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Gevo, Inc. (GEVO) Q4 2020 Earnings Call Transcript

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GEVO earnings call for the period ending December 31, 2020.

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Gevo, Inc. (GEVO -4.10%)
Q4 2020 Earnings Call
Mar 18, 2021, 4:30 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:


Operator

Welcome to Gevo's fourth-quarter 2020 earnings conference call. My name is Carmen, and I'll be your operator for today's call. [Operator instructions] Please note that today's conference is being recorded. I'll now turn the call over to Geoff Williams, Gevo's vice president, general counsel, and secretary.

Please go ahead, Mr. Williams.

Geoff Williams -- Vice President, General Counsel, and Secretary

Good afternoon, everyone, and thank you for joining Gevo's fourth-quarter 2020 earnings conference call. I would like to start by introducing today's participants from the company. With us today is Patrick Gruber, Gevo's chief executive officer; and Carolyn Romero, Gevo's chief accounting officer. Earlier today, we issued a press release that outlines the topics we plan to discuss today.

A copy of this press release is available on our website at www.gevo.com. I would like to remind our listeners that this conference call is open to the media and that we are providing a simultaneous webcast of this call to the public. A replay of today's call will be available on Gevo's website. On the call today and on this webcast, you will hear discussions of certain non-GAAP financial measures.

Non-GAAP financial measures should not be considered in isolation from or as a substitute for financial information presented in accordance with GAAP. Reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measures is contained in the press release distributed today, which is posted on our website. We will also make certain forward-looking statements about events and circumstances that have not yet occurred, including, but not limited to, projections about Gevo's business development plans and operating activities for 2021 and beyond. These forward-looking statements are based on management's current beliefs, expectations, and assumptions and are subject to significant risks and uncertainty, including those disclosed in Gevo's Form 10-K for the year ended December 31, 2020, that was filed with the U.S.

Securities and Exchange Commission, and in subsequent reports and other filings made with the SEC by Gevo, including Gevo's quarterly reports on Form 10-Q. Investors are cautioned not to place undue reliance on any such forward-looking statements. Such forward-looking statements speak only as of today's date and Gevo disclaims any obligation to update information contained in these forward-looking statements, whether as a result of new information, future events or otherwise. On today's call, Pat will begin with a discussion of Gevo's business developments, and then Carolyn will review Gevo's financial results for the fourth quarter of 2020.

Following the presentation, we will open up the call for questions. I'll now turn the call over to Pat.

Patrick Gruber -- Chief Executive Officer

Thanks, Geoff. Hello, everyone. I'm going to keep this relatively short today because tomorrow we're doing another fireside chat. Those who join us will hear Lynn and I discuss more information around the financing, projects, how to think about them, et cetera.

But back to reporting on this year. Now we've had quite a change from a year ago, so I'm going to run through a partial list. Now we sold out the capacity to a large commercial plant using take-or-pay contracts that are suitable for use in backing of project debt financing. Now these contracts add up to more than 45 million gallons per year of hydrocarbons.

That offtake caused us to think bigger sooner. We also paid off all of the Whitebox debt. We advanced the development of our renewable natural gas project. We figured how to make net zero hydrocarbon products by using a mix of renewable energy with our process.

And of course, that's targeted for our net zero plant in, targeted for Lake Preston, South Dakota. We have $530 million of cash on the balance sheet and no material debt. That money should enable us to develop multiple plants and make the full equity investment in our Net-Zero 1 plant rather than being dependent upon a third party. We also have the cash and the balance sheet that should allow us to sponsor significant equity investments in future net zero plants such as Net-Zero 2 or Net-Zero 3 projects.

We've worked with Citigroup to figure out, and they have figured out and vetted a potential bond offering that we may use to finance our debt for the Net-Zero 1 Project. That's taken a lot of work to actually work through that. And they have a really attractive solution in mind. We have work to do to get ready for it still.

Now we shut down our ethanol plant. It lost money given that the market wasn't very good and it wasn't a great focus for us. We've been told by some new investors that they now understand that we aren't an ethanol company. Well, that's good.

That eliminates confusion. We aren't an ethanol company. We're all about the renewable energy into energy-dense liquids, hydrocarbons, net zero footprint. We developed our customer pipeline.

It's grown quite a lot from last year and it's grown even more since. Importantly, we proved that we can establish pricing in take-or-pay contracts that works for our customers and ourselves and results in meaningful take-or-pay contracts. These take-or-pay contracts are backed by the balance sheet or letters of credit from our customers. That's a big deal and a big accomplishment.

We announced our Net-Zero 1 Project. This project slated for Lake Preston, South Dakota will produce roughly 400 million pounds per year of value-added, protein-rich animal feed, roughly 30 million pounds of corn oil, 45 million gallons per year of energy-dense liquid hydrocarbons. These hydrocarbons are drop-in gasoline and jet fuel products that when burned have a net zero greenhouse gas emission across the whole of their life cycle, measuring all the way from capturing the CO2 from the atmosphere, accounting for the farming and agriculture, accounting for all the energy sources, the transportation of the products. The hydrocarbon products produced at our plant are expected to be more than minus 70 in their carbon footprint score.

But when burned as a fuel for transportation, the whole cycle would be net zero, according to the leading science-based life cycle model called GREET that's been developed by Argonne National Lab. So how does it get to net zero? It's all about two things. Paying attention to how things are grown, that is the growing practices such as low-till and no-till, along with precision agricultural techniques, where farmers only apply the chemicals that are needed, not excess. And two, eliminating dirty electricity and fossil-based natural gas from our production processes.

Net zero is being designed to be off the grid from dependence on fossil-based energy. We are putting in a water treatment plant that is expected to generate enough biogas to meet the thermal demands of the plant and provide enough excess gas so we can generate about 30% of our electricity with a combined heat and power unit. We plan on meeting the need for the other 70% of our electricity from a related wind project that we are developing with Juhl Energy. We don't want dirty electricity that's typical of the grid in this country.

We don't want it. We also expect to use our green electricity to generate green hydrogen for our production processes. We haven't decided yet if we'll make excess hydrogen to take to the marketplace. Our negotiating power has strengthened as well.

This means that strategics approach us differently now. We expect that if and when we work with strategics, we'll be able to make a more balanced deal. That's a major change from our previous position when we had our hat in our hand. Yes.

Several parties are in discussion with us. No, we can't give more detail at this point. So what's going to happen this coming year in 2021? We expect to sign more take-or-pay customer contracts in support of Net-Zero 2 and Net-Zero 3. We already have attractive production sites chosen and options are under LOI.

We expect to announce the specifics for these sites after we announce the next set of offtake contracts. We expect that Net-Zero 2 and Net-Zero 3 would look a lot like Net-Zero 1. We expect to start construction of our renewable natural gas project with a size of 355,000 million BTUs. This project would take manure from more than 20,000 dairy cows and convert it to renewable natural gas.

This project will cost about $75 million, and we project a return of more than 30% IRR using conservative estimates. The project is expected to come online and start generating profit in the fourth quarter of next year. In the near term, the gas will be sold to the California market. Once Net-Zero 1 starts up, we may take a portion of that gas up there to drive the carbon scores even lower or maybe we just keep on supplying the California market.

That's the future economic optimization question. In order to close the project finance deal for Net-Zero 1, we need to have the capital cost estimate to the plus or minus 10% or so level. This engineering work and design work is under way. Our engineering partners have upwards of 50 people working on our design and capital cost.

We are grateful to have the money to do it properly. The capital cost of Net-Zero 1 is currently expected to be about $650 million, inclusive of the production plants, water treatment plants and energy complex. On a fully installed project finance basis, the project total would be roughly $800 million because of the interest during construction and the reserves and such that are required to do a debt financing. The IRR for this $800 million project is expected to be better than about 20%.

We need to get the engineering design work done and pin down the capital cost to the appropriate precision to enable the debt financing of Net-Zero 1. That's a prerequisite. We have to know what it is, plus or minus 10% before we could do a debt deal. This will take to the end of 2021 to complete and get it right.

We'd expect to close a bond deal in the first half of 2022. It's possible that the capital cost of Net-Zero 1 Project could go up or down depending upon adjustments, the scope of equipment costs, or what we work through in the design of that plant. Well, that's what all this design work is about right now, pinning down the capital cost with the very best optimal processes that deliver the returns we want. Net-Zero 1 is expected to take about two years to build.

This is normal. It's a big capital deployment. One good thing is that the engineering and design cycle for Net-Zero 2 and 3 would be much, much shorter. We expect that those plants will be based upon Net-Zero 1.

It shouldn't be lost on anyone that our business is significantly derisked. We have money to execute our plans in a real sense. Yes, it's quite a change from last year. Last year, we had to raise money to keep the lights on.

Our team did well developing the business, advancing the technology. Now if we raise more money, the purpose will be to take more of the large cash flow streams we expect from our net zero projects or from an R&D project. Tomorrow, Lynn Smull and I will be doing a fireside chat with Water Tower Research where we will be discussing project economics and financing for both Net-Zero 1 Project and the RNG project. We will be answering a whole bunch of investor questions.

Information on registration can be found in the Investors section of our website, investors.gevo.com. Now I will turn the call over to Carolyn, who will take us through the financials. Carolyn?

Carolyn Romero -- Chief Accounting Officer, Vice President, and Controller

Thank you, Pat. Gevo reported revenue in the fourth quarter of 2020 of $0.5 million as compared to $6.9 million in the same period in 2019. During the fourth quarter of 2020, hydrocarbon revenue was $0.4 million compared with $1.0 million in the same period in 2019. Hydrocarbon sales decreased because of the lower shipments of finished products from our demonstration plant at the South Hampton Resources, Inc.

facility in Silsbee, Texas. During the fourth quarter of 2020, revenue derived at the Luverne Facility from ethanol sales and related products was $5,000 compared to $5.9 million during the same period in 2019. As a result of COVID-19 and in response to unfavorable commodity environment, we terminated our production of ethanol and distiller grains back in March of 2020, which resulted in lower sales for the fourth quarter. Cost of goods sold was $2.0 million in the fourth quarter of 2020 versus $9.4 million in the same period in 2019.

Cost of goods sold included approximately $0.9 million associated with production of IBA and related products and maintenance of the Luverne Facility and approximately $1.1 million in depreciation expense. Gross loss was $1.4 million for the fourth quarter of 2020 versus $2.5 million for the fourth quarter of 2019. Research and development expense increased by $1.7 million during the fourth quarter of 2020 compared with the same period in 2019, due primarily to an increase in consulting and personnel expenses. Selling, general, and administrative expense increased by $0.2 million during the fourth quarter of 2020 compared with the same period in 2019, due primarily to an increase in consulting and personnel costs, offset by a decrease in investor relations and marketing costs.

For the fourth-quarter 2020, we reported a loss from operations of $7 million compared to $6.2 million for the same period in 2019. In the fourth quarter of 2020, cash EBITDA loss, a non-GAAP measure that is calculated by adding back depreciation and noncash stock-based compensation to GAAP loss from operations, was $5.1 million compared to $4.0 million in the same quarter of 2019. Interest expense for the fourth quarter of 2020 was $0.5 million, a slight decrease compared to the same period in 2019 as a result of lower amortization of original issue discounts and debt issuance costs, and the conversion of $2.0 million of 2020/'21 notes to common stock during July of 2020. During December 2020, we converted the remaining $12.7 million of 2020/'21 notes into common stock.

For the fourth quarter of 2020, we reported a net loss of $18.1 million or a loss of $0.15 per share based on a weighted average shares outstanding of 120,017,120. This compares to a loss of $6.8 million in the fourth quarter of 2019 or a loss of $0.50 per share based on weighted average shares outstanding of 13,659,944. During the fourth quarter of 2020, we incurred a $1.4 million noncash loss related to the conversion of $12.7 million of 2020/'21 notes into common stock. During the three months ended December 31, 2020, we recognized a noncash loss totaling $8.6 million due to changes in the fair value of our 2021 notes embedded derivative liability, resulting from the increase in the price of our common stock prior to the conversion of the $12.7 million of the 2021 notes.

Adding back these noncash losses resulted in a non-GAAP adjusted net loss of $8.1 million in the fourth quarter of 2020 or a non-GAAP adjusted net loss per share of $0.07 based on a weighted average shares outstanding of 120,017,120. This compares to a non-GAAP adjusted net loss of $6.8 million in the fourth quarter of 2019 or a non-GAAP adjusted net loss per share of $0.50 per share based on a weighted average shares outstanding of 13,659,944. Now I will turn it back over to Pat to wrap things up.

Patrick Gruber -- Chief Executive Officer

Thanks, Carolyn. Let's open up the call for questions. Operator?

Questions & Answers:


Operator

Thank you. [Operator instructions] Our first question is from Amit Dayal with H.C. Wainwright. Your question, please.

Amit Dayal -- H.C. Wainwright -- Analyst

Thank you. Hi, Pat. Good afternoon, everyone. Appreciate you taking my question.

Patrick Gruber -- Chief Executive Officer

Hey, how you're doing?

Amit Dayal -- H.C. Wainwright -- Analyst

Good. Thank you, Pat. So I'll save some of my questions around the project for the call tomorrow. But just in terms of the timeline you've provided, the first half of 2022 for the financial close of Net-Zero 1, is this sort of a typical timeline for something like this? And could this potentially be accelerated if things fall in place for you as you expect?

Patrick Gruber -- Chief Executive Officer

I would say that the critical timeline runs through getting the engineering estimates done. We got to know what the capital cost is and what we're asking for in terms of debt support. You got to have that pinned down or you can't do a debt financing. We also have to have a bunch of the permitting stuff done and all kinds of things.

That time frame to get that stuff done, we're working on getting it done by the end of this year. And in which case then, we should be able to do the bond offering in the early part of next year. But because that's talking about a year from now or it could be less than a year from now, right? But because it's so far out, there's uncertainty around it. So the lawyers advised me to give it a wide range, first half of the year.

Boom, that's the answer. Do I want it sooner? Hell, yes, I want it sooner. I want it done. And I'm the most impatient person on Earth when it comes to it.

Amit Dayal -- H.C. Wainwright -- Analyst

Understood, Pat. Thank you for that. And then our model currently for Net-Zero 1 has some level of utilization coming online by 2024. Is that a reasonable assumption?

Patrick Gruber -- Chief Executive Officer

Amit, say that again. I missed the first part of the question.

Amit Dayal -- H.C. Wainwright -- Analyst

Yes. I was just saying, our financial model right now that is published publicly, we have you doing some level of utilization from Net-Zero 1 coming online by 2024.

Patrick Gruber -- Chief Executive Officer

Yes.

Amit Dayal -- H.C. Wainwright -- Analyst

Is that still a reasonable assumption?

Patrick Gruber -- Chief Executive Officer

It is. That's the right assumption.

Amit Dayal -- H.C. Wainwright -- Analyst

OK. Perfect.

Patrick Gruber -- Chief Executive Officer

Yes. So in other words, even if we finance in the first half of the year, we still plan to get the plant online in 2024. We've obviously built ourselves some slack in there. And this is one of these things where you got to do the design right and get it right, that allows you to plan right, secure equipment properly.

It could be that we can build things in modules, which shortens up the construction timelines. That's the sort of stuff we're figuring out. But yes, we are aiming at that first part of 2024 like you have in your model.

Amit Dayal -- H.C. Wainwright -- Analyst

OK. Understood. And then with respect to Net-Zero 2 and Net-Zero 3, I mean, you're obviously considering those options right now. But is this, clarity on this probably comes in 2022, or could we see more clarity and progress around these efforts earlier than 2022?

Patrick Gruber -- Chief Executive Officer

I would expect that we have progress in 2021 on those things. So we'll get the contracts signed. We'll have the sites. And I would expect to have the Net-Zero 2 site and customers announced in 2021.

And do I think we can get a Net-Zero 3 in that time frame? I think it's pretty much probable. Now we all heard Tim Cesarek talk a few weeks ago on the fireside chat. He threw out the number of, he can see us doing six plants in short order. Well, that's true, but we got to go through the work and duties.

So I can see us having multiple plants in play at the same time. The firms we're working with on the engineering side and the constructing side, they're capable of execution on that kind of scale. The trick is, you've got to get that design right because it leverages over into the Net-Zero 2 and Net-Zero 3. We can't be changing things or messing around with things.

People will often ask me, why don't I just take over an ethanol plant. Anybody know where the pipe diagrams are for that plant? It's like we got to go learn that. Are you kidding me? Each one is individually different. What we want to do is make it as cookie cutting as possible so we can accelerate these timelines.

That's what we're shooting for. And we're pretty stubborn about it because we think it is the best way to generate the most cash for the company over the long run because we want those cash flow streams. They're worth a lot of money.

Amit Daya -- H.C. Wainwright -- Analyst

Understood. And just looking at the burn rate for 2021, what should we expect in terms of all these efforts that you're putting in place to get the permitting and the engineering, et cetera, done. Like what should be the burn rate for 2021 that we should think about?

Patrick Gruber -- Chief Executive Officer

I think for the burn rate for Gevo, Inc. is in the $25 million-ish range, something like that. And then we'll have project stuff that's capitalized. And that will show up differently as a cash number.

We'll have to give guidance on that, I suppose, at some point. But it's kind of your normal project stuff. It's in that kind of a bucket. But of cash burn to do the development, the resources, we're adding staff, for example, and more people to go do things.

That would show up, we wind up with probably $25 million, $26 million of burn at the corporate level. So that's the GSA, R&D, including the engineering stuff, the actual corporate engineering. Project stuff, permitting, project-focused work, that's all going to be in a capitalization bucket for the project. That's the development expense.

Amit Dayal -- H.C. Wainwright -- Analyst

Understood. Yes. Just one last one for me, Pat, on the renewable natural gas opportunity. The initial effort seems to be just for your upcoming facility and your own consumption, et cetera, to lower your carbon intensity.

But could this develop into a larger sort of ambition for the company in terms of actual revenue scaling beyond what your initial efforts are?

Patrick Gruber -- Chief Executive Officer

That's a very interesting question, a very insightful question, actually. Because what's happened is that we started working on the RNG project in Northwest Iowa because we were thinking about putting that RNG over to Luverne. But the demand for our products outgrew the scale of Luverne, and we would have had to redo a whole bunch of permits in Minnesota and all kinds of stuff that would have dragged out our timelines. So we started thinking about that greenfield plant in Net-Zero 1.

And as we started thinking it through, we realized we could make Net-Zero 1 energy sufficient, generate our own biogas on-site. Well, that diminished the need for that Northwest Iowa RNG. On the other hand, we had already done a whole bunch of the development work. The way we think of it is this, so in these last 18 months, we learned how to be developers for renewable natural gas.

We are going in renewable natural gas business. That's just a fact. We're going to be doing that. This 355,000 million BTUs is initially going to go to California.

That's where we're going to sell it. There'll be a time in the future once the net zero plant starts up or maybe when we start Luverne back up or maybe when we get to our Net-Zero 2 or 3 site, we can use that natural gas there, too, if we need to. So it gives us optionality that I kind of like. But it shouldn't be lost on anybody that we do, in fact, have the capability to develop projects when not everyone can.

And we see how to get it done and how to monetize it. If we sell to California, in which we plan on doing in the early days, good, the plants pay back very quick. That's really attractive. And then that's a good thing.

So it's one of these very interesting games. When I think of Gevo, I think of renewable energy transformed to energy-dense liquids. That's no joke. We're wiping out the fossil-based footprint by displacing fossil-based natural gas.

More of it's better. We could actually drive, if we took that gas up to Net-Zero 1, we could make a large negative greenhouse gas emission liquid transportation fuel. That's kind of astounding.

Amit Dayal -- H.C. Wainwright -- Analyst

All right. Understood. That's all I have. Thank you so much.

I'll see you in the quarter.

Patrick Gruber -- Chief Executive Officer

Sure.

Operator

Thank you. Our next question comes from Poe Fratt with NOBLE Capital Markets. Your question, please.

Poe Fratt -- NOBLE Capital Markets -- Analyst

Yeah. Good afternoon, Pat.

Patrick Gruber -- Chief Executive Officer

Hey, Poe.

Poe Fratt -- NOBLE Capital Markets -- Analyst

If I just get one quick one out of the way. What's your current share count right now?

Patrick Gruber -- Chief Executive Officer

I believe it's 198 million shares.

Poe Fratt -- NOBLE Capital Markets -- Analyst

OK. So it hasn't changed much since the end of January.

Patrick Gruber -- Chief Executive Officer

No. It hasn't changed at all since the end of January.

Poe Fratt -- NOBLE Capital Markets -- Analyst

Yeah. No, I was thinking maybe some of the warrants might have been exercised because I think you still had some warrants out there, right?

Patrick Gruber -- Chief Executive Officer

Yeah. You know what? The number that I have is still the same old number on my slides that show up. Carolyn?

Carolyn Romero -- Chief Accounting Officer, Vice President, and Controller

Yes. They're the same.

Poe Fratt -- NOBLE Capital Markets -- Analyst

OK. And then on the RNG, Pat, you said $70 million to $75 million as far as capex. And you're working on the financing. Have you figured out, is it 70-30 as far as debt/equity? And how much equity are you going to end up putting into that plant?

Patrick Gruber -- Chief Executive Officer

OK. We're going to talk about this tomorrow at the fireside chat, but here's the preview. We don't have to put any more cash into it. We already did the development work.

In fact, we're going to get a rebate, so to speak, in that when we close that deal, we'll get money back. So it's already kind of a done deal and the financing is arranged. And we'll be talking more about that tomorrow when Lynn's on here. He's the guy who did a great job getting it all organized and getting it financed.

And so that cash flow should be, we should be seeing that. It will be meaningful cash flow by the fourth quarter. We'll start seeing some of it early next year. But construction starts like, we're going to break ground like, but it's getting organized right now, getting organized.

So it's very soon we'll be breaking ground. We'll do an announcement and we'll have to see what kind of ribbon-cutting ceremony and stuff like that or a groundbreaking ceremony and things like that. Lynn's done a great job of getting it all organized. Chris Ryan has done a great job at figuring how to do development of R&D and get it done.

It's good. It creates a different business opportunity for us.

Poe Fratt -- NOBLE Capital Markets -- Analyst

Yeah. Just two quick ones. Do you have an estimate on how much cash you might be able to get out of that once the financing is done? And then also the start-up, is it first quarter of 2022 or fourth quarter of 2022?

Patrick Gruber -- Chief Executive Officer

It will start up. Hello. Who is that?

Lynn Smull -- Chief Financial Officer

Oh, it's Lynn, sorry.

Patrick Gruber -- Chief Executive Officer

Oh, great, Lynn's OK. Go ahead.

Lynn Smull -- Chief Financial Officer

Yes. We'll start up in first quarter, but the cash is a little bit back-end loaded because of the way the LCFS credit system works. But we're expecting cash distributions out of the project in the order of $10 million on very conservative assumptions around carbon score and the cost to complete. We think we can do a lot better on the capital cost.

Patrick Gruber -- Chief Executive Officer

What's the range of outcomes, do you think? I know we took a really conservative approach as we did it for ourselves because we're thinking about really long term and how to use it with net zero plants. But if we just sold to California and it all worked well, what's that $10 million turn into?

Lynn Smull -- Chief Financial Officer

Well, the range is about $9 million to $16 million depending on the carbon intensity score. And the returns can vary from 30% to the high 60s, depending on those things, as well as the capex.

Patrick Gruber -- Chief Executive Officer

Does that help you, Poe?

Poe Fratt -- NOBLE Capital Markets -- Analyst

Yes. No. And I think you've had like $20 million in it or you had about $20 million outlays before everything?

Lynn Smull -- Chief Financial Officer

We don't need to put any more cash into it because we've already spent about $8 million on the development, including equipment and engineering and such. And we'll pull that back out. We have zero net cash coming off of the balance sheet to complete the construction of the RNG project.

Poe Fratt -- NOBLE Capital Markets -- Analyst

OK. Great. And then can you give me a budget for your FEED work, either a cost estimate or a budgeting on how much you're going to spend on the FEED work?

Lynn Smull -- Chief Financial Officer

For Net-Zero 1, that's $15 million.

Poe Fratt -- NOBLE Capital Markets -- Analyst

OK. And then, Pat, it was helpful you gave sort of the soft cost and the hard cost, the hard cost of Net-Zero 1 of $650 million and then soft costs are about $150 million as it stands right now.

Patrick Gruber -- Chief Executive Officer

Right.

Poe Fratt -- NOBLE Capital Markets -- Analyst

Can you -- And you need to get that cost estimate to plus or minus 10%. Are you currently at plus or minus 50%? I saw a footnote on your presentation that said it was plus or minus 50%. Can you help me reconcile that goal versus where you are now?

Patrick Gruber -- Chief Executive Officer

Yes. So we're doing, the different parts of the process are at different statuses. So we changed, as we started thinking about how to build out Net-Zero 1 and get ourselves off the dirty fossil footprint of energy, we are realizing, gosh, we should throw a water treatment plant in. Well, we got to go do that and figure that out.

And then how do you integrate it? What's the best way to maximize the protein and oil. So we've worked on a deal there with a partner we'll announce later and had to figure that out. And so what we do is we say things like that, it's plus 50%. Some parts of the process are already, they're pretty well nailed down.

Other parts, we're still going, is this chunk like this? And where does it lay out? And how does it interact with the rest of it? So it's the putting of the pieces together that creates the uncertainty and to get it right. But we also, this is actually the work entailed, actually getting bids on equipment and figuring out the real cost. That's a nontrivial thing. This is a giant plant.

So that has to be done as well. So it's a mixed bag is what we got here. And the trick of it is that we want to keep, we pin down the scope, that's good. That's extremely helpful.

We had inside our battery limit. Inside our battery limit, for everybody listening, means that's inside, think of it as inside our fence lines, under our control part of the plant, part of the build. Things that are outside the battery limit would be things external to us. There still might be some costs we have to pay attention to.

For instance, we'll be doing a wind farm in partnership with Juhl Energy. But that's separate with different financing. The inside our battery limit, we got a water treatment plant. We got a protein plant.

We're going to be taking out the vegetable oil, large amounts of it. We want all that stuff because that offsets the acquisition cost of corn, right? It's correlated. It's an internal hedge kind of a thing. It's worth a lot of money.

And then we got the hydrocarbon stuff. We're partnered with Axens on much of that because they've built a whole bunch of these kind of plants where you take the petrochemical-based butylene into hydrocarbons. Well, that's real similar to what we're doing, except for we're starting with isobutanol. You got to make isobutanol and isobutylene.

Once you go from there, then it works. Well, great, they've done 120 of these plants before, sorry, 25 of these plants before. So that's all good. So it's all about putting all the big pieces together and figuring it out.

And it just takes time. And that's where we're at. So it's not a, oh, we're at this part is, it's a mixed bag, different parts, different places working through.

Poe Fratt -- NOBLE Capital Markets -- Analyst

OK. And maybe I'll ask the cash burn question a little bit differently. Have you determined how much equity you're going to put into Net-Zero 1, what that figure is actually going to be? Or is it still a moving target because the capital cost estimates haven't been completely finalized?

Patrick Gruber -- Chief Executive Officer

At the CEO level, I just simplify it and say, we're doing 100% of the equity in Net-Zero 1 unless someone makes us one helluva sweet deal. And then in which case we'd share that cash flow stream. Now remember, we're greedy. We view that cash flow stream as roughly $100 million a year of EBITDA at the project level.

And so why would we share it? Oh, and I get that people, a strategic would add value. Yes and no. It depends on what the deal is. And so I liken it like this.

I live in Colorado and I'm a baker. I'm baking a cake at high altitude. It's tricky. I got all my ingredients.

I don't need extra cooks in my baking kitchen right now helping me bake. You want to put frosting on it after the thing is baked? Hey, we'll come to it. We'll look at it and see what the deal is at that time. And so it could be that we do add additional people into the mix of equity prior to close.

It could be that we do. And we're going to want to look at that very, very carefully. But getting in too early, then you got too many cooks in the kitchen. That's how you ruin timelines.

So I like where we're at on that front. Now, Lynn, you can give a little more example of what you're thinking about and what you've modeled.

Lynn Smull -- Chief Financial Officer

Sure. The debt work that we've done with Citi has been pretty exhaustive to confirm that we can qualify for private activity bond issuance. That's a tax-exempt bond issuance. Those markets are very attractive for the types of projects that we're sponsoring, the Net-Zero 1.

We expect to be somewhere around two-thirds leverage. At the end of the day, we're expecting that we could be putting in somewhere in the neighborhood of $250 million of equity if we invest 100% of the equity in that project. And I'd also note that the returns that Pat cited are oftentimes not giving credit to a range of fees that we would not charge to the project if we're 100% equity. If we're a partial equity, we'll charge for licensing fees, operations and maintenance fees, project management, certain overhead recoveries.

If we're 100% equity, consolidated, those fees only come to Gevo and add to the IRRs that are being cited.

Poe Fratt -- NOBLE Capital Markets -- Analyst

Great. That's helpful, Lynn. And that $250 million equity, that is a 2022 event, right?

Lynn Smull -- Chief Financial Officer

That's right.

Poe Fratt -- NOBLE Capital Markets -- Analyst

Do you have an idea of sort of where you think you'll end the year 2021 from a cash perspective? You have $531 million now. Do you have an idea of sort of what you think your cash on hand or on the balance sheet will be at the end of this year?

Lynn Smull -- Chief Financial Officer

Well, Pat, I'll just say that we're budgeting the development of Net-Zero 1 as though we're going to complete it and close financing at the end of 2021. That won't happen, but that's the way we're budgeting it. And it's including long-lead equipment deposits to maintain that completion schedule that Pat cited earlier in 2024. We're going to probably have about $45 million out the door.

That will recover when we close the financing of Net-Zero 1.

Poe Fratt -- NOBLE Capital Markets -- Analyst

Yes. OK. And then --

Patrick Gruber -- Chief Executive Officer

So if you're doing our cash then, you'd add it up and say, he told you it was going to be $15 million to do the FEED engineering, right? He told you we'd lay out probably, we budgeted for $45 million outlay, which we may or may not do, but that's what we budgeted for capital equipment long-lead items. And then we told you that it's like $25 million, $26 million of corporate burn-related expenses, and all the other work. So that's the kind of numbers subtracted off of $530 million. That's kind of the number you'd wind up with.

Poe Fratt -- NOBLE Capital Markets -- Analyst

That's really helpful. Pat, is it $15 million on the FEED or $50 million, sorry.

Patrick Gruber -- Chief Executive Officer

$15 million.

Poe Fratt -- NOBLE Capital Markets -- Analyst

$15 million.

Patrick Gruber -- Chief Executive Officer

One, five.

Poe Fratt -- NOBLE Capital Markets -- Analyst

One, five. OK. Great.

Patrick Gruber -- Chief Executive Officer

Yeah. And then one clarification I want to make, you asked about the phase and stuff and design is that, of course, this design, when we're talking about it this way is, it's about a process design. It's about going through the details, the mass, and energy balances. These are engineering exercises to figure it out.

We're optimizing the process along the way, right, because we want to minimize the carbon footprint so we maximize the carbon score that we get. That's how we make the most money. So you go through and look at everything in the design phase, you go through and look at every single unit operation and ask, is it the right one? Does it have the right horsepower on that engine or on that motor? Is it the right pipe size? It's the right detail, detail, and put it all together. And then you got to source the equipment and come up with it.

That's why it takes so much work. And so when we talk about it, we talked about it as engineers to each other here a few minutes ago, but other people listening might not grasp that. Of course, we have a process design. It's about pinning down the exact detail so we can spend money to go buy it.

This stuff doesn't come off the shelf, so anyway.

Poe Fratt -- NOBLE Capital Markets -- Analyst

OK. Great. And then I think, Pat, before on the RNG project, you had been sort of saying that the offtake customer might be somebody who would be recognizable and that would be sort of a significant move. Are you prepared at this point to talk about that or will we have to wait until the financing is finalized?

Patrick Gruber -- Chief Executive Officer

Yes. That will be, we got to finalize that contract. Renewable natural gas is worth a lot of money in California right now. So that gives us the confidence to just move ahead on the project anyway.

And then we'll announce that customer partner when we're ready here.

Poe Fratt -- NOBLE Capital Markets -- Analyst

OK. And then just a couple more, if you wouldn't mind. It looks like you've identified sites for Net-Zero 2 and 3 and then along the line. One intriguing thing to me was that you added a site on your map in Florida.

Can you talk about Florida from the standpoint of --

Patrick Gruber -- Chief Executive Officer

Yes. Sure. Yes. So what's happening to us is that as the demand increases, now remember, we're dealing with people under confidentiality agreements, right? So our customers all talk to us under confidentiality agreements.

And then other partners talk to us under confidentiality agreements. We're always restricted in what we can say. However, corn in the Midwest is a sustainable low-cost way to get these carbohydrate residuals that we can turn into our hydrocarbon products. And we also have good wind resources up there.

We got good biogas resources up there. It makes sense. Stuff makes sense up in the Midwest. In Florida, there are several feedstocks that have potential interest.

There's molasses-type things and there's sugar residues from various types down there. And so people have approached us with sites. And so we're going through the work to evaluate them. You'll see them in other places that popped up on our map, too, where same kind of thing, where people are saying, hey, we can supply you with carbohydrates, would you want to build a site? And we say, yes, you show me the sustainability.

You show me the cost. You show me the risk associated with that acquisition of that carbohydrate source and we'll look at it. But the one in Florida has risen to the rank of, we got to evaluate it. So it shows up on our map.

Poe Fratt -- NOBLE Capital Markets -- Analyst

OK. Great. And then could you help me understand the significance of the MOU that you signed with HCS and how that fits into the overall plan?

Patrick Gruber -- Chief Executive Officer

Yes. Yes. OK. So yes, with HCS, that's Haltermann Carless.

Haltermann Carless is a specialty fuel manufacturer. We announced a deal with them where we would be licensing our technology to them for production of hydrocarbons in Speyer, Germany. And it'll be leveraging their site. Now we will work with them to arrange the isobutanol production in Germany or somewhere along the Rhine river presumably or somewhere in Europe.

We still have to go do that work. You'll notice in that press release, it had talked about jet fuel in Germany, OK? And it talked about the size of the project. We'll co-market it to them because we're real particular about how you place the stuff in the market and hold it sustainable and all the rest, so think net zero concept in Europe. The difference in Europe is that you don't have to have the isobutanol plant next to the hydrocarbon plant.

For instance, you can float the stuff down the Rhine river. In the U.S., you can't do that, of course, because you don't get the credits for it. The EPA requires the plants to be integrated in order to get the RFS credits, the RINs. So there, we can do stuff like that and separate it.

Maybe someday here, we can separate things. But there, it seems to be economical in the work and it's jet fuel in Germany.

Poe Fratt -- NOBLE Capital Markets -- Analyst

Great. Thanks. You just mentioned one thing that actually I wanted to bring up. RIN prices are going through the roof it seems like.

Can you help me understand whether that impacts any of your development plans?

Patrick Gruber -- Chief Executive Officer

Impacts our development, oh, yes, our development plans, you mean broadly?

Poe Fratt -- NOBLE Capital Markets -- Analyst

Yeah. Plans just broadly or does it have any impact on your strategic outlook?

Patrick Gruber -- Chief Executive Officer

What we do is, we tend to do like averages and futures types calculations when we're looking at our own economic projections. But RIN price goes up, that's good for us. So the way to think of our business is, we win if anything green goes up in value. RINs, LCFS, tax credits, we win.

That's just more margin to us, right? And oil price goes up, we win. If corn price goes up, you know what's interesting about that is protein price goes up and so does the oil price. And so that's one. It isn't clear-cut.

It's not a loss. And it might even be a win depending upon exactly how it happened and under what circumstance. So it's one of these very interesting dynamics that we have. We've tried to derisk the project on all those fronts.

But on the RINs, we get 1.6 times the RINs. I mean, this is, again, one of the nuances of making an energy-dense liquid. We are 1.6, ethanol gets one. Why? We're energy-dense so we get 1.6 times.

So that matters. So when you see these RIN prices going up through the roof, now multiply by 1.6, that's what we would get credited to us. So it matters.

Poe Fratt -- NOBLE Capital Markets -- Analyst

Great. Thank you so much. And I look forward to tomorrow's presentation.

Patrick Gruber -- Chief Executive Officer

Sure.

Operator

Thank you. And I don't have any further questions in the queue. I would like to turn it back to Pat for his final remarks.

Patrick Gruber -- Chief Executive Officer

Thank you all for listening to us and join us for the fireside chat tomorrow. We'll be asking Lynn a bunch of questions, and Shawn Severson will be moderating, but I can't help myself and I'll jump in. I now thank you for your support in the company. We appreciate it.

We are off to a good start of this year. Things are working and making progress. It's actually such a change and a blessing from last year. And now we are driving to get this done and get these plants online, Net-Zero 1, and I want Net-Zero 2 and I want Net-Zero 3 as well so.

And I want that R&D done, and we're going to be evaluating whether to make it even bigger. So that's what we're focused on. Thanks for listening today. Bye.

Operator

[Operator signoff]

Duration: 48 minutes

Call participants:

Geoff Williams -- Vice President, General Counsel, and Secretary

Patrick Gruber -- Chief Executive Officer

Carolyn Romero -- Chief Accounting Officer, Vice President, and Controller

Amit Dayal -- H.C. Wainwright -- Analyst

Amit Daya -- H.C. Wainwright -- Analyst

Poe Fratt -- NOBLE Capital Markets -- Analyst

Lynn Smull -- Chief Financial Officer

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