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Gevo, Inc. (NASDAQ: GEVO) Third Quarter 2021 Earnings Conference Call, November 10, 2021, 4:30 pm Eastern Time
Welcome to the Gevo 2021 third quarter earnings conference call. My name is Gigi, and I will be the operator of your call today. [Operation instructions] Please note that this meeting is being recorded. I will now forward the call to Geoffrey Williams, Gevo's vice president, general counsel and secretary.
Please go on, Mr. Williams.
Geoffrey Williams-Vice President, General Counsel and Secretary
Good afternoon, everyone, and thank you for participating in the Gevo 2021 third quarter earnings conference call. I want to first introduce the participants of the company today. With us today are Patrick Gruber, Gevo's CEO; Lynn Small, Gevo's CFO; and Paul Bloom, Gevo's Chief Carbon and Innovation Officer. Earlier today, we issued a press release outlining the topics we plan to discuss.
A copy of this press release is available on our website www.gevo.com. I want to remind our audience that this conference call is open to the media, and we are providing a synchronized webcast of this conference call to the public. A replay of today's conference call will be available on Gevo's website. In today’s conference call and this webcast, you will hear discussions about certain non-GAAP financial measures.
Non-GAAP financial measures should not be considered or substituted separately from financial information reported under GAAP. The reconciliation of these non-GAAP financial measures with the most directly comparable GAAP financial measures is included in the press release issued today, which is posted on our website. We will also make certain forward-looking statements regarding events and circumstances that have not yet occurred, including but not limited to forecasts of Gevo’s Net-Zero 1 project and Gevo’s operating activities for the remainder of 2021 and beyond. These forward-looking statements are based on management’s current beliefs, expectations, and assumptions, and are subject to significant risks and uncertainties, including those disclosed in the Gevo 10-K form for the year ended December 31, 2020. Submitted to the U.S.
The US Securities and Exchange Commission, and subsequent reports and other documents submitted by Gevo to the US Securities and Exchange Commission, including quarterly reports on Gevo Form 10-Q. Investors are reminded not to rely too much on any such forward-looking statements. Such forward-looking statements only apply to today's date, and Gevo assumes no obligation to update the information contained in these forward-looking statements, whether due to new information, future events or other reasons. In today's conference call, Pat will first discuss Gevo's business development.
Lynn will then review Gevo's financial situation. Finally, Paul will discuss Verity Tracking. After these prepared comments, we will be open to questions. I will now turn the call to Pat.
Pat Gruber-Chief Executive Officer
Thanks, Jeff. As everyone who follows us knows and sees in our presentations or video press releases, they know that we are striving for zero-emission fuel. We learned that we can convert renewable carbon into gasoline, jet fuel SAF, and diesel fuel, as well as the basic chemicals used to make most plastics and other high-volume chemicals. These techniques are effective.
The key to eliminating the fossil footprint and all these products are alternatives to renewable electricity and fossil natural gas. If we reduce and eliminate fossil energy in the production system, we should be able to achieve a net zero fossil footprint of our products in the entire business system. This means from carbon capture to the exhaust pipe or jet engine exhaust. We are committed to converting renewable energy into high-energy liquids such as SAF and automotive fuel.
When we looked at our business, we encountered some similar problems-electric cars and hydrogen faced these problems. In other words, what is the source of electricity? Is it a fossil or not? What is the energy source that produces hydrogen, fossils, or does not produce hydrogen? Facts have proved that we are all consistent in terms of infrastructure. If our business system can use renewable energy, it is not surprising that the fossil footprint can be reduced and possibly eliminated. Therefore, electric vehicles, hydrogen fuel, and companies like us all need better access to renewable energy.
I am very happy to see this in public policy, especially in terms of infrastructure. I am very happy to see the bill passed. Due to the scale of our renewable energy demand and the ability to achieve economies of scale, we expect our business system to further promote the development of renewable energy. We have found that there are many parties interested in building renewable energy infrastructure.
They need a big customer, someone like us. I am also very happy that our products enter existing channels and strengthen existing markets. I am very happy that our products have declined at the consumer level. If no one needs to build airplanes, cars or trucks to reduce or even eliminate the fossil fuel greenhouse gas footprint produced by the combustion agent, this is good.
I hope that we will also have the opportunity to help electric cars and hydrogen energy people, because we want to produce excess energy, excess renewable energy, electricity and even hydrogen and supply it to the market, otherwise they will not be able to obtain it. Don't do so. The design of our Net-Zero 1 plant is unique due to the following reasons. We have considered the carbon footprint from the beginning. We are working with Juhl Energy to develop a wind farm directly connected to the factory.
We are planning to install a sewage treatment plant that can produce water for the production process in a short period of time. But just as importantly, it is expected that enough bio-based methane will be produced to run the plant. We also plan to install electrolysis devices to use wind to produce green hydrogen. So this is a different paradigm about how to install energy and manage it.
Of course, we are very happy that we can use the world's leading Argonne National Laboratory GREET model to prove that by replacing energy sources away from fossil energy and using carbohydrates from sustainably grown corn, the system we are building should be able to Achieve a net-zero fossil carbon footprint throughout the life cycle from carbon to tailpipes or jet engine exhaust. Think about it here. Using the carbon score index, the fossil footprint of jet fuel is approximately 90. This means that 90 is a score based on fossils.
When burning according to the Argonne GREET model, our SAF is expected to be zero. This means that the CI score of our SAF sitting on a tank or rail car before being burned is at least minus 90, which is minus 90. If we never use it as a burner to burn fuel, it just sequesters the carbon in the fuel tank. This is an interesting example.
When a fuel such as SAF is burned, it does release CO2. As a result, the carbon score rebounded from minus 90 to close to zero. Renewable energy in storage tanks has all the advantages provided by infrastructure and can be brought to the market for all vehicles and airplanes. They exist and are used without modification. This is really amazing.
Thinking about what can be done is really a new game. Therefore, it is assumed that the net-zero building blocks we produce are used to make plastics, not to make SAF or motor fuel. These building blocks will produce the same plastic as petroleum, except that we have replaced fossil carbon with renewable carbon captured from the atmosphere. The technique is effective.
So imagine a car bumper with tires made of our material. It will sequester the carbon captured from the air and turn it into durable goods. Since we are not burning these products, the carbon score of the bumper or tire is expected to be significantly negative. They are made into durable goods.
Of course, it depends on the content of those plastics or rubbers derived from our net-zero type ingredients. Looking to the future, we hope to increase geological storage in the decarbonization portfolio. Of course, we can do this. Others can, and so can we.
This should make our footprint more negative, and to a large extent more negative, depending on the degree, we expect a CI score of 30 to 40 compared to our situation today. This is true even after the fuel is burned. If we add some new technologies to agriculture, it can even become more negative throughout its life cycle. How could it be so negative? Because our business system will be the cause of carbon sequestration, for example, in soil or geological formations.
In addition, by using the latest corn processing technology, higher value protein products and corn oil can be produced and sold into the food chain. This is really important. We believe that land can be used to produce food and energy raw materials at the same time. And there is a lot of room for improvement.
We are not done yet. Of course, we can also use carbohydrate raw materials to buy from wood, biomass and other carbohydrate sources. As our business grows, any of these is a fair game for us. Before we adopt it, we need to prove the sustainability of each raw material and it must be cost-effective.
Now, we have made excellent progress in our business. First of all, Chevron. The memorandum of understanding with them outlines the basic transaction. They will purchase up to 150 million gallons of hydrocarbon fuels and invest accordingly in production assets to produce these fuels. Very good, this means that if we make six Net-Zero 1 style factories, each factory will have a capacity of approximately 50 million gallons.
If they occupy 50% of the production capacity, then the MOU will consider their investment in 50% of the capital of each factory. We still need to convert the memorandum of understanding into a final agreement, and there may be some twists and turns in the process. But we like Chevron’s promise and the energy they bring to accomplish this work. Ethanol injection is a new thing for us.
We have been studying it silently for many years. Then we announced that we signed an agreement with Axens in North America. This allowed Gevo to obtain an exclusive license to develop ethanol for jet use in North America. Axens is the licensing department of the French National Research and Engineering Laboratory called IFP.
IFP focuses on applied research and engineering. Over the years, they have done a lot of work in oil refining technology, chemical plant technology and many other technologies. They are really well-known research and engineering equipment. Their abilities are indeed enormous.
We just went there last month. They are quite impressive. We met them. As a result of our work on Net-Zero 1, we met Axens, and we are co-designing a process to convert isobutanol into jet fuel and renewable alkylates.
We get along well with them. As we learned about them, we learned that they have more than 60 patents and 25 factories that use technology to convert ethylene into fuel and chemicals for commercial operations. Now we know how to decarbonize alcohol. We know how to convert alcohols to olefins and ethylene to olefins.
Therefore, we realized together, did you know that we already have a very clear way to use commercially proven technology to use ethanol as a raw material and convert ethanol to SAF in a proven process. This is quite impressive. They completed these technologies using petrochemical-based raw materials. What's new here? Introduce ethanol, convert it into ethylene, and then bring the ethylene into a well-proven process.
So we established a strategic alliance with them. We believe that ethanol jets will be important. We think it has a synergistic effect with the isobutanol to hydrocarbon route. In fact, there are many opportunities to add value to everyone.
It should give us the opportunity to produce more products and a wider range of products. As Tim Cesarek likes to say, we can make diesel, jet fuel, gasoline products and many other building blocks for the chemical industry, ultimately achieving higher renewables. The content of energy fuels. In other words, it makes it easier. We have more building blocks to use, so in the long run, we can make a more complete fuel. It is also worth noting that Axens will provide process performance guarantees for alcohol to SAF and engine fuel technologies.
Of course, this is very useful for financing project-level production facilities. We signed a memorandum of understanding with ADM, aiming to convert 900 million gallons of ethanol into about 500 million gallons of SAF and hydrocarbons, and at the same time to build IBA into hydrocarbons, especially indicators. ADM owns some of the most economical ethanol plants on the planet. When converting it to SAF, it is a very good idea to start with low-cost ethanol.
The cooperation with ADM is expected to lead to joint ventures with them and other investors. The ADM indicator is also a pioneer in geological storage. This is an exciting opportunity, and I hope they will become a good partner. I know everyone is interested in customer channels.
It is growing. We are still striving to obtain a financial offtake agreement. The pipeline for potential contracts now exceeds 1 billion gallons per year. We are negotiating these contracts.
Interest in SAF has definitely increased, especially since the White House meeting a few months ago. We expect to announce the next agreement soon, which will be sold out of Net-Zero 2 and later. We acquired the Butamax patent portfolio. We now have approximately 600 patents covering biotechnology, fermentation production processes, and the conversion of alcohols to hydrocarbons.
It has already added value by concentrating all these patents under one roof. I am very happy to clean it up. Our Net-Zero 1 project is progressing smoothly. Kiewit is one of the largest and most capable engineering and construction companies in the world and is an important complement to our team.
Kiewit has huge horsepower and the ability to build multiple factories at the same time. This ability is really important to us, because in this case, I think we will find that we need to build more than one factory at the same time. They are known for delivering on time and on budget. Besides, they are really good people.
We will complete the next round of projects around the end of the year. Then we will enter a more detailed stage. We expect that EPC packaging will be completed at the end of the first quarter, possibly at the beginning of the second quarter, and then work hard to complete the project debt transaction. If all goes well at this timing, we expect the plant to be up and running in 2024.
Our Northwest Iowa renewable natural gas project is on track. It is expected to start in the first half of next year. So far so good. I like the experience we have gained because renewable methane, biogas, and RNG are all very important to us because we are working to defossilize hydrocarbon production systems (such as alcohol in alcohols and hydrocarbons).
As I have already mentioned, one of the major issues that contribute to the footprint of these plants is fossil-based natural gas and fossil-based electricity. Eliminating these things will make everything greener. As the last key point, we are changing our ambitions. We believe that by 2030, using a combination of IBA and ethanol as a raw material for hydrocarbons can deliver and sell a business of 1 billion gallons or more per year to serve the SAF and automotive fuel markets.
We call it the "Billion Gallon Plan." Simply put, it will reach 1 billion gallons or more by 2030. This is what we are working on, and I believe these parts are being implemented. Net-Zero 1 is the first step, and we need to do it well. But we see great potential, and we can achieve rapid growth beyond net zero.
We see that Chevron, ADM, Axens and other companies can all be part of achieving this goal. Lynn Small is with me today. We decided to change the format and content of the earnings call. Rather than reading our earnings press release and the financial details already disclosed in Form 10-Q, we think it is more useful, broader and more general for Lynn to talk only about Gevo's financial situation and his ideas.
Lynn Smull - Chief Financial Officer
Thank you Pat. Gevo's main execution focus is to build and run Net-Zero 1. Net-Zero 1 design and engineering work is progressing smoothly. We are advancing the plant engineering, procurement and construction contracts with Kiewit.
As Pat mentioned, we are very satisfied with the way we work with Kiewit, its strong expertise and capabilities, and the ability to deliver multiple factories at the same time. We expect to start ordering long-term equipment for on-site mobilization and preparation work in the first half of 2022, and continue to carry out detailed engineering design. This is the key to enabling us to maintain the project schedule. Wind power and wastewater anaerobic digestion, design, construction, ownership, operation, and management partnerships (known as DBOOM partnerships) are progressing well.
Our wind power DBOOM partner Juhl Energy is advancing the Net-Zero 1 60 MW behind the development of the wind meter project and is working with potential utility partners to ensure a structure suitable for all participants. We have been deeply involved in the business process with multiple partners of DBOOM for wastewater anaerobic digestion, and expect to complete these arrangements with the winner in early 2022. We have been very actively carrying out advanced work around Net-Zero 1 non-recourse debt financing. We have a number of projects underway, including tax-free private event bonds or PABs, potential ways to guarantee loans to the Ministry of Energy, and some interest in long-term private equity providers.
Out of cautious consideration, we are looking for multiple ways to see which one will present the best debt structure and terms. So far, the basic case is a PAB provided by a city group. Most of our net zero project costs are eligible to be funded by PAB, and these markets are very attractive for this type of credit. Regardless of the approach adopted, we hope that project financing elements will be in place in time for the debt issuance in mid-2022.
The strength of the participants in the Net-Zero 1 project, from the off-takers to Kiewit to Citigroup, and a series of other important supporting elements, will all play a good role in our groundbreaking and financing construction next year. We are also committed to selling out subsequent Net-Zero 1 plants through off-take agreements for development, funding, and construction. In order to build a batch of factories, we will raise funds at the project level as envisaged in the Chevron Memorandum of Understanding, if appropriate conditions arise at the Gevo, Inc. level.
For example, adding one or two strategic parties to the portfolio is possible and will enhance our ability to execute projects. In any case, we ultimately hope to raise funds at the Gevo, Inc. level so that we have capital as equity investment and can benefit from the corresponding level of project cash flow. Our view on capital investment is that the opportunities are huge and should be value-added.
We are also interested in cooperating with companies that have ethanol assets and acquiring ethanol assets, with the aim of decarbonizing existing ethanol production, providing low-carbon raw materials for the production capacity of new employees, and obtaining corresponding low-carbon index scores on the final product. We welcome letters from ethanol plant owners who may be interested in Gevo’s approach. We have identified and are looking for several sites that are as attractive as the Net-Zero 1 Preston Lake site for the follow-up greenfield Net-Zero 1 project. As production capacity increases, we will need the choice of these locations.
When inspecting the site, production decarbonization is always a priority. For example, ADM's plant in Decatur, Illinois, offers an excellent opportunity to meet this demand because of its carbon sequestration capabilities. We are also operating the Luverne plant to produce isobutanol, and are committed to optimizing systems and processes. These experiences should be useful to us when we operate the Net-Zero 1 factory.
We are using Luverne isobutanol to produce small amounts of hydrocarbons at the Silsbee plant in Texas. Next year, we expect to use Luverne isobutanol production as the feedstock for the modular hydrocarbon plant currently manufactured by Praj and planned to be installed in Luverne in 2022. We are currently a pre-income company. Recall that although we produce isobutanol in Luverne to accumulate raw materials for hydrocarbon production, we suspended ethanol production at this plant in the first quarter of 2020 to focus on our net-zero plan.
At the end of next year, we expect to get some revenue from the RNG project and some revenue from the sales of a small amount of hydrocarbon products. By the end of 2024, we expect to see considerable revenue after Net-Zero 1 is expected to launch. As our 1 billion gallon plan begins to take shape, we expect to issue some guidance, but this is too early today. Given our pre-revenue status, the key financial indicators for the third quarter are as follows: Cash and cash equivalents at the end of the third quarter were $522.4 million.
The outstanding long-term debt is $66.8 million. The company burned $6.1 million. The capital investment related to Net-Zero 1 and other capital projects is $16.8 million. We also have other US$9 million investment activities related to the Butamax patent acquisition.
As Geoff pointed out, complete financial data is available in our earnings release, and our 10-Q form is available on our website. Now I will hand it over to Paul Bloom to talk about our progress on Verity Tracking. Paul?
Paul Bloom - Chief Carbon Officer and Chief Innovation Officer
Thanks, Lynn. First of all, I want to point out that we have signed a joint venture agreement with Blocksize Capital for Verity Tracking. Verity Tracking is based on distributed ledger technology (often called blockchain) and focuses on tracking sustainability attributes, such as the greenhouse gas footprint of the entire supply chain, including carbon capture, raw materials, energy used in production, and identifying like us Other key inputs of the product’s life cycle footprint. We intend to provide verifiable and variable sustainability data from the source of raw materials to jet engine exhaust pipes and exhaust.
I’m Gevo’s executive in charge of this joint venture. In the future, we plan to separate Verity Tracking from Gevo. We have more work to do to organize it, such as establishing a key leadership team. We envision that Verity can benefit any company that needs to prove its sustainable footprint.
When we founded Verity, we focused on using it for Gevo's sustainable development system and products. We quickly discovered that this technology and method of tracking sustainable improvements using blockchain solutions also fills gaps in other industries. We intend to open up Verity to work with any company that needs verifiable evidence of carbon intensity reduction and is willing to commit to transparency. As the expected demand for high-quality carbon offsets in the compliant and voluntary markets grows, it is expected that Verity Tracking will provide the carbon accounting required for both parts while avoiding double counting.
We also intend to simplify audits while providing users with first-class data security. We look forward to continuing to develop the joint venture with Blocksize Capital and developing solutions for other potential customers. Thank you. Now I will hand it over to Pat to complete.
Pat Gruber-Chief Executive Officer
OK. Thanks, Paul. Thanks, Lynn. Let's start asking questions.
[Operator Instructions] Our first question comes from Nate Pendleton of Stifel. Your line is now open.
good afternoon. Thank you for answering my question. The first question is, given that the announcement from ethanol to jets between you and ADM is only a few weeks away, can you comment on the progress of your conversation? What is a reasonable timetable for the disclosure of commercialization plans to achieve first production within the 2025 and 2026 timeframes?
Pat Gruber-Chief Executive Officer
Well, the step that must be taken is that we must figure out how we will completely decarbonize the game plan. Then we are doing some engineering work on ethanol to spray things. Once we have determined this, we will know what the timetable should be. So we still have a long way to go from that.
It's not like this month. And-as far as we and ADM are concerned, this idea-you heard that their CEO also talked about the use of 900 million gallons of ethanol feedstock during the earnings call-which is a good starting point to generate large amounts of SAF. We have done a lot of work in the game plan to do this. We must bring in other partners, because decarbonization requires a lot of work.
Then we must fund the whole thing. And there are many interested groups-they hang out here and work with us. So this is one of the things you must keep paying attention to.
excellent. Then follow up quickly. Regarding Net-Zero 1, I want to follow up on the CCS comments you provided. Although not part of the original Net-Zero 1, can you comment on the opportunity for you to integrate CCS and the potential for price and EBITDA improvement?
Pat Gruber-Chief Executive Officer
Well, let me comment first. Then, Lynn, you can pick it up and talk about its economic significance or other things, okay? So the answer is yes, our factory in Net-Zero 1 is just like any other factory. This is a fermentation plant that produces carbon dioxide. Carbon dioxide is actually very valuable because it can be captured and sequestered.
When you do this, it will have an impact of about 35 CI points. So if we start with minus 5, it is another minus 35. Even in California, they just punish corn, our minus 5 in California is 40. This is the basis of our contract.
Then you might get honors for carbon sequestration, so you will get some improvements there. If you get all credits, your CI score in California will drop to 5. Lynn, do you have any comment on the benefits you think this value might bring?
Lynn Smull - Chief Financial Officer
It is 35 CI points. The CI point per gallon is approximately US$0.02. Therefore, in terms of EBITDA improvement, this is considerable. The costs associated with cooperating with counterparties under CCS are far less than the benefits we see from the reduction in CI.
However, what I want to say is that for Net-Zero 1, we do not believe that carbon capture and storage is a key component of debt financing, but a potential future equity upside investment - or participation and contract.
Pat Gruber-Chief Executive Officer
Of course, this is because we believe that funding must be obtained before the CCS pipeline exists.
great. Thank you for answering my question.
Thank you. Our next question comes from Shawn Severson of WTR. Your line is now open.
Shawn Severson-Water Tower Research-Analyst
great. Thank you and good evening. Regarding the issue of isooctane blending, renewable gasoline. Obviously, many people are talking about SAF, and of course ADM transactions and other things.
But when you look at the potential contract and off-take agreement between Isooctane and SAF, what do you see now?
Pat Gruber-Chief Executive Officer
Well, interestingly, it is still split, roughly, 50-50, maybe 40% isooctane, 60% injection. But recently—since the White House meeting a few months ago, the attention of SAF has definitely increased. There is still a problem with airlines, that is, they are not making a lot of money. They are reluctant to carry out projects such as long-term purchases.
So I think it will be interesting to see who has joined the competition-and is the airline's previous off-takers. So it changes a bit. But for isooctane, even if everyone decarbonizes things, isooctane is still gasoline. If you have the most optimistic view of electric vehicles and successful electric vehicles, gasoline pools are still the largest market.
And I think it’s hard for you to find anyone who thinks it’s not like that. Even the most optimistic scenario suggests that by 2050, gasoline emissions will exceed jet fuel or diesel fuel. Therefore, we should decarbonize both. However, California provides a good model for it because they know how to calculate the carbon there.
They did a good job, they have a good model. Our business team with our partners calculated that we need 26 isooctane plants for California to meet their current needs. So there are-that is because they import foreign isooctane or-from other places. Of course, this is based on fossils.
So here is a good opportunity, it will become an important part of the portfolio. Another interesting thing about isooctane is that when all these people are producing renewable diesel, or if you are producing some lower value naphtha products, naphtha can be burned in gasoline Something, you mix some other isooctane, and you only get more gallons of gasoline. So-because our octane is such a high-value product-because it is pure isooctane. So yes-we have the opportunity to absorb more gallons from other people and mix better and get paid.
Shawn Severson-Water Tower Research-Analyst
And it's just a follow-up question. Can you-What is the difference between Verity Tracking and GREET models? Just compare and contrast. I mean I know that they are all calculating carbon, but can you highlight some differences for me so that I can understand the two?
Pat Gruber-Chief Executive Officer
certainly. Paul, do you want to answer this question? First explain what GREET is, and then explain Verity's business philosophy?
Paul Bloom - Chief Carbon Officer and Chief Innovation Officer
Certainly. Thank you for your question. So when you think of GREET, GREET is the life cycle inventory program run by Argonne National Laboratory. Basically, when you have the correct input, it can calculate the carbon intensity scores of different products.
The difference between Verity Tracking, Verity Tracking uses GREET as part of our calculation system to ensure that we calculate the carbon intensity correctly. But Verity Tracking can also track things from the source. Therefore, consider the job of the farmer or grower, then how you handle corn at the processor level, and then how the end product user implements or uses the product. In fact, what Verity Tracking does is to use GREET, and then use blockchain or distributed ledger technology to connect all points in the value chain to the entire business process system to calculate the difference in carbon intensity with your existing products. Is comparing it .
Pat Gruber-Chief Executive Officer
Yes. So the problem is, Shawn, that Argonne GREET is a scientific tool for measuring things. Verity Tracking will actually have similar on-site auditors. We have on-site audits, on-site measurements, calculations, and photographs, regardless of the result.
Then it accurately calculated the energy pack used in production and kept tracking it back to the market. Therefore, think of Verity Tracking as a sustainability certificate that comes with the product, unless it will become a separate business because it needs to be audited, yes, and let a third party look at it and say, yes, in fact the case. Of course, none of us has forgotten that completing Verity Tracking correctly will result in the tokenization of these attributes. This is also very interesting, because this may be another way to commercialize that value.
Shawn Severson-Water Tower Research-Analyst
right. Do you mean that they can trade in a certain capacity like RIN? That is-what do you mean?
Pat Gruber-Chief Executive Officer
Well, you mark it as-everyone knows what a token is, right? Everyone who does blockchain understands tokens. If you have a certifiable attribute that cannot be changed, cannot be changed, and cannot be recorded, then you can tokenize it. We have designed a prototype for this. So you can do this.
Then they can trade in a certain way, in addition to these will be different, there will be some deceptive wave. It will append all data. So you can say that this is where it came from and how it was formed, just as you would expect from a blockchain system.
Shawn Severson-Water Tower Research-Analyst
Thanks for the complete explanation. Thanks, Pat.
Thank you. Our next question comes from Amit Dayal from HC Wainwright. Your line is now open.
Amit Dayal - HC Wainwright and Company - Analyst
Thank you. good afternoon everyone. So, Pat, what makes your partners and potential customers (such as Chevron) reach a final agreement from the MOU? Is there some kind of trigger or some kind of catalyst that can move the pointer for you?
Pat Gruber-Chief Executive Officer
No, it's just inserting. Let Tim be in the same room with the people, I'm in the same room, get it all done and figure it out. that's all.
So this is progress. All these transactions are the same. Then around the ethanol plant, this deal with ADM was great. But we intend—we intend not only to cooperate with ADM.
So it will be interesting to see who else joins this combination, because it is a very fast growth method, and it is a supplement to our isobutanol. So it's fun. It will start to see how we change. I am serious about 1 billion gallons of hydrocarbons per year by 2030.
This is our focus. Yes, the net-zero project and what it proves to be done is an eye-opener for everyone, because it shows how things can be decarbonized if you combine renewable energy, electricity, and natural gas in the right combination. It shows people how to do this. It creates a road map for others.
So we will use it. I am very happy that we can work with Axens. I am very happy that our work is being implemented.
Amit Dayal - HC Wainwright and Company - Analyst
Understood. And congratulations on obtaining Butamax IP. I want to know if you have any plans for this IP in the near future? Or do you just want to sit down and see how you are?
Pat Gruber-Chief Executive Officer
Well, I will tell you how we will use it, that portfolio is really big. So there are many valid patents. So we can further expand these patents, increase them, adjust them and extend the life of patents. There are also some useful technologies included.
I will tell you that its role is that we will succeed, I believe, to become a large company with a good income. And the life cycle of these patents is very long, 20 years. So make sure we don’t create a person who comes back-I want them to be in our tent-because I can imagine that 10 years from now, when something goes wrong, other people might get them, and when we are worth a lot of money, they might There will be other troubles someday in the future. Cleaning up is a good thing.
It provides us with more opportunities to create more intellectual property rights.
Amit Dayal - HC Wainwright and Company - Analyst
Understood. Then regarding the type of your factory construction, your equipment needs, etc., the current supply chain environment, and all the backlogs currently faced by these types of deployments, are you already dealing with these types of issues? Or are they a bit deleted for you at this stage?
Pat Gruber-Chief Executive Officer
There-Kiewit is very good in this regard. This is one of their strengths. So they have taken this into consideration. So far, I don't expect any major problems.
Whether our factory starts in the middle of the year, the third quarter, the end of the third quarter or earlier, these will depend on the impact and impact of other projects. But I don't expect it to be a device at this point. When I asked all engineers the same question, they were like, we have considered these things. OK.
Lynn Smull - Chief Financial Officer
Pat, I want to add that for the purpose of non-recourse debt, we must set the date of liquidated damages. Therefore, Kiewit will consider purchasing restrictions when ensuring their schedule.
Pat Gruber-Chief Executive Officer
Therefore, they will want to absolutely determine the date before committing to the price and damages guarantee date.
Amit Dayal - HC Wainwright and Company - Analyst
Understood. Understood. Only give me the last one. How much money has been invested in this work of Verity Tracking? For example, how big is the team, etc.? Any color will help.
Pat Gruber-Chief Executive Officer
This is a relatively small investment. So this is one of the things I want us to do-I hope I shouldn't say it out loud, but I hope we thought about it and did it years ago. We can have a very cool super liar, valuable-we will get a fixed value business from it. But this is one of small investments and large leverage.
This is a software-oriented thing. So it is not like a heavy capital asset investment. So when we developed this, it was a multi-million dollar thing.
Amit Dayal - HC Wainwright and Company - Analyst
OK. I mean, it looks like you have a lot of opportunities, even with RNG's efforts. One of the things you are building for yourself, these are potential services that you can also provide for others. So I mean, how do you consider all these efforts to increase revenue opportunities?
Pat Gruber-Chief Executive Officer
This is. You can also see this in how we established our partnership with Juhl Energy and others. They are doing well, they are hungry. They want to grow, and they are really good at working in the Midwest.
And they are very creative. They have very good financial partners. They got very good technology partners, very good technology partners. The same is true for our wastewater treatment.
Those of us who work there understand why this is important. I have been saying this, if we want to decarbonize the world, we should focus on electricity. Let us focus on getting rid of more than 60% of fossil electricity and turning it into renewable energy. Let's do something with gas.
The latter, natural gas is the reason why we use renewable natural gas. We initially started doing this because we will supply it to our Luverne factory. But we can make more money-California. So we will do this for a while.
But did you know that we can use it at any time, and its CI score is very low. We believe that biogas will be very important in the future because it is the only feasible way to get rid of fossil methane. So we think we are very optimistic about these opportunities. However, the way we think about it is that we can turn green value into liquid.
That is a different paradigm, and this is how we think about it. Therefore, whenever we look at a site, whether it is an ethanol plant site, purchasing an ethanol plant, or cooperating with an ethanol partner-digestion will be part of it. This may not be fecal digestion, but shooting. If we just digest the remaining carbohydrate waste and fermented ones-the net carbon footprint of the biogas we produce is zero. That's very valuable.
Amit Dayal - HC Wainwright and Company - Analyst
right. Understood. That was our last time. thank you very much.
Pat Gruber-Chief Executive Officer
Thank you. Our next question comes from Poe Fratt of NOBLE Capital. Your line is now open.
Poe Fratt - NOBLE Capital Markets - Analyst
Hey Pat. Are you OK?
Pat Gruber-Chief Executive Officer
Poe Fratt - NOBLE Capital Markets - Analyst
Pat Gruber-Chief Executive Officer
You have always been a very busy person.
Poe Fratt - NOBLE Capital Markets - Analyst
I am-you have done a good job demonstrating a lot of progress you have made. I want to focus on Lynn’s comments on pre-income. You look at quarterly cash consumption, maybe even once a year. Lynn, can you emphasize the capital situation in the fourth quarter financial report? If you don't mind, Butamax won't appear there, and then will it also highlight the company's burn rate?
Lynn Smull - Chief Financial Officer
Yes. I think our corporate burn rate is about $6 million per quarter. So we are looking for $24 million for the company. This does not include the cost of goods sold in Luverne.
In terms of capital investment in the next quarter, it will be similar. With greater investment related to website movement and website acquisition, everything will enter Net-Zero 1 in 2022?
Poe Fratt - NOBLE Capital Markets - Analyst
Lynn, can you quantify this as your expectation for the first half of 22?
Lynn Smull - Chief Financial Officer
Not at this point. I don't want to spread these figures.
Pat Gruber-Chief Executive Officer
But they will be long-we have talked about long-term leading equipment projects in the past. And there will be some field work, and so on. But this is not a lot of money. Once we have determined the delivery date of the factory and the guarantees in place and the financing in place, it will be a later time.
So this is it-we have to continue to unfold, but it looks good. By the way, I asked Lynn to make sure that the reason he mentioned that we are an unprofitable company is because I keep getting questions from investors, where did they go, well, you didn’t do anything-you don’t have any material income . Well, no kidding. We keep telling people that we shut down ethanol.
So ethanol is not our main business. We will concentrate on building future capabilities and technologies. So this is why.
Poe Fratt - NOBLE Capital Markets - Analyst
So what are the changes to the capacity or cost of Net-Zero 1 at this time?
Pat Gruber-Chief Executive Officer
Not yet. And I have been asking this question, Poe, because I have observed the whole world with COVID and the supply chain, and I am also asking Amit. I haven't got any data to show any difference. We are always improving.
So this is a good thing. If anything is a disaster, I've heard it a long time ago. so -
Poe Fratt - NOBLE Capital Markets - Analyst
Yes. Looking at it from the other side, Pat, you introduced a concept that 45 to 50 million gallons per year may be a bit too small to improve efficiency. I'm just looking at whether you really upgraded Net-Zero 1 or its location?
Pat Gruber-Chief Executive Officer
OK. Let me comment. So what Paul is referring to is that we have been talking about net zero 1, which is 45 million gallons of hydrocarbons, 340 million pounds of high-protein animal feed products, and 30 million pounds of oil. This is good.
do you know? We can-if that thing is designed, that Net-Zero site can handle two of the factories. The other sites we choose can handle two of these factories. So you do a lot-there is a cost of capital, yes. But when you do carbon replication, you can save a lot of money.
This is possible when you build things on skis or build skid production facilities, and you insist on using some kind of copy, which can be very interesting. We have not lost these. Of course, when you maximize the capacity of the site, you do spread the fixed costs because it is still the same team that can run 90 million gallons and 45 million gallons at the same time. We have not lost these.
Then you start to think, which is very interesting. What if we have an ethanol plant and an isobutanol plant on site? Once you dehydrate ethanol to ethylene and extract butane from it, guess what? The process of extracting butane from isobutanol and the mixture of butane from ethylene is the same. So it is also the same plant. Therefore, we will not lose all of this content.
We just haven't elaborated on how this will unfold. In the early days here, you were right, Poe, we got it-we have sold 54 million gallons under contract so far. I think we will get more sold out soon and be able to talk about it. You can see Chevron’s interest, there are many people interested.
The lumps and bites are getting bigger and bigger. Therefore, because we still need someone to support them on a financial basis, this is not suitable for the faint-hearted on the customer side. But it is interesting. And I think we will eventually become bigger.
I just don't know when we can pull the trigger. We also really need visual diversity. So I just-we have to get the job done and find out which options make the most sense considering the full set of circumstances of customers, partners, sites, economy and the overall situation.
Poe Fratt - NOBLE Capital Markets - Analyst
great. So Pat, if I heard you correctly, you are still looking for a similar scale, but maybe you can call it hosting so you can get some-whether it’s input synergy or wind, biogas, and wastewater, you’re able to use Some kind-if you want, the pipeline is more efficient, thereby reducing your incremental costs?
Pat Gruber-Chief Executive Officer
I think this is a fair assumption. The reason I say this is that if I want to keep the timeline and get bigger faster, then I should stick to the current scale that we have spent a year on engineering design. If I change it, guess what will happen? I still have a long time to redesign things. So the idea is to do what you say is to use it.
Now we can also use this method-please note that the hydrocarbon plant is a bit different. They are easier to extend because we can take advantage of the vast amount of work that Axens has already done. It will be-a little bit different. Of course, then ethanol enters the mixture.
So when we study ethanol, we want to build a lot of ethanol plants-we can see that they are meaningful. We have-our phone keeps ringing. We do hope to have more partners, but there is no timetable yet. The key is about decarbonization.
So how do we take advantage of all these things and make them work together and deploy them quickly? Because I think it is beneficial to bring large amounts of decarbonized hydrocarbons to the market as soon as possible. This is what we are doing. Lynn mentioned that we will eventually post guidance here. I don't know when it is, but it is not very far away, which means it is inside-I don't know.
I don't even want to speak faster. We provided guidance for the one billion gallon plan, including who, what, where, how, and all other aspects.
Poe Fratt - NOBLE Capital Markets - Analyst
OK. great. Then, if I can, so you mentioned the fact that you—the next batch of contracts may—will be sold out. Net-Zero 2 may be coming soon. If this happens at the end of the year, Pat, does this mean you will build Net-Zero 1 and 2 and very, very parallel tracks at the same time? Or will they be sorted a bit?
Pat Gruber-Chief Executive Officer
They will be sorted because I think we already have a site. We have completed the site development work and will continue to develop more sites. We like some of them. So this part is already in progress.
Engineering work, of course, if we are doing a net-zero copy, it is actually taking that factory down and putting it elsewhere. So it can be done very quickly. I think that's a practical timetable. I'm - Lynn, what have we been talking about? Net-Zero 2 will be the earliest to be delayed by seven months, something like this?
Lynn Smull - Chief Financial Officer
Pat Gruber-Chief Executive Officer
Delayed for six months. Just like what we got-get these permits, complete the site work, complete all the small details. And—but yes, it will be like that. Remember, we sold out 54 million gallons.
Therefore, if we have a big bite here, we will be well into Net-Zero 3 by then. Then we may have a bigger bite. If we have a bigger bite, then let's call, we'd better hurry up and start dealing with these ADM factories that first focus on Decatur.
Poe Fratt - NOBLE Capital Markets - Analyst
Then Lynn talked about Gevo, Inc. level funding for the first time. When you made a Chevron announcement, you refreshed the ATM. But you need shareholder approval to extend the share mandate.
Can you tell me when you expect to vote for shareholders? Then comes second, the time for the potential funds is actually to raise additional funds beyond the cash you currently have?
Pat Gruber-Chief Executive Officer
Well, I think we-we actually have-when we sit here holding $520 million in cash equivalents in cash, we are in very good shape. So it’s not like we have this kind of burn, my God, I have to do something. So we don't-in this case. We did update the ATM because it was time to do so, and it makes sense to do so and everything else.
We have not used it yet. So it's all sitting there. We have many interests-the world changes because of us. So it is difficult for us to describe.
I can't explain to everyone. This is impossible. But the world changes because of us. It's about who will play with us, how we will play, and how we will grow.
Everyone wants to get bigger early. How will we integrate these together and realize it? This is the question before us. I know we can go to build our Net-Zero 1 factory, build another one, Net-Zero 2 and Net-Zero 3, and then build a good business. This is a very profitable business.
I mean, shooting, the annual cash flow of these net-zero factories is around US$150 million. So they are good projects. I want to grow faster. I think that now by combining isobutanol and ethanol with hydrocarbon technology, combining the two, we can grow much faster.
And this is exactly what we should be concerned about. It can deploy capital more efficiently. Therefore, we hope to introduce other partners. We want to bring in people who invest at the project level.
This is the meaning of the Chevron deal. This is-we want to see people interested in Gevo levels. We expect that in the future we will have to raise funds. But we will see-we will do it wisely.
We have discussed this issue in the past. Like, I don’t like to do dilution fundraising very much. We did not-I think we have passed that stage. So this is about value-added things.
It's about saying that this is these items. We are going to raise money. This is the cash flow that is expected to be resolved. This is a must-play game.
Poe Fratt - NOBLE Capital Markets - Analyst
great. Thank you. Well, thank you. Very helpful.
Thank you. Currently, I have no further questions. I want to turn the call back to Pat Gruber's closing speech.
Pat Gruber-Chief Executive Officer
Well, thank you all for joining us. For us, this is an exciting time. This billion-gallon plan is the right idea. I bet we can—I hope to see us do more.
In fact, we are able to work with Axens, complete the transaction with them, complete the transaction, and make progress on the net-zero concept. We are decarbonizing the production system and can prove this. This is a big problem, and it applies to all situations. This is why we attract people. And, together with the use of Verity Tracking to calculate carbon and track corn and all other raw materials or any other raw materials.
So we are on a good track. I like where we are. We are making great progress. Thank you for your support, and thank you for joining us today.
Geoffrey Williams-Vice President, General Counsel and Secretary
Pat Gruber-Chief Executive Officer
Lynn Smull - Chief Financial Officer
Paul Bloom - Chief Carbon Officer and Chief Innovation Officer
Shawn Severson-Water Tower Research-Analyst
Amit Dayal - HC Wainwright and Company - Analyst
Poe Fratt - NOBLE Capital Markets - Analyst
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