Aemetis Q2 2024 Earnings Call Transcript

Quartr
Provided by Quartr
August 1, 2024

There are 9 speakers on the call.

Operator

Greetings, and welcome to the Aemetis Second Quarter 2024 Earnings Review Conference Call. At this time, all participants are in a listen only mode and a question and answer session will follow the formal presentation. 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.

Operator

Mr. Waltz, you may begin.

Speaker 1

Thank you, Oli. Welcome to the Aemetis Second Quarter 2024 Earnings Review Conference Call. Joining us for the call today is Eric McAfee, Founder, Chairman and CEO of Aemetis and Andy Foster, President of North America. We suggest visiting our website at aemetis.com to review today's earnings release earnings press release, the Aemetis corporate and investor presentation, filings with the Securities and Exchange Commission, recent press releases and previous earnings conference calls. Before we begin our discussion today, I'd like to read the following disclaimer statement.

Speaker 1

During today's call, we'll be making forward looking statements, including without limitation, statements with respect to our future stock performance, plans, opportunities and expectations with respect to financing activity and the execution of our business plans. 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 risks and uncertainties 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 the SEC's EDGAR system and our own company Web site. Our discussion in the 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 our company's sources or uses of cash.

Speaker 1

A reconciliation of the non GAAP measures to the most directly comparable GAAP measures is included in our earnings release for the 3 6 months ended June 30, 2024, which is available on our website. Adjusted EBITDA is defined as net income or loss plus to the extent deducted and capitalizing such and calculating such net income, interest expense, income tax expense, intangible and other amortization expense, accretion expense, depreciation expense and share based compensation expense. Let's review financial results for the Q2 of 2024. Revenue during the Q2 of 2024 were 66 $600,000 compared to $45,100,000 for the Q2 of 2023. Our Keyes plant operated during the entire quarter compared to its extended maintenance cycle during a portion of the Q2 of 2023.

Speaker 1

Our Dairy Natural Gas segment produced 89,400 MMBtus from 8 operating dairy digesters and reported $1,600,000 of revenue and our 9th digester began producing biogas at the end of the second quarter. Our India biodiesel business recognized $24,800,000 of revenue, primarily from sales to the India Oil Marketing Companies. Gross loss for the Q2 of 2024 was $1,800,000 compared to a $2,000,000 profit during the Q2 of 2023. Selling, general and administrative expenses were $11,800,000 during the Q2 of 2024 from $9,700,000 during the same period in 2023, driven primarily by the recognition of a loss on asset disposal of $3,600,000 Operating loss was $13,600,000 for the Q2 of 2024 compared to an operating loss of $8,700,000 for the same period in 2023. Interest expense, including accretion of Series A preferred units in the Aemetis Biogas LLC subsidiary, increased to $11,700,000 during the Q2 of 2024 compared to $9,600,000 during the Q2 of 2023.

Speaker 1

Additionally, Aemetis Biogas recognized $3,500,000 of accretion of Series A preferred units during the Q2 of 2024 compared to $6,900,000 during the Q2 of 2023. Net loss was $29,200,000 for the Q2 of 2024 compared to $25,300,000 for the Q2 of 2023. Cash at the end of the Q2 of 2024 was $234,000 compared to $2,700,000 at the close of the Q4 of 2023. We recorded investments in capital projects related to the reduction of carbon intensity of ametacethonal and construction of dairy digesters of $5,400,000 for the Q2 of 2024. Now I'd like to introduce the Founder, Chairman and Chief Executive Officer of Aemetis, Eric McAfee for a business update.

Speaker 1

Eric?

Speaker 2

Thank you, Todd. Aemetis is executing on a 5 year plan that includes expanded positive cash flow from operations combined with long term lower interest rate debt financing guaranteed by the U. S. Department of Agriculture to finance growth. We see solid progress across each of our 5 business units as we will review today and are currently positive cash flow from operations in all 3 of our operating businesses.

Speaker 2

However, before discussing operations and projects, let's review regulatory events that are expected to have a significant positive impact on our businesses. In addition to hearings and meetings with the California Air Resources Board, we recently hosted a representative of the USDA Office of the Chief Economist for a biogas ethanol plant and SCF plant site tour in California. I also visited Washington DC for a week in May and again last week for meetings with top USDA officials, EPA Secretary, Michael Regan and various staff of senators and Senate committees that directly impact the Inflation Reduction Act incentives for renewable fuels and for ethanol E15 blending approval. From these meetings and discussions, I can highlight 3 important external regulatory events that are scheduled to occur over the next two quarters that strongly support the Aemetis business plan. The California Air Resources Board vote on November 8 that is slated to approve the next 20 years of increased demand for renewable fuels and other low carbon energy sources for transportation.

Speaker 2

The IRS guidance showing the calculation of the Inflation Reduction Act Section 45Z Production Tax Credit that begins in January 2025 and the permanent approval of the 15% ethanol blend by the federal EPA, which has been scheduled for early next year as part of a legal settlement with 8 Midwestern states. Combined, these three regulatory events significantly increased the value of our products and are expected to generate more than $50,000,000 per year of increased positive cash flow starting in January 2025. Positive cash flow is expected to continue to grow strongly as the value of LCFS credits increase and as additional biogas digesters are built. I should note that in the current quarter, Q3 of 2024, we are already showing positive cash flow from each of our 3 operating businesses including ethanol production, dairy renewable natural gas and India biodiesel. We have 5 additional digesters under construction, but the regulatory events on November 8 for LCFS, by January 2025 for the 45Z production tax credit and the EPA adoption of E15 are the key elements of strong cash flow and future profitability.

Speaker 2

In the Aemetis Biogas business over the past year or so, we have closed $50,000,000 in USDA guaranteed 20 year loans to build dairy biogas digesters and to convert construction loans to term loans for digesters that already completed construction. We recently received the USDA conditional commitment approval for the next $25,000,000 Renewable Energy for America loan and expect to close the funding later this month. An additional $50,000,000 of USDA guaranteed funding is in process for closing later this year for a total of $75,000,000 of new long term financing for biogas digester and pipeline construction this year. We stored a significant amount of our Q2 2024 Renewable Natural Gas production until Q3 in order to generate almost 80% more LCFS credits under the provisional pathway approval that we expect later this year. In July, we dispensed a portion of the RNG production and will continue to dispense storage inventory throughout Q3.

Speaker 2

Cashing in later on the expected higher price of LCFS credits and more than 80% increase in the number of credits earned at the provisional pathway rate instead of the negative 150 default carbon intensity. The California Air Resources Board has stated that renewable natural gas is an important feedstock for the production of renewable hydrogen for future truck engines, allowing the trucks to be 0 emission using a carbon negative fuel. We believe that Aemetis is well positioned to supply renewable natural gas, renewable hydrogen and negative carbon intensity electricity to power future trucks and cars in California, enabling the transition to 0 emission and below 0 carbon intensity, heavy duty and light duty vehicles. In the development of our Aemetis Sustainability Aviation Fuel and Renewable Diesel business, during the Q1, we received authority to construct air permits for our planned 90,000,000 gallon per year sustainable aviation fuel and renewable diesel plant to be built in Riverbank, California. When operated to produce only sustainable aviation fuel, the design capacity of the plant is about 78,000,000 gallons per year of SAF.

Speaker 2

The need for sustainable aviation fuel is expected to increase rapidly for the foreseeable future as the 90,000,000,000 gallon per year global aviation fuel industry seeks to reduce carbon emissions using renewal fuel to replace petroleum jet fuel. With the strong demand for SAF and with limited supply, we are now discussing the use of innovative pricing structures with our airline customers to accelerate the financing construction and operation of the SAF plant. As one of the very few companies with all the key permits needed to construct a large scale SAF production facility in the United States, Aemetis is building production facilities to supply renewable aviation fuel to an airline market that is currently not expected to meet its ambitious goals of transitioning to lower carbon intensity operations. In the India biofuels business, in late 2023, we announced that we received a $150,000,000 1 year allocation from biodiesel sales to the 3 India oil marketing companies or OMCs under a cost plus contract structure. We began deliveries under this contract in October 23, 2023 and have achieved excellent production and delivery performance.

Speaker 2

The positive impact of cost plus pricing that is now being used by the OMCs to purchase biodiesel is expected to continue for the foreseeable future. The India business has positive EBITDA and funds its own operations and capacity growth. This July, our new Managing Director of the India Business joined the company after serving as the Chief Executive Officer of the GE Joint Venture in India to build renewable power plant plants. We are busy with the IPO process and work on the next annual contract for biodiesel sales to India government owned oil marketing companies. For the Aemetis ethanol business, the temporary approval of a 15% blend of ethanol in 49 states for this summer and the EPA's recent statement that a permanent E15 approval will be adopted effective next year is expected to have a positive impact on ethanol industry margins as retailers seek to provide lower cost fuel to consumers.

Speaker 2

A recent study by UC Berkeley and Naval Academy Economists 2 point $7,000,000,000 per year savings on fuel costs for consumers, equal to about $7,000,000 per day or $0.20 per gallon in California. In Q2, we commissioned an on-site solar energy facility with battery storage to improve cash flow through the reduction of our energy costs and decrease the carbon intensity of the ethanol produced by our Keyes plant, which generates more low carbon fuel standard revenue per gallon using solar energy. The next major step in improving our cash flow and energy efficiency at the Keyes plant is the installation of a mechanical vapor recompression system or MVR. We have completed process design and detailed engineering and are now moving forward with the procurement of equipment. The MVR system is designed to reduce fossil natural gas usage by 80% and increase cash flow by $15,000,000 to $29,000,000 annually at the Keyes plant depending on the value of LCFS credits.

Speaker 2

The MDR Energy Efficiency Project is budgeted for a direct cost of about $21,000,000 and has been rewarded $20,000,000 of grants and tax credits from the California Energy Commission, Pacific Gas and Electric's Energy Incentive Program and the Department of Energy and U. S. Treasury Department. Our Aemetis Carbon Capture subsidiary has received California state approval to drill the characterization well. The first phase of drilling and installation of the conductor pipe is expected to occur in the next 2 months.

Speaker 2

In summary, all 5 Aemetis business segments are synergistic and create what we refer to as a circular bioeconomy. Our company's values include a long term commitment to building value for stockholders, 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 some questions from our call participants. Oli?

Operator

Apologies for that. I don't know where that music was coming from. Thank you, Mr. McAfee. We will now be conducting our question and answer Thank you.

Operator

Our first question is coming from Manav Gupta with UBS. Your line is live.

Speaker 3

So Eric and team, I mean, the credit bank is building. We saw the build even last night and it's been a 26,000,000 metric ton. We are optimistic that something will happen in November, but do you think like what rate a 7% or 9% rate probably is now needed to bring this in check and move the credit prices higher. But like if we look at it by the time we end 2024, the credit bank could be at 32000000, 33000000 metric tons. So won't it take significant amount of time even if we go with 7% or 9% rate to actually get the carbon prices to move?

Speaker 3

That's what I'm trying to understand.

Speaker 2

We think that the shutdown is going to be necessary for the kind of price response that the California Resources Board is seeking because as you know, this funds hydrogen and electrification, 0 emission goals. So a continued low credit price basically postpones those projects. I think as they increasingly see the $30,000,000 to 32,000,000 dollars credit bank number, they're going to realize that 9% basically is the minimum required, not the maximum, but the minimum required to move major oil companies forward on buying more credits now. And so their range is 5%, 7% or 9% in the most recent number that came out. But in discussions directly with carb executives, it's pretty clear that they had no idea that we'd be looking at 32,000,000 credits.

Speaker 2

That was not even the range of possibility in the discussions I've had with them. So I think it's good that we have a November date because it gives them almost the entire year to see the buildup in inventory. And if we had a March 2024 decision, I don't think they would have that clarity. So it's actually in hindsight a good thing for us that those numbers will have built up by the time this decision being in November 8.

Speaker 3

Perfect. And my follow-up quickly is on the ethanol business that U. S. Ethanol margins are looking much stronger in 3Q. And so hopefully, my answer is like you're not hedged and you should be able to participate in this uptick in ethanol margins?

Speaker 2

Andy, you want to take that? Yes. We've definitely

Speaker 4

seen an uptick in margin, certainly for the month of July. So yes, I think August is going to be a little softer as you probably noted yesterday, Manav, that the EIA number showed record production, which is everybody is trying to take advantage of the margin environment too much so, which typically happens with our industry. But right now with the price of corn showing has just been flat to down for most of the summer. We expect a larger crop than maybe what the USDA anticipated growing conditions in the Midwest have been very good, except for the upper Midwest. But I think if you look at the corn belt of Nebraska, Iowa, Illinois is expecting pretty significant crops.

Speaker 4

So I think given that, we'll probably see some softening in the ethanol price just because inventories are going to build over the next month. But as we get into the fall and there has been a pretty robust export program in ethanol this year, I think for the foreseeable future, we're expecting the margin environment to be much more favorable than it was in Q1.

Speaker 3

Okay. My last and quick one is, Eric, how many dairy digesters should we expect to be online by year end? I understand the volumes will take time because there is certification process, but how many digesters do you think you can complete by year end 2024?

Speaker 2

Because we have some multiple dairy digesters, we're giving guidance that it'll be approximately 16 dairies. We have 9 operating now. We have 6 under construction. So we have about 15 total completed for sure, but we have a few that are on the cusp. So definitely expecting though that the number of dairies we're operating will be in the 16 dairy range.

Speaker 2

The 9 that we have currently operating cover 10 dairies and we're adding 6 more, so about 16. One of the guidances that we're looking to increasingly focus people on is what our annual run rate of MMBtu production is because you can directly multiply that times the value for MMBtu to get our revenues. And so we issued a press release a few weeks ago about hitting a $300,000 per year run rate and then we'll probably update that either late in Q4 or early Q1 with our new run rate. We did project that we'd be at $800,000 approximately 12 months from now. So we're scaling from $300,000 run rate from the year to $800,000 And then by giving guidance later on this year about exactly what revenues per MMBtu when we have 45 Z and LCFS in place, I think it will be rather easy to calculate what our annual revenues are at the company from the RNG business.

Speaker 3

Thank you so much, Eric.

Speaker 2

No, thank you. Appreciate your work.

Operator

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

Speaker 5

Afternoon, all. Appreciate all the commentary. Eric, maybe just to start on the MVR side of things. The project has been in the works for a while now. Can you just give us some thoughts around the confidence level in getting that project up and running for, I guess, next year maybe?

Speaker 2

Very high level of confidence. The fabrication of the equipment already has our first $1,000,000 deposits that's been paid. Engineering design has been completed. Permitting at this stage is completed for what we need to do right now. So we're in a fabrication cycle and we would expect that within 12 months, we would be completed with the projects.

Speaker 2

So this is the Q3 2025 target. I would always suggest we have to hold that a little bit loosely. If it slips by a quarter, we shouldn't be surprised. But certainly, we're operating toward a Q3 2025 implementation.

Speaker 5

Great. And then, so sorry if you talked on this already in the opening remarks, my phone was cutting out. But could you just talk to some of the importance and thinking around 45z guidance, especially on the biogas segment and some of the impacts that could have in the range there of outcomes? 45Z

Speaker 2

is a production tax credit based upon the amount of fuel that's produced. There are 2 issues in the biogas calculation because the calculation is pretty simple. You take 1 gallon or whatever fuel it is, you multiply it times its carbon intensity and you end up with a number of tax credits. There's some methods to get this, but essentially those are the 2 variables. The first question is what is the energy density of a gallon of ethanol?

Speaker 2

This has been a focus of the meetings I did in Washington D. C. Last week and a tour in May. It's pretty clear to us that the energy density of a gallon of renewable natural gas should be consistent with the 20 years of policy from the renewable fuel standard. There is 1 RIN, 1 Renewable Identification Number for a gallon of ethanol, which the reference gallon energy density in the Renewable Fuel Standard passed originally in 2,005.

Speaker 2

And to change that reference to something else and as I joke, I say, should it be 1 gallon of whale oil? Should it be 1 gallon of melted butter? What arbitrary other gallon are we going to throw in there because we're rejecting 20 years of federal law if you don't use ethanol. And that's been persuasive in every single meeting I've had with senators and USDA and EPA Administrator, Michael Reagan, last week, etcetera. So we are meeting with all of the members of the committee that are advising the Treasury Department.

Speaker 2

And so far every meeting I've exited, they've all agreed it should be consistent with prior policy and should be ethanol. Ethanol is approximately 76,000 MMBTUs, I'm sorry, BTUs, British thermal units for 1 gallon. And the way that natural gas is defined is 1,000,000 British thermal units. So it's very simple math. You subtract divide 1,000,000 by 76,000, you get about 13 gallons is what the energy density of 1 Btu is.

Speaker 2

That might sound complicated for investors, but it's pretty simple because remember you only both find two numbers together. The first number being 13.15. We're getting some music in the background here. Can you guys hear me? Hello?

Speaker 2

Jordan? Yes. Jordan, do you hear us?

Speaker 6

Yes. Yes.

Speaker 2

So the second calculation is rather simple. It's just carbon intensity. In California, we've been doing this for 15 years. It's using the GREET model. And so twice the guidance has come from Treasury most recent June 18th this year saying that you just calculate your GREET model carbon intensity.

Speaker 2

We know what that is because we do LCFS pathways for all of our biogas. So it ranges from negative 320 to negative 370. So when you multiply 13.15 times our carbon intensity with that calculation, we end up with about $99 per MMBtu of value at a negative 3.50 carbon intensity. And again, ours includes carbon intensity is negative 3.70 or even more. So we are waiting for IRS guidance that confirms that ethanol will be consistent with prior federal law and simply that the great model will be the great model, which they've twice said that that's what it's going to be.

Speaker 2

But there's a table to be issued that will describe different fuels and what the carbon intensity is. Now, because we're talking to investors a lot, I always describe that there's a range of values and that the range of values is between $99 for a negative $3.50 carbon intensity down to $7.20 So it's a very wide range that the IRS could determine. $7.20 is the carbon intensity of diesel, dollars 7.20 and a cap on a dollar per gallon that they do not allow negative carbon intensity, even though the legislation itself has negative in it. What we consider to be a worst case scenario is $7.20 and I personally think there would be some discussion to change that. So that's one of the reasons we've spent so much time with the decision makers is that we are expecting that everybody will have the consensus that it should be the ethanol molecule and it should be the great model and that's just implementation what's already in legislation.

Speaker 2

And if that's the case, it will be $9 per mmbtu. Remember, this is only the 45 Z value. In addition to that, you have the D3 RIN, which is 11.727 RINs per MMBtu times current price of $3.40 is roughly $35 for the D3 federal RIN. That would be on top of the $99 And then we add the low carbon fuel standard value, which at our carbon intensity runs roughly in the $25 range, but would quadruple by the provisional approval and the credit price doubling. So the certainty that we will have in the Q4 with IRS guidance plus LCFS mandates and increased credit prices, I think will put us in a position to give investors a solid number that they can then calculate against the MMBTUs per year number we have.

Speaker 2

Is that clear, Jordan?

Speaker 5

Yes, absolutely. Thanks so much for the color, Eric.

Speaker 2

Sure.

Operator

Thank you. Our next question is coming from Matthew Blair with TPH. Your line is live.

Speaker 6

Thank you and good morning. First question is on India Biodiesel. Could you talk about the overall profitability in the second quarter and hopefully disclose an EBITDA level for this segment? And were you able to switch to PFAD feedstocks or sorry, switch away from PFAD feedstocks and switch over to sunflower oil in the quarter?

Speaker 2

The wintertime oils are ones that can handle colder temperatures. And so the wintertime for us is November, December, January February. So the Q2 did not include any of the wintertime sunflower oil feedstock. 2nd point is we don't disclose close margins because we're in a competitive environment in India, but you can see in our disclosures various calculations that would show that it was a multimillion dollar EBITDA quarter and we expect to continue to grow that, grow the revenues as well as grow the EBITDA numbers.

Speaker 6

Sounds good. And then on the ethanol side, I wanted to clarify that the $10,500,000 of IRA tax credits that came through for the MVR system, was any of that $10,500,000 either recognized in your EBITDA for the 2nd quarter? And is any of that in your cash balance for the 2nd quarter?

Speaker 2

No. Unfortunately, the way that the $10,500,000 is, is this is a 48C credit. So it's investment tax credit. You have to complete the construction of the facility, run it for, I think it is a 90 day period demonstrating that it's hitting the energy efficiency targets it's designed to do and then you get your tax credit. So we will not actually show that $10,500,000 less about a 15% all in cost of sale between all the things that go on to sell the credits.

Speaker 2

So we would expect to pocket about $9,000,000 of cash probably in the Q4 of next year if things go according to current plan and that would show up in that quarter as other income, it would be in the tax credit sale category.

Speaker 6

Okay, that's helpful. And then just to wrap it up, circling back to your LCFS comments, which I thought were pretty interesting. My question is, if CARB holds the vote on November 8, would you expect implementation to start up on January 1, 2025? Or is this something that could slip into like Q2, 2025 or even the back half of the year?

Speaker 2

I think it's going to slip past the Q1. I wouldn't be surprised to see it July 1, 2025 in sort of the way that they think. To me, it's much more important about how big this step down is in 2025 because what you have is a lot of major oil company traders that see excess inventory of LCFS credits, this $32,000,000 that Manav was talking about is basically $32,000,000 reasons not to be in a hurry to buy credits. But if it looks like there's a strong step down in 2025, immediately the credits will react its credit price will react to that. So I think it's mostly the projection of what's going to happen in 2025 and 2026 and the major oil company response to that that's going to affect the price.

Speaker 6

Great. Thanks for your comments, Eric.

Speaker 2

Thank you. Appreciate it.

Operator

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

Speaker 7

Good afternoon, everyone. Thank you for taking my questions. So Eric, you said $50,000,000 in potential annual positive cash flow starting next year. Could you give us sort of a breakdown of how we get to that $50,000,000 from the 3 operating segments?

Speaker 2

The biogas business alone could do the entire $50,000,000 if we get the calculations that we're expecting, quite frankly, I mean, dollars 100 or $99 plus $35 plus LCFS credits times an average of $500 gets us actually $50,000,000 right there. So actually in excess of 50,000,000 dollars But, our ethanol business will have at least 1 quarter, maybe even 2 quarters of the benefits of NBR, which is $15,000,000 to $29,000,000 depending on LCFS values. Our India business should be expanding its contract and because of some things going on in the winter time, we're looking to have expanded margins in the winter time. So you add it all up and you're actually significantly in excess of $50,000,000 of positive cash flow. So the $50,000,000 was us taking some of the unknowns and putting it into the calculation.

Speaker 2

Yes, I think we lost you, Amit.

Speaker 7

Hello?

Speaker 2

Yes, try it again.

Speaker 7

Yes, I was asking about the renewal in India, the renewal coming up. Last time it was for $150,000,000 1 year contract. You think this time it could be similar or bigger amount for you in a longer term duration contract?

Speaker 2

For reasons of conservatism because this is one of the first large contracts. We previously had a $40,000,000 contract. This one was $150,000,000 We only used 60% of plant capacity in fulfilling this. So, we have increased the capacity of the plant. As you may know, we are planning also to continue to do another expansion of capacity, frankly, in the Q4 this year.

Speaker 2

So we would expect it to be a much larger contract, utilizing more of our existing capacity and we're continuing to expand in order to take on larger demand. Just as a reminder, 5% blend is about 1,250,000,000 gallons per year. They're currently running at a little over 250,000,000 gallons per year. So the market is 1,000,000,000 gallons short and the oil marketing companies continue to try to seek to fulfill that 1,000,000,000 gallon gap. Understood.

Speaker 7

Just last one on the IPO process there. I mean, have you actually started any formal work to get this going or are you still in sort of the

Speaker 2

We have already contacted investment banking firms. We have our leaders in place inside the company and the financial results of the past years have trended the way that the investment makers gave us guidance. And so we're actively in the process. I would give guidance that over the course of this quarter, we'll be working closely with narrowing the investment bank down to the lead bank and specifically determining timing. The India SENSEX market continues to do just brilliantly.

Speaker 2

And so I think that the timing will be earlier or at least that's what we expect the advice to be, but we're going through that process right now.

Speaker 7

So is this potentially 2024 end of year type of catalyst or is it a 2025 you think if everything falls into line with how you're planning things?

Speaker 2

I wouldn't be surprised if it was 2024, certainly if the investment banking firms came back with a strong notion, we can move the paperwork that fast because we're already an audited public company. So much of the work that delays things does not need to be done by us. And the India process is a very quick process. It's basically the investment bank does the due diligence. So yes, it's possible we could do it in the Q4, but I don't put that as an expectation.

Speaker 2

My expectation is first half of next year. Understood. Thank you, Eric.

Speaker 7

That's all I have.

Speaker 2

Yes, absolutely.

Operator

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

Speaker 8

Good morning.

Speaker 2

Hey, Dave.

Speaker 8

How's it going? First of all, congratulations on inclusion in the R3. Very excited about that. My first question is just about the asset disposal taken in the quarter and the loss on that. Is there any more color you can give us on that?

Speaker 2

Did you say asset disposal?

Speaker 8

Yes, loss on asset disposal.

Speaker 2

Yes. We launched the mechanical vapor compression, it's called equipment fabrication phase and made the executive decision that the Zbrex unit, which we had put in place and operated for a month, that the commissioning phase of that should not move forward because we could expand the mechanical vapor compression and do exactly the energy savings and other goals we had and do it in 1 integrated unit rather than running 2 units. So we decided to reserve against our investment in Zebrex. We will be able to use that equipment in other places in that operation as well as potentially in our jet fuel plant. But we took a conservative view, which is we wrote off the entire amount and if we happen to utilize some of the equipment, then that's just a benefit.

Speaker 8

Understood. That's very clear. Thank you. And then just sticking with ethanol, is there any scheduled downtime we should be aware of in the back half 2024? Or was most of that handled when you did all the upgrades in the first half of

Speaker 2

the year?

Speaker 4

Andy, do you want to talk about that? We continue to try to do some of the integration work as we move along. We did a significant amount of that when we had our downtime last spring. It is likely that we will have some probably, I would say, days of downtime. It won't be anything like we're going to turn the plant off for a month.

Speaker 4

It won't be anything dramatic like that. But when you're cutting over systems and things like that, there's likely to be 2 to 3 days of outage here and there, but it won't be anything that would be a month's longer or anything like that.

Speaker 8

Understood. Thank you for taking my questions and good luck in the Q3.

Speaker 2

Thanks, David.

Operator

Thank you. Our next question is coming from Ed Woo with Sandient Capital. Your line is live.

Speaker 5

Yes, congratulations on all the progress. Can you talk about just your outlook for ethanol pricing and margin and the impact that oil prices, the relatively stable oil prices have on it? Thank you.

Speaker 4

I think for the near term, as I said, I think August, I'm going to suggest that we'll see some softening in the ethanol margin environment just because of the large production numbers that we posted over the last few weeks. The export program was dented a little bit by the big storms in the Gulf and Texas, particularly. We expect to see that start to recover as we move into September. I think they're playing catch up right now. I think September October look more favorable.

Speaker 4

And then as we get into the Q4, typically around harvest, you'll see some disconnections in the market. Depending on right now, it doesn't appear that there's a strong bean program. It looks like the crop for corn is going to be very strong. Those things can change. Typically, when we get into December, that's when margins really start to soften just because of demand issues.

Speaker 4

So I would say that for August, we're going to see some softening. I would expect to see a little bit of rebound in September October. And then as we get into

Speaker 2

the end of the Q4, we're going to

Speaker 4

see that typical seasonal softening again.

Speaker 5

Great. Thanks for answering my questions and I wish you guys good luck. Thank you.

Speaker 2

Thank you. Thank you.

Operator

Thank you. We have reached the end of our questions at this time. So I'd like to turn the floor back to management for closing comments.

Speaker 2

Thank you to the Aemetis analysts, stockholders and others for joining us today. Please review the Aemetis Company presentation 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.

Speaker 1

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. Oli?

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 Q2 2024
00:00 / 00:00