Gevo Inc (GEVO) 2023 Q1 法說會逐字稿

Good day, and thank you for standing by. Welcome to the Gevo, Inc. Q1 2023 Earnings Conference Call. (Operator Instructions) Please be advised that today's conference is being recorded.

I would now like to turn the conference over to your speaker for today, John Richardson, Investor Relations. You may go ahead.

Good afternoon, everyone. This is John Richardson, Gevo's Director of Investor Relations. Thanks for joining us to discuss Gevo's first quarter results for the period ended March 31, 2023.

I'd like to start by introducing today's participants from the company. With us today are Dr. Patrick Gruber, Gevo's Chief Executive Officer; and Lynn Smull, Gevo's Chief Financial Officer.

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

Please be advised that our remarks today, including answers to your questions, contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act. These forward-looking statements are subject to risks and uncertainties that could cause actual results to be materially different from those currently anticipated. Those statements include projections about the timing, development, engineering, financing and construction of our sustainable aviation fuel projects, our recently executed agreements, our renewable natural gas project and other activities described in our filings with the Securities and Exchange Commission, which are incorporated by reference. We disclaim any obligation to update these forward-looking statements.

In addition, we may provide certain non-GAAP financial information on this call. The relevant definitions and GAAP reconciliations may be found in our earnings release and 10-Q, which can be found on our website at www.gevo.com in the Investor Relations section.

Following the prepared remarks, we'll open the call for questions. I would like to remind everyone that this conference call is open to the media. We are providing a simultaneous webcast to the public. A replay will be available via the company's Investor Relations page at www.gevo.com.

I'd now like to turn the call over to the CEO of Gevo, Dr. Patrick Gruber. Pat?

Thanks, John. Good afternoon, everyone, and thanks for joining us on our call. We are filing our Form 10-Q today, and we ask that you refer to it for more detailed information after this call.

Now last earnings call, I said that I expect that Gevo will play the role of project originator, developer and investor in most of our business development projects. And then we expect to generate cash using a developer business model.

Well, today, I am glad that I can finally, finally talk about 2 deals that have been in the work for a long time. The deal with ADM and P66 is an example, in my opinion, of us demonstrating leadership by enabling the production of SAF, the anticipated potential revenue of $125 million from this deal that depends upon a mix of milestone and royalty payments provided certain conditions are met. I like that we are expected to deploy Gevo capital in these projects.

Now we stand ready to assist ADM and Phillips 66, if they need our assistance. We want them to be successful. We believe it reinforces the view of the readiness of the technology. I think it's a great outcome for Gevo. A piece of what we bring in building SAF business is knowledge around the most commercially ready technology, and that is Axens ETJ technology, Jetanol integrated to ethanol.

Based on interactions and discussions with potential strategic investors and sophisticated Wall Street investment funds working through diligence as they consider investment in our SAF projects, I believe my opinion is shared.

Combining Axens technology with Gevo's low carbon integration technologies, we believe makes for the winning combination that of low-cost production, reliable operations, which is something most people forget about, and low CI potential for SAF and carbohydrate-based renewable diesel.

We at Gevo, having after we filed a patent, we have learned as we integrate these business systems and technologies, the combination of Axens, along with Gevo's know-how and technology, we believe, makes all these hydrocarbon solutions better. Axens has been a great partner. We share a common vision to see the technologies widely deployed and enabled to produce multiple hydrocarbon products and drive CI scores down and even potentially go negative. It's a business system approach. We want everyone who makes SAF from alcohols using Axens and Gevo technologies.

So this is just one example of us at Gevo leveraging our expertise and converting carbohydrates to fuels and chemicals going through alcohols. Coupled with our knowledge and partnerships with farms to grow feedstocks, it puts us in a unique position to seed a number of businesses. SAF is one example where we've identified and brought together the best technology partners to deliver low CI SAF.

Our expertise and competitive advantage is also being applied to create carbohydrate to chemicals and specialty fuel business opportunities and build the capability to measure and track sustainability attributes to do carbon accounting across the supply chain and teach brand owners about these better ways of doing business.

So I'm glad we can finally talk about our development and licensing deal with LG Chem too. At Gevo, we've developed several proprietary technologies to convert alcohols to hydrocarbons. In the past, we talked primarily about these being used for SAF, diesel fuel and gasoline. While these technologies can also be used to make chemicals materials like polymers and plastics, that's what the LG Chem development licensing deal is all about. We developed an elegant technology to convert alcohols into a range of drop in polymers and plastics that are used in components for cars, consumer goods, carpet, diapers, packaging and such.

Think about what's possible here, carbon from the atmosphere, captured through climate-smart agricultural systems and converted into carbohydrates that have that carbon transformed into durable goods using a Gevo type Net-Zero business system and technologies.

Picture in your mind, seeing automobile interiors and exteriors, flooring, diapers and realizing that the carbon in those products came from capture CO2 of the atmosphere, but it's now sequestered right in front of your eyes. It's a new paradigm of what is possible.

The agreement we executed with LG Chem is specifically designed to develop bio-propylene for the production of renewable chemicals using Gevo's proprietary Ethanol-to-Olefins technology or ETO technology. Our plan is to have LG Chem take lead in the scale of the process. In this deal, we are codeveloping the ETO technology with LG, which will allow Gevo to conserve its financial resources to pursue other projects.

The agreement includes a combination of direct payments to Gevo beginning in 2023, commercial licensing terms and potential options for the party to perform a joint venture if the research and development activities prove successful.

LG Chem is a large world-class company and has proven to be an excellent partner, sharing our vision for a more sustainable future. I'm excited to work together towards our collective success.

We also have been developing a new business called Verity Carbon Solutions or VCS. This business is an outgrowth of our proprietary system of accounting for carbon and sustainability across business systems using blockchain-based tools we have previously called Verity Tracking. This business focuses on accounting for validating, monetizing carbon insets created in the value chain.

Carbon insets are carbon reduction credits created inside of a value chain. Gevo's business system approach and technology that reach across the whole value chain have provided us with this unique business opportunity.

Now we originally developed this intellectual property for NZ1 but realize that this technology could be applied to all types of renewable resource-based fuel, chemicals, foods and such.

The first test of a new business idea, though, is showing that someone besides us think it's valuable. Therefore, I'm very pleased that we've entered into a joint development agreement with Southwest Iowa Renewable Energy or SIRE. It's an initial validation of our VCS business. SIRE is a leading ethanol and feed company that is using VCS technology to begin tracking carbon reductions across its supply chains and products with the intent of creating carbon insets that can ultimately be monetized. We expect to grow this business, working with other ethanol, nutrition and nonethanol biofuels companies.

An important aspect of this business is to enable farmers to get credit. And by that, I mean get paid for that carbon value that they are delivering. The same is true for production plans. We intend to ensure that real data is used and reported about reductions in carbon and capturing carbon. We believe the potential for this business is vast, given the agricultural industry is so large that it applies broadly to tracking environmental attributes for any supply chain. As we develop this business, we expect to add more customers and partners. We will continue to inform you all and eventually put forth revenue projections.

Final note, the VCS business model is a capital-light business model. VCS is developing software, tools and providing business system advice, engineering, sustainability consultant services and creating the carbon insets. Ultimately, we'd expect that the carbon inset can be monetized one way or another and that we share that value with our customers and our partners.

Before I turn to the SAF projects, I want to make very clear an important point. We are primarily project developers, licensors and business developers. We may indeed invest equity into projects, but our cost of capital is expensive, and we will be prudent with our cash. We expect to secure third-party debt investment for our Net-Zero projects. We also expect to secure third-party equity. We expect to make money through development, fees, licenses and what commonly is called a carry in the project. A carry means that we expect to receive an equity interest in the project without necessarily making a cash investment per se.

The SAF and hydrocarbon markets are so big, we want to enable as many projects as possible and make money while we're doing it. In addition to playing the role of enabler and project developer, we expect that for certain projects, we can provide operations, maintenance, engineering and even trading services or other support as necessary.

Now turning to our Net-Zero SAF projects, specifically NZ1. Since our last call, there have been several things that have impacted our thinking. First, interest rates are high and expected to go higher. After discussions with potential equity investors, we believe that the right approach is to secure financing using the DOE loan. This is expected to be the lowest cost source of debt and requires the least amount of equity. However, this will delay the time frame for financial close, pushing financial close into 2024 based on current expectations and assumptions. The ZOE has a lengthening and time-consuming process that must be followed. A 2024 close would mean the earliest possible plant startup for NZ1 would be in 2026. In any event, the schedule and timing of NZ1 will be driven by our ability to obtain third-party financing, both debt and equity.

What does this mean for Gevo? This means that recovery of our development costs and fees for NZ1 will be played until the financial close of NZ1 expected in 2024. As a result of this delay, we are reducing our spend of capital for NZ1 to better align with the timing of the DOE loan. Said differently, we have been prudent and careful with our cash given the timing of the DOE loan and the volatile macroeconomic conditions in the world today.

Another issue that we're watching closely is the rulemaking regarding Section 45Z for SAF in the Inflation Reduction Act or IRA law. What is weird is that Section 45Z refers to CORSIA, which it just turns out, isn't even a method of counting carbon. CORSIA is a policy framework, not a scientific method to measure carbon intensity. We note that according to ICAO's website and those sponsors of CORSIA, CORSIA moves away from the patchwork of national and regional regulatory initiatives and offers a harmonized way of reducing emissions from international aviation while respecting special circumstances and respective capabilities about ICAO member states.

Having CORSIA cited in this bill for counting carbon doesn't make practical sense. It isn't a method of counting carbon. However, applied correctly as a framework and taking into account modern U.S. data and the gold standard for counting carbon, that is the Argonne GREET model, I could see how it could work.

Contrast this to the sections of 45Z regarding transportation fuels that are specifically called out to use the Argonne GREET model. So something strange is going on in the SAF section that needs to be resolved through rule-making. It is, of course, the government, so I do expect some sausage making. It'll eventually become clear. The world needs SAF and you really -- the world really does need to use these excess carbohydrates to make it happen, but enough of that.

So I want to be really clear, for SAF, we do not have a traditional build-own-operate business model. We are pursuing a capital-light project developer role that is projected to give an attractive return on our investment, such as in the P66 ADM deal. The idea that Gevo puts all the money or is obligated to put up the billions of dollars needed to build the plants is wrong, wrong paradigm.

We expect to play the role of market developer, project developer, technology developer, licensor and all the while managing our cash wisely. When we bring projects to financial close, we would expect to recover our project development costs and keep that carry interest in the project, the Capital-Light model.

Now we may choose to invest in particular projects along the way too, but it will depend upon our view at the time of what's the best use of cash in our balance sheet. What generates the greatest potential for Gevo. In this difficult economic environment, we are glad that we have a very strong balance sheet. We expect to have multiple routes to generate cash for this balance sheet going forward. These routes are expected to include our RNG business, Verity Business Solutions, our project development businesses, licensing and eventually our retained interest or equity in the projects that we develop. We're just beginning.

Now I'll pass it off to Lynn to talk through the operations and numbers.

Thanks, Pat. To start off, we have moved our RNG business into normal operations, and I'm pleased to report that we have revenue that exceeds expectations for the quarter on RNG.

Given consistent uptime and strong RIN generation driven in part by a catch-up of RINs received for production in the fourth quarter of 2022, our revenue from operations was $4 million. We received some LCFS revenue in Q1, and we'll continue that going forward based on a default temporary CI score of negative 150 until we receive the final pathway approval from CAR expected early next year, which should improve to something like negative 350.

We're off to a great start in Iowa, and I expect continued improvement as our capacity expansion from 355,000 MMBtu to 400,000 MMBtu is implemented later in the year.

We ended the first quarter of 2023 with a strong liquidity position of $453 million in cash, restricted cash and other liquid investments. Restricted cash totaled $77.8 million and is associated with the Northwest Iowa RNG bonds and certain collateral related to the development of Net-Zero 1.

Long-term debt outstanding of $67 million is related to the Northwest Iowa RNG project. Our corporate spend, that is SG&A was approximately $6.2 million for the quarter, net of noncash stock-based compensation of $4.6 million.

During the first quarter of 2023, we invested a capitalized $11.4 million cash in capital projects comprised of $8 million into Net-Zero 1, $1.5 million into the Northwest Iowa RNG project and $2 million into other projects.

We intend to finance the majority of construction capital at the NZ1 subsidiary level with project finance debt and third-party equity. We have strong interest from several potential equity investors based on the amount of due diligence they are doing, although the macro issues Pat talked about are on everyone's minds.

We do, however, expect to secure one or more investors, and we are working through the due diligence process with a number of premier infra funds. It's also worth mentioning that while the DOE loan is the primary track to secure the debt, we are running a second commercial debt track as we want to keep our options open.

Now I'll turn the call back over to Pat.

Thanks, Lynn. Let's open it up for questions.

(Operator Instructions) I have the first question that is coming from Dushyant Ailani of Jefferies.

My first one was just on the [PSX]/ADM agreement. I just wanted to quickly touch on, what are the next steps in that? And when can we expect to kind of see that cash flow come in? Just any kind of more color or thoughts around that?

What I think is -- we're going to have the details of how and when people get paid, they're confidential and won't be disclosed yet. ADM and P66 have got to go do their thing. We do expect payments to begin as early as late 2023, and they last approximately 5 to 7 years. But if we don't make milestones and whatever happens, so it's not a guaranteed income. They've got to go deploy, build plans, get on with it.

Understood. Understood. Okay. And then on -- similarly for the -- on my second question was just on the LG agreement. To what extent or maybe if you can share, so what's the magnitude of the direct payments that you can receive from LG?

Yes. It's several millions of dollars as direct payments over the next few years. And then once -- as it moves forward, then it would come from licensing or even potential participation and we've contemplated a joint venture with them, but it's too early to say what that might look like, but the opportunity could be really significant. And so what's interesting is that refer to LG's press release and how they talk about, they're pretty excited. They said, "bio-based plastic production in 2022 marked 4.5 million tons with expected compound annual growth rate of 14% up until 2027. And we think the bio-propylene can be used in eco-friendly raw material over various plastic products, and it expected to play a pivotal role in the rapid growth of the bio-plastics market".

Okay. Just a second before we go on to the next question. I just got word here that we got $187 million of private activity bonds approved. We just got that. I thought I was hoping to have it just before the call started, but we just got the word of it. So that's good. The State of South Dakota is stepping up and doing their part to help us get the private activity bonds done. That's great, and that will help us as we put together the overall financing package.

The next question, it will be coming from Derrick Whitfield of Stifel.

Regarding NZ1, I completely understand your decision to pursue the DOE loan. Based on your prepared remarks on licensing, are you suggesting that you will sell down nearly all of your equity ownership in NX1? And if so, does that -- or any timing of first production impacts -- in any way impact your supply contracts that you have as offtake?

Well, let me address that latter one first. We announced last week that we just couldn't come to agreement with Trafigura about what to do, how to do it, so we parted ways. And they had a reservation on the capacity of Net-Zero 1. So this gives us a little more breathing room.

The airlines want to pick it up and pick up the pace. And so we have an opportunity to work with the airlines and bring them in and solve some of their problems.

So that's all good because we have -- everybody knows. We have a whole lot of offtake agreements in place. So that part is all good, I think. And it will interesting to see who we fill the plant up, who wants that volume, et cetera. There'll be a bit of a discussion negotiation along that. We recognize that airlines really got to have their stuff. So I think I feel pretty good about it straight away.

And then your second question was what? Remind me?

Sure. Just on your prepared remarks on licensing -- are you suggesting that you're going to sell down your equity ownership almost entirely in NZ1?

No, I don't know what for sure we'll do right now. It depends -- we think that there's opportunities for many plants. And so what we're doing is, we're doing really a lot of work to modularize these ETJ plants based on 100 million gallons of ethanol input to make 65 million gallon hydrocarbon output. We're getting it pinned out, so we can put them anywhere. And the idea would be to -- instead of field building these plants stick built, you build them in modules at a factory and then be able to deliver those plants. We've got enough interest and enough plants. It looks like we want to do multiples at once. Everybody is always wondering about how we're going to afford all this stuff. Well, the way you afford it is to make a turnkey project that's ready to execute straight away. We think that's a better return on our money. However, we still may invest. It depends on how much cash we have on the balance sheet. I'm not a big fan of money raising money up here at Gevo Inc. level. I'm just not. We can do project financing, and it's right for it. We should use it.

And as my follow-up, perhaps building on your comment on modularization. If we were to think about NZ1 and your modularization approach, what could the install cost be, if you were to pursue a brownfield plant with an existing ethanol plant as a partner?

Probably these are swag ranges. So depending upon what infrastructure they have on their site, and for instance, they have railway and tanks or something that can be repurposed or something like that. Maybe that will be on the cheaper side, maybe $400 million of capital. And if they have to build in something else new, that's maybe $500 million of capital. And so we're actively looking at several brownfield sites in discussions. We like some of these sites we see. So when we first chose the Net-Zero 1 site, that was several years ago, and it's a great site, don’t get me wrong. But you know what, incremental returns look like they're going to be better from certain brownfield sites.

And what's happened in the ethanol industry as some of these people woke up a few years ago and started really paying attention to how to decarbonize their ethanol. So they've been doing the work of decarbonizing ethanol. And so we bring along the integration packages, the knowledge of how to put it all together, the Axens stuff, the Jetanol process and put it together. And these could be pretty darn interesting. And it takes a lot less of a capital bite from us, and I like that approach. So that's something we're all over.

And Pat, just to build on to that last part of the comment. When you think about the modularization approach that you guys are perfecting as you think about scaling that up to, let's say, an NZ2, which would be 3x, are you seeing some capital efficiencies now with this modularization approach that you guys could articulate?

Well, what's interesting about it is we are doing that designing and finish that design for a 3x size. And one option actually is to do 3 of these plants. That is one option. That is a possibility and we're evaluating it. Now what's different about that, the 300 million gallon a time is that we're spending the time to learn how to do it from nuclear power. In other words, applying it -- so nuclear electric plant and it makes a massive reduction in carbon. Well, that's interesting to the marketplace at large. Well, we don't have -- that's still a big capital-bite, right, even with efficiencies at that scale. And we don't have the capital ourselves to do that. So that's done more in the eye of big strategic partners.

As far as -- so you get the idea of what we're doing is 2 sides of plants. I think this idea of -- remember that any ATJ plant, if you're using grid electricity, any ATJ plant, I don't care who it is, and it's got 100 million gallons of ethanol coming in and a high yield of product coming out, it's going to be -- that's going to cost, I don't know, 20 to 25 CI points on grid electricity grid gas. And we don't want that increase. So this is what we're doing is figuring out how to wipe that out and get it down to Net-Zero.

And our question will come from Brian Kuzma of Thomist Capital.

Could you talk a little bit more about like some of the specific benefits of waiting to get the DOE funding before you kind of move forward with the NZ1 capital deployment?

Yes. So we don't have to go blazing speed. We've already -- and of course, the world is changing around long lead equipment to. I don't expect to spend much of anything on long lead equipment between now and then. So that's good. I don't have to put any more -- I don't have to put money out. We have to do engineering work and spend some money on that. And that feels pretty good. It gives us time to get the financing in order, make sure that we've got everything clarified that we can do the best deal. It's driven by the DOE schedule, and there's just no way that they can get it -- that will be the time frame. We've got to go along with their path.

Everybody views that as be a really low interest rate and helps with the overall financing. When we're out talking to people in Wall Street and in strategics too actually, the all -- we think we should try to get that. Why don't we try to get that? Why wouldn't you want to do that? We do want to do it. And so before we are beholding to the trough, so as a consequence, but now we don't -- we're basically going, no. We want to make sure we're spending our money wisely, and we're going to keep our cash on our balance sheet. My God, we have $450 million here. I'm going to keep it here and use it for development and deploy it when I have to deploy it to move the ball ahead. We don't have to go a whole hog. The world has changed, so we don't have to. We've got interest. And this example of the ADMP66, you can see how we sync. We're like, well dang, those guys got billions. I don't have to spend money and I can get paid. I like it.

Yes. So at the end of the day, you end up keeping more of NZ1 post-DOE than you would if you just raised a bunch of money to try to do it now, I guess...

That's right. Yes, that's true. And we have more optionality around it to make that decision of how we do it. Because in parallel, remember, we're doing the modularized ATJ plan. That ATJ plant design could be anywhere, we could put it anywhere. In other words, NZ1 cool, that exact ETJ part of the plant, same design could be plopped down at other sites. So we're getting a 2 for a 3 for here in what we're doing.

And I guess that's kind of has me interested that when you look at, what you guys can do and what you can control, you have over $400 million of cash, that's plenty of capital to do lots of different parts of ATJ across the value spectrum. I have to imagine those rates of returns are better than NZ1 at the end of the day when given how -- what's happened in the financing market over the last 12 months?

Yes, I'd say that the brownfield sites, generally, if it's the right sites, and we have particular sites that we like where those are incrementally better returns than NZ1. But the NZ1s are still real good. But yes, you're right. There's ones that we could envision could be better. And so the game here for us is to spend our money to make sure we got this modularization right so that we can crank out multiple plants at once. For us, the way we think of it is -- this is the basic reality is throwing money at NZ1 for speed for -- just to drive it, it's like, man, that's crazy. We wouldn't do that. Why would you do that? We got to have the financing. The critical issue is about getting the financing in place and getting it done rationally and getting it built. We've got a huge balance sheet for a developer like us. And we get to have a carry. Carry is a meaningful portion of the plant. We can invest over that if we want. So it's a little bit different mentality game to play, how to think about it, how to set it up so we can get licensing. And so there's -- we see -- it's just -- it's a different world than what we thought.

And you guys have so much capital and you're going to the capital-light model, it seems that you have all of these options on your table. I mean, taken to the extreme, if you guys went completely capital-light, you could pay out $1.50 dividend right now and still have enough cash and capital to go the extreme capital-light model. I'm not suggesting that you guys do that, but it seems like a -- if you took it to the extreme, that's where you would end up.

It could be. It depends upon how much money we want to make on investments and all the rest, and there's always the unknown unknowns. So yes, it's not lost on us.

Yes. Can you comment at all on where things stand on the Chevron LOI, right now?

The Chevron thing, people ask me, are we still working with them? And the answer is yes, we are still working with them. And I can't say something specifically, although I think folks want to scan the press and see what's been done by them lately. That would be a useful thing to do. And I will point out that we are the only ones in the world who make large quantities of isooctane and gasoline.

Got it. And so when you -- but when you think about these other bigger companies then that are out there that you're doing deals with and are talking to you, like -- like have any of them approached you around okay, you've got $450 million of cash, trading at $280 million worth of market cap, like let's just do a deal where we build this and you become the public vehicle, like well, some private equity firm rolls in their navigator pipeline or something into that. And now you have like a well-funded publicly traded vehicle out there. I mean, there's just so many opportunities with that much cash sitting there for someone to utilize all around the ATJ value chain. So just like so many opportunities exist, right now.

Well, it is. So I think it's a question again of timing. But in general, those are natural conversations to have. So what happens when we're talking to these equity firms, any other strategics and talking about how you move this forward, it's not lost on anybody that we have money. We're unusual in that we have enough money to go ahead and be successful developing stuff. And some of these things, we don't know what it's going to take fully for financing yet or what guarantees that we'll have to help or there's other things we don't know yet. So I think it's all premature at the moment. But these are national conversations that do occur. And everybody wants to see things like -- I think it's really good on the Axens technology is the one that's the most developed of anybody is out there for making jet fuel from an alcohol.

And I think we've seen enough data for that. And so it's about -- we got to work on the banks. We've got to work on the DOE. We got to work on whatever skeptics. We've got to get through whatever committees that we have on -- for equity financers and tuff like that. So there's still -- we got -- we ourselves have some sausage to make still as we work through that process. But yes, those conversations do come up and it's not lost on us on any of it.

And the next question will be coming from Amit Dayal of HCW.

So Pat, I mean, is this a given that you are now basically just going to pursue the DOE option to close on the financing for NZ1?

No. What we said in our comments was that the DOE should be the primary one. And the reason is, is that you can get more debt loaded onto a project than you could from commercial debt. So therefore, it takes less equity, and it would be at a lower interest rate, kind of a win-win-win all around, right? However, because the DOE is the DOE and they got work to do, and we've got to go make it happen, you don't leave that as your only one and only option, you develop the commercial debt market opportunities as well. And you bring everybody along to go get that done. That's how you manage through.

So could you, say go to the commercial markets then refinance this from the DOE or is that not a path for these types of projects?

No. You'd want to know, what we want to know is the big deal is everybody is worried about how much equity is it going to take, right? Because even with our -- all the cash we got, that's still not enough to do that, provide the other guarantees we might need to do or whatever. So what we want to know is what is that equity bite, and the DOE one is substantially different than what we'd get from a commercial lending. We got to know what that answer is. And of course, everyone is sitting around talking to us is going, yes, we'd like to know what that is too. It's just practical.

Yes. I mean the logic makes sense, Pat. I guess, maybe investors probably are now keen to just understand how to model cash flows because if you pursue the DOE path and we sort of push everything out by maybe 1 year, 1.5 years, the cash flows and the valuation aspect in those types of calculations come into play. So how would you sort of -- how do you suggest investors think about from a modeling perspective about sort of these variables?

Well, you take the RNG business, you saw that we exceeded expectations for the revenue. We're expanding that plant, so people can calculate that. It's going to be at 400,000 million BTUs a year in the third quarter, we'd expect. And we also would expect to move from 150, negative 150 CI score to something like minus 300 once we get that from the from carb. So that's part of it. We've got several million dollars of income coming in over the next few years. We've said that. So several is not tens. It's several. So it's like you got that coming in.

You have -- you heard us talk about the developer fees. So think about that. Here's how developer model works. Developer recovers usually upon financial close, all the money invested upfront to develop the project, okay, along with profit. So we said that we closed it early next year, you can expect that we're going to see that money we've invested so far. We've invested about $75 million for NZ1 so far, plus it will take like another 30 at a minimum. And if people need to see extra stuff to get to the close, maybe it takes 80 to get close. But we get paid that back at FID unless we decide to leave it in there. So we're going to have a revenue stream from that. And so when you're getting paid from -- you're getting paid like that with profit from recovering your costs, you can do that with multiple projects, okay? So that's part of this game.

Now it also is true then that we could take -- we'll take a retained interest. But it seems to me that everyone is discounting our ability to count any of the profit from an NZ plant anyway. That's what looks like to me given our stock price for God sakes. So I'm looking at it going, no one values that it seems, that's which I think it's crazy, but it's because it's too far out in time.

So how do you make this incredible story. People look at us and go, "Well, you didn't have enough money to execute all that billions of dollars that you need. You're going to have to go to loot us, blah, blah, blah." What, are you kidding me? Think what, you know, that's not how this works. That's not what you do. You manage the money. So yes, it is a -- I think that, you know, we're really obviously trying to beat home about what rationality looks like as we do this and we're managing our cash, we're going to use it. Yes, we've got uncertainties to work through, but we're in a darn good situation here.

Yes, it makes sense. I'll take other questions offline. Just one last question for me. Are we deploying the cash balance in a way that we can take advantage of this interest rate environment and generate some additional...

Yes. I think in our Q, you'll see that, yes. It's in there.

And this does conclude our Q&A session today. Now I would like to turn the call back over to Dr. Patrick Gruber for closing remarks. Go ahead, sir.

Yes. Thanks. So obviously, what we're trying to get across is to think rationally about how we deploy our money. We actually are in a really good financial shape. We are finding that there are people who want to invest in these projects. We don't have to make investments ourselves to make money on the projects that we've been working on. We have multiple opportunities along different threads of business from RNG to chemicals with LG to -- like I was serious, I'd like to see everybody use the process to make jet fuel from alcohols. I want everyone to do that, and I'd like to take a nick on it, too.

And so it's a different paradigm. And we are developing an intellectual property position. People forget that. We really are technology developers, too. We're really good at patents. Anyone knows our history knows that that's the truth, given our track record of winning things.

So it is a little bit different. I think our low stock price frustrates me. So I look at it, it's like that makes no sense at any level. But I get that people are just doing kind of a simple calculation that I think doesn't make any sense as we're trying to blow that up and pay attention to what we're actually doing here. So I appreciate everybody's investment in us and people listen to the call, and it's going to be fun as we work through all these things and make progress. Thank you.

Thank you, everyone, for attending today's conference call. You may all disconnect and everyone, enjoy the rest of your evening.