Good morning and welcome to Green Plains Inc. Second Quarter 2024 Earnings Conference Call. Following the company's prepared remarks, instructions will be provided for Q&A. I will now turn the call over to your host, Phil Boggs, Executive Vice President of Investor Relations and Finance. Mr. Boggs, please go ahead.

Thank you and good morning, everyone. Welcome to the Green Plains, Inc. second quarter 2024 earnings call. Participants on today's call are Todd Becker, President and Chief Executive Officer; Jim Stark, Chief Financial Officer, and several other members of Green Plains senior leadership team. There is a slide presentation available and you can find it on the Investor page under the Events and Presentations link on our website. During this call, we will be making forward-looking statements which are predictions, projections, or other statements about future events. These statements are based on current expectations and assumptions that are subject to risks and uncertainties. Actual results could materially differ because of factors discussed in today's press release, in the comments made during this conference call, and the Risk Factors section of our Form 10-K, Form 10-Q, and other reports and filings with the Securities and Exchange Commission. We do not undertake any duty to update any forward-looking statement. Now I'd like to turn the call over to Todd Becker.

Thanks, Phil. Good morning, everyone, and thanks for joining our call today. Margins began to turn higher later in the second quarter driven by a change in the fundamentals and U.S. Ethanol is once again the lowest-priced molecule on the planet. We ended the quarter on track for potentially record exports for 2024 and the world has returned to the U.S. to buy low carbon fuels led by expanded use in Canada and many other countries. EBITDA sitting at over 23 million barrels of stocks for most of the quarter, we saw a nice margin expansion as we entered into the third quarter. Favorable natural gas and corn prices also helped as fuel prices remained elevated and continued to stay that way with strong driving demand as everyone knows air travel is mostly a challenge. Fundamentals remain strong for the balance of the year as we expect Brazil to be short export products in the fourth quarter, so we have the potential to have this market somewhat to ourselves as we remain competitively priced in the world. As a result, we delivered positive second quarter EBITDA significantly higher than last year's second quarter and higher than the prior quarter. However, this is still not to our satisfaction as our operating costs on a per gallon basis were somewhat elevated since we had six scheduled maintenance turnarounds during the quarter. This sets us up for strong run rates for the balance of the year. Our utilization remained consistent in the 93% range, inclusive of completing our spring maintenance as mentioned, which tells you we are really seeing the results of investments made when we're experiencing lower run rates. We also continue to work through some of the equipment refreshes at Mount Vernon and Obion we mentioned last quarter and believe we will begin to see the positive impact of that in the second half of the year, which should take our run rates even higher as both of those plants remain somewhat hampered while we await conveyor replacements for both of them and for Obion specifically a new thermal oxidizer that should help both ethanol and ultra-high protein production. When this is complete, it will unlock an additional 40 million gallons of capacity and that can put us up in the high 90s run rates as a percentage. Our renewable corn oil yields had a quarterly platform record at 1.2 pounds per bushel across all of our sites. We challenged our operations team to improve that number after a lower Q1 and they certainly delivered. Looking forward, margins for Q3 are all in the range of the high 20s to high 30s per gallon on paper, the fourth quarter starting to pick up steam as well. We have had some of the third quarter production as margins were peaking in July above current levels, and those hedges are at or above current levels to ensure that we can deliver a strong third quarter. If you look at the simple crush, we reached three standard deviations from the mean. It was just something we could not turn down, but we still have plenty of upside on unhedged gallons. Thus far, that absolutely was the right decision. We don't make random decisions from our trading and risk team, and we do consult our Board, which has been very cautious and thoughtful about these decisions. We review at every Board meeting and on subsequent calls with the Board. We discuss current fundamentals and hedging strategies, but we continue to have a favorable outlook for the balance of the year as the market is backward dated, so spot margins remain the best. The fourth quarter is at the long-term mean and we have very limited hedging out forward, so we want to take advantage of the strong left half that we are expecting. The corn crop appears to be in excellent shape, which the USDA continues to reaffirm with abundant anticipated ending stocks. The crop that will be harvested this year puts Green Plains in a much better spot in both the east and western corn belt than in recent years. Our turnkey JV with Tharaldson started up in the second quarter and we welcome the opportunity to provide additional high-protein production to our growing list of customers. This is the largest project we have built to date and while we continue to debottleneck, we have started shipping product to customers. Commissioning our CST or Clean Sugar project in Shenandoah has been ongoing. The startup of serial number one is not without its challenges, but our Green Plains engineering and operations team along with Fluid Equipment engineering teams have worked nonstop to sort out some manufactured equipment challenges while debottlenecking to best optimize this exciting new facility. Most of the issues so far stem from construction and equipment and not from the technology. Customers have been very patient with us as we work through the startup and interest in our products remains very, very strong. Finally, in our carbon capture strategy, we are pleased that our Advantage Nebraska approach is on track as we have the compression equipment needed for our three Nebraska plants ordered. We are very happy with the short lead times and expect construction of our compression sites to begin later this year. The Trailblazer project remains on pace for starting up in the second half of 2025. We can talk economics later in the call, but feel strongly the value of decarbonized ethanol assets are not correctly reflected in our current enterprise value. We continue to closely monitor the progress of our Iowa and Minnesota assets on Summit as they continue to work through permitting. We're also looking at our Indiana asset as we feel there's plenty of opportunity in the eastern corn belt to sequester carbon in geologic formations in and near Indiana. Again, more later on the overall carbon strategy and economics. One final update on the strategic review. As we indicated in the morning's release, the special committee of the Board assisting the full Board in evaluating alternatives have engaged Bank of America and Vinson & Elkins LLP as financial and legal advisors. As we continue to execute on our strategic review and transformation strategy, we have announced the sale of the Birmingham Unit Train Terminal as only one part of that. We will apply these proceeds to help retire the remaining balance of high-priced partnership debt, strengthening the overall financial position of the company. This will allow us to complete the streamlining and efficiency gains we anticipated after the acquisition of Green Plains Partners in early January. Again, this sale is only one piece of the broader initiative. And now, I'll hand over the call to Jim to provide an update on the overall financial results. I'll come back on the call to provide an updated policy outlook and discuss our progress on our initiatives in more detail.

Thank you, Todd, and good morning, everyone. Green Plains consolidated revenues for the second quarter were $618.8 million which was $238.8 million or approximately 28% lower than the same period a year ago. The lower revenue is attributable to lower prices for ethanol and dry distiller grains in Q2 of 2024 as compared to the same period a year ago. While we also saw a drop in our commodity inputs with corn and natural gas down significantly year-over-year, margin opportunities did improve in the second quarter compared to the prior year and prior quarter as a result of these lower input prices. As Todd stated earlier, our plant utilization rate was 93% during the second quarter compared to the 81.5% run rate reported in the same period last year, which was impacted by the shutdown of Wood River. Q2 2024 was slightly better than the first quarter this year and for the trailing four quarters, we have averaged a 94% utilization rate. We anticipate our plants to continue to perform in this mid-90% range of our stated capacity for the rest of this year barring any events outside of our control. For the quarter, we reported a net loss attributable to Green Plains of $24.35 million or $0.38 per diluted share compared to a net loss of $52.6 million or $0.89 per diluted share for the same period in 2023. EBITDA for the quarter was $4.8 million compared to a negative $15 million in the prior year period. Depreciation and amortization expense was lower by $3 million versus a year ago of $21.6 million. We realized a $22.7 million consolidated crush for Q2 of 2024 compared to $4.6 million in the same period of 2023. For the second quarter, our SG&A cost for all segments was $34 million slightly higher than the prior year's number of $33.3 million due to some higher property taxes at some of our locations. Interest expense was $75 million for the quarter, which includes the impact of debt amortization and capitalization of capitalized interest. This was $2.2 million favorable to the prior year's second quarter. This decrease is primarily driven by lower debt balances offset by slightly higher rates quarter to quarter. With the sale of the Birmingham terminal anticipated this quarter and the subsequent payoff of the partnership debt, we expect our interest expense to decrease by approximately $1.8 million per quarter starting in Q4 of 2024. Our income tax for the quarter was a benefit of $300,000 compared to a tax benefit of approximately $1 million for the same period last year, and at the end of the quarter, the federal net loss carryforwards available to the company were $92.6 million which may be carried forward indefinitely. Our normalized tax rate for the year, excluding minority interest, is around 24%. We anticipate that our tax rate for 2024 will continue to be around that 24% mark. Our liquidity position at the end of the quarter decreased by $52 million from the prior quarter due to capital investments and results from operations. Our liquidity included $225.1 million in cash, cash equivalents, and restricted cash along with approximately $219.6 million available under our working capital revolver. As a reminder, in May of this year, we did refresh our S-3 as a routine transaction due to the expiration of our prior shelf filing. We have no intent of issuing equity to execute on the foreseeable transformation plan. For the second quarter, we allocated $18 million of capital across the platform, including $5 million to our Clean Sugar initiative, approximately $4 million to other growth initiatives, and approximately $9 million towards maintenance, safety, and regulatory capital. On a year-to-date basis, we've incurred capital expenditures of around $339.5 million and we anticipate CapEx for the total 2024 will be in the range of $98 million to $110 million. This range excludes approximately $110 million for carbon capture equipment needed for our Nebraska initiatives that we have financing lined up to cover those needs. Now I turn the call back over to Todd.

Thanks, Jim. So when we laid out a vision of our transformation Green Plains 2.0, we capitalized on the opportunity to increase our focus on ingredients that matter and invest in technology to transform our ethanol plants into a true low carbon bio-refinery platform. So I want to look back at what we've accomplished and what is left to do for the future. Our first MSC system came online during 2020. We all know the challenges of that year and we started shipping product in April of that year with a pet food customer that we still have today and continues to grow their volumes. Since then, we have completed the MSC deployment at four other facilities as well as our turnkey JV partner facility, bringing total production capacity to over 430,000 tons a year. So as we know, this is a long game to introduce products that sell at a premium and while the domestic markets have ebbed and flowed, our global reach continues to grow, and that is where we achieve our best margin profile outside of the U.S. pet sales that we have. These are high-value nutritious feed ingredients that the market was looking for but didn't exist four years ago, and we continue to make inroads with our Sequence products as well. Our innovation teams are constantly focused on developing and improving the way we make Sequence, with the customer always front of mind through enzymatic and biological enhancements and potential reconfigurations of mechanical processes to further increase yields. Sequence reduction involves a series of biological and mechanical processes that are being used in different ratios to lower the cost of production while increasing digestibility and nutritional uplift for our customers. Our 50% protein is now a stable ongoing business, and we achieved our highest yield yet across the MSC platform in June of 3.5 pounds per bushel. While this was the target yield of our original investment thesis, we believe we will continue to make improvements and achieve higher production from our current platform as every quarter we tweak these systems to run more efficiently and learn a lot as we're doing it. In addition to producing these nutritious ingredients, this technology increases our renewable corn oil yields and while we have seen our yields increase across the platform even to a record, we still have additional opportunities to improve those yields and increase production across our existing asset base in both protein and corn oil. More importantly, as of late, we've seen protein markets remain strong during the backdrop of a weaker corn market, which was really the opposite in the first four or five months of the year. We are trending back to the original price spread of $200 a ton and with higher corn oil contributions, as we saw corn oil trade over soy oil as of late, we are beginning to see better margins for all of our products. As we said, protein markets will absorb new production quicker than anyone can imagine, and we still believe that. In our Sequence development, we have trials and negotiations ongoing with multiple large customers, some using the product today and some that could take at least one of our plants entire production capacity for Sequence and enough identified for demand from many more plants as well. We continue to optimize how the Sequence system operates with new enzyme cocktails, and we are in the process of making some minor capital investments to support that production in Wood River and Central City. We expect to make progress on our Sequent sales book and grow that throughout 2024 and 2025 as we lock in business and complete our capital improvements to make the product more efficiently. We have a customer base that is ready to grow with us, and some are now becoming repeat customers. We have also built the world's first Clean Sugar facility with dextrose that has up to 40% lower carbon intensity than that of competing products. This innovative technology was a primary reason we bought and invested in Fluid Quip and seeing this project through the completion positions the company for a transformative future. While carbon sequestration, protein, oil, and ethanol are all really exciting for the future, there still remains nothing more transformative to our financial future and enterprise value than CST. The margin profile remains consistently better than anything else we can do straight up and from a risk-adjusted point of view as well. Yes, we will have some big margins across ethanol from time to time, but that is a true commoditized product, while dextrose is completely opposite. While it may be taking a little bit longer than expected, owning and controlling this technology in what could be a breakthrough moment for the company is really the big opportunity that we have. It is a product that has a moat and a technological advantage that is hard to replicate. And finally, over the last four years, we have positioned the company for the future of decarbonization and to be in the position as an early large-volume, low carbon intensity feedstock provider to both fuel markets and in the future, alcohol to jet sustainable aviation fuel industry as it develops. With four facilities committed to Summit Carbon Solutions and three Nebraska facilities committed to Trailblazer and the Indiana opportunity mentioned, we stand ready to capitalize on decarbonization to significantly lower the carbon intensity or CI score of our biofuels, providing the world with an advantageous liquid transportation fuel. While these projects weren't on our radar five years ago when we launched our transformation, the impact of the IRA has caused us to focus more on projects related to decarbonizing our production, especially with the first mover advantage in Nebraska. To repeat, we strongly believe the value of a decarbonized asset is not at all reflected in the current share price or enterprise value. So we visited this topic on the last call as well, but with its importance, it's worth revisiting again. The 40 B SAF regulations were favorable to U.S. corn ethanol with CCS or carbon capture as we have no reason to believe this will not be reflected in 45Z regulations when those are published as well, possibly even more favorable on how they treat Climate Smart Agriculture. We believe we could be in the cap rate sea with our Advantage Nebraska strategy with 287 million gallons of low CI ethanol, which could attract serious interest from ATJ sustainable aviation fuel producers related to new products needed supply as well as low carbon fuel markets. We considered multiple election scenarios and we believe the repeal of the 45Z clean fuel production credit is highly unlikely in any case. The CO2 pipeline in Nebraska is on track for second half 2025 startup, and the Trailblazer project could be the first sizable decarbonization play in the ethanol industry and having three facilities connected to that should put us in an advantageous position. We continue to evaluate how to best leverage this opportunity and may look to possibly increase the production capacity at those while further decreasing carbon intensity, which by extension will increase the profitability of those sites, with such an outsized return on capital in the near term. As indicated in our press release, our construction management agreements have all been executed and also keep in mind, the plants in Nebraska currently produce about 800,000 tons of carbon, but the equipment was upsized to 1.2 million tons, both for expanded production as well as other opportunities like post-combustion carbon, which continues to drive even better returns than we expected. In summary, Q2 was a quarter focused on executing on the initiatives we have laid out over the past years. As we tick off more and more of these important milestones, the vision of where we can be post-transformation continues to come more clearly into view, which we can see some of this play out in Q3 as we expect to return to profitability, of course, based on current markets across all of our products. Thanks for joining our call today, and we can now start the question-and-answer session. Thank you.

Thank you. Your first question comes from the line of Adam Samuelson from Goldman Sachs. Please go ahead.

Yes. Thank you. Good morning, everyone. So, Todd, there was a lot of discussion on future kind of projects and initiatives in your script and especially at the end there. You outlined a capital budget for this year of $90 million to $110 million. You spent a little bit of a step up from the first half run rate, but not much. Can you help us think about the gating items that would drive you to allocate incremental capital either to expansion in ethanol production in Nebraska, the next Clean Sugar facility, ATJ potentially, just help us think about where the capital budget would go from here and when you think you'd be making some of those decisions?

Yes. I think what's nice right now is the fact that we're coming to the end of a lot of big capital investments that we have made. If you saw, we did not invest a ton of capital this quarter, and it was kind of nice to see that. Now we're coming to a quarter where we could generate free cash flow over and above the capital that needs to be invested at the moment during the third quarter as well. So we talked about that in the past where we will reach this point where the capital investment goes down and hopefully free cash flow generation comes up. I think we'll see that in the third quarter. The big investments we have left to make now is really finishing up Clean Sugar, which most of that has been paid for already. Now we're in the middle of startup and really, the next big thing for us is to build our compression equipment for carbon capture in Nebraska, which is already financed fully anyways and won't take any more cash off the balance sheet. So we will need no more capital for that as well. We're going to continue to look at our CST startup. As soon as we get positive results on that, we'll start to look at where should we increase Shenandoah or should we look to move that to a second site as well and really on ATJ and other initiatives like that, look, I don't think from Green Plains standpoint, you'll see us necessarily investing in ATJ, because I think we can monetize our early position in low carbon molecules that we're going to produce in Nebraska and continue to drive more and more opportunities there. A couple of big things that we look at in Nebraska is should we expand capacity there and should we look at investments in the post-combustion carbon. Both of those are kind of on the table to look at, but at this point, construction costs still remain high to do that, and we want to make sure we do the very best thing for the very best returns today. In the plants we have in Nebraska with 287 million gallons, some incremental upside there as well, we feel like we're just in a great position to start to generate that free cash flow and we'll have to make a determination in Nebraska what we really want to do next, and that really hasn't been made yet. We just want to make sure that we make progress here. We get confirmation of what we talked about on the 45Z. And at that point, it could be all systems go, but at this point, I think we're in a really good place from a capital standpoint as we are winding down that first phase of capital investment and looking at a fully financed carbon upside as well.

Okay. I appreciate that color, and if I guess a follow-up on ultra-high protein, which both in the press release and in the script got a little less discussion than it had in recent quarters. So can you just update us on where you are in building that pipeline of 60 Pro, and where we should think about that as a portion of the sales mix by the end of the year? And more broadly, what premium you're realizing on all the UHP you're actually selling right now and especially the 60 Pro that is in the sales mix? Thank you.

Thank you for the question. We have not reduced our focus on ultra-high protein at all. In fact, we've emphasized the significance of yields and optimizing our operations. We are in the process of ramping up production to the maximum levels we've projected. Earlier this year, we experienced a squeeze due to high corn prices and lower protein prices, which impacted our margins and forced us to prioritize customer supply over returns. However, we noticed a turnaround as soy meal prices and protein prices increased while corn prices decreased, allowing us to align with our original target of pushing towards $200 a ton for wet replacement products. Additionally, we observed a slight reduction in corn gluten meal prices relative to soy prices, though this didn't significantly impact us this year. Our focus is on the upcoming year, and we are making substantial progress with customers we anticipate will include our product in their feed rations. We aim to finalize a couple of plant sales this year and next, keeping in mind the costs associated with producing 60 Pro. Our goal is to ensure the price difference widens back to levels we saw when we made our investments, and we are optimistic this will occur as market conditions fluctuate. We are committed to marketing and integrating 60 Pro into global rations and have noted excellent results in digestibility and feed conversion. We are actively seeking ways to reduce the production costs of 60 Pro, with various initiatives discussed in our script that will improve our returns. Our dedicated team is focused on both 50 Pro and 60 Pro every day and we are continuously assessing how to advance our technology. Fluid Quip is also working towards reducing construction costs and exploring improvements, while our internal team is investigating enhancements for higher protein production, which we believe could lead to significant advancements in the coming years. We remain very attentive to this, as it is crucial for our profitability, especially as we prepare for a low carbon initiative in Nebraska next year.

Alright great. I appreciate that color. I will pass it on. Thank you.

Your next question is from the line of Heather Jones of Heather Jones Research. Please go ahead.

Good morning. Thanks for the question. Just wanted to go to CST and just was wondering if you could give us an update of what your estimated sales pounds for 2025 will be and given the much lower CI score, are you anticipating a premium to the commission of corn wet-miller’s product?

Yes. As we look ahead to 2025, we are continuing to build our sales capabilities. Our primary goal is to produce products that meet specifications, and that remains our daily focus. Once we achieve that, we are confident in our ability to market these products effectively. The system's capacity ranges from 200 million to 250 million pounds per year. We are addressing some bottlenecks in wastewater and similar areas, but overall, our low carbon score is a key advantage for market entry, as we believe our production costs are highly competitive, if not lower, than those of traditional wet mills. Regarding pricing, there is certainly some sensitivity, but low carbon ingredients present intriguing opportunities for consumer packaged goods and beverage companies. However, the emphasis is more on capturing market share, especially given the substantial size of the market. We estimate that the CST, sugar, and dextrose markets in the United States exceed 15 billion pounds, and introducing 200 million to 250 million pounds into the market won't cause disruption. We expect margins to remain stable, but currently, we do not have any volume product available, both for industrial and food sectors. We have observed strong demand from industrial consumers, who utilize our products in a wide range of applications, including enzymes, chemicals, and even house insulation. Our low carbon CST has a significant role in these markets.

Okay. Thank you, and my second question is on ethanol margin. So according to my calculations, they're down roughly $0.15 to $0.20 from the recent peak, but they're still really strong and I was just wondering, I mean, because if you look at stocks, they're, you know, they're above last year and they're materially above the five-year average. So just was curious if you could give us some color on what you think is driving the strength in these margins and is there anything besides the Brazilian short ethanol position in Q4 that you think will help sustain these levels?

Exports are a major focus for us. While we've experienced solid domestic demand, the real highlight has been our exports year-to-date. The volume that's been exported from the country has helped maintain stability. It's important to note that some of the stocks you see weekly end up at the Gulf, where they get re-exported. So, while a 23 million-barrel position might be reported, a significant portion sits in the Gulf and isn't necessarily back at Origin or is in transit. The disappearance of product has been strong, and I anticipate this trend will continue through the end of the year. Brazil's extra capacity is limited from September onward, and we remain very competitive in exports to Europe and elsewhere, being $0.15 to $0.20 a gallon cheaper than Brazil at this stage. I don't foresee demand decreasing, particularly with the low price of our product. Occasionally, I look at the 23 million barrels and recognize that the margins we're experiencing are unlike what we've seen historically. However, in recent years, we haven't seen exports match this level, dropping from a record two years ago to just 1.3 million barrels, and now we're on the rise towards potentially 1.8 million or 1.9 million barrels, indicating significant growth. While we observe strong supply or production weeks at 1.1 million barrels, it's vital to remember that this isn't sustainable long-term. The industry is aging, and although capacity increases, it also decreases, and shutdown seasons are approaching across the industry. These are peak production times, and we might see some continuation into the fourth quarter. Margins have dipped from their peaks, driven more by factors like high corn basis towards the year-end than by simple crush margins. Recent declines have also been linked to DDG pricing. We believe basis levels will come down and stabilize, having secured fourth-quarter basis in some of our Eastern plants below traditional levels due to the large crop carryout and the potentially massive incoming crop.

Okay. Thank you so much.

Your next question is from the line of Salvator Tiano from Bank of America. Please go ahead.

Yes. Thank you very much. So firstly, I want to follow up on, ethanol of the export strength. Obviously, Canada's more recent regulations are helping, but how should we think about next year 2025, 2026? essentially, are there any other dynamics, including regulatory ones, in key regions or countries that can further increase export demand or are we approaching pretty much the new normal for U.S. exports?

If we could maintain our current situation, a run rate of 10:50 on average with domestic demand steady and exports at this level would be really promising. Additionally, Brazil continues to face challenges with ethanol production, but demand is on the rise there. While Brazil's export capacity is strong at certain times of the year, we believe we can stay competitive globally, especially as we start producing lower carbon fuels. This is a transformative period for us, with low carbon intensity fuels being produced in places like Nebraska, North Dakota, Indiana, and Ohio, along with a second pipeline in development. Furthermore, the establishment of permanent E15 in eight states marks a significant change, and we're actively working on expanding that in California as well. Even though California predominantly utilizes E85 at this time, the industry is collaborating to increase acceptance. Recently, we've noticed larger refiners advocating for an expansion in renewable volume obligations, which is a first for us in aligning the ethanol and gasoline sectors against the growing challenge of electrification. We're united in our efforts to promote higher blends and volumes, which benefits everyone, evidenced by recent support from refiners for national E15 and calls for increased renewable volume obligations.

Perfect, and I wanted to check a little bit, you post the high protein volume sold, but can you elaborate a little bit more on the production? If I remember correctly, for the past few quarters, you've been producing more than you're selling. Was this still the case in Q2? And at which point should we expect the volume inflection on top of the production?

We continue to sell everything we have. At the end of the quarter, we might have some stocks in transit, but we typically don’t hold a lot of inventory. As we prepare for 2025, we might produce a bit more 60 Pro and keep that for the program's launch, as it takes time to build up our stocks. Generally, we maintain minimal inventory levels, and we are currently at some of the lowest ethanol, internal, and DDG stock levels in our company's history. We also have low stocks of ultra-high protein. Looking ahead, we expect about 70,000 tons from Green Plains this quarter, plus another 25,000 tons at capacity from our Tharaldson joint venture. This will allow us to reach around 90,000 to 100,000 tons per quarter, all of which will find demand, especially as the protein markets remain favorable compared to corn.

Great. Thank you very much.

Your next question comes from the line of Andrew Strelzik from BMO Capital Markets. Please go ahead.

Hey, guys. This is Ben on for Andrew. Thanks for taking the question. I just have one today, sort of a longer question though. So what are the key policy milestones that Green Plains and the ethanol industry have on the radar through the first half of 2025? And given some of the recent unfavorable decisions like the reversal on SREs and what seems to be delays, deferrals overall like the 2026 RBO, has your sentiment on the probable outcomes changed at all? And what might be holding back key biofuel policy commitments? Thanks.

From our perspective, we've been engaged in this for a long time, and while questions continue to arise, none have significantly impacted us negatively. We've experienced growth in B15 and have the IRA with substantial regulations. We anticipate positive developments in carbon-smart agriculture for farmers. We view the recent policy as a preliminary measure and believe the 45Z rules will benefit our efforts in Nebraska, as well as help us achieve further reductions in carbon intensity. Additionally, we're monitoring low carbon fuel markets for potential values. Generally, our current situation is acceptable; however, we expect that the evolving landscape will be advantageous for us as a company and for the industry overall. We believe that rulemaking will remain favorable regardless of which party is in power, as both Democrats and Republicans support carbon sequestration initiatives, particularly regarding pipelines in the Midwest.

Yes, Andrew, I'll just add. If you look at the calendar, we still expect to see at least proposed rules or some sort of a safe harbor statement from the administration around 45Z since we have the biodiesel tax credit expiring here at the end of the year. Also could see California finally come out with their updated LCFS numbers here. That may slip until after the election and they've indicated the RBOs aren't going to be proposed until the early part of the year. And look, while we could see something come back with small refinery exemptions, as Todd mentioned earlier in the call, we got refiners calling for higher RBOs in general, predicated on increased renewable diesel production, but a rising tide lifts all boats in that scenario, particularly for our corn oil. So all that to say, we have no reason to believe that 45Z will not be beneficial to our platform. Thanks.

Your next question is from Laurence Alexander of Jefferies. Please go ahead.

Hey, good morning. This is Kevin Estok on for Laurence. Thank you for taking my question. Actually, so a few of mine have been asked already, but I just wanted to hear more about your SAF demand expectations, I guess, than what you're seeing in the market. I guess, in the past few, maybe months, I've been hearing, some, like, recalibration of sort of what's going to be considered SAF in different places and basically tax benefits associated with that. I'm just curious like how you expect that to sort of evolve?

Yes. We're waiting for those rules to be written. I mean, our view is in the United States, that's going to be a very important molecule. We've already seen coming through renewable diesel or the HEFA feedstock into SAF, that is becoming an accepted molecule and we're really excited to see that out of some of the producers. We have a lot of different types of technologies that people are looking at in the U.S. for alcohol to jet, and really if you want volume and every that's the one thing that we stress to the D.C. politicians as well as administrators is that if you want volume, you're going to have to come out and follow the jet and I think that the first step will be in Nebraska when that comes on middle of next year and you can go look at who's going to bring it on to that pipeline. Between ourselves and others on that pipeline, there could be up to a billion plus gallons available of very low CI ethanol and that is the first step to making sure that feedstock is available to produce sustainable aviation fuel from alcohol, which will give then, I believe, the courage and the strength for people to start to build these plants. The technology exists to convert to molecule. That's not going to be a problem. Yes, we're going to have to fight, of course, in Europe versus our own policies and what airlines are willing to buy or not buy, but at the end of the day, it's going to be fungible and we're going to see airplanes powered with SAF from alcohol to jet without any question in our mind. We believe we are in a great position as Green Plains to supply that molecule as the base.

Understood. Thank you. And just back on margins or at least I guess ethanol pricing, I mean, I'm sure you don't want to get into providing an outlook there but, obviously, there was a run-in prices a few months ago, then I think they've come back down in the past few weeks. Just curious to get your thoughts on maybe what the puts and takes there for the past few weeks that that kind of decline and whether you think that this is maybe like a more of a normalization in pricing or just thoughts there?

We observed a significant shift in the base margin as the simple crush moved three standard deviations to the right. This increase was primarily driven by a stronger corn basis due to high demand, with industry production levels reaching 1.1 million barrels a day. We are seeing firmer corn bases and more availability of DDGs. Notably, there has been a positive shift in corn oil pricing, transitioning from a discount to soy oil to now being priced at a premium. This change has been beneficial, especially after facing challenges due to weak vegetable oil pricing earlier in the year. We produce the second lowest carbon-intense HEFA feedstock, which is distillers corn oil, appealing to renewable diesel producers. For instance, a new plant in California requires 50,000 barrels a day of feedstock, which exceeds the total production of the entire U.S. ethanol industry. This single plant is looking to import from multiple countries to meet its needs, and we are advocating for stringent quality standards for imports to ensure our corn oil maintains its competitive edge. As we move towards 2025, we believe we will benefit from favorable regulatory positions regarding corn oil as a feedstock. This is becoming increasingly apparent as we see a premium for our product over vegetable oils, and we are aware that some imports are already slowing down. Overall, we feel confident about our standing in the market.

Your next question is from the line of Matthew Blair of TPH. Please go ahead.

Thank you, and good morning. You mentioned some positive commentary on the Trailblazer project. Could you talk about the next steps from your perspective here? And in particular, do you still need permitting to build the spurs from your ethanol plants to the Trailblazer pipeline?

I'm not going to elaborate too much on what's remaining for the Trailblazer project. However, I want to emphasize our strong confidence that all your concerns are being addressed regarding permitting in Nebraska counties. Unlike larger states like Iowa where you obtain a state permit, we deal with county permits, and most of these processes are progressing well. The right of way work is moving smoothly, and there was already a pipeline in place, so we're essentially adding spurs, regardless of whether they are 10, 40, or 5 miles long. Thus far, farmers and landowners in Nebraska have been quite supportive, especially with the notion of "Advantage Nebraska." They appreciate that they will be ahead of the rest of the United States by several years, which has contributed to the positive outcome. Recently, the permit for storage in Wyoming moved to public comment, along with five additional permits for sequestration that are also in the public comment stage. The support in Wyoming is notable, as they have already begun issuing permits for other projects. We feel very confident in the uniqueness of our offerings as a company. Interestingly, lead times for carbon equipment have decreased significantly; originally, we anticipated over a year for delivery, but recent orders are now projected to have lead times of 30 to 40 weeks. This availability aligns with our goals. We have signed a construction management agreement, fully financed our projects, and expect to produce 287 million gallons of decarbonized alcohol next year, generating over $100 million in additional free cash flow annually with a rapid payback on the investment.

Sounds good. Thanks for all the helpful commentary there. And then you mentioned the hedges for the third quarter, but I guess not for the fourth quarter. Could you give us a sense of what percent of your production is hedged for Q3? And is it fair to say that it's had a pretty attractive level relative to that high 20s to high 30s all-in ethanol margin that you referenced earlier?

Yes. I mean, what we've seen is we took advantage of some of the simple crush when it moved kind of that far away from historical means and thus far that has been the right decision. In the meantime, obviously, as we mentioned to Heather earlier, corn basis rallied a bit. The distillers grain prices reduced a bit, although we did see a corn oil uplift as well, but generally speaking, anything we've done and we're not going to give specific numbers has been above at or above the current market. So we're very happy about those results, but it's not we still have a significant amount open for the third quarter and we have de minimis hedging in the fourth quarter. Look, all we're going to look at is in consultation with our committees on the Board is to say at certain levels, we want to make sure we can lock down these quarters, generate the cash flow needed to support the business, generate free cash flow for our shareholders and as like we said, what we're really excited about is we wind down kind of what we said as we're winding down this investment program over the last several years, you start to see easier free cash flow generation to start to rebuild structural cash on the balance sheet as well as give us other opportunities to look at where we're going to go with the company, but that's just the start of it and as we get into mid 5%, we look at the free cash flow generation from 60 Pro, from 50 Pro, from carbon and then also being an advantaged feedstock in veg oils, we think we're reaching these points where we will continue to strengthen this company back to where it was and start to deliver quarters.

We have a question from Eric Stine of Craig-Hallum. Please go ahead.

Good morning. Maybe just on High Pro, maybe it doesn't matter given the demand you're seeing internationally, but I'm just curious what you attribute to, just domestically. I know you talked about demand being a little, I'm not sure what your words were, but some volatility. So just curious your thoughts on that.

When we began developing our 50% protein product, our main goal was to reach the Sequence. We recognized that while 50 Pro has the potential to be commoditized, our product is unique—it consists of 25% yeast and 75% protein and tastes better than traditional soy-based products. There is strong demand for it, especially in the pet industry and other sectors. However, we anticipated that excess soy production capacity coming online would lead to fluctuations in the market over the next couple of years, impacting everyone. Interestingly, we've seen soy prices increase due to issues in Argentina, which has positively affected us, while corn prices have remained in the three to four dollar range. We're adjusting alongside soy protein prices as we expand capacity, but the market seems to be absorbing a lot of supply through exports and domestic demand. We believe investing around $330 million in our platform was the right decision. Initially, we estimated a three to four-year payback period for 50 Pro, but it may extend to four to six years due to the impact of the IRA, which significantly increased soy protein capacity. Still, we are optimistic because as we approach 60 Pro in the future, we expect paybacks to accelerate. We have already made the investment and are now focused on generating the anticipated returns, looking forward to what lies ahead.

Okay, and I just for a follow-up, I might have missed it, but are you still on track for I think you've targeted your mix of 60 Pro to be 20% to 30% by the end of 2024 and just curious, I mean, is there a time you see in the future where that's 100%?

I don't know if it's ever 100%, but I would say we want to continue to drive the cost of producing 60 Pro lower and we have some breakthrough opportunities we believe that we can get some of that done as we have found different ways to look at taking our protein production higher from 60 potentially even into the 70s. We've seen some things as of late that gives us good confidence that we're going to make progress really across the board, both from making a better 50 Pro product, making 60 Pro cheaper than we thought it was going to take to produce it, make it across a couple of our plants next year and then see where that leads us in the future. Our goal is to sell the best economics and when we saw corn gluten meal prices collapse against soy prices, sometimes we had to reassess do we really want to how fast do we really want to move. Now we've seen that start to recover in the world, but there still remains because of the cheaper corn, there's cheaper corn gluten meal. Now we know and historically when we made our investment based on 25 years of data and the spreads between corn, soybean meal, and corn gluten meal and we've seen those move around through those last 25 years. This is just one of those times where corn is just the cheaper commodity than soy. I think that we'll probably see other times when corn is going to rally again and soy doesn't necessarily keep up and corn gluten meal will be the better commodities, but generally speaking, once we start going and we supply to customers, we know we're in the ration permanently. We still are focused on a couple of plants for next year, which when you look at them against our total capacity, those plants are in the range as discussed.

Your next question is from the line of Jordan Levy from Truist Securities. Please go ahead.

Good morning all and appreciate all the details. Todd, in your prepared remarks, you talked about some of the early challenges in getting CST at Shenandoah ramped here. Maybe if you could just expand a little more, and I think you mentioned it was on the equipment side. Maybe just talk about some of those and how the team is working to address those and what remains done in them?

Yes, I mean, I'll give you one example, and I'm not going to get too deep into it, but again, mostly from what we've seen is quality of construction, some issues there, not because we hired bad construction firms, just because it's in the era of where we live in. It continues to be a challenge sometimes to find good tradespeople and so whether it's water flushing through the system and finding the leaks to literally, I'm going to give you this one example is that we put a brand new chemical holding tank, brand new tank and it was leaking. Had nothing to do with our technology, it's just the fact this is literally a brand new tank. So those are the challenges that really, I think we've been facing and we're getting hopefully to the end of some of those. Some of it is learning how to use some of these unit operations as well. When we look at our ion exchange system, that's being used in the world today to make dextrose. There's one system set up in Brazil, and another one being built in Iowa, we think but again, this is just a new application and we have to figure out what we run through it. It's a different feedstock. So it's really just a function of step by step by step debottlenecking across the process but some of it really came from not just construction delays but sometimes re-piping some parts of the system that we didn't like the quality of the construction. And so really, if you've been to Shenandoah, you see it's ready to go. It's an amazing facility. We believe the technology is on track, and it's going to just take some continued time and continued effort to get up and running. And it's really kind of how we think about it. It's an any day now kind of thing and you'll be the first to know and we hope that over the next kind of a little bit of time here, we're going to start making product inspect and that product is ready to be sold to customers who are waiting for that product.

That's super helpful. And then you did a bit of asset monetization here with the terminal in Birmingham. Maybe just a little bit more about how you're thinking about any additional asset sales as you look to?

Yes. Owning one terminal as a company was beneficial, but it’s not our primary focus as a low carbon molecule producer. The terminal has been valuable and has paid off multiple times since we built it years ago. We saw an opportunity to sell it in a favorable market. Although low interest rates were advantageous, the debt tied to SOFR became a burden on the cash flow from that terminal. While we could have refinanced it at a potentially lower rate, we’re not primarily a terminal company. We previously sold our MLP, but still had certain obligations related to it based on the debt terms, which are publicly available. Selling the terminal will allow us to pay off that debt, lower our overall interest costs, and concentrate on our core competencies while strengthening our balance sheet. This decision was part of our broader strategic review, but it's only a small component of it.

Thanks so much for all the detail.

This concludes today's conference call.