Aug 11, 2019
Operator
Welcome to the Aemetis Second Quarter 2019 Earnings Review Conference Call. At this time, all participants are in a listen-only mode.
A brief question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded.
It is now my pleasure to introduce your host, Mr. Todd Waltz, Executive Vice President and Chief Financial Officer of Aemetis, Inc.
Mr. Waltz, you may begin.
Todd Waltz
Thank you, Kristi. Welcome to the Aemetis second quarter 2019 earnings review conference call.
We suggest visiting our website at aemetis.com to review today’s earnings press release, updated corporate presentation, filing with the Securities and Exchange Commission, recent press releases and previous earning conference calls. This presentation is available for review or download on the aemetis.com homepage.
Before we begin our discussion today, I’d like to read the following disclaimer statement. During today’s call, we’ll be making forward-looking statements, including without limitations statements with respect to our future stock performance, plans, opportunities and expectations with respect to financing activities and the execution of our business plan.
These statements must be considered in conjunction with the disclosure and cautionary warnings that appear in our SEC filings. Investors are cautioned that all forward-looking statements made on this call involve risks and uncertainties and that future events may differ materially from the statements made.
For additional information, please refer to the company’s Security and Exchange Commission filings, which are posted on our website and are available from the company without charge. Our discussion on this call will include a review of non-GAAP measures as a supplement to financial results, based on GAAP.
A reconciliation of the non-GAAP measures to the most directly comparable GAAP measures is included in our earnings release for the quarter ended June 30, 2019, which is available on our website. Adjusted EBITDA is defined as net income or loss plus to the extent deduced in calculating such net income; interest expense, loss on extinguishment, income tax expense, intangible and other amortization expense, accretion expense, depreciation expense, loss contingency on litigation and share-based compensation expense.
Now I’d like to review the financial results for the second quarter of 2019. Revenues were $50.6 million for the second quarter of 2019, compared to $45 million for the second quarter of 2018, driven by a 203% increase in biodiesel sales volume from 4.3 thousand metric ton to 13,000 metric tons.
In addition, quarter-over-quarter volumes for biodiesel grew by 7.8 thousand metric tons, or 145%, from 5.2 thousand metric tons during the first quarter of 2019 to 13 metric tons for the second quarter of 2019. Revenues from the India segment were $11.1 million and accounted for 22% of total revenue.
North America segment revenue remained steady between the two quarters. Gross profit for the second quarter of 2019 rose to $3.3 million, compared to a gross profit of $2.8 million during the second quarter of 2018.
India segment accounted for $2.3 million of the reported, consolidated gross profits. Selling, general and administrative expenses were $3.9 million during the second quarter of 2019, compared to $3.6 million during the second quarter of 2018.
Operating loss was $0.8 million for the second quarter of 2019, a reduction from the operating loss of $0.9 million for the second quarter of 2018. Interest expense during the second quarter of 2019, excluding accretion in connection with Series A preferred units in the Aemetis Biogas LLC subsidiary, was $6.6 million, compared to $5.4 million during the second quarter of 2018.
The Aemetis Biogas LLC subsidiary recognized $471,000 of accretion in connection with a preferred payment on its preferred stock. Net loss was $13.9 million for the second quarter of 2019, compared to a net loss of $6.2 million for the second quarter of 2018 due to higher interest expense and a $6.2 million one-time charge for loss contingency on litigation.
Cash at the end of the second quarter of 2019 was $0.4 million, compared to $1.2 million at the end of 2018. During the first-half of 2019, revenues were $92.5 million, an increase of $4.5 million, compared to $88 million for the first-half of 2018.
This increase in revenue was driven by strong demand for biodiesel in India during the second quarter of 2019, as a result of supplying the India Oil Marketing Companies, as well as domestic retail, mining and bulk customers with biodiesel product. North America segment revenue remained steady between the two periods.
Selling, general and administrative expenses were $8.2 million during the first-half of 2019, compared to $7.4 million during the first-half of 2018. Operating loss increased to $5.4 million for the first-half of 2019, compared to an operating loss of $2.9 million for the first-half of 2018.
Interest expense, including accretion in connection with preference payments on Series A preferred units in the Aemetis Biogas LLC subsidiary, decreased to $12.8 million during the first-half of 2019, compared to interest expense of $14.4 million during the first-half of 2018. The Aemetis Biogas LCC subsidiary recognized $920,000 of accretion in connection with preference payments on its preferred stock.
Net loss was $24.6 million for the first-half of 2019, compared to a net loss of $17.3 million during the first-half of 2019 – I’m sorry, during the first-half of 2018 due to a $6.2 million one-time charge for loss contingency on litigation. That concludes our financial review.
Now, I’d like to introduce the Founder, Chairman and Chief Executive Officer of Aemetis, Inc. Eric McAfee, for a business update.
Eric?
Eric McAfee
Thank you, Todd. For those of you who may be new to our company, let me take a moment to provide some brief background information.
Aemetis was founded in 2006, and we own and operate production facilities with more than 110 million gallons per year of renewable fuel capacity in the U.S. and India.
Included in our production portfolio is a 60 million gallon per year capacity ethanol, distillers grain and corn oil plant located in Keyes, California near Modesto. We also built, own and operate a 50 million gallon per year capacity distilled biodiesel and refined glycerin biorefinery on the East Coast of India near the port city of the Kakinada.
Last year, we signed $30 million of funding and launched a renewable natural gas project to build biogas digesters at about a dozen local dairies, construct a pipeline connecting the digesters to our Keyes ethanol plant and installed gas conditioning to produce carbon negative renewable natural gas to displace diesel in trucks. Earlier this year, we signed term sheets for funding $175 million advanced ethanol production facility in California to convert waste orchard wood and other waste biomass into about 12 million gallons of cellulosic ethanol per year.
The combination of these growth and cost reduction initiatives are expected to increase our revenue run rate to more than $350 million per year and annual cash flow to more than $100 million per year. This projected growth in revenues reflects certain planned and completed upgrades of our existing plants and plant completion of new dairy renewable natural gas and cellulosic ethanol production facilities.
With a consistent support of California regulators and continued strong California Low Carbon Fuel Standard credit prices, Aemetis made positive progress in each of our four core businesses during the second quarter of 2019. Let’s first review our biodiesel business in India.
During the past few years, India developed the tax regulatory and procurement structure for blending biofuels. These policies are now being implemented to support the growth of the biodiesel industry.
The total diesel market in India is approximately 25 billion gallons per year, of which less than 250 million gallons per year of biodiesel, or about 1% is currently blended with diesel. The 2018 National Biofuels Policy in India stated a plan to increase biodiesel blending to 5% of the diesel market, equaled more than 1.2 billion gallons per year.
Additional – additionally, the diesel fuel market in India has been growing at a rate of more than 5% per year. After two years of investment in construction, we completed the upgrade of our India plant in early 2019, including installation of a pretreatment unit to process lower cost and waste feedstock into oil.
Expansion of boiler and other utility capacities and implementation of environmental systems to enable full production of 50 million gallons per year of biodiesel and bio-oil, while simultaneously operating the biodiesel pretreatment and glycerin refining units. The plant is now fully operational, using new feedstock pretreatment unit, the new boiler unit and other upgrades that enable expanded plant operations toward full plant capacity.
On May 6, we announced that our Universal Biofuels India subsidiary was awarded a $23 million biodiesel supply contract with the three India government-owned Oil Marketing Companies in a public tender process. Biodiesel shipments to the Oil Marketing Companies began in May, and have quickly grown to comprise about 60% of monthly revenues at the India plant.
We are particularly pleased with this arrangement, because these three Oil Marketing Companies supply about 70% of the diesel fuel consumed in India, and as a group, represent the largest single potential biodiesel customer in the country. During the second quarter, we made excellent headway in ramping up production and revenues by supplying biodiesel to the Oil Marketing Companies, while also adding customers in mining, construction heavy equipment, truck fleets, retail stations and other government sectors.
We achieved the upgrades and revenue ramp up at the India plant without incurring any third-party long-term debt at the India subsidiary, or any ownership dilution to our shareholders. Aemetis effectively owns 100% of the India subsidiary, and as a result, may use the cash created from earnings to repay Aemetis senior debt and provide development funding for our other projects.
At about $3 of revenues per gallon of biodiesel, the upgraded India plant can generate more than $150 million of annual revenues by running at full capacity. Our biodiesel revenue ramp during 2019 was balanced between the $23 million of Oil Marketing Company supply agreements and selling distilled biodiesel to private industry and non-OMC customers.
Additional Oil Marketing Company purchase request for biodiesel have now been issued for time periods extending into year 2020, and we expect to continue to participate as a key supplier under these biodiesel contracts. This late fall and winter, we expect our primary constraint on biodiesel revenues growth in India to be the seasonal colder weather from heavy rain or lower winter temperatures that limits the use of biodiesel in India without special fuel additives or blending facilities.
We anticipated this seasonality and are working on solutions, which may include the installation of heated storage tank – tanks at distribution locations. Once the existing production capacity becomes fully committed to supplying the expanding biodiesel markets, the India plant has a footprint to expand its capacity to 100 million gallons to meet increasing biodiesel demand in India.
In addition to the significant progress in India, our three businesses in the U.S. have achieved major milestones towards sustained profitability.
Let’s review our California traditional ethanol business. Similar to our strategy in India, where we added a technology to allow the use of a lower-cost waste feedstock to produce biodiesel, we have been upgrading our Keyes, California ethanol plant to lower input costs, reduce the carbon intensity of our biofuel and significantly increase the value of the ethanol we supply to customers, including Chevron, Valero, Shell, Flyers and other gasoline suppliers in the 1.5 billion gallon California ethanol market.
In May of this year, the Keyes plant successfully reduced carbon emissions under the California Low Carbon Fuel Standard by about three Carbon Intensity points. The credits were effective as of January 1, 2019 and generated about $250,000 per month additional value from our corn ethanol sales without an increase in operating costs.
The second upgrade to the Keyes plant is a CO2 capture and reuse project. After three years of project development, construction began this month on a project by Linde Gas to build a CO2 liquefaction plant on five acres owned by Aemetis adjacent to the Keyes plant.
Once complete, The CO2 plant will convert the 175,000 tons per year of renewable CO2 produced by our ethanol plant into liquid CO2 for sale to local food processors, beverage producers and other users. The CO2 plant is scheduled for completion by the end of 2019 and is expected to qualify for a carbon capture and reuse tax credit of $35 per ton for more than 135,000 tons of CO2 per year, that is worth more than $6 million in tax credits, in addition to more than 1 million per year of increased cash flow from CO2 sales and the land lease for the CO2 plant.
We’re working on an arrangement to monetize the tax credits with a financial partner. The third upgrade to the Keyes plant is a design and construction of a $7 million membrane dehydration system financed by Mitsubishi Chemical as a strategic implementation of their ZEBREX technology for the first time at a corn ethanol plant.
The Mitsubishi unit is scheduled for completion in Q1 2020 and commissioning in Q2 2020. The ethanol dehydration unit is designed to reduce natural gas usage and decrease the carbon intensity of our ethanol, generating an estimated $3 million per year of increased cash flow.
Additional projects at the Keyes plant are targeted to further reduce natural gas usage and costs and increase the number of Low Carbon Fuel Standard credits. Next, let’s discuss our advanced low carbon renewable fuel strategy.
With the extension of the Low Carbon Fuel Standard in California to year 2030 and the resulting increase in the price of California Low Carbon Fuel Standard credits from $62 in mid-2017 to more than $195 per credit, we plan to produce valuable below zero carbon renewable fuels through the use of patented and proprietary technologies to convert waste wood and other cellulosic feedstocks into biofuels. Our below zero carbon projects were developed to capture the most profitable opportunities in the renewable fuels industry by maximizing the California Low Carbon Fuel Standard and the federal Renewable Fuel Standard values.
The California LCFS rewards the reduction of carbon content in renewable fuels. We believe that some of the highest value LCFS biofuel projects are from renewable natural gas generated by dairy biogas that would otherwise be released into the atmosphere as methane, and cellulosic ethanol produced from orchard wood that would otherwise be burned or converts into methane.
The federal D3 RIN price was set by Congress to provide investors with about $3.50 per gallon of value. However, D3 RIN are only generated by cellulosic ethanol and renewable natural gas, and not by other biofuels, such as corn ethanol, which generate other types of brands.
D3 RINs are the only carbon credit that has a waiver price set by Congress. Observing the high price available to D3 RIN and LCFS generation, Aemetis is building two advanced biofuels businesses comprise to be Aemetis biogas business to build California dairy renewable natural gas production and pipeline collection projects and the Aemetis waste wood ethanol business to convert California waste orchard wood from about 1.5 million acres of almonds and walnuts orchards into cellulosic ethanol, with about 1,200 dairies and more than 1.6 million tons per year of waste orchard wood within 150 miles of the Aemetis plant in California.
Upon the successful completion and operation of these projects, as well as a continuation of a favorable regulatory environment, Aemetis can grow to more than $1 billion of annual revenues, and three – more than $500 million of annual cash flow by converting waste dairy biogas and waste orchard wood in the Central Valley, California into valuable low carbon renewable fuels. Let’s briefly review our Aemetis biogas dairy digester and pipeline project.
Methane commonly known as natural gas is a potent greenhouse gas that is up to 34 times more powerful carbon dioxide at capturing Earth’s heat. About 25% of California’s methane emissions are from the waste ponds on dairy farms.
To reduce damaging methane emissions, in late 2016, California passed the law known as Senate Bill 1383 that mandates the capture of biogas from dairies. Biomethane sourced from dairies can be used to replace gasoline or diesel fuel in trucks and buses to significantly reduce carbon emissions and air pollution.
Along with the mandate, California has funded about $75 million of annual matching grants to dairies to build that biogas digesters and related systems. After more than a year of project development and financing work, earlier this year, we announced a fully financed $30 million project and an award from the California Department of Food and Agriculture of two matching grants for a total $3 million to build a dairy biogas project.
We believe that capturing biogas from dairies and converting it into renewable natural gas to generate negative carbon intensity biofuels, is an excellent way to reduce climate change and create value for dairies and lower costs with diesel truck fleets. Based on our existing animal feed supply relationships with about 100 dairies and the ability to use biogas in our plant until utility pipeline approvals are obtained and pipeline injection is completed, we believe that Aemetis is uniquely positioned as one of only three ethanol companies in California, who can use existing infrastructure in this manner.
Construction of the first two dairy digesters and related pipeline system is expected to be completed this year, followed by the completion of the remaining digesters and systems in the first phase during your 2020. We expect the Aemetis Biogas business to scale up to generating more than $2 per share of recurring annual positive cash flow after completing the expanded planned project with about three dozen dairies and redeeming the preferred stock issued to finance this project.
Let’s finish with an update on our below zero carbon cellulosic ethanol project in Riverbank, California. We were pleased to announce this past summer that the Aemetis Advanced Biorefinery under development in Riverbank, California near Modesto was named as the number one Waste-to-Value Project in the World by Biofuels Digest, the world’s largest daily biofuels publisher.
The Aemetis project earned its number one ranking as a result of our fixed price, low cost almond and walnut wood waste contract for 20 years with a cost of about $20 per ton for the first-half of the contract period; planned production of high value cellulosic ethanol worth more than $5 per gallon, including valuable fish meal and other byproducts; and our use of the patented Lanzatech gas microbe ethanol production technology. The Lanzatech technology is now in full commercial operation at a plant that opened last year in Northern China that converts waste gases from a steel mill to produce ethanol.
This year, we announced three significant financings related to the Riverbank project: a $5 million California Energy Commission grant to fund engineering and equipment; a $12.5 million tax waiver that offsets equity funding required from the – for the project in the State of California; and the signing of a $125 million USDA Conditional Commitment letter for a 20-year debt financing under the 9003 Biorefinery program. We are focused on completing engineering of the plant required for the negotiation of the EPC contract that will include a bonded, maximum construction cost as required by the USDA Conditional Commitment letter.
The Riverbank cellulosic ethanol plant is expected to generate more than $80 million of revenue and more than $50 million per year of positive cash flow by producing cellulosic ethanol from low cost waste orchard, vineyard, forest and construction/demolition wood as feedstock. The financial closing to begin construction of the Riverbank plant is expected in late Q4 2019 or early 2020, primarily depending on the engineering required for the signing of the construction contract.
In summary, we believe that the strong growth occurring at our India plant, which has no long-term debt; the increased profit margins from plant upgrades related to the Keyes biorefinery; the Aemetis Biogas dairy digester and pipeline project; as well as our deployment of the patented Lanzatech cellulosic ethanol technology at the Riverbank plant under development, has positioned Aemetis to rapidly produce expanding positive cash flow from the production of low carbon, clean-burning, high-performance renewable fuels from abundant, low cost, waste biomass feedstocks. Now, let’s take a few questions from our call participants.
Kristi?
Operator
Thank you. Mr.
McAfee. We will now be conducting a question-and-answer session.
[Operator Instructions] And we’ll take our first question from Ed Woo with Ascendiant Capital. Please go ahead with your question.
Edward Woo
Yes. Thank you for taking my question.
My question is on your outlook for ethanol pricing and also your outlook for the oil pricing in the near-term?
Eric McAfee
Outlook on ethanol pricing is – in the United States facing an overproduction that only in the last week has really started to turn. You may have noted in the last week, national inventories in the U.S.
decreased by more than 5%, which was a higher, larger decrease than analysts had projected actually. But it reflects what appears to be very strong exports coming out of the Gulf.
And this is all entirely without any China customer stepping in and taking a larger portion of our exports. So our expectation with ethanol pricing is, it’s going to reflect the price of corn.
And so if we see a increase in the price of corn or even a decrease, we expect that the ethanol price will move along with the price of corn due to oversupply that’s hopefully temporary. There have been increasing reports of plants in the Midwest and certainly in the Eastern U.S., who have a corn supply problem, in that they do not have shuttle train capability that the destination ethanol plant, such as our plant in California have, we bring in roughly 100 rail cars every week, and we can supply that all the way from Minnesota to Texas, I think, we actually use more than 20 locations to supply our plant.
So the probability of destination ethanol plants and – at this time period in which there’s flooding and other concerns about Midwestern corn supply is much, much higher and much better, frankly, than their Western corn plants, some of which not only have to pay premiums that are very high, but might physically not be able to bring in corn at all, without trucking it very long distances, so they just become completely economic. So we have seen less than a dozen, but a large number of Midwestern and Eastern plants that have shutdown or idle their operations, and that will have an impact on production.
Currently, what we’re seeing is a draw in inventory, and if production decreases, we would expect to see further draws on national inventory. Historically, that results in improved margins for ethanol producers.
So the price of ethanol might decrease, but the price of corn could be decreasing faster and the national inventory could be decreasing as well, which is a trend that’s just started. If those factors come together, we could have a repeat of the 2013, 2014 time period, which was a time period in which the federal government was enforcing the blending of biofuels, and it was a very, very profitable time.
Our company generated about $10 million per quarter for four quarters. Again, this was the last time period in which the federal government actually enforced the federal blending rules.
And last little point I always have to make about ethanol is that, the federal government is sitting at a decision point about the small refinery exemptions that were issued over the last couple of years, driven by Scott Pruitt at the EPA, who’s no longer there. And so if we just enforce federal law, which means 15 billion gallons per year of demand in the U.S.
and comply with a federal court order of 500 million gallons of ethanol that EPA is under court order to add to the blending this year, the supply demand of ethanol will dramatically improve, resulting in significant improvement margins for the ethanol industry. It’s a political decision.
It’s not a business decision. It certainly has nothing to do with industry.
This is purely in the range of the White House and the EPA. But every investor should be aware that simple federal operations to complying with federal law is a very, very positive bullish indicator for this industry.
And in general, that’s the message we have is just enforce federal law, stop violating federal law, and you’ll see a tremendous growth of the renewable fuels industry. Regarding crude oil prices.
It’s my view that we have a generally flat price in the $55 to $65 range, because we have a combination of competing factors. Saudi Arabia, that needs about a $75 to $80 price in order to pay their domestic bills and the rest of the world, which is for a variety of reasons, trying to convert to electric cars and the like.
Realistically, though, we have averaged about 1.5 million barrels per day of increased demand because of the more than 3 billion people in Asia, that are coming into the middle class. And as they come in the middle class, their consumptions are rising dramatically.
And so I do anticipate an increased demand of at least 1.2 to 1.5 barrels per day, per year, and that’s just what’s going to happen. So the question is how rapidly for U.S., fracking and other production sources can increase to meet that demand?
And I think the medium-term trend is actually toward a higher price beyond $65, driven by the Saudis, who are going to try to get this over $70 to pay their national bills. So this year’s projection is $55 to $65.
Over the next two years, I would – wouldn’t be surprised at all to yourselves at $70 or $75.
Edward Woo
Great. Thanks for the explanation.
Then my question is on the Riverbank project and the biogas project. It’s incorrect that it seems like it’s a little bit delayed [indiscernible] and whatnot?
Eric McAfee
Let’s start with the biogas project first. We announced the funding, I believe, late last year, so certainly, signed the funding in December, and we are on track with the biogas funding.
Our first production will be in the fourth quarter this year, roughly a year after announcing the financing. And then the expanded production of roughly a dozen dairies is on track for next year.
So we’re on track on actual financing, engineering, permitting and actually construction, and what you should look for ongoing press releases about the project – progress, especially as we get down into the construction phase. So biogas is very much on target.
Second, the second project you talked about was Riverbank, this is cellulosic ethanol project. We were delayed, because about a 15-month approval process to get the White House approval of the USDA loan guarantee.
That is now completed. And as we announced that conditional letter earlier this year, we are now completing the conditions in the letter, which includes engineering and then a construction agreement.
So we are in the process of doing that. I would say we’re on track with that process considering that we just – we’re able to get the USDA approval earlier this year.
But the the general market conditions for our project has continued to be very strong in California. And so we’re moving forward steadily to breaking ground and building that facility.
Edward Woo
Great. It seems [ph] roughly, when you start your biogas, would you actually start producing revenue in the fourth quarter?
Eric McAfee
Biogas should have revenue in the fourth quarter. Yes, that’s correct.
Edward Woo
Okay. And when do you think the Riverbank project may go live?
Eric McAfee
Riverbank projects currently slated to be early 2021. It was a little over 18 months from now.
So, barring changes the mark conditions or something else, but that’s our current projection.
Edward Woo
Great. Well, thanks a lot.
Best of luck.
Eric McAfee
Thank you, and I appreciate.
Operator
[Operator Instructions] And we’ll take our next question from James Stone, an Investor. Please go ahead.
James Stone
Hi, Eric, it’s been a long time since we’ve talked.
Eric McAfee
Hi, Jim, good to hear from you.
James Stone
Yes. I’m wondering, can you give us a little feel for how the large debt that you have?
How that’s going to be paid off? And when you expect to see it get down to more reasonable levels?
Eric McAfee
That’s – it’s a good question. We have mentioned in the past that we raised about $35 million as a part of our Keyes ethanol plant, our corn ethanol plant through a federal investment program that creates jobs in the U.S.
called EB-5. The interest rate on that program was 1% interest.
And this year, we have launched our second funding under that program, and this is to fund our Riverbank cellulosic ethanol project. And we have completed about five investors, which is $2.5 million.
The interest rate has fallen to 0.25%. So for every $10 million that we have in the program, we pay $25,000 a year of interest.
We are in the process of raising in excess of $50 million into that program actually, will qualify for $100 million, again, at 0.25%. That’s interest, expensive, only about $250,000 per year for $100 million of subordinated financing.
So some very positive things have developed in that area in the regulation in the last month or so. And so we’re pushing aggressively to complete that financing.
It’s going to take a while. It’s just – it’s a slow process because of how many investors are involved, $100 million is about 200 investors.
But we are making steady progress and look forward to providing everybody updates on that process. Now separately, from that refinancing, which, of course, would be incredibly significant for the company, we are generating positive cash flow from our India plant already, which has no long-term debt.
And we’re in – as we’re developing our Keyes plant, our corn ethanol plant, we continue to improve positive cash flow, including the project that we completed in May, where we’re just getting this margin advantage that happens when we have lower carbon intensity than other providers in the market. So we are – I think, we have three different projects, first of which is completed; second and third of which are slated be completed over the next six months.
That should have a very significant impact on the positive cash flow from the Keyes plant. And with biogas contributing some cash flows during the fourth quarter, certainly, the cellulosic ethanol plant has an opportunity to be a major contributor with 50 million per year of positive cash flow for its financing.
Operationally, we can pay down our debt, but it’s just a longer plan. So the EB-5 funding is the most short-term avenue for us to significantly pay down our senior debt.
James Stone
Well, I’m thinking also of your good friends who increased their loans rather large amounts, almost when you started the company. When is – what you will hold them?
Do you see that amount beginning to decrease or when will it?
Eric McAfee
If we do the EB-5 funding in the process of which we’re currently doing, all those funds are used to repay the senior secured debt, who was, as you correctly pointed out, have been financial backers of the company since 2008, and have been excellent sources of funding, including the equity we received last December. So they’re not only a lender to us, but they also arranged equity funding of $30 million.
So we have had the good fortune of having a long-term relationship. And it’s enabled us to take advantage of some market opportunities that other companies may not have been able to.
And so I’m expecting that we’ll continue to make almost monthly payments on that reduction, and then hopefully see the rapid acceleration as this EB-5 funding accelerates.
James Stone
Can you possibly give us a little more information on that whatever you all omit at the moment? But when would you think it, at least, cut it in half?
Is that next year or the year after?
Eric McAfee
I think next year will be a reasonable projection. The $100 million of EB-5 funding that we qualify for, it could potentially be this year, but it’s not a reasonable expectation that we receive it this year that there’s some ramping up in the program that just started a few weeks ago.
But I’d like to have another quarter to be able to project when that was – would close. Certainly, there is a opportunity that all 100 investors could fund in the next two quarters.
And by the end of this year, we could have $100 million of pay down in our senior debt. I think that’s unnecessarily optimistic.
And I’d like to have a little more view before I project what’s going to happen, but certainly a 50% pay down by next year is a very reasonable expectation.
James Stone
When you say next year, is that middle and/or beginning?
Eric McAfee
Yes, middle – by middle of next year.
James Stone
Okay.
Eric McAfee
In the middle of 202.
James Stone
And then just one more question. When do you expect to turn into positive earnings?
Eric McAfee
We – our projecting positive earnings would be after our cellulosic ethanol is operational unless we have an EB-5 funding that occurs. So EB-5 funding removes what – almost all of our interest expense, as you can imagine.
And so we could easily turn into positive earnings by completing the EB-5 funding.
James Stone
By when – I’m sorry, I missed…
Eric McAfee
By – yes, by completing the EB-5 funding, we would be removing the large majority of our interest costs. So we – at that point in time, with India and having no debt and positive cash flow already, certainly, the Keyes plant moving forward towards positive cash flow, we could easily be in a position of positive earnings based upon getting that EB-5 funding completed.
So it’s really – earnings will be driven by that.
James Stone
Well, can you give you us anymore information on the timing of that? Is that late this year, early next year, whatever?
Eric McAfee
I think the idea that within 12 months that we could get a 50% reduction and our debt is probably a – and I’m talking about senior secured debt is probably a workable target for us. It should be faster than that.
But let’s get another quarter behind us and before we project them.
James Stone
Okay, thank you. Thank you very much.
I think, you keep this up or cut the stock up to a reasonable price.
Eric McAfee
Thanks, Jim. I appreciate your support.
Operator
And there are no further questions at this time. I would like to turn the floor back over to management for closing comments.
Eric McAfee
Thanks, Kristi. Thanks to the Aemetis shareholders and analysts and others for joining us today.
We look forward to meeting with you and continue our dialogue about pursuing growth opportunities at Aemetis.
Operator
Thank you for attending today’s Aemetis earnings conference call. Please visit the Investor section of the Aemetis website, where we’ll post a written version and audio version of this earnings review and business update.