Gevo Inc (GEVO) 2014 Q2 法說會逐字稿

Welcome to the Gevo Q2 2014 earnings conference call. My name is Adrienne and I will be your operator for today's call. At this time, all participants are in listen-only mode. Later, we will conduct a question-and-answer session. Please note that this conference is being recorded.

I will now turn the call over to Mike Willis, CFO. Mike Willis, you may begin.

Good afternoon and thank you for joining Gevo's second-quarter 2014 conference call. I am Mike Willis, Gevo's CFO. With me today are Pat Gruber, our CEO; and Brett Lund, our Chief Licensing Officer and General Counsel.

Earlier this afternoon, we issued a press release which outlines the topics that we plan to discuss today. A copy of this release is available on our website at www.gevo.com.

I would like to remind our listeners that this conference call is open to the media and we are providing a simultaneous webcast of this call to the public. A replay of our discussion will be available on our website later today.

On the call today and on this webcast, you will hear discussions of non-GAAP financial measures. Non-GAAP financial measures should not be considered in isolation from or as a substitute for financial information presented in accordance with GAAP. Reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measures is contained in the press release distributed today, which is posted on our website.

We will also provide certain forward-looking statements about events and circumstances that are not yet occurred, including projections of Gevo's operating activities for 2014 and beyond. These statements are based on management's current beliefs, expectations, and assumptions, and are subject to the significant risks and uncertainty, including those disclosed in Gevo's most recent annual report on Form 10-K, which was filed with the SEC on April 14, 2014, and in subsequent reports and other filings made with the SEC by Gevo.

Investors are cautioned not to place undue reliance on any such forward-looking statements. Such forward-looking statements speak only as of today's date and Gevo disclaims any obligation to update information contained in these forward-looking statements, whether as a result of new information, future events, or otherwise. Please refer to Gevo's SEC filings for detailed discussions of the relevant risks and uncertainties.

On today's call, Pat will begin with a review of our recent business development. I will then review our financial results for the second quarter of 2014. Following the presentation, we will open the call up for questions.

I will now turn the call over to Pat.

Thanks, Mike. Thank you all for joining us on our call today. I believe we have turned the corner. Our side-by-side operation of producing isobutanol with ethanol has solved many of the operational issues we have countered encountered.

We are finally getting into position to get out of the business of isobutanol, producing and selling it at commercial scale. And today, we are positioned to give more specific guidance.

So let me talk about Luverne first. As we previously announced, we are in fact operating with Luverne in what we call the side-by-side mode, where we produce isobutanol and ethanol.

Currently, three of our four fermenters are dedicated to ethanol, while one is used for isobutanol. Recall that the reasons we went to side-by-side were threefold. First, the production of ethanol facilitates consistent grind -- grinding up the corn -- and the recycle streams.

This is important because dry mills don't have wastewater treatment plants and virtually all of the water used in our process needs to recycled to the front of the plant for reuse. The recycle streams need to be steady and consistent. Running ethanol keeps the streams and recycles all running smoothly while we work on isobutanol.

Instead of chasing down plant operability problems, we can just focus on the IBA production. And this is just what we have done. Regarding recycles, we are now at 100% of recycled water into the IBA fermentation and that is up from 90%.

Our techniques for managing infections seem to work well at side-by-side. We have had no cross-contamination in our isobutanol production or in the ethanol production. Our biocatalysts stay separate.

We also had no significant issues with extraneous bacteria infecting our fermentations. So I am pleased on the results that we have on the side-by-side in terms of the operability of the plant. It makes life so much easier in the commercial implementation of the isobutanol fermentation.

The second reason is that running side-by-side dramatically improves the utilization of a plant to generate cash by utilizing all the assets at the site. We believe that ethanol and animal feed profit will greatly assist us in covering the cost of isobutanol implementation with the goal of achieving profitability across both product lines as we ramp up isobutanol.

Third reason is that we have several parties who are interested in the side-by-side business model. It's good to have a working version of it. There seems to be good reason people are interested in this side-by-side model. A good ethanol plant makes good money.

However, to those plant owners, it is not obvious if and when the ethanol market will grow, so where will that growth come from? Well, isobutanol provides an opportunity for adding a product line and production capacity while they keep their ethanol running. They can expand the revenue and margin for their plant by adding isobutanol production lines.

As previously discussed, we have two LOIs for licensing a side-by-side isobutanol plant and I expect that we will add other partners to our licensing list and I look forward to converting these LOIs into definitive agreements.

Now that the plant operability at Luverne has improved, we are making good progress on the isobutanol fermentation. We have consistently achieved high yields, greater than 90% of our target. This is really good news. We have done that faster than I actually thought we would do it.

This means our isobutanol biocatalyst is converting carbohydrate to isobutanol very, very efficiently. At Luverne, we are currently installing a small distillation column and should have it operating in early fourth quarter.

The purpose of this column is to debottleneck the isobutanol side of the plant. This is a straightforward engineering exercise; no bioprocessing involved. While we are installing that distillation column, we will continue to optimize the fermentation in our 1 million liter fermenters, with a particular view of driving out cost.

The ethanol side of our plant has been running well, producing ethanol at a run rate of approximately 1.5 million gallons per month. That is above our previous guidance of 1.25 million gallons per month. Operating at these rates, ethanol generates revenue of more than $3 million per month at Luverne.

Now here is the correct way to think about our plant capacity as it is set up right at this moment. We could run 18 -- we are running 18 million gallons per year of ethanol. That is the run rate for ethanol.

Once the distillation column is completed and while we are running that 18 million gallons of ethanol, we will have a target isobutanol capacity of 150,000 to 200,000 gallons per month or roughly 2 million to 3 million of gallons per year of isobutanol capacity.

While our capacity by year end would be expected to be about 2 million to 3 million gallons per year, as I look at how we are planning to ramp up the isobutanol production, I believe that our year-end run rate would be roughly 50,000 to 100,000 gallons per month. We will continue to push to the full run rate as fast as possible in 2015, achieving the 150,000 to 200,000 gallon per month, while we run the 18 million gallons per year of ethanol.

Note until the distillation column is operating in the fourth quarter, our isobutanol production capacity is going to be a bit variable as we work on the plant. It will still in the tens of thousands of gallons per month.

In 2015, we have to make a decision to A, switch ethanol capacity back to isobutanol production, or B, add more isobutanol fermentation capacity. That is a future decision.

It is also worth noting that we've begun selling IDGs. That is the animal feed product from isobutanol fermentation in addition to the DDGs. Land O' Lakes Purina have been a great partner on the animal feed.

So bottom line on the plant it's we're really making good progress. We expect to see the plant to be EBITDA breakeven by year-end while it produces isobutanol and ethanol. In the fourth quarter, by the end of the year, we expect production of isobutanol to be reliable so we can sell isobutanol on a normal ongoing commercial basis.

This is really good. Our team is psyched up. We like having the plant operability issues behind us and been able to focus on the isobutanol production directly. We all like being in a position to supply isobutanol on a commercial basis.

Now I will turn to the commercial front. Our commercial team continues to develop market interest and results for isobutanol as well as the products derived from isobutanol, such as jet fuel, paraxylene, and iso-octane.

Our objective is to maximize isobutanol value, both as a drop-in material for [use] in chemicals and as a feedstock to produce other hydrocarbons. That is the jet fuel, paraxylene, and iso-octane.

In both the drop-in and a feedstock markets, we have established partnerships and relationships that should achieve these objectives in maximizing isobutanol value. In a marine market, isobutanol appears to be to be an attractive product that solves problems. Isobutanol is not soluble with water, has high energy, is renewable.

So it appears to make for very good marine fuel component. Marine engines appear to work very well with isobutanol fuels compared to those containing ethanol. We have been working with both the US Coast Guard and Mercury Marine, performing long-term engine testing with 16% isobutanol blends. We have been working with Noble Mansfield, Gulf Hydrocarbon, and others to enable supply to that market.

In the chemical and solvents market, we have been working with distributors who are servicing high-value uses of isobutanol for mining, oil field applications, as well as paint and coatings and plastics. These specialty chemical applications for isobutanol appear to be very attractive. And I look forward to reporting more progress on those fronts.

Gevo continues to produce jet fuel at South Hampton Resources in Silsbee, Texas, for supplying the Air Force and the Navy. This jet fuel is being specified by the Air Force and Navy for blends up to 50% bio-based fuel in the final blend. We expect the specifications to be completed early next year, allowing us to seek larger contracts with the armed forces.

In addition, we expect the ASTM specification for alcohol to jet fuel -- that is the ATJ -- to be completed in the first quarter of 2015. This is expected to enable us to seek contracts in the civilian aviation market. Our jet fuels seem to work really well. They are relatively straightforward to make and it looks like a good opportunity.

Renewable PET, or polyesters, continue to be an interesting application for isobutanol. We have been converting isobutanol to paraxylene at our demonstration plant in South Hampton Resources in Silsbee, Texas.

Paraxylene is a key raw material for making these plastic -- the plastic for bottles, packaging, films, and fibers. The process to produce paraxylene from isobutanol has been working well.

We accomplished an important milestone in the second quarter, producing and delivering to Toray fully renewable paraxylene. Toray will use this bio-based paraxylene to make bio-based polyester. Interest from our partners in renewable paraxylene and in renewable PET remains strong.

So we are continuing to make progress on the commercial front. Interest in our product appears to be high. We need to get on with supplying those customers and the applications.

Now I will now turn it over to Mike Willis to discuss our financials.

Thank you, Pat. Gevo reported revenue in the second quarter of 2014 of $7.7 million as compared to $1.9 million in the same period in 2013. The increase in revenue during 2014 is primarily a result of the production and sale of ethanol and distiller's grains of $5.5 million, following the transition of the Luverne plant to side-by-side.

Revenues also increased in the second quarter of 2014 due to higher hydrocarbon revenue of $2 million. This increase was principally a result of the shipment of bio-paraxylene to Torre in May for which we recognized $1.5 million of revenue, including $1 million relating to a payment we received from Toray in 2012 for the design and construction of our bio-paraxylene demo plant.

We also generated revenue of $181,000 during the second quarter of 2014 from ongoing research agreements. Cost of goods sold increased to $8.3 million in the second quarter of 2014 versus $3.6 million in the same period in 2013 due to the increased production activity at the Luverne plant under side-by-side.

R&D expense was $3.6 million in the second quarter of 2014 compared to $5.8 million reported in the second quarter of 2013. Our R&D activities in the second quarter of 2014 continued to be focused on the optimization of our technology to further enhance isobutanol production rates Luverne as well as production-related activities at our hydrocarbons demo plant in Texas, where we produce our Biojet, paraxylene, and iso-octane products.

R&D expense decreased in the second quarter of 2014 compared with the same period in 2013, due to $1.2 million decrease in expense at the hydrocarbons demo plant and $0.8 million decrease in salaries and consultant expenses.

SG&A expense for the second quarter of 2014 decreased to $4.9 million compared to $6.3 million from the comparable quarter in 2013. Our second-quarter 2014 results continued to show the benefits of cost savings actions, including decreases of $1.2 million in salary and compensation-related expenses.

Within total operating expenses for the second quarter of 2014, we reported approximately $0.6 million for non-cash stock-based compensation. For the second quarter of 2014, we reported a net loss from operations of $9 million, down from a loss from operations of $13.9 million in the second quarter of 2013.

Interest expense for the second quarter of 2014 was $5.8 million compared to $2.3 million in the second quarter of 2013. The increase was primarily due to expensing $3.2 million of debt issuance costs related to the Whitebox financing we completed in May.

We reported a non-cash gain of $2.8 million during the second quarter of 2014 related to changes in the fair value of the derivative warrant liability and embedded derivatives contained in the convertible notes issued in 2012. The Company also reported a non-cash loss of $5.1 million during the second quarter of 2014 related to a change in the fair value of the convertible notes just issued in the second quarter of 2014 to Whitebox.

For the second quarter of 2014, we reported a net loss of $17.2 million, or a loss of $0.25 per share, based on the weighted average shares outstanding of 67,969,811. This compares to a loss of $15.2 million in the second quarter of 2013 or a loss of $0.35 per share. During the second quarter, there were no conversions of convertible note and at quarter end, we had 69,104,005 outstanding.

Cash on hand at June 30 was $5.9 million. In May, we closed a financing with Whitebox advisors that resulted in gross proceeds of $25.9 million. The investment was made by a term loan that was exchangeable into convertible debentures.

After taking into account debt issuance costs of $3.2 million, the pay down of the TriplePoint Capital owned by $9.3 million, and the establishment of a restricted interest reserve account of $2.6 million, the net cash proceeds to Gevo with the Whitebox financing were approximately $10.8 million.

In June, Whitebox exchanged their entire term loan into the convertible debentures. Taking into account PIC interest, Whitebox exchanged their term loan into 26.1 million of those convertible debentures.

These debentures can be converted into common stock of the Company at a price equal to $1.1584 per share and carry a 10% coupon of which under certain circumstances, 5% is payable in cash and 5% is payable in kind.

In conjunction with the Whitebox financing, we also restructured our debt with TriplePoint Capital. We used $9.3 million of the proceeds from the Whitebox financing to pay down TriplePoint's debt, leaving a balance with TriplePoint of $1 million at June 30, 2014, and which is now subordinated to the Whitebox debt.

TriplePoint's remaining debt will amortize over 36 months and carries a coupon of 9%.

In August, we also closed an underwritten public offering of 30 million shares of common stock and warrants to purchase an additional 15 million shares of common stock. The warrants have an exercised price of $0.85 per share and expire on August 5, 2019.

The shares of common stock and the warrants were sold together as common stock units, but were immediately separable and issued separately. The gross proceeds to Gevo from this offering were approximately $18 million, not including any future proceeds from the exercise of the warrants.

In terms of cash burn, we expect this to continue to decrease over the coming quarters. In particular, due to our decision to transition Luverne to the side-by-side configuration and the US District Court's recent decision to stay the patent trial that was scheduled to begin in July.

As a result of these changes in our ongoing corporate expense control measures, we continue to expect Gevo's quarterly cash burn to decline into the single-digit millions in the second half of the year.

With that, I will turn the call back over to Pat.

Thanks, Mike. So what does near-term future hold? I will tell you, I look forward to transitioning to our ongoing sales of isobutanol on a normal customer basis. By becoming a regular supplier, we are committing to customers that we won't let them down.

I expect our commercial development people to continue to add customers for both isobutanol and its derivative hydrocarbon products. I like where we are headed in reducing our burn. I like where we are headed at Luverne. I like getting into EBITDA breakeven. I believe we have turned the corner.

And with that, we will take questions.

(Operator Instructions) Mike Ritzenthaler, Piper Jaffray.

Would you be able to delineate the EBITDA or the gross margin per gallon of ethanol in the quarter? I am assuming that the gross loss stems from the fact that it was only a partial quarter of ethanol production?

So the target of the plant itself is breakeven by Q4.

So think of the cost of goods associated with the plant itself is --

Right.

That is all Luverne, other than a small amount of G&A that shows up below the line.

Okay.

So when you think about Q4, when we are thinking about the plant at EBITDA breakeven, think about those cost of goods associated with the ethanol sales, related products, isobutanol sales. That should net to effectively zero at that point in time.

Yes. Okay. All right, that was the nature of my question. Thanks for clearing that up. On the cash bridge from the end of Q1, thanks for the commentary about how things stepped from the Whitebox infusion to the end of Q1.

I am wondering if there is anything pro forma you can provide us on the current cash situation, given the recent raise.

The only thing that we will probably stay say at this stage is that the current cash position takes us into 2015. We are probably not going to be specific in terms of how far into 2015.

Yes.

But we have a good runway to basically do all the things that Pat described that we are thinking about doing over the next couple quarters.

Sure. I guess one last one for me on the isobutanol cash costs. I know that the side-by-side helped greatly in reducing the cash costs of producing isobutanol. I'm curious about, basically, how far is Gevo from achieving those kind of commercial economics or will that happen post-distillation column and all of that?

We need to get the distillation column in and -- because right now, that is a bottleneck in the plant. We have a mix stream that we have to take care of -- mix stream of ethanol and butanol we have to take care of.

So yes, we got to get the distillation column in and then I think we will be in pretty good shape. First of all, toward the end of the year, I think we will be good.

All right, thanks very much.

Caleb Dorfman, Simmons and Company.

Pat, it seems like you have made some good progress on the isobutanol production. What are going to be the key trigger points to cause you to think about ramping isobutanol production at the plant to 100% isobutanol?

There is several that we consider. First of all, is continuing to improve how good we are on isobutanol. We still have work to do, but get the distillation column in, see it operate, get the product into the marketplace, see how customers want -- at how fast they want to offtake it.

Make sure that we understand -- we will learn more about whether things might occur in the plant. I don't expect anything that is unusual, but we are just going to think it through pretty carefully and make sure that we are doing it with our eyes wide open. I would like to keep all the operability issues behind us.

There's a -- so bottom line -- I guess the answer is, I don't know the full set of criteria yet. It is going to be a blend of economics -- well, how we can make the most money, which mix of ethanol to isobutanol. Which customers want product when, where, how.

There is looks to be demand for it. So that doesn't seem to be an issue. And then there is also the opportunity to expand the plant and there's people who have expressed interest in that side of things, too. So it is a question of I just don't know yet.

Okay. That's helpful. And can you talk about the customer reception so far to the initial volumes of isobutanol that you've shipped out? Are they ready to take on more isobutanol now if you are able to produce it?

Some. Yes. I mean, there seems to be yes, so seems to be good progress there. People have been waiting for us, so our commercial team has done a good job of keeping people engaged without -- I think we did ourselves some credit in that we didn't overpromise to them.

We were very clear to them and transparent along the way, explaining where we were on a supply situation. We don't want to be engaged and supplying until we are sure we can deliver. So now, I think this fourth quarter, we will be able to do those sorts of things. So it looks to be like we're pretty good shape.

What will it take for them to be ready to take a full offtake supply from Luverne, if you switched to 100% isobutanol? How long would it take for them to be ready to take that volume?

Mike and I are looking at each other.

Yes, I mean, it is a difficult question to answer, only because we are definitely -- it won't be until at least 2015 when we are thinking about that. So really, in the near term, we have in our mindset exactly the volumes that Pat talked about in his earlier comments. Getting up to the 150,000 to 200,000 gallons per month.

And that is where we are focused on right now is making sure that we are maximizing the ASPs on that. And as we are selling those types of volumes, then we can do the other things that Pat just talked about is try and maximize the overall profitability of the plant, whether it be a combination of isobutanol or ethanol or all isobutanol.

So it is a difficult question to answer right now.

So if you believe all the customers, if you believe them all -- and you know, we have to.

They're good customers; they're friends of ours. Then it seems to be that we could -- as much as we could make, we should be able to sell. That is what it looks like. The reality always is that you have to do it and you have to go do it. That is the reality.

So I think there is an advantage to starting off the way we are doing it, where we are going to have a limited supply at first. We get to go out and do the applications that are most valuable and expand them before we have to start dumping too much.

I don't want to dump isobutanol into the marketplace too quickly. That hurts the overall market. Yes.

That's helpful. And I guess, final question. Do you have any updates on LOIs, maybe when you can actually convert that into something more than just an LOI?

For the license agreements, you mean.

Right.

Yes. Mike?

We are pushing forward as quickly as possible. Our partners that we have talked about in the past, i.e. IGPC and Porta, remain very interested in moving forward with us. However, they are both working on projects themselves that is taking up kind of their limited bandwidth right now.

But they still remain extremely excited about the opportunity. And so, again, on our side, we are pushing it forward as quickly as possible.

Craig Irwin, Wedbush Securities.

The first thing I wanted to ask, can you confirm for us that the ethanol produced in Luverne is [rentable], that you can write an ethanol [ren] on your production?

Yes.

Great, great. Then looking at the other manufacturers out there, most of them are sort of suggesting mid-$0.30s EBITDA per gallon crush on their facilities. Now I know this is not a facility that was a traditional ICM and not directly comparable, given that it is a little bit smaller than some of these other facilities.

But do you think that you would have -- likely have economics if you would have run at full utilization for ethanol, similar to what some of the other producers are describing these days?

Yes. I actually just asked my plant manager this exact same question. Now obviously, we have burdened the plant itself with additional costs associated with the isobutanol side of the business.

But if you factor that out and went back to kind of what was the fixed-cost base, labor base, et cetera, back in the ways days when it was just an ethanol plant, the number my plant manager described to me was probably in the $0.30 range EBITDA.

Great. So then, if we were to sort of run the numbers on the fourth quarter, give or take, you said EBITDA breakeven by the fourth quarter. That sort of suggests that there is about a negative contribution of about $1.5 million in the isobutanol side.

Can you maybe split out for us the approximate headcount or portion of headcount on the SG&A side that is really focused on isobutanol versus ethanol, just so that we can understand the trajectory as we head into 2015 if we do really see the strengthening environment, like many of us actually expect?

I think we should answer this -- no, well, we can't put it out that way, because we share resources across. And so it is parts, people, and stuff. We haven't thought about it the way you are describing.

The way to view this, though, is the EBITDA breakeven and having the run rate that I described of ethanol and isobutanol, those are like the minimum requirements of how to get the EBITDA breakeven at the overall site. And as this goes up from there, it gets better.

Great. And then just to discuss -- I know this question was raised earlier on the call, but to discuss the concept of what would have you switch incremental capacity from isobutanol to ethanol.

Obviously, you done a tremendous amount of work developing the market and developing the technology, but would this be primarily a profit-driven decision or is this something where you would look to seed the market as you are able to produce these gallons, knowing that scale will benefit you as sort of a lagging factor?

I think you sum it up well. So the way we look at it is, ceding the market, making sure that we have the real live [portier] growth opportunities with good margins -- that is the most important thing we can do. And that is where we need to be focusing our attention.

We should then be taking that input and then deciding -- making that decision of do we switch over to isobutanol from ethanol or do we work to add capacity. And being as we want the lowest cost business system to be able to win in the long run, that is actually what we are shooting for.

So it would be very easy for us to try to push everything over to isobutanol quickly, but if we have any hiccups whatsoever, then that could be a problem. So I want to make sure that we have our act completely together before we do that.

So it is a question I can't answer as to what we would do, how we would do it, and for sure, it will be profit driven in terms of how we think about it. We're going to try to maximize the profits. If isobutanol makes twice, three times as much margin of ethanol, that is going to be a pretty powerful motivation to switch to more faster.

Okay. And then last question, if I may. I know you have been really focused on isobutanol for a long time, just given the future potential. But over the last several years, a number of the ethanol producers out there have made incremental changes to their plans -- debottlenecking, increasing the throughput, things like production of corn oil -- inedible corn oil for use in biodiesel production and other things, introducing microgrind technology, and some of the other small upgrades that can be done to your plant to really improve the economics.

Can you maybe frame out for us whether or not this is an opportunity for you and whether or not you have anything yet in the capital budget to allow this or if this is something that is still in discussion?

You mean for Luverne for us?

Yes.

Yes. All those things that you list benefit us at Luverne. So some of those things, yes. Those things all on relevant are for us to lower the cost at Luverne as well. We just haven't gotten around to it yet.

But specifically in the capital budget, the answer is no, but we are considering all those initiatives.

Yes. All those things benefit us. And Luverne is actually a very good economical plant. It is sited in a great corn basis area and the farmers in that region are really good. So we are pretty well positioned there. And, yes, we can take incremental cost out of this plant.

Great. It is good to hear that is an opportunity. Thank you for taking my questions.

(Operator Instructions) Jeff Osborne, Cowen.

I was wondering, on the Toray side, you mentioned $1.5 million in revenue. But then you also alluded to a $1 million payment from something in a prior year. If I am understanding right, is it just $500,000 for the production and $1 million was some type of true up? Or just maybe explain that a bit further.

Yes. No problem. So yes, the offtake itself was $500,000 and the $1 million was associated with a -- they provided us $1 million in 2012 that -- effectively to help us build that plant. And there was a chance that if we hadn't produced the paraxylene by a certain period of time and shipped it to them, that we would have had to give them that $1 million back.

So from 2012, it has been sitting on our balance sheet as deferred revenue. So we were able to recognize that revenue with this shipment.

Got you. Thanks for the clarification there. And then I had a question on IDGs versus DDGs. Is the protein content the same and hence the price per pound similar for the two or how do we think about that if we were try to get granular on modeling the production of both?

Sure. Yes. The actual approximate amount analysis is identical between the two. And so there is no material difference. As we start up and continue to learn how to run isobutanol and get the plant running -- on the IDG side, in particular -- these products won't be perfect the way that the DDGs are perfect.

We have to get good at running it. So that -- I would put them in at a site slight discount -- DDGs. Very slight discount.

Okay. Is there a (inaudible) how many IDGs per gallon of isobutanol you folks would produce? As it gets perfect?

You know, I should know the number off the top of my head and I don't. How many IDGs did we produce per gallon of isobutanol? It would be the normal number, but --

Ultimately, it gets down to that same range of ethanol, which is kind of always in the 16.5 pound per bushel range.

Yes, but the question is how much grind goes [to it]. Yes, it does. But it is 2 million or 3 million gallons of run rate capacity for isobutanol, what that turns into. Or -- Mike is calculating right now. Hang on just a second.

While you guys got the calculator going on that, maybe for you, Pat -- as you put in the distillation column, A, have you started that process, how long is it going to take, and do you see any risk of ramping that up?

So yes, it's started. Do the -- getting the project implemented is going to take us to -- probably into the beginning of October. And could take plus or minus a couple of weeks, depending upon what little details that we have to follow up on.

Maybe there is a bidding or something or a control or something. I don't expect any issues on implementation of or installation of the equipment. In terms of operating equipment, it is perfectly straightforward, so I don't anticipate any issues operating it there.

We have operated a columns like this in the past. We have other columns in our plant, but we took them over and put ethanol into them because we needed the capacity for ethanol.

Got you. And two other quick ones. One, if you were to go down the path of expanding the plant, what is your sense with the air permits that you have and how long that would take to permit?

So if you made the decision today to do that, where are you in terms of permits and -- anything beyond financing, I guess, what would be the timeline?

I don't have a good timeline. We have started working on it internally, though. I mean, we have started on it.

Okay. And then a last question. I may have missed this, but did you give the gallons of isobutanol, either produced or sold in the quarter?

We did not.

Okay. Perfect. Thanks much.

And I believe, if I am doing the math right -- and I may be wrong. But I believe it is going to be somewhere in the 15,000 to 20,000 tons at that 2 million to 3 million gallon range. That sound right? I did this really quickly, so --

All right. Thanks much, guys.

We have no further questions at this time. I will now turn the call back over to Pat for final remarks.

Thank you all for joining us. I appreciate it and thanks for joining us on our call today. Bye-bye.

Thank you, ladies and gentlemen, this concludes today's conference. Thank you for participating and you may now disconnect.