All right. Under current leadership, Green Plains has materially improved its operational execution and lowered its cost base, which should allow the company to leverage favorable biofuels policies and new carbon capture capabilities to redefine its earnings potential. The business improvements have contributed to GPRE shares increasing 4x over the last 12 months. CFO Ann Reis has enhanced the leadership team since joining Green Plains at the beginning of 2026, and will have the opportunity in the coming years to deploy increased cash generation in support of the company's long-term strategies. We're excited to have Ann, as well as VP and Treasurer Will Yeakel with us to discuss Green Plains' outlook and opportunities. Thank you both for joining us.
Thank you.
Good to be here.
It's a little sticky. I guess, where I wanted to start is on some of the internal changes that have taken place that have enabled a material change in the execution at the company. Can you talk about some of the things that you're doing differently and maybe what's driven that?
Yeah. You know, with Chris Osowski is the new CEO and under his leadership, and he really comes from, you know, an operations background. A lot of operational discipline has been put into place over the last few years. We can see that with, you know, how the plants are producing and the utilization rates. We raised the total production capacity at the end of Q4. In Q1, it was 97% utilization and that is where, you know, we believe the plants will continue to operate, if not higher. Really focusing on the operational and just, you know, the discipline across the entire company.
Not only in the operations space but within our finance space, within how we hedge, how we buy corn, all of that's everything we're looking at from, you know, being more disciplined and making sure that we're being a data-driven organization and following what the data tells us and making decisions based on that. You know, and obviously, you know, there's a lot of changes last year and a distinct effort to simplify the business. Removing those areas of the business that weren't generating good returns and just trying to get down to the basics and the fundamentals of the business, has been a big focus and has proven in the numbers that is definitely the right direction.
You know, the other piece, obviously, is carbon, you know, has really been, you know, helpful for the ethanol industry as a whole and for Green Plains in particular, you know, given the benefits that we get from having three facilities in Nebraska on the Trailblazer Pipeline. All of our facilities qualify for the 45Z carbon credits right now between kind of the reduction, the removal of the iLUC penalty in 2026, as well as, you know, being able to take advantage of some of the provisions within the 45Z regulation with, you know, RECs and energy credits. Just overall continue, you know, get the 45Z by having the production, the ethanol production. You know, having those plants run well and producing ethanol is key to being able to capitalize on that.
I guess in other words, if we were to get a ceasefire, right, how much does that impact the operating environment versus the underlying fundamental improvement?
Yeah, I mean, I would say that, you know, the geopolitical environment, we saw, you know, a spike kind of early on because of it, but it's really normalized. We're still seeing good margins and we're getting into our summer driving season. You know, a majority of the facilities either are or have gone through their spring shutdown cycles. The RVO, you know, has been very helpful, but, you know, with the corn oil prices. It's all part of the fundamentals. It's really not that much about what is going on in the Middle East. You know, while there might be I mean, I think as everybody has experienced, as there's been, you know, discussions about ceasefires or not ceasefires, kinda the markets fluctuate.
You are gonna feel a little bit of that, but I don't feel like really a majority of the good margin environment from an ethanol perspective is driven by what's going on in the Middle East.
Okay. You teed up the E15 conversation, I wanted to get that question in there. It feels like E15 has been a conversation for the last several years that kinda just is ongoing. I haven't seen any headlines today. If they're out there, I don't know, given the conference.
Yeah
Um-
Nothing yet. You pried me away from my phone for an hour or so.
I guess, can you just let us know relative to, you know, the last couple years, which maybe has been a little bit disappointing set of outcomes, where are we today with E15? What are the next steps? How do you think this plays out from here?
Yeah, I wish I had a crystal ball, right? Like, that would be terrific. You know, I really do feel like it's a matter of when, not a matter of if.
The conversation has continued to gain traction, now that the price of gasoline has heightened that conversation obviously. Really all it's done is reiterated what we've been saying all along from an industry perspective is, you know, we're in the middle, the Midwest, we can pull up to most of our gas stations and see E15 pumps, and I know that that's not always across the entire country like that. You know, for us, it's a difference of anywhere from $0.15 to $0.40 a gallon. That is meaningful, particularly when you're talking about gas prices that are now close to $5. You know, what the E15 legislation is not a mandate. It is an option.
It's one that the blenders have also been very vocal about wanting because going through these emergency waivers every summer is also not helpful for them, right? They want consistency. They wanna know where their shipping lanes are. They don't wanna have to change these things. You know, it's, I think there's a lot of momentum. It's like I said, it's bipartisan, you know, lots of support around it. There's just, you know, a small group that where things have, you know, had more opposition is what the, what do we do about these SREs, right? That's the piece that has brought into the discussion whether or not, you know, this is the right thing to do. That's really driven by a small number of refiners in very specific states.
You know, while we are very fortunate in the Midwest where we have a very strong contingency of our house representatives and our senators that obviously are very vocal for the farmers in the ag community and their ethanol producers, you know, their contingencies are very much about their refiners and their states. You know, I understand that there's gonna be, you know, vocal opposition in some areas around this. On the whole, that's a very small number of people and a very small number that it impacts compared to when you talk about what it does to gas prices and energy stability for the entire country. You know, we have faith that that logic will prevail. And healthy, robust, you know, debate is always good. That's how this country was founded.
That it has to go through its process. I feel like it will get done and it's the right thing to do for this country.
Let's say it does get done.
Yeah.
Gets passed, nationwide E15. What happens? How do you think about the adoption curve? How do you think about the preparedness of, you know, the retail gas environment to, like, actually take that on? What's your perspective on that?
I think, on the whole, I think the adoption will be quickly quick in different geographies, right. There's some geographies that are very much ready for it and it's gonna be like a light switch, right. It's not gonna be a significant change in what's happening today because, like I said, this has been going on for eight years. There's other parts of the country and that's where I think that it's important and maybe what gets missed a bit in the discussions around E15. It is not a mandate. It is an option. There are things that have been in place in the past, like the HBIIP grants that were given.
That was really, you know, assistance that was provided to some of these retailers to help them upgrade their infrastructure and be able to take it and be able to sell E15. I think all of those things are important, and it's not about a specific timeline. It's, you know, this is something that's gonna gradually happen over time as consumers demand the lower price fuel. I think, you know, it's not gonna be In some areas, you know, it'll just be a done deal, and it'll be business as normal as what it's been. In others, it's gonna be a slower rollout.
Switching gears a little bit, you already talked about carbon capture, 45Z. That's going to, you know, create somewhat of a step function change in your EBITDA starting this year. You've already started to see some of that. You've already increased your expectations for contributions from 45Z. What was behind the change in expectations?
Yeah. I mean, the first quarter was our first full quarter of full run rate with our compression equipment in Nebraska at our three facilities. We always had a pretty good idea of what the platform was capable, but we wanted to give ourselves a chance to actually get the compression equipment up and running, you know, see it for ourselves and prove it out before we wanted to come back to the street with updated guidance. That, along with the continued high utilization outside of our plant network, obviously great to see. Ann talked about that a little bit earlier. I mean, that's kind of like the base, the first thing that you need in order to maximize your 45Z generation outside of the plants.
Just, again, being able to execute on some of the smaller pieces. I mean, obviously there's a lot of compliance and audit work that goes into all of this, procuring, the Renewable Energy credits. Getting all of those things ticked and tied, seeing, all the data put in front of us gave us the comfort to raise our guide, up to the newer numbers, Andrew.
Is that just the Nebraska plants, or is it, the full plant network?
It's the full plant network. You know, part of our increase in the guide comes from both the advantage in Nebraska, our three plants, on the Trailblazer Pipeline, as well as the balance of plants inside of our network that are all capturing 45Z credits today.
Is there room for you to further lower CI scores, increase the capture rate of 45Z? What are you looking at that might be able to achieve that?
Yeah, there's a variety of levers, right, that we can, we can still look at. You know, one of which is, was released in the proposed ruling and we're waiting on final guidance and kind of final calculators to be released but the ability to capture the lower CI from the feedstock on the corn. You know, particularly in kind of the Nebraska and Iowa regions where we buy a lot of our corn direct from the farmers, we've got the ability to, you know, w e'll know more once the final rules come out. Even within the proposed rules, there's discussions, right, about needing the farmer attestations. You need to know exactly how much fertilizer the farmer put on the fields and all of that.
You know, that takes a very direct and personal connection with the farmer to be able to get that data from them. You know, we feel like in Nebraska and Iowa for sure, we're gonna be able to take advantage of at least some of that. That's, that's part of additional CI that we feel like we'll be able to capture. The other piece, you know, that we are focused on, it's not just it from a CI perspective, it's helpful, right? The 45Z helps us get the returns on some of the capital faster than other, than in non-45Z times.
You know, the main components of the 45Z calculation really are, you know, your feedstock, how much ethanol you make, how much energy you're using, so whether that's electricity or natural gas. Then, you know, there's the sequestration piece of it. That electricity and natural gas are two very good places for us to look at. The thing that's helpful by us reducing our energy usage is not only for the 45Z, but after that is available, it just makes the plants better and less costly to operate. You know, those are really the places that we're specifically looking for capital improvements that both lower the CI score, but just lower the OpEx of the plant altogether.
Great. Okay. We have seen some announcements or headlines, what have you, some off-ball capacity that's maybe reopened, those type. I assume it's mostly tax credit related. Do you expect to see more capacity additions and maybe I guess what I'm getting at the end of the day is, does the industry compete away or produce away the base ethanol margin only after a 45Z, and we end up in a better scenario than where we were but maybe not as good of a scenario as we could be in?
45Z, right, was eligible starting in 2025. We saw an increase in production starting last year already. You know, we talked a little bit about exports previously, right? A lot of the extra production is going towards the export market. You know, that's, you know, kind of really driven a lot by requirements by the different countries. You know, we've seen obviously Canada is a big, a big exporter or importer of our ethanol. The U.K., India, you know, the Netherlands is starting to get further up on the list. You know, there's a lot of demand being driven by outside of the United States.
While, you know, we've seen, yes, some incremental, you know, production increases either from debottlenecking, it's less likely that you're going to see brand-new plants built or anything like that, just because the 45Z runway is so short right now, right? It still ends in 29. There's not an extension. You know, any type of capital improvements, you know, have to be able to be done relatively quickly, to be able to get, you know, that type of payback that I think folks are looking for. You know, it's really more about the incremental increases in production with the debottlenecking and, you know, perhaps, you know, adding a fermenter or something like that. It's not these huge amounts of additional production increase.
It seems that, you know, really like I said, you know, California passed their E15. We haven't seen that come online yet really, because they're still going through their regulations. We have other states that have passed their Low Carbon Fuel Standard, and if you get E15 along with the continued requirements that are outside of the country, I think any incremental production will be easily absorbed.
What is your best guess for export volume from the U.S. in 26 and 27?
Right now, it was $2.1 billion last year. You know, they're estimating $2.4 this year. You know, I think last I saw with the additional country mandates, they're estimating anywhere from another $100 million to $300 million additional capacity each year going forward if those mandates all stay in place. You know, it seems that it's, you know, more of a continuation. Now, any of those things can change, right, as we know, with any sort of, you know, legislative changes. It feels like, particularly with now the upset and everything that we're seeing in the Middle East, you know, countries, they're looking for, you know, a different fuel, one that's a lower cost, and ethanol fits the bill on all of those things.
It is, you mentioned that Canada is USMCA a risk, trade relations with Canada, I guess. How do you think about that?
I think we're past that now, so I'm not overly concerned about it. I mean, I wouldn't say that we didn't have those conversations obviously, when a lot of the tariff discussions were going on. You know, thankfully, it was always, there was, like, the first list. The first tariff list, and then there was this, like, sub-tariff list, and ethanol ended up on the sub one. You know, that provided us a bit of comfort. There really is no, Canada cannot meet its mandates. They don't have the production there to meet those. I don't think that was the first on their list to cause problems over.
Hopefully that's where things have landed.
Okay. On the corn oil side, can you just talk about the demand environment? Obviously, the RVO is a huge influence there, but how do you think about? I don't know if you think about offtake agreements or how you think about meeting that demand over time, especially when you see where prices are now? How have you seen that evolve since the RVO?
Yeah, I mean, even before the RVO, we saw a nice run-up in DCO prices, and we've seen that sustain now that the RVO is out. You know, I think one of the biggest things that we've seen over the last few weeks is that folks on the other side of the table are willing to maybe extend their coverage a little bit, which, you know, is helpful for us. I mean, we talk a bit about hedging and how we think about our business in terms of gross margin. As we're looking at the various components of our gross margin, DCO is a big one and a growing one for us.
It's been encouraging to see some of those conversations evolve and being able to, you know, have some more robust conversations about putting some bigger, longer dated strips on the book for the corn oil business.
Okay. Great. You made some changes to the asset base over the last, you know, year plus, what have you. How do you think about the asset base today? Any thoughts about further evolving that?
Yeah, I mean, I think, you know, Chris has been pretty clear that, you know, we don't have an interest in getting any smaller. You know, we feel like the steps that were taken last year really right-sized the business. Now we feel like we're in a position to really continue to grow, whether that be organically or through other means. You know, really feel like we've got a terrific team in place that, you know, understands ethanol well, understands the production capabilities well, understands the hedging aspects well. You know, we're really trying to continue to optimize the assets that we have. That's definitely number one, because there's still room to go on those.
You know, we've made some significant improvements over the last few years but there's definitely things that we would still like to do, like I said, to continue to reduce the energy consumption of some of the plants. You know, one of them that we talked about on the earnings call for Q1 was the low energy distillation process at York. You know, York is one of our older facilities, that, you know, it's just the design of how it was built back then, is not the most efficient. We know we've got some opportunities there, to not only reduce the natural gas but also to help the production increase there.
You know, it's items like those that we're gonna be really focused on and then continuing to keep our eye on, you know, what makes the most sense to continue to evolve and increase our asset base.
I know they don't get as much attention now as they used to, but can you give us an update on the High Protein, feed business, even Clean Sugar? Where are those kind of in the priority set? How are they evolving as well?
Let's start with Ultra-High Protein first. You know, it's still a great product that we get great feedback from our customers on. I mean, it's a smaller footprint than it was because of some of the simplification work that Ann Reis just mentioned. Again, as we think about the gross margin profile of our business, it's another nice component, and has traded well, and good RVs recently. Been very happy with that business. Again, having the smaller footprint has allowed us to be a little bit more intentional with our customer base. Being able to, you know, continue to invest in those relationships with our customers has paid some dividends.
On the CST front, you know, not a whole lot has changed on the story since the last time that we've talked about it with the market. You know, we, as Ann has alluded to, there's a lot of opportunities for us to invest capital inside of our business. With 45Z here, just the spread between investing in some of those opportunities and investing to get CST restarted and those returns has widened. For the time being, you know, it's an option that's available for us. We have some higher priority items that we need to go out and execute on first before we come back to that.
Okay.
Maybe if I'll just add a little bit.
Sure
On the CST just to help folks understand a bit. When I talked about the 45Z and the components of it, right? It's how much corn you're grinding and how much ethanol you're making along with your energy costs. What CST, it takes a piece of our grind stream off, and to make the Clean Sugar, which the Clean Sugar is, does not have an approved pathway through the 45Z. Basically what we're doing is we're lowering any type of 45Z that we can get on that, if we make the Clean Sugar. As long as 45Z is in play, it just doesn't really make sense from a revenue perspective.
Okay. That makes sense. Shifting gears a little, there's been a lot of discussion about farmer economics, corn acreage, fertilizer prices. What does that do to yields? I'd love to get your perspective. On first, U.S. corn acreage. Do you think USDA kind of got that right, more or less, in terms of the shift there? To what extent do you see greater than normal risk, I suppose, to corn yields this year given kind of the fertilizer dynamics or not?
I'm really glad you asked that question actually. I don't know if that was on our list, but I'm happy about that. You know, the USDA, the one thing that you can always count on is the number's gonna change.
It's just the way it is. A lot of that depends, right, the planning season is just starting or they're halfway through about now probably, depending what part of the country you're in. A lot can happen between now and harvest. You know, what the yields are gonna come out to be, you know, is varies widely depending on the year, and the amount of rain we get and a lot of other factors.
The piece I'm glad you asked about was about the fertilizer because I think, you know, what folks maybe don't always understand is the reason that these farming practices are being encouraged and why they're being looked at in the 45Z is because it's been scientifically proven that by doing things like no-till, maybe not using as much fertilizer or using manure instead of your basic nitrogen fertilizer, all of those things increases the health of the soil. That makes the crops more drought resistant and pest resistant, all of those things. You know, some of our producers that we work with, right? They've, this is nothing new to them. They've done these farming practices for 15 or 20 years because they've all known that these are the right things to do for the health of the soil.
Constantly, you know, taking away topsoil and layers, it doesn't increase. It doesn't help the sustainability of the soil. Those farmers that have done these practices for years really see that in their yields. Even if it is a drought year or if it's a tough year, they're still seeing some of the best yields that they've ever had without any of those additional items. You know, that is why, you know, it's the USDA and others have really pushed to get that included in the 45Z regulation is because it just makes a lot of sense and it encourages the right behavior from the farmers.
Interesting. Okay. As you promised, we're gonna talk about capital allocation a little bit. You know, you talked about some of the internal projects that, you know, that you guys have that can continue to improve productivity execution, maybe 45Z capture, those types of things. The earnings continue to grow, the balance sheet is in such a better place. H ow do you think bigger picture about your capital allocation priorities and maybe as this evolves over the next couple years, how maybe that changes?
Yeah. There's a lot to unpack there but, I mean, you know, based on the very strong and structurally supported demand in our base business as well as the 45Z, you know, for the first time in a long time we have line of sight into some sustainable cash flow coming into our business and that presents, you know, a challenge that we haven't had for a while, but a ton of opportunity and we're obviously excited about that. You know, I think it comes down to, you know, obviously there's clear line of sight into some things which again, we've talked about. It's investing inside of our plants. You know, they've probably been a little bit underinvested over the last couple years because we have been a bit capital constrained.
Then the return profile from 45Z makes, you know, a lot of things that were marginal maybe four or five years ago much more appetizing for us. There's a, you know, a number of things to do inside of there. Then it's, you know, how do we grow this business to be, again, durable and a business that we know can generate profits and returns for our shareholders even beyond 45Z. Obviously there's a lot of things inside of the capital structure that go along with that, whether that's de-leveraging, buying back shares. You know, I think it's probably a little early days for us to come back to the street with that. You're exactly right.
I mean, as the balance sheet improves, you know, I think we'll have a little bit more targeted view on what we want our leverage profile to be. Again, one of the reasons it's early days is because, you know, you can get to your target leverage ratio one of two ways. You can grow your earnings or you can reduce or restructure your debt. Until we have, I think, a better view on what that run rate earnings is going to be, you know, it's, again, probably just a little bit too early to come back on how aggressive we do or don't want to be in kind of that de-leveraging and kind of other balance sheet optimization strategy.
Got it. Okay. Maybe my final question, you know, I appreciate that we're one and change quarters into our, you know, full run rate of carbon capture. We're just starting to see that real step change on, from an EBITDA perspective for the business. As you think forward, we've leveled up to a new level, what are the opportunities to take another step higher from an EBITDA perspective over time from your perspective? I was gonna lead the witness, but I'm not going to. How do you think about it?
You know, I think our focus really is around, you know, being the best at what we're doing, right? We wanna make sure first of all that we're focused on all of the operational excellence across the business and think that quite frankly there's a lot of room to help improve EBITDA just within what we've currently got, and just being able to maximize that. You know, I think that is our main focus and that is truly where we're focused right now. You know, the, like Will said, you know, we're looking at all of our capital projects and our opportunities from cash on a return basis, right?
Everything is on the table and we wanna be, right, very methodical and very data driven on all of those decision makings and make sure that what we're doing is getting the best return for the company. You know, there, I think there's a lot of different ways to get there, and we're gonna let the math speak for itself and tell us right, where's the right place to go.
Great. We're basically out of time so we'll go ahead and leave it there. Thank you so much for being here.
Yeah, thank you.
Thanks for having us.