Good day, and thank you for standing by. Welcome to the Gevo Third Quarter 2022 Earnings Conference Call. Please be advised that today's conference is being recorded. I would now like to hand the conference over to our speaker today, John Richardson. Go ahead, John.

Good afternoon, everyone. This is John Richardson, Gevo's Director of Investor Relations. Thanks for joining us to discuss Gevo's third quarter results for the period ended September 30, 2022. I would like to start by introducing today's participants from the company. With us today are Dr. Patrick Gruber, Gevo's Chief Executive 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 at www.gevo.com. 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 agreement, 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 some 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 at www.gevo.com 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 at www.gevo.com. 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 us on our call. We filed our Form 10-Q earlier today, and we ask that you refer to it for more detailed information. It's been a tumultuous year so far in the financial markets, and there will likely be more to come over the next few quarters. Although our stock price is disappointing to me and to our shareholders, our balance sheet is in great shape, and Gevo's team is focused on pushing forward with our net zero development plan, which I'll talk about shortly. I'm confident that the value of what we are doing will begin to be reflected in Gevo's stock price as we continue to move forward with the growth of our business and the deployment of our net zero plants, starting with Net Zero 1. In the meantime, our business development team continues to see strong demand for low-carbon drop-in fuels from the commercial airline industry as well as from trading arms of some large integrated oil and gas companies. And it doesn't look like there is enough supply coming in the future, based on the publicly announced projects that we know of. I believe the airline industry will need every gallon of low-carbon drop-in fuels that can be produced, and more, as demand is likely to grow exponentially over the next few years. Scalability, substantially derisked low-cost technology and verifiably low greenhouse gas emissions across the value chain are what's important, and we have all that at Gevo. It's a strong position to be in. As we noted in our company update several weeks ago, Gevo has more than 375 million gallons per year predominantly take-or-pay fuel supply agreements in place with high-quality third parties. These agreements represent approximately $2.3 billion in expected annual revenue based on current market projections and assumptions. These agreements are critically important to satisfy the requirements of potential lenders that we are working with to provide project-level debt financing for our net zero buildout. I'm pleased to tell you that we have begun to generate revenue from our Northwest Iowa RNG project. The biogas production has been going well, and we are still debottlenecking equipment to maximize volumes. We have begun collecting data and gas quality and for volumes, which are needed by CARB to get an approved pathway under LCFS. We already have approval for RINs. I expect that the project will begin generating a meaningful volume of RINs in January 2023. However, LCFS predictions will probably lag that by at least 6 months because of the backlog at CARB to get the necessary approvals. Our RNG team has worked tirelessly to ensure this project stayed on schedule, and we believe that we have built a state-of-the-art RNG operation in Northwest Iowa, and it's performing well. In September, we had the groundbreaking ceremony at our Net-Zero 1 project location in Lake Preston, South Dakota. NZ1 is our first commercial scale net zero carbon, sustainable aviation fuel plant. Construction has begun, as it always does, with site preparation. We want to get the ground prepared so that we can move quickly in 2023 once engineering has progressed far enough to start full construction and once the ground thaws out. We expect to start construction early next year with a limited notice to proceed, even in advance of the full financial closing, which itself should happen sometime in the middle of 2023. We intend to keep the project on schedule by beginning construction with Gevo paying the bills as needed before the financial close. That will ultimately fund the complete construction of Net-Zero 1. We currently project that we are on track for a 2025 full production start-up. We've had some good news of late. The supply chain bottlenecks seem to have plateaued for now, while most of the issues around transportation delays have improved and are projected to continue to improve. Well, obviously, this is really important for a capital project. Additionally, costs of some materials and long-lead items look like they are starting to stabilize. Think about steel and other components that can go into a project like ours, that's starting to flatten out. This is good. Our capital cost projections look reasonable, and I expect a more stable price environment and materials availability as we move through next year. At NZ1, in addition to using renewable energy to drive our CI score down, we intend to use carbon sequestration. The plan is to capture the CO2 produced during implementation for biogas carbon and geologically sequester it. We recently reached an agreement with Summit Carbon Solutions, one of the leaders in the space. Summit is expected to provide NZ1 with CO2 pipeline access to transport and dispose of the CO2 produced and captured during our SAF production process. When combined with sustainable agricultural practices, we believe our SAF will have a negative CI score. We expect to be the leader in low-carbon SAF production. Given the offtake agreements that we've signed, it's clear that we're going to need capacity beyond Net-Zero 1. We have a good plan in place upon which we're executing. This plan includes greenfield and brownfield sites, along with partners who are interested in developing advancing projects. We aren't ready to disclose the details of this effort yet, but it's really exciting. We believe we are developing a reliable path for growth with ready access to the capital that we will need for these projects while minimizing dilution to Gevo shareholders by deploying capital at subsidiaries below Gevo, Inc. We expect that the capital for these projects will be gathered at one or more project or platform companies below Gevo, Inc. level. We expect Gevo will maintain a controlling interest in these companies, and the only balance sheet impact to Gevo would be its equity interest in the project and platform companies. Our Net Zero 2 site selection process has been active for several months, and we have narrowed down the potential locations to a handful of very attractive sites, based on a variety of factors. Key among these factors is reliable access to low carbon energy for process energy needs and abundant low carbon feedstock for ethanol sourced from farms with favorable farming practices. We're not ready to discuss the details around the status of these projects yet because many of the fundamental details still need to be finalized, and we don't want to tip our hand too early, anyway. We are excited to have such a strong portfolio of locations identified for future NZ projects. Tracking of carbon and improving carbon reduction is essential and critically important to our business. To that end, we've been making progress on Verity Tracking. Verity Tracking is a system to track carbon, beginning from the farm practices through land use, energy use production across the whole of value chain and out of the wing of a jet, and even after it's burned. Verity uses distributed electro technology, also known as blockchain technology. The idea is to make our carbon values completely traceable, trackable, immutable, and valuable. The USDA agrees it's a good idea. They have selected us for a grant of $30 million to help develop the system. We're still negotiating the final details of the grant, but we expect to accelerate the programs with this money. I can tell you that Verity resonates in the marketplace. The idea of tracking carbon from farm level forward into products has been discussed by lots of people, but the question is how fast to do it. But we think we have a good answer for that, and that's Verity Tracking. We recognize Verity Tracking has relevance beyond our own ATJ process and to provide value to other jet processes, biofuels, and even food. I think Verity Tracking has the potential to be an attractive stand-alone business in its own right, and we plan on further investing in developing this business. I am pleased with the progress we have made over the last 1.5 years on Gevo's goal to decarbonize the aviation industry. This inflationary environment has been unsettling, and it has impacted our expected capital cost for NZ1. They've gone up some, but we haven't budgeted for that now. However, the macro environment for low carbon fuels has stayed strong, and project returns appear to be even better than we originally thought. The project returns are even better than we expected before. The momentum behind our efforts has never had such a level of broad-based support as we do now, and I believe that it won't change with any potential political reshuffling that happens over the next few years. The need for net-zero fuels is undeniable, and the goal to reduce carbon emissions has been generally acknowledged, including by those in the fossil fuel industry. We know the path to success, and I'm confident that we have the right people internally and the right partnerships externally to achieve our 1 billion gallon per year goal by 2030. Now I'll turn the call over to Lynn to comment on the quarter's financial highlights. Lynn?

Thanks, Pat. We ended the third quarter of 2022 with a strong liquidity position of $500.4 million in cash, restricted cash, and other liquid investments. Restricted cash totaled $76.9 million and is associated with the Northwest Iowa RNG bonds and certain collateral related to the development of Net-Zero 1. Long-term debt outstanding of $67 million is related to the Northwest Iowa RNG project. Our corporate spend, that is SG&A, was approximately $7.5 million for the quarter, net of noncash stock-based compensation of $3.6 million. During the third quarter of 2022, we invested and capitalized $22.5 million in cash in capital projects, comprised of $15 million into our Net-Zero 1 project, $7.3 million into the Northwest Iowa RNG project, and approximately $0.2 million into other capital projects. Earlier in the year, we began the process of suspending production at the Luverne facility in order to focus our attention on the net-zero program planning, design, and financing. During the third quarter, Luverne was idle and placed in a care and maintenance status to be used for marketing, testing, and R&D purposes. This change, combined with Luverne's history of operating losses, drove an accounting requirement to perform an impairment test on the value of the asset. Those tests indicated that an impairment existed and required that the assets be written down to their estimated fair value. For the 3 and 9 months ended September 30, 2022, the $24.7 million impairment charge represents a large portion of the basic and diluted net loss per share, accounting for $0.10 and $0.11, respectively. We are progressing our net-zero build program and are in the process of seeking debt and equity partners for Net-Zero 1 and projects beyond the flagship project. Third-party debt and equity financings for the program are being structured on a nondilutive basis at the asset level rather than at Gevo, Inc. The equity outreach is going well with substantial market interest, and we expect to secure more investors as a result of those efforts. The Net-Zero 1 debt process is underway with a dual tracking of commercial debt sourcing and DoE guaranteed loan sourcing. Both tracks are progressing well, and we expect to secure nonrecourse debt for the plant construction sometime around mid-2023. As Pat mentioned, we continue to spend development and engineering capital to progress the project and maintain its timeline in advance of securing the debt.

Thanks, Lynn. Operator, please open the call for Q&A.

Our first question comes from Derrick Whitfield from Stifel.

For my first question, I wanted to ask if you could offer a general update on the ADM and Chevron partnerships.

Sure. So with Chevron, we've had discussions, we extended the contracts or letter of intent with them. And so that will be an ongoing discussion. We just didn't want to put it out there as public advice, given the turmoil that's going on, plus we don't want to get boxed into it. So those are still ongoing discussions. Regarding ADM, same kind of thing. We're working with those guys and making progress on things. And those projects are really big, and so we can't do that by ourselves. And so that one is going to be slightly more complicated to do, but it's plugging along and making progress. Our fate doesn't depend upon either one of those, it isn't intended to. Our fate depends upon NZ1, NZ2, building those out, along with the other sites where we work with brownfield ethanol plants. And there are a number of those that are attractive. So we look at it from the point of view that those big ADM assets are great, love to see them happen, but those are giant projects, and I'm not betting the ranch on those because of the time frames involved. I have to go get stuff built. We have close to 400 million gallons of contracted take-or-pay jet fuel. And we have to go get it done and get it built out while working with people who are going to get it done in their time for the networks.

Terrific. And as my follow-up, I wanted to ask about the Summit Carbon Solutions agreement. Are there any general economic parameters you could share with us on your take on the environmental attributes, inclusive of the IRS 45Q?

I don't think it's appropriate to comment on it because they've done so many deals with so many people, and I don't want anything misinterpreted, but it's a good deal. It's a fair deal for us and satisfies our needs to ensure that we have the CI scores and the value associated with that. It works out economically; it's attractive for both parties.

Our next question comes from the line of Shawn Severson from Water Tower Research.

Pat, I was curious if you could share any insights on the progress of the strategic review. Additionally, as you seek investors for both assets and debt, what is the level of interest you are seeing regarding this compared to financing options?

One of the key points I want all shareholders to understand is that we are not satisfied with our stock price at Gevo. We want to avoid further dilution, but we need to raise a significant amount of money to develop our plans and projects. The good news is that we have strong demand for our product backed by firm and committed offtake agreements. We plan to raise funds at what we refer to as a platform level, which is under Gevo at a private company level. This private company will handle the funding and the construction of these projects, which will include adding debt to each project. Guggenheim and Citi are leading this banking initiative, and we're currently in the process, which is going well with a lot of interest. It reassures everyone that we're collaborating with Axons, known for their proven methods of converting alcohol into Jet fuel. They appreciate our approach to reducing carbon scores and even achieving negative scores through collaborative operations. Everyone involved recognizes the pipeline of locations and their attractive economic potential. I believe we will successfully raise funds and attract strong partners. We anticipate that these investors will also support our Net Zero 1 initiative to some extent, and we’re making headway on securing debt financing by bringing in additional bankers alongside Citi.

Citi and Nomura Green Tech.

Yes, Nomura Green Tech. And that's going well, too. So there's lots of interest in the space. People don't know what to do with their money. There aren't that many solutions that can work. It's about showing that it all can be properly derisked, put into a project format, and getting the financing. As I said, this isn't selling stock at the Gevo level. That's not what this is. This is about investing down beneath Gevo in projects or groups of projects.

My follow-up to that is when you look at the equity side on the NZ1 going forward. Is this something we should expect to have small equity partners, or does it seem like you will have one big check written from whoever is involved? Or are they going to be composed of 2 or just the nature of testing these waters?

I believe that would be the funding, though I'm not certain how we'll set that up yet. I think it will come from the platform company. We have allocated some of our funds to the platform company, along with other investors. Together, they will contribute to the NZ1 project, which is why I believe it will be successful.

Right. And that's what I'm trying to understand; you put your equity in, and then would you expect to have like 2 or 3 other partners per plant? Or do you think this goes with very strategic writing of big checks along what you do at the plant level?

I think what it would be is the platform itself, a platform company. We as investors are committed to investing in NZ1 and additional NZ projects. How that mix of capital goes in, how much actually gets spent, specifically how much is ours versus theirs, and how many people participate, well, that's part of the sausage-making that we're doing. So, I said, gosh, we got to build out 400 million gallons over the next 5 years. And that's like what, 8 plants the equivalent size of NZ1. That's a significant amount of money. It's going to take not just one partner; it's going to take multiple partners working together to go and deploy that.

I think it's reasonable to estimate that it's between $3 billion and $4 billion, or around $3.5 billion in equity. Many of the parties we are engaging with have the capability to invest in Net Zero 1 independently. However, we are receiving substantial interest, so we will need to accommodate as many participants as we can under terms that are favorable for us.

Our next question comes from Amit Dayal.

Pat, just in terms of the cash outlay for the next, say, 12 months, how should we think about your needs on that front coming up? And what are your plans in terms of cash usage over the next few quarters?

I'm going to have to then ask that question. So then, would you address the rough expected cash spending on NZ1 and corporate?

We expect to have a corporate burn rate of approximately $33 million per year. Additionally, we will allocate some funds to Verity's growers program, with the majority of that investment supported by our USDA grant, which will help cover a significant portion of Verity's development costs and the associated support for Net Zero 1 and future projects. The RNG project is now complete and should begin generating cash rather than being a cash burden. Moving forward with Net Zero 1, we plan to enter a limited notice phase for detailed engineering and further site preparation to meet our projected closing date for debt and third-party equity. We anticipate investing around $90 million into Net Zero 1 to reach financial close, but we do not plan to retain the full amount in the project. Instead, we expect to be reimbursed for part of our development expenses from the project's funding sources, leaving us with a smaller equity stake in the overall project. In addition, we will also incur expenses for developing Net Zero 2 and potentially Net Zero 3, although it is too early to determine the specifics of the timeline and funding for those projects.

We plan to focus on advancing NZ1 by ensuring all risks are managed, getting the engineering work on schedule, starting site work, and ordering necessary equipment to maintain our overall timelines and targets for mid-2023. At that point, we will decide whether to withdraw some funds from the project, which has accumulated significant investments over the years, or keep them in and let the project progress. Our decision will be influenced by the circumstances at that time. Lynn is correct that we need to continue development on NZ2, which we have already started and invested in due to its viability. We also have other projects to consider. Our challenge, which is a positive one, is that we have substantial demand secured through take-or-pay contracts that we need to meet, necessitating further construction. These projects are suitable for project financing, so we need to devise an approach that involves collaboration with EPC firms and navigating the associated financing. Gevo is positioning itself to function more as a developer and licensor, which is advantageous and typically yields higher returns. While we may not be able to allocate funds from our corporate balance sheet right now, we will manage our investments wisely and leverage external funding as much as possible to facilitate growth.

Understood. Just one final one for me. With respect to the RNG revenues and cash flows, should we assume 2023 is where you can get the $12 million to $16 million that you have been expecting from this deployment?

Well, that's an annualized run rate expectation of EBITDA because of the delay in receipt of cash through the LCFS in particular because CARB is pretty slow, and the pathway takes time. That annualized run rate probably won't be fully realized in 2023 because of that delay.

We won't see the entire amount right away; instead, we will see part of it. However, we are uncertain about the exact portion we will receive in 2023. It should be noticeable, which is my expectation. Still, we won't receive the full amount in 2023 due to the timing and the way the accounts operate for the LCFS.

We have Derek Whitfield again asking for another question.

I wanted to ask another question just on the offtakes and the contractual obligations associated with those agreements. Given your commercial success in signing those, what are your thoughts on the progression of plan NZ1? Would it make sense to scale the second plant beyond the size of NZ1 once you derisk the first plant?

Yes. Here's how I see it: our challenge involves expanding significant hubs, and many partners we're negotiating with are eager for even faster growth. It's an intriguing period. Everyone understands how to produce ethanol and decarbonize it. They've seen our capabilities. The ATJ (Alcohol-to-Jet) technology appears to have mitigated technical risks. The focus now is on capital investment and growth strategies. However, we must first address the construction of these facilities. NZ1 is based on a design for a 100 million-gallon ethanol plant, which will be a modified version where we have successfully reduced the carbon intensity score using various techniques and proprietary know-how. This design integrates with the ATJ facility based on the access model we are adapting, and this setup looks promising. Importantly, this design can be replicated for any other 100 million-gallon plant. Nevertheless, any additional 100 million-gallon ethanol plant site also needs to undergo decarbonization, as most are not currently decarbonized. We possess the design to facilitate this, and we envision it as a turnkey solution we can provide. We are in discussions with engineers on constructing these plants in modules to expedite the process. One critical aspect is securing partners who have genuinely decarbonized plants. We aim to assist them by incorporating renewable energy, which represents a viable avenue for our growth, and we have ongoing projects in this area. Additionally, we are planning NZ2, which is intended to be three times the size of NZ1. This move aims to achieve larger scale more rapidly, given that we have identified specific sites we believe are more suitable for larger operations, especially considering access to defossilized energy. The same plant design can apply for those larger ventures, allowing us to leverage this size, both domestically and internationally. So, to clarify, NZ1 is designed around producing 100 million gallons of ethanol, yielding over 60 million gallons of hydrocarbons, while NZ2 will target 300 million gallons of ethanol, converting that into over 180 million gallons of hydrocarbons. We have two robust designs that can adapt to any requirement, and that’s the perspective we’re maintaining. Therefore, the definitive answer is that NZ2 is indeed going to be larger, three times the size, which we are actively developing since we already have the framework for the 100 million gallon version established.

And Pat, just on that 3x design. Are there capital efficiency gains to be had with that incremental scale that you guys can quantify at this point?

No, it's not worth discussing in detail because whatever I say may not be accurate, and people will remember that I said it incorrectly. There are a few standard engineering principles that can help clarify things. Ultimately, it comes down to the specifics of our approach. However, the answer is yes, there are advantages, and it will lead to very appealing economic returns.

In general, I think the ATJ portion scales better than ethanol. Methanol has some efficiencies, but ATJ has substantial efficiency.

All right. Thank you. That's all the time we have for questions right now. So I would like to turn it back over to Patrick Gruber for closing remarks.

Thank you for joining us this afternoon. I look forward to connecting with you at upcoming conferences. Lynn, John Richardson, and I will be on the road engaging with people and sharing insights. It's exciting to see the interest in our platform fundraising, and I hope we can mobilize the capital that has been waiting to be deployed. Our NZ1 product is progressing well, with our engineering teams collaborating effectively. I'm optimistic about that. I’m focused on how we can scale effectively, the partnerships we establish, and our strategic decisions moving forward. It's an intriguing challenge that we need to navigate. We're ready to play our part, and we feel fortunate to have developed solid technologies for Sustainable Aviation Fuel, which are well-validated. I am excited about the potential there. I look forward to seeing you all in person when possible, and since the holiday season is approaching, I wish you all early happy holidays. If you have further questions, please don't hesitate to reach out to John Richardson, Kim, Lynn, or myself, and we will get back to you if needed. With that, I’ll conclude the call. Thank you.