Robert Rasmus: Just other opportunities. Just removing dioxin and furans and things like that. Other than PFAS from existing groundwater or – excuse me, in soil.
Gerry Sweeney: And then final question from me, Phase 2, obviously, the contracts that you just announced certainly, validates what is going on with Phase 1 at Red River. What would be sort of the calculus in terms of when you pull the trigger? I would, I’m assuming when – maybe I should say if you pull the trigger, what would the calculus and sort of gates be to make that final decision?
Robert Rasmus: Well sure. It is really a combination of factors, and this is a demand pull business opportunity. It is not something we would or we are not going to build it on spec. I think we would need to be fully contracted or extremely close to selling out all of our existing 25 million pounds of expansion production. We would need to have clear line of sight to being able to pre-contract and or confidence in being able to contract the second line. We would also need to ensure we have adequate liquidity and capital. We certainly wouldn’t want to jeopardize our success in transforming the foundational PAC business and the growth trajectory and the cash flows of the developing granular activated line. If you think about it, one of my main goals in my roughly nine months at Arq has been to de-risk shareholders investment while offering really a growth opportunity through the expansion into granular, hence our laser focus on pre contracting our granular production and transforming the PAC business.
What all that translates into is we are not going to go out and do some daredevil stunt to expand. We are going to continue to be prudent in terms of how we allocate capital and we grow the business.
Operator: We will turn now to Mark Silverberg with ICR for additional questions and comments.
Mark Silverberg: Bob, I think we are going to turn to a few questions that we received from investors overnight and earlier this morning. And so, first, can you please add a bit more detail on the CapEx change that you disclosed with the earnings last night and related to that what would you say is the risk of a further increase to expected spending for Red River Phase 1?
Robert Rasmus: The CapEx creep is fairly simple. The number of occasions and pilings were underestimated by approximately 300%, the additional construction costs plus the increased steel and cement and the contingency resulted in the new guidance we just gave. As it relates to further risk, I will reiterate what I mentioned in my prepared remarks. Our team has been working and continues to work assiduously to identify cost savings in any other ways we can reduce some of the overall project cost and the cost increase. We are also making every effort to ensure that we don’t have any additional upward changes in our spending plans. Those factors, plus the new contingency that we factored into our guidance range should mean that I won’t be on this call next quarter announcing another increase in CapEx. I have to say I dislike having to relay this type of information as much as you like hearing it.
That being said, this is still an outstanding investment even with the increased cost. We foresee a three-year or less payback. We have signed our first contract for approximately 20% of our GAC capabilities six to eight months in advance of initial production. We have clear line of sight and visibility to sign an additional contract. So I still feel very, very good about this investment.
Mark Silverberg: Second question we got was related to the refinancing. You indicated that the refinancing process is underway. Given the scale of forecast at CapEx for 2024 and taking into account cash generation expected in your legacy PAC business, how much debt do you think the balance sheet can handle? And what is the maximum that you will be prepared to add in terms of potential capacity?
Robert Rasmus: Based on our current business and factoring in projected future cash flow and the value of our assets. Because I think we have an under levered balance sheet, and you look at the replacement cost of our plants is well over $500 million. What that translates into is we want to take sufficient incremental debt to really ensure the completion of the project on time and to help us maintain and ensure we have adequate overall liquidity. Any incremental debt that we take on, we would still have a very low EBITDA to debt multiple based on our 2025 EBITDA.
Mark Silverberg: Another question we received was regarding the GAC contract that was announced yesterday. And I know Gerry had asked questions regarding counterparty there. Is there any additional information you could provide in terms of the terms on the contract and second and related to that maybe your confidence in contracting out the remaining capacity for Phase 1 by the end of the year as you previously targeted?
