Todd Becker: But we’re not — its business as usual on every single thing we’ve laid out. There’s nothing changing from that perspective. It’s just to make sure that we believe, the board believes, I believe, some of our shareholders believe that we’re just undervalued first versus replacement value, second versus the value of our future cash flows. Third, versus the simplification that Jim, outlined and when you — it’s very simple now to get money to the bottom line. We need the market to help us with that. But we’re — no, nothing’s changing in terms of its business as usual. If we are already looking at clean sugar number two, we want to make sure we can make it in clean sugar number one. We got to make sure we pick the best sites, make sure we have the utilities, the wastewater, all the things that we need, that we discover.
We are still fully focused on 60 Pro. We are still fully focused on decarbonization. It’s business as usual, but I think this is a good time sometimes to also pause to make sure that, what else should we be looking at from a portfolio mix, from the location of our company, from the value of our company, from everything that we’ve outlined in the press release.
Ben Bienvenu: Okay, very good. Thanks so much, Todd. Best of luck.
Operator: We’ll go next to Salvator Tiano at Bank of America.
Salvator Tiano: Yes, good morning. So, firstly, I want to come back to the Nebraska project and understand a little bit some of the economics. You mentioned the $100 million, which certainly sounds pretty good, but I think for the Summit pipeline, you had disclosed a little bit some information. How would it work here in terms of, 45Z and 45Q that you mentioned will benefit you? Do you have to actually share these with the pipeline operator and who is incurring the cost of the carbon capture equipment that you said you’re ordering right now? And the last part is here, just a little bit on the timeline. You said you’re finalizing the order, and I was under the impression that usually the backlog wouldn’t allow something to be ready within a year, but you seem to have a start update in May 2025. What gives you confidence that you will receive equipment and be able to install by that timeframe?
Todd Becker: Well, that backlog, first of all, it’s addressed the backlog. That backlog has certainly come down a lot just because of the different delays and different projects around the United States. With Navigator not building anymore, as well as some of the enthusiasm that was early enthusiasm, I think when we look at start updates for all the different projects that are out there, Nebraska project being the first, earliest start update, compression equipment is available and so, we’re confident that as we put the order in, we’ll be able to be up in time for the start-up. The e-cons, we can’t, and the different contracts, we really never put out there what each of those would represent, nor at this point, would we do that except to say that we’re giving you a range of what Nebraska is capable of in terms of starting points, with upside from there.
The key is, no matter what project is, get it in the ground to earn some 45Zs, try to extend 45Z if we can, and then you move to 45Q and then carbon credit values. So generally speaking, the e-cons for Nebraska are what we’ve outlined. The total e-cons, kind of when we look forward for ’26 and beyond, and especially when you get into the 45Qs era, they’ll come down a little bit, but generally speaking, you want to attack anything you can to get on in the 45Z area. If we were today fully operating across the Western plants that we have on different pipelines, we would be significantly higher than that relative to our carbon earnings for that, not on top of the fact that we strongly believe that those earnings are going to come, and they’re not being appreciated quite frankly in the valuation of our company and the reason I say that is because three years ago nobody wanted to talk about it, nobody believed it.
We’re a year away from the first project coming online. So when you look at carbon strategies, earnings, as you get into just on 45Qs, based on the end of 45Z, you’re talking about full rate at Green Plains in the 150 rate to 200 rate for the first couple years of Z when all the projects are online in terms of EBITDA, and then dropping a little bit after that when 45Q takes over. So there’s some serious earnings power that I think nobody wanted to talk about a year ago, but it’s definitely worth talking about today because we’re only one year away or so from the first project starting up. And by the way, lastly, that’s a long answer, but there is a project already operating at an ethanol plant in a direct inject that is earning all of the money that we talked about relative to Zs, or relative to the 45Q today where 45Z comes online, but it’s happening.
Money’s being earned already on some of these projects.
Salvator Tiano: Okay, perfect. And I wanted to touch base a little bit on your corn costs. Clearly, the market has not been very tight recently and we’re still going to get a lot of big corn harvest probably in 2024. What are you seeing in terms of the corn base you’re paying this year, what you’re expecting for 2020? Sorry, what are you seeing about the corn base you’re paying right now and for the full year and generally, what we’re thinking about paying $0.18, $1 more in corn bases in the past year in 2023, shouldn’t that be a very meaningful tailwind for your core ethanol margins this year?
Todd Becker: Well, it’s a combination of everything. Ethanol is down significantly as well. So while the corn basis is down year-over-year, ethanol is down, but flat prices down, which means the storage grains are down. But generally speaking, we just manage the margin. If you take a look at some of the big processors, and I’ll give you the generalities, not necessarily what we’re at our plant, Nebraska is a 10-over to 20-over basis market today; Middle Iowa processors is a 5-over to 15-over basis market today and Central Illinois is about 10-over to 15-over. So a lot of people are modelling much lower corn costs generally because they’re going back to historical basis in some areas, but generally across the bigger processor market.
We’re still sitting a little bit over corn, but that’s still significantly lower than $1 or $1.50 over corn we were a year ago or two years ago. So that is a nice thing to have, but generally speaking, it all just goes into the equation to come up with a margin and that’s really how you achieve your goals.
Salvator Tiano: Well, I guess what I’m trying to understand if I’m missing is, as you said, $0.10, $0.20 versus $1 before. So if we think about the $0.90 improvement in your corn cost setting aside the actual corn price, which is also declining, that would seem to add a very, very meaningful amount to your development, which I don’t think we saw in your court. So that’s why I’m trying to understand what you’re saying.
Todd Becker: Yeah, but you’re not — again, it’s four components; its natural gas, it’s corn, it’s ethanol, it’s distillers grains. And you can’t just look at one of those components to think just because there’s a dollar less corn cost, which is $0.30 a gallon, ethanol has adjusted for that. It’s not like they — what corn give it, ethanol can take it their way. So that’s kind of what happens is the market is just, you don’t just get to earn the full dollar or gallon or dollar or bushel gain just because your input cost dropped. It all goes into the margin. Its corn, ethanol, natural gas and distillers grains, less your operating cost gets you to an EBITDA margin. So it’s all just part of the calculation.
Salvator Tiano: I know that that’s exactly what I’m trying to get to because when we do get the corn price and the ethanol price, if you add the base that you said $0.30, for example, band [ph] per gallon, the ethanol profits appear to — they probably should be stronger than they are. That’s what I’m trying to get to and that’s why I’m trying to figure out what I’m maybe missing here.
Todd Becker: Yeah, but remember, often what you see is, we take a — we look at our EBITDA, we take our — we adjust for our SG&A because we are an independent company and while you may see others that don’t have to necessarily adjust for SG&A, our plants, right now because we have a different type of plant stack than maybe the best producer, it costs us a little bit more, but generally speaking, a little more OpEx, but generally speaking, it’s all a combination of and you’re not going to gain — you’re not — the market is not getting the full benefit of this corn input cost breaking hard because everything else has adjusted around it.
Salvator Tiano: Thank you very much.
Operator: We’ll move next to Craig Irwin at ROTH MKM.
Craig Irwin: Good morning and thanks for taking my questions. So most of what was top of mind has already been put out there. So maybe Todd, can we talk a little bit about private market transactions and really what’s going on around some of the plants that are being offered out there. So we’ve heard that there’s actually a pretty intense level of interest because of SAF and the anticipated language this March, ethanol to aviation fuel is something that’s pretty simple by a couple of pathways. I like the pathway you’re working on. But I understand that the asking price for a lot of these plants is pretty rich and they also have demands for tails on carbon, etcetera. Can you maybe just update us on what you’re seeing in the private market and we did mention the strategic review so that that always does include a potential sale. Would you expect those conditions to maybe be a part of the consideration for green plants as well?
Todd Becker: So the private market isn’t really existing today. There’s definitely a lot of interest for plants, but we have a good operating, high quality plant in a good location, it’s above — it’s in that $1.80 to $2.00 range before you can even get somebody to even talk to you, a gallon of replacement. To replace a plant today, it’s in that $1, well, probably $2 to $2.50 a gallon range to build a plant today from scratch. When you look at our — what we think is $950 million gallons or so of capacity and you look at that without, that’s without protein, without dextrose, without carbon, without anything today, that’s what it would take, I think, in the private market to even think about clearing a plant of any good quality.
I think that’s some of the bigger issues that we see. When you look at that compared to our market cap and our net debt position, which is lower, the public markets are a significant discount and it’s not just us, it’s others that are in public, our significant discount to the valuation of the private market, but that’s been going on really since the beginning of time. So we see that, we see that often and so we’re well positioned, but when we look at it from the perspective of decarbonized alcohol, that isn’t even being valued yet. So, absolutely the calls come in to say, how do we partner with you? How do we look at your decarbonized alcohol? How do we get supply agreements? Those are just starting, but they want to see, obviously, the carbon capture happen, but decarbonized alcohol will be a very valuable asset and that’s why we believe we’re well positioned in Nebraska.
