And this is not just a US dynamic, as we expect other global geographies, notably the EU will follow a similar course. Hence, our enthusiasm as it relates to our LSR European opportunity. It’s clear that as these rules tighten, many of our customers will need to apply even stricter approaches to their existing facilities, amplifying the physical product and value we can deliver to them. Crucially, we can do so providing environmentally responsible product, which not only performs better than the benchmark but is also derived from a company with a fully integrated supply chain. We’re excited about our 25 million pound GAC expansion and believe our market opportunity extends well above this space over the long term. So as we conclude on Slide 14, I’d like to summarize where I think we are, what I believe are the key objectives for 2024 and what strategic objectives we must keep in mind as we continue to enhance this very compelling business opportunity.
First, we have taken actions that aim to fundamentally improve the probability of our legacy PAC business. While much of the work is now completed and is already evident in our financial results, we’ll continue to optimize the portfolio and constantly look for ways to enhance our operations and profitability. Second, we are focused on securing contracts for our strategic GAC development at Red River. My confidence around securing contracts ahead of our completion later this year continues to grow, driven by our strong customer relationships, differentiated offerings and macro tailwinds. Third, we continue to drive towards commissioning of our Corbin facility by the end of the second quarter shortly followed by initial production, which will serve as a differentiated advantaged feedstock for our Red River GAC facility.
And fourth, we remain focused on efficiently executing on our construction and development plans at Red River with commissioning and first deliveries expected by the end of 2024. I am very proud of what our team has achieved to date and I’m generally excited for the year ahead. With that, I will turn the call back over to our operator to move us to Q&A.
Operator: [Operator Instructions] At this time, I’ll turn the call over to Ryan Coleman for additional questions.
Ryan Coleman: Thank you, Rob. We have some investor questions that we’d like to get to as well. Our first question we received, how do you know that cost for the first phase of Red River will not continue to rise between now and completion?
Bob Rasmus: We’ve completed an extensive process to get to a place of comfort around where we are today. We’ve looked at all aspects of the project, both internally and externally managed. And while we’re comfortable that we’ve identified all the key pieces that have contributed to the increase we’ve announced today, there’s always uncertainty in managing and executing large projects such as this. We feel we’ve got a pretty good handle. In fact, we feel we’ve got a very good hand on the factors that are in our control. But quite frankly, some aren’t in our control. We’ve baked in some level of conservatism to account for this. But again, we don’t expect further increases as we believe we’ve been diligent as described in today’s update and we’ll continue to do all we need to do to manage and mitigate the potential impacts of any negative outside factors.
Ryan Coleman: Our second question. Could you please elaborate on the planned refinancing of the existing term loan, are you going to do this whether you need money or not? And what do you mean by potential expansion of the term loan?
Bob Rasmus: Refinancing of our term loan has always been on our to-do list and we will absolutely proceed with refinancing. What I mean by expansion is increasing the size of our current borrowing amount. We currently have very low debt levels. We have attractive future cash flows and a valuable asset base as replacement cost we estimate is well over $500 million. As such, I think it’s prudent that we put some additional cash on the balance sheet to fund any needs as it relates to completing Phase 1 of the Red River expansion or it can be used to bring forward Phase 2 if needed.
Ryan Coleman: Our next question. Could you please provide any additional information on GAC margins versus those that you realized in your PAC business?
Bob Rasmus: Pricing for PAC and granular activated carbon varies widely based on the type of product and its uses. What I can tell you is that average GAC pricing is a multiple of average pack pricing. Does it cost more to produce granular activated carbon than powdered activated carbon? Yes. Does it cost a multiple? Absolutely not, nowhere near. That is what makes the GAC market so attractive. I’d like to provide further specifics but for competitive reasons, I’m going to refrain.
Ryan Coleman: Our fourth question. You mentioned the PAC business will be a net cash provider in 2024. Should we expect similar results throughout 2024 as what you realized in Q4?
Bob Rasmus: The fourth quarter was a great quarter, which included some onetime items like the make whole revenues relating to our take or pay contracts. Don’t forget, if the volumes have been taken throughout the year, it would have spread out the results [Technical Difficulty] facing some headwinds as it relates to natural gas pricing and our PGI segment. However, that should be offset by our continued work on pricing enhancements for the water segment and further penetration of the PAC water market. We’re pleased at what we see as our volume growth in the PAC water market. And most importantly, I think for investors and for the company is that this segment carries a higher price point and higher margins than the PGI business. In addition, we’re going to continue to focus on manufacturing efficiencies to reduce our cost and increase margin. And all of these factors combined for me to be confident in the PAC business being a net cash contributor in 2024.