So yes, they’re going to generate 45z, but probably at one-fifth the rate at which, one of our programs in some other cases, one-tenth the rate of what we’re doing. The calculation of 45z is by the way done by the same people that we just closed this $55 million cash proceeds from tax credit sale. It’s the same team, the same lawyers, the same accountants. It’s frankly the same, legislative process that they’re dealing with the Inflation Reduction Act. So this is not something brand new. This is something we’ve been working on for more than a year. And, we are fairly comfortable that this has been thoroughly vetted by a wide number of our advisors, and they’ll come up with roughly the same calculation. So, we are expecting after a discount for sale about $60 per MMBtu, it would be the net proceeds to have.
Operator: Our next question is coming from Derrick Whitfield with Stifel.
Derrick Whitfield: Eric, I wanted to start with the refinancing of your preferred. If I heard correctly in your prepared remarks, it will be converted to a promissory note at year-end at a rate that’s 8% lower than present. Could you confirm that that’s correct and also the absolute level of the principal amount and interest rate?
Eric McAfee: Sure. The refinancing the biogas preferred is structurally an extension, which is what we did December last year, May of this year, and now August of this year. So this is the third extension of the existing financing. The extension, which includes the months of September, October, November, December, four months, is an additional increase of $3 million. So, the 135 million will be 138 million, but we just paid 30 million down. So it’s 108 million will be the balance at the end of December. We have additional payments expected under this program over time. So after December, it’s currently papered to convert into a promissory note that’s got a floor price of about 16%. The prior note was 24%. So it’s about 8% interest rate.
It’s one-third lower interest rate than what it was in the prior terms of the prior extension we did in May. If we extend again, we would then probably do exactly what we did here, which is just increase the amounts in a certain amount. But it is papered to automatically convert. So in the absence of us agreeing with Third Eye to extend, then it would just automatically convert into this interest bearing note in the amount of 108 million at the end of the quarter. We do have a number of counterparties were working on right now that would substantially change this with a substantial pay down and some other things. So, there is ongoing discussion and due diligence and negotiation that would reduce that 108 very significantly.
Derrick Whitfield: And for my follow-up, I wanted to confirm a couple of points from your prepared remarks on dairy RNG. First, I think you heard, I think, I heard you say a new CI score of 370, negative 370. Is that due to RNG volume over performance? And then secondly, regarding the non-projects that are online by year-end, could you comment, I think there’s a slight delay with some of the projects you were expecting to come on? Just maybe comment on the source of those delays.
Eric McAfee: Yes, actually, you were exactly right. The increased volume of biogas production and the way that it impacts our CI score caused our CI score to decrease from roughly at 415 to 370. It just frankly just reflects that there’s only a certain amount of carbon intensity reduction per cow. And so our process is producing more biogas molecules than expected, means that the overall carbon intensity per molecule is slightly less. The overall economics, by the way, are pretty much unchanged from the perspective of the number of credits you get. But we do get more revenues and more D3 RINs, and the D3 RINs having increased from $2 to $3.50 means that more D3 RINs is a very, very good thing. The reason for timing is largely our USDA loan process.
We are very committed to getting better and better at applying for Renewable Energy for America programs, lining up all the consultants, all the advisors, all the permitting, everything that is involved with them, giving us a commitment letter and then executing on the loan. The first one took 20 months. The second one is roughly eight months. We expect to be able to execute on these in the five to six months time schedule on a go forward basis. So there’s education involved, there’s new staff members at USDA, et cetera, that need to be educated and so we are committed to doing it right though, because we end up with 80% of loan guaranteed by the U.S. taxpayer and more important than interest rate, yes, it’s true, the interest rate is lower than market, got it.
But far more important is a 20-year amortization of the loan that is not available in the bond market, the commercial lending market, the tax free or taxable municipal market or any other market you can find. There is not a 20-year loan available for biofuels projects, other than a U.S. guaranteed transaction in this particular environment. So, we are very pleased with our USDA relationship and intend to continue to commit ourselves to supporting that relationship and executing on the business model. And they similarly have the goal of doing this quicker and more efficiently.
Operator: Our next question is coming from Amit Dayal with H. C. Wainwright.
Amit Dayal: So Eric, if you don’t mind, can we go over some of the biogas numbers you provided in your commentary? So you’re saying you’ll be at nine digesters at the end of 2023. How many should we expect by the end of 2024? And then how does that number play alongside your comments about generating over $120 million in PTC $100 million in ITC in 2025, I believe?
