Good afternoon, and welcome to the Aemetis First Quarter 2022 Earnings Review Conference Call. At this time, all participants are in a listen-only. 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 to your host, Mr. Todd Waltz, Executive Vice President and Chief Financial Officer of Aemetis Inc. Mr. Waltz, you may begin.

Thank you, Ali. Welcome to the Aemetis first quarter 2022 earnings review conference call. Joining us for the call today is Eric McAfee, Founder, Chairman, and CEO of Aemetis; and Andy Foster, President of Aemetis Advanced Fuels and Aemetis Biogas. We suggest visiting our website at aemetis.com to review today's earnings press release, Aemetis Corporate and Investor Presentations, filings with the Securities and Exchange Commission, recent press releases, and previous earnings conference calls. The presentation for today's call is available for review or download on the Investors section of the aemetis.com website. Before we begin our discussion today, I'd like to read the following disclaimer statement. During today's call, we'll be making forward-looking statements, including, without limitation, 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 disclosures and cautionary warnings that appear in our SEC filings. Investors are cautioned that all forward-looking statements made on this call involve risks and uncertainties and that future events may differ materially from the statements made. For additional information, please refer to the company's Securities and Exchange Commission filings, which are posted on our website and available from the company without charge. Our discussion on this call today 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 directly comparable GAAP measures is included in our earnings release for the quarter ended on -- in earnings for the quarter ended on March 31 -- I'm sorry on December 31, 2021, is available on our website. Adjusted EBITDA is defined as net income loss plus, to the extent deducted in calculating such an income, interest expense, income…

Thank you, Todd. Aemetis is focused on producing below zero carbon intensity products, including negative carbon intensity renewable natural gas and renewable fuels. Our projects maximize the value of carbon credits and tax credits, while reducing operating costs by using waste materials as feedstock for the production of renewable fuels. In early 2022, we announced an updated five-year plan, which projected revenues to grow to about $1.5 billion in annual EBITDA to increase to more than $460 million by year 2026. This growth is being funded by lower interest rate senior secured lines of credit at the Aemetis parent company and project funding by Aemetis subsidiaries. In the past year and a half, we have repaid about $80 million to reduce higher interest rate bridge loans from Third Eye Capital, which has expanded our access to lower interest rate fundings. We recently closed two new credit facilities at 8% and 10% interest rates with Third Eye Capital, which have an aggregate availability of up to $100 million, subject to certain criteria. These carbon reduction lines of credit are designed to both fund the completion of the carbon reduction projects at the Keyes ethanol plant and to provide the funding prior to project financing for the Jet diesel plant and the two CO2 sequestration wells. The working capital line of credit is intended to provide liquidity for ongoing operations. We're also on track with financing growth using long-term 20-year low interest rate project financing from the United States Department of Agriculture. Our first $25 million of an expected, eventual $100 million of USDA Renewable Energy for America project funding for our biogas subsidiary is scheduled to close in June. The positive regulatory trends for renewable fuels have continued to improve, including the recent approval of 15% ethanol known as E15 by the Environmental Protection Agency and the release this week of the California Air Resources Board 2022 scoping plan that significantly increases the number of credits required under the low-carbon fuel standard program. These regulations are driven by initiatives to decarbonize transportation, the need to reduce the cost of fuels as petroleum prices increased, and a renewed interest in energy security. During the first quarter of 2022, Aemetis achieved important milestones towards revenue growth and sustained profitability in each of our four lines of business. Now, Andy Foster, the President of the Aemetis Biogas and Aemetis Advanced Fuels will review highlights. Andy?

Thanks Eric and good afternoon everyone. The Aemetis dairy renewable natural gas business has been producing biogas since September of 2020 and received a negative 426 carbon intensity pathway from carbon in 2021. RNG is a negative carbon intensity renewable fuel that exemplifies the circular bio-economy that Aemetis is creating by using agricultural waste products and byproducts from our production facilities as feedstocks to produce sustainable below zero carbon intensity transportation fuels. This year, the Aemetis Biogas renewable natural gas project in California progressed with the completion of the construction and testing for 20 of the 36 miles of biogas pipeline; completion of construction and testing of the $12 million centralized biogas to RNG upgrading facility; completing the PG&E utility gas pipeline interconnection unit and testing; full operation of our third dairy digester, which is now flowing gas through our biogas pipeline; and continued construction of four additional dairy digesters that are scheduled for completion in the next few months. We anticipate injecting RNG into the PG&E utility pipeline on a fully operational basis shortly after their team completes commissioning of their equipment next week. This will be the first time that an Aemetis Biogas project generates utility-grade renewable natural gas and will be the first time that our RNG is delivered into the utility pipeline system. By the end of the third quarter, we expect to have seven operating dairy biogas digesters connected via our pipeline to the PG&E utility pipeline, generating approximately 200,000 MMBtus per year of RNG valued at more than $20 million per year of ongoing revenues. The initial production from Aemetis digesters will be delivered to the pipeline and then stored at an approved underground facility until the CARB CI fuel pathway is issued, which can be a six to nine-month process. The RNG produced…

Thank you, Andy. Let's discuss our carbon zero renewable jet and diesel fuel project with carbon sequestration in Riverbank, California. We are pleased that the Aemetis carbon zero biorefinery under development in Riverbank, California near Modesto continues to achieve major milestones. In December of 2021, after three years of negotiations with the City of Riverbank and the U.S. Army, Aemetis signed the acquisition of a 125-acre Riverbank Industrial Complex. This site is a former U.S. Army ammunition production facility with 710,000 square feet of existing buildings laid out as eight production lines; a rail line with storage space for 120 railcars on-site; a 20-megawatt electricity substation; and 100% zero carbon intensity renewable electrical power with a direct power line connection due to hydroelectric dam. Last month, Aemetis took operational control of the 125-acre Riverbank Industrial Complex for construction of our sustainable aviation fuel and renewable diesel plant, as well as the Riverbank portion of our CO2 sequestration well project. We have signed and announced more than $3.4 billion of sales contracts with Delta Airlines, American Airlines, Japan Airlines, Qantas, and other airlines for sustainable aviation fuel. Along with signed letters of intent, we have contracts were about 45 million gallons per year of blended sustainable aviation fuel to be produced at the Riverbank plant. Under the sales agreements, the meet sustainable aviation fuel will be trucked from the Riverbank production plant to a tank farm in the San Francisco Bay Area for blending with jet fuel. The blended SAF will be delivered via pipeline to San Francisco Airport for use by airlines. In addition to the $3.4 billion of blended sustainable aviation fuel sales contracts, we signed a $3.2 billion renewable diesel sales agreement to deliver 45 million gallons per year under a 10-year sales contract with a major travel…

Thank you. We will now be conducting a question-and-answer session. [Operator Instructions] Our first question is from Manav Gupta of Credit Suisse. Please proceed.

Eric and team, my question is, at this point, you have signed some big long-term contracts with Delta and other airlines and which is very commendable. Help us understand a little how these contracts actually work. So, if you deliver a renewable, sustainable aviation fuel, what kind of premium do they give you on that versus normal jet fuel the blended product? And when you sign these contracts, are the airlines asking for a certain portion of your RINs or LCFS credits or maybe even blenders tax credit? So, help us understand how these contracts are structured a little, so we can better model their profitability? Thank you.

Good question, Manav. Let's take them in two pieces, how do they work and then what is the percentage. It's a very simple structure that aligns with the cost structure of jet fuel because all airlines have to buy jet fuels. So, all their costs are very similar, some hedged and some don't. But over time, they all have basically the same cost structure in jet fuel. So, the structure of the contract is jet fuel plus a premium. Think of premium in the 10% range. So, as the price of jet deal gets higher, that premium actually gets higher, but it is correlated with the price of jet fuel, which is something they can hedge against. So, they can hedge against their jet fuel deck to be able to hedge their sustainable aviation fuel commitments. They are getting 0% of renewable identification numbers under the federal renewable fuels standard. They're getting 0% of low carbon fuel standard credits in California. They're getting 0% of the tax credit. All of the producer-related incentives, including those and future ones, are to the account of Aemetis. They are receiving the CORSIA credits, which is a voluntary program among airlines in which the airlines that are adopting sustainable aviation fuel more quickly can sell credits to those who are not adopting as quickly. And that voluntary carbon trading market is a source of revenue for our customers that are buying more SAF as they sell their credits to airlines that do not have access to stabilization field. So, we signed a $1 billion contract with Delta Airlines, $1.1 billion with American, and Japan Airlines, et cetera. These are companies that will be able to sell credits to other airlines and offset some of the premium that is a part of the contract that we have now. So, this is currently structured 45 million gallons per year, which is 50% of our total production of 90 million and optimizes the yields from the plant. And I should mention that we can produce more sustainable aviation fuel, but we would be charging a premium over that business model of jet fuel plus 10% because the yields will be lower as we go beyond 45 million gallons. And we do have a small group of customers that are quite willing to pay for that premium, specifically if they're flying into Europe, the costs in Europe are much, much, much higher than what I've described. And so they're able to offset some of their European costs by buying from us in California at a premium above the jet fuel plus 10% range calculation.

Perfect Eric. My quick follow-up here is, I think you mentioned in the opening comments about the May 10th scoping CARB document, which came out, which I think interestingly, yesterday, even Darling and Julian mentioned. So, my question here is looking through that on other discussions that you are having at CARB, because you know a lot of people at CARB, do you have confidence that going ahead, CARB will actually -- as a scoping document is indicating, maybe raised the targets for 2030 and maybe beyond and, in the process, try and support the carbon price in California? If you could comment a little on that.

They have a very visionary commitment to reducing carbon emissions in California. And the way that I usually present this is described, if you don't have any incentive to decrease your carbon, are you going to actually do that? In other words, why not just buy diesel and drive on down the road, if there is no credit market for the alternative, which is renewable natural gas or even ethanol to replace diesel-only truck. So, all we're talking about really is what the timing is. And as we have spoken to the staff as well as Board members of CARB, they actually express high levels of frustration that the market is not listening to them that they're very committed to this carbon reduction plan that it will require additional low carbon fuel center credits and other mechanisms to be able to achieve that plan. And so they believe that the market is just not listening and we heard that consistently from several different numbers, including people who run the program. So, the scoping plan, I think, is 500-plus pages, describing their vision that they're going to make it so difficult to buy anything as high carbon in California that the cost of that with the credits, everything else, would just be prohibitive and try to provide zero emission future.

Thank you so much for taking my questions Eric.

Sure. Thank you, Manav.

Thank you. Our next question is from Jordan Levy at Truist Securities. Please proceed with your question.

Afternoon Eric, Andy, Todd. Maybe first, we can just touch on some of the financing work you've been doing. It seems like the USDA biogas financing is progressing, but maybe taking a little longer than initial expectations. Maybe if you can walk through the timing there one more time, I know you mentioned it in the opening comments? And then just give us a sense of your confidence in how that's moving forward?

USDA biogas financing is, I would say, slightly slow, but not unexpectedly slow. We've had a range that we're within in terms of how this project is going along and that's why we're announcing flowing gas from our third digester and our fourth, fifth, sixth, and seventh are all well along the way, et cetera, et cetera. So, we are expecting to see this biogas funding to get completed in June. This is $25 million. It's known as a special purpose entity that we put together with a certain defined group of digesters and pipeline, et cetera, in that $25 million. And under the renewable energy for America program, the limit is $25 million of debt per entity. So, we'll have multiple entities. We're in the process right now with four entities for a total of $100 million. So, the goal on this would be to do $25 million this summer and then this fall, do another $25 million and then next year, do another $25 million, and probably middle of next year, do another $25 million. And so this is basically sort of a template that we're doing for the first time and as we do with the second, third, and fourth and potentially sixth, this is getting easier and easier to do and quicker. So, the structure is roughly 6% interest rate, there's a floating component there, but roughly 6% interest rate, but it's very, very long term, 20-year financing and very, very attractive and it's 80% guaranteed by the U.S. Department of Agriculture. So, it's an excellent tool and it's worth waiting for and we have all of the relationships in place for us to close this for $25 million. And frankly, the second and third and fourth is just the same thing that different areas and different processes.

Thanks for that. And then as a follow-up also on the R&D side of things, you all made a lot of progress on the pipeline side of that. Just curious, as you been we're going to build that out if you've got starting to get more interest from other farm owners, you don't have contracts in place with that and how that kind of long-term trajectory is playing out?

Yes. Thank you very much. We've completed 20 miles and only a few months ago, we had four miles in the pipeline. And so our schedule is in the fourth quarter year to half our entire 36-mile pipeline completed. As that pipeline has been going in the ground, you can imagine that these dairy operators are actually driving by our construction site and now they're listening to their neighbors talk about the revenue they're generating off of the project. And it has definitely engendered a lot of additional interest. We have roughly two dozen signed participation agreements with various dairies that we're working on additional -- yes, we're running up in excess of 30 here very soon. So, we're making, I think, great strides. But because we've gone past the tipping point now, there's really not a second biogas pipeline that's schedule to go in the ground. If somebody wants to do biogas, then they know who to call. And we're seeing an increased acceleration in our adoption by dairies in that process. So, by the fourth quarter of this year, we expect to have that pipeline fully in place and I think from that point on, the project becomes very, very different. We've been very focused on the centralized biogas cleanup hub in the PG&E interconnection unit and the initial pipeline so that we could interconnect these dairies. Well, that having now been achieved with 20 miles pipeline, et cetera, our focus is just simply making digesters occur and that's dramatically simpler business plan and frankly, a lot quicker because all of our resources focused on building.

Thank you all so much.

Sure. Thank you, Jordan.

Thank you, sir. Your next question is coming from Amit Dayal with H.C. Wainwright. Please proceed with your question.

Hey good morning guys. Thank you for taking my questions. I mean it looks like largely an execution story from here, Eric. I mean from a risk perspective, given sort of the supply chain issues, I know you probably don't have those in play right now, but what should we keep in mind with respect to any cost increases or any of those types of things that you may be seeing in respect to some of these CapEx plans and project deployment efforts that you are undertaking right now?

We definitely will be impacted by a combination of transportation that's already impacted our ability to just get things are already built physically on site. It has not changed our overall schedule much because, as you know, it's long lead time items that really are having the impact on things, but we've seen the impact of a slowed down supply chain. In terms of cost increases, we had the benefit of buying a lot of materials for biogas digesters in the middle of 2020 when they were being offered, quite frankly, a very large discount and so that has helped to accelerate our process. I do not think that we'll see anything that significantly departs from our plan, which includes contingencies. So, at this point in time, we are not coming up with any revised CapEx budgets because there are contingencies are sufficient to handle what we're seeing in the market at this point time.

Understood. And that’s all I really. My other questions were already addressed. Thank you so much.

Thank you, Amit.

Thank you. Our next question is coming from Derrick Whitfield with Stifel. Sir, please proceed with your question.

Thanks and good afternoon to you and your team Eric.

Hello Derrick.

For my first question, I wanted to build on Manav's question regarding the 2022 CARB scoping plan and ask for your initial impression on the dairy and livestock sector proposal, specifically targeting at least 120 additional projects with at least half being digesters. Is that in line, Eric, with kind of how you're thinking about it from a marketing and certainly a planning perspective?

I would say that, that actually exceeded my personal expectation. It probably met some of the expectations of others who are in the middle of this. But it's because CARB has just gone through a cycle of, on the call, environmental pushback on the role of renewable natural gas. And it has been a decision point and I think that decision's been made. As you look at the scoping plan, without dairy renewable natural gas, it will be very difficult for them to achieve the carbon reduction targets and they lose anywhere close to what they're talking about because with the negative 426 carbon intensity, for example, our project is a very significant contributor to the program. And so over the last, let's say, six months, there's been a cycle of environmental pushback on this, what I believe, to be multilateral benefit process of covering up digesters and capturing methane. And CARB could have responded with a decreased expectation, but instead, I think they have accelerated. I mean anybody that says that they're looking for 420 projects if anything, it's pretty ambitious about it for 50% of that could be dairy is actually exceeding my expectations. So, it's a very bullish signal for us in the renewable natural gas industry and especially, a bullish signal about how many LCFS credits are going to be expected under the scoping plan. And so part of the problem to 500 pages is you kind of want a simple thing, which is how many LCFS credits are required and how many are expected, and you just want to be able to compare the two. Well, because it's a complex document with complex calculations, I don't think people will settle in on those numbers for a number of months. But it's easy to conclude that if they're looking for 420 bigger carbon intensity RNG facilities, then that's a whole lot of LCFS credits that are going to be required. So, we're seeing it very bullish in the CARB and scoping plan.

That's great, Eric. And as my follow-up, I just wanted to ask if you could update us on your current thinking around offtake plans for dairy RNG as you progress through Phase 2?

We have already reached a commercial agreement with a significant offtake opportunity, very favorable terms on both sides. We're very, very happy about the relationship and expect to announce it very soon. So, we -- also as you probably know, have significant internal needs for renewable natural gas for moving our animal feed 2 million pounds a day, et cetera, biofuels. And so a combination of external standard distribution in the trucking market as well as internal consumption is giving us, I think, a significantly lower distribution costs than certainly anybody from the Midwest. We're sitting right in the middle of California with trucks, thousands of them driving by our plant every single day. So, we're just very uniquely positioned to have a low-cost distribution.

Very helpful. Thanks for your time and comments.

Good. Thank you.

Thank you. Our next question is coming from Matthew Blair with TPH. Please proceed with your question.

Hey thanks for taking my questions. Eric, could you just walk us through the drop-off in the RNG volumes in Q1 compared to Q4? Was that due to the testing of the upgrading facility and the pipeline interconnect? And I guess how would that progress through the rest of the year, just keeping in mind, I think your 2022 RNG volume guidance was around like 49 or 50, does that number still hold?

Let's, first of all, define whether we're talking MMBtus or millions of dollars. So, we have not actually produced any RNG, renewable natural gas, to-date. That required the commissioning of the biogas cleanup unit and our PG&E interconnection, so we could actually put it in the pipeline. So, we technically start production of RNG right now, this month. So, what we have historically been able to do that I think most developers are not able to, is we own our own ethanol plant. So, we've been using biogas, which is 40% carbon dioxide and has other contaminants actually, to actually power our ethanol plant. We set up a boiler and we tune that boiler to be able to use biogas rather than petroleum natural gas. And so we've been able to monetize 100% low carbon fuel standard credit value, 100% of the molecule value. The only thing we've really been missing is the D6 RIN we already generate making ethanol. We don't get the D3 RIN when we're making corn ethanol. So, we started that in September 2022 with initial production and got our CARB approval effective soon thereafter. So, what the numbers we have out in the market today are basically the biogas numbers in MMBtus, I think, was 13.8 -- 13,800 MMBtus in the first quarter from two dairies, which you hope by that times four is roughly 50,000 MMBtus per year. Each area is projected to be approximately 25,000 MMBtus per year. So, we're currently running slightly ahead of what I would say is an expectation of an average dairy. The reason why, because it was the middle of winter and so the first quarter being cold is expected to be one of the lowest production season of the year and we exceeded the annual run rate -- if you take the first quarter, multiply 13,000 times four, it gets you in a place in which we're really going to drive to be above 50,000 for the year. So, we are going to be publishing RNG volumes that will show how much we're injecting in the pipeline and putting in storage as we do Q2 of 2022 and those will be the first real revenue volumes. To-date, we've been just selling it to our own subsidiary. So, there's not been any third-party quantification and we haven't been producing renewable natural gas. We've just been producing biogas.

That's helpful. Thank you. And then could you just remind us the -- so this recently completed upgrader, taking the dairy biogas to RNG for $12 million, what's the capacity of that plant?

It's an expandable capacity at relatively lower cost, but it's initially roughly a 20-plus dairy units. So, we're not looking to upgrade until the end of next year. So, we're 18 months away from our caving.

It is expandable.

Yes.

Great. Thank you very much.

Sure, thank you. Appreciate your time.

Thank you. Our next question is coming from Ed Woo with Ascendiant Capital. Sir, please proceed with your question.

Yes, thanks for taking my question. Eric, what's your view on oil prices and gasoline prices, they're both pretty elevated? And how does that affect demand for ethanol in gasoline demand does go down?

I think we all recognize there is a temporary impact because of the Ukrainian-Russian conflict on both oil and gas prices. This is extreme. I don't think that it's sustainable. Specifically on the gas side, it's definitely not sustainable. As the logistics and bringing in nullified natural gas into Europe and other things occur, I think that the power of the Russian spigot of crude oil and natural gas is going to be less in the international market. That being said, we are recovering from a global pandemic. So, supply is not meeting demand. Our logistics supply chains are stalled compared to what you need in order to accelerate into this new demand and so that is putting upward price pressure on gasoline, especially diesel. Andy and I both read regular reports about the supply chain of petroleum and we are at record lows in terms of what's physically in tanks. And you're talking two weeks or less of gasoline or diesel on a tank, you're at the border of a crisis right there and that's what we've been for what prices, and importing gas and everything else. So, our expectation would be a settlement of the Russian-Ukrainian dispute will probably take $20 out of the price of crude oil just because traders are emotional. But the swing producer is not Russia. It's not Iran, it's not Nigeria, it's not Venezuela. The swing producer is Mohammad Bin Salman in Saudi Arabia. Mohammad Bin Salman needs $80 crude oil to pay for his economy, where 70% of the people under age 35 do not have a job and expect a lot of support from the government. He's running almost a welfare economy. And so between projects he's already trying to fund as well as a very heavy social system, Saudi Arabia needs $80 crude oil, that's West Texas Intermediate price, it's about $85 Brent, which is the European price. And so I think there's a bit of a price war because Mohammad Bin Salman has learned that the world is okay with $3.50 gasoline prices. It's dramatically lower than what it is today and that's what we would end up with, at $80 crude oil. And with refinery margins, which are currently per $60 barrel and historically if they're lucky, they're $20. So, take out some of the refinery margin and you're going to be back at oil and gas prices that are in the $80 range and moderated the pump with people very comfortable paying $3.50, even $4 at the pump and the life is pretty good. So, that's my personal view. I'm not hedging or trading in that view and should be relied upon with lots of caveats that assumes that the war is rectified and that may or may not occur in time.

So, you're not seeing any demand obstruction for gasoline and ethanol currently where people driving that to conserve?

Yes, Andy--

In fact, the quite the opposite demand has been strong. There's been draws in most of the pads this week, and it's setting up nicely where there have been built. It's in export pads, so it's the Gulf Coast, in New York. So, the ethanol business is doing fine. As Eric mentioned, gasoline demand still remains strong even with the higher prices. We'll see with the most recent increase this week if that really starts to take a bite and people change summer travel plans. But we haven't seen a big just demand obstruction on the ethanol side. And you add into that, the complete disaster that are -- the Union Pacific and BN railroads and certainly West of the Mississippi is increasing that problem even more. So, the inventories on the West Coast are at -- if not all-time lows, near at because the railroads can't deliver, can't perform, haven't been able to perform for over a year. It's been extremely bad in the last six months. So, when you have that set up, then I think that you're going to continue to see strong demand for ethanol, certainly in our world it is.

Great. Well, thanks for answering my questions and wish you guys good luck. Thank you.

Thank you.

Thank you.

There are no further questions at this time. I would like to turn the floor back over to management for closing comments.

Thank you to Aemetis shareholders, analysts, and others for joining us today. Please review the Aemetis company presentation and the Aemetis investor presentation posted on the homepage of the Aemetis website. We look forward to talking with you about participating in 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?

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