Aemetis signs $3.1B offtake agreement for 450M gallons of renewable diesel

Hot off the press this morning is news that Aemetis signed a 10-year offtake agreement with an industry-leading travel stop company, for 450 million gallons, or 45 million per year, from the Aemetis Riverbank Carbon Zero 1 project in California which will begin producing in 2024. The deal is expected to generate as much as $3.1B in revenue, based on current prices for renewable diesel with this low a carbon intensity, delivered into the California LCFS market. This represents half the capacity and all of the renewable diesel that will be produced at Carbon Zero 1 during its first decade.

The Deal

The Aemetis Carbon Zero 1 plant in California will produce 450 million gallons of RD and 450 million gallons of SAF over the 10 years. So how does one get to $3.1 billion value? The renewable diesel price right now is as much as $7.02 per gallon in California for ultra-low carbon renewable diesel. Time will tell what the actual deal value will be over the next 10 years. The long-term deal value is dependent on carbon prices, and you can buy fossil diesel for $2.10 per gallon on the spot market right now, for illustration. Either way, it’s one of the biggest deals we’ve seen in a long time from anyone, and is the largest for Aemetis so far.

“This supply agreement represents the largest supply contract signed by Aemetis for our Riverbank Carbon Zero Plant,” said Aemetis CEO Eric McAfee. “Combined with $2.1 billion of signed sustainable aviation fuel contracts, we have now signed more than $5 billion of binding offtake contracts related to the Riverbank production facility and also have MOU’s signed with seven airlines for additional contracts.” 

The SAF story

What about the SAF, representing the other half of CZ1’s production?

You may have heard earlier this month about Aemetis’s agreement with American Airlines for 280 million gallons of blended fuel containing SAF to be delivered over the 7 year term of the agreement. The aggregate value of the agreement is estimated to be more than $1.1 billion, including LCFS, RFS, 45Q and tax credits. The SAF will deliver to San Francisco airport.

The blended Sustainable Aviation Fuel to be delivered under this agreement is 40% SAF and 60% Petroleum Jet A to meet international blending standards.

American’s agreement with Aemetis builds on the airline’s efforts to reach net zero carbon emissions by 2050. The airline has also committed to set a science-based target for the year 2035 and has aligned with the aviation industry goal of replacing 10 percent of conventional jet fuel with sustainable aviation fuel by 2030.

The sustainable aviation fuel is expected to be produced by the Aemetis renewable jet/diesel plant under development on a 125 acre former U.S. Army Ammunition production plant site in Riverbank, California. The blended sustainable aviation fuel is expected to be available for use by American starting in 2024.

And as reported in The Digest back in late November, Aemetis signed memorandums of understanding with eight airline members of the oneworld Alliance for 350 million gallons of blended fuel containing sustainable aviation fuel to be delivered to San Francisco International Airport. oneworld members including Alaska Airlines, British Airways, Cathay Pacific, Finnair, Iberia, Japan Airlines and Qatar Airways will look to utilize the SAF for their operations at San Francisco Airport, with the potential for additional oneworld members to participate in the coming months.

The project

The 90 million gallon per year Aemetis Carbon Zero sustainable aviation fuel and renewable diesel plant under development in two phases in Riverbank, California is designed to produce below zero carbon intensity renewable fuels.  The design utilizes cellulosic hydrogen from waste forest and orchard wood along with onsite CO2 carbon sequestration and zero carbon intensity hydroelectric electricity. The demand for renewable diesel has increased as a result of policies including the California Low Carbon Fuel Standards and the federal Renewable Fuel Standard that require reductions in carbon emissions from transportation. 

The Aemetis Carbon Zero plant is being built on the 125-acre former US Army Ammunition plant in Riverbank, California. The industrial site has 710,000 s.f. of existing production and office buildings, a 125 car railroad with ladder tracks, and a 22 megawatt power substation with high capacity power lines delivering hydroelectric power to the site.

Who’s the Mystery partner? (Psst, we think it’s Musket)

The partners are not disclosing the identity of “an industry-leading travel stop company,” no matter how nicely you ask. We suspect it’s Musket — the commodity supply, trading and logistics arm for the Love’s group of companies. Love’s is a U.S.-based, 500 location, $20 billion annual revenue truck stop and country store chain, founded more than 50 years ago. Why Musket? First, they get it, they are serious about defossilization efforts. Second, they have the size and ambition to do this. Third, Musket maintains membership in a serious trade group, the Advanced Biofuels Association, a home for companies that take bold steps and mean it. Other possibilities include Pilot/Flying J — the respected behemoth of the trucking lanes. Also, smaller competitors include Travel Centers of America, Stuckey’s, and Roady’s Truck Stops.

The fuel

Powered by 100% renewable electricity, the Aemetis Carbon Zero plant design utilizes cellulosic hydrogen made from carbon negative waste wood. The below zero carbon intensity, cellulosic hydrogen then is used to hydrotreat vegetable or other renewable oils to produce aviation and diesel fuel.  The process technology is licensed from Axens (France), a global technology provider to the oil and chemical industries.

To further reduce carbon intensity, the Aemetis Carbon Zero production process includes injecting CO2 from the production plant into a sequestration well at the Riverbank plant site to permanently capture an estimated 200,000 metric tonnes per year of CO2.

Check out “Carbon Zero 1: The Digest’s Multi-Slide Guide to Aemetis” here.

The funding

Here’s some background on the financing and funding side with Aemetis signing a non-binding term sheet and working towards completing $100 million of new debt financing from Third Eye Capital of Toronto, Canada back in November. The debt financing is expected to be comprised of $50 million for carbon reduction projects and $50 million for working capital.

Aemetis has repaid more than $55 million of its higher interest rate debt during 2021.  The new, lower interest rate debt financing is expected to provide funding for the Aemetis initiatives that reduce the carbon intensity of renewable fuels, including sustainable aviation fuel (SAF), renewable diesel, carbon sequestration, and upgrades to the Keyes ethanol plant.

Cash and grants of more than $32 million have already been invested in the Phase I, 45 million gallon per year, Carbon Zero renewable jet and diesel plant in Riverbank. This new debt facility is expected to provide the remaining funding to the project from Aemetis prior to completion of additional project debt financing. A $125 million USDA 9003 Biorefinery Assistance Program guaranteed loan has been signed by Aemetis and an additional $100 million under the USDA Renewable Energy for America Program is in process.

Bottom Line

This is big news in terms of deal size, the shear volume of fuel being produced and the sign-on with a major truck stop company to get renewable fuel into main stream trucks and transportation – it’s all signs that renewable diesel, and Aemetis for that matter, isn’t going anywhere but up. What a great way for them to end the year.