Welcome to the Aemetis Third Quarter 2022 Earnings Review Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Mr. Todd Waltz, Executive Vice President and Chief Financial Officer of Aemetis, Inc. Mr. Waltz, you may begin.

Thank you, Paul. Welcome to the Aemetis Third Quarter 2022 Earnings Review Conference Call. Joining us for the call today is Eric McAfee, Founder, Chairman and CEO of Aemetis; and Andy Foster, President of Aemetis Advanced Fuels and Aemetis Biogas. We suggest visiting our website at aemetis.com to review today's earnings press release, the Aemetis' Corporate and Investor Presentations, filings with the Securities and Exchange Commission, recent press releases and previous earnings conference calls. The presentation for today's call is available for review or download in the Investors section of the aemetis.com website. Before we begin our discussion, I'd like to read the following disclosure statement. During today's call, we'll be making forward-looking statements, including, without limitation, statements regarding our future stock performance, plans, opportunities and expectations with respect to financing activities and the execution of our business plan. These statements must be considered in conjunction with the disclosures and cautionary warnings that appear in our SEC filings. Investors are cautioned that all forward-looking statements made on this call involve risks and uncertainties, and that future events may differ materially from the statements made. For additional information, please refer to the company's Securities and Exchange Commission filings, which are posted on our website and available from the company without charge. Our discussion on this call will include a review of non-GAAP measures as a supplement to financial statements based on GAAP. A reconciliation of the non-GAAP measures to the most directly comparable GAAP measures is included in our earnings release for the three and nine months ended September 30, 2022, which is available on our website. Adjusted EBITDA is defined as net income or loss, plus to the extent deductible in calculating such net income, interest expense, loss or gain on debt extinguishment, income tax expense, intangible and other amortization expense, accretion and other expenses of Series A preferred units, loss on lease termination, gain on litigation, depreciation expense and share-based compensation expense. Now I'd like to review the financial results for the third quarter of 2022. Revenue during the third quarter of 2022 increased 44% to $71.8 million compared to $50 million for the third quarter of 2021. Our California Ethanol business experienced steady sales pricing with an increase in the volume of ethanol produced and sold at 15.7 million gallons in the third quarter of 2022, up from 13.8 million gallons in the third quarter of 2021. Delivered corn price increased 15% from an average price of $7.99 per bushel during the third quarter of 2021 to $9.59 per bushel during the third quarter of 2022. Our India Biodiesel segment began delivering product under a tender offer to governmental oil marketing companies in mid-September, delivering $11 million of biodiesel in about two weeks under this tender offer. Gross loss for the third quarter 2022 was $1.1 million compared to a $4.8 million gross loss during the third quarter of 2021. Our California Ethanol segment accounted for $3.8 million of gross loss with offsetting gross profits of $2.8 million from our India Biodiesel segment. Selling, general and administrative expenses were $6.9 million during the third quarter of 2022 compared to $5.1 million during the third quarter of 2021 as a result of investments in our ultra-low carbon initiatives and noncash charges for stock compensation. Operating loss was $7.6 million for the third quarter of 2022 compared to an operating loss of $9.9 million for the third quarter of 2021. Interest expense for the third quarter of 2022 was $7.1 million, excluding accretion and other expenses in connection with Series A preferred units and our Aemetis Biogas subsidiary, compared to $5.5 million during the third quarter of 2021. Additionally, our Aemetis Biogas subsidiary recognized $1.3 million of accretion and other expense in connection with preference payments on its Series A preferred units during the third quarter of 2022 compared to $2.2 million during the third quarter of 2021, along with a loss on extinguishment on Series A preferred units of $53.9 million during the third quarter of 2022 as a result of a charge related to the redemption of Series A preferred units as part of the amendment to the preferred unit purchase agreement. The redemption charge reflects the expected valuation premium for the redemption of Series A preferred units by Aemetis. Management engaged third parties to assist with the accounting and fair value calculation. Management is completing our final review of the accounting and related charges. At this time, we do not believe the amounts will materially change during the third quarter as a result of filing the Form 10-Q, which will be subsequently filed to this earnings release. Net loss was $69.8 million for the third quarter of 2022 compared to a net loss of $17.6 million for the third quarter of 2021, driven primarily by the one-time unitholder redemption charge of $53.9 million or $1.55 per share. Absent this one-time charge, the net loss was $16 million, representing $0.46 per share. Cash at the end of the third quarter of 2022 was $251,000 compared to $7.8 million at the close of the fourth quarter of 2021. Investment in capital projects of $13.7 million were made during the third quarter of 2022, further highlighting our commitment to the execution of multiple low-carbon products projects. This completes our review of the third quarter of 2022. Now I'd like to introduce the Founder, Chairman and Chief Executive Officer of Aemetis, Eric McAfee, for a business update.

Thank you, Todd. Aemetis is dedicated to creating products that have below-zero carbon intensity, such as negative carbon intensity renewable natural gas and renewable aviation and diesel fuel using renewable hydrogen and carbon sequestration. Our initiatives produce sustainable and innovative renewable fuels that positively impact our communities and the environment while also generating tax credits and other benefits through federal and state carbon reduction programs. We aim to minimize feedstock and operating expenses by utilizing waste materials and zero carbon intensity energy for renewable fuel production. Let's begin by discussing the estimated $55 million unitholder redemption charge for the third quarter related to our Aemetis Biogas business. This charge pertains to the repurchase of preferred units from our preferred investor in that subsidiary. Before accounting for this charge, Aemetis reported a loss of $0.46 per share in the third quarter, which fell within our expectations. The unitholder redemption charge is a non-cash accounting entry recorded in Q3 2022 following an agreement to repurchase all outstanding preferred equity in Aemetis Biogas. Aemetis's rationale for this redemption involves multiple factors, including recent high-value biogas industry transactions that have increased the value of our preferred units and discussions about the potential for a spin-out into a SPAC, IPO, or sale. As many of you are aware, OPAL went public with a pre-money valuation of approximately $1.2 billion last year, and Archaea was recently acquired by BP for $4.1 billion, which included $800 million in Archaea debt. We find these transactions to be noteworthy comparisons to Aemetis Biogas, especially considering that dairy renewable natural gas is estimated to yield ten times more California Low Carbon Fuel Standard credits than the landfill renewable gas predominantly produced by OPAL and Archaea. With a carbon intensity score of negative 426, Aemetis Biogas is anticipated to generate around 500 LCFS credits, whereas landfill gas with a positive 30 carbon intensity score produces only about 50 LCFS credits. Furthermore, Aemetis Biogas plans to deploy over 60 digesters, aiming to produce approximately 1.65 million MMBtus annually, in contrast to the roughly two million MMBtus of landfill RNG produced by Archaea, which yields one-tenth the number of LCFS credits. Aemetis has made a strategic choice to acquire the preferred equity of Aemetis Biogas from an investor seeking a liquidity event, rather than waiting until project development is complete. In Q3 2022, Aemetis negotiated the redemption of all preferred equity in the Aemetis Biogas subsidiary, resulting in the estimated $55 million non-cash redemption expense recorded that quarter. While this charge is not a cash payment, it represents an anticipated future transaction where Aemetis has the right to redeem the entire preferred equity. Typically, the redemption of preferred equity is classified as a dividend rather than a non-operating expense that would reduce earnings per share on the income statement. However, in this instance, the accounting guidelines indicated that the certainty of the redemption and other characteristics of the preferred unitholder buyout warranted treating the $55 million as redeemed debt at a premium, as opposed to a dividend that would traditionally appear on the balance sheet without affecting earnings per share. Now, let's go over our financing plan and the advancements we've made in funding Aemetis's growth. In early 2022, we announced an updated five-year plan projecting revenues to reach about $1.5 billion and annual EBITDA to exceed $460 million by 2026. In 2021 and 2022, Aemetis repaid over $80 million to Third Eye Capital to lower the burden of high-interest bridge loans, thereby expanding our access to funding at lower interest rates. Our growth funding strategy focuses on leveraging positive cash flow from our ethanol, biogas, and India biodiesel and glycerin production facilities, supplemented by a new credit facility of up to $100 million for working capital and project development, initiated with Third Eye Capital in March of this year. After completing preliminary engineering, permitting, and site control for each project, we plan to secure project-level financing through low-interest, long-term U.S. government guaranteed loans for construction and operations. This financing structure will minimize or eliminate shareholder dilution while facilitating swift revenue and earnings growth as projects come online. This financing model has proven effective, even in a challenging debt market characterized by rising interest rates and currently low LCFS credit prices. Within the past two quarters, we've secured roughly $50 million from two credit facilities with Third Eye Capital at interest rates of only 8% and 10% per year. This new growth capital has enabled the construction of a solar energy system and several other carbon reduction projects at our Keyes ethanol plant, along with the financing of land acquisitions, engineering, permitting, and equipment for our renewable aviation and diesel fuel plants, as well as pre-project engineering and drilling pad construction for CO2 characterization and sequestration. For a demonstration of our long-term financing approach, Aemetis recently finalized a $25 million project financing agreement supported by the U.S. Department of Agriculture, under the Renewable Energy for America Program, to invest in dairy biogas digesters and biogas pipelines for renewable natural gas production. This funding secured this month comes with a fixed 6.2% interest rate for five years and a favorable 20-year repayment term. Regarding regulatory credit pricing trends, California Governor Newsom issued a letter in August to the Chairman of the California Resources Board, advocating for accelerated decarbonization efforts in the state. The letter set a target of 100 million metric tons of CO2 sequestration. The forthcoming Draft California Resources Board LCFS scoping plan, expected early in 2023, is predicted to increase the number of credits necessary under the Low Carbon Fuel Standard program. We foresee a rebound in LCFS credit prices as traders gain insights into the required number of credits to fulfill the expanded decarbonization goals established by CARB. Moreover, the recent passage of the federal Inflation Reduction Act is anticipated to significantly benefit renewable energy sectors, including our operations. We are currently reviewing the IRA with our tax advisors and plan to release a revised five-year plan in Q1 2023 that reflects the legislation's impact on our business. We are investing considerable resources into the tax review process to develop specific business structures that maximize the value of tax credits under the IRA. Important IRA provisions for Aemetis include a 30% investment tax credit for renewable natural gas capital investments, projected to bring Aemetis up to $180 million in cash over the next five years from these credits. There is also a tax credit ranging from $1.25 to $1.75 for sustainable aviation fuel and a $1 credit for renewable diesel, which could yield up to $112 million annually to support the construction and operation of our 90 million-gallon per year Carbon Zero Plant in Riverbank, California. If efficiently monetized and extended over the 10-year duration of our contracts with specific airlines, these tax credits could potentially offer more than $1 billion to repay approximately $400 million in project financing, in addition to revenue from California Low Carbon Fuel Standard credits, federal renewable fuel standard D5 RINs, and sales of aviation and diesel fuel. Furthermore, the carbon sequestration tax credit has increased from $50 to $85 per metric ton of CO2, with cash payments made as IRS tax refunds to companies in a process termed Direct Pay for the initial five years, followed by an additional seven years of tax credits. We are developing injection wells at our biofuels plant locations in California to sequester a targeted 2 million metric tons of CO2 annually into a deep saline formation. This could potentially translate to $170 million annually in cash from the IRS for the first five years of the project, totaling an estimated $850 million in IRS funding to cover capital and operating expenses across both initiatives. An additional seven years at the same rate could mean a total of $1.2 billion in added tax credits, bringing the aggregate worth of the $85 per metric ton tax credit to $2 billion over the initial 12 years of operation for the Aemetis carbon sequestration wells. Finally, several provisions within the IRA legislation are also advantageous to the Aemetis Ethanol business, including a credit for low carbon intensity ethanol and $500 million for biofuels fueling infrastructure for a 15% to 85% blend of ethanol, as well as the adoption of the GREET model by Argonne Lab for accurate carbon intensity calculations of ethanol and other renewable fuels. These regulations are spurred by the need to decarbonize transportation, the demand for lower fuel costs as petroleum prices rise, increased focus on energy security, and greenhouse gas reduction efforts. Now, let's turn to our biodiesel business in India. The National Biofuels Policy was updated in India in 2022, aiming for a 5% blend of biodiesel, equating to around 1.25 billion gallons annually. This summer, three government oil marketing companies issued a tender to buy up to 180 million gallons per month of biodiesel. For the first time in 15 years, a pricing formula based on feedstock costs was utilized for the OMC tender, reflecting the actual production expenses for biodiesel in India. This pricing approach is expected to become the standard for future sales, fostering rapid growth in biodiesel production due to its predictability. After a brief delay due to testing and documentation requirements, we commenced biodiesel deliveries from our India plant in mid-September, successfully delivering $11 million worth of biodiesel during the last two weeks of the quarter. Production and deliveries have continued through late October, following an extension of the delivery period by the OMCs. We believe this revised purchasing process based on cost-plus calculations will sustain our production levels, despite ongoing uncertainty from the OMCs regarding procurement processes. Our glycerin unit is operational, converting about 10% of our biodiesel production into high-grade glycerin for the Indian market. We also plan to utilize the feedstock pretreatment unit for refining crude tallow for export to the U.S. and Europe, facilitating the production of renewable diesel and sustainable aviation fuel. Negotiations for refined tallow offtake agreements have been underway since early Q3, with production expected to begin in early 2023, followed by export shipments shortly thereafter. Given that our India subsidiary is debt-free and our biodiesel, glycerin, and tallow refining facilities are fully operational, we are well-positioned for continued high-yield performance.

Thanks, Eric. With the recent closing of our first $25 million financing that utilized the USDA Renewable Energy for America program, the Aemetis Biogas renewable natural gas project in California is on track to deliver on in-service dates in Q1 2023 for several key projects. We are completing construction and commissioning of five additional dairy digesters. Our contractor has installed 40 miles of biogas pipeline and is now completing feeder pipeline interconnections as well as testing and commissioning of the final sections. We have completed construction and are now in the final testing for the centralized dairy biogas to RNG operating facility and accompanying PG&E gas interconnection unit. The new digesters pipeline, upgrading facility and utility interconnection are expected to be fully in service in Q1 2023. After receiving CARB LCFS carbon intensity pathways for the RNG, the five new digesters plus the original two digesters that have been in service since 2020 are expected to generate approximately 200,000 MMBtus per year of RNG. While we await LCFS pathways for credit generation, we plan to store the RNG produced underground to preserve maximum credit value. Due to the high volume of LCFS applications, the CARB review process and approval process can take from six to nine months. We anticipate working closely with CARB staff to help facilitate a timely approval. We are currently in the advanced stages of closing a second $25 million USDA REAP financing. Operationally, we are focused on briskly executing the construction of dairy digesters to fill the Aemetis Biogas pipeline and the centralized cleanup facility and interconnection unit. We have signed almost 30 dairy leases or participation agreements and have multiple additional dairies in process. While continued supply chain challenges for items such as compressors or rainy winter weather could temporarily slow down project schedules, our existing backlog of new dairy digesters carries us into 2024. During 2023, we expect to be on track with the dairy digester rollout as described in the five-year plan. To date, Aemetis has been awarded $23 million of grants related to the biogas project from the California Department of Food and Agriculture, the California Energy Commission, Pacific Gas and Electric, and other government agencies for the dairy biogas project and the production of renewable natural gas.

Thanks, Andy. Let's discuss our Carbon Zero sustainable aviation fuel and renewable diesel project in Riverbank, California. In December 2021, after three years of negotiations with the City of Riverbank and the U.S. Army, Aemetis signed the acquisition of the 125-acre Riverbank Industrial Complex under a sale and lease agreement. The Riverbank site is a former U.S. Army ammunition production facility with 710,000 square feet of existing manufacturing space, a rail loop with storage space for 120 railcars on site, a 20-megawatt electricity substation and 100% zero carbon intensity renewal power with a direct power line connection to a hydroelectric dam. Earlier this year, Aemetis took operational control of the Riverbank site for construction of our sustainable aviation fuel and renewable diesel plant as well as the construction of the Riverbank portion of our CO2 sequestration well project. Additionally, Aemetis has completed the purchase of 24 acres at the Riverbank site and built a heavy equipment access road and well drilling pad for the soil characterization well and the carbon capture and sequestration CO2 injection wells. We have signed and announced more than $3.8 billion of sales contracts with Delta Airlines, American Airlines, Japan Airlines, Qantas and other airlines. We've now completed offtake contracts for about 45 million gallons per year, a blended sustainable aviation fuel to be produced at the Riverbank plant. Under the sustainable aviation fuel sales agreements, the Neat SAF will be trucked from the Riverbank production plant to the San Francisco Bay Area for blending with jet fuel. The blended SAF will then be delivered via pipeline to the San Francisco Airport for use by airlines. Incentives included in the pending federal legislation, I should say, that now past federal legislation, expand the market for sustainable aviation fuel by allowing a price to airlines that is competitive with petroleum jet fuel. We look forward to completing engineering and permitting in order to begin construction of the plant early next year.

We will now conduct a question-and-answer session. The first question is from Derrick Whitfield from Stifel. Derrick, your line is live. Please proceed with your question.

Thanks and good morning, Eric and team.

Thank you, Derrick. Good morning.

First and foremost, congratulations on closing the USDA REAP. I know it was a lengthy process for you guys and complex based on our discussions with the industry. Perhaps for the benefit of investors, could you share with us some of the lessons learned from the first loan and then your expectations on timing for the next few? It seems to us that, that process is truly earned out financing the expansion of biogas business as significantly derisked. And finally, if I could ask, maybe if you could also touch on financing plans and the levers you have at your disposal for the Riverbank RDA SAF facility?

We consider the first funding round of $25 million as a unique learning opportunity, both for Aemetis and in introducing the project to our commercial lender and USDA staff. Currently, we are revising the project documents without having to educate environmental and feasibility consultants again, as they are already knowledgeable about our project, as is USDA and our commercial lender. The paperwork mainly involves adjusting locations and amounts rather than changing the document structure. We've established special purpose entities to secure this funding, with $25 million being the maximum allowable under the REAP program per entity, and we've contributed around $11 million in equity through previously built assets. Our total investment is about $53 million, combining preferred equity and grants in the project. We are progressing toward closing the second funding in the next month or two, followed by the third, fourth, and fifth. We are ahead in terms of equity investment, construction, and securing dairy partnerships. Any developer should be aware that the initial education process can be lengthy due to environmental considerations and the USDA's committee process, which took from January 2021 to October 2022 in our case. Both the USDA and our bank demonstrate a long-term commitment, and Aemetis has shown our commitment too. Now that we've passed the initial learning curve, we expect shorter intervals between funding rounds. Regarding sustainable aviation fuel, we have a signed $125 million biorefinery assistance agreement with the USDA and are completing our EPC agreement with a major contractor. We've also acquired the necessary permits to begin construction, which are crucial for finalizing our project financing. Beyond USDA support, the California municipal tax-exempt bond market is attractive due to its low-interest rates, and the Department of Energy is actively supporting sustainable aviation projects. I will present on this topic on November 9 in Washington, D.C., joined by representatives from airlines. Our project has strategic support from both the White House and the DOE. Additionally, we aim to leverage the Inflation Reduction Act, which offers significant incentives over the next decade, allowing us to convert those into debt and equity opportunities. We currently have multiple markets open for expanding our SAF operations, with favorable conditions from the USDA at a 6.2% interest rate and a 20-year amortization. However, the current debt environment is challenging, and completing a transaction now, especially at appealing interest rates with long-term amortizations, is vital. A 20-year amortization is highly advantageous for our financing efforts.

Eric, just to clarify on the USDA loan, if I recall, that comprehended a 45 million-gallon facility and is expandable. Am I thinking about that correctly?

That's correct. We're building a 90 million-gallon facility, so your calculations are accurate. We'll be executing a larger transaction than the initial plan because we were originally going to proceed in two phases. However, the level of interest from our customers led us to double the capacity and undertake the project in one phase instead of two.

And as my follow-up regarding India, it was certainly nice to see a contribution from the business even if it was only for a couple of weeks. Could you comment on your expectation for biodiesel sales in Q4 and your view on when refined tallow production could start to show up in your financials and how that business can grow over the coming years?

Q4 is already one-third completed. As I mentioned, the orders we received for August and September were delayed until mid-September and into October. We have clear visibility on our October deliveries, which are completed. We announced total revenues of $41 million from all sources, and we have already shipped most of that, with two months remaining in the quarter, indicating a strong quarter from a revenue standpoint. We are anticipating the oil marketing companies to release the November tender, enabling us to continue shipping. We expect this to happen in November, which will significantly boost the Q4 revenues we have already recorded. As I previously noted, the procurement process has been challenging, but progress is being made that will allow us to operate our plant at full capacity. As the oil marketing companies become more experienced, we hope to eliminate the current delays and inconsistent shipping. Our tallow facility is fully constructed and ready for operation. We are currently in negotiations for our offtake agreements and are discussing partnerships with approximately five renewable diesel companies in the United States, aiming to finalize these agreements in the first quarter of next year to commence shipments.

Thanks Eric, thanks for your time.

Thank you.

Thank you. The next question is coming from Jordan Levy from Truist Securities. Jordan, your line is live. Please proceed with your question.

Thanks so much for taking the questions. Maybe starting on the biogas side, exciting announcement about the pref deal there. But I think it makes a lot of sense given the activity in the market, could you just provide a little more detail on the financing for that transaction and how we should expect that to kind of play out from a timing perspective?

The financing of the buyout or the financing of the underlying project?

Yes, the buyout.

Yes, we have a debt instrument opportunity and we have an equity instrument opportunity. We have a number of large counterparties starting with oil companies, but going to strategic trading and other companies who are very interested in that preferred. This is a negative 426 carbon intensity product. It's dairy renewable natural gas. It's not positive 30 landfill natural gas. And I would actually say we're just managing which relationship we want to have, maybe even extend into other factors of our business because our counterparties all have strong interest in sustainable fuel and renewable diesel as well as even low carbon ethanol. And so we've been spending a lot of time building long-term relationships. And I think this preferred is really the first opportunity people have to come in, in a meaningful way. And I expect there will be potentially a 100% preferred structure, maybe a 100% debt structure. But either way, it's going to be very accretive to our interest in the biogas subsidiary. What we're doing is we're cashing in on the comparables of that OPAL and then Archaea created for us. And this is the first opportunity for institutional operational companies to get into this business in a meaningful way with Aemetis.

Got you. That makes sense. Maybe bouncing over to the SAF side. Given the provision in the IRA for sustainable aviation fuel, I think it might be helpful if you could remind us how the offtake agreements you've signed for SAF and renewable diesel are generally priced and how the federal and state incentive flow through those?

The structure allows for all tax credits, Low Carbon Fuel Standard California credits, federal renewable fuel standard credits, and other incentives, including potential future ones, to fully benefit Aemetis until the fuel passes the flange into the customer's tank. Additionally, the actual value of the fuel we're selling is over $3 per gallon, which also goes to Aemetis. We are also receiving about a 10% premium on the price of jet fuel. For our customers, this contract structure means they can hedge against jet fuel prices while adding a 10% premium. They will also benefit from airline incentives like CORSIA, where airlines can trade credits among themselves. For instance, if an airline has more sustainable aviation fuel from Aemetis than required for CORSIA, they can sell those excess credits to other airlines. This premium increase can lead to significant revenue for Aemetis, while our customers can leverage credit sales to offset these costs. Ultimately, this means customers could end up paying a price similar to jet fuel, which is fully hedgeable, and it's very appealing for reducing their Scope 1, 2, and even 3 emissions when purchasing sustainable aviation fuel from us.

Very helpful. Thanks for taking my questions, Eric.

Sure. Thank you, Jordan.

Thank you. The next question is coming from Amit Dayal from H.C. Wainwright. Amit, your line is live. You may proceed with your question.

Is the 180 million-gallon per month figure related to the kind of merit that is available?

Amit, I caught about 25% of your question, but I understood that you're asking whether customers in India will continue to demand over 100 million gallons per month. They are aiming for a supply of 1 billion to 250 million gallons of biodiesel per year in India, representing a 5% blend of the country's 25 billion gallons of diesel. There's a tax law enacted earlier this year that is set to take effect in April 2023, around five months from now, which will impose an extra tax of $0.10 per gallon on diesel that is not blended with biodiesel. If a 5% blend is achieved, this translates to an extra cost of $2 per gallon of biodiesel, which companies may pay to avoid the $0.10 per gallon tax. We anticipate ongoing demand from oil marketing companies and private refiners in India to avoid this tax for not blending biodiesel at the 5% rate, which should contribute to a more stable market, particularly with a cost-plus structure in procurement from the oil marketing companies.

That was another equation. Just these seven are completed.

As Andy described, the end of this year, we'll have seven digesters in the commissioning and testing process expected to be what's known as in-service. We accepted from our contractor as meeting performance specifications in the first quarter of next year. We have an additional five that are already in the process of construction, permitting, environmental approvals, that sort of thing. So we're not waiting until these are in service in Q1 before we do the next five. We're actually in the process of those next five. What's really important for all of us to recognize though is a long lead time item here was the gas utility interconnection unit with Pacific Gas & Electric, which is in commissioning and testing now and expected to be in service in the first quarter and the centralized gas cleanup and the 40-mile pipeline. Those are the long lead time items. It took us probably three years to get the PG&E unit that had to be built by them, permitted by them, managed by them. It's their project. We just put up the many millions of dollars to build it, but they actually had to do it. That's behind us. What we are doing now is building rectangular dirt football field-sized digesters in these locations that have already been signed with customers. It's a much more rapid process. And with the same contractors doing the same thing they've already done 7x. So our ability to accelerate now, especially with the financing relationship with USDA working smoothly, I think is going to meet or exceed expectations in 2023.

Thank you. The next question is coming from Matthew Blair from TPH. Matthew, your line is live.

Hey Eric, congrats on the India biodiesel program going again. Could you share the EBITDA margin on those gallons in Q3? And I know it's just going for a couple of weeks, is that EBITDA margin, is that going to be a good run rate for Q4 and beyond?

We are continuing with the same contract for the deliveries we completed in Q4. The contract initially slated for August and September was postponed to September 15th and will extend through the end of October. Therefore, the margin remains the same, allowing us to apply the figures from there, which were 11 million for the quarter and 2.8 million. This aligns with our ongoing shipments for October. In the two weeks we've seen in September, we experienced approximately 1.5 times the monthly revenue expected for October, making for straightforward calculations. We implement winter specifications, which means we use a different feedstock during winter to maintain a lower cold flow plugging point suitable for colder weather. Consequently, we anticipate lower margins during the winter months. Nonetheless, we expect revenue to keep flowing and by mid-February, we will transition out of the winter specifications. India remains a warm country, and many of our customers begin making purchases early as a result. The key challenge in India is the procurement process, ensuring that we receive purchase orders on time every two months is our main concern, rather than production or winter specifications. The focus is on getting the OMCs to fulfill their tender offers.

Great. Thanks. And then on the RNG side, if I heard you correctly, the long-term target is 60 dairies and 1.65 million MMBtu of dairy RNG production. And then it sounds like you have seven digesters running by the end of the year with another five under construction. Do you have any more digesters that you've won, projects that you've won that you haven't started construction on yet? I'm just trying to get a sense of how far along are you on the 60 digester target?

Andy mentioned that we have around 30 signed agreements. Right now, our dairies are signing but expressing frustration about not being able to start construction until mid-2024, which is more than 18 months away. They want us to speed up the process. We have set a target of 66 in our five-year plan published earlier this year and will provide an update in February. About half of the target is already signed in various stages, and we are actively working to complete the other half in the next couple of years. However, dairy owners find it frustrating that a five-year plan means they have to wait four years before construction begins. We fully intend to expedite this. To clarify, we anticipate approximately 200,000 MMBtus per year from the seven operating agreements that will go into service in Q1. This figure will increase with five more projects added next year. Our five-year plan specifies an annual production target, starting with seven by the end of this year and growing in subsequent years.

Got it. Thank you very much.

Yes, thank you Matt.

Thank you. The next question is coming from Dave Storms from Stonegate. Dave, your line is live. Please proceed with your question.

Thanks for taking my question. I want to revisit the current credit environment. How do you see your ability to access the USDA REAP program affecting your competitive position relative to industry peers, or could this credit environment pose challenges for end users in the future?

We have credit in the way of loan guarantees. So we use the loan guarantee process to build the project. And then the tax credit, specifically production tax credits and investment tax credits, basically reimburse us for the cost of construction. In biogas, we're eligible for up to a 50% investment tax credit. So as we make investments to build assets, we then can submit for up to 50% tax credit for that one-time investment of building the asset. On a go-forward basis, we then get production tax credits for producing natural fuels. Our ethanol plant on the clean fuels initiative is expected to be eligible for some tax credit. Certainly, biogas, as a low carbon fuel, has potential for that sustainable aviation fuel, etc. These are production tax credits. And then in carbon sequestration, we have a different set of tax credits with Direct Pay features and the like. So now those tax credits are separate from the loan guarantees. Loan guarantees basically make our debt much less expensive, and far more important than that is about the time that we have to repay it. Most commercial banks today would be talking a 5- to 7-year term. That's almost impossible to build a biofuels facility and have it economic that you pay back all your debt in five to seven years. So a 20-year term and a year or so during construction did not even have to pay any principal is an extremely attractive structure for building these assets. And that's exactly what we closed with the USDA in the Renewable Energy for America program, and that's what we're going to continue to do in multiple phases of that program.

That's perfect. Thank you.

Thank you, Dave.

Thank you. The next question is from Ed Woo from Ascendiant Capital. Ed, your line is live. Please proceed with your question.

Yes, congratulations. My question is, what is your outlook for oil price and gasoline prices and its impact on demand for ethanol?

We think that oil prices are largely under the control of OPEC+, which means OPEC plus Russia. And there are only a couple of guys that have to cooperate to make that happen, and they're sitting in Saudi Arabia and in Russia largely. And they have expressed deep concern about letting the price of crude oil fall below $80. And they said that two weeks ago when they told Joe Biden, nope, I'm not going to increase production. I'm going to actually decrease the production by 2 million barrels per day in order to drive the price of crude oil up. It has fallen down into late $70s and they wanted to push it up above $85. So I think we're in an environment in which as long as those entities are reasonably cooperative, we've got $80 plus crude oil prices. And in the United States, we have refining capacity. Remember, it's not crude oil that you buy at the pump. It's actually gasoline, diesel or sustainability fuels, you have to add the profit of the refineries. Well, in California alone, we went from 22 to 15 refineries. So refineries have tremendous pricing power as you see in the, I think, it was a 500% increase in profitability of the major oil companies announced here in the last week or two. So that oil refining margin is an additional price at the pump, which is comparable to what is actually relevant to selling our biofuel. So put in crude oil prices at $80 or higher and then high refining margins according to the CEO of Chevron for at least three years, and that's a relatively stable oil pricing model for us to produce against. And then, of course, with the Inflation Reduction Act, we're getting encouraged to make lower and lower carbon fuels, which is the point of those incentives. It's to make dramatically lower carbon intensity fuels compared to these petroleum products.

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

Thank you.

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

Perfect. Thank you. Thanks for Aemetis shareholders, analysts, and others who joined us today. Please review the company presentation and the investor presentation that's posted on the homepage of the Aemetis website. We look forward to talking with you about participating in the growth opportunities at Aemetis.

Thank you for attending today's Aemetis earnings conference call. Please visit the Investors section of the Aemetis website where we'll post a written version and audio version of this Aemetis earnings review and business update.

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