Aemetis, Inc. Aktie

Hello, and welcome to the Aemetis First Quarter 2026 Earnings Conference Call. Joining us today are Eric McAfee, Chairman and Chief Executive Officer; Todd Waltz, Chief Financial Officer; and Andy Foster, President of Aemetis Advanced Fuels.

I will now turn the call over to Todd Waltz.

Thank you, and welcome, everyone. Before we begin, I'd like to remind you that during the call, we'll make forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements involve risk and uncertainty that could cause actual results to differ materially from those expressed or implied. Please refer to our earnings release and SEC filings for a discussion of these risks.

For the first quarter of 2026, revenue grew 27% to $54.6 million compared with $42.9 million in the first quarter of 2025. With growth across each of the three reportable operating segments. Gross profit was $2.8 million in the quarter, a year-over-year improvement of nearly $8 million from the gross loss of $5.1 million in the first quarter of 2025.

Operating loss improved approximately 60% to $6.3 million compared with $15.6 million in the prior period. Net loss improved to $21.7 million compared to $24.5 million in the first quarter of 2025. Production tax credits under Section 45Z contributed $4 million of operating income during the quarter, $1.4 million in Dairy RNG and $2.6 million in California Ethanol, representing our first quarter of ongoing credit generation tied to quarterly production since 45Z eligibility was established in the fourth quarter of 2025.

Adjusted EBITDA for the quarter was negative $1.3 million, reflecting typical winter seasonality with stronger revenue and mortgage and performance later in the quarter. Adjusted EBITDA and reconciliation of EBITDA to net loss as described in our earnings release issued earlier today. Cash and cash equivalents at the end of the quarter were $4.8 million compared to year-end 2025 -- sorry, comparable to year-end 2025. Capital investments in carbon intensity reduction and Dairy Digester construction totaled $6.5 million during the quarter.

With that overview, I'll turn the call over to Eric.

Thank you, Todd. I want to highlight three key takeaways from the first quarter of 2026: First, Q1 was a financial inflection point. We grew consolidated revenue 27% year-over-year posted positive gross profit and improved operating loss by more than $9 million. All three of our reportable operating segments contributed to this result; second, we benefited from the California Air Resources Board approval of 7 new low-carbon fuel standard pathways for our renewable natural gas business at an average carbon intensity score of negative 380 compared with a negative 150 default, which has been providing additional revenue at the higher LCFS value each quarter since Q3 2025.

Six additional biogas digester pathways are nearing approval. These LCFS pathways approvals substantially expand the LCFS credit generation per MMBtu of RNG produced and will continue to drive meaningful revenue increases as we scale production; and third, our capital projects are advancing. We received the initial deliveries of Dairy Biogas pretreatment skids in April under our $27 million fabrication contract.

Major equipment for the $40 million mechanical vapor compression project at our Keyes, California ethanol plant has arrived on site and construction has begun. In Dairy RNG, we sold 110,000 MMBtus in Q1, a 55% increase over the same quarter last year. With H2S cleanup and biogas compression equipment contracted for 15 additional digesters and 4 of the equipment units already delivered by the vendor, we are on track to double our operating dairy network with construction into 2027.

At our ethanol plant, the MDR project is on track for completion later this year. The system will use on-site solar and grid electricity to displace approximately 80% of the fossil natural gas consumption at the plant. We expect MBR commissioning later this year to add approximately $32 million in annual cash flow from operations, including additional 45Z and LCFS uplift from the expected reduction in the carbon intensity of the ethanol produced by the plant and cost savings on natural gas.

In India, biodiesel revenue rebounded to $10.5 million in Q1, with the resumption of oil marketing company shipments under new contracts. This revenue growth supports our planned initial public offering of the India subsidiary, Universal Biofuels Private Limited, for which we have retained legal accounting and IPO advisers.

Looking ahead, our focus for 2026 is scaling production, monetizing the stacked credit value of our renewable fuels platform, completing the India IPO and the refinancing of existing debt into long-term financing. The principal catalyst we are tracking through the year include the publication of the updated 45Z CF GRE model by the Department of Energy to significantly increase revenues and margins, commissioning the MBR as the Keyes ethanol plant, rising LCFS credit prices caused by continued quarterly credit deficits and progress on the India IPO.

Thank you to our shareholders, analysts and partners for your continued support. Operator, let's take some questions.

[Operator Instructions]. Your first question is coming from Matthew Blair with TPH.

Certainly, a lot of things going on at your company, but I was hoping you could talk about the possibility of the RD and SAF plant that has been on the table for a few years now, just in light of the very robust 2026 and 2027 RVO that materially increase the biomass-based diesel requirements.

How are you thinking about that RD and SAF project? And maybe you could refresh us on how much it would cost and what kind of capacity it would provide?

Thank you, Matt. The capacity is 80 million gallons a year of SAF or if we run it only in renewable diesel mode, it's 90 million gallons. And as you know from previous reports, we have 10 different airlines. We signed definitive agreements with, et cetera. We got full permitting approval for construction to begin in 2024.

However, market conditions in renewable diesel and SAF were hampered by a new President being hired. That, of course, happened in late 2024. And that caused the financing markets to take a delay in looking at SAF and RD. You have done a very good job covering margins at renewable diesel producers just yesterday.

In California, Phillips 66 announced that they're running above their nameplate capacity on their renewable diesel plant. And certainly, the events since March 1 have driven the price of the molecule up substantially L.A. quotes SAF in need form at $9.80 a gallon as of yesterday.

So the market conditions have moved in our favor significantly compared to where we were in late 2024 with a new President being hired, who had -- this is certainly had a policy position that needs some clarification. So we are definitely in a position right now in which there is -- frankly, a lot of interest in USAF production. I would say that the uncertainty in the last few months has given a new certainty to the need for domestic production of renewable fuel and a clarity that airplanes are not going to fly on hydrogen batteries, nuclear power or any other sort of energy source other than liquid fuels for the foreseeable number of decades.

So we position this project specifically for the conditions we're in right now. High price of crude oil alternatives and frankly, coalescing enthusiasm for the renewable version, which is sustainable aviation fuel. So we are definitely making progress on the financing. That is actually the only remaining part of this. We have the authority to construct permit in place for the facility and market conditions continue to be in favor of that.

That 80 million gallons, of course, if we're selling at $9.80 a gallon is almost $800 million additional revenue. And I think the industry today is reporting roughly $1.60 a gallon of operating margin. So obviously, a very positive improvement in our company's overall revenue and EBITDA growth. But I'm going to wrap this up by saying that there are actually four different sources of revenue for that plant and 45Z, the clean fuels provision is still an unknown. We don't have the updated 45Z. It is absolutely expected anytime soon, certainly before June that republicans need to post it.

And since there are four revenue streams, you sell the molecule, you sell the California credits, the federal credits and then receive the 45Z production tax credit, that is having an impact on the timing of our financing and that most lenders, especially are interested in knowing what the 45Z revenue is for this project.

Federal loss passed Treasury adopted their guidance in February '26 for 45Z but the actual calculator in the Department of Energy website is going to be necessary, that spreadsheet needs to be posted with the updated rules in the spreadsheet in order to finalize that fourth leg of the stool. So to put that note on the table that, that's having an impact. Of course, right now, the business works great without 45Z, but people are curious to know what your total revenue is if we're doing a project of that size.

Sounds good. And then the India biodiesel operations, nice to see them restarted in the first quarter it looks like profitability essentially breakeven, maybe a little bit below. Could you talk about your expectations for the second quarter? Do you think volumes will be in a similar range as the first quarter and -- and I think we typically see some margin improvement in the second quarter as you're able to shift to different feedstocks. Do you think that will happen in the second quarter this time around? Thank you.

Thanks, Matt. Let's talk about the overall trend in India because it's very important for investors to understand that India is a country that's -- a socialist country. And they have elections that occurred in the first week of May. And in order to support the existing government, a decision was taken by the government to set the price of diesel at the same price in March and in April as it was in January and February. There's no change in the price of diesel. I think most people on this call would understand that the price of diesel and crude oil dramatically increased in both March and April. But in India, it did not.

So as of today, when you go to the pump in India, you don't know that the Iranian war happened from the price of the diesel at the pump. Now that means that the government is running a very large negative from their expected tax collections from diesel and the oil marketing companies are losing a very large amount of money every single day on selling diesel because they're buying crude oil at high prices and then selling it at prices below cost in India.

That is about to change. And it should happen in the next few days. That the price of diesel in India dramatically increases. The oil marketing companies and the Ministry of Petroleum have known about this for 2 months and have been proactively meeting with the biodiesel and renewable diesel and sustainable aviation fuel producers or 2B producers in the country in order to come up with a much more solid program for us to be able to utilize all of our production capacity. We have an 80 million-gallon plant that's been operating at -- recently at 10% capacity.

And so there's been a renewed focus on domestic renewable fuels in India, with the policies already in place, National Biofuels policy is a 5% blended biodiesel and a 25 billion-gallon market. That's about 1.25 billion gallons. And they're unfortunately not at 5%, they're at 0.5% blend right now, and that is rapidly changing. So you asked about second quarter, I would put in the context of during the trend of this year, we're seeing dramatic increases. And so frankly, signing larger contracts and frankly, have -- going back to the cost plus contract model is what is in process right now in India.

And during the course of the next few months, I think you'll see that kind of certainty come into play. And our IPO is really being built around us working on that reality that those policies need to be known and need to be adopted. And so we're setting up our IPO to be directly correlated with when those policies are adopted.

I think it will have a very positive impact on not only the valuation of our business, but how much money we raise and we're seeking for the IPO in India to be truly a breakout opportunity. We're looking to build the first global diversified renewable fuels business ever to go public in India and certainly anticipate that, that will be the positioning we have and the -- the events of the last 2 months are having a very significant impact on India and focusing them on redirect themselves to these policies that they've already got in the books, but they haven't been fully enforcing.

Your next question is coming from Nate Pendleton with Texas Capital. Your line is live.

Good morning. Can you provide more color around the financing commentary from the release? Just looking to better understand some of the options that are available to you on addressing the debt broadly. And then more specifically, what are you looking at with regard to Keyes and then the status of the refunding for the Dairy RNG projects?

The improved margins and, frankly, now recovery of confidence and the need for domestic renewable fuels is directly expanding our refinancing opportunities. We have been funded and supported for the last 18 years by roughly a $3 billion fund at Toronto that holds our senior debt, except for the $50 million of USDA debt that we have. And our expectation is that we will continue to have very positive trends toward having municipal bond financings available to us.

Municipal bonds have been used by the renewable fuels industry for a variety of basically greenfield projects, we, of course, are not greenfield were expansion. And so we are actively in the market right now, actually working on a municipal bond type refinancing of our existing bridge financing we got from Third Eye Capital.

The Renewable Energy for America program at USDA is active, but they have slowed down their expansion in renewable fuels in a portfolio review process. The timing of that, and it seems to be changing on a regular basis. So as they make a review of their portfolio goals, they'll be expanding or not expanding. It's really quite uncertain to be quite frankly -- frank with you. So the rapid expansion of interest in the municipal bond and even commercial credit markets, certainly private credit markets, all of which we've had active discussions with, I think, are going to overshadow our renewable energy for America program funding. I think we'll be seeing much larger financings and moving much quicker than what the USDA RE program currently looks like for our company.

Understood. And then I just wanted to get your perspective on LCFS prices for a moment. While the market has flipped to deficit generation recently, prices have broadly remained quite muted. So can you talk about your expectations for that market going forward?

I think we're going to see a rapid price increase during the summer and early fall, what muted the deficit that we -- our second quarterly deficit announced on April 30 and that was for the fourth quarter of last year. So there's a trailing deficit announcement. It will be literally 44 months after the end of the fiscal quarter is when the announcement happens. But the price of being muted was an expectation by traders that people wouldn't drive as much with high gasoline prices.

Interestingly enough, on a formulaic basis, gasoline currently represents roughly 2% of the income of the average American. And I think traders overtraded on this one. They were not anticipating that the Iranian War would actually not be as big of an impact on driving as what it has -- they thought to have a bigger impact on what it really did. It did not have a big impact, especially in California. So LCFS credit deficits, however, are not driven just by consumption of gasoline. It's also driven by how many credits come from renewable diesel.

Renewable diesel is the reason we got such a large $40 million credit bank and renewable diesel has underperformed in Q4 last year and the first part of Q1 of this year, I expect it to underperform in credit generation. So you have fewer credits being generated quite frankly, it was a lot more of a deficit than what was expected because there's fewer renewable diesel credits generated. So we think the LCFS price trend is absolutely upwards. The question of pace has been impacted by the Iranian war that play didn't quite work out. And so we do expect increases to continue. There are plenty of credits in the market. It's not that issue.

The issue is, do you want to pay $200 for it, 18 months from now when there's very few in the credit bank. So it's a question of major oil company traders over the next 18 months at some point in time, reaching a tipping point which they decide they do not want to have to buy $200 credits. They might as well get out there and buy whatever they can in the market. When that happens, you'll see a very rapid price rise. And so I wouldn't be surprised at all to see $150 in 2027 as traders see the cap is $268 and they want to get their book filled up as soon as possible.

Your next question is coming from Sameer Joshi at H.C. Wainright.

So on the NBR, I understand it's going to be deployed before the end of the year. Are there any additional certifications, verifications, needed to be done before you can start generating that $32 million annualized return from it? I know some of it will be immediate because of lower natural gas consumption. But for the other incentive-based cash flows, do you need to do anything?

Andy, you want to take that?

Yes. Thank you for your question. No, there are no additional certifications necessary. We received an authority to construct from the Air District, which is really the big number that we have to get crossed off before we can proceed with the project, and that was received last year. So we have some local permits that are sort of ongoing as you do construction, but we don't have any requirements for additional permitting or authorization in order to proceed. So construction has begun. We've begun demolition on existing concrete structures.

As Eric mentioned in his comments, we've received -- most of the major equipment is state side now. We received the Turbo Fans from Germany last week. The main evaporator was received by -- from Praj in India about a week ago, it's actually currently in transit to the Keyes plant. So all of the big ticket items that take a long time to fabricate are either on site or will be on site within the next week or so.

Moving to the India OMC activity there. Thanks for the color that you provided, Eric, this is for the previous question. But in terms of pricing for -- that will be available for you, do you expect it to be a premium pricing relative to what you got in the last year, for example, are getting currently?

Yes. So there's definitely premium pricing actually. The next contract is already being discussed. But the structure of a cost-plus contract, which we did $112 million of revenue and about $14 million of positive cash flow last time we had a cost-plus contract. That structure is being strongly considered as a replacement to what they've done in the last couple of years, which was this uncertain sort of pick a number and see what happens kind of a structure.

And we covered this, I guess, a couple of years ago with investors. But just a reminder, the cost-plus structure was after many, many years of working with the government to come up with something that was going to expand capacity utilization in India. It worked very, very well. And then the India government passed a 20% tax at a 20% tariff on the feedstock that was being used by the industry, and therefore, the price of the formula went up 20% and after they issued us a contract.

The oil marketing companies did not want to take a loss, so they just didn't take delivery. That created confusion in the market. That confusion has now gotten more clarified because of the very high-cost diesel and the need for them to start getting utilization in the biodiesel industry, and that's the resolution that's being worked out right now. So we do expect a return to better conditions for full capacity utilization. India imports over 90% of its crude oil and really needs to expand its domestic production of renewable fuels.

Understood. And then just one last one. You did mention you got 7 new LCFS pathways approved for the negative 380. 6 are being worked on. Do we -- should we expect those to occur before -- in the first half? Or is it the second half event?

There's a strange delay in the process. So we expect the approvals to occur, but then they are look back a couple of quarters. So if we get an approval, for example, at the end of the fourth quarter, it's a look back to the beginning of the third quarter. So -- and approval by the end of December is actually effective in July 1.

So a strange situation, but the reality is, yes, we do expect by the end of the year to be appropriate progress here with a look back that looks like a 6-month look back because they do it the quarter after the closing of the quarter. So we will keep the market apprised of progress here. And of course, we're focusing on moving it through the process as quickly as possible.

Understood. So that would potentially sort of be a lump sum that you get if it is approved in the fourth quarter for the previous 2 quarters, and then it will be on an ongoing basis?

It's a look-back process, which basically just starts July 1, if you're approved December 30. And then you -- yes, there might be a 1-quarter catch-up. But in essence, it's just a delayed approval for the previous quarter. It's the way the government looks like.

Your next question is from Dave Storms with Stonegate.

I want to stick with the dairy digesters. I believe you mentioned on the call, you're expecting another 15, doubling your digesters by 2027. Can you just remind us when you actually get the investment tax credits related to those investments? And maybe just your thoughts around the monetization of those tax credits.

Good question. We get the tax credits upon the completion, the -- what they call in-service date for each single digester. So we don't have to build all 15 of them and then add 6 months to that or anything. As we build each digester and it goes in service, we generate the 45 -- Section 48, I'm sorry, investment tax credits. We have sold about $95 million of these tax credits. We tend to sell them in $5 million or higher increments, so that is not absolutely required.

And we do expect to have a single party this year, acquire each one of the investment tax credit projects that we generate. So we will be seeking to do at least once a quarter, there is a potential to do it, doing it more than once a quarter, depending on how many new units are completed. So we expect this to be probably a third quarter contribution, but could be quicker than that. And I'd say it could be as in the markets moving quickly. And we have some refinancing activities going on that certainly are very positive for the business. We've already fully financed the construction of $27 million of fees, hydrosulfide and compression skids.

The process is going on. We've received four of them already have more coming. So we're rapidly executing on portions of this project right now. and the investment tax credit delay is a month or so after the in-service date if we were doing it in the ordinary flow of business. So not a whole lot of delay between when the project is completed and when we get the cash.

Understood. That's very helpful. And then just sticking with those potential new digesters. Do those come online at the negative 380 qualification status? Or I guess, how does that process look if they don't come on at the negative 3.80, what do you think the current time line is from the negative 150 to the negative 380?

Andy, you want to take that? Are you speaking about the new digesters that are not -- that are not built now?

Given the temporary pathway score of negative 150. And then once we go through the process with CARB, which hopefully now that they've moved to a Tier 1 approval process will be significantly shorter than what we've experienced in the last few years, which is this kind of 24 months to 36 months. approval process. It should be more like 9 months, and then we would get the benefit of that higher or lower, however you want to look at it. CI score.

So initially, it's a negative 150 as you work your way through the approval process and then you go to the blended rate of the negative 3.80.

Your next question is coming from Ed Woo with Ascendiant Capital.

Congratulations on all the progress, guys. My question is, as we are getting closer to the India IPO, what are your priorities? Or what have you allocated in terms of what you're going to do with the capital raised?

India IPO is primarily designed to support the expansion of the existing projects in India and in California. So our existing projects in California, specifically focused on dairy RNG would be a use of some of the proceeds of our India business. That's one of the reasons why we'll be the first global diversified, so not just biodiesel but multiple different fuels, companies that go public in India. That offers the India investor access to a very well-established incentive environment here in California called the low carbon fuel standard, the federal government support, the low carbon -- the fuel and California is matched by the renewable fuel standard federal level and the 45Z production tax credit and the value of the molecule.

So the Indian investor who has access to arguably one of the best markets in the world for renewable fuels. And that's a diversification of the growth in the India business. Another point we've made publicly is that as the largest biodiesel producer in India, we happen to be very well positioned to build the conversion of a biodiesel facility into sustainable aviation fuel. And so our India IPO, not only is biodiesel and dairy renewable natural gas but also a conversion into an SAF producer in India in addition to expanding biodiesel -- so let's say, a diversified business.

The India market is very deep and wide and right now is about to have the shock of its diesel life the increase of just an incredible percentage increase in diesel costs as a result of what's been going on in the world. So it's a perfect storm for us in favor of us. as a producer in India who's been there for 18 years to open our opportunity to the public markets. And so we're making excellent progress. And certainly, market conditions will determine the actual timing of what we do, but market conditions are certainly trending in our direction.

There are no further questions in queue at this time. I would now like to turn the floor back over to Eric McAfee for closing remarks.

Thank you to Aemetis stockholders, analysts and others for joining us today. We look forward to talking with you about participating in the growth opportunities Aemetis. Todd?

Thank you for attending today's Aemetis earnings conference call. A written an audio version of this earnings review will be posted to the Investors section of the Aemetis website.

Thank you. This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.

Good day, ladies and gentlemen, and welcome to the Aemetis Fourth Quarter and Full Year 2025 Earnings Review Conference Call. Joining us today are Eric McAfee, Chairman and Chief Executive Officer of Aemetis; and Todd Waltz, Chief Financial Officer.

I would now like to turn the call over to Mr. Todd Waltz. Sir, the floor is yours.

Thank you, Ali, and welcome, everyone. Before we begin, I'd like to remind everyone that during this call, we'll make forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements involve risks and uncertainties that could cause actual results to differ materially from those expressed or implied. Please refer to our earnings release and our SEC filings for a discussion of these risks.

For the fourth quarter of 2025, revenue plus tax credits totaled $53.7 million, compared to $47 million in the fourth quarter of 2024. Quarterly gross profit improved to $7.7 million, compared to a gross loss of $2 million in the prior year period. Operating loss improved to $2.5 million, compared to $13.5 million in the fourth quarter of 2024. The net loss improved to $5.3 million, compared to $16.2 million last year.

For the full year 2025, revenue plus tax credits totaled $208 million, compared to $268 million in 2024. Operating loss improved to $37.2 million and net loss improved to $77 million, compared to $87.5 million in the prior year. During the fourth quarter, ethanol and RNG operations generated $10.3 million of production tax credits, reflecting the growing contribution of Federal Clean Fuel Incentives to the company's financial profile.

With that overview, I'd like to turn the call over to Eric McAfee, Chairman and CEO of Aemetis.

Thank you, Todd. Before discussing the business segments, I want to highlight three key takeaways from the fourth quarter and last year.

First, our Dairy Renewable Natural Gas platform reached an important milestone during 2025, achieving positive segment net income and EBITDA, while production increased 61% year-over-year in the fourth quarter. We generated net income of $12.2 million in our biogas segment in the fourth quarter of 2025. We expect strong annual growth in cash flow and profitability from the Biogas segment for the next 4 years, as 45Z is implemented and we continue to expand production.

Second, during 2025, we continue to advance the mechanical vapor recompression upgrade at our Keyes ethanol plant, which is expected to increase plant cash flow by approximately $32 million per year when completed in 2026.

And third, revenue from dairy RNG and ethanol production is generated by renewable fuel sales, as well as environmental credit monetization, including LCFS credits, federal D3 RINs and 45Z production tax credits. The 60% increase in the price of low carbon fuel standard credits in the past 9 months since the LCFS was extended by 20 years, and the recent treasury guidance for the 45Z production tax credit are important contributors to our growth in revenue and cash flow.

Our dairy RNG platform continues to grow production and is becoming a significant driver of revenue and cash flow growth at Aemetis. During 2025, the dairy RNG business produced approximately 405,000 MMBtus of renewable natural gas and expanded to 12 operating digesters. Looking ahead, we expect RNG production to grow during 2026 as additional dairy digesters come online, with equipment fabrication contracted for the H2S cleanup and biogas compression units for 15 digesters, which will double the number of operating dairies in our network.

Turning to our California ethanol business. The Keyes ethanol plant generated $158 million of revenue during 2025 and has approximately 65 million gallons of annual production capacity. We began receiving equipment on site for the installation of the mechanical vapor compression system at the ethanol plant for completion later this year. The MVR system is expected to reduce natural gas consumption by 80%, lower the carbon intensity of ethanol produced by the plant, and increase annual plant cash flow by approximately $32 million.

In India, our biodiesel facility generated $29.7 million of revenue during 2025 and has significant available capacity to supply expanding government goals for biodiesel blending. Our plant has approximately 80 million gallons of biodiesel production capacity, along with about 8 million gallons of glycerin refining capacity. India continues to represent an attractive growth opportunity as the country focuses on the production of domestic renewable fuels to displace imported crude oil and to supply fuel to a fast-growing economy. We are expanding the India business into biogas production and sustainable aviation fuel as part of our work on an initial public offering of the India subsidiary this year.

Looking ahead to 2026, our focus is on scaling production and monetizing the environmental credit values associated with our renewable fuels platform, as well as completing the India IPO and long-term refinancing of existing debt. Key policy developments include the finalization of the 45Z emissions rate calculation by the Department of Energy, further strengthening of LCFS markets, expanded ethanol markets via E15 blending approval in California and biodiesel blending mandates in India, which are expected to support long-term growth in low carbon fuels.

Thanks to our shareholders, analysts and partners for your continued support. Operator, why don't we take some questions now?

[Operator Instructions] Our first question is coming from Derrick Whitfield with Texas Capital.

Great job with the year-end close. I wanted to start with your U.S. business. Maybe, Eric, just at a high level, could you give us your expectations for capital investment for 2026 between your RNG and your ethanol business?

We'll be wrapping up our MVR system. Total investment there is going to be roughly in the $40 million range. We'll be also continue to expand. We have 15 contracted H2S units for the next 15 digesters we're building. That's about a $27 million contract that we have with NPL. And then separately, the build-out of those 15, which will overlap into 2027 is roughly going to be another $70 million on top of that. So we continue to grow the assets, but our refinancing existing debt includes financing for the assets I just mentioned.

And so we're fully financed for the completion of the MVR system. We're fully financed for the $27 million of H2S units. And as we roll out additional digesters, we expect to continue doing the type of 20-year financing, which we've completed. As you know, we completed two financings at 20 years each for our first Aemetis Biogas 1 and Aemetis Biogas 2 entity. We're working on Aemetis 3, 4, 5, 6, 7 and 8 right now.

That's terrific, Eric. And then maybe shifting over to ethanol. Margins are quite positive even before accounting for the MVR investment. How are you thinking about EBITDA generation for that asset in 2026?

Ethanol for us is a story of 2 worlds, pre-MVR and post-MVR. So this quarter, next quarter, we're going to be benefiting from removal of indirect land use change penalty for our corn on top of our existing carbon intensity. So we're currently at roughly $12 million a year. As you know, they're all rounded in nearest 5. So we're currently roughly at that $12 million a year run rate. That's not including any CO2 reuse, which we are waiting for the GREET model and potentially a provisional emissions rate that could be used -- CO2 reuse to lower our carbon intensity. But not including CO2 reuse or roughly $12 million a year.

Post-MVR, we get rid of 80% of our natural gas costs, but also 80% of the penalty that we have for natural gas use. And so post-MVR, 45Z and LCFS values go up and generate roughly another almost $3 million a month of cash flow. So we should be running about $4 million a month on just 45Z plus MVR starting in what we -- we're currently targeting the third quarter for the MVR, but certainly going into the fourth quarter, that's what we expect to be.

And then on top of that is the LCFS credit price increase. It's already gone from $40 to $70. We wouldn't be surprised at all to see it hit $100 this year and $150 or more next year as we continue to see quarterly deficits. We don't see any scenario in which you don't see quarterly deficits in the LCFS program. So that would be incremental to the numbers I just given.

Our next question is coming from Amit Dayal with H.C. Wainwright.

Congrats on the execution in 2025. It looks like you guys are set up very well for 2026 as well. This $40 million investment in the MVR, how much of it has already been made? Or is the $40 million going to take place in 2026, Eric?

Much of it's already made. We are well past half of that right now. And the remaining balance happens over the next 4 months or so. But it's fully financed and has no equity dilution through the completion of it. We don't have any funding through the ATM or otherwise for it at this time.

So conservatively, should we assume contribution post-MVR to only come through in 2027?

Contribution should hit in third quarter, be in full place in the fourth quarter. So it will affect roughly half of this year, roughly.

Okay. And does that -- the product coming out of this post-MVR, will it need to be qualified, et cetera, like the RNG had to go through an auditing process? Or will you be able to monetize right away those benefits?

It's -- for the MVR, we're monetizing it "right away". There is not a long year or 2-year delay. One of the points you're making is relevant, which is we're not including the opportunity to run renewable natural gas into our plant. Under the rules, the renewable natural gas has to be directly connected from the production source to the ethanol plant. There's only a few plants in the U.S. that are structured that way. We happen to be the owner of one of those plants. So we have 50 dairies signed that can supply our ethanol plant with the renewable natural gas.

That would be additional monetization that in our structure, we really accrue to our dairy biogas business, not to our ethanol business. But yes, we are definitely uniquely situated to have incremental economics from 45Z, as well as LCFS by running our Dairy RNG into the ethanol plant. We expect that, that will be something we'll very seriously be considering. We're not announcing we're doing that yet, but it's because we're waiting for the GREET model from the Department of Energy, so we can do our final calculations.

Understood. Maybe just last one for me. I know you haven't provided any formal guidance for 2026, cash flow, EBITDA, et cetera. But at a minimum, can we expect you to perform in line with, sort of, the cash flows we saw materialize in 2025?

We should be significantly in excess of 2025, which represented virtually no 45Z for the ethanol plant from a cash flow perspective and minimal from our RNG. Our business is highly leveraged towards performance of the California Low Carbon Fuel Standard credit, which credit prices were $40, 8 months ago, they're $70 today and should be continuing to rise. The cap is $268. And the 45Z production tax credit, which we've only monetized $5 million of it. We did that the last couple of days of the fourth quarter of last year. And that should be a significant generator.

When the updated GREET model is released by the Department of Energy, as we know, we have the February 4, 2026 U.S. Treasury guidance that was issued, that was consistent with The One Big Beautiful Bill of July 2025. But we're awaiting the spreadsheet to show up on the website of Department of Energy. From that, we will then be able to calculate, with great precision actually, what our total revenues are. And I think there'll be an education cycle, which we'll do with investors to let them show -- let them know what the dairy RNG molecule can do.

I would cite Bloomberg's podcast. If you just -- you don't have to be a Bloomberg subscriber in order to get this podcast, but they did a half hour podcast just a few days ago and described that dairy RNG and swine RNG are the big winners under 45Z, and that there should be $7 per gallon of revenue for dairy RNG from the 45Z. There are 8.6 gallons under the 45Z regulation in every MMBtu. So 1 million British thermal units is 8.6 gallons under the rule and each gallon should be $7. And there's a Bloomberg podcast if you want to learn about the value chain and how the calculation works, et cetera, that is available for public consumption.

I'll take a look at that, Eric. With respect to the India operations, I mean, will investors just have to learn to live with this start-stop situation over there? I know it's more sort of policy than your production capabilities. But is something going to sort of change on that front? Or is this how that market will continue to operate?

Well, historically, the ethanol market operated that way until the government committed themselves to growth and then they went from 1% blend to 20% straight line in about 48 months. The biodiesel market is in a similar spot. The Russians and the Iranians have been selling heavily discounted crude oil into India. And about a month ago, the end of the 50% tariff that Mr. Trump imposed was an agreement by India not to import Russian oil and essentially indirectly fund the Ukrainian war using Indian money. And then, of course, the breakout of the Iranian war 2 weeks ago shut off the other cheap funnel of crude oil, which was in violation of the U.S. sanctions, but Indians have been doing it very commonly.

Well, that kind of ended 2 weeks ago. So India does not have any domestic petroleum, natural gas or even coal of any meaningful amount. So they've just had their 2 great opportunities in the world, which is to buy cheap petroleum and remain dependent upon petroleum disappear. And the biofuels is a domestically produced job-creating agricultural economy-based industry, and that's why ethanol has gone from 1% to 20%. And we believe that biodiesel will have a similar kind of rise, 0.5% to 5% is a 10x expansion in the biodiesel business.

Our IPO is not based upon solely being a biodiesel producer. It's also about the future energy in India, which includes compressed biogas, which is we would call in the U.S. renewable natural gas in India, they know it's known as CBG as well as sustainable aviation fuel, which is a very popular item in India right now, global sustainable aviation fuel market about $90 billion -- sorry, 90 billion gallons and flying in and out of Asia includes fueling up to meet European and other requirements, including the Singapore airport.

So the business we're taking public in India is a global diversified biofuels IPO. We believe it will be the first global diversified biofuels IPO in the history of the India stock market. It happens to have as the centerpiece an 80 million-gallon biodiesel plant that is well positioned to become a sustainable aviation fuel plant. And those contracts would be with international airlines, and to a certain extent, circumvents this issue about the domestic demand for biodiesel in the country. Though we do have bullishness around that demand and do plan to have expansion in the biodiesel assets and production capacity we have in India.

Our next question is coming from Dave Storms with Stonegate.

Just wanted to start with the Keyes plant. It looks like it's been running at about 90% capacity for the last 2 years. How comfortable are you with the current run rate? And is there any potential plans to expand it once you are through the MVR project?

We have an industry that with the adoption of E15 in California already had about 600 million gallons of new market opened up from an approval perspective. And nationally, I think there will be an E15 adoption, certainly with the Iranian war. It's a top of mind as affordability move. So I do expect nationally that ethanol plants will be looking at expansion as a strategic goal as we go from roughly 14 billion gallons of actual consumption in the U.S. to over 20 billion gallons with the approval of E15.

There is probably 1 billion to 1.5 billion gallons of available capacity just by debottlenecking and the like, but that's far short of the 6 billion gallons needed. And we currently have record exports of over 2 billion gallons a year, and those record exports could actually rise. We're seeing continued adoption of ethanol blending worldwide, which puts a further triangulation on the number of available gallons for domestic.

But we have not announced expansion campaign yet. I would note that there is a plant that just announced today that they expanded from roughly 55 million gallons to 105 million gallons by using existing tankage and doing certain process improvements. So there's certainly technology available. And we do plan to expand our business. We're currently expanding it by reducing our carbon intensity, reducing our operating costs and optimizing the carbon. And frankly, mechanical vapor compression will allow us to be positioned for that kind of debottlenecking and expansion.

So I would expect this is going to be more of a 2027 story. We might talk about it later on this year. But frankly, the margin improvement and sustainable positive cash flow from our existing asset is what we're focusing on right now. And I think we're going to be looking to have optimized that by the end of this year and then focus on expansion plans.

That's great color. And then just one more for me. You got some tailwinds coming out of The One Big Beautiful Bill, and I think it was you mentioned in your release that those tailwinds are starting to be implemented. Just curious as to how you see the logistics in the near term for the continued implementation of those tailwinds and maybe any more color you could give us there?

There -- the big lift was July 4, 2025 in the Senate House and the White House when they negotiated a doubling of the number of years, and a significant expansion in the amount of 45 production value that biofuels would obtain, specifically removing indirect land use change penalty, which had depressed the amount that had been available. That was completely removed.

We're now in the implementation phase of that political decision by the President, frankly, and also both the House and the Senate. And the first step of that adoption is the Treasury's announcement on February 4, 2026, of 176 pages of tax guidance. There were no surprises in there. And we are now just awaiting the spreadsheet, known as the GREET model from the Department of Energy, which will allow us to calculate the amount of 45Z revenue that we generate from every MMBtu, or every ethanol gallon.

And I should make note that there is a process that was set up January of 2025 called the provisional emissions rate, and that was further refined in the February 4 guidance with what's called a calculated emissions value letter. And so the process of getting our own distinct additional value, because we have done energy conservation and other enhancements in our facilities, that process of getting a CEVL was set up last month. And so we are actively seeking CEVLs that would allow us to have accurate calculations of both our ethanol as well as our dairy RNG business, carbon intensity, but they call emissions rate.

And so the adoption should be that great model gets published this month by the DOE and that in a very short period of time thereafter, a matter of weeks, we should get a calculated emissions value letter because we just have a couple of little cells that need to be entered with our unique data, and the number that comes out gets put on a piece of paper and issued to us. And then with no real work at all, we file that with cash returns.

So it's a very simple process. should be a very quick process. But the word should, unfortunately, is where the uncertainty comes in. We're waiting for the DOE to issue the GREET model, and we're waiting for the DOE to open up the calculated emissions value letter process so that we can get very accurate calculations.

Our next question is coming from Ed Woo of Ascendiant Capital.

Congratulations on all the progress. As you talk about being the first global bioenergy company in India market, have you considered expanding to other international markets? And also, what is your expansion opportunities in India? Would you consider possibly a second plant?

Let's take India first because that's what we're actually implementing right now. We are definitely planning to locate plants near feedstock sources, and we have a special relationship with the leading feedstock supplier in the tallow business, for example. And so we do expect to have multiple plants located near feedstock sources. That gives us the advantage both on cost inputs, but also, frankly, puts us closer to the blending facilities that are also regional.

But our India business is diversifying into biogas and then into taking one of our facilities, making into sustainable aviation fuel and renewable diesel plant. And so our IPO in India is driving the adoption of new markets, quite frankly, the Indians are not currently involved with, including sustainable aviation fuel. And there's a lot of excitement about getting independence from imported crude oil in India. So we're in the middle of that process. And the reason why it's global is our India business, the subsidiary, 100% owned by our company, will be making investments outside of India as part of the IPO. So we're looking forward to more information being disseminated to the market as we put out our what's known as red herring and other documents, you'll be able to read more about that.

As we have reached the end of our question-and-answer session, I will now turn the call over to management for closing remarks.

Thank you to Aemetis stockholders, stock analysts and others for joining us today. We look forward to talking with you about participating in the growth opportunities at Aemetis.

Thank you for attending today's Aemetis earnings conference call. Please visit the Investors section of the Aemetis website, where we'll post a written version and an audio version of this Aemetis earnings review and business update. Ali?

Thank you. Ladies and gentlemen, this does conclude today's call, and you may disconnect your lines at this time, and we thank you for your participation.

Welcome to the Aemetis Third Quarter 2025 Earnings Review Conference Call. [Operator Instructions] As a reminder, this conference is being recorded.

Joining us on today's call are Eric McAfee, the Chairman and CEO of Aimetis, Andy Foster, the President of Aemetis Advanced Fuels and Todd Waltz, the Chief Financial Officer of Aemetis. It is now my pleasure to introduce your host, Mr. Todd Waltz, the Executive President and Chief Financial Officer of Aemetis, Inc. Mr. Waltz, you may begin.

Thank you, Matthew and welcome, everyone. Before we begin, I'd like to remind everyone that during this call, we'll be making forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on our current expectations and beliefs, and involve risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such statements. These risks and uncertainties include, but are not limited to, those factors discussed in our earnings release issued today and in our most recent Form 10-K and 10-Q filings with the Securities and Exchange Commission. under the caption of Risk Factors and Management Discussion and Analysis of Financial Condition and Results of Operation as well as in our other filings with the SEC.

We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future developments or otherwise, except as required by law. Please refer to our earnings release and our SEC filings for a more detailed discussion of the risks and uncertainties. Full financial details can be found in our third quarter 2025 earnings release and the Form 10-Q available on the Aemetis website and EDGAR.

I'll briefly highlight the key items. Revenues were $59.2 million, up by approximately $7 million from the second quarter of 2025. primarily due to the fulfillment of biodiesels with oil marketing companies in India and stronger performance from ethanol production and sales pricing. In California, we saw production rate of 14.7 million gallons as margins allowed for higher grind rates. California Dairy Natural Gas recognized $4 million of revenue from 12 operating digesters during Q3, using the CARB-approved LCFS pathway for 7 of the digesters. As we'll discuss later, Section 45 tax credits from the production of dairy renewable natural gas were not included in the third quarter since our recognition is based upon when credits are sold. India Biofuels posted $14.5 million of revenues, a new India CFO with IPO experience, joined the company during the third quarter. continuing to build out the management team to target a public listing in 2026.

Operating loss improved sequentially on higher volumes and lower SG&A. Interest expense remained steady at around $13 million during the quarter. Cash at quarter end was $5.6 million after making $4.1 million of investments in the carbon intensity reduction and dairy renewable natural gas production expansion during the quarter. We expect multiple income streams from India, LCFS credits and federal tax incentives to ramp up during the fourth quarter, positioning us for a strong exit to the year 2025 and increase income streams during 2026 as the projects are completed. With that,

I'll turn the call over to Eric McAfee, Chairman and CEO of Aemetis. Eric?

Thank you, Todd. I'll start with the business segment update, followed by updates on future projects and a regulatory update. In our dairy RNG business, we significantly increased biogas production capacity at the end of the third quarter with a new multi-dairy digester coming online in September that increased RNG production capacity by more than 30%. As planned, we expect to reach more than 500,000 MMBtus of renewable natural gas production capacity by the end of this year and grow to a 1 million MMBtu annual run rate by the end of 2026. We are now operating or building digesters to process waste from 18 dairies, funded by $50 million of USDA guaranteed financing with 20-year repayment terms and attractive interest rates as well as equity and revenues from operations. Seven of our dairy digester low carbon fuel standard pathways were approved by the California Air Resources Board during the second quarter of this year at an average negative 384 carbon intensity score.

These pathway approvals increased our LCFS credit revenue by 160% for these dairies starting in the third quarter of this year. compared to dairy digesters with a negative 150 default pathway score while pathways are pending approval. Four more LCFS pathways are currently under review at CARB and are expected to be approved under the fast Tier 1 pathway process that was adopted by CARB in the July 2025 extension of the LCFS program. Additionally, these dairy RNG facilities qualify for Federal Section 48 investment tax credits. To date, we have sold $83 million in investment tax credits related to our RNG facilities and received more than $70 million in cash. Since January 1, 2025, we've been generating transferable Section 45 Z production tax credits, but we do not show the cash received from these credits in our financial reports until the 45 credits are sold. Currently, we have $12 million of investment tax credits and $10 million of 45 Z production tax credits in the sale process. Please note a significant upside.

The Department of Energy has not issued the updated 45 Z spreadsheet that allows the correct calculation for dairy RNG. So the amount of 45 Z income is expected to increase significantly when the DOE issues the updated calculation. This DOE update could occur at any time, but is definitely expected for the implementation of the One Big Beautiful Bill in January 2026. We allowing us to generate and sell additional 45 Z production tax credits for year 2025, if the calculation correctly utilizes the greenhouse reduction model to comply with law. Collectively, molecule revenues, LCFS credit sales, D3 RIN sales and the sale of 45Z production tax credits are expected to generate strong positive cash flow from operations in the fourth quarter of this year. and expanding operating cash flow in 2026 as new dairy RNG production comes online, 45Z calculations are issued by the Department of Energy and LCFS credit prices continue to rise.

At our ethanol plant, our fully financed $30 million mechanical vapor recommission system is completing the equipment fabrication and is planned to begin on-site construction in Q4 of this year for completion in Q2 of 2026. We are very pleased with the professionalism and expertise of the team at the NPL subsidiary of Century that is providing construction management and other support for the project. We have been awarded about $20 million in grants and Federal Section 48C tax credits to fund the MBR system. The MBR project is expected to reduce natural gas use by 80% and and add an estimated $32 million in annual cash flow starting in mid-2026. Ethanol pricing has improved since earlier this year as lower corn prices improved margins. The legislative approval of 15% ethanol blending in California last month is expected to increase demand for ethanol by more than 600 million gallons per year, equal to about 10 of our ethanol plants, which is expected to support pricing and drive demand for more ethanol production nationwide.

We had decreased production during the spring of 2025 in order to optimize ethanol margins, but increased ethanol production during Q3 and continued in Q4 support ethanol demand and to participate in higher margins. In India, we resumed biodiesel deliveries to government oil marketing companies in April of this year following a 6-month pause in OMC purchasing. We are targeting an IPO of our India subsidiary in early 2026, and recently appointed a new Chief Financial Officer at our India subsidiary to lead the process. We are also actively seeking to expand into biogas and ethanol production in India, which are strongly supported by government policies and pricing. Let's look at our future projects. For our sustainable aviation fuel and renewable diesel project, we have received the authority to construct air permits and conditional use permit for our 90 million-gallon per year SAF diesel facility at the Riverbank site in California, When operated solely for SAF capacity will be approximately 78 million gallons per year. We are in active discussions on financing structures and are awaiting further clarity on the 45Z production tax credit and biofuel mandates to support project financing.

For our carbon capture project at our Ribrag site, we have completed initial site work and conductor installation for our geologic characterization well. The data we obtained from the next phase of drilling will support our Class VI CO2 sequestration permit application. Once permitted, the site is expected to sequester up to 1.4 million tons of CO2 per year. Our River Bank, California site near Modesto, is a 125-acre former U.S. Army ammunition production facility with 710,000 square feet of existing buildings, including 7 production lines that are more than 600 feet long, 45 feet wide and about 30 feet tall. A 20-megawatt on-site power substation, connected by an on-site high-capacity power line to the 350-megawatt etch hedge hydroelectric power station and on-site high-capacity natural gas pipeline and 2 fiber data links already at the site. The CO2 sequestration at the site is planned to generate revenues while decreasing carbon intensity of electricity produced from natural gas, such as fuel cells, which produce a pure form of CO2 compared to gas turbines.

Our dairy RNG is also available via a utility pipeline to reduce the carbon intensity of the electricity produced from natural gas at the site. In addition to our recent expansion of tenants at the Riverbank site, including a new facility built by a recycling company from England to extract precious metals from electronics, we are currently negotiating agreements to utilize the unique capabilities of the Riverbank site to provide lower emissions, lower cost and lower carbon intensity power and other infrastructure to users. Let's review some regulatory events that support a strong growth outlook for Aemetis and the biofuels and biogas industries. Aemetis is positioned to benefit from a range of federal and state policies that directly enhance the value of its low-carbon biofuel and biogas operations. The California Low Carbon Fuel Standards, amendments adopted by CARB to establish a 20-year framework for reducing transportation fuel emissions became effective on July 1 of this year.

In response, LCFS credit prices rose by more than $0.25 since -- I'm sorry, 25% since this summer and are expected to continue to increase as credit supply tightens and credit demand increases. We expect further strengthening for the foreseeable future to the current LCFS credit price up to the cap of $268 that continues to increase each year. The total renewable fuel standard. The sale of renewable natural gaps qualifies for D3 RINs, I think about $19 per MMBtu in value at base prices. Section 45Z production tax credits. Effective January 1, 2025, the new federal Section 45Z transferable tax credit support low emission ethanol and RNG production. Aemetis is currently applying treasury guidance to calculate market these credits for both our plant ethanol production and our RNG sales with additional clarification from the DOE and treasury expected later this year.

In addition to any further clarification in 2025, the Section 45Z credits will increase in 2026 and under the recent One Big Beautiful Bill, which removes indirect land use from the ethanol plant calculation and requires dairy specific carbon intensity scores for RNG. This will more than double the 45Z credits in 2026 for each business even with no further changes to the current treasury guidance. Section 48 investment tax credits. Aemetis received $19 million in cash proceeds in Q1 2025 from the sale of solar and biogas related ITCs. We expect additional sales of both investment and production tax credits in Q4 2025 and and in Q1 2026 for the balance of 2025 production tax credits, plus additional sales of both PTCs and ITCs for the next 4 years, E15 ethanol blend expansion. In California, the recent E15 approval of 15% ethanol plant should decrease fuel prices at the pump by $2.7 billion per year when fully adopted according to a UC Berkeley study, while increasing the ethanol market by more than 600 million gallons per year.

The U.S. EPA has approved temporary summer use of 15% ethanol in 49 states and new legislation is advancing to allow year-round use, including the match in California. E15 approval in all 50 states would expand the potential U.S. ethanol market by more than 6 billion gallons per year from the current 14 billion gallons per year, while lowering fuel prices for consumers. With legislation passed at the federal and state level, we are now in the slow process of regulatory adoption of these policies with the 45Z production tax credit, 15% ethanol blending and the significantly increased demand for LCFS credits as primary examples of supportive policies that will increase revenues and/or cash flow from operations starting in the fourth quarter of this year.

We are very pleased with the price on our projects as well as California and federal policies made during year 2025 to date and believe that Aemetis is positioned for significant growth in revenues and improved cash flow through year-end and throughout 2026. Our India IPO continues to expand the opportunities in India to diversify our business and attract new investors into a large growing market. Our new projects at the Riverbank site are exciting and to a large extent, unexpected in their size and potential for a positive financial impact starting in 2026.

Now let's take some questions from our call participants. Matthew?

[Operator Instructions] Your first question is coming from Matthew Blair from TPH.

Great. I had 2 questions on the ethanol segment in the quarter. The first is it does look like your corn costs came down quarter-over-quarter, but they're a little bit higher than our modeling. So could you talk about any sort of issues with basis? Like were there any challenges there? And overall, what kind of ethanol EBITDA did you generate in the third quarter. And then second, regarding the opportunities around California E15. It sounds like there's a lot of upside. I think you mentioned 600 million gallons a year of incremental ethanol demand in the state. But this depends on retailers offering E15 instead of E10. So maybe could you talk about whether that will actually happen, whether retailers will indeed switch over to E15 and what are the mechanics there?

Certainly. Thanks, Matt. We appreciate all your work. Ethanol corn -- ethanol industry in general benefited from lower corn costs as corn volumes this year were substantial. And because of sort of global supply-demand balance, we have excess corn here in the United States. We do have transportation that delivers it to California transformation actually gave us a slight benefit during the quarter as well. So lower corn costs and attractive -- relatively attractive, I should say, rail, were benefits. Corn basis did have an effect of offsetting it a bit as corn farmers were reacting to low corn prices and they held the corn in their bin rather than releasing the market. So although the spot prices on NYMEX appeared to give you 1 number, the actual physicals of prompt delivery had a benefit to farmers as they held back. And that's probably where your model was slightly different than the market was the corn base has moved around quite a bit during the third quarter.

We don't have a business that's designed to be the low-cost corn feedstock plant because of the demand for ethanol in California. Actually, it's cheaper to move ethanol in the California than it is to move corn. So we actually see it as a disadvantage of our model is that we have higher corn costs and we have higher power costs in California. But we also have a decarbonized grid in California. California has a commitment to a 0 carbon intensity grid driven by solar and wind and hydroelectric and nuclear and we have that as a sustainable benefit. So we have changed our operational strategy at the ethanol plant to change from petrol natural gas feedstock and convert, as we know, with mechanical vapor compression to almost completely removing using any petroleum natural gas in our plant. That decreases our carbon intensity significantly decrease our cost of energy completely and takes advantage of the fact we're physically in a market where low carbon intensity electricity can offset the higher corn cost of the Midwestern supply chain.

We also have completed a $12 million solar project on site, of course, that solar energy. 0 CI, again, and we have carbon negative dairy natural gas directly connected to our ethanol lab. I haven't done a count on this, but us and the 1 other ethanol producer in California, I think, are among the few dairy RNG projects in United States that actually can monetize through the 45Z ethanol molecule rather than having to fill trucks. So that direct connect to our ethanol plant, which is required, there's no book and claim in this business to be able to calculate for ethanol, is a unique opportunity that we expect to use more in 2026 than we're currently using. But it buffers us from the absolute necessity of having to have trucks to consume R&D. So for a variety of reasons, we think that our plant is a distinctive competencies that will be sustainable over a long span of time, and we'll overcome our corn and rail cost disadvantage.

So we'll be talking about this more over the course of the next 2 quarters. as our MDR is adopted and try to provide more clarity about how we believe we'll have a sustainable margin advantage over pretty much any other producers in the U.S. Second one is E15 in California. The $0.20 per gallon is just a competitive advantage for anybody that uses E15. And the legislature stepped in to adopt E15 permanently October 2 when it was signed by the governor. And that's because California prices are completely out of control, 17% of oil refining capacity for gasoline will be going offline in the next 12 months. and market demand is increasing. Certainly, it's not decreasing as people had projected as electric vehicles would be adopted and the cancellation of the $7,500 federal tax credit electrical vehicles has reduced electric vehicle sales by 50% in the last month according to national statistics.

So California is going to require a lot of gasoline for a long time. And ethanol is really the only way to reduce the cost of the gasoline. All the other factors are increasing the cost of gasoline. So we anticipate that retailers -- sorry, largely with independent retailers and the truck stops, the travel stops national chains who are already structured with their infrastructure to be able to get this increased margin by a rapid adoption of E15. We think the competitive environment will cause pretty much every retailer to adopt E15 as rapidly as they can. Otherwise, the guys across the street or down the street will be getting their customers from them with a $0.20 cost advantage.

Your next question is coming from Derek Whitfield from Texas Capital.

For my first question, I wanted to start with the top-down look at your business. As you think about the impact, the inflection in the credit markets will have on your U.S. RNG and ethanol business, and the IPO of our India Biofuels business, could you paint the picture for your EBITDA profile net to Aemetis in 2026? And how this could lead to improved access to lower cost capital and allow you to pay off some of your Third Eye credit facilities and notes.

Yes. That's a very good top-down because you actually hit what I believe will be the biggest business opportunity that we're pursuing right now. We are in the middle of a refinance of our most expensive debt. Third Eve Capital has some very inexpensive debt, about $118 million at an effective interest rate of about 5.1%. But we also have a chunk of debt with them that is pretty expensive. And so we are in the process of negotiating the refinance of that expensive debt, supported by the 45Z production tax credit revenue, which we've been generating since January. It hasn't shown on our financial projections yet. But as we monetize this into cash the favorable impact of that over the next 4 years is resulting in our ability to refinance our gross expensive debt. I do not anticipate that's going to close this quarter. I think it's a first half 20206 event as lenders get comfortable with the ongoing nature of our 45Z sales. But we do anticipate we'll be doing sort of 45Z sales on a quarterly basis.

We have multiple buyers that want to cite sign up with multiyear offtakes for our 45Z production tax credits. And we have existing buyers of our investment tax credits that have already told us they want to buy all of our 2026 ITCs and for the foreseeable future. And that particular buyer has capacity that can take whatever we need to offtake to them. So I think the investment committee -- community as well as the lender community will see this ongoing quarterly flow of 45Z production tax credits for both biogas as well as ethanol and a steady drumbeat of ITC sales that are in federal law now can continue on for the next 4 years at least. And personally having been in Washington, D.C. a lot. I think we've got 2031 to 2035. So we have up to a 9-year span of the 45Z activity continuing on. So I'm anticipating to see a refinance of that expensive debt as the fundamental quarterly profitability of the company becomes much more clear.

Terrific. And as my follow-up, Eric, I just wanted to touch on the government shutdown and get your thoughts on expectations just around when we'll get final RVO and 45Z policy and also ask if you think the administration is receptive to increasing the D3/D7 RVO given the strength of recent regeneration reports.

Let's talk RVO for a second. RVO is a fight between the oil industry and the ethanol industry with independent oil refiners being very successful in their strategies of walking away from RVO obligation just last week, CVR run by Karl Icon, was able to benefit to $488 million of avoidance of buying the obligated party RINs that they were obligated to buy. And their strategy historically has been just don't buy them. then complained to the government or declare bankruptcy or do whatever you're going to do to avoid them. And they've been very successful with that strategy and just received another $0.5 billion from the biofuels industry. from that kind of behavior.

Now in my view, the large integrated oil refineries, certainly Valero is at the top of that list are on both sides of the equation. They're suffering when the D4 or D5 doesn't reflect the actual market value because they operate the largest renewable diesel assets in U.S., P66, Marathon, Valero, I'd even put Montana refining on that list. Our traditional refiners that have migrated into renewable diesel and have interests that are very substantial in the success of the renewable diesel business. And so I think the Trump administration has a problem. And that problem is that the political cost of ignoring farmers hits about 28 states where the U.S. have been literally have to have the corn and soybean vote. And you don't get a corn and soybean vote when you are supporting oil refiners and trashing the renewable volume obligation with waivers. So I hate to tell you, but I cannot really handicap this one well. I've spent over a dozen trips to Washington, D.C.

There's a very strong support for the RVO among the 28 ag state and the 56 senators from those states. I think what we're seeing here, unfortunately, is there are other issues that are more important to the administration, both domestic and foreign issues that they've been spending time thinking about and that the events of yesterday or day before yesterday, the Democratic wins across slate are going to bring back into clarity, the need for the votes of Midwestern corn and soybean states. And I think that -- I hate to say it this way, but the Democratic sweep, including Proposition 50 in California is a wake-up call for Republicans to pay attention to domestic policy including energy prices, which kind of drove a couple of governors into their seats by declaring on utility prices. So I think RVO will suddenly become a much more interesting topic because of the Democratic those that happened this week. It's strange, but it's all politics and that had a real wake-up call. And I hope that senators we talk to you directly will be more effective now with the White House.

Regarding 45Z, the Department of Energy has been focused on the January 1, 2026 adoption of the One Big Beautiful Bill. There's been no real appetite to take up except for the fact that the industry is making a tremendous amount of noise about the need for 2025 calculations to be completed. And we have really until September '15 to 2026 to get that done and continue to be very organized as an industry to have the political and regulatory support of the DOE finally gets around to doing what they should have done in January 2025. But the new leadership at the DOE is still not in place. Audrey Robertson, the Head of [indiscernible] still isn't in her job. And so the response we get from many regulatory agencies is that the person who's in charge of making decision is still pending Senate approval and we should all just be patient and understand that politics takes time. So we're sitting here in November with something that should have been adopted in January under previous administration.

I do think it will get figured out. I do think that there's a range of outcomes, some of which I'm pleased with, and many of which I'm not. But we, as an industry, are United to getting the 45Z grid model to reflect the overall grid model and not be manipulated, which is what had happened in January of the artificially negative 51%. So I have a lot of confidence in the industry is United on the 45z topic, our company has a tremendous -- I mean, tens of millions of dollars of additional tax credits in year 2025, that are waiting for this calculation to come out. So there will be some upside. I just don't know whether it's going to impact 2025 or we're going to have to wait until January 2026 to start seeing the actual calculation.

Eric, just maybe to follow up on 1 point of the question. Just on the day 7 RVO, do you think there's an appetite to increase that just given the strength of recent regeneration reports, which would suggest the market slightly oversupplied.

The market is clearly oversupplied. There is a broad need to answer the soybean farmers need to sell soybean oil and the corn farmers need to sell corn oil. And right now, I think that's -- the only real solution to that is to increase biofuels markets, both ethanol, which takes corn starch, as well as renewable diesel and even potentially SAF. There's a movement to go back to the $1.75 under a new tax bill for SAF. So I think the pendulum swung against the corn farmer and soybean farmer during the middle of 2025. and there has not been enough of a reaction by the federal government. And direct subsidies are 1 reaction, another reaction is simply create new markets. And so a domestic market of biofuels for D4NS and D5S which are largely -- renewable diesel in SAF as well as D6, which is ethanol are clear needs. What I personally focusing on is the D3. The D3 cannot be replaced by anyone of the other molecules. And so you end up with a cellulosic waiver credit is really the only solution to over mandating D3s. And the message I would like the industry to communicate is that the RVO should start with a very strong so that you don't have an overflow of D3 in the D4s and then D4s and the D5s and D5s and D6s because that's the weakness of the RVO.

If you don't start with a strong D3, essentially overshooting what dairy RNG producers are going to achieve than whatever you mandate for D4 and D5 are going to get reduced, and that's going to be upsetting to a lot of soybean farmers. And then D6 is upsetting to a lot of corn farmers. So it's a very simple solution to a very large problem, which is how do you take care of 160 million acres of U.S. farmland that produces only 2 crops, corn and soybean, and that is increase of biofuels market demand by having a stronger RVO starting with the D3 RIN. So this is a message we've been taking as an industry. I serve on the Board of the renewable fuel association representing corn the ethanol industry, but also the RNG coalition representing the dairy RNG and other RNG producers. And I think the biofuels industry has done an excellent job of making the case. But the the administration's attention it's been elsewhere, and they've solved some very big issues in the Middle East and elsewhere. And now I think they're going to have to snap their head back to paying attention to domestic industry and this is a big one. The RVO strengthening is a really big opportunity they have to help 60 million acres in 28 states.

Your next question is coming from Amit Dayal from H.C. Wainwright.

So Eric, I think there were expectations that some of these 45Z tax credits would be monetized in third quarter. Was there any push out? And then going forward, I know you are trying to make this a bit more consistent in the future. But what are the sort of steps that are being taken to make that come to fruition?

There are the actual physical things to happen in the third quarter that caused this delay in the fourth quarter, specifically the expansion of production capacity by about 30% happened in the middle of September. So we literally had 11 days to sell ITCs if we're going to do it in the second quarter. And because you have to do a cost action and insurance policy much other things, that's just really not possible. So it was the completion of the project and the in-service date that drove the ITCs to the fourth quarter. On 45Z, it's much easier for us to sell larger volumes. And if the DOE calculation would come out, and it was the right number, we'd have almost $40 million of 45Z to sell for 2025. And selling a part and then later selling more have some technical complications to it. It's not impossible, but it's just -- it's difficult and it's a pain in the rear. .

So we've been trying to sell the correct number the first time rather than go back and doing it twice. And that has caused us to be reluctant to sell the smaller numbers. I mentioned $10 million of 45Z with a sale in the fourth quarter, it should be $40 million for the year. So it's unfortunate, but that's where we are. And the government shutdown, I think, was the final nail on the coffin that caused us to conclude that we should just go forward. And when we get more tax credits later for 2025, we'll just sell them later. It's disappointing, but that's what's happening in the world, and that's what we're going to do.

Understood. With respect to the India IPO, I mean, it looks like you are close enough now in the first quarter, 26% is not too far. Any high-level sort of indications for maybe investors in terms of what you think the valuation range could be for that business? And how much you are looking to sort of retain and how much you might offload?

I'll answer the second question first. We're looking to sell between 20% and 25% of the subsidiary. So we retain ownership of more than 75% of we still be consolidated revenues and cost of goods sold and everything else into our financial statements. And this show a minority interest in other income as we declare what our earnings are the valuation, which will drive how much capital we can raise is it's a wide gap because we're expanding our footprint in India pretty significantly. So over the course of the next quarter, we expect to be finalizing what the valuation looks like. And certainly, by the end of the first quarter, we're looking to have a number that we could report that we're pretty solid on. But as of right now, it's a fairly wide band, anywhere from $100 million to $200 million would be the range we're looking for. If I can expand it to $300 million, I can assure you that we have a business opportunity that would justify that kind of support for the company, and we're going to push for that as much as possible. So if we can sell 20%, 25% of the company for $300 million, we absolutely will. And the business expansion we have in India, I think, supports that kind of valuation. We're just looking to see whether the market is in agreement with us about the exciting growth opportunities we have in India.

Just last one, the $266 million in debt issuing us current. A little bit of an overhang on the stock, it feels like I know you are working on it, but is there maybe an update on the time line by when you think this could get negotiated and done?

The refinancing is in process. The 45Z revenues is what's really delayed that process. We're looking for 45Z to be a quarterly predictable drum beat of after-tax cash and income to the company that will go on for the next 4 years and probably for the next 7 or 8 years because of where these things get extended. And so that was supposed to start -- supposed to have started January of 2025. But as we have learned, the treasury upon departing with the prior administration throughout an artificial number of negative 51 carbon intensity. Our California carbon intensity is negative 384. So the current calculation does not allow us to generate about 90% of the revenue from 45Z. And that has delayed our refinancing, let's call it, completion as we've had to say to the lenders, okay, guys, it's in process. This is what the loss is, but we don't have the calculation yet. We have legislation. We have regulation. We don't have the DOE calculation. And so when we drop in the DB calculation, I think since we have good solid offtakes, 45Z as well as ITCs, I think our business becomes much more understandable and predictable as we start showing those revenues on a quarterly basis. And that drives the refinancing.

Your next question is coming from Dan Storms from Stonegate.

Just to start -- I want to start with the dairy digesters right now, it looks like you sold about 114,000 MMBTUs in the quarter. On an annualized run rate basis, that's a little shy of the $550,000 goal you have set for the end of the year. I guess my question is, what will it take to get the run rate up to that number? I know there's a typical seasonality as the winter slows that down. Is there anything else we should be keeping in mind here?

The 30% production capacity increase that I discussed happened 11 days from the end of the first -- of the third quarter. So it did not have a significant impact on the 90 days of the third quarter. And so that's a primary driver of what we're doing here in the fourth quarter to exit with a higher capacity. We also have multiple digesters under construction right now. And so it's an overlapping process where we're building additional digesters at the same times we're completing the in-service dates for existing digesters.

Understood. That's very helpful. And then turning to the India plant you mentioned now that you bring online biogas and ethanol production there. I guess what are the logistics to getting that up and running and any time lines we should have in our mind?

Yes. There's 2 things in India. Number 1 is we have an 80 million-gallon plant that's fully operational and fully maintained, ready to do 80 million gallons a year and the oil marketing company tender process continues along. We have a tendering process right now. It's publicly available to everybody. We should be able to announce our allocation from that as quickly as next week then that would be for the next 4 months. We expect, however, that there is some policy enforcement by the India government that is being brought to fruition. There's a just a piece of litigation at the Supreme Court that this month, the government is having to justify where they haven't adopted a penalty for diesel gallons that do not have biodiesel. And this was a penalty that was passed in legislation a couple of years ago, but they've been postponing it several times and have not quite adopted it yet. So that litigation is for the enforcement of that penalty. Virtually every gallon of diesel in the country will have biodiesel in it if the Sureme Court determines the enforcement of that legislation is going to have to start.

So there's also some contracts that were issued to us, $58 million, had about $18 million profit in it. that the oil marketing companies because the tariff was changed by the government determined they would not perform in of those contracts. It's a contract breach by the oil marketing companies, that is a part of that legislation. So we are targeting a resolution of the government's position and maybe some strengthening in the tenders as well as perhaps a resolution in this contract allocation that we received. And if we can get 1 or both of those, that's going to be very strongly positive for our biodiesel business and really timed well for the IPO. Our diversification into the other businesses will include at least 1 acquisition of an operating facility and for a variety of reasons, we're extremely well positioned there.

So we'll see some transactions happening either prior to or at the time of IPO driving us into these new lines of business. We have a very talented management team and an extremely talented CEO and extremely talented CFO and looking forward to that team continue to build an exciting business in India that, by the way, is diversified. It's more have lines of business that might be differentiated from the parent company because they're responding to the needs in the India market, which is an expanding market, all by itself.

Your next question is coming from Ed Woo from [indiscernible].

Congratulations on all the progress. And also on the India IPO as is progressing for a possible IPO next year, have you given further thought on what you're going to do with the proceeds, either take it back to the U.S. and use that as part of your refinancing plan? Or will it be stated in India to develop these new business lines that you are talking about?

A portion of the IPO proceeds are definitely planned to be utilized in the U.S. And if we have not completed the U.S. refinancing, I can assure you we'll be a part of that. But the process we have currently is a refinancing without India IPO funds included. It just makes it easier, of course, at the amount we're financing smaller. We are anticipating that the India IPO would also provide substantial growth funding in India, essentially fully funding a very strong revenue increase. And because of our intention of having 75% of more owenership by the parent company, all those revenues would drive top level growth in the United States. So we expect the refinancing as well as top level and bottom line growth to come from India.

That sounds good. And just a clarification again. India doesn't have any debt right now, right?

That is correct, yes modifies the inventory prepaid for the inventory.

We have reached the end of the question-and-answer session. I will now turn the call over to management for closing remarks.

Thank you to Aemetis stockholders, stock analysts and others for joining us today. We look forward to talking with you about participating in the growth opportunities at Aemetis. Todd?

Thank you for attending today's Aemetis earnings conference call. Please visit the Investors section of the Aemetis website where we will post a written version and an audio version of this Aemetis earnings review and business update. Matthew?

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.

Welcome to the Aemetis Second Quarter 2025 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded.

Joining us on today's call is Eric McAfee, the Chairman and CEO of Aemetis; Andy Foster, the President of Aemetis Advanced Fuels; and Todd Waltz, the Chief Financial Officer of Aemetis.

It is now my pleasure to introduce your host, Mr. Todd Waltz, the Executive Vice President and Chief Financial Officer of Aemetis, Inc. Mr. Waltz, you may begin.

Thank you, Matthew, and welcome, everyone. Before we begin, I'd like to remind everyone that during this call, we'll be making forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on the current expectations and beliefs and involve risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such statements.

These risks and uncertainties include, but are not limited to, those factors discussed in our earnings release issued today and in our most recent Form 10-K and Form 10-Q filings with the Securities and Exchange Commission under the caption Risk Factors and Management Discussion and Analysis of Financial Condition and Results of Operations as well as in our other filings with the SEC.

We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future developments or otherwise, except as required by law. Please refer to our earnings release and our SEC filings for a more detailed discussion of these risks and uncertainties. Full financial details can be found in our second quarter 2025 earnings release and Form 10-Q available on the Aemetis website and EDGAR.

I'll briefly highlight the key items. Revenues were $52.2 million, up by $9.3 million from the first quarter revenue, primarily due to the fulfillment of biodiesel orders with oil marketing companies in India. California Ethanol saw a slightly lower production rate of 13.8 million gallons to maximize margins during the quarter. California Dairy Renewable Natural Gas recognized $3.1 million of revenue from 11 operating digesters during Q2 using the CARB-approved LCFS pathway for 7 of the digesters.

As we will discuss later, Section 45Z tax credit revenue from the production of dairy renewable natural gas were not included in the second quarter since we recognize revenue when credits are sold.

Operating loss improved by $4.9 million from the first quarter of 2025, reflecting reduced SG&A in the second quarter of 2025. Interest expense, excluding the Series A preferred unit accretion, rose to $12.3 million, in line with our capital structure and investment phase. We reported a net loss of $23.4 million, roughly flat versus Q2 last year after adjusting for the nonrecurring charge during the prior quarter of last year.

Cash at year-end was $1.6 million following $3.6 million of investment in carbon intensity reduction and dairy renewable natural gas production expansion. As Eric will describe shortly, we expect multiple revenue streams from India, LCFS credits and federal tax incentives to ramp up as the year progresses, positioning us for a stronger second half of 2025.

Further, we remain focused on improving our capital structure. With cash flow expected to increase in the second half of this year, we anticipate further progress on debt reduction and are actively pursuing low-cost financing and refinancing alternatives.

Now Eric McAfee, our Chairman and CEO, will review our businesses.

Thanks, Todd. I'll start with the business segment update, followed by updates on future projects and supportive regulations.

In our dairy RNG business, we are steadily scaling up gas production with a new multi-dairy digester coming online this month that is expected to increase RNG production by 30%. As planned, we expect to reach 550,000 MMBtus of renewable natural gas production capacity this year and grow to a 1 million MMBtu annual run rate by the end of 2026.

We are now operating or building digesters at 18 dairies funded by equity and $50 million of USDA guaranteed financing with 20-year repayment terms and attractive interest rates. 7 of our dairy pathways were approved by CARB during the second quarter at a blended negative 384 carbon intensity score, unlocking about 120% more LCFS credit revenue for those dairies starting this quarter compared to digesters with the negative 150 default pathway score. Four more pathways are currently under review with CARB and are expected to be approved under the faster Tier 1 pathway process that was adopted by CARB last month.

Additionally, these dairy RNG facilities qualify for federal Section 48 investment tax credits. To date, we have sold $83 million in investment tax credits related to our RNG facilities and received approximately $70 million in cash. We monetize the production of dairy RNG in multiple ways. Until this year, we have generated revenues primarily through the sale of the gas molecule, the sale of California low carbon fuel standard credits and the sale of federal D3 renewable identification numbers.

Since January 1, 2025, we've been generating transferable Section 45Z production tax credits, which we are working to sell and generate additional income this quarter. In July 1 -- or to say, on July 1, 2025, the California Air Resources Board amendments to the LCFS program that will apply for the next 20 years became effective, resulting in an increase in LCFS credit prices from about $42 to about $60 in the past month or so.

The current cap on the price of LCFS credits is $268 for the year 2025. The LCFS program is expected to incur deficits this year that would reduce the inventory of available LCFS credits and be expected to continue to increase credit prices.

Collectively, molecule revenues, LCFS credit sales, D3 RIN sales and the sale of 45Z production tax credits are expected to generate strong positive cash flow from operations this year, and expanding operating cash flow in 2026 as new production comes online.

At our ethanol plant, our key vendors are fabricating equipment for the $30 million mechanical vapor recompression system. The MVR project is expected to reduce natural gas use by 80% and add an estimated $32 million in annual cash flow starting in 2026. We have been awarded $20 million in grants and tax credits to help fund the MVR system.

Ethanol pricing has improved since earlier this year and the recent EPA approval of summer E15 blending and lower corn prices have improved margins. We decreased production during the spring in order to optimize margins, but recently increased ethanol production to support market demand and participate in the higher-margin environment.

California legislation to approve E15 year-round passed the assembly with a unanimous vote and now is advancing through the state Senate for approval that is expected later this year.

In India, we resumed biodiesel deliveries to government oil marketing companies in April following a 6-month pause on in OMC purchasing, shipping $11.9 million of biodiesel and co-products in the second quarter. We are targeting an IPO of our India subsidiary in early 2026 and recently appointed a new Chief Financial Officer at our India subsidiary to lead the process. We are also actively seeking to expand into ethanol production in India, which is strongly supported by government policies and pricing.

Let's look at our future projects. For our sustainable aviation fuel and renewable diesel project, we have received the authority to construct air permits and conditional use permit for our 90 million gallon per year SAF and renewable diesel facility at the Riverbank site in California. When operated solely for sustainable aviation fuel, capacity will be approximately 78 million gallons per year. We are in active discussions on financing structures and are awaiting further clarity on the 45Z production tax credit and biofuel mandates to support project financing.

For our carbon capture project at the Riverbank site, we have completed initial site work and conductor installation for our geologic characterization well. The data we obtained from the next phase of drilling will support our Class 6 CO2 sequestration permit application with the EPA. Once permitted, the site is expected to sequester up to 1.4 million tons of CO2 annually.

Let's review some regulatory events that support a strong growth outlook for Aemetis and the biofuels and biogas industries. Aemetis is positioned to benefit from a range of federal and state policies that directly enhance the value of its low-carbon biofuel and biogas operations.

The California Low Carbon Fuel Standard. Amendments adopted by CARB to establish a 20-year framework for reducing transportation fuel emissions became effective on July 1. In response, LCFS credit prices rose by nearly 50% and are expected to continue to increase as credit supply tightens and credit demand increases. We expect further strengthening during the second half of 2025 and for the foreseeable future.

The Federal Renewable Fuel Standard. The sale of renewable natural gas qualifies for D3 RINs, currently adding $19 per MMBtu in value at today's prices. Section 45Z production tax credits. Effective January 1, 2025, the new federal Section 45Z transferable tax credits support low-emission ethanol and RNG production. Aemetis is currently applying treasury guidance to calculate and market these credits for both our Keyes plant ethanol production and our RNG sales, with additional clarification expected later this year.

In addition to any further clarification in 2025, the Section 45Z credits will increase in 2026 under the recent one big, beautiful bill, which removes indirect land use from the ethanol plant calculation and requires dairy-specific CI scores for renewable natural gas. We estimate this will double the 45Z credits in 2026 for each business, even with no further changes to the current treasury guidance.

Section 48 investment tax credits. Aemetis received $19 million in cash proceeds in Q1 2025 from the sale of solar and biogas-related investment tax credits. We expect additional sales of both investment and production tax credits in Q3 2025 and in Q1 2026 for the balance of 2025 production tax credits, plus additional sales of both PTCs and ITCs later in 2026.

E15 ethanol blend expansion. The U.S. EPA has approved temporary summer use of 15% ethanol in 49 states and new legislation is advancing to allow year-round use, including in California. E15 approval in all 50 states would expand the potential U.S. ethanol market by more than 5 billion gallons per year from the current 14 billion gallons per year, while lowering fuel prices for consumers.

In California, E15 should decrease fuel prices at the pump by $2.7 billion per year according to a recent UC Berkeley study, while increasing the ethanol market by an estimated 600 million gallons per year. In California, Governor Newsom has directed CARB to expedite the process for allowing the sale of E15 gasoline in the state. And as previously mentioned, the state House unanimously approved legislation that would allow for E15. California is currently the only U.S. state that does not allow the sale of gasoline with higher than a 10% ethanol blend.

These aligned policy developments in the U.S. are expected to significantly strengthen Aemetis' revenue, cash flow and project economics across its RNG, ethanol, carbon capture and SAF, RD businesses. Our India business is expected to grow with support from the India government for the benefits of biodiesel, ethanol and other biofuels to farmers, consumers and the environment. With aligned regulatory support and milestone execution underway, Aemetis is positioned for growth and improved cash flow through year-end and throughout 2026.

Now let's take some questions from our call participants.

[Operator Instructions] Your first question is coming from Matthew Blair from TPH.

Congrats on getting the CARB approval for the 7 dairies at the end of the second quarter. I think you mentioned that, that did not flow into your financial results. Could you talk about at current LCFS prices around $60, what kind of EBITDA impact that might have for Aemetis? And are you currently waiting any other LCFS pathway approvals?

Sure. Thanks, Matt. We have 7 dairies already effective. We have 4 more pending right now, and then have additional ones that we'll be filing in the fourth quarter that are currently in the 90-day testing period. So we would be expected to exit the year with a total of 7-plus another 5 minimum. So at least 12 dairies either granted or soon to be granted. The new process, by the way, Tier 1 is significantly shorter than the 2-year process we went with Tier 2.

So the financial impact, I think I'm going to get back to you on that one because it's highly correlated with the price of the credits. So when we were at 42, it was 1/3 less revenue than it is at $60. I think we cited it's roughly $19 per MMBtu, if I recall correctly. But we -- let's get back to you with a memo on this. The formula is well known, but the price is moving quickly. So we're trying to give investors a range of values per MMBtu for the LCFS. So we'll also endeavor to see if we can include that in some press releases, so people can see the impact as those prices change.

Sounds good. And then could I get your view on the D3 RIN supply-demand outlook? This year, I think we're tracking for around like 1.6 billion D3 RINs generated. You're looking at RVO for 2025 around 1.1 billion for '26 and '27, I think the proposal is around like 1.3 billion, 1.4 billion. Do you have any hope that the EPA may revise up those initial 2026 and 2027 D3 RVOs?

As you know, we're in a comment period that ends tomorrow, and there is a universal opinion in biofuels that the D3 RIN is being understated. There was a mistake by the EPA, and it was filed in the Federal Register, so it was printed for everybody to read that through no fault of their own, the oil industry is being forced to buy DJ RINs. As I think everybody knows, that's exactly opposite of what the renewable fuel standard was written to do.

As George Bush, the President, who signed the Renewable Fuel Standard said, if you left up to the oil companies, we would all just be buying oil from the Middle East. So the point of the entire Renewable Fuel Standard is to cause the adoption and to be focused on the availability of production, not on the amount of consumption. So those comments, which you can read as public filings, you'll see ours as well are focusing on what the actual renewable fuel standard regulation requires.

Andy, do you want to make a comment on that?

No, I think that's -- you hit it exactly right, Eric. I think the -- it's a -- maybe not quite a mistake by some forces within the industry to skew in that direction, but the law is the law, and we're going to emphasize that in our comments as well as many other biofuel producers around the country.

Your next question is coming from Derrick Whitfield from Texas Capital.

Eric, could you update us on the progress of 45Z as you understand it, with respect to timing of final rules from treasury and the GREET model that will be used for the provisional emission rate calculations?

We are in the thick of it right now. And there is an update to the GREET model that has been presented to the DOE. And if accepted and adopted, it could matter -- be a matter of a few weeks at most, maybe even a 1-week span that they could update the GREET model. They've already updated twice a year after the initial filing in January. So this would be a third update. That update would allow us to then generate 45Z credits in the month of August and sell them in August or September. So the quick and easy way forward is for industry is for the Department of Energy to simply add a few cells. I think it's 6 or 7 cells to the foreground of the GREET model.

The 45Z final rules, which in your -- there's proposed guidance and then final guidance. We currently have guidance. It's a January 2025 guidance. It's called intention to propose guidance, but it says on its face, this guidance can be used for transactions. So we do have guidance. And frankly, that guidance is sufficient for us to transact 45Zs if the GREET model is updated and we're happy with the calculations.

The reason why industry has to do this effort is that they were in a hurry. They admit they were in a hurry. And so, they took all of the methane emissions and divided by -- from all the animals in the United States and divided by all the estimated animals and said, okay, if you're going to make RNG, this is your average number. And whether your project is better or worse doesn't matter, here's your number. And they acknowledge that's not correct. We are working to fix that.

And the OBBB signed on July 4 helped clarify for the regulators exactly how the 45Z is going to work starting January 1, 2026, which helped clarify for them what 2025 should look like. So we're working to get that implemented. I would tell you that it's largely down to 1 or 2 people at this point in time, and our company has been very proactive in getting those formulas in front of the DOE, so we don't have to delay in terms of what kind of work needs to be done on the GREET model itself.

And not to belabor the point, Eric, and we've had conversations on it because it could be a material number for you guys for your dairy business. But as you kind of think about where you stand or Aemetis stands today as it relates to attending the registrations and tax ID numbers, and whether you would expect the credit to be retroactive for first half sales, I'd love your perspective on that. And again, we're still thinking about this as potentially a $60 to $80 per MMBtu type metric that we could see. Is that a reasonable range as well?

The current calculation should be about $82 per MMBtu. And what we're missing is the DOE GREET model that allows the foreground cells to be input to site to put in what state you're in, et cetera, if you're an anaerobic digester in order to put out the emissions rate that would generate that number.

So we expect that the DOE will put out a model for 2025. That is not their current process. Currently, they're focusing on January 2026. Industry in general is having to motivate them to see the value of putting out an amended model for 2025.

But the values when we're done with it, between the combination of the model plus the provisional emissions rate process, which is an opportunity for us to say, we're not happy with the total numbers come out of the model, let's go ahead and get some project-specific information from them. Between the 2 of them, we should end up at roughly $82. That goes up, by the way, by the rate of inflation. So next year, it will be actually larger in the year after that, larger. But current target is in the $82 per MMBtu range.

And Eric, just one part of that question I wanted to have you comment on too, is just where you or Aemetis stands in attaining the registrations and tax ID numbers?

We're fully registered. Andy, do you have any comment on this? Ethanol plant is fully registered. Our RNG production facility. I would disclose to people that you don't have to register each one of the digesters because they're not producers of renewable natural gas, they produce biogas. So it's just our RNG production facility that's required to be registered. So we're fully registered and have acknowledgments from IRS of that registration. That was also done on a timely basis. So we don't have any issues there.

Your next question is coming from Amit Dayal from H.C. Wainwright.

Just a question on the monetization strategy for your production tax credits going forward. It's been a little lumpy in the past. But going forward, with this regulatory backdrop, do you think we can see a little bit more consistent monetization going forward?

Yes. The Section 48 investment tax credits, as we, I think, commented probably a year ago, were expected to be lumpy as we do investments, and we go through a several quarter cycle of putting them all together and then selling them. And we are in the process of doing another Section 48 tax credit sale, which we would hope to close this quarter.

But 45Z is more akin to revenue. And so, we've already done a transaction in which a single customer signed up to multiple closings of tax credit purchases. We would anticipate that, that's the format we're going to use for 45Z with the expectation in the worst-case scenario of one sale every quarter, probably the most optimistic scenario would be a sale every 45 days, but certainly every quarter.

So 45Z should become a recurring quarterly revenue item. Somewhat harkening back to what Derrick Whitfield just said, we've been generating 45Z since January. We have not reflected any of the revenue because our revenue recognition policy is that upon the sale and receipt of cash, then we recognize the revenue.

So if you look at our Q1 and Q2 revenues, you're not actually seeing any 45Z revenues and frankly, not seeing any LCFS revenues in those quarters. Those -- both those types of credits, we recognize when they're sold. And so our dairy pathways approved in the second quarter are actually credits received literally in the last few days of the second quarter, and then are sold in the third quarter.

So third quarter is going to be one of those quarters, which we would expect would have some of the catch-up on the LCFS, certainly catch-up for the first half of the year on the 45Z if the Department of Energy files the amended a GREET model. And so that you'll see this onetime lumpiness on quite a lot of cash and a lot of profit showing up, and then it will become more of a quarterly correlated with production.

Understood. With respect to the India IPO, is there -- I'm just trying to see if there's an official process that has already begun? Or is this just preparation on your end that you will soon sort of get into sort of a formal mode of going public for that business over there?

We have our new CFO on site. He joined us in July. So we're not even, I think, a month into having him on board. I think it was about July 15. And so we're well into the process. There's not a public filing early in the process. The public filing comes after some review of documentation by the investment banking firm and some other parties.

So we would expect to see sometime this fall that there would be public filing documents that people would be able to read. I don't think we're going to press release that, but it will certainly become known. We'll mention it on our earnings calls, et cetera. But it will be an administrative process with SEBI, which is the regulator in India.

Understood. And then the use of proceeds, if this comes through within that time line, like what are you thinking, Eric? Is it to pay down debt or any other strategic initiatives?

We definitely have an ability to transfer money to the parent company. The exact amount will be determined largely at market conditions. But we are in a scenario in which some amount of money would be transferred to the parent. I do expect that probably would be invested in debt repayment.

But as Todd mentioned at the end of his conversation, we are working on significant refinancing. So it's possible we won't actually have any obligations for current pay because we're reamortizing our senior debt in these refinancings over quite a long period of time, 20 and 30 years. So if that were to be the case, it would just be -- it's basically strengthening the cash position of the parent company and giving us a little more flexibility for development some of these projects.

But I would not anticipate that we're talking about the majority of the funds, I would anticipate probably 25% of the IPO proceeds would be for the parent company and the balance will be for development of the India assets. I should mention because we did talk about it a bit, the ethanol industry in India is very rapidly growing. It's increasing by another 50% over the next 60 months.

And we're in the middle of what the India government is looking to implement to strengthen their agricultural sector, while at the same time, lowering cost of the pump and having environmental benefits. So the ethanol industry in India is just very strongly supported. They set the price of the ethanol. They set the price of the corn. It is a very attractive business.

And so we are very actively involved with the development of 2 sites for ethanol production and a core part of our IPO in India is that we have a base biodiesel business that's expanding, but frankly, we are aggressively moving into ethanol. Even the recent news about heavy tariffs on India is being interpreted by Bloomberg and others as a negotiating tool to bring India to the table. And one of the open doors that India has talked about is India does not allow genetically modified corn. And therefore, their yields are about 3.3 per acre and American yields are in the 11 bushels per acre. So they're less than 1/3 of the yield per acre, which means that U.S. corn is frankly less expensive.

And so we'll see how these trade negotiations go. It's a very uncertain environment for a lot of parties. But one of the outcomes very possibly could be that India becomes a market for U.S. corn, but restricted to ethanol use. Very big issue was they do not want the population there eating genetically modified corn. So restricting it just to ethanol use would be of great value to Aemetis.

We would be uniquely positioned to have an excellent ethanol business supplied, frankly, by U.S. corn, but then providing distilled grain and low-cost fuel and environmental benefits to the Indian economy. So we'll see how that plays out, but that was kind of an upside. The domestic environment for ethanol in India is very attractive.

I really appreciate that additional color, Eric. It looks like you guys are positioned well on multiple fronts from this point.

Your next question is coming from Dave Storms from Stonegate.

I just want to -- could you remind us with your RNGs that are expected to get approval by the end of this year, are those approvals backwards looking? Will you be able to take advantage of those higher credits?

No. We have 7 that are already approved, the 4 that are pending would be expected to be approved next year and pack back to best case scenario is probably the fourth quarter of this year.

Yes.

Yes, probably the fourth quarter this year. So we might have some impact this year. The way they do it is sort of a 6-month look back kind of a situation. So if we get approved by March of next year, then it could be effective in the fourth quarter of this year. So currently, though, I would say we've taken a conservative view, which is probably first quarter next year is the first time we'd see those 4 additional pathways have an impact. We hope to see an upside, but I think that would be our projection right now.

Understood. And then maybe just a little more commentary about -- around the refinancing. How far along in that process are you? Maybe if you're looking at any unique options and maybe an anticipated time line to getting that completed? Anything like that would be very helpful.

We are very deep in a refinancing process with a counterparty. And I would say by the end of August, we'll be through most of the due diligence and documentation work. The dependence we have on that refinancing, and I would say almost all refinancings will be for us to prove out our 45Z production tax credit revenue.

Not that it won't happen, it's federal law. It's the calculation for renewable natural gas and the calculation for ethanol plant. If the DOE model is done properly, then we're able to show the DOE model. We sell tax credits. We'll get, frankly, tens of millions of dollars from that in the first transaction, and we'll be showing that to our lender, and they would be able to plug it into their formulas.

Currently, the formulas work okay. But with that number included in revenues, it actually becomes a very, very attractive 5-year stream of after-tax cash flow to the company. So we need to prove that out. And I say prove it out as in everybody knows what the math is, but do we have the cash? Not yet. So let's get the cash in and then the conversation can lead to final documentation and closing.

Your next question is coming from Ed Woo from Ascendiant Capital.

Congratulations on all your progress. Thanks for the update in terms of California and possibly allowing usage of E15 gasoline. If it gets passed, how quickly do you think it will get implemented? And how quickly will you see the increase in demand for your ethanol?

The implementation will not be immediate at every one of the stations in California. But because we're selling a commodity, it's that last gallon that really prices everything. So 600 million gallons of additional demand is actually enough to push the entire country from oversupply to a sort of a more balanced environment. And then with E15 and 49 other states, there is certainly the expectation that we're just going to be short ethanol.

We currently export almost 2 billion gallons of ethanol to foreign countries. And if E15 becomes adopted in California this year, which is a better than 75% chance that's going to happen. And if Congress picks it up and gets approved this year, which is better than 50% chance, you're just going to be short. It's going to end up getting the value it should be getting, which is more on par with gasoline. And since we're replacing aromatics, and aromatics are typically $0.20 to $0.50 a gallon more expensive than gasoline, and we're doing 113 octane versus 84 octane, which is gasoline-based octane.

We have a very valuable molecule that's been undervalued because of this 10% limitation, too much supply, not enough demand. That is expected to move to the opposite, which would be excessive demand because of how valuable the molecule is, and that should generate additional value per gallon for us. I do think it's a gradual trend, though. It's probably an 18-month cycle before you're going to see significant need for additional construction of facilities, but that's certainly what's coming.

If we add 5 billion gallons of demand to the U.S. ethanol industry, that's far in excess of capacity in the industry. The entire industry's production capacity today is about 17 billion gallons, and that's going to increase to over 20 billion in rather short order with E15.

So it's just a question of when. Does it happen earlier or later, but sometime over the next -- by the end of 2026, I think you're going to see people proposing new facilities because of how profitable the industry is and a need for more of the molecule.

Andy, do you have any comments on that?

No. I think from an implementation perspective, it's really up to the blenders, how fast they want to go with this in terms of putting it out. There's no physical change that needs to take place. It's just a question of what they -- how fast they want to implement it.

And I believe that the CEQA reform also allows for an expedited price process on building additional storage facilities, which has been a big issue in California. California does not have enough fuel storage facilities. And so a lot of times, it's the trade-offs between things like ethanol and RD and sort of what's driving the demand for those things.

But I believe that the CEQA reform that the governor just recently signed will help streamline the process of building some additional tankage in California, which is desperately needed. So that should help as well.

Thank you. That concludes our Q&A session. I will now hand the conference back to Eric McAfee, Chairman and CEO, for closing remarks. Please go ahead.

Thank you to Aemetis stockholders, analysts and others for joining us today. We look forward to talking with you about participating in the growth opportunities at Aemetis.

Thank you for attending today's Aemetis earnings conference call. Please visit the Investors section of the Aemetis website where we'll post a written version and audio version of this Aemetis earnings review and business update. Matthew?

Thank you. Everyone, this concludes today's event. You may disconnect at this time, and have a wonderful day. Thank you for your participation.