Aemetis, Inc. (NASDAQ:AMTX) Q4 2022 Earnings Conference Call March 9, 2023 2:00 PM ET

Company Participants

Todd Waltz - Executive Vice President and Chief Financial Officer

Eric McAfee - Founder, Chairman and Chief Executive Officer

Andrew Foster - President of the Aemetis Biogas and Aemetis Advanced Fuels

Conference Call Participants

Jordan Levy - Truist Securities

Amit Dayal - H.C. Wainwright

Derrick Whitfield - Stifel

Manav Gupta - UBS

Matthew Blair - Tudor, Pickering, Holt & Co.

Edward Woo - Ascendiant Capital Markets

David Storms - Stonegate Capital Markets

Operator

Welcome to the Aemetis Fourth Quarter 2022 Earnings Review Conference Call. [Operator Instructions] As a reminder, this conference is being recorded.

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

Todd Waltz

Thank you, Matthew. Welcome to the Aemetis Fourth Quarter and Year-End 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 the Aemetis Advanced Fuels and Aemetis Biogas. We suggest visiting our website at aemetis.com to review today's earnings press release, the Aemetis Corporate and Investor Presentations, filing 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 the 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 are available from the company without charge.

Our discussion on this call may include a review of non-GAAP measures as a supplement to financial results based on GAAP because we believe these non-GAAP measures serve as a proxy for the company's source or use of cash during the period presented.

A reconciliation of the non-GAAP measures to the most directly comparable GAAP measures is included in our earnings release for the 3 and 12 months ended December 31, 2022, 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, loss or gain on debt extinguishment, income tax expense, intangible and other amortization expense, accretion and other expense of Series A preferred unit, loss on lease terminations, certain cash grants, gain on litigation, depreciation expense and share-based compensation expense.

Now I'd like to review the financial results for the fourth quarter of 2022. Revenues were $66.7 million for the fourth quarter of 2022 compared to $64.4 million for the fourth quarter of 2021. The selling price of ethanol decreased from $3.36 per gallon during the fourth quarter of 2021 to $2.65 per gallon during the fourth quarter of 2022. Biodiesel sales of 10,700 metric ton occurred during the fourth quarter of 2022 at a price of $1,511 per metric ton. Our California ethanol segment accounted for $49.4 million of revenues, and our India biodiesel accounted for $17.2 million of revenue during the period.

Cost of goods sold increased from $51.7 million during the fourth quarter of 2021 to $67.9 million during the fourth quarter of 2022, resulting principally from delivered corn price increasing from an average of $7.23 per bushel during the fourth quarter of 2021 to $10.05 per bushel during the fourth quarter of 2022 and the incremental sales in our India biodiesel segment. Gross loss for the fourth quarter of 2022 was $1.1 million compared to a gross profit of $12.7 million during the same period in 2021.

Selling, general and administrative expenses remained flat at $7.5 million during the fourth quarter of 2022 and 2021. Operating loss was $8.7 million for the fourth quarter of 2022 compared to an operating profit of $5.2 million during the fourth quarter of 2021.

Net loss was $22.4 million for the fourth quarter of 2022 compared to a net loss of $881,000 for the fourth quarter of 2021. Cash at the end of the fourth quarter of 2022 was $4.3 million compared to $7.8 million at the end of the fourth quarter of 2021. This completes our review of the fourth quarter of 2022.

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

Eric McAfee

Thank you, Todd. Aemetis is focused on producing below 0 carbon intensity products, including negative carbon intensity renewable natural gas and renewable aviation and diesel fuel with renewable hydrogen and carbon sequestration. Our projects generate sustainable and innovative renewable fuels that benefit our communities and restore our environment while generating tax and other credits from federal and state carbon reduction programs. We seek to reduce feedstock and operating costs by using waste materials and zero carbon intensity energy for the production of renewable fuels.

Aemetis grew revenues 21% in 2022, representing $45 million of new sales. For 2023, we are excited about the strong and growing positive cash flow expected from biogas, biodiesel and renewable oil feedstock refining facilities coming into full production this year, driving the strong growth in revenues and cash flow planned for the next 5 years. Interestingly, all of our India biodiesel, glycerin and feedstock refining facilities are already built and are debt-free.

Due to the time delays related to carbon pathways for biogas production, all 6 of the 2023 California biogas facilities that are expected to generate revenues this year are already built and are awaiting approval of their LCFS pathways. Until the California Resources Board approval is processed, and we are able to begin selling into the renewable natural gas market as full LCFS value, we will be storing the renewable natural gas that we produce underground and carrying it on our books as inventory.

As we will discuss later this month, we are completing a maintenance upgrade cycle for our Keyes ethanol plant that save millions of dollars while accelerating our reduction of energy costs and driving the lower carbon intensity of our biofuel by installing a new decision control system with artificial intelligence capabilities, along with several other important process upgrades.

The external political and regulatory environment for renewable fuels and the reduction of carbon pollution in the U.S. and India has improved significantly during the past year. The passage of the Inflation Reduction Act in August '22 -- 2022, provides an estimated $400 billion of funding toward renewable energy and carbon reduction projects.

Last month, the California Air Resources Board held an LCFS scoping plan webinar, where their staff stated that CARB plans to significantly increase the number of credits required under the low carbon fuel standard program starting in 2024, with sufficiently expanding the -- by sufficiently expanding the LCFS mandates to increase the price of credits to more than $240 per credit in the next 2 years from about $60 a day.

We are encouraged that CARB's strong support of the LCFS program. And while significant details need to be addressed in the scoping plan, we're working closely with our fellow biofuel producers and carb staff to achieve a positive outcome.

As we have expected for the last couple of years, we believe that LCFS credit prices will rebound to more than $200 per credit as the markets recognize the large number of LCFS credit will be required to meet the expanded decarbonization goals set forth by CARB. These credits generate revenues for Aemetis in all of our U.S. businesses and indirectly benefit our India business that produces feedstock for U.S. renewable diesel and sustainable aviation fuel by refineries.

During 2022, we achieved important milestones in the construction of 36 additional miles of biogas pipeline, upgrades to the Keyes ethanol plant, growth to profitable operations by the India biodiesel plant and many other key achievements.

Last month, we updated the Aemetis 5-year plan, which now projects $2 billion of revenues, $496 million of net income and $682 million of positive EBITDA in year 2027, the fifth year of the plan.

The updated 5-year plan reflects continued growth in production revenues during the 5-year period. while adding the significant positive impact of the Inflation Reduction Act that was passed into law in August 2022 and increased California low carbon fuel standard credit prices.

The Aemetis 5-year plan assumes LCFS credit prices that are 35% lower than CARB's plan as we took what we believe to be a conservative view. Our estimate of revenues from LCFS credits being lower than CARB's projection, therefore, provides a significant upside to our profitability and should enhance the pace of our growth.

The Federal Inflation Reduction Act is expected to provide a large amount of funding for Aemetis. During the next 5 years, we expect to receive more than $820 million from the sale of investment and production tax credits generated by the construction and operation of renewable fuel plants, renewable hydrogen production facilities and CO2 sequestration facilities.

The expected sale of IRA tax credits provides important project financing to build facilities, not to just be a source of cash flow after production has begun. The transferability of tax credits under the IRA has opened a new large market from investors seeking to offset tax liabilities by purchasing tax credits for Aemetis and other renewable energy producers.

We are currently working to complete our first tax credit sale, monetizing our investment tax credits and CO2 reuse tax credits that we began generating in January of this year. To date, we believe that we have generated more than $24 million of investment tax credits, primarily from biogas project investments. And we expect to generate more than $60 million of IRA tax credits this year.

During 2022, we continue to make progress in reducing our average interest rate on debt. The best and most recent example of our reduced cost of borrowing is the 6% interest rate obtained in October 2022 for a $25 million 20-year loan that is 80% guaranteed by the U.S. Department of Agriculture. The initial interest rate is fixed for 5 years, and we believe the rate is significantly below the prevailing interest rates for renewable fuels projects.

As our senior lender, Third Eye Capital was a key contributor to our progress in 2022. In '21 and '22, Aemetis repaid more than $90 million to Third Eye Capital to reduce higher interest rate bridge loans, which expanded our access to lower interest rate funding.

In the past year, Aemetis has drawn more than $50 million on our new lower interest rate credit facilities from Third Eye Capital. We look forward to continued progress with Third Eye Capital as we continue to repay higher interest rate loans and utilize the lower interest rate credit facilities.

For many investors in Aemetis, the planned redemption of the Third Eye Capital preferred stock investment in our Aemetis Biogas business has been confusing and a source of concern.

The Third Eye investment of $30 million of preferred equity into Aemetis Biogas starting in late 2018 enabled Aemetis to attract $23 million of grant funding. We used the $53 million of combined funding to begin building the biogas project without debt, until we added $25 million of USDA guaranteed long-term funding in October 2022.

In the fourth quarter of 2022, Aemetis negotiated an extension on the redemption of the preferred equity of our Aemetis Biogas subsidiary from Third Eye Capital. Early this year, we extended this redemption to May 2023 and may agree to extend the redemption again, if needed.

We are seeking to refinance the Aemetis Biogas preferred stock and have strong indications of investment interest from multiple parties, and we are working to complete the redemption during Q2 2023. However, our primary goal is to attract quality investors who share our vision for the long-term growth of our company.

Our overall plan is to fund growth by using positive cash flow from our ethanol, Biogas, India Biodiesel, glycerin and India refined tallow feedstock production facilities, enhanced by up to $100 million of working capital and project development financing from the credit facility that was signed with Third Eye Capital in March 2022.

In the past two quarters, we received funding of about $50 million from the two credit facilities provided by Third Eye Capital reduced interest rates. We plan to obtain more than $200 million in the aggregate of 20-year $25 million USDA guaranteed project financings under the Renewable Energy for America program known as REAP.

We are in the process of closing three more $25 million REAP loans this year for our biogas business as well as other long-term debt funding for our Jet diesel business.

We are investing a significant amount of time and resources to develop and implement specific business structures that should maximize the value of the tax credits available under the Inflation Reduction Act. These regulations are driven by initiatives to decarbonize transportation. The need to reduce the cost of fuels as petroleum prices increase, a renewed interest in energy security and a desire to reduce greenhouse gas emissions.

Let's briefly review our Biodiesel business in India. The National Biofuels Policy in India was updated in 2022 and now is being implemented to achieve a 5% blended Biodiesel is equal to about 1.25 billion gallons per year in India.

On April 1 of this year, a new biodiesel tax is scheduled to go into effect in India, which is a tax on diesel. The three government oil marketing companies are expected to issue a tender offer to purchase up to the entire production capacity of the Aemetis biodiesel plant under a feedstock plus pricing formula that was used very successfully last fall to bring biodiesel plants into full production.

The pricing formula and timing of the 2-month tender by the oil marketing companies is expected to be the ongoing format for sales to the oil marketing companies. We expect the formula to be a successful mechanism for the rapid growth of biodiesel production in India due to the predictability of the pricing.

This year, India is expected to achieve a 1% biodiesel blend which would fully utilize all of the existing production capacity in the country. Our plant in India is uniquely situated to benefit since importing biodiesel or renewable diesel is not allowed under India law.

The tallow feedstock pretreatment unit in India is expected to be utilized to refine crude tallow for export to the U.S. and Europe furthering the production of renewable diesel and sustainable aviation fuel.

Negotiations of refined tallow offtake agreements have been underway since late last year and refined tallow production is expected to begin in Q2 2023 to support exports to U.S. renewable diesel production plants.

Since our India subsidiary has no debt and the 50 million gallons per year biodiesel plant, the glycerin plant and the tallow refining facility are fully constructed, we are well positioned for profitable operations at full capacity.

Now Andy Foster, the President of the Aemetis Biogas and Aemetis advanced fuel businesses will review some highlights. Andy?

Andrew Foster

Thanks, Eric. With the recent closing of our first $25 million financing utilizing the USDA Renewable Energy for America program, the Aemetis Biogas renewable natural gas business in California delivered in-service dates in Q1 2023 for several projects. We completed the installation of 40 miles of Biogas pipeline. We completed commissioning of the biogas to RNG upgrading facility. We completed the commissioning of the RNG interconnection unit with PG&E's pipeline. We completed 4 new digesters and now have 6 fully operating. We will complete construction on the seventh digester by the end of March with 2 additional digesters slated for completion by midyear. Additionally, we'll begin construction of up to 10 more digesters by the end of 2023, depending on the timing of permitting and USDA financing. We've also signed up a number of new dairies and now have approximately 40 dairies in the Aemetis RNG network.

After receiving CARB LCFS carbon intensity pathways for this RNG, these 7 dairy digesters are expected to generate approximately 200,000 MMBtus per year of RNG. We have submitted our RNG production data to obtain LCFS pathway approval that will allow us to begin generating LCFS credits. While we await the approval of LCFS pathways, we are storing the RNG underground and carrying as inventory, as Eric mentioned.

Due to the high volume of LCFS applications and limited staff resources at CARB, the CARB review and approval process can take up to 1 year or longer but we anticipate working closely with CARB staff to help facilitate a more timely approval.

Operationally, we are focused on executing the construction of dairy digesters to fill the Aemetis Biogas pipeline, the centralized biogas to RNG production facility and the PG&E interconnection unit, all of which are in operation now.

To date, Aemetis has been awarded $23 million worth of grants related to the biogas project from the Department of -- California Department of Food and Agriculture, California Energy Commission, PG&E and other government agencies for the dairy Biogas project and the production of renewable natural gas.

Let's take a moment to discuss progress at our California ethanol plant. Demand for ethanol in California, steady wet distillers grains pricing and increasing value for distillers corn oil used as animal feed or for renewable diesel production have helped to offset the increased cost of corn and energy in 2022.

Due to insufficient natural gas storage and inventory planning, by California's large gas utilities and restrictions on the El Paso pipeline that feeds California, natural gas prices spiked by more than 500% in December, creating an extremely unfavorable margin environment.

We decided to turn this challenge into an opportunity and undertake an extended maintenance cycle turnaround and accelerate the implementation of several important ethanol energy efficiency plant upgrades during Q1 and during this period of high natural gas prices, which extended into January and February as well.

Our California ethanol plant upgrades will allow us to operate using high-efficiency electric motors and pumps powered by low or zero carbon intensity renewable power sources, including our solar microgrid and local renewable electricity.

As a strong endorsement of this strategy, Aemetis has been awarded $16 million of energy efficiency and other grants by PG&E, the CPUC and other entities to support -- to supplement our own funding to complete these projects.

Our goal is to significantly reduce or completely eliminate the use of petroleum-based natural gas at the Keyes ethanol plant. This approach is in keeping with the state's focus to reduce or eliminate carbon-based energy sources and will result in significantly improved LCFS value for our renewable fuel ethanol.

Let me take a moment to provide a few updates on the Keyes ethanol plant projects that are expected to materially increase cash flow when these projects are fully completed. First, the Mitsubishi ZEBREX electric ethanol dehydration unit has been installed and operated in full production mode for more than 3 months.

We continue to work closely with Mitsubishi to fine-tune and refine the operation of the ZEBREX unit and our -- but our early results are extremely positive. The ZEBREX unit reduced our natural gas use by almost 25%, which when annualized is expected to save Aemetis millions of dollars in energy costs and reduce the carbon intensity of our ethanol thereby increasing the value of our biofuel.

We are currently implementing some design improvements as a result of testing and expect to completely commission the upgrade in ZEBREX unit this summer to maximize the value of the system.

We are in the middle of construction of the solar microgrid with battery backup system. Working closely with our EPC and technology provider, Total, we are installing the solar microgrid with battery backup for load balancing and emergency operations. This project is supported by an $8 million grant from the CEC. The solar unit is designed to generate approximately 1.9 megawatts of zero carbon intensity electric power at low cost for operation of our ethanol plant. We expect to compete -- complete the solar installation in 2023 and lower energy costs and thereby reduce the carbon intensity of our ethanol.

The mechanical vapor recompression or MVR system will further reduce petroleum natural gas and steam use and is in the final detailed engineering and equipment procurement phase. We expect the MVR system to reduce our fossil natural gas use by approximately 65% at the Keyes plant when the system becomes operational in 2024.

Currently, natural gas costs for the Keyes plant exceeds $10 million per year, so a 65% savings in natural gas costs and a significant reduction in ethanol carbon intensity is expected after the MVR system is operational. This expected cost reduction and carbon intensity improvement is in addition to the 20% of natural gas reduction expected from the ZEBREX dehydration system.

One additional item with note, in April, we will begin the process of changing the ethanol production enzymes that will then allow us to recognize a portion of our ethanol production and cellulosic. This will add additional LCFS value, and with the recent rule announced by the EPA is expected to qualify the cellulosic gallons for valuable D3 RINs and a federal tax credit of $1.01 per gallon of cellulosic ethanol. The overall financial impact is expected to be between $6 million and $10 million annually. In summary, operational performance and project milestones for the Aemetis Biogas and ethanol plant business continue to be on track with our 5-year plan. Eric?

Eric McAfee

Thank you, Andy. Let's discuss our carbon zero sustainable aviation fuel and renewable diesel project in Riverbank, California. A year ago, Aemetis took operational control of the 125-acre Riverbank site 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 $3.8 billion of sales contracts with Delta Airlines, American Airlines, Japan Airlines, Qantas and other airlines. We have now completed offtake contracts for about 45 million gallons per year of blended sustainable aviation fuel to be produced at the Riverbank plant.

Under the sustainable aviation fuel sales agreements, the neat SAF will be trucked from the Riverbank production plant to the San Francisco Bay Area for blending with petroleum jet fuel. The blended SAF will then be delivered via pipeline to the San Francisco Airport for use by airlines.

In addition, we signed a $3.2 billion renewable diesel sales agreement to deliver 45 million gallons per year under a 10-year sales contract with the major travel stop chain for its Northern California locations.

Incentives included in the recently passed IRA legislation expand the market for sustainable aviation fuel by allowing a price to airlines is about 10% higher than petroleum jet fuel and is partially or even entirely offset by CORSIA carbon credits generated by the airlines. We look forward to completing engineering and permitting in order to begin construction of the Riverbank renewable jet diesel plant later this year.

Let's review our subsidiary, Aemetis Carbon Capture. Aemetis currently captures the 150,000 metric tons per year of CO2 emissions from our ethanol plant near Modesto, and reuses the CO2 for local customers. In October 2020, the Aemetis ethanol plant in California was identified in a study issued by Stanford University Center for carbon capture as 1 of 3 ethanol plant CO2 sources in California that have the highest potential return on investment from building a carbon capture and sequestration facility compared to the oil refinery cement plants and natural gas power plants that comprise the 61 largest CO2 emission sources in California.

In Phase 1 of the Aemetis carbon capture project, we plan to inject up to 400,000 metric tons per year of CO2 emissions from our own biogas, ethanol and jet diesel plants into 2 sequestration wells, which we plan to drill near our 2 biofuels plant sites in California.

We expect to construct 2 CO2 injection wells that each have a minimum of 1 million metric tons per year of injection capacity. With additional CO2 supplied by other emission sources to sequester a planned total of more than 2 million metric tons per year of CO2. The initial phase of construction includes drilling 2 characterization wells to provide empirical data for the EPA classics permit.

During 2022, Aemetis completed the purchase of 24 acres at the Riverbank site and built a heavy equipment access road and a well drilling pad for the soil characterization well to provide data for our EPA Class 6 injection well permit. We are currently in the engineering and permitting process for the 2 characterization wells with an expectation that we will drill the first characterization well after Riverbank site.

The direct pay feature of the Inflation Reduction Act provides a federal tax credit of $85 per metric ton of CO2 as a cash refund to Aemetis each year for the first 5 years of production. The planned 2 million metric tons of CO2 per year from the Aemetis carbon capture project, which generated an expected $170 million per year from the Federal direct pay tax credit as well as an estimated $400 million per year and a projected $200 per ton of sequestered CO2 from the low carbon fuel standard. We believe the fixed amount of $850 million provided by the direct pay funding over the first 5 years of the project could support funding the estimated $250 million capital cost of the 2 injection wells and related equipment.

In summary, Aemetis is expanding a diversified portfolio of negative carbon intensity projects, dairy renewable natural gas, biodiesel in India, sustainable aviation and renewable diesel fuel, low carbon ethanol using zero carbon intensity electricity, renewable hydrogen and CO2 sequestration. All of these projects are synergistic and create what we refer to as a circular bioeconomy within Aemetis in which we use byproducts and waste products from our facilities in local areas as feedstock to produce low and negative carbon intensity renewable fuels.

Our company's values include a long-term commitment to building value for shareholders, the empowerment of and respect for our employees and business partners, and making significant and positive contributions to the communities we serve.

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

Question-and-Answer Session

Operator

[Operator Instructions] Your first question is coming from Jordan Levy from Truist Securities.

Jordan Levy

Eric, maybe just to start out on the investor deck, you outlined your estimates for the tax credits for each of the segments under IRA. Knowing there's a lot of details still being worked out with the agencies, can you just give us your high-level thoughts on how you're thinking about monetizing those tax credits within each of the segments?

Eric McAfee

The IRA provides for what we call a certificate mechanism for investors to participate in the tax credit value. Under solar and wind, it's an allocation mechanism, which they have to actually become an owner in the project. The transfer of the certificates 1 time to an investor opens up a wide array of potential buyers.

We currently are working with the brokerage firm that has done over $6 billion of state and federal tax credits and insurance broker that has over 60% market share in the guaranteeing of tax credit instruments for investors and directly with multiple investors who have hundreds of millions of dollars per year of tax liability.

I think that over the course of the next 12 months, greater clarity will come in from the IRS about exactly what forms to file for the transferability, et cetera. But clearly, there is a strong amount of investor appetite at this point in time and a desire to do larger transactions. And so we happen to be in a unique position of having more than $24 million of tax credits we generated in January and in February. And so we are negotiating actual transactions where many other parties are more projecting potential future investment or production tax credits.

Jordan Levy

And maybe just as a follow-up, going back to your comments, and I appreciate the color you gave on the preferred equity for biogas. Maybe if you could just expand a little on what that process looks like as you enter midyear and maybe look to do a transaction there and how we should think about sort of the moving pieces there?

Eric McAfee

I think the best way to look at it is that Third Capital is seeking some liquidity from a very, very successful investment that they believe that they made. Certainly, when you look at the comps, it's a very successful set of comparables. And so we have decided to pick up some additional acceleration growth capital that will enable us to not only achieve our 5-year plan, but probably even exceed the pace of building the digesters, et cetera, but looking to do it at very low or even zero dilution to shareholders.

So we've engaged investment bank. We have operating documents. We have investors already interested and we're going through a process that I expect in Q2 will result in a refinancing of the Third Eye preferred as well as providing some additional growth capital. And currently, we're expected to take -- we're expecting to have low or zero -- our target is zero dilution to shareholders.

Operator

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

Amit Dayal

Eric, would you mean giving us a bridge to your working capital and CapEx needs for 2023. There's a lot of sort of investment activity going on as well as just your own operations are growing along with it. So just wanted to understand how we are looking to bridge working capital needs and other operating cost needs in [2023]

Eric McAfee

Thank you, Amit. The $100 million credit line we signed with Third Eye Capital approximately a year ago has been approximately 50% utilized. There is $50 million of potential availability that's, of course, depending on combined with terms and conditions of the arrangement. But we perceive that as being attractive low-cost capital and is slated to fully fund all the -- what you could see as equity in our project companies for this year. On top of that, we have 3 additional $25 million funding totaled $75 million from USDA. That funding includes working capital and contingencies that we don't utilize that adds up to millions of dollars of available funding for the working capital activities of the company. And then positive cash flow.

As we reported today, our India biodiesel business generated about $8.3 million of margin in this most recent OMC sales, oil marketing company sales in India. We are going into a process that should result in about 9 months' worth of sales. April 1 is when the tax begins, we believe that's when shipping starts under our renewed contracts with oil marketing companies. And that business alone is a business that can generate several million dollars a month of positive cash flow. And has proven itself capable of generating $8 million in less than 2 months.

So on top of that, we have our India tallow business, where we're expecting shipments to begin. That's a 50 million-gallon of opportunity at $6 a gallon. We won't get to full production this year due to just the supply chain, but that $6 and 50 million gallons is what the opportunity is there, and it's a very strong margin business.

And biogas, our 90 days of testing for production of renewable natural gas and injection underground was completed. The process of CARB approval is pending and we would expect mid this year to sometime later this year to begin generating a significant amount of cash flow from biogas, partially because we're storing the revenues underground right now. So when they come out of the ground, they tend to be accelerated. So it's faster than the pace of current production. And where we have 7 digesters. We're looking to substantially increase that this year.

So our positive cash flow biogas business is a contributor to the overall needs of the company. So all in all, we're an operating company that has operating cash flow, and then we increment that with the Third Eye Capital credit line and long-term financing from the USDA.

Operator

Your next question is coming from Derrick Whitfield from Stifel.

Derrick Whitfield

Eric, we and several investors for that matter, admire the synergistic nature of your business, your unrelenting focus on avoiding dilution and the unappreciated nature of your assets. Having said that, the stock is under immense pressure as a result of the capital plans for the Riverbank facility and the implied interest on your Third Eye reserve facility. Given the capital-light aspects of your business in India and the Keyes ethanol business from here, the huge PTC tailwinds you have for both RNG and ethanol in the U.S. in 2025 and the fact that you could build and refinance RNG with REAP money, is there a scenario where you could delay funding for the RD SAF business by a year or carve it out to remove the implicit threat?

Eric McAfee

We receive that project funding as being basically unrelated to our other business activities. It is a project funding. So the way we've currently slated it, we have about $40 million, we've already invested over the last 5 years in the project. And the coming together, project financing is primarily long-term debt and preferred equity. It's not a parent company transaction, it is a subsidiary company transaction. We've already put in our $40 million of equity.

So the constraint for us actually is engineering and permitting phase that we are looking to complete. And then we've already signed USDA 9003 Biorefinery Assistance Program, low commitment letter. We have already shown that we can do renewable energy for America program funding, again, guaranteed by the USDA and other producers in California have been very successful with municipal tax-free long-term financing.

So we are -- we believe that it's not a transaction that's, frankly, even related to the parent company dilution at all. We've already done our investment. It's primarily just a procedural process to complete permitting and complete the financing.

So the timing, unfortunately, is going to run at the pace of those programs. So any delay is really not our effort to try to minimize dilution because we're not actually structured to have any dilution in the transaction, it's all just procedural.

And we do have $3.8 billion of airlines and $3 2 billion of a travel staff company, all looking for product in 2025 and we're currently on track to be able to achieve that. So we continue to push forward aggressively to achieve our goals of minimizing dilution but also achieve the expansion plans.

Derrick Whitfield

And Eric, just to be clear on that point, some of the long time -- long lead time items, they would not be procured or advanced until you have the project financing in place?

Eric McAfee

That is correct.

Derrick Whitfield

Okay. And then as a follow-up, I wanted to ask if you could offer color on the dairy RNG competitive landscape. And specifically, are you seeing greater competition as a result of the LCFS pricing CARB is suggesting or the PTC impact on dairy RNG volumes out in 2025?

Eric McAfee

The dairy RNG business is a very local business. It's basically 1 dairy 1 pipeline and then our process of turning into renewable natural gas. The dairies actually produced biogas, which is 40% CO2 and has a substantial amount of processing and interconnect issues that have to happen.

So the state of California will be definitely attracting more growth and investment. But our particular local area where our 40-mile pipeline is in place. We have almost 40 dairies signed many of whom are coming in now that they're sitting in the neighborhood -- neighbors involved. Andy, do you have any comments you want to make about RNG?

Andrew Foster

No, I would affirm that, Eric. I would say to your question, Derrick, there are more people that are interested in developing projects in California. I think the scoping plan will have a lot to do with how many out-of-state folks want to come and really play in California. You've got some that are already here. I mean the 3 main established developers in state, obviously, are Aemetis, [MOS], and CalBio but we have seen some other state guys come in. But I think a lot is going to have to do with how the scoping plan ends up and what CARB does in terms of the program going forward.

Operator

Your next question is coming from Manav Gupta from UBS.

Manav Gupta

Eric, my question is based on Slide 18. I think the Slide 18 is showing 7 dairies right now and then 66 by year-end 2027. should we -- given the work you've done on pipelines and stuff, should we assume a linear progression? Or is there any reason these come on in clusters?

Eric McAfee

The best way to look at that is on an annual basis because of the pace of permitting and primarily CARB approvals to be frank with you, CARB very possibly will be approving 4 of our digesters all at once. So from a financial investor perspective, it would look like we built 4 all at once. What really happened was we're building at an average pace of 1 or so a month, and then the CARB approvals come in, in sort of bunches.

So we are being what I think is accurate and that it means we're being conservative by estimating a 14-month delay between when we start producing RNG and storing it underground and when we actually receive our CARB approval. So in our 5-year plan, we show virtually no revenues in the current 2023 year because we're expecting that our CARB approvals do not occur until the end of the fourth quarter, and revenues really start next year. We'll get some more evidence here over the next few months as the pace of CARB actual approvals. And I doubt if we'll update our 5-year plan. But you should look for press releases about our CARB approvals and that will give you a sense of what the actual is. Our 14-month projection, we think is conservatively accurate.

Manav Gupta

Okay. And then the second question is, Eric, I mean, yes, you are -- you want higher carbon prices but there is an opposing force out there. There are the refiners out there who love this low carbon price environment, and they're pushing for a lower carbon price. So I'm just trying to understand like how do we go from here? What really gives you confidence that ultimately CARB will swing to your side and do things to raise the carbon price versus refiners who are out there saying you do this and you cause the gasoline price to go up. We don't want you to do that. So if you could talk us through that.

Eric McAfee

Andy, do you want to comment?

Andrew Foster

Yes, Manav, this is Andy. Great question. I think CARB has heard very clearly over the last year from renewable producers across different technologies, whether it's RNG or other liquid fuels or hydrogen or you name it, this low LCFS price is bad for everybody. And the only group at rewards are the people who are the petroleum, 90% mandated petroleum use in the United States right now. And I don't think CARB wants that look. I don't think that's what they desire to do. I think it's part of the rescoping plan is addressing that. And as you saw, I'm sure, Manav, you were probably on the workshop a couple of weeks ago, they showed a slide that showed a dramatically different result as far as the LCFS pricing over $200.

So clearly, that message has made it through. I think now it's balancing -- making the program more aggressive, which they announced they're going to do. We'd like to push them even further. Rather than 30%, we'd like to see 35%. We'd like to see that -- really take that aggressively. But I think a lot of it has been sort of waiting to see what's CARB going to do with this rescoping plan. And I think now that, that's becoming more clear. And you're going to see a lot more of these projects moving forward.

So yes, it's obviously something that we've all been frustrated with, but I think we and other producers have spent a lot of time having, I think, very good constructive discussions with the CARB staff about this. And again, at the end of the day, it's not a good look for CARB or any other state that the oil producers are the winners here. And so I think that process will work itself through and reverse itself here over the next 12 months.

Manav Gupta

Last question. If CARB puts in provisions, which basically mean that in-state dairy RNG is fine, and out of state dairy RNG is not so good. Does that benefit you disproportionately?

Andrew Foster

You're talking about the book and claim proposal that they're considering. It's good for the -- yes, we think even as an end-state producer, I think our view is that it's good for the industry to have open borders, so to speak, when it comes to natural gas production. We don't necessarily support that proposed change to book and claim. It's important for California to recognize that a lot of the renewable natural gas that's currently being used in the state is being brought in from out of state. In-state production is now starting to catch up but really the foundation of this program was helped along by out-of-state producers. And at the end of the day, what they're doing is providing environmental benefits to the area wherever they're doing it. It's helping to support California's program.

So we don't think it's a great idea to erect those kind of barriers. And I'm not even sure -- I mean there could be some potential benefit to us, but I think looking at it from a larger perspective, Manav, we think it's good to continue to support out-of-state production.

If California wants to reward in-state producers with sort of a localized health impact credit, we support that, and we've made that clear to CARB. And I think out-of-state producers have actually told us they support that, too. So our view on it is that we think it's good for the industry to have a fungible network of gas produced -- production across the country supporting California's goals.

Operator

Your next question is coming from Matthew Blair from TPH.

Matthew Blair

I was hoping to ask about this [8,400] MMBtu of external RNG sales in the fourth quarter. It looks like that's the first quarter that you've had external sales. So I guess, number one, does that imply that you did receive an LCFS pathway that allows you to have external sales? And then number two...

Andrew Foster

No. Just -- yes, just to clarify, that's gas that has been sent to storage. And obviously, we go through a process where we're keeping the environmental attributes of the gas. But we do put that gas into storage. So there is incremental revenue that comes out of doing that. But no, we have not been approved our pathway yet. We were approved for -- the initial 2 dairies were approved for utilizing the gas in the ethanol plant. But now that we're interconnected with the pipeline, we have to go back through the process of getting all of the -- currently, the 6 dairies that we have operating through that LCFS pathway.

Matthew Blair

Okay. So that was going to be my follow-up. So -- and that's why the RNG I guess, approval, the pathway approval wouldn't come through until, I think you said mid to late 2023.

Andrew Foster

Yes, we're hopeful. It's a process that has currently got something like over -- I think, over 50 or 55 applications that are in the queue right now. And I know CARB has heard a lot of input on that from producers as well, and they're working to improve that by adding additional resources.

And then one of the other proposals in the scoping plan is to move to a Tier 1 application process, which will greatly expedite that. That unfortunately, that's not going to be until next year, but that's something hopeful to look forward to as we continue to build out our development is that we'll go into a more streamlined Tier 1 application process that should really help alleviate a lot of these delays that all producers and developers have been seeing.

Matthew Blair

Okay. That's helpful. And then my follow-up is on the India biodiesel segment. We're a couple of months into the first quarter. Could you talk about your overall expectations for the first quarter here. I know you mentioned that coming in April, there could be some nice tailwinds on both biodiesel sales and the glycerin -- sorry, not the glycerin, the tallow exports. But what are your expectations for Q1 for India biodiesel?

Eric McAfee

Current expectations is that this has proved positive that the India government is very talented at doing things slowly. But once it actually occurs, it's very, very good for us. So I do not expect anything out of the first quarter. I do expect very good news out of the first quarter. So since the market hopefully will be informed about what's coming in April, there will be good news in the first quarter. But other than buying feedstock, which we have done, we bought almost $10 million worth of feedstock and operating the plant, which we have done to be able to get ready for shipments. The actual revenues that occur upon delivery won't start until April.

Operator

Your next question is coming from [Jed Fareed] from Alliance Bernstein.

Unidentified Analyst

Derrick already asked my questions.

Operator

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

Edward Woo

Congratulations on the progress. My question is on India. It looks like you guys are getting back to relatively normal operations and you mentioned that there's no debt there. Have you guys considered any type of monetization of that asset since it seems to be a very valuable asset that has no debt.

Eric McAfee

Our current monetization of it is just getting it to full production, and that has proven to be a very, very positive cash flow business for us in this new cost-plus environment. And tallow exports will be a new source of revenue for us. So that's our current strategy to generate cash from those assets. However, the India stock market has also been very interested in the new $0.10 per diesel gallon tax that gets implemented in a couple of weeks in India. And we are the leading biodiesel company in India, therefore, the leading beneficiary of a 5% blend of diesel with biodiesel and -- I'm sorry, biodiesel, diesel. So we do anticipate there will be certainly opportunities for an IPO or other kind of private equity structure that will come out of that. But our current goal is every dollar of production we do there in margin that is generated from that is actually just free cash flow for the parent company. So we see that as a terrific source of tens of millions of dollars of cash for the parent company, supporting the overall 5-year plan initiatives.

Operator

Your next question is coming from Dave Storms from Stonegate Capital Partners.

David Storms

Congrats on adding the 36 additional miles to that biogas pipeline. My question is now that you have the 40 miles or so completed, should we expect any more infrastructure spending on the biogas side of things? Or is it more about getting the LCF approval at your current digesters and all the other goals you've outlined for the year?

Andrew Foster

No, we'll continue to spend on infrastructure because we're obviously building out more dairies. As far as that level, a 40-mile pipeline probably not another one of those. As we connect the dairies that we have now, there will be some additional small amounts of pipeline that a mile or 2 to connect various dairies. But primarily, the spending is going to be around building out the digesters and the associated equipment that goes with that, the pretreatment units that are at the dairies.

I'd say one other thing that I kind of keep your eye on it. I think this will be true for development in the state is as we get adding in the sort of the final dairies that are kind of still out there tend to be further away from pipelines and the infrastructure that's been built by Aemetis or the other developers. So you're going to see some trucking solutions that are going to be deployed, and that will have some associated infrastructure as well.

Operator

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

Eric McAfee

Thank you, and thanks to the Aemetis shareholders, analysts and others who joined us today. Please review the Aemetis company presentation that is posted on the home page of the Aemetis website along with our 5-year plan. We look forward to talking with you about participating in the growth opportunities at Aemetis. Todd?

Todd Waltz

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. Matthew?

Operator

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