I will now turn the conference call over to your host, Phil Boggs, Senior Vice President, Investor Relations.
There is a slide presentation available and you can find it on the Investor page under the Events and Presentations link on both corporate websites.
Actual results could materially differ because of factors discussed in today’s press releases and the comments made during this conference call and in the Risk Factors section of our Form 10-K, Form 10-Q and other reports and filings with the Securities and Exchange Commission.
The first quarter of 2021 has been truly transformative for our company, as we executed across every phase of our transformation plan, accelerating our path toward becoming a sustainable agricultural technology company, producing high value proteins, veg oils and clean sugars, combined with carbon capture and sequestration technology, which lowers the carbon intensity of our products.
Turning to the financial results, we reported a net loss of $6.5 million or $0.17 of diluted share in the quarter, inclusive of a $36.9 million gain related to the sale of the Ord facility and a $22 million charge related to the extinguishment of convertible notes in conjunction with our capital raise.
Our Ag and Energy segment also performed well during the quarter, resulting in improved operating results year-over-year, driven by market volatility in our merchant trading and distribution businesses, in our fuel racks, natural gas storage and corn oil distribution platform.
Our Ultra-High Protein business continue to exceed expectations at Shenandoah, consistently delivering higher protein yields and increased corn oil yields, which gives us ever increasing confidence as we deploy this technology at Wood River and further locations across our portfolio.
In recent weeks, we have seen protein yields of 4 pounds per bushel and have seen corn oil yield consistently above 1.1 pounds per bushel, approaching the 1.2 pounds we expect to achieve with the Fluid Quip MSC system.
All in all, we closed on over $600 million in transactions, including the concurrent equity raise and convert transactions, raised capital through our financing with BlackRock and monetized our Ord facility for $64 million, while retiring over $170 million in debt.
Our Project 24 initiative is nearing the finish line, as Mount Vernon started up recently and construction at Madison is on track to be completed in the third quarter.
While production was slightly lower, our quarter did financially benefit from our risk management position and strategic actions we took in response to Winter Storm Uri.
The macro industry data has continued to be structurally favorable as ethanol stocks have fallen below 20 million barrels, which is the lowest level coming into summer driving season since 2014.
Thank you, Todd, and good morning, everyone.
In the first quarter, Green Plains realized a net loss of $6.5 million or $0.17 per share, inclusive of a $36.9 million gain related to sale of our Ord facility and a charge of $22.1 million related to the partial extinguishment of our 2022 convertible notes.
I also want to point out that our convertible debt — with our convertible debt, we have adopted a new accounting guidance which now records our convertible debt at the notional value on the balance sheet and will no longer include a non-cash accretion expense running through interest.
Our liquidity position at the end of the quarter consisted of $654.4 million in cash, cash equivalents and restricted cash, along with approximately $330.4 million available primarily under our working capital revolvers and our delayed-draw term loan.
For 2021, depending on construction timing, our capex is projected to be between $200 million and $225 million, including the completion of high protein technology at Wood River, the start of projects at Obion and Mount Vernon as well as two additional sites.
For Green Plains Partners, we had 179 million gallons of throughput volume at our storage facilities during the quarter, which was down 62.6 million gallons or 26% from the first quarter of 2020 as a result of lower production rates at Green Plains plants as well as the sale of Hereford and Ord.
On a 12-month basis, adjusted EBITDA was $54.6 million, distributable cash flow was $45.7 million, and declared distributions were $11.4 million, resulting in a 4.13 times coverage ratio for the first quarter and a 4.02 times coverage ratio for the trailing 12 months.
Additionally, we have partnered with Summit Carbon Solutions to develop the world’s largest carbon capture and sequestration project to capture and sequester up to 10 million tons of CO2 annually.
I did want to spend a little time on Fluid Quip and the important role it will play in our future as we expect it to be beneficial to Green Plains in a number of ways.
My point here is that we believe we are one of the global leading agricultural technology companies through the partnership with BlackRock, Ospraie and Green Plains.
Now I’d like to walk through the vertical, specifically protein oil carbon sugar and specialty alcohols, some of which were already covered that are important to our 2024 guidance.
We are in final conversations to choose a general contractor, which we believe can speed our ability to complete these projects more quickly than if we were to build them ourselves, and we are working quickly to wrap this up — wrap this important milestone up.
Fluid Quip sales channel continues to show strong interest from others in the industry that want to add Protein technology to diversify the earnings streams. We have a proven technology deployed at five U.S.
We continue to refine the operating parameters at Shenandoah and believe we will achieve 1.2 pounds per bushel consistently and we are getting very close, delivering an increasing supply of low carbon intensity feedstock for the renewable diesel industry, while prices continue to move higher gives us a structural uplift to 1.0 margins, which is very helpful and is a critical piece of our long-term success.
The added flexibility this technology add to our platform not only lessens our reliance on government biofuel policies, but opens the doors to significant upside potential as we tap new markets once unavailable to the dry milling space.
Our goal is to work with these end customers and to select one of our existing facilities for a full-scale deployment of this innovative technology in the near future.
We are excited to have announced last week that due to the success of the early rounds, the pipeline is being expanded in the Southwest Iowa in Nebraska, allowing us to add five more of our biorefineries to the project, combined with nearly 70% of our capacity committed to this carbon pipeline with the opportunity to improve the CI score or carbon intensity intensity of each of these products, it is a great opportunity.
More to come on this as well as we explore the potential of each, but I did want to mention this that we are exploring this path as well.
Renewable corn oil is already seeing significant improvement in pricing and every $0.10 per pound that corn oil pricing improves, that had nearly $40 million in incremental EBITDA, and we have seen these prices improve more than that since the beginning of 2021 alone.
With 75 million gallons of specialty alcohol capacity, we believe this business will contribute up to $50 million over fuel grade economics, depending on the results we are able to achieve as we go through full contracting cycles.
So when you combine these initiatives, we are on track to achieving over $300 million of annual run rate EBITDA by 2024 prior to considering traditional crush margins and moving up from there as the carbon sequestration opportunity comes online and as we move up the J-curve for protein and nutritional solutions.
In conclusion, we have an impressive list of partners from Hayashikane to Novozymes to Optimal to Ospraie to Summit to Syngenta, to our pet food partner and many more under late-stage development as we speak, all wanting to help our products get to high-value markets.
So in general terms, we sold the initial Shenandoah volumes for the first two year when we started up last year and then for the 2021 volumes as well at somewhere between $50 and $100 premium over soybean meal pricing for the product based on the 50% to 52% protein.
Okay, then on top of that — and maybe on just dollars in the whole Fluid equipment, but just — there is no revenue sharing or there is no — anything that comes from that over the time.
But in general, Fluid Quip makes a margin on each sale that they make and that’s reported in the Fluid Quip business.
In 2022, what type of EBITDA would you be showing given what projects are done and what project is going to be done? And can you just give us some context to how that would play out, just assuming zero ethanol margins? I know nobody believes that, but let’s just assume a zero margin, and I’ll leave it there.
And then on top of that, adding in alcohol corn oil and and then the traditional zero margin on the ethanol business, if we just assume zero EBITDA, that’s $100 million to $200 million model that we can put forward for 2022, but it’s really just based on kind of completion dates and when — that’s why we believe 2022 is really our inflection point when we start to see four to six plants coming on, and then obviously, the rest in late ’22 and then ’23 come on.
How we’re thinking about is, we’ve already been working with dozens of customers — potential customers that have either new technologies or technologies where they’ve been buying from traditional wet mills that want to be involved with our low carbon dextrose and so — and one of the, one of the constraints, obviously, is fermentation capacity, and whether you look at lactic acid or PLA or something else like that, obviously, fermentation is very important.
And I think that’s going to be something that we will have a strategic management and mainly driven as well by our low carbon intensity of it.
And I think once Summit decide or gets to the point where they’re basically full in terms of the capacity needed, then I think they will ultimately look at than raising their next round of capital to continue this to get it to a shovel-ready project through engineering and permitting, and at that point, we will continue to make our decisions on how far we want to invest in the project.
Good morning.
Our goal with — in 2022 and later in 2021 as Wood River comes up on line, is that we will probably end up increasing our protein purities for the customers that we have on the books today who are now and kind of final stages of using the product that we sent them and thinking out ways to formulate around it, around the prices as well.
The industry backdrop seems to have gotten better given the state of inventories, given kind of what we see broadly from industry crush margins.
And I think that’s something has to be considered, while certainly on paper margins look as good or better than what we were able to achieve in the first quarter, obviously, with corn moving up and ethanol maybe now moving up quite as fast.
We’re in a great — I would say, though, we are in a great fundamental situation with ethanol stock under 20 million barrels coming into summer driving season.
But Todd, maybe can you talk a little bit about the strategic opportunities from monetizing your corn oil over the next couple of years as high pro comes on line, you’re going to be one of the largest producers of what is the favored feedstock for LCFS credits into California.
Yeah, the spot corn — the spot spot vegetable market, obviously, is beneficial to this industry and we are a strategic feedstock for what I think is the renewable diesel phenomenon that’s taking place.
And that’s what it’s going to be all about, because there will be times potentially with what’s brewing into soybean balance sheet and the tightness in the soybean balance sheet that you can end up making a call to somebody to buy your feedstock and and there may not be any available, and that’s something we’re going have to watch out closely, which I think is very beneficial to our industry and to veg oils overall.
Yeah, I mean, we have a lot of relationships that are providing lots of opportunities for us that even as we move up the protein purity levels and start to think about more innovation around this product, because oftentimes people forget it’s 75% protein and 25% yeast.
But what’s turning out is that this product is now much more uniform and has started — it’s starting to be respected again by nutritionist in the poultry space, in the dairy space and also in the in the swine space where they want to go straight to Shenandoah and start thinking of even Wood River next on the post MSC distillers grain, which I think is really, really a big opportunity for start getting a premium on millions of tons, and that starts adding up very fast and that was unexpected consequence that we’re very excited about as well.
Kind of following up on Craig’s question to start out on corn oil.
So, going after the rest of that oil, you don’t want to change your final products in terms of the post MSC distillers grains too much because by taking all the oil out you may see some degrading value, but relative to where we’re at veg oil prices between kind of $0.65 and $0.75, you want to go after all the oil you can because the remaining product still has enough value to justify that.
So we’re going to kind of in that sweet spot of 1.2 pounds to 1.5 pounds per bushel is kind of where we want to try to settle out.
We think there is a lot of up there in terms of the true valuation of this technology company and the things that they’re working on across multiple different platforms, not just — if you go on our website, it’s not just a protein technology, it’s their oil technologies, they got fractionation technology, they’ve got fiber technology, they got a lot of different technologies that are applied and put in many other plant besides Green Plains plants to try and increase profitability throughout the ethanol plant, whether it’s higher yields or higher purity.
Yeah, so GBP right now is pretty well focused on paying down it’s debt like we outlined and making sure that we address the current maturity of this year, which we think only about $34 million will be remaining at the end of the year, and to utilize a combination of operating cash, refinancings and maybe strategic actions to repay those debt obligations.
And at this point, obviously, by repaying the debt and eliminating the amortization, the heavy amortization, we think overall at some point, notwithstanding whatever the new debt structure will look like, hopefully increasing back the distribution as well, maybe sometime in 2022 depending on where we end up with our new lenders on the refinancing.
I want to ask about the carbon capture and sequestration project.
In addition to that, we are working on three direct inject sites, that’s Madison, Mount Vernon and Obion, where we would realize all of the economics from the 45Q and the low carbon fuel standard credits if there are any as well.
And they sent two plants and two plants got scores from Carb and in a manner that if they sequestered their carbon, what would happen if the carbon score in each of those plants, very similar to the plants that we have going on in the pipeline, and others have as well, not just ourselves, but any shipper on the pipeline.
And if you think about that, you start to look at, see high scores of a vegetable oil-based or corn oil-based renewable diesel, and that’s in the 30s as well, and obviously, soybean oil-based renewable diesel is in the 40s or the ’50s, and then the other oil, some of the waste oils are even lower than that.
My second question is just revisiting kind of the core ethanol fundamentals as Adam noted in his Q&A, those margins for the industry are much improved, the S&D looks pretty good for the next — little while here with resurging demands for driving.
Yeah, another reason I’m reticent is because over the last three years, obviously, cautiously optimistic was the only way to be, but you saw what the last kind of two or three years and the challenges that oversupply faced.
So while — even if ethanol took a turn at this point, I think we’re in a place right now as a company where our balance sheet is in such great shape with significant liquidity and additional liquidity available that it would be pretty tough for us to have anything get in our way at this point of actually executing successfully in 2.0.
So it’ll be pretty tough for something to get in the way of a successful completion of our 2.0 strategy at this point.
Hey guys, on the carbon capture, you indicated that the CI score drops from 60 to 30, that’s almost $0.20 to $0.25 a gallon uplift, you’re indicating about $0.15 on your slide deck.
So that’s why the opportunity to get involved ourselves and I would imagine all the other shippers on the pipeline is that will commit the volume, you go build the pipeline, we’ll share the economics, and we’re all partners with each other.
But that doesn’t even include, obviously, where is the voluntary market going to go to, and where are other credit going to be involved in and the shippers — some of the shippers get involved in those as well depending on their level of risk.
Okay.
So I mean there’s — we are always looking at all of the risk that we have as a company and investing some insurance capital into those risks, whether it’s corn, whether it’s in corn oil, whether it’s in natural gas or whether it’s an ethanol, and that’s always who we have been and and we set ourselves up for a cold snap in this winter and we were able to protect the downside of that.
Obviously, we don’t — we’re not the developer or the pipeline that some carbon solutions were involved in it as a shipper and as a potential investor as well and as a partner, and so it’s very nice to have the Green Plains Partners.
Hey, just quickly, on the the clean sugars.
In general, we think that what we’re able to achieve at the price we’re able to achieve it with the CI score that it has, is that we are absolutely on the right track.
The gains that we’ve made in terms of increasing our purities and getting higher yields of those purities and increasing the value of the remaining projects just gives us more confidence that this is truly transformational for our company.