Good day and thank you for standing by. Welcome to the Gevo Second Quarter 2022 Earnings Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, John Richardson. Please go ahead.

Good afternoon, everyone. This is John Richardson, Gevo's Director of Investor Relations. Thanks for joining us to discuss Gevo's second quarter results for the period ended June 30, 2022. I'd like to start by introducing today's participants from the company. With us today are Dr. Patrick Gruber, Gevo’s Chief Executive Officer; Tim Cesarek, Gevo's Chief Commercial Officer; and Lynn Smull, Gevo's Chief Financial Officer. Earlier today, we issued a press release that outlines the topics we plan to discuss. A copy of this press release is available on our website. Please be advised that our remarks today, including answers to your questions, contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act. These forward-looking statements are subject to risks and uncertainties that could cause actual results to be materially different from those currently anticipated. Those statements include projections about the timing, development, engineering, financing, and construction of Gevo's sustainable aviation fuel projects, its sales agreements, its renewable natural gas project, and other activities described in our filings with the Securities and Exchange Commission, which are incorporated by reference. We disclaim any obligation to update these forward-looking statements. In addition, we may provide certain non-GAAP financial information in this call. The relevant definitions and GAAP reconciliations may be found in our earnings release and 10-Q, which can be found on our website in the Investor Relations section. Following the prepared remarks, time permitting, we'll open the call to your questions. I would like to remind everyone that this conference call is open to the media, and we are providing a simultaneous webcast to the public. A replay will be available via the company's Investor Relations page. I would now like to turn the call over to the CEO of Gevo, Dr. Patrick Gruber. Pat?

Thanks, John. Good afternoon, everyone, and thanks for joining our call today. We filed our Form 10-Q earlier today, and we ask that you refer to it for more detailed information. Our team had fantastic momentum as we exited the first quarter of this year. We announced two new SAF supply agreements: one with Delta, another with British Airways in the first quarter for a combined 105 million gallons per year. We maintained that momentum through the second quarter and beyond. Since the first quarter, Gevo's business development team has done a great job to close five additional supply agreements with American Airlines, Alaska Airlines, Japan Airlines, Finnair, and Aer Lingus for a combined total volume of 155 million gallons per year of SAF. Collectively then, Gevo now has over 350 million gallons per year of committed SAF offtake that has an applied hydrocarbon revenue value estimated at over $2 billion per year, inclusive of the market value of the environmental benefits and based on current market projections and operating assumptions. Now that brings us significantly closer to our production goal and sales goal of 1 billion gallons per year by 2030. It's tremendous progress. I'm proud of our team. And what's even better is that they're all take-or-pay agreements, and that helps us. Now it's good momentum for SAF and our systematic approach to driving down carbon intensity; the customer base buys into what we're doing. It's inclusive of our whole supply chain, from growing raw materials to the burning of jet fuel. And we continue to believe that net zero carbon-negative fuels can be produced profitably. That's what all the data keeps saying. We haven't slowed down either. Our team continues to discuss and negotiate agreements with other potential partners, including strategic partners. We are very pleased with our Northwest Iowa RNG project; all three of our dairy partners and the digesters are now producing biogas, and that gas is being sent to the upgrading unit and injected into the sales pipeline where the sales are managed by BP. Over the next several months, gas production data will be gathered for Gevo’s application to CARB, so that we can apply for LCFS and maximize the value to Gevo in those gas streams. I look forward to being able to report meaningful revenue and associated profit for that project in the near future. Our team has done a great job working through start-up issues; everything is working very well. To remind people, this is a 355,000 million BTU nameplate capacity; it is the fifth-largest dairy project ever constructed, and it is doing really well. Our Net-Zero 1 project in Lake Preston, South Dakota, which is designed to produce 62 million gallons a year of low carbon fuels, with 55 million gallons being sustainable aviation fuel, remains on schedule to deliver its first volumes in 2025. The FEL-3 work is expected to be done around year-end, but we already have enough data to move forward on the build-out, and we expect to stay on schedule. As we announced last month, Gevo closed the land purchase for approximately 245 acres in Lake Preston where the NZ1 plant is going to be built, and we have planned a groundbreaking ceremony for next month to kick off the initial site work phase. We expect to be ordering long lead equipment in the fourth quarter of 2022; we are doing everything we can to stick to our schedule. We're monitoring supply chain issues and attempting to mitigate any that we find as they arise. NZ1 is happening. I expect this NZ1 plant to be quite something. It's going to show the world what's possible. It's going to show that sustainably produced raw materials can be converted into SAF with energy-efficient production processes. We can displace the fossil-based energy; that's the electricity and the heat sources, get rid of the methane from fossil-based, and swap them out with renewable energy, making it all profitable to produce our jet fuel. We continue to evaluate additional plant locations as we map out the path forward beyond Net-Zero 1. Kim has done such a good job selling that we have so many gallons that we've got to really plan these out and get on with it. Remember, we have over 350 million gallons per year of SAF to deliver beginning over the next few years and multiple plants are required to satisfy those contracts. We expect that the take-or-pay or otherwise financial agreements that we have will assist us in securing debt and equity for our projects. Our team has done a great job, and our customers have done a great job cooperating with us to make sure that it all works. We've discussed previously that both greenfield sites and existing ethanol plants will likely be in the mix for future production projects. Our focus continues to be on locations with stable, low-cost feedstocks that are CI score advantaged, and a large part of the footprint from traditional production facilities comes from the sources of electricity and gas. It's essential to avoid fossil fuels. A large part of our effort is around opportunities to de-fossilize energy sources to drive the production facilities, substituting electricity and addressing heat sources. Of course, we also need to choose states and local governments that are business-friendly and supportive of the overall goals. We have been achieving our Net-Zero 1 development milestones that we identified in our company update in June, and it is on the timeline that we had planned. We will begin ordering long lead equipment over the next few months, and we expect to close our contracts for wind power and green hydrogen that we need for the energy sources for our NZ1 plant. In June, we issued shares of common stock to strengthen our balance sheet and advance what we believe will be a challenging financial market over the next two years. Now, we can move forward with our NZ1 project and begin initial work on NZ2, our next big plant, without significant capital constraints. We're already getting organized to implement a NZ2 plant, but I must say, nothing is going to distract us from executing on NZ1. NZ1, FID, and financial close on the debt component is expected to occur around mid-2023. We have already been spending and planning to build that plant in advance of that. We expect to have one or more equity partners in the project at that time, which preserves Gevo Capital for the NZ program development. We expect NZ1 to be the cornerstone for our platform of NZ projects with debt and equity partners. We have met several investors, energy, and financial strategics who see what we're doing and have expressed interest in investing in our projects. We continue to explore and flesh it out. The combination of our take-or-pay contracts and proven production technology takes a lot of risk off the table, and people are starting to notice.

Thanks, Pat. First of all, I'd like to thank all the airline and trading companies that have joined our crusade for their continued confidence in Gevo's capability and vision. The importance of sustainable agriculture to the production of both nutrition and ultra-low carbon sustainable aviation fuel and transportation fuels has been acknowledged by these companies through their multiyear commitments to Gevo. We continue to see demand for low-carbon SAF exceeding supply for the next decade and beyond by as much as a factor of 12. Based on what we're seeing, we believe the SAF market size is 10 million to 30 billion gallons over the next two decades. On the supply side, currently announced SAF projects total approximately 2.4 billion gallons globally. Gevo's goal of one billion gallons of fuel production by 2030 should be easily absorbed by the level of expected demand. While not distracting from our ethanol-to-jet production build-out, it's important to note that we continue to consider ways to progress our isobutanol platform to supply low-carbon renewable gasoline blendstocks and SAF. Additionally, both the ethanol-to-jet and isobutanol platforms can supply chemicals, which is an area of rising interest with our customers. Our chemical products have the potential to be significantly carbon-negative based on the great model. The world hasn't seen drop-in products that can drive down CI scores like this. It will be exciting to see how the market determines the value of these products. It's important to note that the ethanol-to-jet and isobutanol platforms also have operational and product synergies and can optimize our cash cost and product position on the same platform over time. In short, they're complementary, and I anticipate you'll see more on these efforts in the future. Based on our volume of executed take-or-pay contracts, we have proven that the strong demand for SAF exists. We continue to secure additional contracts and will supply the market for volume beyond 2027. However, going forward, our team will focus attention on securing partners in the energy transition space, as well as traditional energy companies and strategic financial groups who can help us grow faster. Further, we continue to screen and secure greenfield facility builds, and we will also look to partner with existing ethanol producers who are keen to decarbonize, where it creates value and accelerates our production timeline. Finally, I expect our commercial efforts to build off our Verity tracking platform, which, as you know, is in development. This will help us secure customers and differentiate us among users who believe in the vision of tracking and counting carbon across every link of the value chain.

Thank you, Tim. We ended the second quarter of 2022 with a strong liquidity position of $546.8 million in cash, restricted cash, and other liquid investments. We realized $139 million of net proceeds from the issuance of common stock and common stock warrants in the June 2022 offering. Long-term debt outstanding of $67 million is related to the Northwest Iowa RNG project. Our corporate spend, which is SG&A, was approximately $6 million for the quarter, net of non-cash stock-based compensation. During the second quarter of 2022, we invested approximately $15 million in capital projects comprised of $6 million into our Net-Zero 1 project, $8 million into the Northwest Iowa RNG project, and approximately $1 million into other capital projects. Construction on our Northwest Iowa project is complete, and it is being placed into service in Q3. Depreciation will start flowing through the income statement at that point. We continue the development and financing efforts around Net-Zero 1. There is substantial interest from lenders in Net-Zero 1's project financing. The actual debt structuring and financing efforts will ramp up later this year to drive towards a debt close in 2023 after the project delivery contracts and final costs have been locked in. We're also engaged in discussions around equity partners in Net-Zero 1 and our Net-Zero program overall. We'd welcome an equity partner or partners to preserve our development capital for subsequent plants while still giving Gevo meaningful permanent project equity positions. I'd also note that the Senate passed the draft Inflation Reduction Act of 2022, which is a positive development for Gevo, given both the SAF blenders tax credit and the clean fuel production credit for SAF were included for a total of five years. The CFPC would take effect for production in 2025. To qualify for this new tax credit, SAF producers must produce fuel with at least a 50% reduction in lifecycle greenhouse gas emissions when compared to petroleum jet fuel. The SAF credit has an upside of $1.75 per gallon if a Net Zero CI score is received. This is all very good for Net-Zero 1 as we expect our staff to qualify for the CFPC incentive, and we could qualify for as much as a cap of $1.75 a gallon if the EPA uses the Argon 3.0 model as its measurement tool since we plan to be net zero under that model. Now I'll turn the call back to Pat. Thank you.

Thanks, Lynn. Yes, there are other good things in that bill as well. There are funding provisions for overall greenhouse gas reduction programs to build out plants and capacity, as well as funding for some of the DOE programs and the USDA smart agriculture initiatives. All of these aspects have great potential to benefit us, which is pretty exciting. Thanks, Lynn. And operator, now please open up the call for Q&A.

Thank you. We have a question from Derrick Whitfield with Stifel. Your line is open.

Thanks and good afternoon, all.

Hey, Derrick.

For my first question, I wanted to ask if you could really share your thoughts on potential benefits from the pending IRA legislation, really building on where you ended the conversation. Obviously, the SAF BTC is a positive, but it seems like there's also potential on the CCS and ITC elements that could benefit your capital costs. Any thoughts you guys could share about those benefits and the payment mechanism would be really appreciated.

Yes. The way the CCS works for us is that there is one of the pipelines being built not too far away from us. We'll probably connect to that. I would expect us to do so. The deal that we make with that will be clear: we'll be capturing CO2 that comes off fermentation, so it's a doable capture, and it goes into the pipeline for geological sequestration. That improves our CI score along the way. It helps add to the margins of our product. How much it adds is dependent upon how California LCFS treats it, how it will be handled under RFS, and the blenders tax credit that we just discussed. Those are things that will be unfolding. If you use a model, you'd wind up with carbon-negative type CI scores. There's nobody else talking about fuel from carbon-negative sources, but us. That's because we start with a net-zero plan, and if you add CCS to it, it goes negative. That's a significant proposition. It demonstrates what's possible for the future. Other interesting elements in that bill are the DOE programs which are supportive of energy transition initiatives. They fund the USDA smart agriculture projects, which are crucial because sustainable agriculture can integrate into the overall picture. One of the great tools this country has is to capture carbon in the soil, which necessitates using modern farming techniques like low-till and no-till with precision agriculture. These practices involve monitoring growth, measuring carbon, and so forth. Those are the types of programs proposed in that bill, and they're very important. The hydrogen initiatives have received funding, and so have wind tax credits; these developments benefit us as we plan to build hydrogen where we are collaborating with JUUL Energies for wind. I believe there are also provisions for biogas, but I think those will become more relevant in the farm bill as that progresses, as that will be more detailed in how to build things. Overall, there's a lot of intriguing content in the legislation. It's just a question of whether it will get coupled as it goes through the House and what the language behind it will ultimately mean. But overall, I'd say it's pretty encouraging.

Certainly. And maybe just tacking on to your response while the plan for decarbonizing your energy sources for NZ1 is likely locked, could that change your potential or preferred pathway for decarbonizing your production process as you critically review that legislation to date?

There's nothing in there that would change it like that. The fundamental view for all production plans is that for all ethanol producers, anyone who manufactures anything, grid electricity is not green. That's just a simple fact of life. People can discuss how great their electricity is, but the reality is, if we want to use it, it creates a footprint for us. And you know what's worse? Fossil-based natural gas. Those are the issues facing all of us who manufacture things. These long-standing sources must be substituted over time if we're to be successful in reducing greenhouse gases. An important realization here is that people are really grasping the idea of energy transition that will happen gradually. It will require various sources of renewable electricity and different routes to arrive there. The same goes for hydrogen—it is a useful source. We can capture excess energy from wind, turning it into hydrogen, and obtain the energy back out. We'll be implementing this at our plant in Lake Preston. Moreover, there are possibilities for techniques involving geological sequestration where we can burn natural gas, capture the CO2 from it, and store it underground. This falls under the category of blue energy, which would help reduce the carbon footprint. All these facets were touched on in the bill. However, make no mistake: these factors are fundamentally market-driven. The government's efforts are commendable and show progress, which is great, but ultimately, it's all market-driven. This environmental issue is not going away, and the CI score is a new competitive attribute of which we are fully focused.

That's great. Could I ask one additional question? Regarding the chemical products you referred to in your prepared remarks, could you help put into perspective the market size and the potential for de-fossilization for low-carbon chemical products?

Yes. Here's a simple way to think about it: our business involves taking new raw materials and converting them into fundamental building blocks. These building blocks are the primary petrochemicals that you get out of a cracker, such as ethylene, propylene, and butenes. If you know how to produce these from renewables effectively, which we do, you can manufacture virtually everything found in petrochemicals—all significant chemical products. The relevant technologies already exist and are in use within the chemical industry. What will be fascinating about our materials is that they are massively carbon-negative. Consider this: if we produce sustainable aviation fuel, it gets burned in a jet aircraft, and we measure CO2 emissions from the tail compared to what the farmer has sequestered upfront, we can achieve a net-zero emissions scenario. If the same fuel were to sit in a tank, it would have approximately a -100 CI score, illustrating the full carbon sequestration perspective. This concept applies equally to chemical products, presenting the possibility of generating significantly carbon-negative polyethylene, polypropylene, polyester, and so on. Essentially, think of all plastic products—all major plastics can be constituted this way. The exciting thing is that implementing these changes does not necessitate new production facilities; it simply requires introducing renewable materials into the existing infrastructure of the chemical industry. That’s all that needs to happen. We don't require new plants to go downstream; that capability already exists. We just need to switch the raw material inputs.

That’s great. Thank you for your time and responses.

You bet.

At this time, this concludes our question-and-answer session. I would now turn the call back over to Dr. Gruber for his closing remarks.

Thank you all for joining us. It's an exciting time for us here at Gevo. I'm pleased to be moving forward, and the progress feels really good after all this time. I appreciate all of our partners who are working with us on de-fossilization and decarbonization efforts, as these will be tremendously important as we advance. Each solution will be slightly different at each location, and our customers have been fantastic. They've been learning how to implement sustainable agriculture and understand the nuances of counting carbon while comprehending the ins and outs of this kind of business as it is different. We must account for the entire supply chain. We aim to reduce CI scores and transform the entire business ecosystem together. It's quite an engaging opportunity to pursue, and I look forward to moving ahead, grateful for our teams who are achieving great things. Thank you all for your support of Gevo. With that, have a good afternoon.

This ends our presentation. Thank you for joining us today. You may now all disconnect.