Gevo, Inc. (GEVO) Earnings Call Transcript & Summary

Well, welcome everybody today. We have Dr. Pat Gruber, CEO of Gevo. Many of you are familiar with the company. We've done these in the past with the company. As a reminder, these are open access events, also available on demand that we hold to help communication between companies and shareholders and address a number of the key issues. Our research and content can be found at www.watertowerresearch.com, and again, it's open access non-permission research and as well as various other webinars and information on the company, please feel free to access it there at your leisure. Again, if you are on demand, you want to forward this to somebody, you can use this same link to send it around and access the event. As a reminder, again, we hold these to help with the transparency, enable companies to communicate with investors and give smaller investors a chance to engage with company management. So we will be taking some questions, ask everybody to keep it on topic things that hopefully Pat can answer or we can answer and keeping professional and try to get to as many of them as possible. It's impossible to reach them all, get through all of them, but we'll certainly try. So with that, we have a number of topics, but I'm going to turn it over to Pat quickly, and then we're going to jump right into it.

All right. Thanks. It's nice to be back again, Sean. We've missed doing these. I'm glad we can get at it again. It's good to answer these questions. This world of biofuels is pretty interesting because you know we're doing these hydrocarbons and been leading it for more than a decade now and plan on continuing to do so. But let's jump into the question, Sean.

Sure. Okay. I want to start with the evolution of the business. So I've known the company for well over a decade at this point all the way back since the IPO. The industry has changed dramatically. The model has changed and evolved with the industry. Maybe let's start with a history, let's call it, the evolution of Gevo and kind of run through some of the things, particularly in the last couple of years where you were and where you are now and the cause and effect of some of those things.

Sure. But we're going to go way, way, way back to the day I got here. I came here to do alcohols and the hydrocarbons. And that's what we did and we build the company, that's what the original investment was in. That's been working ever since. We've built up an incredibly extensive patent portfolio about this, incredible set of technologies around this, alcohols are things like isobutanol, ethanol, even methanol. And they all can be converted. The processes to do so are very, very similar. So we've been working on this for more than a decade. And working on which vertical market is going to be the one that has enough near-term reward to pay for that carbon value. That's been the question. So why this isn't -- why I mentioned this is that people knew we worked at isobutanol. I don't think people -- I think that we probably didn't communicate, as we could have. The technology can convert isobutanol into a hydrocarbon fuel like octane for gasoline and jet fuel, very, very similar to what it takes to do ethanol into a jet fuel. It takes -- there's one more -- there's more steps you have to do to do the ethanol approach. And you get a broader mixture. Well, that's not suitable for gasoline, okay? So as the market shifted and people said, let's do Jet fuel, like, oh, sure. If they want just jet fuel, and that's where people can get paid for carbon, we should be doing the ethanol approach. The technology we developed already applies One of the things when you look at these technologies is, we talk about -- we tell people we work with Axens. We work with Axens because Axens has unit operations that they already use in the petroleum industry, where you take like ethylene, that's a 2-carbon building block and make it into fuels in the petrochemical industry. Well, we've taken their technology and their unit operations and translated them into what it would look like in a stand-alone processing facility that's ag-based using carbohydrates as a feedstock to make the ethanol, and then we've learned how to decarbonize it. Now again, these technologies, whether it's isobutanol, ethanol, super highly related technologies and the approaches for engineering. I don't think people appreciate -- it's we all spend -- I know it's on your list of questions. I read the intro thing, but we're going to have spend probably just on the ATJ part, $100 million of engineering by the time we're done and get it the way we really want it. Feed happened long ago. So one was wondering about feed done long ago, definitely part of what it takes here. It's about how do you make these facilities run. I have a really strong team of operating engineers. The approach that we take is we care about operability of plants, and that means you have people who have to live in those plants, help design them and think through all the issues. So we've been doing that, and then we've been learning how to take that technology from Axens and apply it into a stand-alone biorefinery that makes these hydrocarbons. And so anyone else who take, a way to like it might be that with Axens, you're buying engine components, so are an engine. We're the ones building the cars and selling the car. And so we selected their engine to drive the car or to help with the car, it's one part of it. But it's us, it's our engineering. It's our intellectual property. It's our patents that we filed on top of it, and it's our know-how. And so you see these massive carbon reductions, so how to get to net 0. Well, that's because we actually have all that engineering data. And that's what people notice about us and why -- it's not just some off-the-shelf thing, you can go, hey, give me an ATJ plant. This is how this works. The next guy is going to have to spend that kind of 2 and except for we have the exclusivity of the Axens or we can work with them, and we are working with people to enable them and license it because so there's a -- it takes big capital investments to go build out these plants. So in our business model over the years, we've always done alcohols to hydrocarbons. We can do olefins too, to make chemicals and plastics. We've always had that technology. We were the first to do PET and a bunch of other things. This deal with that, we just do with LG, is a licensing deal to do propylene because that's another variant of what we're doing. Great. That's a really nice technology. That technology also will be the next generation of a low-cost way to make alcohol into jet fuel and gasoline and things like that. But we -- it takes big capital to do these things. Now we're really blessed that we have a strong balance sheet. And so when you look at that and you ask where our money is going, engineering site developments. We plan on having multiple sites. And we've been designing this plant in Lake Preston, South Dakato, achievement at 0. That's done through the energy infrastructure, along with the alcohol, how you integrate the plants and all that kind of stuff. And there's a bunch of technology that goes into that, which we filed patents on. And then there is -- but we've designed those same -- that ATJ plant is designed to be put down anywhere next to anybody's 100 million-gallon ethanol plant or it could be essentially located. That's part of the design basis of what we're doing because this can't be a one-and-done type of a thing. The investments are too great. And so for us, that means we're a developer. We are a developer. We're a technology developer, too. So a site developer, we're a technology developer, we're a licenser. We're the one licensing the technologies that goes into these plants. We're the master licenser. So people always with us, and we work with Axens and there'll be other companies too, but isn't a one-stop shop. People don't do these vertical industries. This is not done. It's been done like once to my knowledge, and that's we did it at a Cargill years ago. We did [indiscernible]. So it's not something that can just run down the street go ahead and order. You got to go develop it and build it. And so that's where the bulk of our money, efforts go so that sort of stuff. And for us then, it also says that we're -- in addition to being a developer, we're also an investor. And we look at it just that way. And here's the choices in front of us. There are things like we're working with people and say, well, I would like to invest in your net zero 1 plant. Can I have all the capacity? Okay, if you want all the capacity and put up the money, that's possible, you sure you want to do that. Those are -- that's a fairly common discussion. How do we do that? Well -- and as you know, we had talked about doing this last earnings call, we talked about going for the DOE loan guarantee because everyone expects a DOE loan guarantee to be many, many points lower interest, percentage is lower than the market, no one knows where it's going to land yet. So that's many, many tens of millions of dollars out of that project. We have to pay attention to. So that, of course, people are going to want to do that. So that's why we've aligned to that. So the way to think of us is that we're developers, we do sites, we license technology. Someone came along and said they want to plan. We certainly work with them and license the plant design to them. I mean we just spent, like I said, on that portion of the plant, $100-plus million. And the -- it's not a little, it's a big effort to do it, right? It's hundreds of engineers that we've been using. And we -- and it's under our management, mine engineers doing it working for people. I'll get questions sometimes about, well, what about you work with this company, and that company, yes, normal. This isn't like it's a frick and one-stop little thing. This is going from agricultural to petrochemical and everything in between, including grain storage and transportation. So of course, we work with different engineering firms. It isn't some one-off little project. So I think what you're seeing is us trying to articulate more clearly what it is we're about. Now there's implications as to what this means, though, right? Some paradigms, I think that people have in their head that we're just going to go ahead and build this ATJ plant, and we'll be the first ones there, and [indiscernible] God, and it will be all done. And some day, Gevo might make cash flow someday in the future if the world works right. Well, that'd be kind of silly to do that. That's not taking advantage of very [indiscernible] property properly, I don't think. What we would do, though, is take a portion of that, license it, in the development phase, what you do a developer -- a developer without technology, but they would typically do develop a site, organize it, in-license the technologies and then you get -- the developer gets to carry in the project, right? A carry means you get a percentage of the project without investing. They can always invest if they wanted to. But they got to carry. So developers can do that. Technology licensers get a technology fee. They get paid because that's who has the technology and know-how. It is us Gevo, who has the overall technology and know-how to deploy here. Fundamental point. It isn't like you can go get it. So that's a -- someone would have to go even from -- if we said go today, if we didn't have a deal with Axens, I got newsman, they're going to have to go spend at least $100 million to go get that done because that's what it takes these days. And so it's just -- what happens then when you think about these projects and how Gevo makes money, your developer, you recycle your money. So you put back out of the product, when the project closes, you get the money back. this is a fundamentally important point. It's like real money. That $100 million I'm talking about and actually for the site, it will be more like $170 in total. That is -- that money would come back to Gevo and then we could use it to invest in that project, or we have other ones that we could invest in that we're trying to develop at the same time because we're trying to grow fast. So that's how this works. So it's a combination of development fees, licensing fees. It's a common -- it doesn't mean we sit around on our butts waiting until 2026, 2027, hopefully, we have cash flow and in the meantime, go broke. That's not the model, okay? This is about making money along the way and selling what we have is intelectual property, and bringing it, recycling the money back in, so we could do multiple projects at once. We are not big fans of raising money at these low prices aren't. But I'll get this question all the time, like Sean will say -- I'll get people say, well, you're going to have to reverse stocks but what are you talking about, we have $450 million of cash. And it's like an [indiscernible] okay. Suppose we are below $1. Got it, we'd have to be below $1 for a year before we got delisted. So I said, what, if we popped up any time, it's not an issue anymore. So it's just there's all this [indiscernible] stuff that we hear about were like, wow, which is why you see us trying to articulate a little bit better.

Well, let's look at it another way. So we go back to the announcement of Net Zero 1, for example, okay? So let's take -- we took investors familiar and tracking the Gevo story for a while. There was NZ1 that was going to be a plant taken on equity investors, project finance, doing it at the plant level, building a plant, taking equity ownership, you have the original technology from the isobutanol to jet fuel, right? But things have evolved, you've had access to some new technology. So maybe again, I think some of that was in your hands. But if you go back to looking at what's different today about the Gevo model, I think it would come down to a lot less capital needs, right? Because you go to licensing technology. But if we -- let's take that snapshot of that plant at that time and what the idea was, and then over the last couple of years have evolved into this, including the technology opportunity, right? So maybe if you just quickly hit the points of what you would say is different about Gevo today when people go back and they say, okay, we want to build a plant at NZ1 when the first time this was talked about.

Sure. So the broad concept level, it's the same kind of thing. It would still be an NZ project, alcohol to hydrocarbons. And the technologies that we use would have been isobutanol technologies, stuff that we all did proprietary tons [indiscernible] and the converting of it -- of the isobutanol and hydrocarbons is stuff that we did also. Now we partnered with Axens then and that's actually how we got to know them because we can copy their commercial applications to take what's called butine into the jet fuels because that's a step. More like as we got to know each other, we're like, we'll shoot. They learned, we know how to decarbonize stuff and know how to make these models reliably, that work in the chemical operations. And we learned is say, okay, those technologies, they have already work in [indiscernible] said it derisks it. So we are already working with them under that project, right? Now as you mentioned, it was set up even for Net Zero 1 to be a project-level financing, meaning in a special purpose entity, meaning we would put money into that project. We're developers, by same time developers. We're going to develop it, and we would invest in it, co-invest in it and bring in other investors at a project-level financing. We've talked about that over and over and over. Same thing. It's the same model it actually is now. Same model, actually is now. What's different about it is when we were first doing that, we didn't know that there would be multiple plant opportunities. We thought there would be, but we didn't know there would be. So that's what's happened. That was at the very forefront of people saying, hey, look, there's value for carbon, which I still -- I want to see it, but okay. It was at the very beginning. So there was -- we didn't know how big the market was or how much the demand was. It was for the 1 billion gallon challenge. It was before all that stuff. So -- and we're also looking at octane. While there was definitely a shift in the marketplace where we turned up with some of these contracts from airlines. And they said, well, look, we'll do take-or-pay contracts to help you with the financing. Use those to help offset the debt. Well shoot, if you want to do that, and it's all jet fuel, and then the octane interest, it's still there, by the way, the octane interest is still there. This is in the background. We're like, well, what we're going to do that, you don't need to do isobutanol, which is more -- that one, ethanol doesn't have any risk around it and a scale...

Very well developed, mature industry, everybody makes -- still reached all over the country.

And the tricky part of all this is how do you do the [indiscernible] financing and get people comfortable with it because even though we're using existing ethanol, existing Axens unit operations, we have to put them together in a certain way to drive the CI score down but no one's built a big vertical plant before, right? So we still got a little newness around it, not very much. And so we always get the check -- the box checked whenever someone's doing diligence on us for technology. That's not the issue. It's an issue of what's the value of the products. So from a broad concept for us, technology-wise, super similar. There -- whether it's -- we switch to ethanol, makes jet, we're leveraging more of Axens' technologies and you incorporating that into our overall offering of what it would be that we deploy, we still would be investors. We have multiple projects to build. So we don't have the money to go build all of them. And we can see that you can make money along the way by developing and licensing and investing along the way. And it is a balancing act. And so the way you think of it as if we're licensing, like we did a deal recently, you saw a P66 and ADM [indiscernible]. Well, that way, that's a pretty good validation in my opinion, of the Axens' technology. Why would someone say they commit to $125 million for the ability to do that. While we've been -- help those guys. I want to see them successful. It's a big -- great. I don't have the money, that would take billions of dollars to their projects. And they want -- I want to see them all be successful, let's go help them. They'll announce their schedule of when they do stuff and then we'll be able to talk about it more. But it's -- more power to them. And that's -- they'll do their gig. We'll help them all that I can. I want to see them successful. And I will also, in the meantime, do my Net Zero 1 plant with its partners and we'll go invest in other projects, too. And if you've seen our corporate presentation, a recent one, you'll see that, we have a pipeline of stuff where the idea is literally to take the carbon copy of NZ1 ATJ plant, that's the one that takes in ethanol, 100 million gallons, spits out 65 million gallons of hydrocarbons. We got some really good sites for that. And so how do we get those done as well? And so you could see that we could invest in multiple of these projects. We might take majority missions in some of them, but these are investment decisions separate that the development decision. So we're blessed with enough money, so we can take that rational decision and sit back and look at it and say, should our mind, do we get more return here or there? The one thing that I can say for sure is that if we're just simply doing a licensing model, the IRRs are outrageously good.

Yes. There is no capital -- yes.

Yes, yes it's -- but it's like come on man, you are killing me. So that's the development in our business model of Gevo, that's the developer, investor segment for going alcohols into hydrocarbons. But that's not all we do. We have an R&D segment as well. And R&D segment is we got -- we're expanding our 355,000 million Btus, up to 400,000 million Btus. And that's like one of the largest dairy projects ever done in the country. We have our own proprietary pipeline, 3 dairies feeding a central upgrading unit. It's working well, near capacity right now, and now it is being expanded. We have the RINs already, and we have the LCFS pathway at least preliminary one. And we'll get the next one whenever they get around to it, which is I don't know the time frame. But it's -- that's going to be a profitable project even it's already breakeven. So it's already doing pretty darn good. And it took a lot of -- those are big projects. We learned a lot about it. We're going to look for other opportunities there, too. So again, that's a potential investment. You won't see me declaring though and saying, I'm going to add 3 or 4 or 5 of these not doing that because the way the world works right now, it's too screwed up, in my opinion, for speculation like that. We were looking but be super selective and we'll jump on it quickly when it's time if we find the right opportunities. We have another business group called Verity Tracking -- Verity Carbon Solutions is a combination of what's called very tracking. And this is about how do you account for the carbon and turn it to money separately than from the government. We started on this several years ago. We filed patents on this. And proprietary system use blockchain technology [indiscernible] tokens. And the tokens will see what market we take them to, how we take them to a market, maybe they're just private. And I'm going to work through if we take it in any kind of a public sense and has to go through SEC hurdles, we got to get it all figured out first. But the idea is to make bulletproof, here's the carbon certification bullet-proofed, where exactly that carbon come from, how? What all went into the manufacturing of the fuel that goes with that token? What is it? You press on the button you can see its whole history, everywhere, mutable. No one can mess with it, it's bullet-proofed, audited the whole bit. That's what we're doing. It's making great progress. We've already been able to make tokens and the guy -- the team is putting the -- they've already got a business plan together and I'm always bugging them to come out and give me the revenue projections, talk about them publicly. And they're like, well, we're still working on it. So it's at this preliminary stage, but it's got legs. And you're going to see us not just use it for ourselves. It's being used for existing biofuels first and probably for some food too, as I imagine. But they've already -- we already signed a deal with [ Sire ], Southwest Iowa Ethanol Group, and we have got other ones too. And so it's got legs, and it's going to be interesting to see, and we have an advantage in that we've got the whole pieces put together first. So we're going to try to keep that advantage. And that is a software thing. So I have a bunch of software people here now, DLT people, and it's been pretty interesting. And then the last leg we have, the way to think of it is a -- we got all these little technology specialty things that we can do. And so we have people approach us and say, well, can you make me this kind of fuel or that kind of fuel? I'm like sure you pay me enough. And so these are all things I put in my short-term bucket that helped to generate cash. We'll do some of these things, too. And so people like, wow, you're going to burn money and keep burning money, oh, my God, you're an endless burn. And so our burn -- for everyone's benefit is about -- projected to be about $35 million this year, it's not 80 or 100 or anything like that. That other money goes into the capital projects that we expect to recover. And so this is about a $35 million burn, which is actually pretty reasonable for the things that we're doing. And from what we're told by big investors on Wall Street, they go, God, that's all. When they say, well, yes, well, we're spending this money over here on the capital expense, the engineering that's all capitalized. And so we keep plugging along on that. And what we think is that we'll have an opportunity to sell products, especially things along the way, too. And I think some of those will turn up. People will be able to see them. But for instance, the propylene might be one of those. Chemicals are never the scale that fuels are. They're always small. So those -- so if we do chemical things, they would fall into that bucket. Octane, as I mentioned, is still one of these things. We are still active and we produce octane and sell octane or does it go, I don't know. I can't talk about that part, but Dan, it seems to be showing up in the marketplace somewhere. So someone pay attention...

And that's for everybody out, as you're talking about renewable, drop in gasoline is...

Yes. Correct. Yes, yes. So we just can't talk about that kind of stuff because the people they got to develop it in their time frame, they come to us and say, well, you want to go build this a plan, I guess, show me your money, and then we'll go talk about it. So everything we do is like pretty measured in a sense of how do we create the most value from it? And when do we invest? What you won't see us do is preliminarily commit over commit to anything. Have dry powder is a good thing and investing wisely when you've got other partners standing with you say, I want to invest in go make this happen. That's good. That's a better thing than being to limit ourselves. The market for jet fuel to put in perspective, it's like Jeff fuel in the U.S. is 25 billion gallons about [indiscernible], all right. Well, that could -- if you were to do 2 billion gallons, just $2 billion that take 15 to 20 plants. My goodness. We got a target-rich environment here -- go ahead.

Touch on the plant again for a second. So let's talk about that. That's a big number, right? Lots of plants, lots of demand. I don't think anybody doubts that there's more demand than need be to make everything go around 100x, right, for -- in terms of companies and the industry and everything else. So I think that everybody knows that this is going to be a big area, a big opportunity. When it comes to Gevo and execution at the plant level, if I'm understanding this right, to boil it down a little bit, there's the royalty, let's call it opportunity, right, which is a licensing technology. So Gevo can license technology, to a plant, right, in order to -- yes, I have to. Yes, I have to. We have. Nobody else can do it using that process. We have to use licensing technology. Now there is the commercial know-how, right, which is the engine where you're spending money today if I understand, engineering build -- understanding the knowledge behind building a plant from an ethanol plant to produce SAF, right? So...

So think of it as a plant the design itself, actual design of a plant itself, right? So the plant design is owned by Gevo.

Okay. So you've got the technology, the plant design then the implementation of plant design, I assume there's reduction in the CI score, right? Carbon reduction is into that, so that's again, let's say, call it, a proprietary know-how place for Gevo. Okay, s you can make money from those 2 factors. Shareholders can understand that those are 2 opportunities, plant being built money and money to cash registers. The third would be the ability to directly take an equity stake in that plant at your size and choosing and in which plant now, okay, so those are the 3?

Right? And this last one is super important because I think sometimes -- well, we get to pick and choose how we best. We best use our money to develop more projects or do we invest it in one of these projects along the -- and that will be the decision that we have to take at the time it's ready to be invested in and say, what do we need to do? But yes, so we could get it from a developer with a carry in the future, that's possible on the first one, will we get a carry, I don't know, we'll see. But it's a -- we get a carry, remember, that doesn't -- then get an equity interest. Maybe it's 10%, 10% without any equity investment. But I'd get a 10% of the cash flow streams coming out of that plant, may be cool, but you know what, might want a lot more than that, in which case if we have excess capital, we might want to invest it in it and get more equity in that project, right? And so we also have a keen view as to which projects are better than others.

Right, right, yes, and that's why we make the choice about which ones. But to the shareholder out there right now, they're looking at it and going, okay, we've got opportunities to make money in these 3 buckets from NZ 1 construction, right? And hopefully, 5, 10, 20 as we go. So what that means to them, if I'm understanding is what this means to shareholders and us analysts is that you have the ability to control the capital spend. You're going to be able to replicate a lot of the -- or leverage a lot of the investment made in the plant design, which is where you're spending now, right? The engineering and construction, the plant model that gets -- you've already invested in the technology, you have that -- you're investing in the knowledge around the plant. So these are -- this is where the money is going now in terms of the cash flows. And if as the plants are constructed, that engineering expense for the plant construction is going to drop off, right, because -- it comes back to you, right?

Comes back to us. With profit. And the profit could show up either as equity in the plant or somewhere or just a plant on profit. And so it's right. So the more plants that we get financed, the more we see recycling of money. We're not going to let plant design itself took an enormous amount of expertise to do. People say, well, gosh, how come we report on fee? We have. We did fee. But you know what, this is a first-of-a-kind overall integrated facility. And so we're going through every little thing and making sure we have it, and we're also modularizing a lot of it. This is probably to derisk future capital cost and all the rest because that allows us to deploy more plants faster, right, because you build them in a factory and it takes risk off the table or what's perceived risk these days is, particularly with the rising interest rates and all the rest or even turning up with post-COVID people who are skilled laborers in the field, people like -- well, one way you can help solve that is by doing modularization. So we're -- this is the most heavily engineered project that I -- my team has ever been involved with and by far, we're like, well, and it's because of the world at large, because of where we add, because of what we're doing and all the rest. But it's -- that's right. So it's a whole bang design. It may be that maybe -- and this is hypothetical, but maybe we're the one selling modules and here's the plant, here's the physical plant. We can do that too. That's on the table for us. And so it all depends. We're also designing a 3x larger plant that's a nuclear powered -- nuclear energy powered, and that's first -- that was done with a particular customer set in mind without talking a lot about it. But not for us per se, that one was done where we are acting as developer, licensor, enabler and all that kind of stuff and want to see it happen. But for us, doing a 300 million-gallon ethanol input to 195 million gallons of hydrocarbon output, that's a big, big, big capital project right there. And so that's too much risk for us. But that's in the [indiscernible]. So we're developing that one for those kinds of peoples in mind, thinking that, that will appeal to them, which it will. And we could design it with just scaling it up or running multiple little ones. Those are also -- we've got a great site secured for that and we refer to that one as the NZ2 site. But it is -- we've got other sites that are like even better, just as much or better. I got other ones. And so that we're also working on, and they're listed in our board deck. And you'll see not get very specific about it because what happens with our -- too many people are asking the questions coming out and what about this? And what about that? What about this? And what about that? My God, you want to love negotiating leverage on anything, you are a developer -- anybody details, all right? So anyway. So yes, so that's a better -- more fair representation of our business. And so the ideas expect to have happen is our burn should decrease. Yes, our burn should decrease over the next couple of years. It should be decreasing, from 35. That's what should happen as we start to make money from our RNG plant. And you know what, if our RNG plants -- it's a big RNG plant, it could make a lot of money at the price of roll, the press in California right now, but shoot for now. Everyone tells me they're coming back, great. Let's bring it back, right. And then I need our pathway. Right now, we're using [indiscernible] minus 150, and I think the official pathway be way more than minus 350. But it's like let's have that too. When are they going to get that done? Well, they're 6 months time line doesn't seem to be working. So we'll see. It will be done when it's done, it's California. And we can't make it go faster. And then I think on the Net Zero 1 front and any of these ATJ plants, there's a couple of things in our minds. One is that I mentioned the DOE loan guarantees crucial, and we've been out raising money in Wall Street. Definitely, people are interested, but everyone is like hey, why wouldn't you go for the cheaper interest rate...

It's non-dilutive financing too also...

Non-dilutive and -- right, and it's more debt than you can get in a commercial bank or a private equity. So -- they're like, well, why you should do that? Okay, fine. We'll do that, but that slows down what we're doing. But there's a second thing that's occurred, and that is the [ salary ] bills, people dug into it and the rulemaking. You've got all these people with their voices going, how do we count carbon in -- the jet fuel section is treated differently than on road transportation fuels. In on road transportation, fuels were specific about saying [indiscernible]. Well, they said CORSIA or other method in the jet section. CORSIA is a method for counting carbon. So that was like the weirdest thing ever. And it's not even a method for counting carbon. So what are they talking about? And what do they mean? Well, that's what -- that's been -- I'm in D.C. today again. But that's what the debate is about. And you got all the different agencies working -- trying to work together -- trying to work together to solve it. IRS has got a new thing to do. They're the ones who have to implement it. So how are they going to do that? And it's going to be interesting. And so until we know what that looks like, it's hard to pin down the economics completely. That's just as a practical matter. Remember this is all about carbon value.

And what is that carbon value again?

And so it will get sorted out. It just take time. It will get sorted out. It just takes time. And -- but it is not time in a real practical sense here is worth spending sorting it out and getting it, right? We are not -- like I said, we're blessed with a strong balance sheet. So it isn't like the old days when we were like dodge and bankruptcy.

I mean -- and obviously, the market is completely different. Now there is a market. I mean back then, that was a lot of missionary work in the market exists today. So it's a totally different environment. I'm going to jump right to a bunch of questions. We've got a bunch from the audience. I have half a dozen more questions, but I want to get to a lot of these. We'll have you back because I got a bunch to run through. And I know the audience is eager to get some questions in as well. So I'm going to run through them real quick. And then if you -- we can have -- some are going to be short answers, others not so short, I imagine. But I do want to get to a bunch of these. We've got quite a few. So I'm going to run through them, and we'll play a speed game here -- okay. what is the fixed investment for Net Zero?

The fixed investment still projected to be about $850 million, and that's the hard cost equipment and installation of that equipment on a finance basis will be up over $1.3 billion or something like that. And these costs, we did put on all kinds of contingencies in that. So in that bigger number, and it's all kinds of contingencies to take the capital may be up to $1 billion. But I don't know if it's that or not yet. We're going to -- it depends upon if we asked for an EPC quote today, I guarantee you, it's going to be a higher number than it would be, if it would be in 6 months from now. And the reason is that as we root out cost boosts, you only want that answer right before financing is when you really want that answer. Otherwise, people have to put in extra contingency factors, [indiscernible]. So we'll see. But we could be that -- we will probably use multiple EPCs on this. It could be -- because there's like who's got the expertise to cut across the whole...

There can be [indiscernible]...

We've got multiple plants we're building here literally in one site, multiple plants.

Next question is time line status on RINs for RNG.

We have RINs for RNG. We've announced that long ago. That's like one of these things where we're pretty excited to get that. That's why it's already a breakeven operation and starting to do some returns. And so we're pretty pleased about that. And as I mentioned, we have the temporary pathway from California, too. So that all bodes really, really well.

I've got a bunch of questions on that Net Zero 1 plant progress. And I still think a lot of investors kind of bark up the wrong tree on this. So let me ask it a different way. Everybody is looking for progress reports and stuff, right? What can they watch. Now you've had a few different shifts in the model and what you're talking about today. So let me ask it in a different way and say, what is the progress of your checklist to get to breaking ground on that Net Zero 1 and kind of go through some of the licensees, engineering and things like that.

Well, financing is the next one. That's it. Financing. that's it. I got one thing, financing. Now along the way, we may have to redo contracts a bit or we might have to do, I don't know what we'll have to do to satisfy, everybody's going to want to dip their finger in the pie. But it's financing. I got one thing. The engineering, good. And when people ask me these questions about are we going to see progress and see a [indiscernible]. That's not how this works, folks, does not how this works. I just said we're going to do modularization. This means it's built somewhere far, far, far away. And then it will be like the latest moment possible, we put down the rest of the concrete and bring the modules up there and assemble it. So it's not a -- this is not the old school stick build model that we're talking about here. And I think it's going to -- it may be that we build part of -- maybe some of the ethanol plant gets stick built. But the ATJ plant, modularization, man. And so -- and we're looking to be how to be most effective with our capital. And I've got sites that are equally as good, if not better, than NZ1. So I'm like sitting here going that could be -- NZ1 could be NZ2 for -- we don't care. We just simply care about getting deployed robustly and having it work and having it financed. And that's the thing that's on our mind. And it isn't our voice, we don't control it. We have to bring in partners. This is a fact. So we don't have the money, and we're not going to raise it at Gevo, Inc. level to have all the money. That's not how this works. That means I've got to work with my partners at that special purpose entity and say, who wants to play, how do you want to play and take their voice into account, too. And so yes, as -- so as we progress here, it is about -- financing is the thing, and it's going to take us into next year because of the DOE, we've already told people that. Other things along the way it could happen that are good, people might step up, who knows. The world's strange place right now, having the economic crisis that we do haven't helped anything, but people are still engaged, so that's all good.

What kind of rates the institutions offer when compared to DOE. So it's the public market out there, you think, with bankers say, for something like this versus DOE.

I think that we would be sub-10, between 5 and 10 with the DOE loan and it would be like 10 to 16 or 18 with a non-DOE loan.

Okay. Why buyback?

It's simple. It's that the world is a weird place, right? And we used to always have a stock buyback program in place. And so when the world is really stupid. You see weird things happen with stock, and there's some price point, and we go -- we should probably pick up some stock ourselves. And so it's just that simple, is we've seen -- some of the talk we've seen is crazy, too. Like we do watch that occasionally. And some of the stuff there that people talk about is outer BS -- unbelievable BS about all this reverse stock split. What are you talking about people, it's like so that's why -- but we would -- so -- but the thing is, it is with the intent of we have that tool in place. So after we hit the right price...

Take advantage...

We would have to.

Yes. Understood. Any plans for hydrogen?

Yes. We're putting up with Jewel Energy -- or sorry, or Zero6 Energy is our new name, hydrogen plant. And so we need a little bit of hydrogen. And so one of the questions in our mind is how much energy should we make, so we partner with them to do that. But as a direct strategic intent, a new vertical for us, as hydrogen per se, no, we don't have one of those. Although we need to look at it because there's different avenues of funding that come with that. And we do always -- we always need a little bit of hydrogen, not a lot. But we'll shoot if there's people giving money away for hydrogen, we should be looking at it.

A bunch of questions on Verity. When generate revenue and how much? I think you kind of touched on that. But let me ask the last part of that question in a different way. How big of a market opportunity is this? Is this viewed as a stand-alone business and product that you would sell to -- and I could tell you talking -- covering a number of companies in the section. There's so much focus on accounting for carbon because if you're going to put it on your books and it's going to be an asset or potentially a liability, you better have a way to documented SEC rules changing. And again, I added on to that question, but there are a number about Verity, so what is the go-to-market strategy there to summarize it.

It is to partner with people who generate the carbon value itself initially. And then we'll take a percentage of that profit that comes with it. And so initial focus is getting that all -- that business system up and operational. And so that would be working across other biofuels other than our own. That would be for other people as a service. Part of that -- part of what also comes into play there is we find ourselves having to consult with them and teach them what we know how to do to a lower CI score because not everybody knows that kind of stuff, right? We got to get paid for it. So those are the kind of things that come into play with Verity Carbon Solutions. It's a stand-alone business unit. Maybe we'll spin it out someday. It depends on what happens in the future, but it would be a natural thing to have a -- we have to figure out some way so as value could be realized in some way. And we -- I don't know the best way to do that yet. It's in cloud, large-scale incubation stage is where we're at. And so we got to incubate the sucker and make sure that we understand where the value lies and what it is, then we'll figure out the best way to monetize. In terms of the service it provides, it not only is documenting the carbon reductions and selling them in a monetizable way, but it also is taking it and documented all the way to the field level so that we can track stuff right back to field. So that's a separate part of it, 2 different thrusts as part of Verity. And it's going along pretty good. There's tons of interest in it.

I'd like to have you back and just talk about Verity for one to for...

We'll get Paul Bloom on that. He's in charge, and a very interesting conversation.

Okay. Next question is on patents. Gevo's had patents for many years. And those filed a decade ago still active.

Yes. Patents -- the old patents, the last 17 years and the 20 -- and so we have hundreds of patents. This is like one of these things for anyone who meets us. You remember that we were at patent battles, most of my Gevo life...

Yes. Yes. Yes. Was at DuPont, wasn't it? Dupont's entity or...

Yes, the Butamax. Yes, it was BP and DuPont, we own them and we're still here. They're gone -- on portfolio. And so we have great respect for BP. And it's a -- we're friends with them, obviously, because we do business with them even for RNG. But the -- yes, we get tons of patents, and we know intellectual property. And so this is like one of these crazy things. It's like -- this is like one of these things were on a dummy. I should have thought of this, but you actually triggered in me, Sean, because you were asking me questions here a couple of months ago, and you're like, what is the deal, man? It's like people got to lock in their heads. We're at the mercy of the market now. We have our own property. There's a lot of tons know-how here, patents, know-how trade secrets. And this plant design itself as to say, go ahead. spend your $100 million, go get or done, they'll take 1.5 years or 2 years, if you can find the people who know how to do it. And because we're leveraging on top, we're leveraging people who have done it before, my guys. So we're not your normal little start-up company, we got operating engineers who people run plants and build plants. So a little bit different than your -- most of your little companies. You know that because you've been around us but...

I would say lot of time, yes, lot of companies -- next one, I don't know there's -- the question is, what is the [ Maverick 1 ] project that Axens had on their sides. I'm not familiar with that. I don't know if you can even answer that. What is an isobutanol project that Gevo is working on?

I can't comment on the first one.

Okay. All right. We'll move right past that. Let's see more...

People can draw their own conclusions to what it is. Axens has some exclusive relationship with us. It would have to be something that we were involved with or somehow. But I don't know that -- I'm not -- I just disavow any knowledge.

Okay. And questions on REIT. Is that done too -- maybe a few questions about that...

Well, the isobutanol is that we're going to -- we have a plan. We've had people approaching us. Isobutanol is a really good special chemical. And so people have been asking us, would you please make -- we continue to invest in the technology and perfect it even better than it was much, much better. I'm really glad we didn't build the plant because it's way better now. And should we do that? Sure, someone pays the right price, we can go do that. But we're going to be marshaling our capital and protecting it and being very careful in how we allocate it and how we use it, right, because we want to go for the surefire things. And whenever they got these new chemicals, why are they paying us this premium? Why, you better show me the money because it does cost more than petrochemical-based isobutanol. So show me the money, and then we'll go do something, but until then, no. So we're very much -- people know we have it. And as soon as we said, we aren't doing it then people came out of the woodwork asking us to go do it and like show me your money. I think that gasoline is going to be important. Isobutanol still is the best molecule for making gasoline. And I think it's the best one for making rubber or PET or any of these things, it will be here -- we'll be able to use that over in time.

So we're running along. I try to keep these to 30 minutes usually, but we have so many questions from investors. And I really want to get to the audience and I appreciate all the professional questions that have been asked. I'm trying to get through a couple more Pat, as long as they have you. This is a good one. It's talking about the security of take-or-pay contracts. That's a good question. I mean, obviously, the needed for project finance and what -- how do you feel about that, losing contracts, still valid risks...

What's really weird is when we first started doing this, the marketplace, there just wasn't anything like this ever done, right? So getting a take or pay contract -- take or pay contracts help to derisk. We have lots of them. Question in our mind is, are they good enough for investment? What you know that is to pin down the investment. In a marketplace environment like this, it's challenging. There is just no question about it. It is freaking challenging. All in debt markets to equity markets, everyone's gone, we see what happens here in the world, it's uncertain, and that's been like this for months now. And the banking crisis is a real thing. We don't -- it still doesn't get much play these days, but it's a real thing in the background, what happens to banks. So all of that talks about freedom of money and money flow and all that kind of stuff. So it's a challenging environment right now. All that does mean the requirements for projects to come that much more stringent. That's what it means to us. We're like, okay, what are the requirements? Let's work through them. And I'm really glad we're working through the DOE loan process because that will give us the best interest rate, I believe, and it requires the least amount of equity for something like a Net Zero 1. So it makes a lot of sense, should go do that. But it's this challenging game here of sorting out all the pieces. And the take-or-pay contracts are a piece of that. What it is very common to go back and renegotiate those or not for us, but in general, when there's bank debt guy might say, well, I need to see this then we might have to go back. That's all stuff that's in the category of normal as you figure out what's what.

We have a few questions on the capital structure. I really didn't want to get into this, but people are asking about warrants and on the books, some of the deals, the equity deals that have been done. Maybe it's worthwhile just to explain more. Feel free to e-mail me guys, if you want to [indiscernible] research and talk a little bit about some of these deals work in the structure. But maybe -- can you just explain a little bit why warrants are out there? What those come from...

Yes, we did -- yes, we did a deal last year. We raised $150 million. And I don't recall how much -- how many shares we issued at the time and then it rewarants that went with us. They've got a one full warrant coverage.

[indiscernible]...

I think 437 or so something like that. And so there's this really weird idea that people can just trade freely around and say, yes, I don't think so. So it's one of these not when you're not -- it just doesn't work that way. And so we raised $150 million. I'm really glad we did. It was a smart thing to do in retrospect the big investors that we have, applaud us for being foresighted to see that there was going to be a crisis. And so I know that it upset a lot of people as well. And people don't like having the warrants. I acknowledge that. I understand. But for us, we'd have been in deep duty because we don't know how long we're going to be in market turmoil and what [indiscernible] come. So we're glad to have the money, and it'd be another, I think, 100 -- whatever it is, 100 -- they have to -- if we ever hit their strike price, great, then there's more money right there. But yes, that's there. We debated doing it. It was a deal. We did it because we thought the markets were going to go on the toilet and they did. Our balance sheet, remember, we're in a really unusual development company. We have development capital. People don't have development capital. It's the hardest to come back. We have it. And so that's a big deal. And then we also wanted to invest side-by-side with other people.

I'm going to ask one more question and then wrap it up or way over. Again, I apologize to all the -- we got through a lot of questions, but there's still some more out there. I'm going to end with this one. The EU has rolled out jet fuel from corn to be sustainable. What is your comment on that?

I don't know where they're getting that from. I think they read their Annex 9 a little more carefully. And so that statement is overly broad. And so it is that waste carbohydrates are acceptable, even if they're from corn or wheat or any other food product, if they are the way carbohydrates. Our mining team was very active in getting that in there. So by the way, we aren't done in Europe either. We'll have projects in Europe. It's just that we can only do focus. We got to have these dam designs done the way we want them and make sure that we understand the modularization, but those -- we're already having the discussions for other places in the world for the same thing.

Well, I'm going to end it there. Pat, I can't get into any more today. I'm going to have you back soon obviously. A lot of interest, a lot going on. So I'll turn it over to you for closing remarks. And again, thank you, everybody, for participating today. Sorry, I couldn't get to more questions, but hopefully I will send them to myself or the company and do our best to get answers for you. But I'll hand over to you, Pat.

Yes, we're going to be up in our game with interactions with shareholders. Sean is working with us more now, and then we'll be getting way more active, I think, about communicating the stuff. Part of -- we're going to see lots of twists and turns in the future. And the fundamentals are good. We believe our cash cost of production to be the lowest in the industry. Capital costs are a lot, and we have to go finance that. I mean we've got to get good returns. We got to pin down the uncertainties around whatever all that is, Carbon value is the big one. But there's fundamentals are sound. In the meantime, we're going to chip away at our losses so that we start to improve and achieve profitability when I'm really encouraged like, oh, God, we could be profitable next year. I don't want to say that all out, though. And so I don't know enough yet. And what is going to Verity do? I got the same question. I asked Paul Bloom that every dam day.

We'll have them on for that because that's a very interesting topic. I tell you, it was an oil and gas conference a week before last and same thing, just heavy focus on...

Those guys even hit us, I'm preparing for that. And so how do we take advantage of it. We're not quite [indiscernible] quite in a row, but -- so how does it all fit together? Those pieces will start to become clear over time. In the meantime, we'll chip away at fewer losses. The money we invest is done in a way that's being super diligent. It's not being overcommitted to any one thing, and we're going to keep the pool of money to the right time for investment and make the right investment decisions. And so it's a little bit different than just anybody thinks that we're just going to burn all the money and run out you -- that's not the right paradigm here. That would be crazy setting it...

We're good, but we look forward to having you back. And for investors, usually, we like to do these on a narrow topic. So we'll pick something specific like Verity or like RNG, and we'll be running through these to keep them short. We wanted to have this to have a get a general update for everybody to give access and kind of hear a broader update. But going forward, we'll be doing these on narrow topics, feel free to reach out to me. I know you have a lot of concerns and questions. Anything I help with, please let me know. Again, topics were for specific things. We should be doing these more frequently along with some podcasts going forward to hopefully help us as well. So we look forward to engaging with you guys. And again, we're here to help you, the investors and understand the business and create some transparency and help the company work better with shareholders and get -- and obviously get more access and open access to you guys as well. So again, thank you, Pat. This is very helpful. Great start. We look forward to doing more of these.

Thanks. See you.

All right. Thank you, everyone.