Aemetis, Inc Q4 FY2023 Earnings Call

Good afternoon and welcome to the Aemetis Fourth Quarter and Year End 2023 Earnings Review Conference Call. At this time, all participants are in a listen-only mode and 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, Incorporated. Mr. Waltz, you may begin.

Thank you, Ali. Welcome to Aemetis's fourth quarter and year-end 2023 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 North America. 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 aemetis.com. 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 regarding our future stock performance, plans, opportunities, and expectations regarding 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 the call today 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 sources or uses of cash during the periods presented. A reconciliation of non-GAAP measures to the most directly comparable GAAP measures is included in our earnings release for the three months and year ended December 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 on extinguishment, loss on lease termination, USDA cash grants, income tax expense, intangible and other amortization expense, accretion expense, depreciation expense, gain on litigation, and share-based compensation, plus income tax benefit. Let's review the financial results for the fourth quarter and year-end of 2023. Results for the three months ended December 31, 2023: Revenues were $70.8 million for the fourth quarter of 2023, an increase from $66.7 million for the fourth quarter of 2022. The ethanol gallons sold increased from 13.4 million gallons during the fourth quarter of 2022 to 15 million gallons during the fourth quarter of 2023. Biodiesel sales of 18,300 metric tons were recorded during the fourth quarter of 2023 at $1157 per metric ton. Our California ethanol segment accounted for $45 million of revenue, and our India Biodiesel segment accounted for $22 million of revenue during the period. Cost of goods sold increased from $67.9 million during the fourth quarter of 2022 to $69.9 million during the fourth quarter of 2023 due to an 18% increase in feedstock costs from the incremental sales in our India Biodiesel segment coupled with an increase in corn ground from 4.3 million bushels during the fourth quarter of 2022 to 5.2 million bushels during the fourth quarter of 2023, offset by a 33% decrease in the average delivered cost of corn. Gross profit, selling, general and administrative expenses, and operating loss were consistent between the fourth quarter of 2022 and 2023. Net loss was $25.4 million for the fourth quarter of 2023 compared to a net loss of $22.4 million for the fourth quarter of 2022. Cash at the end of the fourth quarter of 2023 was $2.7 million compared to $4.3 million at the end of the fourth quarter of 2022. The financial results for the 12 months ended December 31, 2023: Revenues were $187 million for the 12 months ended December 31, 2023, compared to $257 million for 2022. During 2023, $77.2 million of revenues were generated by the India Biodiesel segment, $55.5 million of revenue were generated by the California renewable natural gas segment and $104.3 million of revenue were generated by the California ethanol segment. We idled the plant during the first five months of 2023 due to historic and unexpectedly high energy costs and took advantage of this period to lead various maintenance and plant efficiency projects. Gross profit for the 12 months ended December 31, 2023 was $2 million compared to a gross loss of $5.5 million during the same period in 2022. Our India Biodiesel segment accounted for $9 million of gross profit from sales of biodiesel for the year ended December 31, 2023. Selling, general and administrative expenses increased to $39.3 million during the 12 months ended December 31, 2023, compared to $28.7 million during the same period of 2022, attributable in part to the reclassification of expenses from cost of goods sold during the extended five-month maintenance and upgrade cycle for the Keyes plant in early 2023. Net loss was $46.4 million for the 12 months ended December 31, 2023, compared to a net loss of $107.8 million during the same period in 2022. Investments in our low carbon initiatives increased property, plant and equipment by $33 million while debt repayment of $51.3 million was made to our senior lender during the 12 months ended December 31, 2023. Now, I'd like to introduce the Founder, Chairman, and Chief Executive Officer of Aemetis, Eric McAfee, for a business update.

Thanks, Todd. We released the updated Aemetis five-year plan about two weeks ago, and we encourage investors to closely review the extensive information provided in the presentation, which is available on the homepage of the Aemetis website. Before discussing the many milestones we achieved in 2023, let's talk about financing. Understanding how Aemetis plans to continue to grow rapidly in the current market environment is a key part of our five-year plan. The first important point regarding the Aemetis funding plan is that the financing of our projects is being completed on a project finance basis for each subsidiary. Thus, the debt position of the Aemetis parent company does not impair our funding of new projects. I make this point to clarify any suggestion that our well-established financing relationship with Third Eye Capital is somehow constraining our project financing or the growth of our company. In fact, the opposite is true. Third Eye Capital has been integral to our success in providing project development funding and then obtaining long-term project financing from our other lenders, enabling Aemetis to receive $50 million of 20-year financing in just the past year. We expect more than $100 million of 20-year financing for Aemetis Biogas capital expenditures to close in the current year in addition to other significant project financings that are in process now. Third Eye Capital is a primary beneficiary of the long-term lower interest rate project financings provided by other lenders, as the excess cash flow from these new projects is expected to continue to reduce the amounts outstanding to Third Eye Capital. Rather than being a hindrance to the growth of Aemetis, for the past 15 years, Third Eye Capital has been funding the growth of our initiatives and continues to support Aemetis in attracting 20-year financing from other lenders for new projects that create new revenues, new cash flow, and new debt repayment capabilities. The second important point about financing at Aemetis is our long relationship with the U.S. Department of Agriculture, which is a major provider of loan guarantees that enable 20-year financing for projects. Over nearly two decades, Aemetis has built strong and productive relationships with several top leaders at the USDA, as we share similar goals of strengthening the agricultural sector by creating a new energy market for agriculture and agriculture waste products. Our board member for the past 15 years, Jack Block, a former secretary of the USDA, has been extremely helpful in this shared vision and collaboration. Our positive relationships at the USDA are key to our confidence in USDA programs, such as the Renewable Energy for America program known as REAP that support renewable fuels projects. These USDA programs have already guaranteed funding of 20-year financing for the Aemetis renewable natural gas business and can also provide government guarantees and 20-year financing for sustainable aviation fuel, the conversion of our ethanol plant to use electricity instead of petroleum natural gas for power, and our carbon sequestration projects. A third important point about financing at Aemetis is that we have already fully repaid our long-term debt at our India plant and have been generating strong positive cash flow from India biodiesel production operations over the past two years under cost-plus pricing with government-owned oil refineries. This strong financial position has allowed the India business to internally fund expansion to 60 million gallons per year from ongoing positive operating cash flow and has now positioned our India subsidiary for a planned initial public offering onto the India Stock Exchanges. Our India business is highly attractive as an IPO company on the fast-growing India Stock Exchanges since we are one of the largest biodiesel suppliers in the booming Indian economy. We have no long-term debt. We sell biodiesel under a cost-plus pricing formula to government-owned oil marketing companies and we are in a rapidly growing market that has more than $5 billion per year of growth to meet the biodiesel blending targets set forth in the 2022 India National Biofuels Policy. It only took 15 years for Aemetis to become an overnight success in India by building and operating a production plant, paying off all of our long-term debt, and then expanding production capacity. Our strong financial foundation in India and $150 million of current biodiesel supply contract allocations is only the beginning of our planned growth. We plan to expand our biodiesel production capacity in India using cash flow from operations, but a primary use of funds from a potential IPO onto the India stock markets would include the production of sustainable aviation fuel to meet growing global airline demand for SAF. The India plant can be expanded to supply SAF for airlines in India as well as international markets, such as the existing 10 airlines that have signed $3.8 billion of agreements with Aemetis for delivery of SAF in California. The fourth important point about financing growth at Aemetis is the attractiveness of our projects to lenders and preferred investors. The sophisticated investors and lenders in our projects understand that our risks are mitigated by using bonded contractors, technology guarantees, and even cost-plus pricing to provide confidence that debt obligations will be paid. The markets for our new projects in dairy, renewable natural gas, sustainable aviation fuel, and carbon sequestration are rapidly growing, supported by regulatory policy and uniquely positioned to generate positive margins. The final point I'd like to make about financing related to Aemetis projects is the design of our business model in which our existing cash flow from operations supports future capital expenditures to reduce the need for debt as we grow. In 2023, we generated positive cash of $32.7 million from adjusted EBITDA plus tax credit sales. This positive cash generation from operating the business is expected to continue to expand, allowing us to fund future interest and principal reductions on debt as well as fund a meaningful amount of our capital expenditures from our growing operational positive cash flow. Let's review our five businesses. In the India biofuels business, in late 2023, we announced a $150 million, one-year allocation for biodiesel from three oil marketing companies under a cost-plus contract structure. We started deliveries under this contract in October 2023 and have achieved excellent production performance during the four months of winter fuel specifications that require higher cost feedstocks. Beginning this month, the summer fuel specification allows lower-cost feedstock to be used. The positive impact of cost-plus pricing that is now being used by the India oil marketing companies to purchase biodiesel is expected to continue for the foreseeable future. The India business is debt-free and funds its own operations without outside long-term financing. Our India plant expanded to 60 million gallons per year of capacity during the third quarter, entirely funded by the positive cash flow from operations. We continue to expand the production and capacity of biodiesel using an enzymatic process, a technology developed by Aemetis at our India plant that allows lower-cost, lower-grade feedstock to be used to produce high-quality biodiesel. Aemetis believes that our India biodiesel plant is the largest capacity producer in the world, using Novozymes enzymes to convert low-cost feedstocks into biodiesel. To meet the rapidly expanding demand for biodiesel by the government-owned oil marketing companies, we are continuing to expand production capacity in India with a plan of 100 million gallons per year of capacity in 2025. The India market is about 25 billion gallons of petroleum and diesel, and the government has set a goal of a 5% blend of biodiesel. We expect the cost-plus contracts from India government oil refineries will support the addition of a significant amount of new biodiesel production capacity in India over the next five years, with Aemetis continuing to expand the capacity beyond 100 million gallons to supply the increasing demand for renewable fuels. The planned export of refined tallow from the India facility to renewable diesel producers in the U.S. is making steady progress with feedstock sales to several biorefinery customers in active discussions. Andy Foster, President of Aemetis North America will now review the Aemetis Biogas and ethanol businesses.

Thanks, Eric. In the Aemetis Biogas business, this summer, we closed the second $25 million USDA Guaranteed loan to build dairy biogas digesters for an additional eight dairies. This closing brought our total to $50 million of committed USDA REAP-based project financing to build digesters receiving waste from 15 dairies designed to produce a combined 400,000 MMBtus of renewable natural gas each year. This month, we will have nine fully operational dairy digesters supplied with waste from 10 dairies. We plan to accelerate the rate of biogas digester development in 2024 as we close USDA guaranteed financing for the next projects for $75 million of new financing, as well as other financing to accelerate project construction. We are very pleased to have passed the operational startup phase and are now at positive cash flow from operations at Aemetis Biogas. Aemetis and other RNG producers have experienced significant delays in the CARB pathway approval process for LCFS credits, with some at 24 months and counting. We recently met with top staff at CARB, and they expect to address this issue in the rulemaking process in the upcoming reauthorization of the LCFS program this year. We generated revenue from the sale of LCFS credits from our Aemetis Biogas operations for the first time in Q1 of 2024. In addition to the sale of renewable natural gas as a fuel and the sale of Federal D3 RINs, this new LCFS credit revenue stream will only increase as we build new digesters and as CARB approves the lower carbon intensity values that we have already demonstrated in actual operations. In October 2023, we repaid $30 million of the original Aemetis Biogas startup funding, and the balance of that financing was recently extended at an effective interest rate of less than 8.5%. The California Air Resources Board has stated that renewable natural gas is an important source of renewable hydrogen for the future of truck engines, allowing the trucks to be zero-emission using a carbon-negative fuel. We believe that Aemetis is very well positioned to supply RNG, hydrogen, and below-zero carbon intensity electricity to future trucks and cars in California, enabling the transition to zero-emission and below zero CI heavy and light-duty vehicles. For the Aemetis ethanol business, during Q1 and most of Q2 of 2023, we experienced extraordinarily high natural gas prices in California, which made ongoing operations economically unviable during that time period. As a result, we chose to idle the Keyes ethanol plant and took advantage of this time to complete an extended maintenance cycle and to begin the implementation of energy efficiency projects. This pause in production helped us avoid future plant shutdowns that would have been required to install key components of our energy efficiency upgrades. The result was an acceleration of our planned projects to reduce our biofuels carbon intensity through a number of plant efficiency and electrification projects. We also accelerated the installation of an entirely new Allen Bradley Distributed Control System with artificial intelligence capabilities along with several other important project upgrades. We restarted the Keyes ethanol plant in late May and ramped up production during June and July. The goal of our Keyes ethanol plant upgrades is to significantly reduce the use of fossil-based natural gas at the plant. When these projects are completed next year, we expect that natural gas usage at the Keyes ethanol production facility will be reduced by more than 80%. This transformation from fossil natural gas to renewable electricity will put Aemetis at the forefront of decarbonized manufacturing facilities in the State of California and is expected to reduce the carbon intensity of our fuel ethanol produced at the Keyes plant by double digits, which will increase the value of our ethanol while reducing energy costs. In fact, this transition has already begun. By the end of this month, we will have tested, commissioned, and brought into service a 1.9-megawatt solar microgrid system that will generate zero carbon intensity electricity for plant operations and load shedding during peak hours in order to save on energy costs. This low carbon electricity from solar energy reduces the carbon intensity of our ethanol, thereby increasing revenues by generating more LCFS credits. In summary, despite facing some temporary and highly unusual external headwinds in the first and second quarters of this year in our ethanol business, operational performance and project milestones for the Aemetis Biogas and Aemetis ethanol plant businesses continue to be on track with the company plan.

Thanks, Andy. In the Aemetis sustainable aviation fuel and renewable diesel business, earlier this week, we announced that we received the authority to construct air permits for the construction of the 90 million-gallon per year SAF and RD plant at the Riverbank site. Last September, the use permit and California Environmental Quality Act approval allowing the use of this 24-acre site for a sustainable aviation fuel and renewable diesel plant were approved. We have signed $3.8 billion of final binding supply agreements with 10 airlines and a $3.2 billion renewable diesel supply contract with the National Travel Stop Company. These agreements are final contracts, not Letters of Intent or Memorandum of Understanding. So, we expect to update these agreements to reflect project timing as well as pricing terms to reflect current market conditions. Currently, the hydrotreated esters and fatty acids known as HEFA process for SAF production is significantly less expensive than the ethanol-to-jet process to produce SAF. Aemetis is deploying the Topsoe HydroFlex HEFA process that enables the production of SAF and renewable diesel at any output ratio, thereby allowing the maximization of pricing by the production sale of the higher-value fuel. When operating at a fifty-fifty production allocation of SAF and RD, the plant is designed to produce 90 million gallons per year, comprised of 45 million gallons of SAF and 45 million gallons of renewable diesel. At a 100% allocation of production to SAF and no RD production, the plant is designed to produce 78 million gallons per year of SAF. The need for sustainable aviation fuel continues to increase, but the overall market supply of SAF continues to be delayed, resulting in significant supply shortages that are expected to continue for the foreseeable future as the 90 billion gallon per year aviation fuel industry seeks to reduce air pollution and carbon emissions using renewable fuel to replace petroleum jet fuel. As one of the very few companies fully permitted to construct a large-scale SAF production facility in the United States, Aemetis has a meaningful position as a leading supplier to the airline market that cannot currently meet their goal of transitioning to lower carbon fuel. In the Aemetis carbon capture and sequestration business, we were issued the first CO2 sequestration characterization well permit by the State of California to a nongovernmental project in 2023. The CO2 characterization well is designed to provide geologic data for the EPA Class VI injection well planned for the Riverbank site. In California, the passage of Senate Bill 905 last year established a public engagement process to resolve specific issues related to CO2 sequestration projects, including royalty rates and the unitization of pore space rights. We are supported by this legislative process in California that is implementing regulations for CO2 capture to achieve the ambitious carbon emission reduction targets set by Governor Newsom. The California Air Resources Board has held several low carbon fuel standard public events where staff stated that CARB plans to significantly increase the number of credits required under the program by significantly expanding LCFS mandates. CARB's own model estimates that the increased mandates will raise the price of LCFS credits to more than $220 per credit in the next two years. Though the updated regulations strengthened in the LCFS have been delayed, we expect that the recent increase in LCFS credit prices reflects the market expectation of strong LCFS credit mandates will be adopted at a mid-2024 CARB Board meeting. LCFS credits generate revenues for Aemetis and all of our U.S. businesses and indirectly benefit our India business, which can produce feedstock for U.S. renewable diesel and sustainable aviation fuel biorefineries. In summary, all of the five Aemetis businesses are synergistic and create what we refer to as a circular bioeconomy within Aemetis. We use the biofuels, byproducts, and waste products from our facilities and local areas as feedstock to produce low and negative carbon intensity renewable fuels to meet government mandates for air quality improvement and carbon emissions reductions. The strong demand for dairy renewable natural gas and the rapidly growing sustainable aviation fuel market are key areas of investment and project development at Aemetis. Our existing facilities are focused on projects that improve energy efficiency, reduce carbon intensity to increase revenues at lower costs, and technologies enabling the use of lower-cost feedstocks at our existing production facilities. 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. Now let's take a few questions from our call participants.

Thank you, Mr. Eric McAfee. Our first question comes from Manav Gupta with UBS. You may proceed.

Good morning, Eric and Andy. So, my first question relates to the CARB timing here. There was a meeting somewhere in March. Looks like it's moved. There are two schools of thought again, they're having second considerations. The other school of thought is they looked at the program and thought it was not aggressive enough to reduce the rate at which the carbon credit bank was building and they're now looking at ways to bring it down at a faster pace. You talk to those guys, you're close to those guys. What's the thought process over there?

Hey Manav, it's Andy. So, thanks for your question. I think it's a combination of those things that you just mentioned. I think there were frankly some incorrect estimates regarding what the credit market looked like as this year would evolve and where it would end up at the end of this year, and I think it became readily apparent to CARB, especially when you saw the sharp decline in the LCFS price in the earlier part of this year that those estimates were not on target. So, I think that was one contributing factor. I think they received a lot of feedback, a lot of public comment, which I think has also kind of slowed down their process a little bit. But I would suggest that a combination of the LCFS credit situation, which is a huge overhang in the market, and sort of an unanticipated, but not by us, but I think by CARB in some respects. It was pretty apparent as we were exiting last year that this was going to be a problem. So, I think they're addressing that, and I do expect, certainly it's our hope that they will come back in April with some more aggressive goals when it comes to the overall program.

Perfect. A quick follow-up is you mentioned you have nine dairies operating. How many do you expect to have online by the end of the year? Also, given the delay period, how long do you think it will take for revenues from these nine dairies to start coming in, whether through RFS or LCFS credits? I will turn it over after that. Thank you.

So, I think by the end of this year, we're expecting to have 18 dairies online. And the second part of your question, would you repeat that? I'm sorry.

Like by when do you expect to start monetizing these credits from these nine dairies? Because there is a lag period before the dairy actually comes on and then you're storing the gas. So, when do you expect to start monetizing these credits?

We actually started monetizing these credits this year, of course, at the lower the temporary pathway, the negative 150, but we actually started that process in in Q1, Manav. So, as we go through the application process, there are specific milestones you have to achieve from a timing perspective. However, we've already begun that process and we expect that process to continue on. Our applications have been in for nearly a year now, in early May, I think is when we submitted. So, we are encouraging CARB to accelerate that process because, obviously, once we get the full pathway, then the number of credits will significantly increase. But we actually have already started that process.

Our next question is coming from John Annis with Stifel. Your line is live.

Hey, good afternoon and thanks for taking my questions. For my first one, Eric, if I heard you right in your prepared remarks, you mentioned the potential for SAF production in India. Can you frame how you see SAF economics in India stacking up against the U.S. markets? Are there any regulatory incentives in India that would support building out SAF capacity there?

Our initial opportunity is simply to tap into the less expensive waste feedstock in India and then export this SAF to the San Francisco airport where we have $3.8 billion of existing contracts with 10 airlines. It's a direct feedstock arbitrage from a country that has a tremendous amount of underutilized feedstock. We already have a 50 million gallon per year tallow refinery in place, with direct relationships—we used to export biodiesel to Europe using tallow as a feedstock. So, we are well positioned to be a leading player in this business model. The cost-plus structure with oil marketing companies is an opportunity for SAF adoption in India. This would be our secondary market opportunity – arbitraging the California price against the India price in the cost-plus structure.

Makes sense. And for my follow-up, regarding the RNG fueling station that's under construction at the Keyes ethanol plant, can you provide some color on the potential margin uplift associated with selling your own RNG versus using a third party? And then secondly, just in terms of volume, what percentage of your RNG production could be sold through your owned fueling station there?

There are two elements of increased margin. First, the molecule itself currently is sold into the pipeline as brown gas. We get approximately $4 per MMBtu for doing that. However, we're selling the energy equivalent of 7.2 gallons of diesel, so 7.2 gallons times in MMBtu is somewhere in the $35 range of value. If we were to sell it at the equivalent price of diesel instead of selling at $5 per MMBtu, we'd be selling at $35. As a part of incentivizing customers and attracting their new adoption of RNG into truck fleets, we of course will be selling at a discount. So, we would expect an uplift somewhere from $5 to around the $15 or $20 range as we sell at essentially a 50% off price compared to running petroleum diesel. The second benefit is that current discounts are in the 15% to 20% range for RNG sold through other third-party fueling stations. So, we would not incur any of that, and that's 15% to 20% of revenues. The low carbon fuel standard revenues and the Federal D3 RIN revenues are both being hampered by the need to sell through other fueling stations. In answer to your last question, our goal would be that 100% of our product would go through our own fueling stations. We're in the middle of one of the most active trucking environments in the world. Virtually all agricultural products at some point in time touch a truck. There aren't a lot of railroad depots next to almond orchards or other crops in Central Valley, California. So trucking is very active and literally a quarter-mile from our plant are probably tens of thousands of trucks that drive by every week.

Our next question is coming from Jordan Levy with Truist. Your line is live.

Good afternoon, all. Maybe just to start, now that you've passed that important milestone with the authority to construct permits. Just curious, I know it's very recent since that announcement was made, but if you could just help us landmark sort of the next steps in terms of financing at Riverbank and the options you're pursuing there?

We are well into a process of project financing. Of course, that has been delayed waiting for the three key permits, all three of which we now have. So, we have been working on a preferred equity, what's called as mezzanine financing structure as well as senior secured debt. In the Riverbank project, we have already signed a USDA Biorefinery Assistance Program, it's called Program #9003 for senior debt supportive 20-year financing. But we have multiple opportunities in senior secured debt and we've got a very active customer base among airlines, many of whom have already funded into funds that are dedicated to the growth of SAF production, and airlines and manufacturers of the wide-body jets have all joined in together to provide what we call mezzanine or even equity financing to support SAF. We have active discussions with the largest of those investors. Now that we have a permit, we can actually have constructive closure on those discussions. Up to today, we've had uncertainty regarding when we'd actually get the permitting. I would expect this year to show a lot of action in closing project financing.

Appreciate that. That's super helpful. And then maybe just jumping over to the India Biodiesel side. You mentioned the potential for an IPO process on the Indian Stock Exchange there. What’s the process in getting that through the wire? And how are you thinking about that progressing through the year?

As with any IPO process, we see it as an evolving process. We've already gotten pretty well acquainted with many investment bankers. Certainly, we have some of the world's leading lawyers for IPOs in India. We've set that kind of infrastructure in place, but we're also expanding the senior management of our India subsidiary and are looking forward to some very talented people joining our business there. We've seen consistent success with IPOs in the India market. If that continues, I think we're very well positioned for completing something this year, but we are subject to market conditions. We are doing everything we're supposed to do to go through the process. To a certain extent, I would say it's a faster process in the U.S. There's just a different way that you interact with regulators in the India market. We think we’ll learn over the next quarter about valuations and other terms, and we've already been approached by very large investors about a pre-IPO investment. We are open to that discussion as it strengthens the valuation of our company. So, it's a very active opportunity in India and we're pursuing it.

Our next question is coming from Amit Dayal - H. C. Wainwright. Your line is live.

Thank you. Good afternoon, everyone. Eric, just with respect to timing, it looks like at least from your recent updated business plan, roughly $100 million plus in CapEx is going towards the SAF and RD facility. So, when will this start getting deployed? Do you have a timeline? Is it the second half, I'm assuming? But is there a catalyst that triggers all of this, and when would that materialize?

The $100 million we referred to is related to our biogas operations. We expect to close probably $75 million of that financing this year, with the last $25 million dribbling into next year. So that's actually going to the biogas business. Separately, the SAF project financing is much larger than that; it's in the $0.5 billion range. We also have some carbon sequestration financing going on, some mechanical vapor recompression of the ethanol plant, and India expansion. Each one of our subsidiaries described is doing well. India is self-funding its expansion from operating cash flow. The USDA is helping us with some smaller financings with 20-year amortized loans. We basically have one large financing this year that's really not been achieved before and that's financing this SAF plant. The airlines and the aircraft manufacturers do not have many new permitted facilities in North America and certainly not massive $2 billion projects. So we're getting a lot of support and looking forward to cooperating with these customers so we can get this production facility operating.

Understood. Thank you for that, Eric. With respect to the India Biodiesel Facility, I know you're at 60 million gallons capacity now available. The business plan shows roughly 50% to 60% of that being utilized. Are you just being conservative with that outlook? Or is that just the visibility you have right now in terms of working with these oil marketing companies?

You are correct that we have continued to expand capacity. We're ahead of the oil marketing companies. Since they are government-owned, they tend to move a little slower than everyone else. However, we have seen them now get a pricing model that has reduced the constraints on expanding production. We saw that coming. Over the last two years, we have expanded capacity to 60 million gallons. We're continuing to invest to expand capacity. I believe we will have some upside surprises in terms of revenue from India because capacity won't be a constraint. We'll literally be able to contract 60 million gallons while we build plant capacity to 80 and eventually 100. Our strategy is to be ahead of the market and then let the market catch up with us.

Our next question is coming from Dave Storms with Stonegate Capital Market. Your line is live.

My first question is just around the pacing of the dairy digesters. I know you mentioned you plan to be at 18 by year-end, but how should we think about how that will be spaced out through the year?

We'll be operating digesters for 18 dairies and we're increasingly going to be talking, by the way, about Wet Cow Equivalents because you can multiply that times a certain number of MMBtus per year and get the revenue in one step. Over the course of this year during our earnings call and other messaging, we'll be working toward Wet Cow Equivalents, which makes everybody's life a lot easier. We have two dairies coming online this month, followed by another round of dairies coming online in about six months in the third quarter. So, the third and fourth quarters are when you're going to see some of the ramp-up.

Understood. That's very helpful. As a follow-up on that, as you're bringing on this next cohort of dairies beyond 18, how do you prioritize construction? Is it the Cow Equivalents that the dairy would have? Is it contingent on permits? Is it distance from existing or future pipelines? Just how do you think about that?

Good question. Thank you. We want to maximize the proximity to the pipeline because we're making a significant investment there. Some of this has to do with the USDA funding, which has made it somewhat chunky in how we roll these processes out. We get them permitted, we get environmental approval, and then we kind of wait. We are putting some things in place that will allow us to not wait as much. Over the course of the second quarter, I think you'll see additional liquidity provided that will enable us to smooth out that process and accelerate it. Especially as we exit 2024, I believe we will have an upside surprise on the development pace in the biogas business.

I should note that we have 43 dairies signed either participation agreements or lease agreements and expect to be above 50. We don't press release every week or month when we sign an additional dairy. So, we'll probably press release when we cross the 50 mark. But in general, we already feed animals at roughly 80 dairies. So, we'll just continue to exercise our relationship with dairies. Our five-year plan is to construct 75 dairies, which is less than the total aggregate number of dairies we supply with animal feed today. We expect to continue signing dairies far ahead of our construction, and our opportunity this year is to provide additional liquidity to the process to prepurchase equipment and accelerate the dairy development phase.

Our final question today will be coming from Ed Woo from Ascendiant Capital. Your line is live.

Yes, congratulations on all your progress. Talking about the India potential IPO, have you thought about listing in the U.S.? And also, what are your plans with the capital infusion when you do the India IPO, especially since you said that India was cash flow positive already and doesn't necessarily need funding going forward?

If the U.S. market were to be extremely excited about India, today, we'd absolutely take that into consideration. We will discover that over the next few months. The India stock market is very hot, and there seems to be a strong appetite to invest in companies in that country. Even international funds are coming into India to do that. The use of funds would include sustainable aviation fuel because it is a 90-billion-gallon market. There will not be hydrogen, electric, or nuclear-powered airplanes flying in passenger or cargo jets across the oceans anytime soon. The major engine manufacturers and airframe manufacturers have all committed themselves to sustainable aviation fuel as a major initiative. What's lacking is any of the fuel. Being one of the few companies that have executed well in this space, we see tremendous growth opportunities. Our India plant has access to cheap waste, low carbon, low-cost feedstock in a country of more than 1.3 billion people, which gives us a unique positioning. We’ll leave it open to the markets to tell us where they want us to go. But I can tell you that the European market is also very interested in this business model. We believe the India Stock Market is where we are going to end up, but we're certainly open to feedback from investors and investment bankers.

Thank you. As we have no further questions at this time, I would like to turn the floor back over to management for closing remarks.

Thank you to Aemetis shareholders, analysts, and others for joining us today. Please review the Aemetis five-year plan that is 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 an audio version of this Aemetis earnings review and business update.

This concludes today’s teleconference.