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

Hello, and good afternoon, everyone. My name is Shawn Severson, Co-Founder and President of Water Tower Research and Head of Sustainability Research. As a reminder, Water Tower Research produces open access content and research for all investors. You can see our website at www.watertowerresearch.com for coverage and content on a number of companies, as well as our guests today, Dr. Pat Gruber, CEO of Gevo. We're going to be spending some time talking today about technology. We get a lot of questions from investors, I know the company does as well, about SAF technologies, how they work, why Gevo is doing what it's doing, spending -- how it's spending the money and where and why. So we thought this was a great topic to answer a lot of those questions, and so did Pat, so here we are today. And we have a presentation that we're going to go through. I'll let Pat talk a little bit about that. He has some slides he wants to highlight on there. But with that, I'll turn it over to you Pat, and we can start.

Thanks. Yes. We get a lot of technologies -- lot of questions come up about this -- even still we get questions about why did you switch from technology from isobutanol, ethanol and all stuff like that. Well, we have been working on alcohol-to-jet and -- for as long as I've been at Gevo, and that really is related to -- we're actually trying to do carbohydrates. I'll explain. These slides are ones that we use with customers. I just used them earlier this week to explain what we're doing, and it helps them. So let me pop through them here. The most important thing to understand is that jet fuel is over here on the right. It's got 12 carbons, 26 hydrogens, you burn it, releases a whole heck of a lot of energy, and that's what makes it a great jet fuel. The amount of energy here is absolutely immense, and it produces 12 carbon dioxide and 13 water. If I want to make it jet fuel, I got to do the reverse of burning. I got to take those carbon dioxides and water, and I got to put them back into the form of that jet fuel. Everybody has to do that. Everybody who makes jet fuel or any other hydrocarbon, for that's renewable, must put that energy back in. A gallon of energy -- that energy, it's in a gallon of jet fuel. You have to put that energy back in. Plus then on top of that, there's the process energy. So it's carbon source, and then all this energy. And when we think about a net-zero system, that actually -- you have to work across the whole of the system, thinking about where did you get your carbon? Are there opportunities there to capture carbon in soil and sequestration during the production of the raw materials? The answer is yes, we're using agriculture, no for most other things. If you can capture CO2 from a fermentation process and put it down a hole. And interestingly enough, when you do that, it leaves the energy of photosynthesis behind in the molecules. I'll explain that in a minute. And then you can also capture energy from energy production -- CO2 from energy production, and sequester that. So if you do that, you can actually get to be carbon-negative across the whole life cycle, driving this to a [ zero ] footprint even after it's burned and driving it negative even after it's burned. The different kind of feedstocks that we've always considered are things like carbohydrates and carbohydrate source, it can be starch, it could be sugar, molasses, any of those things are fair game. Wood, gas or ag residues, and all those. We like cornstarch best because it's the cheapest raw material, the most available and the most well-developed infrastructure and the lowest CI score. That's why we like it. And HEFA is made from vegetable oil or fats and oils. That technology first makes renewable diesel and then makes it into, with another step, a jet fuel. And then there is direct air capture or power-to-liquids. That's another approach that people keep talking about, and for life of me, I can't figure out how it makes economic sense. I'll explain a little bit. We -- in a corn kernel, I remind you that the starch is the white stuff inside of a corn kernel, and there's protein and oil in here too. You want to pay attention to all 3 of these because they matter. We want only the carbohydrate, and remember these all results are being produced by photosynthesis. The protein gets sold for animal feed. It matters because up here in the upper left of this slide, you see the acquisition cost as a bushel of corn. This one had -- example, has [ $4.86 ]. There's co-product value of the protein and the oil in this example, and you get what we call a net corn. So the actual carbohydrate cost $2.94 a bushel, right, turning that into feedstock per gallon to $1.73 or $0.077 a pound. That's hugely important, because look at this chart over here on the right, is that this is looking at the sugar prices for corn starch from a dry mill versus molasses versus cane or beet sugar down here, or even cellulosic sugars, and here's what's important. Every $0.01 change of a carbohydrate cost is $0.27 a gallon jet fuel production cost change. Freaking humongous. So from a $0.05 a sugar to up to $0.25, that's like a $5.40 cash cost difference due to raw materials. It's huge, and this is simply because of the chemistry. Even in perfection, it's true. So this is what you get. This is the reality of things when you're using these. So you want really low cost, really low-cost products as a raw material. It's hugely important. So people say, well, why should we do molasses? I'll tell you why, because I don't feel like -- we'd have to charge people a couple of bucks more a gallon. Or what about cane or beet sugar? Well, there'll be $3 more a gallon, cellulosic sugars, $5 more a gallon. That's why. Here's what's happening in the carbohydrates-to-alcohols. Photosynthesis goes into making these things. The carbohydrates go to a fermentation plant, you can make ethanol or isobutanol. Ethanol is a bit more well-developed and commercially-proven technology [indiscernible] of fermentation on earth. We've been adding our intellectual property to it to figure out how to drive it down to a [ zero ] footprint. This is about energy integration systems, unit operations, specifics about how you deal with the plant itself. We also have a bunch of patents on core products and things like that , that we'll be able to use eventually. And isobutanol, of course, is an alcohol. You notice that these molecules that I'm showing you here, these gray things, the big balls that are gray, those represent carbons. The white things represent hydrogen, and the red things are oxygen. So ethanol has 2 carbons. You noticed that isobutanol has 4. Well, this is a way of taking a complicated agriculture material and getting something clean by which we can do chemistry on. And what we want to do to make these into jet fuels, you want to strip off the red things, those are the oxygens, and then we want to connect these things together to the right chain links. And what you got to do is, you've got to get over here to the C12H26. So in other words, it would take 3 of these isobutanols connected together, and it would take 6 of these ethanols connected together. Well, in ethanol, that takes 2 steps and then followed by the last third step. And with isobutanol, there's 1 step followed by -- it's actually the same step that you use with ethanol. And so we have been developing these technologies ourselves at Gevo since 2007 when I got here, doing these catalytic chemistry steps, and we have developed a bunch of patents around these. Axens has developed technologies to do these latter 2 steps in particular, and more recently, this first step for ethanol, and we have our own versions, too. And so when we're looking at this and we want things that are proven, you really want to go with stuff that you know works well. The reason that this works is that there's -- these things map into the petrochemical industry, and I'll explain that in a minute. Here...

So Pat, you're saying the Axens' technology, going back to this, isobutanol was the original pathway that Gevo had pursued before, right? And then with the Axens' technology, that was an enabling technology, you made the switch to ethanol. How -- what was the relationship between isobutanol and ethanol and Gevo?

Well, they're both alcohols. It's that simple. We don't care. It's the catalytic chemistry, how to strip off the oxygens and connect things together. We've been doing that. Now, we've got huge patent portfolios on it. In the petrochemical industry, they use related technologies. So these steps over -- these steps they use in the petrochemical industry already. I'll explain it in just a minute, okay? I want to show one other slide first. This molecule that I've done in green here is jet fuel, but all of these things -- all the things that are labeled green come from photosynthesis in our system. And this concludes these -- the little bars between the green balls, those represent electrons. And so all of this stuff comes from photosynthetic energy. That's huge. If I was doing direct air capture, the only things on this chart that would be green would be the big balls themselves. Everything else would have to be man-made energy stuffed into here. We're using photosynthetic energy to hold things together and build the molecules, okay. Fundamentally important point about what we're doing and why, and that leads to much lower energy. This is a map of the petrochemical industry, Shawn, and everybody else. This is a typical map, and there's distillation goes across the top. You take a barrel of oil, distill it, you get diesel fuel, gas and jet fuel. There's another route to get these olefins -- to get these jet fuels, and that is you can -- out of a cracker, you get these things called olefins. These are ethylene that has 2 carbons, propylene has 3, butylenes. And then you can take those things with -- and do unit operations to make jet fuel. Well, that's what -- we're coming in this way into this ethylene stage or in the olefin stage, okay? And from there, we can make pretty much anything. That's what's enabled by this technology. This is why we started pursuing it so long ago. Let's say, we have a bunch of patents on these things and how to drive the carbon down. That's what's interesting about it. Axens does -- has technology in the petrochemical industry operating, and they have the leading market share of these technologies to take ethylene itself and convert it into fuels in these 2 steps. That's what they've been doing in the petrochemical industry. And we're like, well, shoot, they're already doing that. It's already well known. We have our versions tailored for our stuff, so we've merged it with theirs to make something that gets to a lower carbon footprint and operates in a biorefinery situation rather than a chemical refinery. So they're a technology supplier to us. We own the overall technologies that cover the manufacturing. It's us, not them. They have their processes, they own the unit operation technologies, but we own the overall plan designs. And so you put it all together, it's like this. That's what's enabled, okay? That's interesting. So we have the ability to make diesel fuel, gasoline, jet fuel. And we can also make any of the plastics that people talk about, whether it's PET or polyethylene, polypropylene and stuff like that. Of course, that's why LG is interested in what we do. We also have the ability, our own catalytic version -- our own versions of technology to do ethanol into jet fuel that has an improved version of catalyst that I think probably beats everybody's technology in the marketplace. We have our own version, patents filed, and it just isn't ready for primetime yet. So we'll start with then one leveraging off of what Axens has had. And then we have the ability to take that ethanol, make into propylene for plastics. So this is why we just don't emphasize these markets very much even though they're all here for us, because you still need the plant build that makes these olefins that are green and carbon negative. That's how I should mention that. We -- in this route, doing what we're doing, these olefins are minus 100 CI score, so minus 100. That sequestered carbon right there captured, and you can make a minus 100 plastic or minus 100 car bumper or whatever it is. So eventually, that will become valuable.

And then the Axens' technology path, that just -- that's one piece of the overall [indiscernible] more proprietary knowledge-based process that Gevo has used?

That's right. There -- it's one piece. You still have to know to put all the pieces together to get the right things done and then drive the carbon footprint down across the whole. And there's other technology suppliers that could make sense in the future here, like, we are a technology supplier, people forget that. But these are technology platforms we've been developing, and we're going to continue to develop and use them commercially and get paid for it. So it isn't like we're just a developer or we're just trying to in-license everything, it's not. We have our own technologies on top of everything, and that's a point that's been lost on folk. I get asked that question all the time, and I could never even understand it until recently. It was like -- I was talking with one of the investors who helped me understand this. I'm like, way, I don't understand. I don't. Why are people so confused? He's like, no. Nobody had, we're the only ones who have a complete plant design for something like this that does a net zero footprint. Here's what HEFA does. HEFA takes photosynthetic energy, goes to crops like oil seeds and stuff or get corn oil or it goes to crops, go to animals, and you get the fats and oils, and then it make renewable diesel. And you get diesel, and they do one more step and add it back to make jet fuel. That's how that one works, okay? So it has quite a lot of energy in it. It's a good product. Ours, I think, is competitively -- is cheaper to manufacture than this. This is a direct air capture route. You come in at this olefin stage. And the thing is, is that all of this is -- the hydrogen has to be manufactured, of course. And then all the electrons and energy electricity that goes in here is immense. To do this direct air capture, it would take [ 600 ] --- to do a plant of our size it would take roughly about 600 megawatts of power, not counting the thermal energy that's required on top of it, which is huge, and so that's just the math of what it takes to do this. And so people get all excited about this. It's like, yes, okay, free feedstock. Well, great. You need 550,000 metric tons of CO2, can capture and condensed plus 600 megawatts of renewable energy, otherwise it won't be a [ zero ] footprint or even a low footprint. Oh, and all the hydrogen needs to be renewable too because you need 13 sets of hydrogen added to make a jet fuel, and each one of those were 5 CI points a hit if they aren't all green. So good luck to you all. It's like people live in a fantasy world thinking this is going to happen anytime soon. And then FT, Fischer-Tropsch, is another technology people talk about. And that one actually is even hard for me to figure out because the energy is worse, because you burn the stuff first and then you'll combine it again. And of course, in this, the selectivities -- selectivity means the yield of carbon directly in the jet fuel. In our case, ours is like really super high in like in the 98%, 99% range. These are in the 30-some percent range for the last 2 technologies, so that's got really important as well. And it isn't like they're going to have an advantage to improve that over time. It's the nature of what it is. So that's why we like what we're doing and why most people are predicting that ATJ is going to be a really big thing over the long run. It's a question of just getting it built. Here's a study that's done by Nexant comparing our economics to all the technologies. And this -- we're way over here on the left because of the co-product values, the business system and all the rest of how we generate our products, the core products that get generated and all the rest. These other technologies are HEFA or Fischer-Tropsch over here on the right. So we're in a good competitive position, so we like that. And what we're doing in technology is this: We're the overall designers of the plant. We own the overall technology. Axens is a supplier of technology to us, source lead equip, source products and so are other people. There's many people who have been. We bring it all together, we're the ones doing the engineering. We worked with a number of engineering firms over the years. People get whacked out about what about this guy or that guy you keep switching in? No, we don't. We keep working with them all. They all do a part and they all have specialties and they all have capabilities, and we look at them. And then of course, we do care about who's going to be the EPC. But it's us actually who own the technology overall for the plant design. It isn't anyone else. It's us, and is ours. So when we've invested -- we'll, have invested by the time this is finished, we'll probably invested $150 million in the overall net zero designs of plants, of engineering, and it's taken a couple of years. Well, I got news. Anyone else who wants one of these, has to start from scratch and go do that, or they can buy it from us cheaper. We might sell it to them and license it, and that's...

If I tie that back to the developer model and the advantages there. So we talked -- I know you talked a little bit about that on the quarterly call, but sitting in this position with the Gevo plant designs and aggregating all this best-in-breed technology, there's a proprietary nature, which makes you the logical developer for these 4 NZ plants, right? I mean that's really where the value sits in some of the better returns. Of course, the option to invest in plants, we know that, but how does this play into the developer role?

Well, we'd be -- this is -- so in this one, we are a licensor. We'll be a licensor to the developer. We happen to be the developer, too.

Got it. Okay.

We're the licenser to the developer. The developer happens to be us. In any project, there has to be a developer. Someone's got to derisk stuff so people can invest, bring the site, bring -- get the permits, figure out everything, in-license whatever technologies and plant designs and whatever else. That's typically what a developer does. Yes, we're playing that role because we're the best suited for it. We understand the best of the economics of how to supply corn and the coal products and deal with the energy and all that kind of stuff. That's our game, right? Well, we also happen to be the people, licensing the plant design, right? We're a licensor in addition to being a developer. This is actually the Net-Zero 1 plant design. This actually is the real rendition now. And you guys all were paying attention to this kind of stuff, know that it's all done 3D model. This is actually what it looks like. Over here on the left side of the slide is the ethanol plant. That's 100 million-gallon ethanol plant. These are green silos in front, and those little silver things in the back are fermenters, and that's the processing area. Over here on the right side or in the middle to the right side is the ATJ plant itself for the steps of converting the ethanol into the jet fuel. And we would make 65 million gallons of hydrocarbons here, 60 million of which is jet fuel. We have some diesel fuel and gasoline. We'd also be generating CO2. We have -- so much very confident. They'll get the pipeline finished up there. They keep telling us that every day, and so great. I hope they do. It's value-added if they do. We have options if they don't. We're still at net zero. I feel pretty good about our optionality up there. And we're also producing an enormous quantity of animal feed, 695,000 metric tons of animal feed. That's 1 billion -- 4.5 billion pounds, that's a lot. And that will help the overall economics of the system. The whole thing will be wind powered, and it will be ability to use our RNG if we want to bring it up there. Right now, I don't think we need to, but we could if we wanted to drive the CI score down further and it'll have all green hydrogen for it too.

And, Pat, one question on that. At the Verity side, how much carbon can be squeezed out of the climate smart corn, as you put it? I mean, how important is that in reaching the net -- the final CI score that you want to achieve?

Well, in our -- it's a -- you don't have to have it -- no, you don't have to have it, but you do have to track it. So we count that as kind of the upsides, and I'm not sure how it will unfold yet. It depends upon what that 45Z is. We have to come back about that too. But it's a question of, there's money there. It's worth 30 CI points probably in total, if we can get the right farmers, but tracking it. Now, we rolled out the Verity tracking tool at the field level, and it works. And this is based upon the data from last year looking into this year. We can tell field-by-field what someone did, and how it worked and what their CI. That's huge for these guys because now, they have a measuring what -- they can look at and see what they did in the field though or I put too much fertilizer on that. I didn't need that, or I needed to do whatever is going on that can sort it out. So we like it a lot. And there's also the whole -- Verity also attracts the energy of a plant itself or it's the sources of energy used in the plant. This is an important question that comes up, and this is what we've been sorting out is, we understand -- our basic cash cost for SAF is about -- I'll just tell you the numbers. It's like -- it's less than $4. It's like $3.80-ish, something like that with current assumptions, something in that ballpark. Petrojet at -- I don't know, $75 oil is probably at $2.50 or something like that cash cost in that range. Well, we unfortunately have -- so if we had a fully depreciated plant, we've got a net-zero footprint. You know what? We are well within that hunt of beating them up straight ahead head-to-head, but we got new capital before debt and equity. So we have to stack those cash costs plus the debt and equity returns and put them up here, and that gives us this bigger bar. Well, that's why we got half of revenue sources. So there's potential for revenue directly from the customer purchases of SAF and that's, for instance, part of that could be equated to a jet fuel plus a premium. And then there's potential from the government, and you've got state level and a couple of federal government programs. So state-level programs, like $1.5 a gallon in Illinois, there's $1.5 a gallon in Minnesota, $1.60-plus in Oregon, plus there's the California stuff that everyone knows. There's 13 other states that are passing these laws. We like that a lot, that helps us. That's great. We just got to get them all, put all the pieces together. RFS matters. RFS is about -- I don't know, $2.40 or so of value. That's great. That's awesome. We need that. And then there's the question of the IRA bill, the 45Z. The question is, what the heck are the rules? Then also I need them to do is just to find the dang rules and then we can get on with us and finish the pricing and the economics of the project because the question right now is, what comes from the government? And we don't know yet. And we know it will be something, we just don't know what the amount is. In any case, we know what the returns have to be in order to make jet fuel happen. It doesn't change anything from our point of view. So we just got to know what the makeup is and who's going to make it up. That's what we got to know. So that's where we're at. And then to summarize how we think about this stuff is that drop-ins, obviously, de-fossilized energy, you don't have that. You don't get to net zero. You got to have accurate carbon accounting all the way straight through that, that's what Verity is all about. We have been very focused on the scalable, known, reliable production technologies. This -- the amount of work that goes into this is hard to describe to people because our -- it's my engineers here at Gevo, all the expertise and people who built these things before and operated these kind of plants before work for us. They work for us, and we're thinking through all the operational things that can go wrong, and so we're designing these plants to run. We're at some -- this isn't like some of these little start-up companies. They say these things they just can't -- they're not true. Our guys are really good at this, and they have operating experience and built plants before, and they're my guys driving it. And then we leverage all the other expertise we can lay our hands on, and right now, it's all about getting this dang project financing done. The goodness that we got invited for that, to the term sheet stage with the Department of Energy, That ought to help things along, too. I just need to know what the heck the deal is with the IRA bill.

So one of the questions I have, and we have a bunch in the audience, and we're running up on half an hour so I do want to get to those as well, a couple of them at least. Talking about derisking and technology risk. Is there still technology risk? I mean, I know you guys have run this at pretty much a volume production. Is there a risk in this from a technology standpoint anywhere?

Not in a normal way that people talk about technology risk, no. The unit operations are all proven to work unit operations. We strung them together slightly differently, but there's no risk and there's not risk that we're taking involved with those. And that's part of the careful design that we're doing. We're putting them together in a -- how integrating energy is done a little different, but our view of what we're trying to achieve is different. Now, what's interesting is that this led to intellectual property too. So we have innovation still -- even though we're using existing unit operations, we've strung them together. But the way we do it is pretty damn creative to drive the footprint down, and that leads to intellectual property. And so we filed these things. So think of it as an envelope around everything that we're putting together. So we're trying to keep what's good about all these unit operations preserved, leverage them and then make them better and optimize them further and then capture that intellectual property.

So take a couple of questions. One is about cash needs for NC1. You mentioned all of this spend at about $150 million into NZI so far. And I don't know, we've had conversations, investors have asked about this. How does the cash go in and come out of the plant? The money you've spent, and you need a lot more money to finish the plant is the gist of the question? Or to get to a client level is the gist of the question we had from somebody.

So the plant, by the time it's fully financed and installed and all the rest of project financing and all the costs of that even with the deal, we think it will be well over $1 billion. We've talked about this before, right? But it's going to be leveraged. So what's the equity component, who makes up that equity component? We do not have enough cash on our balance sheet to just stand here and go, we're going to do it all equity finance. That's crazy. That would take -- put us at too much risk. We aren't doing that. And so we would have to raise money at a corporate level to do that. I'm not up for it. We can do better by doing project financing and using other people's money on a project, and there's investors who want to do that. Why would I take all this dilution up here? That would be crazy. So I'm doing it. So that means that we're going to use our balance sheet to whatever we can to take as much of this plant equity that we can. It's balanced against the needs and wants of whoever else the equity partners are that come into this. Now, it's a project financed deal. It's not at a Gevo, Inc. level, it's project financed. It's a separate company, a special purpose entity set up as a project as an LLC, and it will have its own investors, of which we're one. The way that this money works is we get back our -- the $150 million we can get that back, we'll get it back at the financial close. And what goes back to our balance sheet is cash to go use. We can use some of it for investment here. We can go use it to develop something else if we wanted. And so this is the part that people have been missing or not understanding, I think, is that when they are God, you don't have to raise money. Yes, no, I don't think so. Not right now and not at a corporate level, unless there was some special reason that was so damn accretive, which I don't, right? We don't have to do that. So it's a -- the way that we think about this is all about raising the project funds. We'll make the decision as to how much we invest by how much cash we have on hand against the other opportunities we have on hand at the time. And we want the portfolio of things, and it could be that -- we'll have to do the -- we know we have to build an ethanol plant first, so we might accelerate that a bit depending upon what happens on the 45Z stuff and get the ATJ plant going in a staged way. You have to sort all of that stuff out. But yes, we're committed to getting something built. It's just a question of, I need the economic details so I can pin down the rest of the project financing.

Next question is regarding the technology, and I guess the gist of it is the funding that some of these other technologies are getting. When you look at companies out there and they're getting money. And I think the question is, how and why are they able to compete?

Yes, I have to know specifics. So there was like a $2 billion thing for direct air capture. It's like that one makes no sense to me. This is like, the cost of carbon for that is so immense. It's like, okay, whatever. Good for them. I don't care. The markets are so darn big that we look at all this stuff, it's going to take every fracking technology that people can think of. We've always scratched our heads at lots of the stuff of -- we're pluggers and pragmatists. We have been around the block, and I've seen every damn technology there is. We've looked at everything there is. So you can't -- there's nothing new to show us that we haven't evaluated in my career. There's only a few ways you can do this, and I got news. We're in the low-cost category to produce stuff. There could be HEFA and we are right there together, and -- but our scalability is way more than HEFA. That's a good place to be. We're going to be in the winning solution no matter what. We like that. It's a question of how do you form this capital? And the thing is, everybody has to build new plants. Everybody has to build new plants. That takes big capital, and this environment has sucked in the last couple of years. It's like, holy crap, I would never believe that we would get this bad in a marketplace in terms of investments. So that's all stuff that impacts us. We're working through it though, and our stuff is fundamentally sound.

There are a couple of questions that seem to feel that the DOE loan was taking longer than expected, and so maybe address that, because there are several questions actually regarding the DOE loan.

Yes. Well, that's like, what the...

Can't say that.

Sorry, they're actually going very, very fast. DOE loans, the way you have to do it, it's this prescribed process where you're going to do a preproposal and then you get selected from those. That takes several months. And then you get invited back to do a more formal proposal, and then they have to go look at that and accept that. Once that's done, then they do like predue diligence. And then once that's done, then they do the -- invite you back for the term sheet negotiation stage, we're at. They've actually gone at light speed for these guys for us. They're doing a great job of working through it and trying to go fast. And so they're going light speed, and it will still take -- this close with these guys, it will take until second quarter next year probably, and that's going light speed. So that's just the [ fracking ] government process, accept it. I'm sorry. I can't do c*** about it. That's just the way it is, and they're going as fast as they can. A guy named Jigar Shah is -- he's got that group working hard, and he's doing great. And Jigar is well aware of us, and we know him really well. We know that they are working their butts off over there trying to make this happen. But they got procedures and processes and all this kind of stuff to go through. It's just the government, man. So that's life. Now the good news is that they look at this and they said they believe it's a well-qualified project, but they've looked at everything we have, including the contracts and everything. Well, that's great, good, and they'd be the underwriters for the debt. That's a huge thing for us actually because that makes it way more practical to get the debt without extra c*** than you would have to do if you're at a commercial bank or something.

Next question is regarding McDermott and the change in EPCs. I know there's some explanation behind that, but maybe cover it again to explain to people what the process was?

Yes. So we've been working with multiple engineering firms over the last couple of years depending upon what phase of the project we're in and what we're doing. We're always evaluating people for -- to be the EPC for the overall project. The choices that we care about for EPCs are what are -- are we going to get to terms that we can work with and do in a project financing approach? Not all people who are EPCs can do that, they just can't. Or they've been changing along the way. So we actually had kind of a runoff looking at different companies. And we've got proposals from people already. McDermott is -- seems to have the most favorable terms, and that's why they're now the leading horse candidate to give this final lump sum turnkey. And they are working -- they promised to work with us in an open, transparent way. This is incredible because what happens is that these guys, what they'll do, and this is true of all projects. Everybody is project financing. This isn't unique to us. This is true always. When you ask for the price -- if we have to say, I need to price today when I really don't need the price for 6 months. They'll bake in all kinds of extra, they just add it. They just bake it in. Now I got a great team who can go no, that [ PH probe ] didn't cost $1,000. It's worth $200 -- sorry, take it out. There's all kinds of these details that we've seen that people try. So we spend a lot of time, and we have consultants who work with us to basically keep everybody on the up and up. McDermott is we did have a -- we did look at these multiple firms. McDermott gives us the most financeable terms, and now, we'll have to finalize the number. The actual -- but you don't call out. We have the numbers for engineering. So when people say did you complete [ PL3 ]. Well, yes, like fricking earlier this year. Yes, we did. You know what though, we're in an inflationary environment, for God's sakes. So things are changing in different parts of the supply chain, so you got to update the stuff and pay attention to it. And so we'll have to update it again. That's normalness. That's called normalness okay? That's what we do. And so it's not -- this isn't some fricking wind turbine that we're just putting up. This is a complicated piece -- this is a complicated plant. It's big. So it's not little piece of equipment here. It's a whole bunch of pieces of equipment, and you got to pay attention to them all on what's happening. And we're in pretty good shape. So we had built in some escalators, have built in some cost increases and stuff like that. We'll have to pin it down and see how it works, but we -- I think it looks pretty good so far.

How does -- the role Praj plays in this now?

Praj is a partner with us in India. We're helping them working with Indian oil. So they -- people saw they flew recently on jet fuel that was made by us. And we want to see them do ATJ over there. And whether it's isobutanol or ethanol, we don't care, we'll help them. And they also supply technology around how to decarbonize ethanol plants, and here's the most important thing. They're really good at building modules, really, really good at it, and that's -- they're going to shine in this, I think, and they have a good relationship with McDermott. So I would -- that's what I would expect to have happened. Maybe McDermott ultimately has to be the one to stand up because of the debt and all that kind of stuff to be the guy who's on the hook. That would be McDermott who says exactly who the suppliers are, but I think that Praj is the lead horse there for the module supply.

Next question is about offtake agreements. I can mention one, how much of rolled to the offtake agreements play in the NZ financing and the DOE loan?

They're important. They're important. And they're an important role. It was a gating item, so those look good. But -- and all the airlines are working with us. So from a standpoint of they understand the time lines of things, they understand it. The IRA bill has thrown a wrench into things because of the lack of clarity for longer than anyone ever expected, and it's going to still be unclear for another couple of months, I think and -- at least. And then -- and even when they come out, it's going to be a 45B rule, not the 45Z that we need, but it will still be a good indication of how people should be thinking about things. And so there's all of that. So the people are all cooperative, we all kind of work together, so there's not a problem on the relationship side. And then -- on the offtake agreement side itself, yes, we did offtake agreements. We've got 400 million gallons plus. Trafigura is out, that's good. Airlines can come in. They like that idea, and it's just a question of putting all these pieces together. Having the DOE, the DOE thing was important because the equity investors on Wall Street types, equity firms, they're like why would we want to know the DOE loan because that would take less equity overall to get this built at a lower interest rate. Why wouldn't we do that? You should figure that up first if we can get that before we have more discussions. So now we're back, we'll have to have more discussions with them again. It's that kind of a thing. So this isn't like a -- we don't have a -- there's nobody who has enough money on their balance sheet to just build one of these plants and go high. I think I'll just build a plant today. Nobody does. They don't have this money. So everyone has to do project financing of some type.

I'm coming up at 40 after, but we've got a number of questions. And you know this one we hear all the time, time line, but people want -- they want dates. You can't give them specific dates. But what may be helpful, Pat, is if we could think about the upcoming milestones. I think you did a good job talking about a lot of those on the quarter as well. But the milestones that set the tone for this. I mean, looking at DOE approvals. I mean, everybody is looking for when is NZ1 going up, right? I mean, you know the questions, the same ones that everybody asks all the time. How do we answer that in terms of helping shareholders understand progress and things that are happening relative to time lines and end results?

Well, the financing one is the most important one of all. That's the one that actually matters. The idea of looking at -- when we break ground and stuff, it's the wrong d*** concept again. The world's changed people, move on. That's not what it is. This plan I just said it could be built in India and then shipped over here and then assembled later. That doesn't mean maybe we'll pour footings sometime in advance for sure. But you know what, if they're getting shipped over here, they're not going to be 2 years in advance. I mean, come on. So it's a question of -- it depends. Now the ethanol plant, we probably build sooner. So as soon as we have clarity around how we view the world, then you might see us want to move forward with that sooner rather than later depending upon how much money we can make on it while we're waiting for the ATJ plant to get figured out. So these are things that we look at. It's not static, like people want. Sorry, it just isn't. And I wish it was really simple like that, but it's not. We're going to -- the goal is to get something built as soon as we can that generates cash. That's what we care about it. And this is -- here is a real important point. Without over committing ourselves to screw up our balance sheet, hugely important point. It's like, no, we're not doing that. And so we view the money we have on our balance sheet primarily for investment. So I had a guy recently, an investor said, well, I want to hear somebody talk about we're going to be profit -- you could make maybe incremental profit in the -- 2024. Yes, you're a minority. Everybody else is worried about us burning through our cash in some irresponsible way. We're not doing that. What do you think? What? That's craziness. And so we're going to improve our position, expect RNG to make more money. I expect that Verity should start kicking in money. I expect that we'll have other things that come along that can make money. We should expect money from the P66/ADM deal. I expect that to come in. And all those things help us, and that gives us more money to invest in our projects. And it's projects, projects, multiple projects. I can invest in NZ projects, NZ1. I can invest in other NZ projects. We have several other sites that are pretty interesting. And the ATJ plant is the same, whether it's at NZ1, like, Preston or somewhere else. It's in modules, it's just a question where do we send them is that's the way to think of it. We have to work on -- we got to see decarbonized ethanol. You see -- we have partners and those kind of things that we're developing. So it's not linear in the standpoint of just plug along, it's NZ1, NZ1 only, they live and die by NZ1. That's stupid.

And then I guess, just looking at financing is really, when I think about it, financing is just the big issue. Once you have the financing, the plant is moving forward, it's funded, everything else falls in place. So I mean I think that's really maybe the answer too is that financing makes all this very tangible and very real, and all the other pieces fall into place. But everything you've been doing to date is getting towards that financing -- the financial close. And at that point, it all comes together.

Correct everything we're doing. So this derisking stuff that we're doing, it's enormous derisking that we're doing. This is the role of technology supplier and a developer to derisk the hell out of everything. And so that people can come along and okay, I'll take my -- use my infrastructure funds, and I can take my returns and I'm accept -- that works for me. And derisking it for debt. This is not like the amount -- and the world is risk averse right now, and yet we're still working through it successfully, we believe. So it's -- we've done way, way, way more engineering. And all the plants that I've been around and built over the years, we've done more work in the development of this one than anyone I've ever seen in my life to satisfy everybody, and it's just because everyone freaked out. If we heard -- this was 2 or 3 years ago, it would have been a different situation. But it's not, that's where we're at. So okay, deal with it. It's a good thing we've got fundamental economics that work and the world needs SAF.

Well, we're coming up quarter til, so I'm going to stop there. We're 45 minutes in. I appreciate all the questions from everybody. I know this is a complex subject. I hope you found it educational. We're able to understand the technology, and we did get through quite a few questions. So obviously, a lot of investor interest, Pat, so I'll turn it over to you for final remarks, and then we'll close it down for today.

Yes. So we do listen to the questions. We're trying to address them, and we'll be doing more of these. I understand that we have not been talking as much in the last, I don't know, this year in 2023 as we had in previous years. We're going to get back to it. Shawn is working with us. We have a new guy, Eric Fries, Vice President Finance, working with us, and we have [ Heather Rob ] here too. And we'll try to get these things, get questions and address things as we can. But really like where we're at from the standpoint of -- I wish things would go faster too. But you know what, I'd rather have them get right and we're managing our cash well right now, and we're in a pretty good fundamental position. We've got a lot of work to do still, of course. And I like our optionality. And this is something that is lost is, we don't have that -- we do not have to have SAF to be successful as a company. I don't have to have SAF. I have to have something. And whether that's something is a diesel, we could do that, same technology. We could do old plastics. When people want those, great. We'll do those too. So it's not one-trick pony here, people. It's not. That's not the game we're playing. That's not how we're going to maximize the value of Gevo over time, and throw on top of it, Verity. So it's just a different game we're playing.

Great. We appreciate your time today, Pat. Thanks for everybody's attendance and look forward to having you back and lots to discuss, so I'm sure we'll have another one here in the very near future. Thanks, Pat.