Aemetis Inc (AMTX) 2024 Q1 法說會逐字稿

Welcome to the Aemetis first quarter 2024 earnings review conference call. (Operator Instructions) As a reminder, this conference is being recorded.

It is now introduce you to your host, Mr. Todd Waltz, Executive Vice President and Chief Financial Officer of Aemetis Inc. Mr. Waltz, you may begin.

Thank you, Kelly. Welcome to the Aemetis first quarter 2024 earnings review conference call. Joining us for the call today is Eric McAfee, Founder, Chairman and CEO of Aemetis. We suggest visiting our website at a modest.com to review today's earnings press release, the Aemetis Corporate and Investor Presentations, filing with the Securities Exchange Commission, recent press releases and previous earnings conference calls.

Before we begin our discussion, I'd like to read the following disclaimer statements. 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. But 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 risks and uncertainties and future events may differ materially from the statements made.

For additional information, please refer to the company's Security and Exchange Commission filings, which are posted on the SEC EDGAR system and our own company website. 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 our company source or use of cash.

A reconciliation of the non-GAAP measure to the most directly comparable GAAP measures included in our earnings release for the three months ended March 31, 2024, 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, income, tax expense, intangible and other amortization expense, accretion expense, depreciation expense, and share-based compensation expense.

Let's review the financial results for the first quarter of 2024. Revenues during the first quarter of 2024 or $72.6 million compared to $2.2 million for the first quarter of 2023. Our Keyes plant returned to full operation in the second quarter of 2023 after completing an extended maintenance cycle during the first quarter of last year.

In Q1 of this year, our dairy renewable natural gas segment produced 60,300 million BTUs of renewable natural gas from heat operating dairy digesters sold its first LCFS credits and reported $3.8 million of revenue.

Our Indian Biodiesel business generated $32.7 million of revenue, primarily from sales to the three India oil marketing companies. Gross loss for the first quarter of 2024 was $612,000 compared to a $1.3 million gross loss during the first quarter of 2023.

Selling, general and administrative expenses decreased to $8.9 million during the first quarter of 2024 from $10.8 million during the similar period in 2023, driven primarily by a reduction in fixed cost of goods sold charged to selling, general and administrative expenses due to the extended maintenance during the first quarter of 2023.

Operating loss was $9.5 million for the first quarter of 2024, compared to an operating loss of $12.1 million for the same period in 2023. Net loss was $24.2 million for the first quarter of 2024 compared to a net loss of $26.4 million for the first quarter of 2023.

Cash at the end of the first quarter of 2024 was $1.6 million compared to $2.7 million at the close of the fourth quarter of 2023. We recorded investment in capital projects related to the reduction of capital intense of Aemetis ethanol and construction of dairy digesters of $3.6 million for the first quarter of 2024.

Now I'd like to introduce the Founder, Chairman and Chief Executive Officer Aemetis, Eric McAfee, for a business update. Eric?

Thank you, Todd. In the Aemetis Biogas business, over the last year or so, we have closed $50 million in USDA-guaranteed 20-year loans to build dairy to biogas digesters and to convert construction loans to term loans for digesters that completed construction. We have signed 44-agreements with dairies and now have nine operating dairy digesters supplied with waste from 10 dairies.

We plan to accelerate the rate of date of biogas digester development in 2024 as we expect to close $60 million of new private financing to accelerate project construction. And as we expect to close an additional USDA-guaranteed REIT loans that provides 20-year debt, with each closing expected to provide $25 million of additional construction funding.

We generated revenue from the sale of LCFS credits, related to renewable natural gas for the first time in the first quarter of 2024. Renewable natural gas revenue is expected to significantly increase as we build new dairy digesters as CARV approves our provisional pathway applications, including the existing digesters that we filed early last year.

And as our renewable natural gas generates inflation Reduction Act 45Z production tax credits, beginning in January 2025.

The California Air Resources Board has stated that renewable natural gas is an important feedstock for the production of renewable hydrogen, for future truck and engines, allowing the trucks to be zero emission using a carbon-negative fuels.

We believe that Inmet is excellently 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 zero emission and the low zero carbon intensity, heavy duty and light-duty vehicles.

The expected adoption this year by the California Air Resources Board of a 20-year mandate for the rapid decarbonization of transportation will directly benefit the lowest carbon intensity renewable fuels as well as the feedstocks for renewable hydrogen and renewable electricity production.

As we plan to have started the biogas project in 2018, Aemetis again excellently positioned to be a significant beneficiary of the updated LCFS mandates this year. We are also well positioned to benefit from the inflation Reduction Act 45Z production tax credits that starts in January 2025.

In the development of our Aemetis sustainable aviation fuel and renewable diesel business. During the first quarter, we received the authority to construct air permits for our planned 90 million gallon per year, sustainable aviation fuel and renewable diesel plant built in Riverbank, California when operated to produce only sustainable aviation fuel. The designed capacity of the plant is about 78 million gallons per year of SAF.

The authority to construct permits are a significant milestone, as we had already received the use permit and the California Environmental Quality Act approval in 2023, which were the other key discretionary permits we needed to move forward with the project.

We have signed $3.8 billion worth of supply contracts with 10 airlines and a $3.2 billion renewable diesel supply contract with a national travel stop company.

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 then the 90 billion gallon per year global aviation fuel industry seeks to reduce carbon emissions using renewable fuel to replace petroleum jet fuel.

With the strong demand for SAF and 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. We now working on the project financing for the SAF plant with due diligence and negotiations currently underway with investors.

We are receiving a high level of interest from multiple stringent strategic and financial investors, some of whom have significant commercial interests in the success of the aviation industry.

As one of the very few companies with CEQA permits needed to construct a large-scale SAF production facility in the United States, Aemetis is on track to be a leading supplier of renewable fuel to an airline market that cannot currently meet its goal of transitioning to lower carbon intensity operations.

In the India biofuels business in late 2023, we announced that we received a $150 million one year allocation from biodiesel sales to the three India Oil Marketing companies, under a cost plus contract structure. We started deliveries under this contract in October 2023 and have achieved excellent production and delivery performance.

The positive impact of cost-plus pricing that is now being used by the oil marketing companies to purchase biodiesel is expected to continue for the foreseeable future. The India business has positive EBITDA and funds its own operation and capacity growth.

For the eMedicine ethanol business, the approval of a 15% blend of ethanol in 49 states for the 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 the price of ethanol as retailers seek to provide lower cost fuel to consumers.

We have completed construction of an on-site solar energy facility with battery storage to reduce our energy costs and reduce the carbon intensity of the ethanol produced by our Keyes plant, which generates more low-carbon fuel standard revenue per gallon.

The next major step in improving our cash flow and energy efficiency at the Keyes plant is the installation of a mechanical vapor compression system. 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 natural gas usage by 80% and increase cash flow by up to $15 million per year at the Keyes plant. The MVR energy efficiency project is budgeted to cost about $21 million and has been awarded $16 million of grants and tax credits from the California Energy Commission, Pacific Gas and Electric company, the Department of Energy and the Internal Revenue Service.

Our Aemetis carbon capture subsidiary is in the process of financing that characterization well and the engineering for the EPA Class 6 permits using USDA 20-year financing. We received the California State approval to drill the characterization well, and now we are working through the USDA loan process.

In summary, all five Aemetis business segments are synergistic sync and create what we refer to as a circular bioeconomy. The growing demand for renewable natural gas biodiesel sold under cost-plus contracts in India, the undersupplied sustainable aviation fuel market as well as the emerging carbon sequestration market.

Our key areas of investment and project development at Aemetis. Our existing operations in California and India are focused on projects to expand capacity, improve energy efficiency, reduce carbon intensity, increase revenues, utilize lower-cost feedstocks and significantly improve cash flows.

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 that we serve.

Now, let's take questions from our call participants, Kelly?

Thank you, Mr. McAfee. We will now be connecting the Q&A session. (Operator Instructions)

Manav Gupta, UBS.

Hey, so guys, my first question is, looks like CARB is looking at those balances and saying, maybe we need to do more and, on that front, it looks like they might go with a 7% step or 9% step down. You talk to those guys very often. What is the probability that they took a look at this and say, no, we need to do more than just 5% that you know and go for a 7% or 9% scenario there?

We talk to CARB, but we also talk to the researchers that provide the data that supports CARB activity. And as I think, you know, those numbers this year are increasing at a much higher rate than they had expected.

So I have I do believe that they are going to go with a higher than 5% and they have looked at them the automatic acceleration mechanism, which they had proposed that was going to take several years before they put them in place. They're looking closely at putting it in place earlier.

So in my view, of both a larger than 5% step down and an earlier adoption of the automatic acceleration mechanism is needed and that the market will respond positively when that's adopted the fall in price in LCFS credits, which has been dramatic. It was roughly $75 a couple of months ago and at $50.

Now that's a 30%-plus percent loss and their market during the middle of them proposing extreme measure of tightening. So it's exactly the opposite of what they thought would happen. So I think everyone has an opportunity to speak into this process. And the more that Wall Street speaks in the process, the more I think we're going to see a tightening.

They do complain that Wall Street doesn't talk to them enough and that they would like to hear from Wall Street more. So your comments very appropriate and I'll be looking to get more and more involvement with stock analysts and direct connection with the correct executives at CARB.

Perfect. My quick follow-up is here nine days on you talked about accelerating your looking. It looks like your funding is coming through. So and if you for our modeling purposes, how many days do you think we should have in our models by year?

And I understand there's a lag here between the volumes sold and the dairies online. But just from your perspective, how many do you think would get online by year-end 2024?

Yeah. We're still tracking 18 dairies end of 2024. And the acceleration that we're doing will have its largest impact in 2025, the purchase of long lead time, the skids in that sort of material that will enable us to rapidly accelerate as we go into 2025.

So it will have direct impact on 2025 operating income and cash flows as we prime the pump as we like to say over here.

Thank you so much. I'll turn it over.

Thank you, Manav.

Derrick Whitfield, Stifel.

Thanks. Good morning, Eric and team.

Good morning, Derrick.

Eric, I want to start with the EB-5 financing, which you recently received approval for from the US Citizens and Immigration Services. Maybe if you could just speak to the progress you've made in securing investors to advance funding because it's certainly quite impactful for you guys from a cost of capital perspective?

Yes. Just so I'm very familiar with what Derrick was talking about. This is subordinated debt funding with long maturities at interest rates below 3% per year being subordinated of course, that access equity for funding USDA and other senior secured debt financing at the approval allows us to bring in a foreign investors in this case at $800,000 per investor.

And we have already successfully raised approximately $40 million under this program. I think it's $39.5 million under this program in the past from about 70 investors. And we are actually I'm sorry about 80 investors. And we under this program have been approved for another roughly 250 investors.

So it is a very big milestone for our company. This is sold through brokers in foreign countries. And I've spent a lot of time in both India as well as all around China doing direct presentations to groups of investors through brokers.

The process is very slow and then very fast. We raised of shoot 80% of our prior funding into weekends through one broker. I flew to trying to raise that money, flew home flew back raise more money and we close it out literally in two weekends. And the reason why it goes slow is that they go through a cycle of due diligence and marketing.

And then the actual presentations and signing up investors in our experience goes extremely fast. So we are doing that, that fundamental work with brokers now and we'll be looking to potentially have initial funding into the Escrow account this quarter.

So we're seeing progress and we'll continue to as we have in the past, focusing energy on the idea that it takes a little while. But when it happens, this is very long-term very low-cost financing to access equity. And it's non-dilutive. It's not convertible into equity by the way.

That's great. And then maybe shifting over to 45 Z policy. Wanted to ask what you're hearing from your sources on how US Treasury will treat ultra-low CI like your dairy RNG with the emission factor. And even beyond that, I wanted to get your opinion on what you're seeing in values for your dairy RNG for 45Z applications where you could create again, very low CI hydrogen that could have a nice multiplier on it as well?

Yes. The recently released let's call amended great model that came out last week. It gives us guidance that there is just like in California, whatever the calculation is, if it's carbon negative 320, and that's what the number is. And that does not seem to be any pushback on that topic by any of the people we've spoken to and inside the agencies.

Which set the USDA office of Chief Economist, spent an entire day here and that staff member sits in these meetings with the IRS and the DOE and the White House. And so, there is an encouragement of ultra-low CI. Now we all know that biogas is the big winner in this with negative hundreds, 300, 400.

So, carbon negative renewable hydrogen and will also be another big winner So biogas can make the replacement of diesel into engines directly or make renewable hydrogen that goes into diesel engines, replace diesel consumption or can go into electric vehicles.

So all three of those pathways or are the mechanism that biogas is using to really be the probably the biggest winner and the Inflation Reduction Act 45Z, et cetera.

Perfect. Thanks for the color, Eric.

Jordan Levy, Truist Securities.

Hey, I appreciate all the details. Maybe I appreciate the comments on the trajectory for the biogas. So just to build out, maybe just over kind of the near term quarters or so, how should we think about the ramp in LCFS credits?

Where do you stand kind of in that process for moving from conditional the final pathway approval there?

Let's take it backwards. We filed in May of 2023 for our initial round dairies. The process is basically sit there and nothing happens. And then all at once they review your application in a very short period of time of a few months, it's approved. But it's a bottleneck of projects and that has caused that as of today, they haven't actually started looking at our project.

But is a look at it. It then has a very quick sort of 90 day review process and some other stuff and it happens very quickly. So we are expecting during the third quarter that that process will occur and because of the way that they do their approvals in the quarter of the approval the beginning of that quarter is when we get to do the LCFS credits.

So as early as July 1, we could very easily be getting basically twice as much revenue from low-carbon fuel standard credits than what we have today. So we are not aware of anything that would prevent it from being July 1. But on the other hand, it's all subject to the activities of staff and they have been behind. So either it's going to be effective July 1 or sometime in the fall that we would essentially double our LCFS credits.

The production of biogas is what generates those credits. And we are ramping up rapidly because of two factors. Number one, we're adding more dairies and we brought three more dairies on so far this spring. We'll continue to bring on dairies.

But secondly, is the weather in the wintertime. It's colder. And therefore, these passive solar digesters generate less revenue than winter than the summer, they literally double their revenue. So you have our ramping in the springtime into summer and it continues into the fall here in California.

So we have a double win ramping in the provisional plus seasonal. Now next winter, we will have more dairies online. So it's not like we see much of a decline in revenue, but just the rate of growth will slow next winter. So we have an uncertainty, which is will we get a July first effective date or an October 1 effective date. And that's based upon the performances of staff, we are, of course, pushing hard for a July 1 effective date for those initial digesters, that should be approximately half dozen digesters by the way.

Got it. Appreciate that. And then maybe just to move onto RiverBanc and how you're thinking about some high-level dynamics there. This morning, Vertex announced doing some renewables, and we know that there's current margin headwinds in the renewable diesel space.

And I also know that this isn't apples to apples necessarily because you're focused on aviation fuel stock opportunities, but maybe just help us think about kind of the path where are margins for SAF sit today to where you expect them to go and also kind of the benefits you have at Riverbank when that plant comes online that help you margin perspective as well?

Absolutely. Renewable diesel and SAF have sort of started to diverge as businesses the production facilities. We're not historically designed when they were building renewable diesel plants to be able to be flexible and produce SAF. In the current designs for new plants, Topsoe out of Europe has been the winner with over 90% of the new renewable diesel plants in North America in the last three years selecting one technology provider.

That's technology provider for an additional capital expense expenditure of spend, which can be up to $50 million for a plan of our size does allow you to have the HydroFlex technology where you literally can dial in moving from renewable diesel to SAF. We decided to make that investment. In our case, it's going to be roughly $30 million that will allow us to produce SAF 100% or frankly produce RD 100%.

And we think that flexibility is important because of the uncertainties in the inflation protection act and frankly, in the low-carbon fuel standard. So we have we also have Scope three emissions, which are a significant revenue source for aviation fuel that does not exist for renewable diesel. So Vertex did not have an opportunity to get Scope three emissions.

I think you guys know that there was a recent Sobha transaction with Microsoft and some others for about $200 million related to 50 million gallons of SAF. So that's roughly $4 a, gallon of revenue that Vertex and others that are renewable diesel players do not have access to.

So our belief is having the flexibility is important. That's a $30 million investment that may never pay off for us. We might always run this as an SAF plant. But any uncertain condition that there's a year or two where we need to just produce renewable diesel, well, incentives are being adopted. We are going to be in that position. We are very familiar with the dirt Vertex.

I don't know, but I'm the former guy. I'm the guy that acquired Vertex and took them public to my public company in 2006 acquired Vertex and brought in Ben Cowart as the on the CEO and built the company, did about $2.6 billion of revenue last year, about $161 million of positive cash flow.

We are very close with the management team over the last 15 years, having been the guys at it, acquired them and made them a public company.

So they are in a very special situation. And what's their petroleum unit will make a lot of money. And so we absolutely understand their situation might be a little more unusual than someone who has a dedicated RD plant. And I think it's an excellent move by the management team there to maximize their opportunity. And as they noted, they retain their flexibility to be able to produce renewable diesel in the future and potentially have an upgrade to SAF.

So I would keep them on the list of future SAF producers, but they're a great example of what happens when the low carbon fuel standard trends downward by 30% in a matter of a few months and 45Z doesn't really have an incentive for SAF. You have to extend 40B in order to be able to inside of it incentivize SAF production.

And with those two uncertainties, I can see why Vertex would move back into petroleum, and that would probably be probably other producers that would be considering the same kind of move.

Absolutely. That's great insight. Thanks, Eric.

Sure. Thank you, Jordan.

Matthew Blair, Tudor, Pickering, Holt.

Thank you and good morning. On the India Biodiesel segment, Eric, could you share the EBITDA in the first quarter? And then for the second quarter, is it reasonable to assume that that should step up as you're able to move to a cheaper feedstock?

Do you want to catch that one?

Yes. So yes, let me take that question because I don't have it ready hand. EBITDA. I do have gross profit. So for our India biodiesel, because that gross profit per unit was $2.8 million, that's $32.7 million of revenue.

And the second half of your question, yes, the wintertime requires a different feedstock because November, December, January, February, they have colder conditions in India. And so they have a different temperature in which the biodiesel has to be able to not start gelling.

That requires a different feedstock. And so well, our March performance was significantly better than the wintertime and during the summer here, we're in very very good shape under both lower cost feedstocks as well as able to run the plant really as fast as we can because we have $150 million contract to supply by the end of September.

Sounds good. And then on the I'm on the dairy RNG side. So today, and much of that gas is being stored, is that correct? And when you do plan to market that gas, are there any concerns about getting into the California transportation market, just given that RNG has such a high share I think it's like 98% or 99% of existing California CNG and LNG demand today?

Excellent questions. Let's segment two parts. Stored gas. The low CARB fuel standard has a nine month limit on how long you can store the gas, we would have preferred to have actually delayed revenue and have it all be under this. This essentially 2x a 100% increase, but the rules don't allow us to do that. So we have to still sell all the gas on a trailing nine month basis or three quarter basis.

So we don't have quite as big as that inventory as we would otherwise have desired to have if they if they let us do it, we would have invested in the in the medium term. And but not on the other hand, we have to sell the gas.

So the revenues you're looking at is gas that we're having to sell because the rules required to do at the renewable natural gas in California comes from landfill gas, which in general, I would say, is probably a positive 30 carbon intensity. And it comes from dairy renewable natural gas, which is negative 320 to negative 420 carbon intensity.

Because of that difference in carbon intensity, the economics for dairy, renewable natural gas, I would say is always a much more compelling than landfill gas. So this the very high penetration of our NG. is now about displacing landfill gas with dairy. We're in Imatra gas. So that's really what's going to be the phase we're in right now.

And interestingly enough, there's just not enough dairy, renewable natural gas, even for California. I don't anticipate we're ever going to have a situation which all the day or even of the renewable natural gas it has been used and that there's any leftover. We have a substantial shortage of that extra low carbon or ultra-low carbon intensity fuel here.

Sounds good. Thank you very much.

Thank you, Jordan. I'm sorry, Matthew take care.

Amit Dayal, H.C. Wainwright.

Hey, Eric. With respect to the capacity expansion efforts in India. Is that already? Is that work already underway or is that going to begin later this year?

We have two different kinds of capacity expansion one is nameplate going from 60 million gallons to 100 million. We have equipment under design and then we'll be doing fabrication installation starting later this year.

The second one is our proprietary technology to use very low cost feedstocks. And that expansion actually is happening this quarter. So a higher percentage of our capacity will use very low cost feedstocks. And this is a competitive advantage we have. So we're actually doing two types of expansion in India.

Okay. Understood. And then with respect to, you know, as the business has been changing right. Like, you know, year or two years ago, we were still in the midst of developing the RNG business. If there was stop and go. But the nature of the business revenues and the operations have changed quite a bit in the last 18 months.

In that context, your working capital needs, you know, how are you sort of thinking about working capital I know your comments around the EB-5 related funding probably addressed that, but how should we think about balance sheet and working capital needs as you are ramping revenues, expanding operations and getting closer to on the building of Riverbank, et cetera?

That's a very good question because we usually talk about the capital budget financing of being the focus of our efforts. We have a business model for all of our existing operations that do not put any working capital requirements on a lettuce, and I won't go into deep detail, but in general, our ethanol plant is financed by our corn supplier.

They're a very large $4 billion revenues company, and they just desperately desire to have us as a customer. And so we said terrific just give us an extra five days to pay you after we grind the corn. And that will be exactly the date in which we receive our revenue. So we don't have any working capital deployed to run the $200 million plus ethanol plant.

In India, our vendor is a very long term relationship we've had since 2008 and 2009, who is a feedstock supplier to us and between our just credit facilities because we've been in business a long time and that relationship, we are able to utilize a relatively small amount of our own working capital in India, instead use our vendors for the working capital supply.

And then in biogas, we happen to be fortunate in that we're in this capital investment phase. And there's working capital budgets as a part of every Renewable Energy for America program funding, they have literally usually more than $1 million working capital built into the funding with the idea that during construction, et cetera, there will be operating costs.

So we built into the construction process. And then after operations, which is where we're at now, we're getting positive cash flow from operations. So, we don't have any working capital needs there directly.

And then on our two emerging businesses, the SAF plant will be a project financing So working capital is a part of the initial funding of that financing. It will not require additional financing after it starts. And then carbon sequestration happens be USDA funding. So we're actually right now in the process of financing the working capital as part of the USDA 20-year financing.

So it's a working capital is structured as part of our project financing or is provided by vendors as we operate the plants.

Understood. That's all I have, Eric. Thank you so much.

Thank you, Amit.

Dave Storms, Stonegate Capital partners.

Good morning. You got a couple of big projects on the horizon between the Keyes plant and Riverbank. How should we think about CapEx through the year? And then additionally for grades, should we expect any downtime with that MVR project?

Sure. Good question. The key is CapEx is essentially a short term working capital utilization because we already have $16 million worth of cash grants or and tax credits we can sell for cash. So of the $21 million and we've invested a big chunk of the $21 million already as equity. The remaining amount essentially is just putting up the money and then getting it back from the California Energy Commission or Pacific Gas and Electric or otherwise.

So the timing of that CapEx is going to be backward loaded for this year. The installations and other activities really are Q4 and Q1 of next year. And so the again, it's not revenue-generating tailed fully operating, but the spend will be mostly the back end of this year as we're bringing in equipment.

And then in terms of downtime during last year's maintenance cycle, we did some of the heavy lifting cutting and preparing that would have otherwise required downtime. So we are anticipating this will be on relatively minimal downtime of a couple of weeks and that the work we did last year is the longer downtime that could have caused this to be done for a month or so.

That's very helpful. Thank you. And then just one more. You mentioned in your prepared remarks, your work on innovative pricing structures for the SAF fuels. Would you be willing to share any of the options that you're looking at? Or what that might look like, once it's all completed?

Probably the best way to do it without taking a base time would be to refer to my Biofuels Digest article that I wrote a Monday of last week, Biofuels Digest, I think dot-com or something but you could just Google, Eric, McAfee and SAF and down and Biofuels Digest.

Some of the success we're having in India, we think is a format for the airlines need to look at in order to accelerate SAF pricing. And it's a it becomes more of a partnership between the supplier and the airline in which the airline is taking more of the risks around incentives and feedstock and energy costs.

In exchange, they could be the producer gets a more known amount of cash flow from the operations, which enables long-term debt financing at lower cost. So we are that article, I think, gives you pretty good insight the way that we're thinking about it. And I would invite people to take a look at that article.

Understood. Thank you for taking my questions.

Sure, thank you, Dave.

Edward Woo, Ascendiant Capital Markets.

Yes. Congratulations on all the progress, and congratulations on the LCFS credit that you sold in the quarter. As you are getting more used to selling these credits, should we expect them on a more regular quarterly basis? And also, are you able to increase the economics that you're getting on each deal?

Yes, to both of them, we will be selling them early in each quarter. They essentially will be maturing at the end of the previous quarter, but it takes a week or so for the booking to happen. So in the first half, the 1st month of each quarter, we expect to be selling the LCFS credits and then second, the provisional pathways that we have applied for roughly negative 320 to negative 370, our significantly larger generators, Adelphia LCFS credits there. What's knows that the full pathway of a negative [150 million].

So we expect to be generating between 80% and 100% more LCFS credits depending on the project. And if the paperwork moves at the pace. It's supposed to move up based on the based on discussions we've been having with the with staff at CARB we will have that approval in the third quarter and we'll be able to sell those then in the fourth quarter. So we're seeing that could definitely impact this year in a very material way.

Great. Well, thank you. And I wish you guys a good luck.

Thank you, Edward. We appreciate it.

There are no further questions at this time. I would like to turn the floor back over to management for closing comments.

We have we have one more question from James Larkin, Kelly. Can we that, let that flow through?

Absolutely, James Larkin, your line is live. Please post your question

Perfect. Hey. This is James Arnold from Piper Sandler, and thanks for taking my call for Eric. I guess in a recent interview, you talked about India IPO and a potential for raising money that way. And I know you talked about in the past, but could you maybe do you have any updates on that? Or what kind of how much money you would be looking to raise there?

Sure. As we expected. We are expanding our management team in India that through the first step of an IPO process and have some great progress there, which we'll be announcing soon. And then the continued deliveries under the $150 million cost-plus contract is as a part of our IPO process has been a proof of the ongoing commitment of the India government.

This is not our first but our second contract, and we're about to enter into what we believe to be our third. So we are basically just for proving out our business model, including our proprietary low-cost processing technology, enables enabling us to use cheaper feedstocks.

So in terms of expectations, this is not a current quarter announcement. The IPO process in India is about a six month process. And until you essentially have an IPO, you don't really announce it. There's some securities regulations around that.

But the indicators for the market are that just watch the press releases about new members of management who I think you'll be very excited about and our continued execution on the fundamentals of the business capacity expansion use of funds to make sustainable ag agents, aviation fuel and all the things that go together to make a really exciting business in India.

Perfect. Thank you for that. And then I guess one more question kind of sticking with India on the talent of feedstock, would there be a significant CI impact from importing into the U.S. would have been kind of competitive with other low-CI feedstocks flowing to different refineries?

Yes, the India tallow product where we built a 50 million gallon India talc refinery, and we're using that to make refined tallow. We then turned into biodiesel and shipped to Europe. That's why we built the refinery. That tallow does have a carbon intensity. That's basically the same as US tallow. But when you take it across the Pacific Ocean, there is an additional carbon intensity related to that shipping.

So, the India tallow is disadvantaged compared to what I'm going to call the carbon intensity of North American tallow, which you end up with is a pricing difference, though, because the India tallow is a is bought from fragmented suppliers and it in a country that doesn't really value tallow. It's an into country and tell those of byproduct the animal business.

So there's not necessarily carbon intensely density. That's the only factor in the commercial discussions. It's all just also just the underlying dynamics of a fragmented supply chain and the basically the lack of tallow refining in India.

And so we seek to continue to make good use of that market position. Eventually, of course, it acts as a very nice hedge for our own supply chain where we can get North American product really, really just around our plant in Central Valley, California is probably as much as 50% of our supply chain. And yet we have this ability import our own product come from India.

Great. Thank you.

Sir, there are no further questions at this time. I would now like to turn the floor back over to management for closing comments.

Thank you very much, everybody, for joining us today. Please review the Aemetis company presentation is posted on the homepage of the Aemetis website. And we definitely look forward to talking with you about participating in the growth opportunities at Aemetis if you have an opportunity to join us.

Thank you for attending today's Aemetis earnings conference call. Please visit the Investors section of the Aemetis website. We will post a written version and an audio version of this Aemetis earnings review and business update. Kelly?

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