Welcome to the Aemetis First Quarter 2019 Earnings Review Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Mr. Todd Waltz, Executive Vice President and Chief Financial Officer of Aemetis, Inc. Mr. Waltz, you may begin.

Thank you, Rob. Welcome to the Aemetis first quarter 2019 earnings review conference call. We suggest visiting our website at aemetis.com to review today's earnings press release, updated corporate presentations, filing with the Securities and Exchange Commission, recent press releases and previous earning conference calls. This presentation is available for review or download on the aemetis.com homepage. Before we begin our presentation today, I'd like to read the following disclaimer statement. During today's call, we'll be making forward-looking statements, including without limitations statements with respect to our future stock performance, plans, opportunities and expectations with respect to financing activities and the execution of our business plan. These statements must be considered in conjunction with the disclosure and cautionary warnings that appear in our SEC filings. Investors are cautioned that all forward-looking statements made on this call involve risk and uncertainty and that future events may differ materially from the statements made. For additional information, please refer to the company's Security and Exchange Commission filings, which are posted on our website and are available from the company without charge. Our discussion on this call will include a review of non-GAAP measures as a supplement to financial results, based on GAAP. A reconciliation of the non-GAAP measures to the most recent directly comparable GAAP measures is included in our earnings release for the quarter ended on March 31, 2019, which is available on our website. Adjusted EBITDA is defined as net income or loss plus to the extent deduced in calculating such net income; interest expense, loss on extinguishment, income tax expense in tangible and other amortization expense, accretion expense, depreciation expense and share-based compensation expense. Now, I'd like to review the financial results for the first quarter of 2019. Revenues during the first quarter of 2019 were $49.9 compared to $43…

Thank you, Todd. For those of you who may be new to our company, let me take a moment to provide some brief background information. Aemetis was founded in 2006, and we own and operate production facilities with more than 110 million gallons per year of renewable fuel capacity in the U.S. and India. Included in our production portfolio is a 60 million gallon per year capacity ethanol, distillers grain and corn oil plant located in Keyes, California near Modesto. We also built, own and operate a 50 million gallon per year capacity distilled biodiesel and refined glycerin biorefinery on the East Coast of India near the port city of the Kakinada. Last year, we signed $30 million on non-dilutive equity funding and launched a renewable natural gas project to build biogas digesters at about a dozen local areas [ph], construct the pipeline connecting the digesters to our Keyes ethanol plant and install gas conditioning to produce carbon negative renewable natural gas to displace diesel in trucks. We are also in the late stages of developing a $175 million advanced ethanol production facility to convert waste orchard wood and other waste biomass into 12 million gallons of cellulosic ethanol. Three of the four businesses are now fully funded with preliminary term sheets in place for funding of the cellulosic ethanol project. The combination of these growth and cost reduction initiatives are expected to increase our revenue monthly run rate to more than $350 million per year, and in excess of $100 million per year of annualized positive cash flow within the next 24 months. This growth in revenues and cash flow reflects the upgrades of our existing plants and plant completion of new dairy renewable natural gas and cellulosic ethanol production facilities during 2019 and 2020. With the consistent support…

[Operator Instructions] Our first question comes from Ed Woo with Ascendiant. Please proceed with your question.

My question is on the core ethanol business. What's your outlook for ethanol pricing near-term?

Ethanol pricing near-term has an upside opportunity in that meaningful enforcement of the renewable fuel standard will garner upto as much as $0.80 per gallon increase. We're currently selling our product for about $1.70 in California, and less than a quarter mile away, after-tax it's sold at retail for about $3.50 a gallon. So in that calculation you can see there is a $1.80 of value that is being garnered for driving our fuel basically to the rack and then from the rack to the retail station and selling it. That $1.80 easily could be 50% or more to us; so we have a very significant upside in the pricing, this is all being driven by the supply demand curve in the U.S. which has been temporarily depressed by the EPA issuing about 2.5 billion gallons of refinery waivers, and in this month we should see the decision on the 2018 refinery waivers, which if that decision goes in compliance with federal law, you will see RINS [ph] -- the piece of paper the oil companies have to deliver the EPA, increase the value significantly and the physical demand for biofuels, specifically ethanol increase significantly as well. So we could see a very dramatic upside in ethanol. Just because everybody in California is already spending $4.20 a gallon and we take out $0.70 of taxes, end up with $3.50 going for the fuel of which currently we're garnering less than half of $3.50. So my projection on price is no change that we're going to be at the $1.70 range for the foreseeable future but that there should be the political wins of the fellas that would like to be re-elected President, this will drive enforcement of biofuels law. And of course, E15, which is again this month scheduled to be approved; that's a 50% increase of biodiesel market size in the U.S. that is -- it would become law for the first time and would again drive increased demand. So I see very significant upside but my projection would a flat price.

And then, moving towards the price of oil; I know it has a direct impact on your biodiesel plant, what's your projection for oil and has this increase -- recent increase of prices is positive for your business? Is it sustainable?

As you know, oil was at $44 late last year, currently it's in the low $60 range, hit high of $64 recently. My projection for crude oil is, it's going to be in the $55 to $65 range for the foreseeable future with the balance between Mohammed Bin Salman, the young man running Saudi Arabia, and another young man running the United States who have differing interests in terms of the price of crude oil. But the Saudi Arabians need a $70 plus price of crude oil plus taxes immediate in order to not be running negative cash flow every month as a funder of domestic economy and military expenditures. So there is a upward price pressure from the Saudi's and downward price pressures through Twitter from the U.S. President. So, I think we're in a very nice range and watch prices have not damaged the U.S. economy, the Saudi's of course are trying to avoid an energy cost increase that would stall the U.S. as a primary customer. And the current prices of the pump are stiff and expensive but not enough to actually slowdown economic growth. So we're really in a sweet spot here between $55 and probably at high of being $70 WTI; so my projection would be the $55 to $65 range is going to be sustained for a long period of time.

And last impact on India, do you think at current prices you will be able to hit those revenue potential off-lease [ph] for your India plant?

Yes. Actually this is a very bullish time for our India plant because the India government in late 2014 stopped subsidizing the importation of crude oil in general. And in so doing allowed the price of diesel to increase as the price of crude oil worldwide increases; so going from $44 crude oil to plus $60 crude oil plus taxes and immediate price has had a very positive impact on our margins in India. At the same time in which the waste feedstock that we use to operate our plant has largely been flat or even down in pricing. And what it proceed to be really stable on an ongoing basis as we use more and more waste feedstocks and they don't have alternative markets available. So it's a very, very bullish time to be in the biodiesel business in India, domestic demand now driven by the government who came out about 5 months ago with a tender, a public bidding process for all of the biodiesel capacity in the entire country. So we could have bid a 50 million gallons to the government, instead we bid only about 20% of that. So we have about 80% of our plant capacity that is growing our presence in the trucking industry, the retail industry and other industries, and which we are seeing very strong domestic demand. So we made a business decision to allow ourselves to expand into these new markets and be a significant supplier and a diversified customer base, and the $23 million purchase order that we announced literally represents less than $20 of our plant capacity, it's only about 15% of our plant capacity.

Our next question comes from [indiscernible]. Please proceed with your question.

Couple of years ago there was some discussion about spinning out some of the India plant in an IPO, and the Indian market has been very, very generous. I was wondering if that's still being considered. And if so, how close that is?

Scott, you're exactly right. The Indian market has been very much open as the U.S. market has been for new IPOs and with the India government coming out late last year for the first time with these very large tenders that are now being filled, the optimism among domestic investors in India for specifically renewable biodiesel has taken a turn for the better. The specific opportunity we have is that we could expand our contracts with the India government while also at the same time expanding our capacity from 50 million gallons to 100 million gallons per year. Since we sell biodiesel for about $3, we also have a byproduct called glycerin; a 100 million gallons a year would represent over EUR300 million revenue, up from only EUR21 million in 2018. So that's a very significant revenue increase on a relatively small capital investment because we design the plant with 100 million gallon footprint. So the upside there for -- in IPO in India definitely exists, we just this month start shipping under that government contract, so this is now opening up these discussions with investment bankers again about what the appropriate timing would be for an IPO. I do think that there is a tremendous amount of value that can be unlocked in the India subsidiary, and we intend to fully actualize on whatever that opportunity is. Today, I don't have a projection of what an IPO date would look like but certainly it's time to have those discussions because both the energy markets and the regulatory environment for biodiesel come together very nice to create basically a billion gallon capacity increase in India, that's $3 billion of new revenue and we are the leading supplier; so we have an opportunity to capture a large portion of that as the India government demonstrates their desire for a 5% blend at biodiesel. 5% by the way is not the end, India is the only major country in the world that has allowed a 100% of diesel with biodiesel. So our customers other than the government that blends at 5%, our customers largely displace all the diesel in their vehicles with our product, so it's a 25 billion gallon diesel market, and I have done the math but I would estimate at least 20 billion gallons of that could be literally completely displaced with biodiesel or renewable diesel. So there is -- I wouldn't say unlimited but a very significant 60 billion gallon, that dollar per year of 20 billion gallon market that we are a lead player in and we invested 10 years to be where we're at today where the regulations and the market conditions of crude oil prices have come together to make us a very nicely profitable fast-growing business with a significant upside, and that's of course what drives the IPO discussions in India.

Our next question is from Tom Welsh [ph], a private investor. Please proceed with your question.

Question number one, can you break out for us what it might mean when [indiscernible] comes along the line as far as per gallon increase in cash flow?

It's about 3 million per year, so it's about 65 million gallons of current production, call it $0.05 per gallon.

And could you do the same for a CO2 production?

CO2 production, if we get to $35 tax credit which is the new tax law from last year and it specifically provides for the reuse of CO2, so we intend to submit it, subject to the IRS coming back with some strange interpretation, if -- we have 175,000 tons per year of CO2 we produce, so theoretically, the maximum that we could get would be $35 times 175,000 tons, which is about $6.1 million a year of cash flow. On top of that, we have about a million, almost 1.5 million from selling the actual CO2 molecule and leasing the land. So the highest theoretical amount we could get would be $6.1 million plus $1.5 million, about $7.6 million a year of total increase in cash flow which is for -- we have a 20 million shares outstanding, that would be roughly $0.35 a share. Now, I say theoretical because it's a ramp-up of CO2 use by the Lindy Gas company and in their spin outdoors, say they are asset balanced company, they are owned by a company called Messer [ph]. So, it won't be the first year that we do the 175,000 tons but I would expect the ramp-up to be to 100,000 to 150,000 tons over a couple of years.

In regards to the guaranteed loan, currently it's a conditional commitment. You said that one thing that needs to happen under the conditional commitment is a bonded maximum construction cost. Any other thing that need to happen under that conditional commitment to make that happen?

There are a variety of administrative documents that need to be delivered but the only major milestone is actually signing the EPC contract and the related documents around that contract. All the other items, the major milestones have already been achieved. The 20-year feedstock contract, the 55-year lease on the property, the building of the demonstration facility, operation of it for 120 days, including the start-up and shutdown every month, the independent engineering report. Those all cost a lot of time and our total investment we show is about $10 million over that 3-year timeframe but those are now in place. So the conditional commitment largely is just completing the CPC contract.

With regards to biodiesel, I know you looked at this for a long time. Now with the upgrade to the biodiesel plant, it's going to be a little more complicated to double your capacity there. Do you have an idea of how many months this might take to -- once you get capacity at the plant, how long it would take to double that capacity?

We have a quote from a vendor to double our capacity in about 10 months' timeframe. So it's upon us determining that the current plant which was revenue of over $150 million a year; I think I just did the math at $168 million a year, that capacity when fully allocated, we would be making an executive decision to go forward. And if you're around it, you'd probably say it take 12 months but the actual vendor process is about a 10-month process for that expansion.

Last question that I have for you; last conference call you talked about bringing on potentially new fleet of business, one that you mentioned with the mining company that was -- saying they wanted to switch over to biodiesel, and other was a cement company, I think. Can you comment on new vendors or a new fleet users for the biodiesel segment?

I congratulate you for actually reading what we write, so thank you so much for that. We do expect to see some announcements coming soon about those markets with have done extremely well recently, and so as we have a solid tax regime that's settled down in India under this GST arrangement, we found that the mining and construction industries have emerged as being a very large consumers of diesel which has a high tax rate. And so by displacing that with biodiesel and getting the benefits of low carbon emissions and a bunch of other things, they also get the benefit of the cheaper fuel. So, we expect to be announcing some milestones that have been achieved in those sectors over the next month or so.

At this time we have run out of time for our question-and-answer session. I'd like to turn the floor back over to management for closing comments.

I would like to thank everybody who joined us today. We look forward to meeting with you and continue our dialogue about pursuing growth opportunities at Aemetis.

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

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