goal of a 5% blend of biodiesel. We expect the cost plus contracts of India government oil refineries will support the addition of a significant amount of new biodiesel production capacity in India over the next 5 years, with InMedis continuing to expand the capacity beyond 100,000,000 gallons to supply the increasing demand for renewable fuels.

Speaker 1

The planned export of refined tallow from the India facility to renewable diesel producers in the U. S. Is making steady progress with feedstock sales to several biorefinery customers in active discussions. Andy Foster, President of Aemetis North America will now review the Aemetis Biogas and Ethanol Businesses. Andy?

Speaker 1

Thanks, Eric.

Speaker 2

In the Aemetis Biogas business, this summer we closed the 2nd $25,000,000 USDA guaranteed loan to build dairy biogas digesters for an additional 8 dairies. This closing brought our total to $50,000,000 of committed USDA REAP based project financing to build digesters receiving waste from 15 dairies that are designed to produce a combined 400,000 MMBtus of renewable natural gas each year. This month, we will have 9 fully operating dairy digesters supplied with waste from 10 dairies. We plan to accelerate the rate of biogas digester development in 2024 as we close USDA guaranteed financing for the next projects for $75,000,000 of new financing as well as other financing to accelerate project construction. We are very pleased to have passed the operational startup phase and are now positive cash flow from operations at Aemetis Biogas.

Speaker 2

Aemetis and other RNG producers have experienced significant delays in the CARB pathway approval process for LCFS credits with some at 24 months and counting. We recently met with top staff at CARB and they expect to address this issue in the rule making process in the upcoming reauthorization of the LCFS program in this year. We generated revenue from the sale of LCFS credits from our Aemetis biogas operations for the first time in Q1 of 2024. In addition to the sale of renewable natural gas as a fuel and the sale of federal D3 RINs, this new LCFS credit revenue stream will only increase as we build new digesters and as CARB approves the lower carbon intensity values that we have already demonstrated in actual operations. In October 2023, we repaid $30,000,000 of the original Aemetis Biogas startup funding and the balance of that financing was recently extended at an effective interest rate of less than 8.5%.

Speaker 2

The California Air Resources Board has stated that renewable natural gas is an important source of renewable hydrogen for the future of truck engines, allowing the trucks to be 0 emission using a carbon negative fuel. We believe that Aemetis is very well positioned to supply RNG, hydrogen and below 0 carbon intensity electricity to future trucks and cars in California, enabling the transition to 0 emission and below 0 CI heavy and light duty vehicles. For the Aemetis ethanol business, during Q1 and most of Q2 of 2023, we experienced extraordinarily high natural gas prices in California, which made ongoing operations economically unviable during that time period. As a result, we chose to idle the Keyes ethanol plant and took advantage of this time to complete an extended maintenance cycle and to begin the implementation of energy efficiency projects. This pause in production helped us avoid future plant shutdowns that would have been required to install key components of our energy efficiency upgrades.

Speaker 2

The result was an acceleration of our planned projects to reduce our biofuels carbon intensity through a number of plant efficiency and electrification projects. We also accelerated the installation of an entirely new Allen Bradley distributed control system with artificial intelligence capabilities, along with several other important progress project upgrades. We restarted the Keyes ethanol plant in late May and ramped up production during June July. The goal of our Keyes ethanol plant upgrades is to significantly reduce the use of fossil based natural gas at the plant. When these projects are completed next year, we expect that natural gas usage at the Key's ethanol production facility will be reduced by more than 80%.

Speaker 2

This transformation from fossil natural gas to renewable electricity will put Aemetis at the forefront of decarbonized manufacturing facilities in the state of California and is expected to reduce the carbon intensity of our fuel ethanol produced at the Keyes plant by double digits, which will increase the value of our ethanol while reducing energy cost. In fact, this transition has already begun. By the end of this month, we will have tested, commissioned and brought into service a 1.9 Megawatt solar microgrid system that will generate 0 carbon intensity electricity for plant operations and load shedding during peak hours in order to save on energy cost. This low carbon electricity from solar energy reduces the carbon intensity of our ethanol, thereby increasing revenues by generating more LCFS credits. In summary, despite facing some temporary and highly unusual external headwinds in the 1st and second quarters of this year in our ethanol business, operational performance and project milestones for the Aemetis Biogas and Aemetis ethanol plant businesses continue to be on track with the company plan.

Speaker 2

Eric?

Speaker 1

Thanks, Andy. In the Aemetis Sustainable Aviation Fuel and Renewable Diesel Business, earlier this week, we announced that we received the authority to construct air permits for the construction of the 90,000,000 gallon per year SAF and RD plant at the Riverbank site. Last September, the use permit and California Environmental Quality Act approval allowing the use of this 24 acre site for a sustainable fuel and renewable diesel plant were approved. We have signed $3,800,000,000 of final binding supply agreements with 10 airlines and a $3,200,000,000 renewable diesel supply contract with the National Travel Stop Company. These agreements are final contracts, not letters of intent or memorandums of understanding.

Speaker 1

So we expect to update these agreements to reflect project timing as well as pricing terms to reflect current market conditions. Currently, the hydrotreated esters and fatty acids known as HEFA process for SAF production is significantly less expensive than the ethanol to jet process to produce SAF. Aemetis is deploying the TOPSO HydroFLEX HEPA process that enables the production of SAF and renewable diesel at any output ratio, thereby allowing the maximization of pricing by the production sale of the higher value fuel. When operating at a fifty-fifty production allocation of SAF and RD, the plant is designed to produce 90,000,000 gallons per year, comprised of 45,000,000 gallons of SAF and 45,000,000 gallons of renewable diesel. At a 100% allocation of production to SAF and no RD production, the plant is designed to produce 78,000,000 gallons per year of SAF.

Speaker 1

The need for sustainable aviation fuel continues to increase, but the overall market supply of SAF continues to be delayed, resulting in significant supply shortages that are expected to continue for the foreseeable future as the 90,000,000,000 gallon per year aviation fuel industry seeks to reduce air pollution and carbon emissions using renewable fuel to replace petroleum jet fuel. As one of the very few companies fully permitted to construct a large scale SAF production facility in the United States, Aemetis has a meaningful position as a leading supplier to the airline market that cannot currently meet their goal of transitioning to lower carbon fuel. In the Aemetis Carbon Capture and Sequestration business, we were issued the first CO2 sequestration characterization well permit by the State of California to a non governmental project in 2023. The CO2 characterization well is designed to provide geologic data for the EPA Class 6 injection well planned for the Riverbank site. In California, the passage of Senate Bill 905 last year established a public engagement process to resolve specific issues related to CO2 sequestration projects, including royalty rates and the unitization of poor space rights.

Speaker 1

We are supported by this legislative process in California that is implementing regulations for CO2 capture to achieve the ambitious carbon emission reduction targets set by Governor Newsom. The California Air Resources Board has held several low carbon fuel standard public events where staff stated that CARB plans to significantly increase the number of credits required under the program by significantly expanding LCFS mandates. Barb's own model estimates that the increased mandates will raise the price of LCF credits to more than $2.20 per credit in the next 2 years. Though the updated regulations strengthen the LCFS have been delayed, we expect that the recent increase in LCFS credit prices reflects the market expectation of strong LCFS credit mandates will be adopted at a mid-twenty 24 CARB Board meeting. LCFS credits generate revenues for Aemetis and all of our U.

Speaker 1

S. Businesses and indirectly benefit our India business, which can produce feedstock for U. S. Renewable diesel and sustainable aviation fuel biorefineries. In summary, all of the 5 Aemetis businesses are synergistic and create what we refer to as a circular bioeconomy within Aemetis.

Speaker 1

We use the biofuels, byproducts and waste products from our facilities and local areas as feedstock to produce low and negative carbon intensity renewable fuels to meet government mandates for air quality improvement and carbon emissions reductions. The strong demand for dairy renewable natural gas and the rapidly growing sustainable aviation fuel market are key areas of investment in project development at Aemetis. Our existing facilities are focused on projects that improve energy efficiency, reduce carbon intensity to increase revenues at lower cost, and technologies, enabling the use of lower cost feedstocks at our existing production facilities. Our company's values include a long term commitment to building value for shareholders, the empowerment of and respect for our employees and business partners, and making significant and positive contributions to the communities we serve. Now let's take a few questions from our call participants.

Operator

Thank you, Mr. McAfee. We will now be conducting our question and answer session. Thank you. Our first question is coming from Manav Gupta with UBS.

Operator

You may proceed.

Speaker 3

Good morning, Eric and Andy. So my first question relates to the CARB timing here. There was a meeting somewhere in March, looks like it's moved. There are 2 schools of thought again, they're having second considerations. The other school of thought is they looked at the program and thought it was not aggressive enough to reduce the rate at which the Carbon Credit Bank was building and they're now looking at ways to bring it down at a faster pace.

Speaker 3

You talk to those guys, you're close to those guys, what's the thought process over there?

Speaker 2

Hey Manav, it's Andy. So thanks for your question. I think it's a combination of those things that you just mentioned. I think there were frankly some incorrect estimates in terms of what the credit market looked like as this year would evolve and where it would end up at the end of this year. And I think it became readily apparent to CARB, especially when you saw the sharp decline in the LCFS price in the earlier part of this year that those estimates were not on target.

Speaker 2

And so I think that was one contributing factor. I think they received a lot of feedback, a lot of public comment, which I think has also kind of slowed down their process a little bit. But I would suggest that a combination of the LCFS credit situation, which is a huge overhang in the market and sort of an unanticipated, but not by us, but I think bicarb in some respects, it was pretty apparent as we were exiting last year that this was going to be a problem. So I think they're addressing that and I do expect, certainly it's our hope that they will come back in April with at the next meeting with some more aggressive goals when it comes to the overall realization, Manav, that the LCFS credit overhang in the market was causing a serious deterioration. And the ability for companies like us to make return on investment and further invest in programs, but also to encourage new investment in the entire renewable sector.

Speaker 2

I mean, this was clearly something that they were getting a lot of feedback on. So I would expect I'm hoping certainly that they will come back in April with some more aggressive numbers as a result of this delay.

Speaker 3

Perfect. A quick follow-up is you indicated you have 9 dairy zones. So first, how many do you expect to be online by year end? And then when do you I mean, there's a delay period here, so you do have 9 dairies, but how long will it take to start seeing the revenues from these 9 dairies to flow in, whether it's through the RFS credits or through with LCFS credits? And I'll turn it over after that.

Speaker 3

Thank you so much.

Speaker 2

So I think by the end of this year we're expecting to have 18 dairies online. Yes. And the second part of your question, would you repeat that? I'm sorry.

Speaker 3

Like by when do you expect to start monetizing these credits from these 9 dairies because there is a lag period before the dairy actually comes on and then you're storing the gas. So when do you expect like to start monetizing these credits?

Speaker 2

We actually started monetizing these credits this year, of course, at the lower the temporary pathway, the negative 150, but we actually started that process in Q1, Manav. So as we go through the application process, there's specific milestones you have to you get to from a timing perspective. But we've already begun that process and we expected that process to continue on. And then hopefully, our applications have been in for it will be almost a year in early May, I think it's when we submitted. So, we are encouraging CARB to accelerate that process because obviously once we get the full pathway then the number of credits in goes up significantly.

Speaker 2

But we actually have already started that process.

Speaker 3

Thank you so much.

Speaker 1

You're welcome. Thank you. Thank you, Matt.

Operator

Thank you. Our next question is coming from John Annes with Stifel. Your line is live.

Speaker 4

Hey, good afternoon and thanks for taking my questions. For my first one, Eric, if I heard you right in your prepared remarks, you mentioned the potential for SAF production in India. Can you frame how you see SAF economics in India stacking up against the U. S. Markets?

Speaker 4

Are there any regulatory incentives in India that would support building out SAAF capacity there?

Speaker 1

Our initial opportunity is simply to tap into the less expensive waste feedstock in India and then export these SAF to the San Francisco airport where we have $3,800,000,000 of existing contracts with TAN Airlines. And so it's a direct feedstock arbitrage from a country that has a tremendous amount of underutilized feedstock. And we already have a 50,000,000 gallon per year tallow refinery in place, direct relationships. We used to export biodiesel to Europe using tallow as a feedstock. So we are well positioned to be a leading player in just doing that business model.

Speaker 1

The cost plus structure with oil marketing companies is an opportunity for SAF adoption in India. So that would be what I would call a secondary market opportunity would be to arbitrage the California price against the India price and the cost plus structure that they're using for biofuels in India. And certainly, a third element is the feedstock itself that we make in India positions us just amazingly well due to the demand for waste feedstocks. And as you listen to California Resources Board and others, there is an increasing emphasis on waste feedstocks and the values of those feedstocks will, I believe, continue to increase.

Speaker 4

Makes sense. And for my follow-up, regarding the RNG fueling station that's under construction at the Keyes ethanol plant, can you provide some color on the potential margin uplift associated with selling your own RNG versus using the 3rd party? And then secondly, just in terms of volume, what percentage of your RNG production could be sold through your owned fueling station there?

Speaker 1

There are two elements of increased margin. First is that the molecule itself currently is sold into the pipeline as brown gas. So we get approximately $4 per MMBtu for doing that. However, we're selling the energy equivalent of 7.2 gallons of diesel. So 7.2 gallons of times in MMBtu is somewhere in the $35 of value.

Speaker 1

So if we were to sell it at the equivalent price of diesel instead of selling at $5 per MMBtu, we'd be selling at $35 As a part of incentivizing customers and attracting new adoption of RNG into truck fleets, we of course will be selling at a discount. So we would expect an uplift somewhere from $5 to around the $15 or $20 range as we sell at essentially a 50% off price compared to running petroleum diesel. The second benefit is that current discounts are in the 15% to 20% range for RNG sold through other third party fueling stations. And so we would not incur any of that and that's 15% to 20% of revenues. The low carbon fuel standard revenues and the federal D3 RIN revenues are both being hampered by the need to sell through other fueling stations.

Speaker 1

In answer to your last question, our goal would be that 100% of our product would go through our own fueling stations. We're in the middle of probably one of the most active trucking environments in the world. Virtually all agricultural products at some point in time touch a truck. There aren't a lot of railroad depots next to almond orchards or other crops in Central Valley, California. So trucking is very active and literally a quarter mile from our plant are probably tens of thousands of trucks that drive by every week.

Speaker 1

So the North American adoption center of innovation for both PepsiCo as well as Frito Lay are within 15 minutes of our facility. It's absolutely a hotbed for innovation in trucking. So we have a goal of setting up multiple fueling stations and arrangements to use our RNG not only with 3rd parties, but moving our own products, animal feed, biofuels, carbon sequestration, CO2 for us as well as for people that seek to get the environmental benefits of low carbon fuels.

Speaker 4

I appreciate all the color. Thanks again for taking my questions.

Speaker 1

Thank you, John.

Operator

Thank you. Our next question is coming from Jordan Levy with Truist. Your line is live.

Speaker 5

Afternoon all. Maybe just to start, now that you've passed that important milestone with the authority to construct permit. Just curious, I know it's very recent since that announcement was made, but if you could just help us landmark sort of the next steps in terms of financing at Riverbank and the options you're pursuing there?

Speaker 1

We are well into a process of project financing. Of course, that has been delayed waiting for the 3 key permits, all three of which we now or sets of permits essentially, all three of which we have now. So we have been working on a preferred equity, let's call it mezzanine financing structure as well as senior secured debt. We and the Riverbank project have already signed a USDA biorefinery assistance program, it's called program number 9,003 for senior debt supportive 20 year financing. But we have multiple opportunities in senior secured debt and we've got a very active customer base among airlines, several of whom have already actually many of whom have already funded into funds that are dedicated to the growth of SAF production.

Speaker 1

And airline manufacturer airlines as well as manufacturers of the wide body jets have all joined in together to provide, let's call it, mezzanine or even equity financing to support SAF. And we have active discussions with the largest of those investors. So now that we have a permit, we can actually have construction closure on those constructive closure on those discussions. Up to today, we've had uncertainty around when we'd actually get the permitting. And so now that's in place, I would expect this year is going to show a lot of action in closing project financing.

Speaker 5

Appreciate that. That's super helpful. And then maybe just jumping over to the India Biodiesel side. You made a mention of the potential for an IPO process on the Indian Stock Exchange there. Maybe what are some of the what's the process in getting that through the wire?

Speaker 5

And then how are you thinking about that progressing through the year?

Speaker 1

As with any IPO process, we see it as an evolving process. We've already gotten pretty well acquainted with many of the investment makers. Certainly, we have some of the world's leading lawyers for IPOs in India. We've set that kind of infrastructure in place. But we're also expanding senior management of our India subsidiary and are looking forward to just some very, very talented people joining our business there.

Speaker 1

And certainly, we have seen consistent success of IPOs in the India market. If that continues, I think we're very well positioned for completing something this year, but we are subject to market conditions. We are doing everything we're supposed to do to go through the process. And to a certain extent, I would say it's a faster process in the U. S.

Speaker 1

There's just a different way that you interact with regulators in the India market. But I think that we'll be learning over the next quarter about valuations and other terms and we've already been approached by very large investors about a pre IPO investment. So I want to say that we are open to that discussion as it strengthens the valuation of our company. So it's a very active opportunity in India and we're pursuing it.

Speaker 5

Thanks so much for all the details.

Speaker 1

Yes. Thank you.

Operator

Thank you. Our next question is coming from Amit Dayal with H. C. Wainwright. Your line is live.

Speaker 6

Thank you. Good afternoon, everyone. Eric, just with respect to timing, it looks like at least from your recent updated business plan, roughly 100,000,000 dollars plus in CapEx is going towards the SAF and RD facility. So when will sort of this start getting deployed? Do you have sort of a timeline?

Speaker 6

Is it second half, I'm assuming? But is there a catalyst that sort of triggers all of this? And when would that materialize?

Speaker 1

The $100,000,000 we referred to is actually related to our biogas operations. We have $50,000,000 which we closed last year. We expect to be getting $75,000,000 well, actually $100,000,000 of financing, probably closing $75,000,000 with the last $25,000,000 dribbling into next year. So that's actually it's actually going to the biogas business. Separately, the SAF project financing is much larger than that.

Speaker 1

It's in the $500,000,000 range. So we have also a little bit of carbon sequestration financing going on, mechanical vapor recompression of the ethanol plant going on, India expansion going on. And so looking at each one of our subsidiaries, as we described, India is self funding its expansion from operating cash flow. The USDA is helping us with some of the other smaller financings with 20 year amortized loans. And then we basically have one large financing this year that's really not been achieved before and that's financing this one SCF plant.

Speaker 1

But I tell you the airlines and the aircraft manufacturers don't have a lot of new permitted facilities in North America and certainly ones that are not massive $2,000,000,000 projects. So we're getting a lot of support and looking forward to cooperating with these customers so we can get this production facility operating.

Speaker 6

Understood. Thank you for that, Eric. And then with respect to the India biodiesel facility, I know you're at 60,000,000 gallons capacity now available. The business plan shows roughly 50% to 60% of that being utilized. Are you just being conservative with that outlook?

Speaker 6

Or is that just the visibility you have right now in terms of working with these oil marketing companies?

Speaker 1

You are correct. We have continued to expand capacity. So we're ahead of the oil marketing companies. Since they are government owned, they tend to move a little slower than everybody else. But we have seen them now get a pricing model that has reduced the constraints on expanding production.

Speaker 1

So we saw that coming. And so over the last 2 years, we have expanded capacity of 60,000,000 gallons. We're continuing to invest to expand capacity. And I think we'll have some upside surprises in terms of what our revenue will be out of India because capacity won't be as much of a constraint. We'll be literally able to contract 60,000,000 gallons as we are building the plant capacity to 80,000,000 and then eventually 100,000,000.

Speaker 1

And so our strategy is to be ahead of the market and then let the market catch up with us. And we expect that to later on this year when we get our next 12 month allocation with these 3 oil marketing companies, it could be substantially more than the $150,000,000 which we committed to last year.

Operator

Thank you. Our next question is coming from Dave Storms with Stonegate. Your line is live.

Speaker 7

Good morning. My first question is just around the pacing of the dairy digesters. I know you mentioned you plan to be at 18 by year end, but how should we think about how that will be spaced out through the year?

Speaker 1

We'll be operating digesters for 18 dairies and we're increasingly going to be talking by the way about wet Cal equivalents because you can multiply that times a certain number of MMBTs per year and get the revenue in one step. So over the course of this year during our earnings call and other messaging, we'll be working toward wet cow equivalents, which make everybody's life a lot easier. We have 2 dairies coming online this month, and that will be followed with in about 6 months in the Q3 with another round of dairies coming online. So the 3rd Q4 is when you're going to see some of the ramp up. The USDA financing process has temporarily made it somewhat chunky the way that we roll these processes out.

Speaker 1

We get them all permitted. We get environmental approval and all these other things all done and then we kind of wait. We are putting some things in place that will allow us to not wait as much. And so over the course of the Q2, I think you'll see some additional liquidity provided that will enable us to just smooth out that process and accelerate it. So especially as we exit 2024, I think we're going to have an upside surprise on the pace of development in the biogas business.

Speaker 7

Understood. That's very helpful. And then just as a follow-up on that, as you're bringing on this next cohort of Dairies and beyond 'eighteen, how do you prioritize construction? Is it the cow equivalents that the dairy would have? Is it contingent on permits?

Speaker 7

Is it distance from either existing or future pipelines? Just how do you think about that?

Speaker 2

Good question. Thank you. So I think obviously we want to maximize the distance the proximity to the pipeline because obviously we're making a pretty significant investment there. Some of this has to do with, as Eric mentioned, the USDA funding and the various vehicles that we're using to fund them in terms of how the timing works out because you sort of lump these into 5 or 6 dairies into a specific, we call it AV1, AV2, AV3 and it's sort of so that creates some of the timing and it doesn't always necessarily make sense if you look at a map, unfortunately. If they were crisp, we would do it the most efficient way we possibly can.

Speaker 2

The good news is these dairies are all generally located in a very close proximity to one another. So it sort of doesn't really matter. Obviously, the larger the wet cow equivalent count, the faster we can get the bigger dairies on. That's a good thing for all of us. But to some extent, it's a little bit beyond our control with how the USDA funding rolls out.

Speaker 2

And the other thing to keep in mind, and I'm glad Eric mentioned it in terms of the wet cow equivalents is really going to we're going to start to refer to this business because in the past dairy counts was sort of a metric we used of X amount of dairies. But what we're finding is on many of these projects, it's more economical for us to take 3 or 4 dairies and create 1 digester that these dairies all feed. We call them mega digesters or cluster digesters, however you want to refer to it. So the number of dairies that you'll see reported can kind of get a little clunky and confusing. So we think on a wet cow equivalent basis, you can measure MMBTUs of gas and it's pretty much more straightforward way to do it.

Speaker 2

But back to your question, I think we obviously if we can group dairies together as we're doing construction from a labor perspective, that makes tons of sense. And so we're trying to do that as much as we can and then proximity to the pipeline. But as I said, the USDA funding mechanism, the REIT loans don't necessarily all develop in exact sequence for which dairies are assigned to each loan and that constrains our ability a little bit in terms of how we plan.

Speaker 1

And I should note that we have 43 dairies signed to their participation agreements or lease agreements and expect to be above 50. We don't really put press releases out every week or month when we sign an additional dairy or 2. So we'll probably press release when he cross 50. But in general, we already feed animals at roughly 80 dairies. So Wilbeach just continue to exercise our relationship with dairies.

Speaker 1

Our 5 year plan is 75 dairies constructed and that's less than the total aggregate number of dairies we supply with animal feed already today. So our expectation is that we'll continue to sign dairies far ahead of our construction and our opportunity this year is to provide additional liquidity to the process to prepurchase equipment, etcetera, and just accelerate the dairy development phase. Specifically, because we have the interconnect and the pipeline already in place, we're focusing really just on building dairy digesters and seeking to increase that pace.

Operator

Our final question today will be coming from Ed Woo with Ascendiant Capital. Your line is live.

Speaker 7

Yes, congratulations on all your progress. Talking going back to the India potential IPO, have you thought about listing in the U. S? And also what are your plans with the capital infusion when you do India IPO, especially you said that India was cash flow positive already and doesn't necessarily need funding going forward?

Speaker 1

If the U. S. Market were to be extremely excited about our India subsidiary, we'd absolutely take that in consideration. We will discover that over the next few months. India stock market is very, very hot and there seems to be a strong appetite to invest in companies in that country.

Speaker 1

And so even the international funds are coming in India to do that. Use of funds would include stabilization fuel because it is 90,000,000,000 gallon market. There are not going to be hydrogen, electric or nuclear powered airplanes flying in passenger or cargo jets across the oceans anytime soon. And so the major engine manufacturers and airframe manufacturers have all committed themselves to sustainably aviation fuel as a major initiative. What's lacking is any of the fuel.

Speaker 1

And so being one of the few companies that's actually executed well in this space, we see really tremendous growth opportunities. In our India plant having access to cheap waste, low carbon, low cost feedstock in a country of more than, what, 1,300,000,000 people is just a very unique positioning we have. So we'll leave it open to the markets to tell us where they want us to go. But I got to tell you that even the European market is very interested in this business model. So we think the industry stock market is probably where we're going to end up, but we're certainly open to the feedback we get from investors and investment bankers.

Speaker 7

Great. Well, thank you and I wish you guys good luck.

Speaker 1

Thank you. Thank you.

Operator

Thank you. As we have no further questions at this time, I would like to turn the floor back over to management for closing remarks.

Speaker 1

Thank you to Aemetis shareholders, analysts and others for joining us today. Please review the Aemetis 5 year plan that is posted on the homepage of the Aemetis website. We look forward to talking with you about participating in the growth opportunities at Aemetis. Thank you for attending today's Aemetis earnings conference call. Please visit the Investors section of the Aemetis website where we'll post a written version and an audio version of this Aemetis earnings review and business update.

Speaker 1

Ali?

Operator

Thank you. This concludes today's teleconference. You may disconnect your lines at this time and we thank you for your participation.

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Earnings Conference Call
Aemetis Q4 2023
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