Thank you for standing by, and welcome to the Delek US 4Q earnings call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question- and- answer session. To ask a question during the session, you will need to press star one on your telephone. Please be advised that today's web conference is being recorded. If you require any further assistance, please press star zero. I would like to hand the conference over to your speaker today, Blake Fernandez. Thank you. Please go ahead.
Thank you, and good morning. I would like to thank everyone for joining us on today's conference call and webcast to discuss Delek US Holdings' fourth quarter 2019 financial results. Joining me on today's call is Uzi Yemin, our Chairman, President, and CEO, Assi Ginzburg, EVP and CFO, and Louis LaBella, EVP and President of Refining, as well as other members of our management team. The presentation materials used during today's call can be found on our Investor Relations section of the Delek US website. As a reminder, this conference call may contain forward-looking statements as the term is defined under federal securities laws. Please see slide two for the safe harbor statement. In addition to reporting financial results in accordance with generally accepted accounting principles or GAAP, we report certain non-GAAP financial results.
Investors are encouraged to review the reconciliation of these non-GAAP financial measures to the comparable GAAP results, which can be found in the press release, which is posted on the investor relations section of our website. Our prepared remarks are being made assuming that the earnings press release has been reviewed, and we are covering less segment and market information than is incorporated into the fourth quarter press release. On today's call, Assi will review financial performance, Louis will cover operations for the quarter, and Uzi will offer a few closing strategic comments. With that, I'll turn the call over to Assi.
Thank you, Blake. Financial results were enhanced by the biodiesel tax credit that was approved by Congress retroactively for 2018 and 2019. You can see on slide three, on an adjusted basis for the fourth quarter 2019, Delek US reported a net loss of $8.5 million, or $0.11 per share, compared to net income of $165.7 million or $2.03 per diluted share in the prior year period. Our adjusted EBITDA was $66 million in the fourth quarter 2019 compared to $287.4 million in the prior year period. I would like to point out that the 2018 portion of the BTC is reflected in adjusted results for 2018. Adjusted results this quarter included a $31.1 million benefit from the BTC for the first three quarters of 2019. However, this was partially offset by $23.9 million of after-tax headwind.
These include environmental and employee expenses and operational factors such as accelerated maintenance and the product inventory build, along with unplanned expense and repairs. We expect many of these items to normalize in the future. Finally, we had $39 million of hedging losses in the quarter, of which approximately $17 million was unrealized. On slide four, we provide the cash flow waterfall. In the fourth quarter 2019, we generated cash flow of approximately $127 million from continuing operations, which includes a working capital detriment of $10 million. Cash capital expenditures were $107 million, excluding a $51.5 million contribution to Wink to Webster. In February, we contribute our 15% Wink to Webster investment totaling $145.6 million to a new JV with a Wink to Webster partner. With the strength of our combined investment, the JV successfully secured project financing.
The new JV structure will benefit our financial position and result in an immediate $69 million cash distribution of previously invested capital, with future expected Wink to Webster capital requirements financed at 100%. As a reminder, we expect total capital room requirements for Wink to Webster of $340 million-$380 million. Slide five highlights our capitalization. We ended the fourth quarter with $955 million of cash on a consolidated basis and $1.1 billion of net long-term debt. Excluding net debt at Delek Logistics of $828 million, we had a net long-term debt of approximately $284 million as of December 31st, 2019. On slide six, we provide first quarter guidance that may be helpful in modeling the company. With that, I will turn now the call over to Louis to discuss our operations.
Thanks, Uzi. During the fourth quarter, our total refining system crude oil throughput was approximately 272,000 barrels per day, which reflects downtime at Krotz Springs, where we elected to accelerate maintenance on the reformer. I would also point out that Big Spring sales volumes were reduced to build product inventory in advance of the turnaround in January. As shown on slide six, for the first quarter 2020, we expect crude throughput to average between 245,000 and 255,000 barrels per day. This reflects a major turnaround at Big Spring Refinery. On slide seven, I want to highlight our capital spending.
Capital expenditures during the fourth quarter were $103 million compared to $106 million in the fourth quarter of 2018. Our full year 2019 capital program was $428 million. This is expected to decline 24% to approximately $325 million this year. This amount excludes the Wink to Webster connector, where financing will be provided by the joint venture. The 2020 capital program is broken down by segments as follows. $205 million is our Refining segment, $23 million is our Logistics segment, $26 million is our Retail segment, and $72 million at the corporate level. The Big Spring gathering system is included at the corporate level and will comprise approximately $52 million this year. As a reminder, CapEx excludes JV investments like Red River and Wink to Webster.
Finally, I would like to highlight that we are increasing our EBITDA forecast for the Big Spring gathering system in 2022 by $5 million to a range of $45 million-$55 million. Next, I will turn the call over to Uzi for closing comments.
Thank you, Louis, and good morning, everybody. Our company had strong financial performance in 2019, delivering $696 million of EBITDA and $659 million of adjusted EBITDA in an environment where midland discounts evaporated. During the year in refining, we brought online the alkylation unit at Krotz Springs. We performed a turnaround and completed vacuum tower work at El Dorado. This facility is now positioned to run higher utilization rates with improved distillate yield and has better crude optionality. In retail, we continue to high-grade our portfolio through select asset sales while adding new stores to the market. Renewables continues to be a growth area where we acquired our third biodiesel plant in October. This business stands to benefit from the recent passage of the biodiesel tax credit, which was extended through 2022.
Moving to our core focus, the midstream growth projects, including Wink to Webster, Red River expansion, and Big Spring gathering system, should enhance performance over the coming years, while providing more stability to our earnings stream. Over time, we feel this should be rewarded to a higher valuation multiple. As we grow the midstream, we're looking to simplify the capital structure of DKL, along with potential asset drop-down opportunities from the sponsor, DK. As shown on slide eight, cash return to shareholders remain a priority. In 2019, we repurchased $178 million of our stock. Our share count has been reduced by 17% from the peak in the second quarter of 2018. Our board of directors has approved a 3.3% increase in our regular quarterly dividend from the third quarter 2019 level. This marks our seventh consecutive increase since the first quarter of 2018.
Finally, I'd like to be a little personal here and thank my dear friend, Uzi, for serving the company for the last 15 years. Uzi has been a huge asset to the company and to myself. Uzi has elected to move back to Israel to be with his family, as we all know they are already in Israel. The company couldn't be what it is without Uzi. I'd like to wish him good luck. With that, I'd like to open the call for questions.
As a reminder, to ask a question, you'll need to press star one on your telephone. To withdraw your question, press the pound key. Please stand by while we compile the Q&A roster. Your first question comes from the line of Silvio Micheloto of Mizuho. Your line is open.
Hi, Uzi. Sorry, it's Paul Sankey here from Mizuho. We bid you, not for the first time, Uzi, all the best and many thanks for everything you've done over the years. Uzi, can you talk a bit about the retail sector and the plans that you have there? You mentioned that you sold some stations and added some, I think, in the current environment, people are very interested by your exposure to retail. Could you talk a little bit more about that and where we go from here? Thanks.
Yeah, absolutely. Good morning, Paul.
Hi.
Obviously, retail for us is something that we have done for years. At the same time, we weren't shy to extract value out of retail. As we all know, our EBITDA from retail is around $40 million. What we are doing is that we divest some stores here and there, collect the cash, then take that cash and build the future stores. As we speak, we have two stores under construction and two more are coming later next year. Our plans are to convert the old stores and divest them and invest in the big stores, which is obviously part of our cash flow. I wouldn't be surprised to see that EBITDA continue to grow as the stores that we are building are showing probably return. There are only a few of them, return of between 25%-30%.
If we look at the history, don't be surprised if over the next two, three years, the EBITDA of the retail will grow to $50 million, $60 million, $70 million.
That's helpful. Thanks, Uzi. Secondly, you had some hedging losses in the quarter. Can you talk about the current market environment as you see it? Anything that you might be thinking about in terms of hedging one way or the other? Thanks a lot, Uzi.
Yeah. Hedging obviously is part of our box tool. We had a hedging loss last quarter. Some of it will reverse itself in the first quarter, that's perfectly fine. We look at it on a regular basis. If you look at what happened last year, second quarter, we had a big hedging gain, this time we had a hedging loss because of different things that we did, including inventory. I want to be clear, Paul. I read many notes, saying that Delek has a miss. We had anywhere between $0.08-$0.38. The actual number, the GAAP number of Delek, in the fourth quarter was $0.44 positive. When you look at GAAP, by the end of the day, it all reflects itself in the cash. I saw a couple of notes asking about the cash situation.
Well, we can call it one time, we can call it non-recurring, we can call it whatever we want. Cash is cash, and the $0.44 actual GAAP number, in the fourth quarter, reflects itself in the cash situation, including the hedging.
Okay, anything finally from me on the market? Well, that was part of the question, essentially, but how do you see the market developing over the course of 2020? Thanks.
Well, we weren't in the camp of IMO will be a great benefit. We don't think that IMO is here to stay. At the same time, we see several incidents in several refineries and gasoline market is pretty strong so far for the year. It depends on how quickly these facilities can come back to play. Also, if the VGO blending continues, then we may have a good summer ahead of us in terms of gasoline.
Thank you.
Your next question comes from the line of Manav Gupta of Credit Suisse. Your line is open.
Hey, first of all, congrats, Uzi, for all that you've done for Delek. My question relates to slide seven. Uzi or Assi, whoever wants to address this. Your CapEx expenditure is showing as $428 in 2019 versus $325 in 2020, which is about 24% decline, but this doesn't include the JV spending. Can you give us the numbers with the JV spending because a major portion of the decline will happen in the JV spending. I'm trying to understand apples to apples, 2019 versus 2020 included with JV spending. What are the numbers?
If you look at the 2019, we have spent $428 million. In addition to that, we continue to Wink to Webster roughly $75 million in that period.
Okay.
When you look at 2020, we have $325 million, but at this time we will receive $50 million from Wink-to-Webster. That 325 is actually going to be $275 million because we are receiving $50 million because we closed the project financing. From a cash flow perspective, this year is a much, I would say, lighter on money going out the door.
Perfect. That's what I want to make sure I understand that point. The second point, Assi and Uzi. Uzi more. You talked about El Dorado last quarter. We understood there was a turnaround. Slightly disappointed to see the gross margin this quarter. El Dorado is a much better asset than a subpar five sub $5 gross margin. Can you help us understand what happened at El Dorado and why it won't happen going ahead?
Yes. In El Dorado, we were still ramping up during the fourth quarter, coming out of that work on the vacuum tower, running off some excess inventory. We are in shape. The tower is still performing well, where our diesel yield is still where is expected and what we predicted, and we're ready to run the barrels in 2020.
Thanks, guys. Thanks for taking my questions.
Thank you, Manav.
Your next question comes from the line of Brad Heffern of RBC. Your line is open.
Hey, good morning, everyone.
Brad.
I guess in the release, in the prepared comments, you talked about simplifying the capital structure of the MLP. I assume that means some sort of IDR conversion, but can you put any more color around that and then also talk about any timeline for the drops?
As you know, we've been building at Delek a large gathering system that we feel that, as it matures, the right place for that system, it needs to be part of the DKL business model.
We wanted to achieve that together with a potential IDR simplification. The idea was to do it throughout 2020. We are looking at the markets, making sure that they will support the transaction, and we are also preparing the DKL balance sheet to do it. I would say it's a 2020 target date.
Okay. Thank you. I guess just on cash returns for the shareholders. Obviously, you've increased the dividend I think 7 out of 8 quarters now. The yield's at close to 5%. Are you at the point where you think it's competitive and the dividend's in the right place, or should we expect to continue increases? I noticed that you didn't give a guidance for repurchases in the first quarter, so is that program becoming less formalized at this point?
Well, we obviously want to continue to return excess cash flow to shareholders. In the upcoming quarters, we have big amount of cash coming between the BTC refund, which is $80-something million. The money that we already got that is not on the balance sheet from the refinance of all the project financing, and also the tax refund that is showing up. We will see how the cash shapes up, but, I don't see any reason why dividend, we won't continue to be very competitive.
Thank you.
Your next question comes from the line of Benny Wong, Morgan Stanley. Your line is open.
Hey. Good morning, guys. Thanks for taking my question. My first question is around Big Spring. Obviously, you guys took out the guidance there of your outlook, and you guys are spending about $50 million there. Just wondering, how much more runway is there to grow that business and what are the factors you're thinking or balancing to regulate the potential for growing faster there?
Well, it's just a matter of returns. We have a hurdle of around 20% for this type of business. Benny, if you look at the stats from RIG's standpoint, you'll see that Howard County and Martin County continue to grow despite the fact that other counties are declining. As you know, we are in Howard County and Martin County. If we meet the 20% threshold, which you will start seeing the benefit this quarter, but mainly next year, we will continue to look into that. Our situation is that we continue to produce cash, and despite what market calls miss, cash is coming in. For us, it's just meeting the hurdle of at least 20% in that area and also balancing it with other needs.
Understood. Appreciate those thoughts, Uzi. My next question is more for you, if I may. I was just wondering if you're able to share some thoughts in terms of your potential role with Delek US going forward. As I understand it, looks like your contract might be coming up later this year. I think there's many of us in the investment community that obviously don't want to see you go anywhere. Just curious in terms of how you're thinking about the future and if there's been any preliminary conversations or understanding between you and the company.
Prem, we are in discussions. The company or the board has expressed desire for me to stay. Obviously, I'm still young and enjoy what I do, so I don't see any reason to believe that we won't extend that agreement. We usually do it for three years, and I don't see any reason why it won't happen this time again.
That's great to hear. Thanks, Uzi.
Thanks, Benny.
Your next question comes from the line of Neil Mehta of Goldman Sachs. Your line is open. Neil Mehta, your line is open.
Hey, thanks. Thanks so much. Appreciate you guys taking the time. Assi, I guess the first question is for you, which is can you talk a little bit about the CFO transition? We're gonna miss you a ton here. The decision behind that. Uzi, as you think about backfilling the CFO role and an important lieutenant for you, how do you think about the characteristics you'll want in that seat?
Sure. After 15 years with Delek, I've made a decision to go back and be with my family in Israel. As you know, I tried it before, Uzi always able to convince me to come here and support the company. As I see my family grow up and I'm away from them, I decided that I want to be close to home. This was the only driver for me doing it. I will let Uzi discuss what the capabilities and how the new role will look like.
Well, obviously, Assi has been with us for a long time, and it's painful for me on one end, but I'm very happy for him, that he's joining his family. I know it's hard to commute, and for me, it's something sad personally because I'll miss him, but I'm glad for his decision.
In terms of the role, as we all know, CFO is a very important role. We have several very good candidates
We are going to finalize it hopefully over the next three, four weeks, and we'll notify the market about these candidates. Some of them are very well known to you guys.
Great. Well, congratulations, Uzi, looking forward to that update, Uzi. The follow-up question is just on the macro, in particular, Midland has traded decently above WTI now for a sustained period of time. That's with Big Spring currently down for turnaround. I guess, Uzi, the concern would be, as Big Spring comes up, does that continue to create a further bid, an inversion of that Midland differential? Just could you talk through the crude flows and the different moving pieces of supply-demand as we think about that Midland WTI differential. Then if you want to layer onto that, your views on your ability to access different types of crude, given the investments that you have made in projects like Red River to play different arbitrages against each other.
That's a great question. It has several components. I'll let Avigal, who deals with that every day, to take it.
Neil, good morning. How are you?
Good, thank you.
We all see Midland as premium to WTI. Over time, we find it hard to believe that the source of the barrel is going to be more expensive than the clearing point. We believe that at some point, something fundamental is going to make the market change. We have all seen that coming with all the announcement of the new pipe. It's no surprise to anyone that Midland is being traded premium, and we were ready for that with the Red River investment, exactly to diversify our crude. All of that was well known since we all saw Gray Oak coming, we all saw EPIC, and obviously W two W. That premium is well expected, and we have lined up the alternative for the second half of 2020 with the Red River investment.
Neil, just to remind you, the expansion in the second half of the year is about 65,000 barrels a day. That'll be incremental access in the second half through Red River.
Great.
Your next question comes from the line of Theresa Chen of Barclays. Your line is open.
Good morning. Also like to offer my congratulations to Uzi on your retirement. Second time around. Thank you for all your effort and hard work over the years.
Thank you.
Maybe a follow-up on Neil's question around the Midland diff first. I believe some of this pressure has been a result of line fill on Gray Oak and EPIC. It's been reported in the news. How long do you think this is going to go on for? When do you think we might see some easing in the interim just from that alone?
I guess pinning down the exact timing, I'm not sure I'm smart enough to give you that. I want to be clear. We see that $1.10, $1.20, and we as a company already taking steps to change our crude slate. If we are doing that, I'm sure others do the same thing, especially in light of the fact that there are a lot of barrels still flowing between Midland and Cushing on several pipelines. While I don't know how long this can stay, I don't believe that the source of the barrel can be more expensive than the destination for an extensive period of time. That's just not economic. Something would happen, and somebody will do something different. Similar to what we are talking about converting these barrels. Some people will do what we basically did. We canceled.
We had a pipeline, Amdel Pipeline, 35,000 barrels. We canceled that TSA. More and more people will just don't ship what they used to ship if this stays for a while. If I need to guess, this is a few months situation, but I'm not smart enough to pin down the exact time.
Got it. Switching gears a bit, touching on the earlier comments about the DKL's drop down and looking at the markets to support the transaction. With the AMZ at 184 today, what are your financing options and assumptions, Uzi? Would you be open to going to the private markets perhaps for more economic financing?
I will start by saying that a few days ago, the transaction looked much better for both companies, and the changes in the MLP market last few days impacting some of the economics in this transaction. With that being said, the Delek Logistics high-yield bond is trading very well above par. In addition to that, our revolver is still unfunded by over $250 million. We have basically just for a drop, we have the capacity on hand to do it without utilizing the market. As Delek, we are always happy to accept Delek Logistics stocks as a means of funding, especially when you look at the 12% yield that they are currently providing. We like those returns. If the market will improve, I see less likelihood of us going to the private market.
As I mentioned more, probably Delek would accept those shares as a means of payment.
Got it. With the cash portion of the proceeds, since it sounds like a portion or all of this could be done with debt, what are the parent's plans for that cash?
Well, we think that we want to maintain the cash level of our company. We feel comfortable. I know that you guys need to look at the stock price. The number one thing for us is to continue to provide cash so we can continue to implement our strategic plan. We will take that cash and then look at different ways to invest that, either through places to generate more EBITDA or retain cash to shareholders.
Thank you.
Your next question comes from the line of Phil Gresh of JPMorgan. Your line is open.
Yes. Hi, good morning. Just a follow-up to the previous question and thinking about the cash you'd be getting from the drops. How do you think about consolidated and parent financial leverage in the current environment with cracks where they are, the tight Midland differential and what level of net leverage, especially on a consolidated basis, you're comfortable with?
On a consolidated basis, we have roughly $1.1 billion of debt, as you know, and we finished the year with $700 million of EBITDA. It's a 1.5x leverage. I think, and we saw other companies in the past, energy companies at even 2.5x leverage. If you look at our bond, it's trading very well, and we think that at these levels of 2.5x leverage, the company is in a very good shape financially. I would like to mention that we need to remember one thing. Delek US invested $hundreds of millions in Wink to Webster and gathering businesses over the last 2.5 years. All of the debt is sitting on our books, and none of the EBITDA is there yet.
When we think about Delek ability to produce EBITDA, when we look at 2021, we expect additional of over $100 million of EBITDA coming from those assets. I think right now we're in the transition year that we are being penalized for making the investments, but we don't see the EBITDA. In addition to that, as Uzi mentioned, during Q1, we received already back net $50 million from the project financing because we over-invested. Between Q1 and Q2, we expect a BTC and tax refund of additionally $150 million. Those three together will take Delek US at the parent level to be in a net cash position, and that's the position we really like to be.
Thanks for all those details. That actually led to my follow question. With this JV financing structure, you've given very clear color on the cash in, cash out in 2020. Once this project comes on stream, without getting too detailed into modeling, maybe you could just give us some color about how that financing structure impacts what we actually see in the financial statement. Thanks.
As you know, we closed the project financing. The interest on the project financing is extremely low. It's a LIBOR plus one and a half, and we have good opportunity to lock the LIBOR, and the treasury is at a very low level at this point. We're probably going to hedge 75% of it. The way it's going to show up on the financials, they will be exactly like Red River. It will be net of the interest cost at the project level. If net-net, we expect, let's say, 20% return on the project, which is a $70 million EBITDA from the project, we will have to pay roughly $10 million a year of interest cost. The distribution will be around $60 million a year, assuming a 20% return. That's the way you're going to see it on the P&L.
The debt will not be on the balance sheet, and what you'll see is an investment in the equity method similar to a reserve.
Okay, great. Thank you very much.
I will say one more thing. We're not anticipating any amortization of debt in the first few years of the project. All of the cash flow will go to Delek.
Okay. All right, thanks.
Your next question comes from the line of Roger Read of Wells Fargo. Your line's open.
Yeah, thanks. Good morning. Uzi, let me say thanks for everything over the years. Congratulations to you for moving on, and all the best back in Israel.
Thank you, Roger.
A couple questions. One, just to follow up on what was a pretty major topic on the last call, the upgrades at El Dorado. Just curious now that you've had, I guess, probably by this point, a full quarter to run it, if not a calendar quarter, how that's performing. Is it in line with your expectations better than? Are there some other opportunities we should be thinking about across the rest of the units where you might be able to tweak some things this year?
Yes, Roger. Looking at the unit, and you're exactly right. Looking at the unit, it's still producing as we expected with the diesel yield, as well as making spec asphalt product right off the bottom of the tower. We look for all opportunities now of a variety of different crudes to try to optimize the unit to make the most money that we can going forward. We've been working really strong with commercial and seeing what's out there available that's around us that we can bring into the refinery and capture that.
Roger, I would just add, I think Louis mentioned earlier, but in the fourth quarter in particular, the facility was ramping back up in October, which was when crack spreads were strongest during the quarter. We weren't able to really capture the benefit of that. The facility was really online contributing in November, December when cracks had gotten weaker. We would expect a better contribution into one Q, two Q, et cetera.
Great. Thanks for that. Coming back to some of the discussion earlier about switching crudes that you're running, backing off maybe a mispriced Midland barrel towards something out of Cushing or even local. We've heard previously that it's better to run a pure Cushing barrel than what's sometimes called a Frankenbarrel, a pure barrel out of Midland versus a Frankenbarrel out of Cushing. I was just curious, as you change the crudes in the units, do we have to think about any sort of impacts on yields that might be a little bit more on the negative side? In other words, we have to see an even wider shift in crude diffs to get a major change in crude feedstock.
Roger, it depends on the configuration of every unit. To what you say, there is a merit, and every LP, when we change crude slate, we look at the quality of the barrel at the same time. However, just remember that because of our gathering system and the way we are doing our stuff, we can maintain some of the quality of the barrel. It depends on the specific refinery and the specific situation at the time. I'm going to tell you, though, that under a scenario of $1, $1.20, there's already incentive for us to change to a Cushing barrel versus a Midland barrel.
Yeah, that's what I would have expected. One last follow-up, just because you mentioned it in the opening remarks on the renewables. I know you all have made some acquisitions as well, some investments. As you mentioned earlier about retail EBITDA growth in the coming years, how do you see renewables growth, X the tax credit, because we'll never know if that's going to get renewed from time to time, but just the sort of underlying part of that business, maybe volumes as well as an EBITDA thought process?
First, it was renewed until 2022. That's just the fact. Second, biodiesel is an opening for us to look at other opportunities. We don't want to be in a situation that we invest in returns of 10%, 12%. If you remember, as we were controlling Alon. Alon did the renewable diesel, not biodiesel, in California, and then we sold it. It depends on the market. It depends on the feedstock. This is an area that we need to look at. I want to be honest, though. We don't believe always in food-based energy. That's something that we just need to remember.
That's fair. Thank you.
Thanks, Roger.
Your next question comes from the line of Paul Cheng of Scotiabank. Your line is open.
Hey, guys. Good morning.
Good morning, Paul.
Thank you, Uzi. Assi, just want to say congratulations for your second retirement, and wish you the best of luck and have fun in Israel. Thank you for all the help over the years. We miss you.
Thank you, Paul.
Just a couple of quick questions. On the financing side, if I get you correctly, that the rest of the need for the Webster project is all going to be project financing, right? You're saying that the first several years that you're not going to see any debt repayment. When the principal is going to start to be repaid, and when that it will be fully paid off?
As you mentioned first, going forward, all of the investments will come from the paid by basically the JV financing debt because we already put 100% of the equity needs. The way the project work, we put the first 20% of the equity of the needs, and then the banks put all the rest. The deal that we have is basically a 3-year deal. Usually after that, you're doing a bond that is also very likely amortized, mostly with balloon. As I mentioned, this will turn eventually into a bond, most likely investment-grade bond, and we will see very light amortization on it in the next few years.
I see. That if you don't turn into a bond, then after you come on stream, after three years, that start to have the repayment, but you will turn into bond most likely by then.
Yeah, it's a project finance. It's not a permanent finance. It's there for the construction. That's another two years. Then after that. Look at the shippers of this pipeline, Exxon, Plains, Delek, MPLX. With the quality shippers, we don't see an issue of turning it into a bond.
Okay. With the hedging position, can you tell us that what product and what margins that you have hedged in the first quarter and the second quarter?
Paul, I don't think. Go ahead, Blake.
No, Paul, we have a lot of different positions, so we really don't disclose any of the details around it. Unfortunately, we're just not going to get into that level of detail on it.
Okay, that's fine. For the Big Spring, I presume that the turnaround is a full plant turnaround.
That is correct. Will be completed sometime early March.
Okay. For the renewable diesel, you said, is the product being sold all in California?
I'm sorry?
Is the renewable diesel that you guys produce, is it all being sold in California?
No, none of it. No, nothing is being sold in California.
Oh, nothing is sold in California.
Nothing.
Is that an opportunity given that in California that there's another low carbon tax credit?
Well, we are producing biodiesel and not renewable diesel. What we are doing is we're blending all these gallons into the diesel that we sell, and that's the reason we are not splitting. We don't split. Most people split the dollar 50/50. We don't split it. That's the reason you see the full benefit of $80 million in the quarter.
I see. Okay. Will do. Thank you.
Thank you.
Your next question comes from the line of Jason Gabelman of Cowen. Your line is open.
Yeah. Hey, morning. I just wanted to go back to the cash flow for a second. I think you mentioned there was a $15 million inflow to offset the equity payments to Wink to Webster. There's going to be an additional amount that comes in, and then an additional call, it's $70 million from the biodiesel tax credit. How much is that altogether coming in terms of cash flow outside of normal operations?
Between Q1 and Q2 net, we will receive $50 million, five zero, from the Wink to Webster financing. We will receive $98 million of BTC, and we will receive $48 million of tax refunds. When you combine them all, it's $196 million that we expect to receive between Q1 and Q2.
Okay
will be in Q2.
All right. Was there any other one-time cash inflows in 4Q that you could call out?
You saw there were some tax benefits of over $30 million as a result of the fact that we put in service towards the end of the year, a big part of the gathering system that will start producing cash. You'll see in the cash flow when you'll get it, there's, I think, $36 million of tax inflows in Q4.
Deferred tax, Jason.
Got it. Okay, just on this biodiesel acquisition that you made, is there any material earnings impact that you expect in 1Q as a result?
Well, the biodiesel, in general, With the dollar now in place, the three plants are going to be between around $10 million, if you will, for the year.
Got it. All right, great. Thanks a lot.
Ladies and gentlemen, we have come to the end of our time. I will turn it back to the management for closing remarks.
Well, thank you everybody for listening to us this morning. I'd like to thank my friends around the table. I'd like to thank the board of directors for their belief in us. I'd like to thank all investors for their interest in us. Mainly, I'd like to thank our employees who make this company what it is. Have a great day. We'll talk to you soon.