Aemetis, Inc Q1 FY2024 Earnings Call

Welcome to the Aemetis First Quarter 2024 Earnings Review Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce you to your host, Mr. Todd Waltz, Executive Vice President and Chief Financial Officer of Aemetis, Inc. Mr. Waltz, you may begin.

Thank you, Kelly. Welcome to the Aemetis First Quarter 2024 earnings review conference call. Joining us for the call today is Eric McAfee, Founder, Chairman and CEO of Aemetis. 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. Before we begin our discussion, I'd like to read the following disclaimer statement. During today's call, we'll 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 the SEC EDGAR system and our own company website. 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 our company source or use of cash. A reconciliation of the non-GAAP measure to the most directly comparable GAAP measures included in our earnings release for the three months ended March 31, 2024, 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, income tax expense, intangible and other amortization expense, accretion expense, depreciation expense, and share-based compensation expense. Let's review the financial results for the first quarter of 2024. Revenues during the first quarter of 2024 were $72.6 million compared to $2.2 million for the first quarter of 2023. Our Keyes plant returned to full operation in the second quarter of 2023 after completing an extended maintenance cycle during the first quarter of last year. In Q1 of this year, our dairy renewable natural gas segment produced 60.3 million BTUs of renewable natural gas from eight operating dairy digesters, sold its first LCFS credits, and reported $3.8 million of revenue. Our Indian Biodiesel business generated $32.7 million of revenue, primarily from sales to the three India Oil Marketing companies. Gross loss for the first quarter of 2024 was $612,000, compared to a $1.3 million gross loss during the first quarter of 2023. Selling, general and administrative expenses decreased to $8.9 million during the first quarter of 2024 from $10.8 million during the similar period in 2023, driven primarily by reduction in fixed cost of goods sold, charged to selling, general and administrative expenses due to the extended maintenance during the first quarter of 2023. Operating loss was $9.5 million for the first quarter of 2024, compared to an operating loss of $12.1 million for the same period in 2023. Net loss was $24.2 million for the first quarter of 2024, compared to a net loss of $26.4 million for the first quarter of 2023. Cash at the end of the first quarter of 2024 was $1.6 million, compared to $2.7 million at the close of the fourth quarter of 2023. We recorded investment in capital projects related to the reduction of carbon intensity of Aemetis ethanol and construction of dairy digesters of $3.6 million for the first quarter of 2024. 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. In the Aemetis Biogas business over the last year or so, we have closed $50 million in USDA-guaranteed 20-year loans to build dairy biogas digesters and to convert construction loans to term loans for digesters that completed construction. We have signed 44 agreements with dairies and now have nine operating dairy digesters, supplied with waste from 10 dairies. We plan to accelerate the rate of biogas digester development in 2024 as we expect to close $60 million of new private financing to accelerate project construction and as we expect to close an additional USDA-guaranteed REIT loans that provide 20-year debt, with each closing expected to provide $25 million of additional construction funding. We generated revenue from the sale of LCFS credits related to renewable natural gas for the first time in the first quarter of 2024. Renewable natural gas revenue is expected to significantly increase as we build new dairy digesters as CARB approves our provisional pathway applications, including the existing digesters that we filed early last year. As our renewable natural gas generates Inflation Reduction Act 45Z production tax credits beginning in January 2025, the California Air Resources Board has stated that renewable natural gas is an important feedstock for the production of renewable hydrogen, for future truck engines allowing the trucks to be zero-emission using a carbon-negative fuel. We believe that Aemetis is excellently positioned to supply renewable natural gas, renewable hydrogen, and negative carbon intensity electricity to power future trucks and cars in California, enabling the transition to zero-emission and low or zero carbon intensity, heavy-duty and light-duty vehicles. The expected adoption this year by the California Air Resources Board of a 20-year mandate for the rapid decarbonization of transportation will directly benefit the lowest carbon-intensive renewable fuels, as well as the feedstocks for renewable hydrogen and renewable electricity production. As we planned, we started the biogas project in 2018, Aemetis is again excellently positioned to be a significant beneficiary of the updated LCFS mandates this year. We are also well positioned to benefit from the Inflation Reduction Act 45Z production tax credits that start in January 2025. In the development of our Aemetis sustainable aviation fuel and renewable diesel business, during the first quarter, we received the authority to construct air permits for our planned 90 million-gallon per year sustainable aviation fuel and renewable diesel plant to be built in Riverbank, California. When operated to produce only sustainable aviation fuel, the design capacity of the plant is about 78 million gallons per year of SAF. The ability to construct permits are a significant milestone, as we had already received the use permit and the California Environmental Quality Act approval in 2023, which were the other key discretionary permits we needed to move forward with the project. We have signed $3.8 billion worth of supply contracts with 10 airlines and a $3.2 billion renewable diesel supply contract with a national travel stop company. 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 in the 90 billion-gallon per year global aviation fuel industry seeks to reduce carbon emissions using renewable fuel to replace petroleum jet fuel. With the strong demand for SAF and limited supply, we are now discussing the use of innovative pricing structures with our airline customers to accelerate the financing, construction, and operation of the SAF plant. We're now working on the project financing for the SAF plant, with due diligence and negotiations currently underway with investors. We are receiving a high level of interest from multiple strategic and financial investors, some of whom have significant commercial interest in the success of the aviation industry. As one of the very few companies with CEQA permits needed to construct a large-scale SAF production facility in the United States, Aemetis is on track to be a leading supplier of renewable fuel to an airline market that cannot currently meet its goal of transitioning to lower carbon intensity operations. In the India Biofuels business in late 2023, we announced that we received a $150 million, one-year allocation for biodiesel sales to the three India Oil Marketing companies under a cost-plus contract structure. We started deliveries under this contract in October 2023 and have achieved excellent production and delivery performance. The positive impact of cost-plus pricing that is now being used by the oil marketing companies to purchase biodiesel is expected to continue for the foreseeable future. The India business has positive EBITDA and funds its own operation and capacity growth. For the Aemetis ethanol business, the approval of a 15% blend of ethanol in 49 states for this summer and the EPA's recent statement that a permanent E15 approval will be adopted effective next year is expected to have a positive impact on the price of ethanol as retailers seek to provide lower-cost fuel to consumers. We have completed construction of an on-site solar energy facility with battery storage to reduce our energy costs and reduce the carbon intensity of the ethanol produced by our Keyes plant, which generates more low-carbon fuel standard revenue per gallon. The next major step in improving our cash flow and energy efficiency at the Keyes plant is the installation of a mechanical vapor recompression system. We have completed process design and detailed engineering and are now moving forward with the procurement of equipment. The MVR system is designed to reduce natural gas usage by 80% and increase cash flow by up to $15 million per year at the Keyes plant. The MVR energy efficiency project is budgeted to cost about $21 million and has been awarded $16 million of grants and tax credits from the California Energy Commission, Pacific Gas and Electric Company, the Department of Energy, and the Internal Revenue Service. Our Aemetis carbon capture subsidiary is in the process of financing the characterization well and the engineering for the EPA Class VI permit using USDA 20-year financing. We have received the California state approval to drill the characterization well, and now we are working through the USDA loan process. In summary, all five Aemetis business segments are synergistic and create what we refer to as a circular bioeconomy. The growing demand for renewable natural gas, biodiesel sold under cost-plus contracts in India, the undersupplied sustainable aviation fuel market, as well as the emerging carbon sequestration market are key areas of investment and project development at Aemetis. Our existing operations in California and India are focused on projects that expand capacity, improve energy efficiency, reduce carbon intensity, increase revenues, utilize lower-cost feedstocks, and significantly improve cash flows. Our company's values include a long-term commitment to building value for stockholders, the empowerment of and respect for our employees and business partners, and making significant and positive contributions to the communities that we serve. Now, let's take questions from our call participants. Kelly?

Thank you, Mr. McAfee. Your first question is coming from Manav Gupta with UBS. Please pose your question. Your line is live.

Hi. So guys, my first question is, looks like CARB is looking at those balances and saying, maybe we need to do more on that front. It looks like they might go with a 7% step down or 9% step down. You talked to those guys very often. What is the probability that they took a look at this and say we need to do more than just 5% step and go for a 7% or 9% scenario here?

We talk to CARB, but we also talk to the researchers that provide the data that supports CARB's activity. And as I think you know, those numbers this year are increasing at a much higher rate than they had expected. So I do believe that they're going to go with a higher than 5%, and they have looked at the automatic acceleration mechanism, which they had proposed that was going to take several years before they put that in place. They're looking closely at putting it in place earlier. So in my view, both a larger than 5% step-down and earlier adoption of the automatic acceleration mechanism is needed and that the market will respond positively when that's adopted. The fall in price in LCFS credits, which has been dramatic. It was roughly $75 just a couple of months ago and hit $50. Now that's a 30%-plus loss in their market during the middle of them proposing an extreme measure of tightening. So it's exactly the opposite of what they thought would happen. So I think everyone has an opportunity to speak into this process. And the more that Wall Street speaks in the process, the more I think we're going to see tightening. They do complain that Wall Street doesn't talk to them enough and that they would like to hear from Wall Street more. So your comment is very appropriate, and I'll be looking to get more and more involvement with stock analysts and in direct connection with the correct executives at CARB.

Perfect. My quick follow-up is this. You mentioned nine dairies and that you're looking to accelerate, which suggests your funding is coming through. For modeling purposes, how many dairies do you think we should have in our models by year? I know there’s a lag between the volumes sold and the dairies becoming operational, but from your perspective, how many do you anticipate will be online by the end of 2024?

Yes. We're still tracking 18 dairies by the end of 2024, and the acceleration we're doing will have its largest impact in 2025. It's the purchase of long lead time skids and that sort of material that will enable us to rapidly accelerate as we go into 2025. So it will have a direct impact on 2025 operating income and cash flows as we prime the pump, as we like to say over here.

Thank you so much. I'll turn it over.

Thank you, Matt.

Your next question is coming from Derrick Whitfield with Stifel. Please pose your question. Your line is live.

Eric, I wanted to start with the EB-5 financing which you recently received approval for from the U.S. Citizenship and Immigration Services. Maybe if you could just speak to the progress you've made in securing investors to advance funding because it's certainly quite impactful for you guys from a cost of capital perspective?

Yes. To clarify what Derrick mentioned, we're dealing with subordinated debt funding that has long maturities and interest rates below 3% per year. This debt functions as equity for supporting USDA and other senior secured debt financing. The approval we've received allows us to bring in foreign investors, with a limit of $800,000 per investor. So far, we've successfully raised around $40 million under this initiative, specifically about $39.5 million from approximately 80 investors in the past. Moreover, we've been approved to include roughly 250 more investors. This marks a significant milestone for our company. The fundraising is conducted through brokers in foreign markets, and I've dedicated considerable time touring India and China, presenting directly to investor groups through these brokers. The fundraising process can be both slow and fast; we managed to secure 80% of our previous funding over just two weekends with one broker. I traveled to China, raised the funds, returned home, went back to raise more, and completed the round in effectively two weekends. The slow pace arises from the rigorous marketing due diligence cycle, but the actual investor engagement and signing progress quickly when it begins. We are currently working with brokers and aim to have initial funds deposited into the escrow account this quarter. We are making progress and will continue, as we have before, to be patient, knowing that although the process takes time, when it accelerates, it leads to very long-term, low-cost financing that is nondilutive and cannot be converted into equity.

That's great. And then Eric, maybe shifting over to 45Z policy, I wanted to ask what you're hearing from your sources on how the US Treasury will treat ultra-low CI like your dairy RNG with the emission factor? And even beyond that, I wanted to get your opinion on what you're seeing in values for your dairy RNG for 45Z applications where you could create again very low CI hydrogen that could have a nice multiplier on it as well?

Yes. The recently released revised model provides guidance that, similar to California, if the calculation indicates a carbon negative figure of 320, then that is the established number. There appears to be no opposition on this topic from those we've discussed it with, including individuals within the agencies. The USDA Office of Chief Economist spent an entire day with us, and their representatives are involved in discussions with the IRS, DOE, and White House. There is strong support for ultra-low carbon intensity. Biogas clearly stands out as a significant advantage in this scenario, achieving negative figures around 300 to 400. Additionally, carbon negative renewable hydrogen is poised to be another major beneficiary. Biogas can directly replace diesel in engines or be converted into renewable hydrogen to substitute diesel consumption or be used in electric vehicles. These three pathways highlight how biogas is likely to emerge as the biggest beneficiary under the Inflation Reduction Act 45Z and similar initiatives.

Perfect. Thanks for the color, Eric.

Absolutely.

Your next question is coming from Jordan Levy with Truist Securities. Please put your question. Your line is live.

Hello. I appreciate all the details. Maybe I appreciate the comments on the trajectory for the biogas digester build-out. Maybe just over kind of the near term the next three, four quarters or so, how should we think about the ramp in LCFS credits? And where do you stand kind of in that process from moving from conditional to final pathway approval there?

Let's take it backwards. We filed in May of 2023 for our initial round dairies. The process is basically you sit there and nothing happens. And then all at once, they review your application in a very short period of time with a few months, it's approved. But it's a bottleneck of projects that has caused that as of today, they haven't actually even started looking at our project. But as soon as they look at it, it then has a very quick sort of 90-day review process and some other stuff, and it happens very quickly. So we are expecting during the third quarter that that process will occur. And because of the way that they do their approvals, in the quarter of the approval the beginning of that quarter is when we get to do the LCFS credits. So as early as July 1, we could very easily be generating basically, twice as much revenue from low carbon fuel standard credits than what we have today. So we are not aware of anything that would prevent it from being July 1. But on the other hand, it's all subject to the activities of staff, and they have been behind. So, either it's going to be effective July 1, or sometime in the fall that we would essentially double our LCFS credits. The production of biogas is what generates those credits, and we are ramping up rapidly because of two factors. Number one, we're adding more dairies. We brought three more dairies on so far this spring. We'll continue to bring on dairies. But secondly, the weather. In the winter time it's colder, and therefore, these passive solar digesters generate less revenue during winter. And then the summer, they literally double their revenue. So you have a ramping in the springtime, in the summer, and it continues into the fall here in California. So we have a double ramping the provisional plus seasonal. Next winter we'll have more dairies online. So it's not like we see much of a decline in revenue, but just the rate of growth will slow next winter. So we have an uncertainty, which is will we get a July 1 effective date or an October 1 effective date, and that's based upon the performance of staff. We are of course pushing hard for a July 1 effective date for those initial digesters, which would be approximately half a dozen digesters by the way.

Got it. Appreciate that. And then maybe just to move on to Riverbank and how you're thinking about some high-level dynamics there. This morning Vertex announced they were switching some renewable diesel production back to conventional. And we know that there's current margin headwinds in the renewable diesel space. And I also know that this is an apples-to-apples necessity because you're focused on aviation fuel and you have some interesting feedstock opportunities. But maybe just help us think about kind of the path from where margins for SAF sit today to where you expect them to go and also kind of the benefits you have at Riverbank when that plant comes online to help you from a margin perspective as well?

Certainly. Renewable diesel and sustainable aviation fuel (SAF) have begun to evolve as separate businesses. Historically, the production facilities for renewable diesel weren't designed with the flexibility to also produce SAF. However, in the latest designs for new plants, Topsoe from Europe has emerged as the leading technology provider, capturing over 90% of new renewable diesel plants in North America over the past three years. By investing an additional capital expenditure, which could reach up to $50 million for a plant our size, we can implement the HydroFlex technology that allows a seamless transition between producing renewable diesel and SAF. We've chosen to invest approximately $30 million to enable us to produce either SAF entirely or renewable diesel completely. This flexibility is crucial due to the uncertainties surrounding the Inflation Reduction Act and the low-carbon fuel standard. Additionally, there are Scope 3 emissions that represent a significant revenue potential for aviation fuel, which renewable diesel does not offer. Vertex, for example, hasn't had the chance to capitalize on Scope 3 emissions, even though there was a recent transaction involving SABA and Microsoft worth about $200 million for 50 million gallons of SAF, translating to roughly $4 revenue per gallon that Vertex and other renewable diesel companies cannot access. We strongly believe that having this flexibility is vital. While that $30 million investment may not yield returns for us, it positions us well to produce renewable diesel if necessary during periods of uncertainty regarding incentives. I have a close relationship with Vertex, having previously acquired the company and taken it public back in 2006, and forged a strong partnership with its management team over the past 15 years. Their petroleum unit is set to be quite profitable, and we recognize that their situation may differ from those solely operating renewable diesel plants. Their management has smartly retained the flexibility to produce renewable diesel in the future and possibly upgrade to SAF. I would keep them in mind as potential future SAF producers, as they exemplify the challenges faced when low-carbon fuel standards decline significantly in a short time, alongside the lack of incentives for SAF production. To incentivize SAF, extending the 40B tax incentive will be necessary, and these two points of uncertainty explain why Vertex is shifting back to petroleum, a move that other producers might also consider.

Absolutely. That’s great insight. Thanks, Eric.

Sure. Thank you, Jordan.

Your next question is coming from Matthew Blair with Tudor, Pickering, Holt. Please pose your question. Your line is live.

Thank you and good morning. So India Biodiesel segment, Eric, could you share the EBITDA in the first quarter? And then for the second quarter, is it reasonable to assume that should step up as you're able to move to a cheaper feedstock?

Do you want to catch that one?

Yeah. So, yeah, let me take that question, because I don't have a ready-hand EBITDA. I do have gross profit. So for our India Biodiesel, the gross profit was $2.8 million on the $32.7 million of revenue.

In the second half of your question, yes, the winter time requires a different feedstock because November, December, January, and February they have colder conditions in India, and so they have a different temperature in which the biodiesel has to be able to not start gelling. That requires a different feedstock. And so our March performance was significantly better than the winter time. And during the summer here, we're in very good shape under both lower-cost feedstocks as well as being able to run the plant really as fast as we can because we have a $150 million contract to supply by the end of September.

Sounds good. And then on the dairy RNG side. So today, much of that gas is being stored. Is that correct? And when do you plan to market that gas, are there any concerns about getting it into the California transportation market just given that the RNG has such a high share I think it's up to like 98% or 99% of existing California CNG and LNG demand today?

Excellent questions. Let's take them in two parts. Stored gas. The low CARB fuel standard has a nine-month limit on how long you can store the gas. We would have preferred to have actually delayed revenue and had it all be under this essentially 2x a 100% increase but the rules don't allow us to do that. So we have to sell all the gas on a trailing nine-month basis or a three-quarter basis. So we don't have quite as big of an inventory as we would otherwise have desired to have. If they let us do it, we would have invested in the medium term. But on the other hand, we have to sell the gas. So the revenues you're looking at is gas that we're having to sell because the rules required to do it. The renewable natural gas in California comes from landfill gas which in general I would say is probably a positive 30 carbon intensity and it comes from dairy renewable natural gas which is negative 320 to negative 420 carbon intensity. Because of that difference in carbon intensity, the economics for dairy renewable natural gas I would say is always much more compelling than landfill gas. So the very high penetration of RNG is now about displacing landfill gas with dairy renewable natural gas. So that's really what's going to be the phase we're in right now. And interestingly enough, there's just not enough dairy renewable natural gas even for California. I don't anticipate we're ever going to have a situation in which all the dairy renewable natural gas has been used and that there's any left over. We have a substantial shortage of that extra low or ultra-low carbon intensity fuel here.

Sounds good. Thank you very much.

Thank you, Drew. I am sorry, Mathew. Take care.

Your next question is coming from Amit Dayal with H.C. Wainwright.

Thank you. Hi, Eric. Regarding the capacity expansion efforts in India, is that work already underway, or is it scheduled to start later this year?

We have two different kinds of capacity expansion. One is nameplate going from 60 million gallons to 100 million. We have equipment under design and then we'll be doing fabrication installation starting later this year. The second one is our proprietary technology to use very low-cost feedstocks. And that expansion actually is happening this quarter. So a higher percentage of our capacity will use very low-cost feedstocks, and this is a competitive advantage we have. So we're actually doing two types of expansion in India.

I understand. Regarding the changes in the business, especially over the past year or two as we have been developing the RNG business, India has had its ups and downs. However, the dynamics of our revenue and operations have evolved significantly in the past 18 months. In that context, how are you approaching your working capital needs? I recognize your remarks about the EB-5 related funding likely address this, but how should we view your balance sheet and working capital requirements as you increase revenues, expand operations, and move closer to building up Riverbank?

That's a very good question as we typically focus on the capital budget financing. Our existing operations have a business model that doesn’t require working capital from Aemetis. Generally, our ethanol plant is financed by our corn supplier, a large revenue company that was eager to have us as a customer. We agreed to pay them an additional five days after we process the corn, aligning with our revenue receipt. Therefore, we don't allocate any working capital for the $200 million-plus ethanol plant. In India, we have a long-standing relationship with our feedstock supplier since 2008, which allows us to use a minimal amount of our own working capital, relying instead on our vendor for working capital needs. Additionally, in biogas, we have secured a capital investment phase with working capital included in the funding through the Renewable Energy for America Program, which typically covers operating costs during construction. We have incorporated this into our construction process and are now experiencing positive cash flow from operations, so there's no working capital requirement at this stage. For our two emerging businesses, the SAF plant will utilize project financing that includes working capital in its initial funding, negating the need for further financing post-launch. Carbon sequestration is being funded through USDA financing, where we are currently arranging the working capital as part of this 20-year funding. In summary, our working capital needs are structured through project financing or supported by vendors as we run the plant.

Understood. That’s all I have, Eric. Thank you so much.

Thank you, Amit.

Your next question is coming from Dave Storms with Stonegate Capital Partners. Please pose your question. Your line is live.

Good morning.

Hi, David.

You got a couple of big projects on the horizon between the Keyes plant and Riverbank. How should we think about CapEx pace through the year? And then additionally, for the Keyes plant upgrades, should we expect any downtime associated with that MVR project?

Good question. The Keyes CapEx is essentially a short-term working capital utilization because we already have $16 million worth of cash grants or tax credits we can sell for cash. So of the $21 million, we've invested a big chunk of the $21 million already as equity. The remaining amount essentially is just putting up the money and then getting it back from the California Energy Commission or Pacific Gas and Electric or otherwise. So the timing of that CapEx is going to be backward loaded for this year. The installations and other activities really are Q4 and Q1 of next year. So the – again, it's not revenue generating until it's fully operating, but the spend will be mostly the back end of this year as we're bringing in equipment. And then in terms of downtime, during last year’s maintenance cycle, we did some of the heavy lifting cutting and preparing that would have otherwise required downtime. So we are anticipating this will be relatively minimal downtime of a couple of weeks, and that the work we did last year is the longer downtime it could have caused us to be down for a month or so.

That's very helpful. Thank you. And then just one more. You mentioned in your prepared remarks, your work on innovative pricing structures for the SAF fuels. Would you be willing to share any of the options that you're looking at? Or what that might look like once it's all completed?

The best way to address this without taking too much time would be to refer to my article in Biofuels Digest that I published last Monday. If you search for Eric McAfee along with SAF and Biofuels Digest, it should come up easily. We're seeing success in India that we believe serves as a model for the airlines to consider in order to expedite SAF pricing. It involves a partnership where the airline assumes more of the risks related to incentives, feedstock, and energy costs. In return, the producer benefits from a more predictable cash flow from operations, which facilitates long-term debt financing at lower rates. The article provides valuable insight into our perspective, and I encourage everyone to read it.

Understood. Thank you for taking my questions.

Sure. Thank you, Dave.

The next question is coming from Edward Woo with Ascendiant Capital Markets. Please pose your question. Your line is live.

Yes. Congratulations on all the progress and congratulations on the LCFS credit that you sold in the quarter. As you are getting more used to selling these credits should we expect them on a more regular quarterly basis? And also, are you able to increase the economics that you're getting on each deal?

Yes to both of them. We will be selling them early in each quarter. They essentially will be maturing at the end of the previous quarter, but it takes a week or so for the booking to happen. So in the first half of the first month of each quarter, we expect to be selling the LCFS credits. And then second, the provisional pathways that we have applied for roughly negative 320 to negative 370 are significantly larger generators of LCFS credits than what's now is the default pathway of a negative one 50 million. So we expect to be generating between 80% and 100% more LCFS credits depending on the project. And if the paperwork moves at the pace it's supposed to move based on discussions we've been having with staff at CARB we will have that approval in the third quarter and we'll be able to sell those then in the fourth quarter. So we're seeing that could definitely impact this year in a very material way.

Great. Well, thank you. And I wish you guys good luck.

Thank you, Ed. We appreciate it.

There are no further questions at this time. I would like to turn the floor back over to management for closing comments. We have one more question from James Larkin, Kelly. Can we let that one flow through? Absolutely. James Larkin, your line is live. Please pose your question.

This is James Larkin from Piper Sandler. Thanks for taking my call. Eric, I guess in a recent interview you talked about an India IPO and a potential for raising money that way. I know you've talked about it in the past, but could you maybe, do you have any updates on that? Or what kind of how much money you'll be looking to raise there?

Sure. As we expected we are expanding our management team in India. That's through the first step of an IPO process and have made some great progress there which we'll be announcing soon. And then the continued deliveries under this $150 million cost-plus contract as a part of our IPO process has been a proof of the ongoing commitment of the India government. This is not our first but our second contract and we're about to enter into what we believe to be our third. So we are basically just for proving out our business model including our proprietary low-cost processing technology enabling us to use cheaper feedstocks. So in terms of expectations, this is not a current quarter announcement. The IPO process in India is about a six-month process. And until you essentially have an IPO, you don't really announce it. There are some securities regulations around that. But the indicators for the market are that just watch the press releases about new members of management who I think you'll be very excited about and our continued execution on the fundamentals of the business, capacity expansion, use of funds to make sustainable aviation fuel, all the things that go together to make a really exciting business in India.

Perfect. Thank you for that. And then I guess one more question kind of sticking with India. On the tallow feedstock would there be a significant CI impact from reporting that to the U.S.? Would it be kind of competitive with other low-CI feedstocks going to different refineries there?

Yes, we built a 50 million-gallon tallow refinery in India to produce refined tallow for biodiesel, which we then export to Europe. The carbon intensity of this tallow is similar to that of U.S. tallow, but the shipping across the Pacific adds extra carbon intensity, making Indian tallow less favorable compared to North American tallow. This results in a pricing difference because Indian tallow is sourced from fragmented suppliers in a country that undervalues it, as tallow is a byproduct in the animal industry in a predominantly Hindu society. Therefore, carbon intensity isn't the only factor in our commercial discussions; the disjointed supply chain and limited tallow refining in India play significant roles too. We aim to leverage this market position, which also serves as a hedge for our supply chain. We source about 50% of our supplies from North America, mainly around our plant in Central Valley, California, while having the option to import from India.

Awesome, great. Thank you.

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

Thank you very much everybody for joining us today. Please review the Aemetis company presentation. This is posted on the homepage of the Aemetis website, and we definitely look forward to talking with you about participating in the growth opportunities at Aemetis if you have an opportunity to join us.

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. Kelly?

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