Welcome to the Aemetis First Quarter 2023 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, Matt. Welcome to Aemetis’s First Quarter 2023 Earnings Review Conference Call. Joining us for the call today are 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 on the Investors section of the aemetis.com website. Before we begin our discussion today, I’d like to read the following disclaimer statement. During today’s call, we will be making forward-looking statements, including, without limitation, statements with respect to 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 are available from the company without charge. Our discussion on this call will include a review of non-GAAP measures as a supplement to financial results based on GAAP because we believe these non-GAAP measures serve as a proxy for the company’s source or use of cash during the periods presented. A reconciliation of the non-GAAP measures to the most directly comparable GAAP measures is included in our earnings release for the 3 months ended on March 31, 2023, which is available on our website. Adjusted EBITDA is defined as net income or loss plus, to the extent deducted in calculating such net income, interest expense, 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, certain cash grants, gain on litigation, depreciation expense and share-based compensation expense. Now let’s review the financial results for the first quarter of 2023. Revenue during the first quarter of 2023 decreased to $2.2 million compared to $52.0 million for the first quarter of 2022. Due to historically high natural gas prices in December 2022, we made the decision to idle the Keyes plant in our North America division and initiated an extended maintenance cycle, which extended through the end of the first quarter, allowing for the acceleration of several important ethanol plant energy efficiency upgrades. Working on the extensive plant maintenance and upgrade during Q1 of 2023 enabled the Keyes plant to avoid significant loss due to insufficient natural gas storage in the Western United States, which made continuing operations uneconomical. From December through March, exorbitant pricing for natural gas would have resulted in a significant loss for the ethanol business. Thus, management made the difficult but necessary decision to temporarily idle production. The Dairy Natural Gas segment produced 21,300 MMBtus from six dairy digesters, and the RNG was placed in underground storage to preserve carbon credits while waiting for approval of a low carbon fuel standard pathway for each digester. At an expected approval CI value of minus 427, this inventory represents meaningful future revenue that will be recognized once the pathways are approved. India Biodiesel recognized $1.5 million of revenue from private customers. Gross loss for the first quarter of 2023 was $1.3 million compared to a $3.1 million loss during the first quarter of 2022. Selling, general and administrative expense increased to $10.8 million during the first quarter of 2023 from $7.3 million during the same period in 2022, driven primarily by $2.7 million of fixed cost of goods sold charged to selling, general and administrative expense during the idle time. Operating loss was $12.1 million for the first quarter of 2023 compared to an operating loss of $10.4 million for the same period in 2022. Interest expense excluding accretion of Series A preferred units in the Aemetis Biogas LLC subsidiary increased to $9 million during the first quarter of 2023 compared to $6.3 million during the first quarter of 2022. Additionally, our Aemetis Biogas initiative recognized $5.6 million of accretion of preferred payment during the first quarter of 2023 compared to $1.6 million during the first quarter of 2022. Net loss reached $26.4 million for the first quarter of 2023 compared to a net loss of $18.3 million for the first quarter of 2022. Cash at the end of the first quarter of 2023 was $4.1 million compared to $4.3 million at the close of the fourth quarter of 2022. Investments in capital projects related to the reduction of the carbon intensity of Aemetis ethanol totaled $7.6 million for the first quarter of 2023. This completes our review of the first quarter of 2023. Now, I’d like to introduce the Founder, Chairman and Chief Executive Officer of Aemetis, Eric McAfee, for a business update. Eric?

Thank you, Todd. Thank you very much. Aemetis is focused on producing below-zero carbon intensity products and is executing the 5-year plan that is available to investors on the Aemetis homepage. Core activities to achieve the 5-year plan include extensive energy efficiency upgrades to the Keyes ethanol plant, the build-out of our dairy renewable natural gas project and the ramp-up of production at the India Biodiesel plant. Each of these core activities was achieved during Q1 while minimizing the negative impact of temporary extraordinarily high natural gas prices during Q1 2023. During Q1, we completed an extended maintenance and upgrade cycle for our Keyes ethanol plant that avoided significant losses during the quarter, but importantly, avoided future plant shutdowns that would have been required to install the upgrades. The result is an acceleration of our reduction of energy costs and driving down the carbon intensity of our biofuel through a number of plant electrification projects. We also accelerated the installation of an entirely new Allen Bradley decision control system with artificial intelligence capabilities, along with several other important process upgrades. While a top priority for Aemetis is to maintain our decade-long track record of continuously operating the Keyes plant to supply feed and fuel to local markets, doing so under the extremely negative conditions that developed late last year and continued into the first quarter of this year in California natural gas markets would have been irresponsible and unsustainable. Thus, we chose to use that short time period to conduct a significant plant maintenance program and pull forward many of the critical components of our energy efficiency projects. In the long run, this decision to focus on fundamental improvements in our energy efficiency will save us millions of dollars in project costs through avoided down days and lost production, and save time in completing the projects. We are currently working through plans that will allow us to restart the Keyes plant in the second quarter. Despite the temporary low revenues during Q1 2023, as we completed the planned upgrades and extended maintenance at the Keyes ethanol plant, we are excited about the strong and growing positive cash flow expected from biodiesel and renewable oil feedstock refining facilities coming into full production this year. Until the California Air Resources Board carbon intensity pathway approvals process is complete, and we are able to begin selling into the renewable natural gas market at its full LCFS value, we will be storing the renewable natural gas that we produce underground and carrying it on our inventory. Our sustainable aviation fuel and renewable diesel project continues to make steady progress toward full permitting in 2023, while our first carbon sequestration characterization well drilling permit is now nearing completion due to work during the first quarter of 2023. Also during Q1 2023, our India Biodiesel, glycerin and feedstock refining facilities started production in anticipation of the second quarter 2023 contracts with the three India government oil marketing companies. About $34 million of biodiesel contracts were issued to Aemetis by the three India oil marketing companies in Q2 2023, and deliveries are on schedule. The external political and regulatory environment for renewable fuels and the reduction of carbon pollution in the U.S. and India has improved significantly during the past year. The passage of the Inflation Reduction Act in August 2022 provides an estimated $400 billion of funding toward renewable energy and carbon reduction projects. However, the IRS has yet to issue guidance that clarifies the form for the transfer of higher-rate tax credits. Thus, the IRA investment tax credit to the Aemetis Biogas business generated during the first quarter of 2023 from placing six digesters, 40 miles of biogas pipeline and the renewable natural gas production facility with utility interconnect into service in late January could not be booked as a sale during the quarter. We have many interested tax credit purchasers and continue to make progress toward the sale of the credits on hand as well as several exciting inflation reduction act sale transactions that would provide funding for Aemetis projects during construction. The IRS has stated that guidance is expected to be issued in June 2023, at which time we expect to be able to close sales of the tax credits at a discount to the base value of the tax credits. The sale of investment tax credits is expected to be booked as other income and would generate a substantial amount of EBITDA, cash on hand and earnings. During the first quarter, the California Air Resources Board held an LCFS Scoping Plan Webinar, where their staff stated that carbon plans to significantly increase the number of credits required under the Low Carbon Fuel Standard program starting in 2024, significantly expanding the LCFS mandates and increasing the price of credits to more than $240 per credit in the next two years. The LCFS credit market reacted positively to the news from CARB and prices increased more than 20%, from about $65 to yesterday’s $86 LCFS credit price, which is a pricing freeze trend that we had expected and that CARB projected would occur. We believe that LCFS credit prices will continue to rebound to more than $200 per credit as the markets recognize the large number of LCFS credits that will be required to meet the expanded decarbonization goals set forth by CARB. These credits generate revenues for all of our U.S. businesses and indirectly benefit our India business that produces feedstock for U.S. renewable diesel and sustainable aviation fuel power refineries. Now Andy Foster, the President of Aemetis Biogas and Aemetis Advanced Fuels, will review highlights. Andy?

Thanks, Eric. With the closing late last year of our first $25 million financing that utilized the USDA Renewable Energy for America program, the Aemetis Biogas renewable natural gas project in California delivered in-service dates in Q1 2023 for several key components. We completed the installation and final commissioning of the 40 miles of biogas pipeline. We completed commissioning of the biogas to RNG upgrading facility. We completed commissioning of the RNG interconnection unit with the PG&E pipeline. We also completed four new digesters and now have six fully operating with the seventh digester being completed right now. With the expected funding of our second $25 million USDA guaranteed loan this quarter and a third funding plan for later this year, we are scheduled to begin construction of up to ten more digesters by the end of 2023, depending on the timing of the permitting and USDA financing. We have also signed a number of new additional dairies and now have approximately 40 dairies in the Aemetis RNG network. After receiving CARB LCFS carbon intensity pathways for RNG, these seven dairy digesters are expected to generate approximately 200,000 MMBtu per year of RNG. We have already submitted our RNG production data to obtain LCFS pathway approvals to begin generating LCFS credits. While we await the approval of LCFS pathways for credit generation, we are storing the RNG underground and carrying it as inventory. Operationally, we are focused on executing the construction of dairy digesters to fill the Aemetis Biogas pipeline, the centralized biogas to RNG production facility and the PG&E interconnection unit, all of which are operating now. Let’s briefly discuss progress at our California ethanol plant. As Eric already discussed, we are working on the restart of the Keyes ethanol plant to take advantage of strong demand for ethanol and distillers grains in California, creating a highly favorable margin environment. I would also note that during the Q1 period when the Keyes ethanol plant was idled and an extended maintenance and upgrade period, operations for our RNG business remained uninterrupted. Todd and Eric noted that beginning in December of 2022, unusually cold weather, coupled with insufficient natural gas inventory planning by California gas utilities and restrictions in the natural gas pipeline that feed California, caused natural gas prices to spike by more than 500% and stayed elevated during Q1 2023, creating an extremely unfavorable margin environment for ethanol production in California. We decided to turn this challenge into an opportunity to undertake an extended maintenance cycle and accelerate the implementation of several important ethanol energy efficiency plant upgrades during Q1 in this period of high natural gas prices. Our California ethanol plant upgrades will now allow us to operate using high-efficiency electric motors and pumps powered by low or zero-carbon intensity renewable power sources, including our solar microgrid and local renewable electricity. As a strong endorsement of our carbon reduction and energy efficiency projects, Aemetis has been awarded $16 million of energy efficiency and other grants by PG&E, the California Public Utilities Commission and other entities to supplement our own funding to complete these projects. Our goal is to significantly reduce or completely eliminate the use of petroleum-based natural gas at the Keyes ethanol plant. To put a finer point on it, when these projects are completed in 2024, we expect that natural gas usage at the Keyes ethanol production facility will be reduced by over 80%. This transformation from traditional natural gas to renewable electricity will put Aemetis at the forefront of decarbonized manufacturing facilities in California and is expected to reduce the carbon intensity of the fuel ethanol produced at the Keyes plant by double digits. In addition, upon restart of the Keyes plant in the second quarter, we plan to implement the use of ethanol production enzymes that will allow us to recognize a portion of our production as cellulosic ethanol, which currently qualifies for LCFS credits through a significantly reduced carbon intensity for the qualified cellulosic gallons produced, as well as a $1.01 per gallon federal tax credit. Additionally, the US EPA is working through a rule-making process to potentially qualify the enzyme-based process for a D3 cellulosic RIN. In summary, despite some unusual and challenging external headwinds in the first quarter of this year in our ethanol business, operational performance and project milestones for the Aemetis Biogas and ethanol plant business continue to be on track with the 5-year plan. Now I’d like to turn the call back over to Eric.

Thank you, Andy. Let’s review our growing biodiesel tallow feedstock refining and glycerin refining business in India. The national biofuels policy in India was updated in 2022 and is now being implemented to achieve a 5% blend of biodiesel that is equal to about 1.25 billion gallons per year. During the first quarter of 2023, the three government oil marketing companies issued tender offers to purchase more than ten times the entire production capacity of the Aemetis biodiesel plant under a feedstock plus pricing formula that was used very successfully last fall to bring biodiesel plants into full production in India. The tender offers were for delivery during the second quarter of 2023. Aemetis selected specific delivery locations and amounts, then received supply contracts for $34 million of biodiesel to be delivered during April, May and June of this year. The pricing formula and timing of the tender offered by oil marketing companies is expected to be the ongoing format for sales to the oil marketing companies. We expect the formula to be a successful mechanism for the rapid growth of biodiesel production in India due to the predictability of the pricing formula. Our plant in India is uniquely situated to benefit from the successful feedstock plus pricing mechanism since importing biodiesel or renewable diesel is not allowed under Indian law, and Aemetis owns and operates the largest production facility biodiesel plant in India. We are negotiating the sale of tallow feedstock that is refined by our tallow pretreatment unit in India for export to the U.S. for the production of renewable diesel and sustainable aviation fuel. We recently made breakthroughs in tankage locations at two delivery points in California and have two renewable diesel customers in late-stage contract discussions. Since our India subsidiary has no debt and the 50 million gallon per year biodiesel plant, the 50 million gallon per year tallow refining facility and the glycerin plant are fully constructed, we are well positioned for profitable operations at full capacity as we scale up operations this year. Let’s discuss our carbon zero sustainable aviation fuel and renewable diesel project in Riverbank, California. A year ago, Aemetis took operational control of the 125-acre Riverbank site for the construction of our sustainable aviation fuel and diesel plant, as well as the Riverbank portion of our CO2 sequestration well projects. 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 of sustainable aviation fuel to be produced at the Riverbank plant. In addition, we signed a $3.2 billion renewable diesel sales agreement to deliver 45 million gallons per year under a 10-year sales contract with a major travel stop chain for its Northern California locations. Incentives included in the recently passed IRA legislation expand the market for sustainable aviation fuel by allowing a price to airlines that is about 10% higher than petroleum jet fuel, which is partially or entirely offset by CORSIA carbon credits generated by the airlines. During Q1 2023, we continued to make steady progress toward air permits and other building permits for the 90 million gallons per year Riverbank SAF RD plant. We look forward to completing engineering and permitting in order to begin the construction of the Riverbank renewable jet diesel plant later this year. Let’s review our subsidiary, Aemetis Carbon Capture. Aemetis captures 150,000 metric tons per year of CO2 emissions from our ethanol plants near Modesto while it is operating and reuses the CO2 for local customers. In Phase 1 of the Aemetis Carbon Capture project, we plan to inject up to 400,000 metric tons per year of CO2 emissions produced by our biogas, ethanol and jet diesel plants into two sequestration wells, which we plan to drill near our two biofuels plant sites in California. We expect to construct two CO2 injection wells that each have a minimum of 1 million metric tons per year of injection capacity, with additional CO2 supplied by other emission sources to sequester a planned total of more than 2 million metric tons per year of CO2. During 2022, Aemetis completed the purchase of 24 acres at the Riverbank site and built a heavy equipment access road and a well drilling pad for the soil characterization well to provide data for our EPA Class V injection well permit. The initial phase of construction includes drilling two characterization wells to provide empirical data for the EPA Class V permits. We expect to receive our first well drilling permit for the Riverbank characterization well in the next month, which is on track with our well development plan. The direct pay feature of the Inflation Reduction Act provides a federal tax credit of $85 per metric ton of CO2 as a cash refund to Aemetis each year for the first five years of production. The planned 2 million metric tons of CO2 per year from the Aemetis Carbon Capture project would generate an expected $170 million per year from the federal direct pay tax credit, as well as an estimated $400 million per year at a projected $200 per tonne of sequestered CO2 from the low carbon fuel standard in California. We believe the fixed amount of $850 million provided by the direct pay funding under the Inflation Reduction Act over the first five years of the project could support funding the estimated $250 million capital cost of the two injection wells and related equipment. In summary, Aemetis is recovering from the temporary exorbitant pricing of natural gas in California during the first quarter of 2023. With this extraordinary event behind us, we are in the process of restarting the Keyes plant and expanding a diversified portfolio of negative carbon intensity projects: dairy renewable natural gas, biodiesel in India, sustainable aviation and renewable diesel fuel, low-carbon ethanol using zero carbon intensity electricity and renewable hydrogen, and CO2 sequestration. All of these projects are synergistic and create what we refer to as a circular bioeconomy within Aemetis in which we use byproducts or waste products from our facilities and local areas as feedstock to produce low- and negative-carbon intensity renewable fuels. Our company’s values include a long-term commitment to building value for shareholders, the empowerment of and respect for our employees and business partners, and making significant and positive contributions to the communities we serve. Let’s take a few questions from our call participants. Operator?

Thank you, Mr. McAfee. We will now be conducting a question-and-answer session. Our first question is coming from Amit Dayal from H.C. Wainwright.

Eric, just on the RNG side, how many MMBtus by the end of June do you think you’ll have in storage? And could you maybe share your internal thinking on how much you may get for this once you have the guidance on the ITC?

We reported on the Q1 report how many we had in storage. At the end of Q1...

I was talking more about by June, how much you think you might have, sorry.

Yes, I don’t have that in mind, but it would be linear. So the six operating digesters would actually be increasing slightly as we get out of the winter, which is colder in California. These are solar dairy biogas digesters so as they warm up during the summer, we get more production, much like you would get out of a solar farm. So we can get that data, and we’ll include it in future communications. Regarding the value per MMBtu, California low carbon fuel standard value, as we know, they went from $65 to today over $86 just in the last few weeks and probably six weeks of trading, but CARB itself on Slide 51 of their webinar cited that over the next 22 years, they expect more than 20 years to exceed the price cap, which is over $250 per credit. We think as traders realize that, that CARB’s not only intention, but what they’re going to actually do very quickly, the price of the credits will exceed $200. So we generate a negative 427 permanent intensity, over 500 LCFS credits, about 10 times as much as a landfill project would for an equivalent volume of MMBtu. So we will be providing more clarity on this, especially as we start pulling out of the ground and shipping it. But our focus is on not selling this product at low LCFS prices. And just in the last month or so, you’ve seen a 25% increase in the value of that inventory in the ground. It’s because we’ve been going long. We have projected ever since a couple of years ago that this recovery would happen. It’s now happening. And so we are taking a long view, not the short view. By inventorying the product as we get carbon approval, the value should end up easily above $100, potentially above $150 as we get CARB pathway approvals and start moving the product. So we also have the federal D3 RIN currently at roughly $2, and next month, the EPA announces its first government-issued mandate, let’s call it, the first 15 years of the program since 2007, it was set out in legislation. This is the EPA’s first opportunity to show that the President is actually committed to decarbonization. And we should see a recovery in D3 RIN prices if that comes to pass. So we think betting, again, long on D3 RINs. Under the previous administration, they were $3.40 per RIN. They are $2 a day under a president who would like to support decarbonization. So we would be looking for recovery of those prices, again, putting the inventory on the ground allows us to preserve that future opportunity to participate in the price increase.

Understood. And then do you think you’ll get clearance to recognize revenues for all the six or seven digesters, or will this be staggered through the course of ‘23?

It’s going to be staggered because of the physicals coming out of the ground. The biggest uncertainty is a decision we have not announced yet. When we get an EPA approval, which we expect by the end of this quarter, do we just ship with what’s called a temporary pathway in California; it’s negative $150 million, and we generate revenue, but it’s going to be short of our revenue potential when we get our final pathway. We’ll make that decision in June or so, but we certainly could start generating a significant amount of revenue, frankly, be positive cash flow from operations just by deciding to not wait for final CARB pathway approval. We are definitely intending to work with CARB and make sure that approval is expedited. And so that’s one of the reasons why we’re waiting until the end of June, because if we can get expedited pathway approval through CARB, which we’ve been successful in doing in the past, then we’ll just wait until we have our full pathway approval. And there’s a significant amount of money. I mean, we’re taking millions of dollars of benefit for us to wait until we have our negative 427 pathway.

Understood. And then just for the India Biodiesel deliveries, what kind of cadence should we think about in terms of how revenues will potentially come in? Is it equal amounts spread through the course of 2023? Or will it be weighed more towards the near term versus maybe the fourth quarter?

The Indian government and three oil marketing companies have expressed their commitment to improving procurement to ensure our plant operates continuously without interruptions. We anticipate some delays at the start of each quarter as paperwork is processed. However, we expect to manage this by maintaining inventory and shipping during the quarter, leading to a stabilization of revenues. We secured $34 million in contracts for the second quarter, covering April, May, and June, and production began in March. The plant was operational in the first quarter, but revenues were not reflected due to contract delivery starting in April, despite the contracts being finalized in March. A similar situation is expected for July, with production in June for July deliveries. We believe that by late July, the paperwork will be completed, allowing us to deliver while considering the quarterly outlook. This current quarter utilizes only about 70% of our total production capacity due to our cautious approach to commitments. As the procurement cycle improves, we’re projected to increase from around $35 million to more than $50 million in quarterly revenues from India. The primary uncertainty lies with the pace of paperwork processing. Nevertheless, there is a clear commitment, and if the process remains smooth, our revenues in India will grow each quarter, though we might see a slight dip during winter months. Given that we are only operating at 70% capacity, this may not be very noticeable. We are expecting significant growth in our India business. Additionally, we currently do not report any revenue from our feedstock business, which is increasingly recognized as essential for the profitability of renewable diesel and sustainable fuel plants. We operate the largest tallow-refining plant in India with no debt and full operational capacity, yet show zero revenue. Once we finalize our contracts and logistics in California, this segment could match the size of our biodiesel business. Overall, India represents an exceptionally positive opportunity for us.

Understood. And then with respect to the Keyes plant, now that you’ve had a chance to make some of the improvements that you are looking to make, how should we think about margins from this facility given that you can recognize some of these improvements in your selling price?

The improvements are going to be recognized gradually over the next six quarters. Today, we’re just getting the benefit of E15 being approved for this summer. That means a lot of ethanol that otherwise would come to California, produced by Midwestern producers, will not. It will go to the East Coast, down to the Gulf or stay in their own states. This is the second summer that 15% ethanol blending has been allowed. The EPA had already proposed that next year, it would be basically finalized. So we’ll see a rapid expansion in availability of less expensive, less polluting, domestic renewable E15, 15% ethanol. What’s pretty remarkable is, as an industry, the entire U.S. capacity is about 17 billion gallons. If you take the U.S. gasoline market and multiply it by 10%, 15%, it’s over 20 billion gallons. So we don’t even have the physical capacity to produce E15 across all vehicles in the United States. This is a shift from too much ethanol to too little and a need to invest in additional facilities, primarily driven by low-carbon feedstocks. This news was taken with a shrug by the market. I don’t think people understand the market dynamics of the commodity and which demand exceeds supply. But as they look at margins, certainly in our business, the margins in California are at high marks right now, and with a lack of supply coming on California, we perceive that there will be some future margin expansion just because the E15 function and crude oil prices remain elevated. So ethanol continues to be a very low-cost and low-carbon solution for buyers of gasoline.

Just last one, Eric, on the cash needs and your balance sheet with respect to all these initiatives, how are we managing through what your requirements are right now? Are there any plans to tap the capital markets, et cetera, just to fill some of these gaps while maybe these RNG revenues come into play for you?

We structured the company so that each project is a project financing in and of itself. Biogas, we closed $25 million of 20-year financing last October. We have another $25 million, we’ve announced we’re scheduled to close this quarter and another $25 million later this year. We’ve already put $53 million of equity and grants in that project. So there’s no additional equity required. When you look at our biogas business plan, investors should understand, there is no need for capital other than for us just to use the renewable energy for America program, which we already qualified for, and we continue to actually improve the pace in which we’re completing those fundings. So you can just take biogas and set it aside, especially as we flip the switch and turn positive cash flow as early as next month if we decide to go ahead and take the revenue early. It’s operationally positive cash flow and the project is fully funded. It’s just not needed. The ethanol plant with this restart is positive cash flow; there’s no capital required to expand that business. We have $16.7 million of grants we’re spending. So it’s primarily grant-funded expansion, having already put in our equity. Thus, largely, our projects are grant-funded with maybe one little exception, but will be funded through internal cash generated there. You can take the ethanol plant and set it aside. I don’t have to worry about it. India is debt-free. So India Biodiesel, India glycerin, and India tallow don’t have to worry about it. They’ve got a large cash balance, and they’re just growing the cash balance. It can be set aside. I don’t have to think about that one. The jet and diesel plant, we have over $30 million already invested in it, and we’ll do one project financing. The Inflation Reduction Act has an opportunity to support sustainable aviation fuel directly in the same way that solar and wind is supported by the tax credits that are generated over time as your solar and wind project works. We have multiple markets, not just counterparties, but multiple markets that have come to us, which would enable us to fund our sustainable jet and diesel plant without additional equity from us. We have put in $40 million in 5 years of work and $7 billion of offtake contracts, permits and engineering and all that; that’s the heavy lifting we need to do. So between now and the stall, our job is simply to complete engineering, and we’re looking for support from our existing lines of credit to do that and the inflation reduction tax credits, which we’ve already created to assist us in making that easy. So existing credit facilities and inflation reduction tax credits allow us to get to a project financing, which has no dilution to the common shareholders' success. It’s purely a debt financing over a long period of time, 20 years plus. As a reminder, we have a signed USDA loan guarantee commitment. It’s called a conditional commitment letter for that project. The carbon sequestration is very easy. I noted in a month or less, we’re expected to announce that we have a permit for our first well drilling; existing credit facilities and existing tax credits on our balance sheet that we’re in the process of selling, fund the characterization well. The EPA providing process is not very expensive. Thus, 1.5 years from now is when we actually start talking about financing the capital budget to build out the facility. But what’s so unusual is we are our own producer of CO2. So unlike many other projects that don’t control their CO2, we control it. We’re ideally situated for a USDA or other debt structure, making it a perfect structure for the kind of debt we’re already using in another project. When you break it down that way, it’s really about just getting the operating margin from our existing facilities to scale up. India is already showing very strong positives. We generated over $8.5 million of positive cash flow in the fourth quarter last year from India, primarily in the latter half of the third quarter as well.

Your next question is coming from Derrick Whitfield from Stifel.

Eric, so today, your stock is down quite meaningfully, while the market response seems a bit aggressive relative to what you announced, we sense that investors are increasingly focused on resolution to your preferred, which is scheduled to convert into a credit agreement in June. Could you offer any color on your latest action plan regarding refinancing the preferred or if you plan to use your business to cash flow, some element of that?

There are three potential outcomes regarding the preferred situation. The first is an extension, which is what we did in December after a similar discussion last fall. This is the most likely outcome. The second option is a partial or full refinance of the debt instrument since the biogas project is operational, all the infrastructure is complete, and the USDA is funding the projects. We do not need external funding to complete the project; it is entirely a discounted cash flow analysis. With the significant increase in LCFS credits and potentially rising D3 RINs following EPA announcements, we are well-positioned for refinancing. Additionally, we expect to generate over $150 million in investment tax credits throughout the $380 million project, with a portion already completed. We may also sell inflation reduction act tax credits to help meet redemption needs. The third possibility is converting to a note. There is no dilution effect from moving from preferred stock to a note — it simply changes its position on the balance sheet, as both forms are obligations of the company. Our accountants have treated this as a debt instrument for the past four years, and our profit and loss statements have already accounted for the costs as if it were debt. The designation as preferred stock has not affected its treatment in our financial records. If we do proceed with the conversion, it would purely be a name change, as we already have everything in place. In any of the three scenarios, there will be no dilution for shareholders. The biogas project is robust, and not only is the enterprise value strong, but the cash flows are also increasing as we make decisions on when to begin generating revenue. It’s a solid business with a monopoly-like position that institutional investors quickly recognize and want to be involved with. While we anticipate refinancing with some institutional lenders, it is not essential for the project's success, which does not require external capital for the actual buildout. I understand investors' concerns about the unfamiliar parties involved, but the relevant stakeholders have been very supportive of the company and will likely continue to be. They see significant value in our biogas business and have opted for a lower return for more certainty, benefiting our shareholders in the process. The original arrangement was set for December 2024, and they have opted for certainty over more potential upside.

Terrific. And with regard to the ITC, could you comment on your expectations for timing and amount as you understand it today?

There are two types of tax credits: the investment tax credit, which is based on the investments we make, and typically accounts for around 40% of that investment as a tax credit. The other is the production tax credit, which will begin in 2025 under the clean fuels provisions of the Inflation Reduction Act. Currently, we are primarily discussing investment tax credits. Over the life of the project, we anticipate around 40% of approximately $380 million will translate to about $150 million in credits. Some argue that this figure may be too low and that it should be closer to 50%, but we're not pushing for that. The IRS is expected to announce by June of this year how to transfer these credits. The unique aspect of the IRA is that it doesn't require bringing an investor on as a part owner of the project, which was a necessity in solar and wind sectors. Instead, we can transfer credits to one taxpayer at a time through a certificate process. There isn't a trading market for tax credits; the transactions will be between us and a single investor, although we could have up to 50 investors in a single project. The specific ownership stakes each investor acquires still need to be determined, as we don't currently have a form to file that indicates a tax credit sale. This missing guidance from the IRS is highly anticipated. Once it is issued, federal taxpayers might question why they haven't contributed to an inflation reduction project, as they would still need to meet their tax obligations. They could either pay the full tax bill or a reduced amount through us, payable when they need to fulfill their IRS obligations. There is likely to be significant interest from investors eager to secure these opportunities in quality projects that offer high decarbonization benefits, especially in biogas. We believe this market will be strong, but we first need the necessary forms. Transactions are challenging without clear direction from the IRS. While we may have some favorable developments soon, we expect to wait for the guidance to be released and anticipate that sales will occur in the usual course of business, likely in the third quarter.

And Eric, one last for me, if I could, just because I want to make sure to be clear on the topic today. I’m showing a very positive cash margin for a generic ethanol facility at present to the tune of about $0.50 per gallon. Understanding that, that is a generic number, how does that square with your calculations inclusive of plant upgrades at Keyes?

California cash margins are in that range right now, and actual operations in California are currently generating that kind of number.

Your next question is coming from Matthew Blair from TPH.

Hoping you could provide just a little bit more color and update on the overall debt picture. I think there was some debt that was scheduled to mature in April, the revolver, some term notes. What’s the status on that? Was that extended or refinanced? What’s the status there?

Yes, I’d be happy to. Those facilities included provisions that allowed us to extend the notes, and we exercised those options and extended the notes.

And did that come at the same rates?

Yes. The rates were not changed as a part of the extension. There was an extension fee that was paid for that option, but the rates stated in the original notes remained.

Okay. And then on the India Biodiesel sales for Q2, are you expecting a similar margin as we saw in Q3 and Q4? Or with lower oil prices, will that have an impact there? And then also, have any of the tenders gone through yet for Q3? And if not, when approximately would you expect those to go through?

We expect a lower margin than what we had last time. Not dramatically lower, but let’s call it a moderated margin than we have before. If you take the numbers forward moderately and slightly, we’re in the range, but it’s not quite as robust. We expect the next procurement cycle to start in June or July, August, September, and October. We expect that the remaining part of the summer specifications will be all in one tender offer. As you can imagine, we’re being very proactive with the oil marketing companies and trying to move the paperwork quickly so that we don’t have a gap starting July 1. From a production perspective, we continue producing the product, and we would ship more in the three-month period or something that there was some delay in the paperwork. It’s that confidence that they have in the underlying demand that has been created through the first tender offer last fall, the second one now, the third that’s in the process. They definitely want to buy the product, and the volumes they’re requesting are significantly more than anything the industry could produce. We know where we’re going, which is they want us to expand production to meet the demand there.

Okay. Great. And then last question. You mentioned that the dairy RNG was put in storage in Q1. So it looks like your inventory on the balance sheet rose by about $8 million from the end of 2022 to the end of the first quarter. I understand there’s probably a lot of things that go into inventory, but is that the starting point that your stored biogas would generate roughly $8 million of revenue?

Let me give you just a perspective on that. When we initially injected the carbon value, the low carbon fuel standard value was around $65. Today, it’s at $86, and when we actually pull it out in terms of revenue, it should be higher. CARB is saying it will be $250 if we’re willing to wait three quarters from now. The value of that inventory is changing. I would focus on the number of MMBTUs and then multiply it by the current valuation in the marketplace or your own feeling of what the market is going to do. Both D3 RINs and LCFS credits comprise over 90% of the value of that inventory. The actual storage value is changing per day as LCFS prices go up and in a month as EPA sets up new D3 RIN obligations.

Your next question is coming from Jordan Levy from Truist.

This is Henry on for Jordan. In the past, you guys have mentioned a potential spin-off of the India Biodiesel segment. Just curious if that’s something you’re still thinking about or might come back to the table. Or if there are any other kinds of strategic transactions you’re looking at in that space?

India Biodiesel is a very bullish part of our business right now. Since it’s illegal to import biodiesel into India, it’s obviously a great opportunity for global companies to get exposure to the Indian market. In India, there are four domestically owned businesses, and there’s us. We’re the only foreign-owned biodiesel producer, and we’re the largest in the country. We are not currently in discussions on a strategic arrangement with an oil company or a private equity firm. We did have very extensive investment banker meetings and they’re standing by, waiting for a phone call from us to do an IPO in India. The IPO market in India is structured to favor the offering company with a high valuation. As a result, you can raise a lot of cash quickly in India. We believe we need to put up a couple of quarters and have continued positive trends with our tallow business, and we have a significant opportunity in India, but probably not this year. I think we’re talking about next year. So I don’t want to leave anybody with the expectation that we’re hopping around looking for a Q3 or Q4 transaction. What we’re looking to do is show our scale up, which is very significant, both in revenues and margins, and our strategic position is fantastic. We believe we’ll be probably, if not the best beneficiary of the renewable fuels and biodiesel business in India, certainly the top two. I don’t even know who the other one would be out of the five; we know very well the other four. We are excellently positioned to do a public transaction in India.

Awesome. And then just a quick follow-up. Going to the digester side, I know you mentioned the plan to bring online about ten more digesters by year-end this year. Any headwinds or risks we should be looking at in terms of bringing that on? Or is that a pretty conservative number from year-end?

To be specific, we’ll be constructing ten more. I just want to ensure we have the correct phrasing. We’ll have additional projects coming online, but some will be filling, and some will be under construction, etc. I do expect the pace to increase because the challenging part, which includes the pipeline, the RNG facility, and the interconnect, is complete. Right now, we are focused on building these rectangular piles of dirt with layers of rubber in a skid along with some processing equipment. This is a process we can replicate. Our pace is aligned with USDA funding, which actually dictates our speed. We are not introducing $25 million of new equity that would dilute shareholders; instead, we are utilizing $25 million of USDA funding this month without affecting shareholder equity. Our goal is to continue improving and securing that 20-year financing at low-interest rates backed by the USDA. That’s essential for their program's success, and that’s what we’re working on.

Your next question is coming from Ed Woo from Ascendiant Capital.

Yes. Can you talk about the logistics involved with getting the Keyes plant back up? And how long or how quickly can you get it back to full capacity?

Sure. The logistics are relatively straightforward. It’s corn supply, which currently, railroad shows some improvement over last year. As far as the physical plant start-up, it probably takes about, I’d say, a week for us to get back to full production, maybe 7 days, maybe 10 days, but it should be relatively quick. As we’re finalizing our plans, we should be able to enter the market relatively quickly. I think it’s pretty straightforward.

Great. And I wish you guys good luck.

Your next question is coming from Dave Storms from Stonegate Capital Markets.

My question concerns the Keyes plant. Can you quantify how the economic viability of operating that plant has improved after implementing all the upgrades you talked about? And how that may even get better as you complete the upgrades through the end of this year?

Let me take that on initially, and then I’ll have Andy wrap it up. We have two factors. Number one is external commodity price factors. In the first quarter, the price of natural gas was tremendously high; it hit a high of $83 intra-day trading, and it usually sits around $5 or $6. This drove us to make the decision to accelerate our upgrades and do basically a 10-year plant maintenance cycle, which positions us tremendously for lower costs and a more sustainable operation. That external market has now moved to being very favorable. E15 has created overall demand in the U.S. that’s much higher over the next three or four months because the retail stations are no longer forced to sell only 10% ethanol during the 3-month summer driving season; now they can sell 50% more. As a result, the California market will not receive as much ethanol from the Midwest as we usually do. This external market for natural gas prices has recovered to where it was roughly six months ago—good price for ethanol, reasonable price for corn, and good price for natural gas. Internally, our upgrade projects will provide a fundamental lower cost of operation. We spent over, let’s call it, $1 million a month on natural gas. As we get rid of 80%, that’s a permanent $800,000 a month or $10 million a year improvement in our economics. Andy, you want to talk about the phasing of adopting the Solar, MVR, and ZEBREX process over the next year or so?

Sure. To echo what Eric said, there are two ways to look at it: the short term, which is the current market. As Eric mentioned, from the price of corn to the price of ethanol and the tight supply in California, the crush margins in California look pretty positive. I’d say, through the summer, we expect that to continue. South America is going to show a strong corn crop; Midwest farmers are planting too early to predict anything about this year’s corn crop. However, the carry seems to be significant. There was some activity in terms of corn purchasing by China, and a couple of those were canceled. So I think people are comfortable with the current supply, and pricing seems to have calmed down from where it was over the last few years. So in the near term, at least through the summer, I believe we see a positive market from the ethanol perspective in terms of a crush margin. As for the improvements we’re making at the plant, we’re transitioning from using natural gas to electricity, which is significant. We’ve already brought in the Mitsubishi ZEBREX dehydration system, which we’re continuing to adjust as we go along because frankly, it’s the largest installation they’ve ever done. It’s had some hiccups, but when running, we’ve seen over a 20% reduction in our natural gas consumption, which is a significant savings. The next step will be mechanical vapor recompression using our existing cogeneration facility that uses a lot of natural gas to make steam and subsequently uses large turbofans to generate heat. By the end of these two implementations in 2024, we expect a double-digit reduction in our CI for the ethanol produced at the Keyes plant, which positions Aemetis as a leading low-carbon ethanol producer. The overall operational performance and project milestones for Aemetis Biogas and ethanol plant business remain on track with our 5-year plan.

That concludes our Q&A session. I would like to turn the floor back over to management for closing comments.

Good. Thank you very much. We want to thank all of you for spending time with us today, and we look forward to further discussions about our plans. We invite you to review the Aemetis company presentation that’s posted on the homepage of the Aemetis website. Todd?

Thank you for attending today’s Aemetis earnings conference call. Please visit the Investors section of the Aemetis website, where we will post a written version and an audio version of this earnings review and business update. Matt?

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