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

Hello, and good morning, ladies and gentlemen. Welcome to today's Virtual Non-Deal Roadshow. My name is Julia Perron, a virtual event moderator here at Renmark Financial Communications. On behalf of our team, we'd like to thank everyone in Seattle and surrounding areas for joining us today for the presentation of Gevo, Inc., trading on the NASDAQ under the ticker symbol GEVO. Presenting today is Eric Frey, Vice President of Finance and Strategy. And with that, I will hand it over to Eric.

Gevo, we're stock GEVO trading on the NASDAQ. And we announced our 3Q earnings on Monday. So please check out our third quarter earnings release and our earnings call should be available on that website, too. So I'm not going to rehash the earnings call, but really wanted to give an overview of Gevo to those who may not be familiar with our story and also do Q&A for those who might already be familiar with our story. So if you're a shareholder, thanks for supporting our mission. And if you're considering becoming a shareholder, I hope that you'll consider joining us. I'm going to try to keep it to maybe 15 minutes. We'll see how quickly I can go to keep it succinct since, as I said, we did release our 3Q earnings. But what you're seeing here is the corporate investor presentation that's on our website. It's the first one in the IR section of our website. And I'm just going to go through that and give you the high-level takeaways. Like I said, for those who may not already be familiar with what we do. Just keep in mind that there may be forward-looking statements of what I'm about to present. So take into consideration the risk factors that are in our SEC filings and in our third quarter release. So the first thing about Gevo is we think we have a great team. We have a lot of experienced senior people who have experience at the nexus of agriculture, fuels and chemicals and carbon management and sustainability. And we think that, that's a distinguishing feature of us. We don't think every company has those experiences in those what have historically been different areas, which are now coming together in the world of energy growth and energy transition. So what are we? Well, we're a diversified renewable energy company. What does that mean? It means we start with renewable resources as our raw materials. We have processes that take those renewable resources into drop-in hydrocarbon fuels in a way that's cost competitive with fossil-based alternatives. And the result of all that is you get the same molecules for your diesel truck engine or your jet aircraft engine or the same ethanol that is blended in gasoline in your car. But because of the way it's produced, that product has a life cycle that reduces carbon footprint. And the idea of generating the same energy that works in the same infrastructure and the same engines and fleets, but doing it in a way that manages carbon is something that we think is a differentiator for us. It's something we think is in growing demand, but not enough supply. And so we divide our business into 4 segments, if I can use my pointer here. So this segment that's called Gevo Fuels up here. This includes our facility that we call Gevo North Dakota. So that's where we have an ethanol facility that makes ethanol, low-carbon ethanol as well as has carbon capture and sequestration, CCS. I'll talk more about that. And this also has our alcohol to jet SAF platform. So we are building a platform to make Synthetic Aviation Fuel or SAF from the business that we put together today, and I'll talk more about that. This box down here that says Gevo RNG. We have a few sites that are tied together into one business where we take the manure from dairy cows, run it through a digester and then capture the fugitive methane emissions from that manure, clean it and then inject it into the natural gas pipeline system. So same molecule, it's CH4, it's methane. It works in your stove and it works for power and all the rest of the things that methane does. But instead of coming from fossil resources, it comes from a renewable resource, and it reduces carbon footprint because on the front end, we've captured what would otherwise be fugitive methane emissions. And on the back end, we delivered a product that is a nonfossil-based product. Over here in the upper right corner is Verity. Verity is basically a software tech start-up that's wholly owned by Gevo. It's got its own website, its own team of employees that are software engineers and in some cases, farmers, too. But the idea of Verity is we felt that to do the things we're trying to do on the left side of the page, we needed a software system that has end-to-end tracking. And the reason you need end-to-end tracking for a business like this is because these are complex commodity supply chains when you have a farm producing a bushel of corn or soybeans that then goes to a grain elevator that then goes to a processing plant that then goes to anywhere, Canada, California, somewhere else. That's a complicated supply chain, and it's a commodity supply chain. You need a software system to track the exact route that, that product took through that supply chain to convince the end customer that it reduced carbon footprint and had other sustainability attributes. So if you want to sell a drop-in product that has sustainability attributes, you have to have something that -- an audit trail that validates it. And that's the intention of Verity is to enable that. And then down here, this box is called GevoChem. We also have an R&D budget where even while we're building out our SAF platform, the ingredients to make SAF, which we think are profitable by themselves, but then that enables growth in the making SAF in the future. Even while we're doing that, we're already paving the way to make it better because this is a new industry by definition. So it's not fully optimized like the oil and gas industry. We think the second and third generation of our SAF plants can be better each time, and that's what this is intended to do down here. So what's the common thread? These are sort of 4 different things, but they're all tied together in what we do because they play off each other. Everything we do is about taking renewable carbon, making products that are scalable, that are cost competitive with the fossil-based alternatives and reducing carbon emissions along the way. That's the common thread. This just shows the assets that I talked about and where they are geographically. This is a really cool picture. This is a real picture, by the way, of the Northern Lights in North Dakota at our Gevo, North Dakota facility. So this is a facility that takes bushels of corn as an input. And like many ethanol facilities across the U.S. and across the world, it grinds the corn and makes several products. One of those products is low-carbon ethanol, which today is mostly blended into your gas tank for your gasoline-powered car. It makes about 67 million gallons per year, and it's exceptionally low carbon. It's some of the lowest carbon fuel available on the marketplace today, and it's dropped in. It doesn't require electrification. And the reason it's so low carbon is because on this site, it's about 500 acres. We have carbon capture. We're one of the few operating CCS industrial operations that's operating today, and I think one of the very few number ones that are attached to an ethanol plant. It's currently sequestering about 165,000 metric tons per year of carbon dioxide that originally came from the atmosphere, and it has the capacity to do about 1 million tons per year on this site. So this is a great asset for us today, and it enables us to make synthetic aviation fuel tomorrow because you can convert ethanol into jet fuel, and I'll talk more about that. This is an important point. So when you do this -- when you make ethanol, this kind of process, you could start with any fermentable sugar, okay? But in the U.S. the great place to start is corn because corn is so abundant, it grows really well in the U.S., and it makes a lot of sugar and it makes a lot of corn oil and it makes a lot of protein. But the corn we use is not the kind of corn that is destined for human consumption, okay? So we're not using corn that goes into sweet corn. We're not using corn that goes into your popcorn, 99% of the corn that's used in the U.S. is what's called field corn. That's corn that's destined to be milled and made into high-protein products, corn oil and then sugar. Once you have the sugar, you could -- sugar can be sugar, but we all have lots of sugar in our diets already. A big industrial use for sugar is to ferment it and make alcohols. And you can make medical-grade alcohol, you could make spirits and you can make fuel-grade ethanol which is blended into gasoline and then used as a fuel additive, okay? So that's a really important point that we try to get across all the time. This is a renewable circular economy business. In many cases, the same farmers that deliver bushels to a facility like this pick up the protein and use that as animal feed. So it is part of a sustainable circular economy that benefits rural communities. And by the way, this is a little hard to see, but this chart over here, these green bars, this shows you the last 100 years of how many acres were planted for corn in the U.S. And what's really amazing is it's about the same. It's like between 75 million and 100 million acres was planted for corn 100 years ago and about the same number of acres was planted for corn today. So what's changed? What's changed is we've made billions and billions more bushels of corn from the same acreage. And the reason for that is because of this orange line down here, yields have improved. And the reason yields have improved is because farmers, they're all about doing more with less or more from the same. The way you improve your farm is to have better yields and to preserve your soil and to not have runoff and to take good care of your animals and so on. So farmers are all about sustainability anyway. They're already incentivized to be sustainable. And that's why this is a great starting point for what we want to do, which is to make drop-in fuels and chemicals that are scalable, but also manage carbon. And historically, that has not been easy to do and the marketplace hasn't had access to that kind of product. So when you make corn, I mentioned this, what comes from that field corn that I mentioned, basically, by way, it's 3 products equal by way, 1/3, 1/3, 1/3. So for every pound of product that you grind from this bushel, you get 1/3 of a pound of ethanol, which you can convert to jet fuel and diesel fuel and other fuels, Naphtha. 1/3 of high-protein animal feed. These are nutrients that humans do need in our bodies, right? We can't produce all our own proteins and amino acids. So we have to get them from plants and animals. This is where it comes from. And then the other 1/3 by weight is carbon dioxide. Now this is often overlooked. We view this as a co-product. It's just as valid as these other co-products. And the reason for that is because this carbon dioxide, basically 2 reasons. One is when you ferment sugar into beer and ethanol, it gives you bubbles. And what are the bubbles? They're carbon dioxide. Well, it turns out that nature -- mother nature is doing all this work to concentrate that carbon dioxide into a very high-purity carbon dioxide stream. And that stream reduces the cost of carbon capture, number one. Number two, if you trace it back, it originated in the Earth's atmosphere. So when the plants grew up through photosynthesis, they were drawing carbon dioxide out of the atmosphere. That's what ended up in those bubbles essentially. And so if you have a sink, if you have an underground reservoir or you have other industrial uses for that carbon dioxide, you add value to society and you've managed carbon dioxide footprint, too. So we think this is great. You get 100% of the nutritional value out of corn or whatever the feedstock is. It could be other crops. It doesn't have to be corn, but the U.S. is corn. You get a drop-in fuel, you get protein and nutrition and you get an ability to manage carbon. That's why we target and it's scalable. Now that's a simple picture because that's sort of like what happens when you look at the inputs and the outputs of a plant like this, an ethanol plant like we have in North Dakota. But what's more complicated is the revenue streams. So when you go from corn to ethanol, you may only have those 3 products that I mentioned, but you have a bunch of different revenue streams that come off that. So you can sell, obviously, the animal feed and the protein product. You can sell the corn oil. And then you have the carbon removal and the carbon abatement, who will -- who in the marketplace will pay for and value and buy that. That can be detached. The same person that buys animal feed may not be willing and able to pay for the fact that we capture carbon. There are RINs that support this marketplace. There's 45Z tax credits, which would actually go back a long time, but today, they're known as 45Z tax credits. And there's different state and local incentives. Then when you go in the future, as we want to do, go from ethanol to jet fuel, there's another set of revenue streams that are associated with that. So there are specific credits and incentives and buyers that really want to see more SAF in the world for a bunch of reasons that I'll go into. To be successful at this, it takes a lot of skills that we think that we have. One thing that we're sort of innovating is how we count and sell our carbon. We treat, like I said, carbon dioxide as a co-product. And the reason we treat that -- the way we balance this and what we're kind of excited about growing is there's basically 2 ways to monetize that carbon value. One way is you have a gallon of ethanol that goes on a railcar and it goes somewhere like British Columbia or Oregon or Washington or another low-carbon fuel standard market where they value low carbon fuels, especially. And in those markets, we would keep the carbon value attached to that gallon. So that someone who buys that gallon knows that it came from a plant that use carbon capture and so many tons of carbon dioxide were captured in that process. And therefore, it's a low-carbon gallon. Now those markets value carbon at somewhere -- anywhere from $50 to $100 per metric ton. It goes up and down because they're trading markets and sometimes they're higher and sometimes they're lower. But there's another marketplace that we're unlocking, and we think we're uniquely positioned to unlock, which is the Carbon Dioxide Removal or CDR markets. Now there's lots of acronyms and names for this but basically on the right side of this page over here, it essentially means if we sell our fuel in a local market, let's say, that's not a low carbon fuel standard market, Well, then no one has paid for the tons of carbon that were captured. So we can detach that as a virtual certificate as a piece of paper that promises that we did indeed capture carbon. And we can sell that on global voluntary carbon markets. These are brand owners that want to reduce their corporate carbon footprint, but they don't have any ways to do that because they don't do carbon capture. So they come to suppliers like us and say, "I'll buy these certificates from you, promise me that you actually did it, promise me that the carbon is not going to leak back into the atmosphere, promise me that you didn't double count, right? You're not selling this to multiple counterparties. You count once and only once and so on." And this is actually a $10 billion marketplace in terms of how many CDRs have been sold over the last 2 years. We did our first $1 million of sales of these last quarter, and we think we can get to $3 million to $5 million sales of these by the end of this year. We'll see. But this is different. This market is a compliance market, if you comply to get the credit. This market is a business-to-business marketing effort. You have to earn your client -- these businesses trust as a supplier. Now only 2% or 2.5% of the transactions that have occurred in the CDR market have actually been delivered. That means that these buyers are purchasing future promises of carbon reduction that haven't been delivered yet. We're delivering our carbon reduction every day. So because we're one of a very few number of plants that's actually doing this. So we think we have an intrinsic advantage. And the prices, if you go to this website, CDR.fyi, for the type of carbon capture that we do at a biofuels plant is more like $100 to $300 per metric ton. We think that's very significant when our well is sequestering 165,000 metric tons per year. If we can shift more of those tons to the right side of this page, we think we could max out at $30 million or $33 million per year if we fully optimize the way we count and sell our carbon. We'll see how fast and how quickly we can do that and how we optimize it. But we're going to be optimizing between where we point our carbon based on which market wants it the most. So we think that's a great source of growth for us. Like I said, last quarter, we had our second consecutive quarter of positive EBITDA after making this transformative acquisition earlier this year when we acquired the carbon capture and the ethanol plant. We think we have a path to basically double our current run rate EBITDA effectively to about $40 million per year by simply optimizing how we count and sell our carbon, okay? Not investing capital to change the plant, not building a SAF plant, just optimizing our commercial structure basically. We think we can almost triple that again to this $110 million of EBITDA if we make minor -- if we do debottlenecking in our plant, so maybe increase volumes by 10% or 20% and do minor expansions at the plant as well to get those same volumes. We think that requires not very much capital, not nearly as much capital as we spent to acquire the plant and gets us a lot of return for our dollar. This is all before we make Synthetic Aviation Fuel. So this is just optimizing and doing minor expansions to what we have today. How fast we can get there and how much of this $110 million we can get to? We're going to figure that out, and we'll have more detail as we go. But we think this is sort of the size of the prize basically, and we're -- this is what gets us excited. We have a strong balance sheet, but we just released that last quarter, so I'll let you take a look at that. Let me pivot to why we like Synthetic Aviation Fuel. So I talked about what we have today and how it's a platform of growth for us today. But that's the ingredients to make Synthetic Aviation Fuel. If you can make low-carbon ethanol and if you have RNG to support it, if you have Verity to track it, then that's the platform to extend that ethanol into jet fuel and make Synthetic Aviation Fuel. It's pretty obvious, I think, to most people that Synthetic Aviation Fuel is a good way to manage carbon in a sector like aviation, which is hard to electrify. But probably more fundamentally, just as important, if not more importantly, the demand for jet fuel in the U.S. is increasing. We need about 2.3 billion gallons per year more jet fuel in the next 10 years. That's according to IEA data, the last long-term forecast. Meanwhile, the demand for gasoline is not increasing. So you have a mismatch. The U.S. fossil fuel refinery complex produces about 50%. There's only certain components in a barrel of crude oil. So refineries make about 50% gasoline today and only about 9% jet fuel. Our process really targets the jet fuel because it's a chemical conversion process from ethanol to jet fuel, we can make 90% of our product stream can be jet fuel. So really targeting this demand, but not exacerbating this gasoline demand or lack of demand. Okay. Well, how much does it cost? Well, like I said, our goal is to be cost competitive with fossil jet fuel. The X-axis here is the price of West Texas crude oil. The Y-axis here is the price of jet fuel and the blue is a scatter plot. So if the price of crude oil goes up, the price of jet fuel goes up and vice versa. This green box here is what we're targeting. So we think we can be in the hunt even in a first-generation plant in terms of the cash cost of production per each gallon. And it can be a much lower carbon jet fuel. So now we do need to cover our capital costs. We have to get a return on capital, okay? So that requires some combination of government incentives, state, local incentives or customers who are willing to pay that additional value of the carbon reduction that's different from fossil jet fuel. But the point is the thing that's really exciting is we think, number one, we're the cheapest route in a cash cost of production basis to make SAF versus other methods, which are much more expensive. And two, we're in the hunt for a first-generation plant to be competitive. There's a path for this. We're not just trying to force an expensive product into the marketplace. We're trying to create an industry that can actually compete and serve demand. That's what actually we're trying to do. For each, what we call ATJ-30, if we were to deploy our SAF technology at our North Dakota site, we would convert about 50 million gallons of ethanol to about 30 million gallons of jet fuel. And we think if we do that, that would provide $150 million of EBITDA. So this is the long-term larger growth that's on top of that earlier growth that I was just talking about. Why we really get excited? Because if we do that in North Dakota, we think we'll have a design, okay, that you can deploy repeatedly at many different sites. There's 180 ethanol plants in operation in just the U.S. And each site would bring in jobs, investment to rural communities and give them more options to sell their corn, their sugar, their ethanol into a new marketplace that demands a product. So you're using abundant resources and you're serving an underserved market, which is jet fuel and carbon management. We think we want to be the link that connects those dots. The current administration supports this. If you look at this last -- one of these executive orders, it talks about how the U.S. needs more biofuel, ethanol and aviation fuel. Well, that's great. We get asked this question all the time is what's the political cycle like? Throughout the political cycle, we tend to get a lot of support because we're about investing in rural communities, and we're about biofuels, ethanol and aviation fuel. And both political parties in the U.S. tend to support that. So what are we trying to do? What are we focused on right now to get from here to there? We call this Project North Star. The idea is, let's use North Dakota, where we have our low-carbon ethanol and we have our carbon capture as a showcase. We have a bunch of acreage up there. Let's deploy our SAF technology, deploy Verity and have that be a showcase to then go after all those other sites that I showed on the previous page. To do this requires a bunch of skills. You have to be knowledgeable about all the things that are shown in these hexagons here, and we think we have those skills. So high level, what's next for us? Step one is grow our EBITDA just by optimizing what we have. Step two is deploy our SAF technologies and platform to that existing business and extend that low carbon ethanol to jet fuel to give us another leg of growth. That takes longer time and takes more capital than that first step, but that's the next step. And then copy paste. We want that to be a showcase to do it again. And again, if the U.S. wants to fulfill that additional 2 billion gallons plus jet fuel demand that we need in 10 years, we need to build about 70 of these plants. We don't know how long -- how quickly we could get to 70 or we could build 70, but the point is that there's a target-rich environment. And with that, maybe I'll stop and take questions.

Thank you, Eric, for the presentation. As mentioned, we will start the Q&A. Your first question for today is a 2-part question. The question is, why do you anticipate alcohol-to-jet 30 to take as long as alcohol-to-jet 60 to build when the ethanol plant and infrastructure is already in place?

We do estimate it will take something like 2 to 3 years construction time to build an ATJ-30 once it's in construction. We're targeting to get to FID sometime in the middle of 2026, maybe the back half of '26. We're not committing to a precise dates yet, but that's -- we're just letting you that, that's kind of a trend. We're not super aggressive on construction time lines because the U.S. is a country where we haven't built a huge number of large refineries and fuels and petroleum complexes recently that are different or innovative, okay? The U.S. in terms of skilled welders, skilled construction, that kind of thing, we have great people, but not necessarily that many. And so what we've tried to do is have a strategy where we've put a lot of effort and time and dollars into the front end of that process. If you design a really good mousetrap where you can fabricate modules at one location like on the Gulf Coast or in another country where they have really good fab yards, then you reduce risk and cost and time during construction. So we're putting a lot of that effort in the front end so that we reduce that risk on the back end and also so it's a more repeatable model, not just one plant and then done. That's our overall strategy. We will try to compress those construction time lines as much as we can, but this is a long-term view. We don't think the demand for carbon management is going away. We don't think the demand for jet fuel is going away, and we don't think the supply of ethanol and sugar and corn is going away. So the wins at our back, our strategy on the SAF platform is going to be measure twice, cut once basically. But we're going to go as fast as we can.

Can we expect there to be more ATJ-30 plants planned before ATJ-30 is operating? Or is it more likely Gevo needs to prove ATJ-30 in North Dakota first?

That is possible. We're having business development discussions all the time, not just in the U.S. but globally. So it is possible that we'll see some of these in parallel. We're just not ready to commit to anything yet. What we can commit to is that we're targeting Gevo, North Dakota. We're going to use it as a showcase to do more. But will they need to be in sequence? Could there be some things in parallel? Absolutely. That's what we're going to target. We're just not ready to make promises yet.

Is it completed ATJ-30 necessary to begin selling and developing Gevo's sustainable aviation fuel plant designed to other ethanol manufacturers? And do you foresee a path where modular plant sales to other producers could coincide with the build-out of ATJ-30?

Yes. The short answer is yes. I think I sort of addressed that in the last question. But the short answer is yes, absolutely. We will -- what we feel confident in is that this is in demand. We feel confident we have a good mousetrap. And this is how the ethanol industry scaled up and got big. And that's what we want to do. We're not about producing SAF. We're about scaling up. Gevo historically has already produced SAF. We've already tested in flights in jet engines. We don't need to do that again. What we need is a durable business that's been repeatable and scalable. And to do that, you got -- we want to do exactly what your questioner just asked. That is what we're targeting to do. We'll see how much of this, like I said, can move in parallel rather than in sequence.

What is the estimated time frame to build an ATJ-30 in modules and how long to put them together once they are at the site? If the estimated cost to build is around $500 million, what is the extra money on the DOE loan going towards?

We've estimated 2 to 3 years construction time, okay? So for that part of our growth, right, we've got the short-term growth, optimizing what we have and then the long-term growth, deploying our SAF platform. For that longer-term growth, we think it probably takes 2, 3 years construction time. 3 years feels like on the conservative end, we feel like we -- it should not take longer than that. But we don't think it can get under 2. We don't think it can be 1 point some years. So we think that, that's a good estimate based on what we know now. We'll make that more precise as we go, and we'll work with our EPC to nail down a schedule. Yes. So the questioner is asking us, for those of you who may not have seen it, we filed an 8-K some weeks ago in which we have a DOE loan, it's about $1.6 billion, $1.7 billion, conditional commitment, conditional commitment from the DOE to fund a SAF construction project, okay? And originally, they were looking at their scope of that loan was a South Dakota site to build what we call ATJ-60, twice the size of ATJ-30. In that 8-K, the DOE and Gevo said that we are -- they've extended the deadline for the expiration of that conditional commitment period to April 2026 and that they are considering a change of scope for that loan to fund the construction of a smaller ATJ-30 at our North Dakota site. And we think that, that's a great thing to look at for a whole bunch of reasons. We think that it's got a lot of things going forward at that site. And so we're really happy that they're willing to look at that. Now that may not require that same size loan because it would be a smaller facility, and it's also half built. We don't need to build an ethanol plant, there's already an ethanol plant. So what that means is that the loan will be fit for purpose for that facility, right? We're not going to take out a loan that's multiple times larger than what's required to build, obviously. But one way it could work in terms of the equity that we need is it could be that Gevo can contribute the equity that we own, noncash equity of the value of the ethanol plant and carbon capture to a legal entity, a special purpose vehicle. And if that's valued, then that combined with the debt may give you something that's leveraged appropriately, okay, an appropriate -- a prudent amount of leverage that the lender will accept. And then the cash from the loan may be sufficient to fund the construction. That's a possibility. We're going to explore that. Maybe we don't hit that and Gevo needs to raise a little bit of equity. And we would do that at the project level as our thinking right now. So that's the high-level idea. But we wouldn't just raise -- I don't really see us raising a loan that's multiple times larger than what's necessary to build. If we're building and it costs $500 million, the loan will be sized for that type of project is my assumption.

Would the $150 million in EBITDA from ATJ-30 be summed to the $100 million expected after debottlenecking for a total of $250 million in EBITDA post ATJ-30 operating?

Yes. The short answer is yes. Those are 2 different things. So on that Page 12 in our IR deck, that is all stuff we think we can do. It's the size of the prize of stuff we think we can do before we build a jet fuel plant. The $150 million of EBITDA that we think is generated by ATJ-30, we believe that, that will be incremental because we believe that each gallon of ethanol plus all the -- or excuse me, jet fuel plus all of its co-products generates about $5 per jet fuel gallon. So it's $150 million if it's a 30 million gallon jet fuel plant. So yes, these are 2 separate things. And that's why we're so excited because we think we have a durable business now that we can grow by tweaking and optimizing. And that is the platform for an even more exciting but longer-term SAF technology deployment where Gevo really shines. That's something that we think that we do well. And like I said earlier, that's how the ethanol industry got big to begin with as you had repeatable designs, and there were many locations because it's a distributed resource, many co-ops and farmers and so on who said, we'd like to build an ethanol plant and the providers would say, great, we have an engineered design, if you want a big one or a small one, and then you license it or you co-invest. And so that's our strategy. But these are 2 different things.

Can the R&D costs for ATJ-60 ever be recouped? It was my understanding that those costs would come back to Gevo via private equity or outside investors when they invested in the plant.

Take a look -- so some of those costs are expensed on our income statement, but we actually believe are recoverable. And the way they're recoverable is when we do a project, we would seek reimbursement and return on the risk that we took as the developer, okay, before construction. So let's say, you have a lender and they're going to lend to you to build a construction project. One of the use of proceeds on day 1 is to reimburse the developer and also give them an appropriate return on the risk that they took. And so we do believe that some of that is recoverable even though some of it is expensed. But also importantly, what I would point out is some of our costs are not expensed. So you'll see in our balance sheet construction in progress. What is that? What is that construction in progress? Well, a lot of that is money that we've spent that includes things like long lead equipment for a SAF plant that is recoverable. So we can either reuse that equipment at different locations or we could sell it. So think about like a hydrolyzer, for example. If we put a down paint on a hydrolyzer, that's not money that we lost, that's really an asset that we have that is recoverable. We've left in our wake over the last several years. So Gevo has over 300 patents. And the thing that I get really excited about is most of what we're focused on today is existing technology. So making ethanol is existing, carbon capture is existing, converting ethanol to jet fuel, the chemistry to do that is it exists at industrial scale. But what's unique, what I think what gets me excited is that investment in ATJ-60, we've left in our wake a trail of patents and know-how, not all of which may be patented, but both. And so Gevo has over 300 patents. Some of it is unique technology. Other is not unique technology. It's patented around the engineered plant design because it's not sufficient to just have the catalyst to convert chemical A to chemical B. How did you use energy? How did you like design all the pipes and all the pieces of the plant to manage carbon and manage your energy? That's actually key. It's that mousetrap. So we have a good asset in terms of our know-how and our mousetrap of how you engineer an alcohol-to-jet facility, and that's another asset that we built by spending the money on ATJ-60 and ATJ-30.

What kind of operating plant would the Lake Preston site be used for as your CEO said it was a great industrial site? For what exactly?

First of all, it's a good ethanol site. There's good corn basis there. That means the price of corn is not too high because a lot of corn is grown there. There's good access to rail, so you can get products out. And there's good markets there to buy animal feed. So it would be a good place to build an ethanol plant is I'm not saying that we're about to build an ethanol plant right now. I'm just saying in the list of things, that's definitely one. It's a good place to build other biofuels plants, too, whether it's SAF or any other kind of biofuel plant because you're not far from the Minnesota airports where they have a SAF tax credit. You're not that far from Illinois airports where they also have a SAF tax credit. And then you can still reach Canada and the West Coast where they have LCFS credits and so on, too. So there's a bunch of things we can do there, and we're going to explore putting that site to work. But obviously, we love North Dakota because in North Dakota, it's not just a great site. It's a cash flowing facility that's making the ingredients for SAF, and that's a durable business by itself.

How much of the $52 million in 45Z credits are RNG versus Red trail?

So if you look at that press release, actually, I think the way we phrased it is it was the ethanol 45Z that we sold out, there's a little bit of additional 45Z related to RNG, the so-called biogas 45Z. We'll get a little bit from that, too.

Why is the stock price going down even though you had a decent Q3 earnings, why isn't insider ownership going up?

Well, what I would say is our -- so the largest individual shareholders are CEO, most of the largest individual shareholders are management. Management does get paid because we're a small cap high-growth company. We do pay employees in stock. And so they're incentivized to make the company grow basically. That's kind of how we operate. Depending on when you ask that question, the stock price has gone up. So our stock price has gone up 100% from 6 months ago. I think that's -- we're pretty pleased with that. Now depending on when you're looking back to, is it yesterday or a week before or 2 weeks before, our stock price may go up and down just like any stock price. But overall, the question is, does it go up over the medium and long term? That's what we're targeting, number one. And number two, is it up relative to peers in the market. And we think we're not -- we're undeterred. I was saying we felt very confident when we were trading at $0.50 per share a year or 2 ago. We were saying confidently we think that's going to change because of the milestones that we're about to achieve. We did achieve those milestones, and it did change, and we're no longer at $0.50. We're now well above $2, I think, right now as I'm speaking. So we see a lot of value. I wouldn't be here if I didn't believe in what we're doing and our mission, didn't believe that we're going to grow. Our goal is to grow much higher than where we are now. That's what we're focused on doing but there may be bumps along the way. We are a high-growth company. And so things may -- we're paying attention to the long-term trend, not just the daily weather, if you like.

Can you comment on some of the debottlenecking solutions in North Dakota?

If you think about what would, let's just say, 20% more volume do in North Dakota, well, 20% more on -- currently, it's 165,000 metric tons per year of CO2. So if you increase that by 20%, maybe you can push that to 180,000 or something in that ZIP code, right? And currently, it's 67 million gallons per year of ethanol. If you increase that by 20%, maybe you can get to 75 million gallons or like that kind of ZIP code. And what do those things do for you? Well, they do quite a lot. If the 45Z tax credit is -- look at the 45Z that we just did this year, $54 million of ethanol, 45Z from 67 million gallons of ethanol production, okay? What that tells you is we're well in excess of $0.50 per gallon per ethanol gallon of 45Z. So if you add 10 million or 15 million gallons, let's just say 10 million gallons, that's several million dollars that goes to the bottom line basically. And if you add 10,000 or 20,000 metric tons per year of CO2, and we can sell that as CDRs, I showed that slide, the average so-called BECCS credit, basically CCS associated with biofuels, at least the last time I checked that website was like $210 per metric ton. So that's all really exciting. And those are things that are not hard to do. It's a 500-acre site. Ethanol fermentation, one of the beauties of ethanol fermentation is it's not a super complicated process. I mean I don't want to oversimplify it, but it's not the most complicated industrial process actually. You have a big VA and you're fermenting it and you have things like beer wells. That's what it is. It's a process that involves just fermentation. So just by tweaking little things like that, doing little repairs to ensure the quality of earnings and ensure that we don't avoid dips and then also doing debottlenecking and minor expansions, we should be able to get those types of things done for modest amounts of capital. And I should mention, too, one of the things that our CFO talked about in our earnings call, which I want to make sure people saw is increasingly, this kind of activity should be self-funding for Gevo, if not already. And the reason I say that is if you take a look at our cash flow statement from the third quarter, what you'll see is there's a deduct for the sale of tax credits, that's the 45Z. Well, the reason for that deduct is because we earned the credits, we produce and earn the credits, but we haven't yet converted them to cash yet. We would expect very soon to be converting them to cash at the same cadence now that we're producing them. And therefore, in the very near future, if you look at our cash flow statement, when that deduct goes away, when those 2 things catch up, you'll see that we should actually be getting close to, if not positive, operating cash flow, which would be really exciting for us. So this year, we got positive EBITDA and significant revenue. We think in the near future, we'll have positive operating cash flow. So pay attention to that, too. That makes it much easier, puts us on a much better financial footing to do these tweaks that I was just talking about.

What margins do you expect for producing SAF?

So I think if you look at the $150 million of EBITDA per year that we put on that slide about the ATJ-30 project, that is $150 million a year of EBITDA on 30 million gallons per year of jet fuel. So it's about $5 per jet fuel gallon. Now don't be deceived. If you think about that number, you think, well, you're just selling really expensive jet fuel. Well, no, that's what the numbers are if you divide one by the other. But you got to remember that along the way, you're making a lot of co-products. So our effective cost is reduced or if you like, our revenue goes up because we get all these different co-products, not only from the animal feed and corn oil along the way, but also the different credits and incentives and the carbon reduction that we're getting from customers. If you add all that up, it's like $5 a gallon if you put it on a jet fuel gallon basis, which is the $150 million that we showed. As you mentioned, the other reason for that is because it's such an efficient method. It's very efficient to grow corn. It's very efficient to ferment sugar from things like corn into ethanol. And we have good processes. We know the yields, we think, with pretty good certainty of how you convert ethanol into jet fuel. The reason for that is because ethanol, you can make it very clean. It's a very good feedstock to do -- to take a page of the chemical industry playbook. So once you add all these ingredients, it's a very scalable, cost-effective way to make jet fuel from a nonfossil-based resource. And that's why those margins are so good on a jet fuel basis.

How many tons of carbon do you expect to sequester in 2026? And at what cost per ton?

I can't tell you cost per ton, but what I can tell you is we're currently doing 165,000 metric tons per year. We do think that we can improve that through various mechanisms at the site just by improving some things at the site and also, like I said, debottlenecking. So one thing is you make improvements, one thing is you increase throughput, right? And both those things would increase that number of metric tons, like I said. So in the future, could we get to 180,000 or 200,000 metric tons per year of CO2 being captured if we do all those things? For sure, that's something that's achievable. We'll see how much of that we can get and how quickly. But we did disclose that we hit a milestone of, I think, over 560,000 metric tons have been sequestered by that well so far, which we think is a huge number, and it's part of a well that's been operating since 2022. So it's a great site. It's a great reservoir. The geology is really good. The carbon capture equipment has been working really, really well. Can we make it work even better? Yes, we think we can. And we'll let you know each quarter that we're doing that.

Thank you, Eric, for all your answers today. If you do not get a chance to submit your question, feel free to reach out to the appropriate account manager here at Renmark. This concludes our presentation for today. But before we go, I'll turn it back over to you, Eric, for final remarks.

Check out our Investor Relations page on our website. We do have several presentations going back a while and other events like this that are saved down there, if you want to take a look. Like I said, our 3Q earnings was Monday. So look at our 3Q earnings release. We think that it shows that we've achieved kind of a step change in our company that sets us up for these 2 legs of growth that I was talking about. And so we're very excited about that. If you have questions, e-mail our [email protected] e-mail bucket, I answer that. And we will do more events like these as we go forward. We're pretty excited. So please check out our website, and I hope that you will consider being a part of our -- being a shareholder in our company and joining us on our journey.

Once again, this was Gevo, Inc. trading on the NASDAQ under the ticker symbol GEVO. Thank you again to everyone in Seattle and surrounding areas for joining us today. Stay tuned for other presentations in your area. Thank you, and see you next time.