Aemetis, Inc. (NASDAQ:AMTX) Q1 2021 Earnings Conference Call May 12, 2021 2:00 PM ET

Company Participants

Todd Waltz - Executive Vice President and Chief Financial Officer
Eric McAfee - Founder, Chairman and CEO
Andy Foster - President of Aemetis Advanced Fuels

Conference Call Participants

Manav Gupta - Credit Suisse
Derrick Whitfield - Stifel
Amit Dayal - H.C. Wainwright
Jordan Levy - Truist Securities
Ed Woo - Ascendiant Capital
Marco Rodriguez - Stonegate Capital

Operator

Welcome to the Aemetis First Quarter 2021 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, today's 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.

Todd Waltz

Thank you, Melinda. Welcome to Aemetis first quarter 2021 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. We suggest visiting our website at aemetis.com to review today's earnings press release, corporate 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 activity and the execution of our business plan. These statements must be considered in conjunction with the disclosures and cautionary warnings that appear in our SEC filings. Investors are cautioned that all forward-looking statements made on this call involve risk 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 are available from the company without charge.

Our discussion on the 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 measures is included in our earnings release for the quarter ended on March 31, 2021, which is available on our website.

Adjusted EBITDA is defined as net income or loss plus to the extent deducted in calculating such net income, interest expense, income tax expense, intangible and other amortization expense, accretion expense, depreciation expense and share-based compensation expense.

Now I'd like to review the first quarter results for 2021. Revenue during the first quarter of 2021 increased to $42.8 million, compared to $39.5 million for the first quarter 2020. Our North America operations in the first quarter of 2021 compared to the first quarter 2020 experienced steady ethanol sales volume, with an increase in the selling price from $1.56 per gallon to $1.91 per gallon, and an increase in the delivered corn price from an average of $5.20 per bushel during the first quarter of 2020 to $6.87 per bushel during Q1 2021.

Gross loss for the first quarter 2021 was $3.6 million compared to $400,000 loss during the first quarter 2020. Losses during the first quarter of 2021 resulted from a crush margin that was weaker than the same period of the previous year. Within the first quarter 2021, the crush margin improved during the quarter as ethanol rose from $1.40 per gallon in January 2021 to more than $2.90 per gallon today. Corn pricing and supply are an ongoing supply chain issue for the ethanol industry.

Selling, general and administrative expenses increased to $5.4 million during the first quarter 2021 from $3.9 million during the same period in 2020, driven primarily by compensation expense, insurance premium increases, as well as professional fees as we execute our five year growth plan.

Operating loss was $9 million for the first quarter 2021 compared to an operating loss of $4.5 million for the same period in 2020, much of which is from the effect of the difference in the crush -- in the ethanol crush spread between the periods. Interest expense including accretion of Series A preferred units in the Aemetis Biogas LLC subsidiary increased to $7.2 million during the first quarter 2021 compared to $6.9 million during the first quarter 2020.

Additionally, our Aemetis Biogas initiative recognized $1.9 million of accretion of preferred payments on its preferred stock during the first quarter 2021 compared to $960,000 during the first quarter 2020. Net loss increased to $18.1 million for the first quarter 2021, compared to a net loss of $12.1 million for the first quarter 2020. Cash at the end of the first quarter 2021 was $15.8 million compared to $592,000 at the close of the first quarter 2020. Cash strengthened from proceeds of $62.4 million of stock sales, which was used to repay $36.9 million of high interest rate debt, invest in capital projects and fund working capital for operations.

That completes our financial review for the first quarter 2021.

Now, I'd like to introduce the Founder, Chairman and Chief Executive Officer of Aemetis, Eric McAfee, for a business update. Eric?

Eric McAfee

Thanks Todd. As we discuss the results from Q1 2021, I encourage you to consider viewing the Aemetis corporate presentation, which can be found on the homepage of the aemetis.com website. Aemetis was founded in 2006. We have grown into four lines of business which are focused on producing renewable natural gas from dairy biogas, with a negative 426 carbon intensity for transportation fuel to replace high carbon intensity diesel and gasoline.

Renewable fuels including low carbon and negative carbon intensity ethanol, high grade distilled biodiesel, renewable jet and diesel using cellulosic hydrogen for waste wood and byproducts including carbon dioxide and corn oil enhanced by carbon dioxide injection wells, we plan to sequester CO2 and significantly reduce the carbon intensity of our products, health safety products including sanitizer, alcohol, refined glycerin, blended hand sanitizer and other health safety products and technology development to maximize the value of our products and processes. We own and operate production facilities with more than 110 million gallons per year of capacity in the U.S. and India. Included in our production portfolio is the largest ethanol plant in California, a 65 million gallon per year fuel ethanol plant located in Keyes, California, near Modesto that we leased in 2009, retrofitted for 18 months, began operations in mid-2011 and have owned since 2012, when the original shareholders converted their ethanol plant ownership into about 10% of the common stock of Aemetis.

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 Kakinada. We have operated in India since 2007, we founded the India Biodiesel Manufacturers Association, and our Managing Director serves as Chairman of the Association on behalf of the five major biodiesel producers in the country.

Before discussing our businesses, I'd like to comment about the values and the culture of our company, as well as the social and environmental impact of our production plants, and development projects, during a difficult time in the U.S. and India due to the COVID pandemic, and the lack of enforcement of federal renewable fuels laws by regulators. We are a company who spends their time working to improve our communities. Our investments create jobs, feed and house hundreds of families that depend on us to sustain and expand our business. And the products we produce provide a positive and meaningful contribution to reversing global climate change.

From truck drivers in India that move our feedstock and biofuels, to Midwest farmers that grow the crops and supply our California biofuel plants, to the workers that maintain and expand our $300 million of production plants worldwide, as well as the 160 Aemetis team members, and the several hundred people that work to support our businesses, they rely upon us to operate every day, despite external events such as financial crises, and policy changes that impact our business. Despite the extraordinary circumstances of the past year, we have maintained 100% employment at all of our facilities worldwide.

We seek to build a strong sustainable company by supporting a resilient supportive corporate culture among our teams, who work together to create value during times of uncertainty. During the past 15 years, this company culture and value system has endured oil price crashes, stock market collapses, financial market downturns, political uncertainty, and the active undermining of federal and renewal fuel laws by multiple administrations from 2014 to the present time.

Recent changes in federal leadership have been recognized by Wall Street as a significant positive trend for Aemetis and the renewable energy sector. But our company was founded in 2006 with the same goals and values as we are executing upon today. Though the stock market has only recently responded favorably to the unique below zero carbon intensity leadership position held by Aemetis in the California renewable biogas and biofuels market, our team has worked tirelessly for longer than a decade to build the fundamental foundation of our business.

In that respect, we like to say that we are an overnight success that took 15 years of hard work to build and are now simply accelerating our leadership position as we execute the five-year plan that was announced in Q1 2021. Financing this 15-year growth process to become about a 200 million revenues business without heavily diluting shareholders was not easy. It took hard work and sacrifice and extreme commitment to our shareholders by our management team and our Board of Directors.

Our entire top management team has more than 12 years of tenure at the company with our President Andy Foster joining the company during the founding in 2006 and our Head of International Sanjeev Gupta joining in 2007. We have one Aemetis Board of Directors member does serve for 14 years, firmly serving as the Secretary of the U.S. Department of Agriculture. And two of our Board members were formerly long-term executives at Chevron Corporation. Our Audit Committee Chairman lead independent director has served as the Chief Financial Officer for five public companies, each of which had more than 1 billion of revenues, and the largest had $16 billion of revenues. We have a deeply committed and experienced team that has been working for many years to execute a long-term vision and build value for shareholders, regardless of the external challenges that have come our way.

In the face of external challenges and the need for growth capital, many of our competitors decided to sacrifice shareholder value for management compensation or executive comfort, entering into highly diluted equity transactions, or convertible debt financings to fund losses or projects. In the past 15 years, we have done neither, avoiding highly dilutive equity offering or convertible debt financing. To achieve the goal of protecting Aemetis shareholders from dilution, I've personally guaranteed more than $200 million of debt that has funded Aemetis since 2008. This personal guarantee benefited Aemetis shareholders by allowing shareholders to receive the benefit of funding with minimal dilution, and has funded our growth through about $200 million of revenues.

I've received no stock options since the inception of the company as compensation, making the decision every year to allocate my options to our employees to maximize their ownership in the company. However, like other shareholders, I have benefited from avoiding large equity dilution since my wife and I are the largest shareholders of the company through our holding company McAfee Capital.

While we have great upside potential, my personal guarantee since 2008 has demonstrated commitment to the long-term value of Aemetis. This is consistent with the values I spoke of earlier. And I'm proud that our shareholders have had the opportunity to participate in a higher valuation of the company stock in recent months. The $200 million of senior bridge financing has now been significantly reduced by $62 million of new equity received at high valuations during Q1 2021 and our cash balance at the end of Q1 2021 was $15 million.

I still have more than 100 million of personal guarantees in place related to the Aemetis senior bridge debt. But we're well on our way to achieving strong operating cash flow that will further reduce or refinance the high interest bridge financing that funded our past growth. Fortunately, the positive macro trends for renewable fuels have opened up low cost long-term, U.S. Department of Agriculture, Department of Energy and tax free municipal private activity project financing opportunities for Aemetis.

Less experienced investors and research analysts who may not fully understand this process of startup and rapid growth, utilizing short-term high interest rate financing, which has been refinanced using long-term low interest rate debt. Please note that this growth funding technique is not unique to Aemetis. It has been successfully utilized by other prominent companies, notably Tesla to minimize shareholder dilution while funding $15 billion of debt for rapid growth, then repaying the debt with low interest rate financing and equity offerings at a very high valuation.

We're deploying similar well established financing tools, just doing so with far fewer zeros. As of March 31, 2021, balance sheet shows, we've already achieved significant progress in repaying our high interest rate bridge financing. Yet, even after the $62 million of equity funding during Q1 ‘21, there were only approximately 29.8 million shares outstanding at Aemetis. We value shareholders as a top priority, including our own employees who are meaningful shareholders in the company.

I would like to mention another aspect of our company culture at Aemetis, to serve our communities with our products and our leadership. Our 90 employees in India have been severely impacted by the COVID pandemic with the lockdowns in India last year and another wave of COVID infections this past month, which has affected almost every family related to our company. However, our India plant workers have been helping the local community serving food to migrant workers that are stranded away from their homes when the COVID lockdowns occurred.

From setting up food stations to serve migrant workers who are homeless and lining to hold the highway near our Indian plant, to caring for our own workers with strict and effective safety measures during the COVID crisis. The leaders in our company have shown courage, compassion, and a concern for others ahead of themselves.

Our Keyes plant team has not stopped working for a single day during the year long pandemic despite significant local surges and COVID infections. They quickly pivoted to producing hand sanitizer alcohol, at the very time California's economy was shutting down. Additionally, the renewable fuel products we produce go to the very heart of creating safer and healthier communities through cleaner air and reduce dependence on outside sources of energy.

Though many investors may not fully understand or appreciate why so many of our employees have made the personal sacrifices and long-term decisions that built the company this advanced stage. I hope it is clear that the resilience and persistence shown by our team is exactly why we have been able to execute and achieve key milestones in the midst of the global pandemic. Such as obtaining a California Environmental Quality Act permit for a 32 mile expansion of our dairy renewable natural gas project, or receiving 19 separate air permits for the jet fuel diesel project, and many other achievements realized in the past year.

The circular bio-economy created by our California dairy renewable natural gas project are soon to be solar powered ethanol plant, our biodiesel plant with glycerin byproduct, and our renewable jet diesel plant under development to use cellulosic hydrogen from waste orchard wood provide significant benefits to the environment and local communities.

Each project provides large capital investments into local communities, while creating thousands of new jobs in agricultural and rural areas. During the fourth quarter and full year of 2021 Aemetis achieved important milestones toward revenue growth and sustained profitability in each of our four lines of business.

Now I'd like to ask Andy Foster, President of the Aemetis North America business to review highlights of our renewable natural gas and ethanol businesses. Andy?

Andy Foster

Thanks, Eric. At Aemetis, we're focused on producing below zero carbon intensity products, including the production of negative carbon intensity renewable natural gas and renewable fuels. Our products maximize the value of carbon credits under the California Low Carbon Fuel Standard, the Federal Renewable Fuel Standard and IRS 45Q tax credits, while reducing operating costs by using waste materials as feedstock.

An excellent example of a low carbon sustainable circular bio-economy that Eric spoke of is our dairy renewable natural gas project, which is designed to have many synergies with our Keyes ethanol plant. Our Keyes ethanol plant uses agricultural feedstock that absorbs CO2 from the atmosphere during plant growth, from which our production facility produces ethanol and animal feed. The Aemetis ethanol plant delivers 65 million gallons per year of renewable ethanol, but also produces about 2 million pounds per day of wet distillers grains that supply approximately 80 local dairies and feeds more than 100,000 cows.

Methane commonly known as natural gas is a very potent greenhouse gas that is up to 80 times more destructive than carbon dioxide in warming our planet's atmosphere. Approximately 25% of California’s methane emissions come from the newer waste ponds on dairy farms. To reduce these damaging methane emissions, California passed a law commonly known as Senate Bill 1383 that mandates a 40% reduction in methane emitted by large dairy lagoons by the year 2030. Biomethane sourced from dairies can be used directly in the form of renewable compressed natural gas to replace gasoline or diesel fuel in cars, trucks and buses to significantly reduce carbon emissions and air pollution.

The dairy cows generate waste that is captured in the covered lagoon anaerobic dietary digesters that we're currently building at dairies, producing biogas that is cleaned up, pressurized and sent through -- and processed through a unit at the dairies to remove hydrogen sulfide. We then transport the biogas via an Aemetis owned pipeline to Aemetis ethanol plant, where it is used in ethanol production or we upgrade it and compress to produce renewable natural gas.

This RNG can fuel RNG trucks at our fueling station at the Keyes plant to carry our wet distillers grains to the 80 dairies and biofuels to customers throughout Northern California. This process is a sustainable negative carbon intensity circular bio-economy that productively uses dairy waste as fuel and significantly reduces air pollutants in the community. Trucks can also be fueled by our RNG at any compressed natural gas station connected to a utility pipeline in California, as our RNG interconnection to the PG&E pipeline enables us to send RNG to other RNG fueling stations that we build or are owned by others. This end to end system is scheduled to begin operating by the end of 2021.

In September 2020, we completed the construction of the first two of 17 covered lagoon digesters in the Aemetis biogas central dairy digester project, including on-site dairy biogas cleanup and pressurization, a 4-mile pipeline that is owned by Aemetis and a boiler unit to use the biogas' process energy at the Keyes plant in the production of ethanol.

During Q1, the California Air Resources Board issued a reduced carbon intensity fuel pathway for the Keyes ethanol plant utilizing a negative 426 CI score for our biogas compared to a positive 100 carbon intensity for petroleum natural gas. Today, Aemetis has been awarded about $23 million of grants from the California Energy Commission, The California Department of Agriculture, and PG&E and other government agencies for the dairy biogas system, and production of renewable natural gas.

In 2019, after more than a year of project development and financing work, we announced the $30 million of equity financing to fund our biogas project. In addition, we are in the process of obtaining long-term debt funding under the USDA Renewable Energy for America program for more than $75 million of USDA guaranteed loans that will complete the build out of the 17 dairies. This 17 dairy project is scheduled to generate more than $40 million per year of operating cash flow under 25-year dairy supply contracts when it is fully operational in mid-2022.

The preferred equity investor in the biogas project is automatically redeemed by an allocation of 75% of operating free cash flow until the preferred receives $3 for every $1 of equity invested. Aemetis recovers operating costs and 25% of free cash flow from inception, subject to covenants. The redemption of the biogas preferred investment is expected to be completed by the year 2025, after which Aemetis receives 100% of cash flow from the project generated by 25-year [loan] agreements with dairies.

Now let's take a moment to discuss progress at our California ethanol plant.

Revenues from ethanol production increased to $42 million in Q1 of 2021 despite lingering COVID issues early in Q1 that caused lower ethanol demand, while corn costs increased significantly starting in the second half of 2020. However, by late in Q1 2021, the price of ethanol had accelerated rapidly and is now more than 100% higher than January of this year, as the new administration and EPA have shown a commitment to enforcing the Renewable Fuel Standard.

As the economy began to reopen due to availability of vaccinations in Q1 2021, fuel ethanol demand began to recover. Since mid Q2, the Keyes plant has been running at full capacity in order to meet the significant demand for ethanol in California, particularly driven by the severe winter weather in the Midwest that caused major disruption to the railroad system and supply chain used by Midwest ethanol producers, but mostly reflecting increased consumption of gasoline and ethanol as economic activity has increased and Californians began driving more as they start to return to work.

The Aemetis ethanol plant has been operating at maximal sustainable production rates while building the following projects to increase cash flow by approximately $23 million per year once completed.

First, completing the installation of a new $8 million zeolite membrane dehydration unit from Mitsubishi that will reduce natural gas use at the alcohol plant by replacing our molecular sieves, which use a significant amount of petroleum natural gas to operating with electrically powered equipment. This upgrade to an electric dehydration system will reduce the carbon intensity of our fuel and is partially funded by a $1.5 million energy efficiency grant.

Second, installing five new stainless steel tanks for USP and beverage, high grade alcohol storage, and load out which will increase our storage capacity by more than 250,000 gallons and providing flexibility for operation of the new electric ethanol dehydration system at the plant.

Third, installing a $12 million solar panel and microgrid array with battery backup to further reduce natural gas consumption by replacing carbon-based natural gas with zero CI solar electricity, while operating -- while optimizing energy used throughout the ethanol plant primarily funded by an $8 million California Energy Commission grant.

And fourth, designing and building an electrically driven Mechanical Vapor Recompression, also known as MVR system to significantly reduce petroleum natural gas use, which equates to reducing approximately 100,000 pounds of steam per hour, partially funded by a $6 million California Energy Commission grant. And also, we've applied for a PG&E energy efficiency grant as well.

When completed, these upgrades are designed to potentially eliminate petroleum natural gas use at the alcohol plant, reduce our steam driven cogen system and save up to $8 million per year of natural gas and utility pipeline transmission costs. The California biorefinery will primarily operate using high efficiency electric motors and pumps powered by renewable power sources. The combination of this new electric membrane dehydration system, zero CI solar power and the electric MVR system is expected to result in a double-digit reduction in the carbon intensity for the fuel process at our -- for the fuel produced at our ethanol plant in Keyes.

Eric McAfee

Thanks, Andy. Let's review our biodiesel business in India. Last quarter, our Universal Biofuels subsidiary in India bid on a portion of a newly issued $900 million biodiesel purchase tender offer for about 225 million gallons by the three India government oil marketing companies. In the past, the OMC bidding process required a one year fixed price for biodiesel. However, the OMC bidding prices for biodiesel was not successful in 2020, due to a high level of volatility in crude oil and other markets.

So in response to requests by biodiesel producers, including Aemetis, the oil marketing company contracting process has been changed to a monthly bid instead of a one year contract with a fixed price. We expect that the new monthly OMC bidding process will be successful during 2021 allowing large volumes of biodiesel to be blended into petroleum diesel to improve the air quality and reduce carbon emissions in India.

The second wave of COVID related shutdowns has delayed the ramp up of production at the India plant, but we are well positioned for a rapid revenue increase, as large government purchases of renewable biodiesel occur to meet climate change and air quality goals once the current COVID crisis facing India begins to subside, hopefully in the coming weeks and months.

Let's discuss our carbon zero renewable jet and diesel fuel project using negative carbon intensity hydrogen in Riverbank, California. We're pleased that the Aemetis carbon zero biorefinery under development at Riverbank near Modesto continues to achieve major milestones including the significant development we just achieved through the issuance of 19 separate air permits for our Riverbank refinery, otherwise known as the ATC or Authority To Construct. Though further amendments are planned as a part of final construction engineering, the ATC air permit allows us to move forward with engineering, EPC contractor agreements and project financing.

During Q1 2021 we signed an agreement to retain Koch Project Solutions as the project manager and EPC which has accelerated the pace of project development toward construction. The Riverbank plant is designed to produce 45 million gallons per year of renewable jet and diesel, generating more than $230 million of revenue and more than $65 million per year of positive cash flow. We plan to expand production to 90 million gallons per year at the Riverbank site by year 2025 as part of our five year plan to generate approximately $460 million of revenue, and $130 million of annual positive cash flow from renewable jet and diesel production. The Riverbank plant is designed to use waste orchard wood and other waste biomass such as dead forest wood to produce cellulosic hydrogen, which will hydro treat vegetable and other renewable oils to produce jet and diesel fuel. Waste wood has become a major challenge for California as the state is facing a severe drought and has prioritized forest management to reduce the impact of damaging wildfires.

Let's finish with a brief review of our Technology Development Group. Headed by Dr. [Gautam Vemuri] as our VP Technology Development, the Aemetis Technology Development team worked with the federally funded Joint BioEnergy Institute in Berkeley, California for three years in the development of a patented process to extract sugars from low cost waste orchard and forest wood feedstocks. This important production process has been exclusively licensed to Aemetis for wood and other biomass from non-commercial forests. The negative carbon intensity sugars can then be used to produce high value cellulosic biofuels in the Aemetis Keyes ethanol plant, displacing expensive and carbon intensive corn starch as feedstock to produce ethanol. The remaining lignin can be used to produce cellulosic hydrogen for the hydro treatment of vegetable and other oils to produce renewable jet and diesel fuels.

A $3 million California Energy Commission grant was awarded to J Bay and Aemetis, which partially funded the years of collaborative work and lab testing that led to the granted patent. Last Friday, we were notified that Aemetis project proposal was selected by the U.S. Department of Energy to apply for a $1 million grant and a follow up $15 million to $40 million grant to fund a production plant to extract sugars from locally sourced orchard and forest waste wood. We expect commercial operations to pre extract cellulosic sugars from waste wood when the Riverbank renewable jet and diesel plant becomes operational. These waste wood sugars are expected to generate more than $5 per gallon of revenue at low feedstock costs when used to replace corn starch in our Keyes ethanol plant.

In summary, Aemetis is now implementing a diversified portfolio of negative carbon intensity projects from dairy renewable natural gas and low carbon renewable ethanol to renewable jet and diesel fuel. We are rapidly deploying new projects and adopting both proven as well as new technologies to reduce carbon intensity and input costs, thereby significantly increasing the value of RNG and renewable fuels by maximizing LCFS, RFS and IRS 45Q credit values.

Our company's values remain unwavering, a long-term commitment to building value for shareholders, empowerment and respect for our employees, and making significant and positive contributions to the communities we serve. The foundation upon which we have been executing upon our five-year plan, despite the challenges of the COVID pandemic and other external factors, remain solid, and we believe will result in exciting growth opportunities for Aemetis.

Now, let's take a few questions from our call participants. Operator?

Question-and-Answer Session

Operator

Thank you, Mr. McAfee. We will now be conducting a question-and-answer session. [Operator Instructions] And we'll go right to the line of Manav Gupta with Credit Suisse.

Manav Gupta

So my first question here is that when I look at your business growth plan, and in the near-term, the biggest growth is coming from dairy RNG. Is there any reason why I should be worried that Aemetis will not be able to hit those dairy RNG growth numbers? I think our EBITDA guidance is $45 million 2022, going up to $110 million 2024. So is there any reason, wins, LCFS, competitors, why you think there could be an issue with you hitting that guidance?

Eric McAfee

At this point in time, we have removed some of the key barriers such as the California Environmental Quality Act permit for our pipeline, which we announced within the past month has been granted. And frankly, we've already signed up the key contracts with the dairies for the execution through the next full -- up to the 17 dairies that are challenges over the next year. So I would say the key project challenges are behind us.

We are executing on the Renewable Energy for America program, USDA loan, you may know that separately we have $125 million USDA financing commitment letter signed already. But in this dairy biogas process, we've invested about $30 million of equity already. We have no debt in the subsidiary at all. And so the next phase is funding the USDA refunding. That program is a very common program, it's very fast. It's typically a three to six months process, from application to completion and we're well into that process.

So assuming that, that can continue to move forward, I would expect we wouldn't see any interruption in our execution over the next roughly 18 months. And that program would allow us to continue funding after that. So we really don't have exposure to needing additional equity or similar contributions. I think the refinancing is the way forward.

I should mention though that this project is a very, very attractive project. It's the lowest carbon renewable fuel on the market today at a negative 426. And there are other agencies and tax free municipal markets, et cetera that seem to be very, very excited about this. So I anticipate we will be executing on the USDA for the next year or so. But I could see a scenario in which after that tax free long-term financing or other sources of financing will be used. So we're really just at a -- I think, at financing execution phase at this point time. The project milestones, I believe are well under control. And we're right on track on those items.

Manav Gupta

And then Eric, what is not in the guidance is the carbon capture and sequestration, which came out a little bit after the guidance. So if you could talk about that opportunity, from your perspective, how much you can capture and sequester. But as I understand the size of the facility is much bigger than what you can utilize. So is there an opportunity to get third-party carbon capture opportunity. I mean, what kind of opportunity is there to capture third-party carbon and put it in the ground?

Eric McAfee

You were correct. The Stanford University Center for Carbon Capture Study reviewing 61 of the largest carbon emission sources in California identified that our sites would be able to do about 1 million metric tons of CO2 injection per year at our Keyes plant between the plant itself and the biogas carbon, we produce about 200,000 metric tons of CO2 per year at 52 dairies. So 1 million minus 200,000 leaves about 800,000 metric tons per year, that third parties, which under the Stanford study identified would be oil refineries would be the next category of carbon emitters that would be most attractive for sequestration.

We have already had meetings with major oil refiners in California, there is a strong appetite to work with us and basically piggyback on the extensive EPA process that we're going through. One of the unique opportunities we have is that our CO2 pipelines either will be very, very short, I mean a matter of a couple 100 yards, or 1 mile or 2, just basically insignificant compared to the Midwest pipelines, so it’s a $2 billion pipeline being proposed to go from Iowa with North Dakota, another I think $1.5 billion Blackstone and Valero pipeline being proposed.

In our project, our pipeline costs are I mean de minimis, a couple of million dollars maybe -- would be -- if we had to go 1 mile or 2. So we're just in very unique position to execute quickly and don't have to wait for permitting et cetera. These third parties would be an opportunity for us to essentially have the well already built, and we just move the CO2 in via rail or via truck, you may note that we use biogas in trucking. So we're in a very, very unique position in which we can be fueling our own trucks with our own biogas. And if you look at the economics of biogas, as you can see that's a very low cost fuel price to use. So our plan is to complete these, what for us is essentially it's an offtake agreement but it's more of a partnership relationship with oil refiners. And the ones we're focusing on in the Bay Area. But frankly, the economics work almost equally as well for LA refiners. And I would expect to see reports on those arrangements over the next quarter.

Operator

Next, we go to the line of Derrick Whitfield with Stifel.

Derrick Whitfield

Thanks and good afternoon, all. And also thanks Eric for your prepared remarks on your Board and your company's culture and values. Perhaps beginning with that, there's been a lot of undue attention recently focused on your history in relationship with Nevo Motors. For the benefit of investors listening in today's call, could you speak to that history and put it in perspective? And then also speak to the opportunities you see in your low cost investment in Nevo Motors?

Eric McAfee

Sure, absolutely. Aemetis is a below zero carbon renewable fuels producer. And in order for us to monetize the biogas we produce the ethanol we produce, frankly, even the renewable diesel we produce, we are strongly benefited if it goes into trucks, there's a multiplier, and some other reasons why displacing diesel in transportation is much more valuable than displacing gasoline.

And yet in the marketplace today, there are no truck companies that use ethanol as the range extender for an electric truck. And actually, it's a very simple reason, ethanol engines are like gasoline engines, they don't have the torque, they don't have the pulling power. And that's why when you go out and look at Class 8 large over the road trucks, they're virtually all diesel trucks, you don't see gasoline trucks pulling down -- 80,000 pound truck down the road.

Likewise, we don't add Aemetis have access to the infrastructure to build a truck. So as we look closely at what the discipline is that we need to apply in our business, we wanted to focus on producing these carbon negative fuels. And I think our presentation laid out a pretty disciplined plan to take advantage of our excellent position as an ethanol producer supplying over 80 dairies and our ability to produce the biogas molecule.

I have a background as a venture capitalist in Silicon Valley, have funded about 25 companies. I founded about 8 public companies, four were oil companies, 2 were biofuels companies, including Pacific Ethanol. And so it didn't take long for us to decide, somebody needed to go and invest the capital, develop the technology and deploy electric trucks with ethanol range extenders, opening an entirely new market for ethanol in the U.S., electric trucks with biogas range extenders, expanding our ability to ship biogas into trucks in California, as well as just electric trucks because biogas as you know with renewable natural gas can be converted into electricity to power electric trucks. So that's often the future.

So because we felt that, that was not a business that Aemetis should do, we took one of my other portfolio companies and encouraged their management team to get active in this business and they got very excited about it. And the relationship we have with them ended up being mature enough that we determined that Aemetis actually has a lot of value we can bring to that startup, though we don't have to put up any cash related to their equity et cetera. We have 142 acre Riverbank facility that used to be an army ammunition plant was 710,000 square feet of buildings that were 7 production lines very akin to what, let's say, a truck manufacturer want to do.

We also happen to have here the former headquarters building of the portfolio company that is undertaking this. It's about 3,000 square foot office space, not much, but we have it available. And so we found that there were just a number of things we could do including supply carbon negative renewable natural gas, which is a unique asset for a renewable natural gas truck company to be able to use.

So we have a shareholding that is not about 20%. If it does exceed 20%, our balance sheet is exposed to consolidating the debt. And our income statement is exposed to consolidating any operating losses. And so we have protected our balance sheet and income statement from any ups or downs in the business. But we have maximized the amount of equity upside we have. And if shareholders were to look at TuSimple, T-U-S-I-M-P-L-E and Plus.ai, you might notice their valuations are rather significant. And I think Nevo Motors has some opportunities to execute in that marketplace with autonomous and electric trucking that emphasizes the need for range extender fuels that are carbon negative. That's basically deploying our assets into removing the blend wall. So we don't have to put 9 gallons of gasoline in 1 gallon of ethanol or a single gallon of ethanol. We can literally fill up the truck with ethanol and drive it down the road or renewable natural gas into renewable natural gas trucks. Does that answer your question, Derrick?

Derrick Whitfield

It did. Thanks, Eric. And then as my follow-up. I wanted to focus on your carbon zero project. Could you speak to market offtake interest in that project and comment on when you simply be in a position to announce offtake commitments?

Eric McAfee

We are currently in paperwork with two oil refining companies that have strong marketing presence in California. I'd say easily among the largest suppliers of diesel and seem to be renewable diesel in California. And I would expect that documentation, which is moving at the pace of major oil companies should be able to close certainly in the next several months. We don't control the lawyers at the major oil companies. But we've had a very, very high level -- I'd almost say that no one has said they're not interested. What we've been able to do is pick various strategic relationships where we have multiple points of contact that are synergistic with our business. And so we're looking to execute on that.

Operator

Our next question or comment comes from the line of Amit Dayal with H.C. Wainwright.

Amit Dayal

With respect to the dairy digester deployments, can you give us an update on how many are deployed now? And I know you have provided some color on how the revenue recognition for this looks. But if you could remind investors listening in, that would be very helpful?

Eric McAfee

Sure. We've completed two dairy digesters, a 4 mile pipeline. And Andy, why don’t you give, how we're doing over there?

Andy Foster

Yes, Amit, so we have two that are currently operating and sending gas to the ethanol plant for process energy. We have five that are either permitted or mostly through permitting that will begin construction on in the next -- call the next 30 to 60 days. We'll have five more that we'll be getting in the third quarter. So we'll have -- by the end of this year, we'll have 10 digester projects underway under construction. We're also beginning on Monday the construction of our gas cleanup hub at the Keyes facility, which will take the gas that's piped in from the dairies and clean it up through Air Liquide membrane system and then we'll be ready for interconnection to the PG&E pipeline or our CNG station at the ethanol plant. We're going to begin the construction on that.

All of the permitting work has been done and we're going to start pouring the foundation next week on that, expect that to be done by late second quarter, early third quarter. So I think everything is moving along the pace. The only challenge that we found is the counties -- because of COVID a lot of the counties are back to the counties are backed up in terms of their ability to process permits. We're not having any pushback on the permits. They're all very strongly supportive of our project, it's just workload. And they're getting -- the economy is picking up in California. So they're getting something like 30 new permit requests a week from various projects around the county. So kind of working through that. The fact that we have a good relationship with them is helping us move the process along. But I'd say to answer -- circle back to the beginning of your question, we should be at a place where we'll have 10 projects underway certainly by the end of this year, and five of those projects will be pretty close to completion by the end of the year or beginning of Q1 next year.

Amit Dayal

And with respect to biodiesel sales in India, it doesn't look like there were any sales in 1Q. Is this because of the change in the bid process or is it because of other reasons?

Eric McAfee

It’s permanently driven by COVID. The bid process has actually improved to benefit us. But there's some really strict measures that had to be done to protect our employees and vendors in India.

Amit Dayal

Understood. And your presentation, Eric has around 52 million coming from India biodiesel sales for '21? Is that still something that you think is achievable or should we sort of adjust our expectations for biodiesel revenues this year?

Eric McAfee

I think that COVID will have an impact on this year. At full operation 12 months, it's $168 million operation. So to tell you the truth, it's all about how the COVID and OMC tender process kind of rolls out in the second half of this year, we could very easily meet this year's expectations. It's really only about -- it’s less than a third of what our total operating expense -- opportunity is. The unknown really is how this COVID situation affects India.

I'm sure you're aware of how dramatic this second phase has been for them. But it could be just as dramatic that they recover as the vaccine start distributing, et cetera. So currently, I would not change that. We might revisit it in the third quarter, we'll have a lot more visibility then. But certainly we're set up to just start the plant and run it at 100% capacity the day you started. And that that's all depending on these external factors.

Amit Dayal

And with respect to sort of managing the crush spread, et cetera, for that business right now, is there anything you're doing unique or is there any opportunities to manage some of these things better? Or are we just sort of dependent on volatility in the commodity space right now or the ethanol margins?

Eric McAfee

Andy, you want to take that?

Andy Foster

Yes, I'd say unfortunately, I wish there was more we could do. I think hedging in this kind of a market right now is a pretty dangerous strategy because we're not located near the corn. I think if we were in the Midwest, some of the Midwest producers are able to do that because of their unique situation with local corn bases. But we're just not in that position. I think I'd say, on the upside for us when we've been through a similar experience, and I would say it was 2016 or…?

Eric McAfee

2013, half of….

Andy Foster

Where there was a drought or some other event that was going on that caused essentially a shortage. We work with J.D. Heiskell as our corn merchandiser based out of Omaha, a great company, 100-year old company. And they have the ability to draw from grain elevators, all over the Midwest. In fact, I think that year, we received grain from something like 25 different corn elevators. And that gives us a dramatic advantage in the marketplace. Midwest plants are not set up to receive grain from any other source other than trucks locally. So when they run out of corn locally, they're done. There's really nothing they can do. And I've talked to -- in the past couple weeks, I've probably talked to six different producers in the Midwest, who said, this is the one time I wish I was a destination plant because you guys have the ability to find it, you can bring it in from the Eastern Corn Belt if we wanted to. I mean, it gets expensive when you do that. But I think that is the one advantage we have in a very -- what's going to be a very volatile, very difficult year on the corn supply side.

So I think, we're going to do the best we can. But I think the idea of trying to hedge as a destination plant with this volatility could end up costing us some pain. So we're unfortunately sort of stuck with what we're at.

Eric McAfee

And I’d like to say we don't sell corn, we have to sell ethanol. So the demand for ethanol that’s actually going to determine our cash flow. We're seeing very, very strong demand for ethanol right now and shortages in the Western PADD area.

Andy Foster

Yes PADD 5, which as you know is the Western United States, for the past three months has shown record lows from an inventory perspective. Part of that is attributable to the giant storm that hit Texas, and the Southwest, still actually having impacts, as you all probably know, across the economy, that is starting to work itself out. But California sort of went from zero to 60 miles per hour in the last couple of months in terms of gasoline demand.

And so we're seeing, I think, at least through the third quarter, which is about all the visibility you're going to get in a market like this right now. I think we're seeing that we're going to continue to see strong demand in California, in our local truck market, which is really what we serve within 100 mile radius of our plant. We continue to see strong ethanol demand. So it's one of those deals where if ethanol can keep pace with corn, we can continue to have an operating positive contribution margin. If we see a retreat in ethanol pricing and the corn situation stays where it is, it's where it gets a little challenging.

Amit Dayal

I know there was discussion previously about maybe allocating some capacity to high grade industrial quality alcohol. Is that still in play? Or should we not really assume any contribution from those efforts?

Andy Foster

We have ongoing discussions. I'll let Eric speak to the sanitizer business, but from a potable alcohol perspective, we have ongoing relationship with a couple of very large producers in our area, in fact, have discussions scheduled for later this month. So I think we're going to continue to see as now we have a DSP permit from the TTB, we’re allowed to do that. I think we're going to continue to try to grow our potable alcohol, grain neutral spirits business, that's a nice piece of business. I won't say it's huge volumes, but it's a good solid business that allows us some diversification. And I think the same is probably true on the sanitizer side where we see opportunities to do that. We'll take advantage of those opportunities.

Eric McAfee

Right. And we're waiting for the FDA to actually enforce the pharmacopoeia standard again. That'll shut down a lot of the cheap imports of low quality products. And now over 200 of them have been warned by the FDA, is not meeting FDA specs. So we're waiting for the market to kind of clean up, as we see this.

Andy Foster

And the market is -- I mean, the channel was jammed pretty significantly last year. So that there's not a ton of demand from non-traditional USP sources right now. Because anybody that goes to the supermarket, you can find bottles and bottles and stacks and stacks of hand sanitizer. So the market needs to settle itself out a little bit. And then we do believe that's an ongoing opportunity for us.

Operator

Next we go to the line of Jordan Levy with Truist Securities.

Jordan Levy

Two quick questions. First, just wanted to touch on the Department of Energy grant, you all mentioned that in relation to the cellulose extraction from the orchard wood. To my understanding that you guys haven't put a lot of weight into this in your five-year plan, but just wanted to take your thoughts high level on the potential that sort of project and what the economics of that could look like and what percent in that sort of time?

Eric McAfee

Sure. Thanks, Jordan. The first step in our jet and diesel hydrogen production process is to extract sugars from the waste wood, because we have an existing 65 million gallon plant that can process those sugars with very minimal additional capital expenditures that of course, being our corn ethanol plant. So our overall strategy is to wean ourselves gradually off of being 100% dependent on corn. So as we increase the volumes of wood, we're using a jet fuel, we're increasing the amount of sugar we can get from that wood. And every 10% of the corn starch that we decrease at our corn ethanol plant saves us purchasing costs of corn, and generates a lower carbon intensity score for the ethanol being produced and generates a different [renewable identification] under -- number. So we estimate about $30 million per year of additional positive cash flow from our corn ethanol plant, probably 10% of the feedstock that is displaced.

We've done these numbers a number of times, and they always come out around 30 million, sometimes it's 28 million, sometimes it's 35 million. But about $30 million. This is per 10%. This is linear, so it doesn't decrease. If we go 20% then it's $60 million, et cetera. The scale of our sugar extraction technology, which is patented, the patent was granted in January of this year is exclusively licensed to us for non-commercial forests. We're using it for orchards, which is a 1.5 million acres and 1.6 million tons each year in California. That technology now needs to go to the pilot scale. And so the Department of Energy grant program is specifically to fund pilot projects. And it's a two phase program. It's a $1 million grant award for engineering and some other things and then a $15 million to $40 million grant award for actual construction of the plant. The size of our plant would be a small commercial size because of how it’s integrated whether other facilities, it actually would be projected to be positive cash flow upon its construction. So we're calling it the pilot plant, but it's a pilot commercial facility. And then we would just expand it that point on.

So it's a gradual technology development we've been working on for probably four years. Now we have a patented technology and the Department of Energy has recognized its unique opportunity to have a broad impact on the corn ethanol business. And not just our plant, but frankly, every plant could benefit from this technology.

Jordan Levy

Thanks, Eric. And just as a follow-up just pivoting back to the RNG business. Just wanted to get your updated thoughts as it relates to kind of the long-term trajectory of that business and the ability to scale it beyond the 17 and even potentially beyond the 15, the five year plan, just noting kind of the increased competition we've seen just in general in the RNG space, and you're kind of in unique positioning geographically, just wanted to get your thoughts on how you think you can continue to scale that business?

Eric McAfee

We are actively interacting with the dairies in the region, the counties that we operate, and we, of course, supply about 80 dairies with feedstock. Putting 36 miles of pipeline in the ground obviously makes us the obvious choice for any dairies within a few miles of our dairy -- of our gas pipeline. And that's all occurring over the next 12 months. So we continue to expand those relationships. Through approximately 1,200 dairies in California we are regionally the leader in our market, just because of our obvious connection to the local dairy market through the animal feed business. I would say that over the next year, our job is to dominate the region that we're in. And then a year from now, expand our footprint to other regions of California.

If you look at the market in California there’s really only a couple of developers, and one of which is in the South part of the valley. And one is sort of in the Central part of the valley. And we're sort of the North part of the valley. And we have good relationships with the dairies in our area. And I think we're showing we can very, very quickly ramp up those dairies into being customers. So out of the 1,200 dairies, our goal is to have a substantial portion of them.

Andy Foster

This is Andy, I would just add to that, that we're deep into conversations with some -- all the brand name, offtake partners that you all are familiar with. We're having all those conversations. But what we're trying to do is come up with a strategy that will address -- I think the underlying question you ask, which is, at some point does California becomes saturated? Really I think that's kind of what everybody's concern is because now you've got outside of the state developers coming in, and it's kind of the Wild West.

I think Eric touched on two things that give us an advantage. One is our existing relationship in the dairy economy, right? We've been selling feed to dairies for the last 10 years. We have a strong relationship. And I think that helps us a lot in terms of -- and then I think the evidence is the number of dairies that we've signed up, and are continuing to engage with. So you got to have the source of the gas, number one. But the other thing we're trying to do is balance our offtake agreements, so that we're not putting all of our chips into one basket and then going to get real sad and disappointed when the price changes or things happen in the market that are undoubtedly going to happen as we progress into this in the next 5 to 10 years. So we're looking at really diversifying where we send our gas and how it's used.

And then I think the open remaining question that is -- got an obvious answer to it. It's just not quite there yet is how electricity is going to play into this whole market. And I think we're contemplating that as well and without getting into any detail let's just say we're not keeping our -- we’re eye on the ball and on all the potential markets that will exist for renewable natural gas, as we progress for this. And I've had significant discussions with the California Air Resources Board and others. So we're trying to -- having been a destination ethanol plant for 10 years, we sort of know what it's like not to have very many options. And so what we're trying to do is sort of smash that model and give ourselves lots of options so that we reduce our risk across the business.

Operator

Next, we go to the line of Ed Woo with Ascendiant Capital.

Ed Woo

As we just passed 100 days with the new President in the office, what do you see either in the green bill that he's proposing, as well as the stance that EPA has in terms of the ethanol waivers? How do you see that playing out in the next six months?

Eric McAfee

I would say that there's some very promising legislation of increasing the value of carbon credits from $50 under the 45Q, a provision to, in one case it’s $80, and another one I read was $125 per ton, very significant increase in the revenues that we could potentially get from carbon sequestration. The EPA has not only just thought but they've actually taken very significant action in favor of the biofuels industry. They filed an opposition to their own grant of three waivers. This is strange, but they went to the Supreme Court and they actually opposed their own grant of hardship waivers to three oil companies, and filed also a petition in support of the biofuels industry on something that went to Supreme Court just a couple of weeks ago.

So the EPA has actually hit the ground running, the new secretary has promised that the renewable volume obligations which are sort of the blending rules, which had been delayed without getting published in the next few months. And so I think they're playing catch up a little bit, but they so far have been not only saying things but doing things that are very much in support of renewable fuels. The price of D3 RINs, which is cellulosic RINs generated by our biogas was about $0.80 in the third quarter of last year, and today it’s $3.20 per D3 RIN. So that's a very significant almost quadrupling of the Federal revenue reflecting that the offtakers, the obligated parties expect to actually have to blend the actual physical molecule or buy a RIN from somebody who is physically blending the molecule.

This is what the Renewable Fuel Standard was designed to do, was to encourage some of the blend and other ones who didn't want to blend to be able to buy RINs. And that mechanism is now working. The price this morning for the D6 RIN, which was about $0.30 or so last year is $1.80. The D6 RIN is a corn ethanol RIN, again, supporting the value of blending ethanol. Because if you blend ethanol, you don't have to buy any RINs, you get the RIN for free. We give away RINs, 65 million of them every year to anybody that buys ethanol and blends it. So we're very well equipped to meet the market demand. But frankly, the EPA doesn't enforce any rules, there's not the market demand.

I think the positive thing that the stock market has seen is that renewable fuels companies now are operating under a set of rules that are being enforced, and that's providing a balance in the market we haven’t had for a number of years.

Operator

And we take our last question or comments from the line of Marco Rodriguez with Stonegate Capital.

Marco Rodriguez

I was wondering if you could maybe spend a little bit of time on the capital structure here for Aemetis. You made some comments earlier in your prepared remarks were very helpful. But how are you kind of thinking about the -- you're at the market offering just kind of given the volatility in the stock price, and it looks like some of the more expensive debt, maturity date is extended, I guess you said it another year here to April '22. Just update us on your thoughts on how you're thinking about that?

Eric McAfee

Sure. In response to really long, long discussions with various Wall Street players we recognize the concern about the high interest rate bridge that, that we have. And we took steps in early 2021 to not completely replace that debt. I don't think it's necessary. We have about $300 million cost of our assets. So we reduced that debt down to a meaningful opportunity to refinance it at lower interest rates.

So we are saving a substantial amount of money now by not having interest that's due, but frankly, the remaining higher interest bridge financing can now be refinanced with other tools. And I think that in the first quarter this year, we were above that refinance threshold. Now we're clearly within that refinance threshold. So we are, I think, executing on a moderate plan of debt reduction of high interest rate debt that I think over the next couple months, you'll see matures very nicely with what we would call low interest rate debt, something in this 8% to 10% range we would consider to be low interest rate debt.

I think, though, that most people are not clear that our projects do not require a parent company debt financing. Our projects are standalone and when we put for example, the $30 million of equity funding into biogas, that allows us to do debt funding at the project company level, USDA Renewable Energy for America program, for example, has nothing to do with the parent company debt. We could have $1 billion of debt, the parent company would have no impact at all on our project company debt, because our subsidiary has no debt at all. The Aemetis Biogas subsidiary literally is a debt free entity, with $30 million of equity invested.

So the same goes with our jet diesel plant, we have about $32 million of equity in grants in that subsidiary and so functionally, it's well set up to do a USDA or DoE or tax free muni financing. And I think most investors if they want to spend the extra time just a one layer down from looking at the consolidated balance sheet, they’d very quickly figure out that our India plant has no debt at all either. We have no long-term debt at all. It is completely debt free 50 million gallon biodiesel plant set up to be able to do over 160 million a year of revenue. All upside, no downside. Biogas, of course, I mentioned is debt free.

So we structured the company deliberately with no convertible debt. So we're not worried about the conversions that dilute shareholders and a very, very cooperative, supportive relationship with our senior lender. They're the ones that put in the $30 million of equity in our subsidiary. So they're also an owner of equity in the publicly traded stock of the company. So we have a very solid relationship with them. They've done very well and their senior debt. And because of that relationship, we've been able to grow the company well. But by paying them down significantly, in the first part of this year, I think it probably provided some comfort to those investors, it might be a little more concerned about the debt load we're hearing as we came out of the fourth quarter last year.

Operator

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

Eric McAfee

Thank you very much to the analysts who’ve joined us today as well as Aemetis shareholders and others. Please review the Aemetis corporate presentation that’s posted on the homepage of the Aemetis website. We look forward to talking with you about participating the growth opportunities at Aemetis.

Todd Waltz

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 audio version of this Aemetis earnings review and business update. Melinda?

Operator

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