Operator: Your next question is coming from Derrick Whitfield with Stifel. Please pose your question. Your line is live.
Derrick Whitfield: Thanks and good morning, Eric and team.
Eric McAfee: Hey, Derrick.
Derrick Whitfield: For my first question, I actually wanted to pick it up with where Manav left it there on macro, but really focus more on Riverbank. In light of the less favorable D4 RVO announcement, could you update us on your latest thoughts on the macro environment for RD and SAF investments? And separately, could you comment on your degree of flexibility that you will have in your operation and supply agreements to produce and allocate production to SAF?
Eric McAfee: Absolutely. Let’s take the second one first. We invested, it’s about an extra $30 million investment to use the Haldor Topsoe HydroFlex process. What HydroFlex allows is we can run the plant 100% renewable diesel. Any percentage of SAF all the way up to 100% Sustainable Aviation Fuel. The yield is less on aviation fuel. But the economics would drive the decisions of what percentage of SAF and RD we produce. Currently, we’ve done our contracts with 50% RD and 50% SAF. So let’s then talk about what would drive our decisions. The D4 RIN and the D5 RIN under the renewable volume obligation of 2023, ’24 and ’25 is being discouraged by the EPA. They have set targets that are below the known volume that are coming into the market and frankly, the signal was don’t produce as much biodiesel as you’re producing now and just kind of trying to play the magic of go make SAF happen.
But by the way, don’t produce as much renewable diesel as you plan to either. So it’s essentially a discouragement signal from the EPA for building renewable diesel plants which is the kind of plant that makes an SAF molecule. So there’s a contradiction between the White House’s 3 billion gallon 2030 target for Sustainable Aviation Fuel production and an RVO that is below the current capacity to produce existing biodiesel and renewable diesel. Now, our response to that is that we believe people will be discouraged. Well, in any market in which your other producers are discouraged means that the amount of capacity they produce is less. But I tell you, the people that are not discouraged are our customers in the SAF business. The airline industry consumes about 100 billion gallons per year worldwide of aviation fuel.
There will be no battery or hydrogen or nuclear powered airplanes anytime soon to displace this petroleum jet fuel. And the airline industry is fully committed, driven by penalties in Europe and incentives in the U.S. to a rapid displacement of as much of that 100 billion gallons as possible. So we end up with one of these classic situations which customers want the product but government policy is lagging what industry needs which is to have supportive policy. So we, as I said in our commentary will be fully permitted and frankly going to the financing closure here very soon. And so we see it as many projects that are year or two or three years behind us due to litigation or other problems, very possibly may be further delayed or not to get built at all, providing even a bigger gap between the reality of the customer, the airline’s willingness to pay for this Sustainable Aviation Fuel solution to their decarbonization goals and the actual production.
So what the EPA has set up is basically a miss on the 2030 3 billion gallon goal by telling us we don’t need to build any Renewable Diesel or SAF production capacity whereas airlines who are our customers and frankly our partners are very encouraging and very supportive and trying every way possible to participate in our project. So we are very enthusiastically moving forward in partnership with our customers and frankly our technology providers. And one of the reasons we have high level of comfort and confidence is we are a feedstock supplier to our own plant. Many of the reasons why these projects will get delayed is a lack of feedstock supply chain confidence. Either price or just the physical, you can have a great price, but if you can’t get the physical volumes then obviously the plant is not going to operate.
And our 50 million gallon tallow refinery already built and already debt free in India, plus our distilled corn oil production in our plant in California and other access to other domestic tallow supply puts us in a very unique position to be confident and move quickly. While at this point in time, I would suspect that many projects are being looked at again very closely. Feedstock has always been something to look at closely, but now with D4 and D5 and D5 RINs is largely a question mark what the price is going to be, I think it’s going to provide less competition for the Aemetis SAF plant, and that’s good news for our customers. We have been asked to expand the capacity of our plant in Phase 2 and Phase 3. And I can tell you right now we could easily triple the amount of contracts we have with our existing customers and still not be anywhere close to what their goals are.
