Welcome to the Origin Materials third quarter 2022 earnings conference call. At this time, all participants will be in a listen-only mode. Later, we will conduct a question and answer session. I will now turn the call over to your host, Ashish Gupta, Investor Relations. Ashish, you may begin.
Thank you and welcome everyone to Origin Materials third quarter 2022 earnings conference call. Joining the call today from Origin Materials are Co-CEO Rich Riley, Co-CEO and Co-Founder John Bissell, and CFO Nate Whaley. Ahead of this call, Origin issued its third quarter press release and presentation, which we will refer to today. These can be found on the investor relations section of our website at originmaterials.com. Please note on this call, we will be making forward-looking statements based on current expectations and assumptions which are subject to risks and uncertainties. These statements reflect our views as of today, should not be relied upon as representative of our views of any subsequent date, and we undertake no obligation to revise or publicly release the results of any revision to these forward-looking statements in light of new information or future events.
These statements are subject to a variety of risks and uncertainties that could cause actual results to differ materially from expectations. For further discussion of the material risks and other important factors that could affect our financial results, please refer to our filings with the SEC, including our quarterly report on Form 10-Q dated August 3rd, 2022. In addition, during today's call, we will discuss non-GAAP financial measures which we believe are useful as supplemental measures of Origin Materials performance. These non-GAAP measures should be considered in addition to and not as a substitute for or in isolation from GAAP results. You will find additional disclosures regarding the non-GAAP financial measures discussed on today's call in our press release issued this afternoon and our filings with the SEC, each of which is posted on our website.
The webcast of this call will also be available on the investor relations section of our company website. With that, I'll turn the call over to Rich.
Thank you, Ashish, and thanks to everyone for joining us. For today's presentation, we will be referring to the slides that were posted to the investor relations section of our website earlier this afternoon. I will start by reviewing two, three highlights, then provide a commercial and regulatory update. I will then turn it over to John, who will discuss our recent Alternative Fuels & Chemicals Coalition award and construction progress on Origin 1 and Origin 2. Nate will wrap up with the financial overview. We will begin on slide three. We continue to execute on our plan and make progress on our mission to enable the world's transition to sustainable materials. First, we have seen a more than nine-fold increase in our customer demand since our announcement to become a public company in February 2021, with offtake and capacity reservations increasing to $9 billion today.
Second, we remain well capitalized and on track for completion of Origin 1 by the end of 2022, with preparations for commissioning and startup now well underway, with plant commissioning to be complete by the end of Q1 2023 and startup beginning shortly thereafter. We are also maintaining our previously disclosed capital budget for Origin 1 of $125 million-$130 million. For Origin 2, the previously disclosed capital budget, construction timeline, and financing assumptions are unchanged. As reported previously, the state of Louisiana, pending finalization, is expected to award a private activity bond volume cap allocation to Origin in the amount of $400 billion. We also expect to receive more than $100 million in pending state and local incentives.
As discussed on prior calls, front-end design of Origin 2 is underway, with detailed engineering set to begin in 2023. Third, we remain well capitalized with approximately $362.2 million in cash and cash equivalents on hand. We maintain our expectation that the capital projects for Origin 1 and Origin 2 can be fully funded from our existing cash on hand and previously indicated traditional project financing sources. Now turning to slide four, I'd like to provide a brief overview of Origin for those who are new to the story. Origin was founded with the mission to help solve climate change by enabling the world transition to sustainable materials.
Our patented drop-in core technology, attractive unit economics, and carbon impact have gained the support of a growing list of major global brands and investors and an increasingly diverse range of consumer and industrial end markets. Our list of strategic partners includes industry leaders such as Danone, Nestlé Waters, PepsiCo, Ford Motor Company, Mitsubishi Gas Chemical, Kolon Industries, Himalaya, Solvay, Mitsui & Co., Minafin Group, LVMH Beauty, Revlon, Mitsubishi Chemical Group, Ferrari, Intertex World Resources, and ATC Plastics. Our CPG partners have publicly disclosed their intent to migrate 100% of their current petroleum-based PET consumption to decarbonized and recycled materials. After extensively evaluating our technology and testing our products, these market leaders have made significant financial contributions to Origin, both as investors and customers, demonstrating their environmental commitment and confidence in our technology and products. They have signed multi-year offtake contracts worth hundreds of millions of dollars.
This year's escalating geopolitical tensions in energy-rich portions of the globe have provided a reminder of the urgency with which the world needs to transition to more sustainable and less volatile energy solutions. The carbon-intensive nature of the plastic industry, where over 99% of product is made from fossil fuels, has placed the industry under considerable pressure to dramatically transform the way it produces and uses plastic, both for environmental and economic considerations. Origin offers an entirely circular plastic solution. Carbon negative recyclable PET, which the world's plastic recycling infrastructure is already designed to collect, sort, and reuse, with the critical added benefit of removing CO2 from the atmosphere.
Beyond plastics, we note that while there's been some progress made in reducing greenhouse gases from shifts to renewable energy sources and electric vehicles, it is clear that reducing emissions from energy use alone is insufficient to achieve the goals and commitments established by companies and governments. As a result, in the near term, we believe that these companies will need to integrate decarbonized materials into their supply chain. As such, we expect demand to remain well ahead of our projected supplies for the foreseeable future. Turning to slide five, we continue to see strong favorable tailwinds for our technology and business model, with some of the world's largest public companies committing to zero carbon mandates and governments increasingly enacting regulations and funding investments to tackle climate change.
The recently passed Inflation Reduction Act, or IRA, is expected to provide approximately $369 billion in direct investments related to climate solutions. We are excited by the support the bill has received and see multiple meaningful funding opportunities that we plan to provide more detail on as the legislation is finalized. For one, the IRA is expected to significantly expand the Section 48C Advanced Manufacturing Tax Credit, available for investment in manufacturing facilities for clean energy technologies. Origin is currently exploring several paths of eligibility in order to qualify for a discretionary tax credit for a significant portion of Origin 2's capital expenditures, providing benefits toward the financing of the plant. Second, while we are still evaluating the details of the program, we see the potential to benefit from the IRA's Advanced Industrial Facilities Deployment program.
This Department of Energy-run program, created under the Office of Clean Energy Demonstrations, will provide $5.8 billion in competitive funding, such as grants, rebates, direct loans, and cooperative agreements to advance industrial facilities aimed at reducing greenhouse gas emissions from historically energy-intensive industries. We're optimistic that our pilot facility in West Sacramento, our Origin 2 plant in Geismar, Louisiana, as well as future plants that we build in the U.S. to qualify for this competitive financing. Finally, in addition to the IRA, Origin is exploring opportunities for funding and financing under last year's Infrastructure Investment and Jobs Act, or IIJA. Origin has identified more than a dozen IIJA initiatives that may potentially assist in advancing a variety of Origin investments, most notably Origin 2 and infrastructure improvements in and around the Geismar, Louisiana site.
Turning to slide six, we continue to make steady progress commercializing the business and have grown customer demand to a total of $9 billion today, made up of offtake agreements and capacity reservations. This represents a more than nine-fold increase since we announced our intent to go public in February 2021. As a refresher, capacity reservations are signed agreements designed to lead towards take or pay contracts and revenue once our plants are complete. They give us and our customers more time to negotiate a take or pay offtake agreement, which typically is a much longer document that meets the requirements for project financing.
As previously mentioned, we continue to expand the breadth of industries and end markets that we serve, from global CPG brands like Pepsi, Danone, and Nestlé Waters, to automotive leaders like Ford, and specialty chemical innovators like Solvay and Mitsubishi Chemical Group, to ultra-luxury brands like LVMH Beauty and iconic cosmetic brands like Revlon. Our sales pipeline remains strong. We continue to make inroads into new industries and have numerous active discussions with existing customers to expand their current agreements with prospective customers to adopt our sustainable products. We also see significant opportunities to expand into high-margin product categories. This year's new strategic partnerships with Mitsubishi Chemical Group, Intertex, and ABC Plastics, for example, have provided us with significant momentum in carbon black, a promising new product category for Origin. Our carbon black, made from Origin's hydrothermal carbon, is a versatile 100% bio-content filler and pigment.
Like traditional petroleum-based carbon black, it can be used in a wide variety of applications, including automotive components and tires, belts and hoses, mechanical rubber goods, plastic master batch, and toners. We expect our sustainable carbon black to be deployed across a diverse array of applications to decarbonize the rubber and automotive supply chains, end markets which have very favorable growth prospects. In light of strong customer demand, we are pleased to announce that we are substantially committed for our Origin 2 paraxylene and PET capacity. Going forward, our sales and marketing team will be primarily focused on high-margin products such as carbon black and advanced HMF-derived products for Origin 2 and beyond. As we previously mentioned, our customers require more development and testing for these products than for drop-in ready paraxylene and PET.
As we approach the start of Origin 1 operations, we anticipate being able to deliver larger quantities of samples to our customers. We look forward to updating everyone as we embark on this evolution in our sales efforts. In addition, we're very excited to tell you about a new strategic relationship with a major Japanese chemical company and a major Asian chemical company. We continue to see considerable opportunities to expand into new end markets and applications, and we look forward to providing more detail about these partnerships, as well as others, when appropriate. With that, I would like to turn it over to John, who will discuss our recent Alternative Fuels & Chemicals Coalition award and provide an update on Origin 1 and Origin 2.
Thanks, Rich. In early October, Origin received the 2022 Alternative Fuels & Chemicals Coalition Global Bio-based Economy Performance Award. The award, which is sponsored by the Industrial Biotechnology journal, is given annually to recognize companies that are advancing science and contributing to the production and commercialization of industrial biotechnology products. Origin was selected for outstanding performance and achievements in the commercialization and scale-up of our patented technology platform, which, as many of you know, turns the carbon found in sustainable wood residues into useful carbon negative materials for a wide range of end products, including clothing, textiles, plastics, packaging, car parts, tires, carpeting, and wood. Turning to slide seven, I'm gonna provide a construction update for Origin 1 and Origin 2.
Those interested in the Origin 1 story and the continuous progress made by our team, I'd like to point you to a new construction update video that we posted today to the investor relations section of our website. For Origin 1, our first plant located in Sarnia, Ontario, construction is progressing well, and we remain on track for mechanical completion by the end of 2022. A considerable achievement despite the pandemic and supply chain-related headwinds. We expect plant commissioning to be complete by the end of Q1 2023. We start up beginning shortly thereafter. We are maintaining our previously disclosed capital budget for Origin 1 of $125 million-$130 million. During the third quarter, we further strengthened our Origin 1 operations leadership team and support staff.
I'm very proud of how our team has executed against our construction milestones as we draw closer to commercial production. This is a large manufacturing plant with a lot of moving parts, and what we've been able to accomplish to date, despite COVID and macro supply chain issues, truly shows the capability, efficiency, and efficacy of our capital projects team. In our slides and in our construction video, you can see the progress we've made since our last update in August. All major equipment has been delivered on-site. Since our last call, we've further progressed the assembly of the piping and electrical systems. The piping modules both interconnect our core chemical process modules and connect the Origin 1 site with utilities supplied by the neighboring site.
As we have discussed before, the modules were fabricated off-site using a modular construction approach and shipped in, minimizing the work that was required to be done at the field. We also completed the construction of our biomass building, which is where we will store sustainable wood residues entering the plant prior to processing and conveying to the reactor system, as well as substantially completed our HTC building, which is where we will separate HTC, a solid material, from the liquid aqueous phase of our core chemical process. Notably, both the biomass building and the HTC building feature a significant amount of steel and a number of components and pieces connected together. HTC is a carbon-rich, highly structured and flexible raw material that can be converted into a wide range of applications, including carbon black and activated carbon for the automotive industry and material handling industry.
We've recently received and installed our second filter press, an important part of how we handle HTC at Origin 1. The filter presses will use the same HTC separation technique that is currently used at our pilot plant out in California, but are about 100 x the size. The control room building, which houses our distributed control system and the power distribution building, both arrived on-site during the quarter. The distributed control system is the brain of the plant, controlling every power system on-site. Finally, we delivered several new tanks on-site that will contain product as well as solvents that will be used and recycled as part of our core chemical process. Our site will have lots of integrated storage, which gives us the ability to manage our chemicals and materials.
New equipment includes a storage tank, which will contain unrefined CMF before its distillation step, as well as brine tanks, brine recovery tanks, HDL tanks, and several tanks for storing finished CMF. Due to its large size, our distillation feed tank was assembled on-site rather than delivered by road. Today, we are thrilled to tell you that we are closer than ever to mechanical completion and operation of Origin's first commercial plant. Of course, this is a testament to the amazing level of talent we've been able to attract to our company. The Origin 1 team has done an incredible job creating a great safety culture while executing this project, and we will very much take what we've learned and the culture we've developed to Origin 2 and beyond.
At Origin, we recognize that our team is a critical differentiating factor that will enable our success in the execution of our vision. Over the past year, our ability to attract high caliber technical talent with a deep commitment to our sustainability-focused values has far exceeded even our most optimistic expectations. It's become clear to us following recent conversations with investors that the pace at which we are adding depth to our team and the truly remarkable quality of our people is something worth highlighting. We decided to use a portion of today's call to discuss some of the great recent additions to Origin. Beginning on slide 18, it would be hard to overstate how enthusiastic we feel about the future, specifically our ability to commercialize our technology and products. I'd like to highlight just a small sampling of the world-class talent that has joined our team.
Matt Plavan, Origin's engineering director for capital projects, has deep experience in project execution, which he developed over a 20+ year career working with Fortune 500 owner operators and EPC company. He is highly experienced in the design, procurement, and construction of industrial assets, including petrochemical technologies. Dr. Zhan Liu, Technical Manager, is the inventor of the award-winning technology, C5CD Alky, which received the 2019 Hydrocarbon Processing Award, a tremendous accomplishment for any research scientist. Dr. Bill Williams, Director of Process Development for Carbon Products, is an expert in carbon black applications and chemical process engineering. Throughout his career, Bill has developed several technologies to reduce CO2, improve carbon efficiency, capture CO2 emissions, and processes for chlorofluorocarbon alternatives. Dr. William Gong, Senior Scientist, is an expert in the Mid-Century style oxidation of para-xylene to terephthalic acid.
He has close to 30 years of petrochemical R&D experience in organic chemical reaction mechanisms, synthesis, and the development and application of homogeneous and heterogeneous catalysis. Dr. James Lattner, Technical Fellow, is an expert in the petrochemical oil and gas industry. During his 40-plus-year career as a chemical engineer in oil and gas, James specialized in the process development and scale-up of chemical technologies and reaction engineering. Chris Stark, Commercial Director, brings a diverse skill set to Origin from outside the chemical industry. During his 20 years of service, Chris rose to the rank of colonel in the Marine Corps Special Operations Command unit, where he led cross-functional teams. He has significant experience planning and leading projects in fast-paced environments.
Dr. Jay Han, Technical Director, recently inducted into the National Academy of Inventors, is a highly accomplished inventor and material scientist with over 300 science ventures and publications and almost 300 patents. Dr. Ron Moffitt, Polymer Principal Scientist, brings to our team more than 38 years of experience in polymer research, development, processing, and the manufacturing of fibers, films, and containers. All of the people I've mentioned are outstanding additions to our team. We are thrilled to have them as well as the incredibly talented new people that I won't have time to mention on this call, but are likewise making incredible contributions to our mission every day. An example of R&D success that can be attributed in large part to new technical talent is Origin's recent increase in registered patent families. As indicated on slide four, our R&D efforts continue to yield fantastic results.
We have registered additional patent families, bringing our total to 23, with more in development as we speak. Apart from being a testament to our team's technical abilities, our R&D successes also validate the flexibility of CMF as a platform chemical, which with our technology can be produced at high yields under mild conditions directly from raw biomass. In the ordinary course of business, Origin may acquire technologies or enter into licensing agreements to improve our product offerings and competitive position. During this quarter, we made an approximately $5 million deposit towards securing a licensed technology that can be used to produce high-margin downstream products using our intermediate product, feedstock. We will provide an update on this licensing opportunity when appropriate. With regard to Origin 2, our previously disclosed capital budget, construction timeline, and financing are unchanged with updates to be provided when appropriate.
As discussed on prior calls, we are closely monitoring costs associated with the current high levels of inflation and the challenging supply chain environment. We continue to proactively manage our cost base and note that we have built appropriate contingencies into our initial production. We are not currently placing any equipment or construction orders for Origin 2, and we expect current inflation and supply chain conditions to likely change in our favor in the last 12 months- 24 months. Notably, we've seen recent declines in steel prices, which have also filtered through the specialty steel indexed on these prices and that are used in the construction of plants like Origin 2. I'd also note that materials companies generally benefit from higher product prices and margins in an inflationary environment, which can mitigate the impact of inflation on our capital budget.
Origin 2, our first world-scale manufacturing facility, will produce carbon-negative materials used to make PET plastic resin and fiber, which is used in packaging, textiles, apparel, and other applications. HTC, which can be used in fuel as activated carbon and as a replacement for carbon black. Front-end design of the plant is underway, with detailed engineering set to begin in 2023. As previously announced, we've selected a site in Geismar, Louisiana, for Origin 2, subject to finalization of economic incentives. We expect the 150-acre facility will convert an estimated 1 million dry metric tons of sustainable wood residues each year into products for a wide range of end markets. Some of the reasons that we believe the Geismar site is the ideal location for Origin 2 include the extremely skilled labor pool in Louisiana, access to relevant infrastructure, and access to sustainable feedstocks.
Before I conclude, I'd like to give you some additional detail about what we're currently working on for Origin 2. The team is optimizing and refining the scope and layout of the plant, incorporating value-engineering activities. We are producing updated equipment arrangements and flow diagrams for our FEL-2 engineering contractor. While we had hoped to complete these tasks by the end of Q3, we decided that it was more important to expand on the value engineering work to get it done correctly upfront. We continue to work closely with landowners and fiber suppliers in Louisiana and Mississippi and are performing a logistics study with our FEL-2 contractor to further define our feedstock and product movement strategy. To summarize, the team has continued to make considerable progress, and our expectation remains that Origin 1 will be complete by the end of 2022.
Regarding Origin 2, the previously disclosed capital budget, construction timeline, and financing are unchanged. Origin 1 represents an important milestone for our mission to enable the world's transition to sustainable materials. We are excited by the progress our team has made as we approach mechanical completion and operation. With that, I will turn it over to Nate to discuss some of the financial details.
Thanks, John. I'll begin with commentary on our third quarter results, then our financing expectations for Origin 1 and Origin 2, finish with an update on our 2022 outlook. Speaking to slide 23, third quarter operating expenses were $9.7 million, compared to $7.1 million during the same period in the prior year. Adjusted EBITDA loss was $8.4 million for the third quarter, compared to a loss of $5.7 million in the same period of the prior year. Finally, net income was $8.3 million for the third quarter, compared to a net income of $27.9 million in the same period the prior year. Turning to our balance sheet, Origin ended the third quarter with $362.2 million in cash equivalents, and marketable securities.
We maintain our expectation of fully funding the construction of both Origin 1 and Origin 2 using our existing balance sheet cash and cash equivalents from previously indicated traditional financing sources. In regard to the financing of Origin 2, as we've discussed on prior calls, the state of Louisiana, pending finalization, is expected to award private activity bonds, tax-exempt bonds authorized by the state and local governments for the financing of qualified projects with private capital, volume cap allocation to the company in the amount of $400 million. We also expect to receive more than $100 million in pending state and local incentives. As Rich discussed, we anticipate various federal tax credits, grants, loans, and other programs targeted towards promoting advanced manufacturing from the IRA to be incrementally beneficial for the financing of Origin 2 once the details of those programs are finalized by the relevant government agencies.
We maintain that our financing assumptions for Origin 2 remain reasonable and achievable, with Origin 2 fully funded from existing cash on hand and previously indicated traditional financing sources. The $400 million private activity bond allocation from the state of Louisiana provides a strong foundation for the financing of Origin 2. In combination with certain 2021 Infrastructure Investment and Jobs Act provisions and other non-volume cap tax-exempt financing, could enable the debt financing of Origin 2 using entirely tax-exempt bonds. Origin also continues to work with leading financial institutions on other forms of traditional private financing and federal loan programs, including through the U.S. Department of Agriculture and Department of Energy. As we've highlighted on our previous earnings calls, inflationary pressures remain an area of focus. Or as John discussed, at this point, we are not adjusting our overall capital budget for Origin 2.
We acknowledge the situation remains fluid, and we continue to closely monitor our cost estimates such that we can communicate any changes to the market at appropriate times as we progress through the project. We'll now close with an update on our 2022 outlook. We are maintaining our prior outlook for an adjusted EBITDA loss of up to $36 million and capital expenditures of up to $175 million. We look forward to providing full year 2023 guidance for revenue, EBITDA, and other financial metrics on our next earnings call in early 2023. With that, I will turn it back to Rich for closing remarks.
Thank you, Nate. In closing, I'm incredibly proud of our team's continued execution as we draw closer to the commissioning and startup of Origin 1, and encouraged by the strong momentum that we continue to see for our industry-leading technology as the world moves aggressively to a zero carbon future. I would like to thank all of our customers for their commitments to Origin, our team and construction and engineering partners for their contribution to our company's success and our shareholders for their continuous support. With that, I would like to ask the operator to open the line for questions.
If you would like to ask a question, please press star one on your telephone keypad now, and you will be placed in the queue in the order received. Please be prepared to ask your question when prompted. Once again, if you would like to ask a question, please press star one on your phone now. Our first question comes from Steve Byrne from Bank of America. Please go ahead, Steve.
Yes, thank you. You indicated that, you know, there's a fraction of the CMF that you're gonna produce at Origin 2 that has already been allocated to produce paraxylene and the derivative PET. I'm curious what fraction of the CMF capacity at that plant are you allocating to that pathway? What fraction are you going down another path, which I would assume would be the furan-based chemistries like PEF? Why did you come to this conclusion? Do you have a view that the furan chemistries could potentially create more value than going down the path of PET?
Yeah, thanks, Steve. Great question. We're not, you know, disclosing the specific allocations of our CMF from Origin, too, at this time. We've, you know, always talked about and planned for a portion of the CMF to go to those higher value applications. You mentioned PEF. I would call out surfactants is another one. You know, CMF is this incredibly flexible molecule that can go on to be a lot of things. We've talked a lot about paraxylene and PET, and I've seen enormous demand for that. We're excited to continue engaging with customers and potential customers around additional even higher value applications of our CMF.
It's one of the great things about Origin 1 coming online, is it enables us to produce, you know, large scale samples to those development partners as we build on the CMF platform.
You picked up almost another $1 billion in offtake agreements. Is it fair for us to assume that those are mostly, you know, PET-based? If not, what else are you getting in there now? More, maybe more specifically, do you have any offtake agreements yet for the, you know, the carbon black or, you know, the HTC? Or do you think you need product from Origin 1, you know, to deliver to your partners before you could really establish some offtake agreements for the HTC?
It was another very strong quarter for demand. A meaningful part of that is from our sort of flagship paraxylene and PET offerings, but for other materials as well. We've previously announced some offtake agreements for HTC going to the carbon black application. Again, we are excited for Origin 1 to come online and provide you know larger scale samples as we work to get even more carbon black offtake agreements. You know, the carbon black is not quite as drop-in as our paraxylene offering. Being able to provide meaningful samples is important to continuing to advance that business.
Very good. Thank you.
Thank you.
Our next question comes from Frank Mitsch from Fermium Research. Please go ahead, Frank.
Hey, good afternoon, folks. I wanted to talk about the timeline on Origin 1 and the capital spend associated with it. You're maintaining that, you know, the $125 million-$130 million budget. You also indicated that you're gonna spend this year up to $175 million in CapEx, but it looks like year-to-date you guys have spent $58 million for the first three quarters. Can you just, you know, kinda walk us through the spending to get to that $125-$130, you know, over the next couple quarters, please?
Yeah, sure. You know, we laid out the capital. By the way, thanks, Frank, appreciate the question. Good to hear from you again. We laid out that CapEx expectation, you know, beginning of the year, and it was really anticipating that we might need to place some early orders.
For a large scale equipment for Origin 2. You know, we expect that the $125 million-$130 million budget that we laid out for Origin 1 is consistent. We're, you know, still expecting mechanical completion by the end of this year. I think we'll likely hit that pretty cleanly. But I think that, you know, what we're seeing right now is that we probably don't need to have quite as many orders for Origin 2, but, you know, we wanna leave space for that and make sure that we have the sort of right capital allocation there. In particular, we wanna make sure that we don't exceed it. That was sort of the general thinking alongside that.
But you know, in any case, if it isn't spent this year on Origin 2, it'll be spent, you know, sometime next year. We would expect all of that would be timing issues associated with CapEx, not a guidance, you know, up, down, in general for the project.
It makes some sense given the fact that you're anticipating steel costs, et cetera, so the cost of the equipment to come down. If we're looking at 2025, you know, there's no rush to get the equipment right now. Is that the right way to read that?
Exactly the right way to read that, Frank.
All right, great. I mean, you know, congrats on the ever rising upward capacity reservations offtake agreements getting to $9 billion. As you think about, you know, that and, you know, let's make the assumption that, you know, much of that comes to fruition, what does that get us up to in terms of, Origin numbers? I mean, are we past two? Are we past three? Are we past four, you know, in terms of that very large number?
Yeah, thanks, Frank. We, you know, are taking orders across all three plants for a variety of products and, you know, some products are more sold out than others. Yeah, we've been taking orders on Origin 3 to be specific.
All right. I'm implying that Origin 2 is probably booked up at this point?
Origin 2 is substantially committed for paraxylene and PET. As we said in the script, our sales efforts are evolving to what we've talked about in the past of focusing on advanced CMF derivatives, carbon black and other high margin products.
Gotcha. All right, thank you so much.
Thank you.
As a reminder, if you would like to ask a question, please press star one on your phone now. Our next question comes from Eric Stine, from Craig-Hallum. Please go ahead, Eric.
Yeah, hi, it's Aaron Spychala in for Eric Stine. Thanks for taking the questions. First, maybe on just kinda testing and sales cycle. Can you kinda talk about the evolution there over the past year plus as customer demand has grown and kinda the outlook there as Origin 1 comes online?
Yeah. Our sales cycle tends to be, you know, a relatively small number of relatively large deals. They can take, you know, a variety of time to come to fruition. Some move really fast, some require more, you know, R&D engagement and things like that. There's not really a number of months or things like that that I could point to. I would say, you know, demand continues to be very strong. It continues to be strong across applications and geographies, as well as strong across our product portfolio.
All right. Can you just kinda give an update on the, you know, feedstock strategy? Any update there, you know, pricing, economics, margins as kind of the market's developing and you're moving forward?
Yeah, sure. Feedstock strategy that we're expecting to use for both Origin 1 and Origin 2 is residuals from the timber and lumber processing industry. You know, there are other feedstocks that are available in the region of Origin 2 that we may also incorporate into that feedstock strategy. Everything from agricultural residuals to even things like post-consumer recycled corrugated cardboard or paper products, mixed paper, et cetera. That's the feedstock strategy. You know, our interest in that is both economic because those kinds of feedstocks tend to be lower value to other industries. Of course, that means better economic value to us. Also, you know, there's a driver from an emission side too.
You know, those kinds of feedstocks often are used or not used in such a way that they release significant CO2 and methane emissions. You know, those kinds of biogenic or biologically derived feedstocks, when they get put into a landfill, for example, they will often decompose anaerobically in the landfill and generate methane emissions, which are really a very potent form of greenhouse gas.
Intercepting those kinds of biologically generated feedstocks, you know, even cardboard of course originally came from a tree somewhere, and preventing them from going to the landfill and instead using them in our technology, which can ultimately, you know, lock the carbon into a material is a particularly powerful way of avoiding and mitigating greenhouse gas emissions to using our technology, in addition to, as I said, the economic benefits of using feedstocks like that.
Right. Understood. Thanks for taking the questions. I'll hop back in.
That concludes today's live Q&A segment. I'll now turn it over to Ashish Gupta, Investor Relations, to conduct the next segment of our investor Q&A.
Thank you, Ross. As we've done on our last two earnings calls, we invited all investors to submit questions for our third quarter call as part of our Ask Origin campaign. Once again, we were pleased to see such a high level of participation and want to thank everyone who submitted a question. In the interest of time, we'll be taking the most commonly asked questions. Our first question is for Rich. Rich, excuse me, why are some of the customers in the investor presentation order book unnamed, and when will you name them?
Yeah, so as you can see from the order book increase, demand's very strong, and we continue to see significant sales traction. When it comes to actually press releasing these customers, that's in close coordination with these customers. Sometimes we don't announce them right when deals are signed or release their names for a variety of reasons. A notable example would be that some customers want to wait and announce their relationship with us in conjunction with their own broader ESG announcements. We really defer to customers on when making our relationship public works best for them.
That makes a ton of sense. Appreciate the color there. John, since you did such a great job covering feedstock and our focus on sustainability of the biomass feedstock, I just wanted to see if there's anything else you wanted to touch on there or if you thought it was best to move on to the PFAS question.
Yeah. I think that was a good question. As you mentioned, I gave a pretty comprehensive answer to Aaron on it. I think, you know, one other thing that might be worth noting is that the fact that we can use feedstocks such as those that I described is what allows us to access tax-exempt bond financing for projects like Origin 2. You know, there's the sort of primary economic impact of using feedstocks like that, which is that they're less expensive. Of course, there's the mission-oriented impact of avoiding pretty potent greenhouse gas emissions. There's a secondary economic impact, which is that it allows us to access a really attractive kind of financing for these projects.
That can make a real difference as well. That might be worth highlighting for folks too.
Thank you for being so thorough with all that. I guess, you know, could you clarify for folks, is there any PFAS in our products?
This is an interesting question. We get this more often than I would expect. As a chemist, you know, by the way, PFAS stands for perfluorinated alkyl substances. That's a class of compounds which, you know, as a chemist, you wouldn't necessarily associate with any of the stuff that we're doing. But they're a substance of concern, I would say for the human species. Since we're dealing with chemistry and materials and sustainability of chemistry and materials, they tend to come up as part of that kind of discussion. The short answer is no, we don't have any perfluorinated alkyl substances in our products, nor do we have those processes in our, so rry, those chemicals as intermediates or solvents or something like that in our processes.
We don't really touch them. There's something that's that sort of actually hits on a broader category of products and I would say a broader category of applications that you can use our products for, which we sometimes think of as sort of safer chemicals and intermediates. Places where we can provide an intermediate that performs as well or perhaps even better than the fossil-based equivalent material or analog, but doesn't have some of the health impacts. I would say, you know, there are. Of course, sustainability is a big driver for materials and chemicals these days, as it should be.
I think another one is security of materials, and chemicals and security of supply. Of course, you know, with the sort of geopolitics of the world these days, that's something that is more top of mind for people. I think another huge driver of change in the materials and chemicals world is this sort of human health and safety component. As we understand better the impact that some of the materials choices we made as humans, you know, sometimes 50 years, 60 years or even 100 years ago, how those choices are affecting us. I think, you know, we're much more sensitive as a species to how should we select materials now which don't have those kinds of negative human health impacts.
PFAS is of course one there. They're one of these class called forever chemicals, which have their own sort of risk profile. There are other materials that we find really interesting as targets because we can go in with our molecules and replace things like, you know, like BPA or phthalates, et cetera, and provide, again, sort of as good and often better performance in the application. You have eliminated that human health issue. We don't use any PFAS in our process or in our products. I think that touches on a much broader category of sort of value that we can provide using our intermediates that we're pretty excited about.
That's great, John. We're gonna turn to Nate for a couple of finance-related questions. Nate, could you help us understand to what degree rising interest rates and tightening financial conditions are a problem? Is project financing an issue at this point?
Sure. You know, look, we continue to consult with the leading financial institutions specializing in financing capital projects exactly like this, and we're pleased to reaffirm our financing assumptions for Origin 2 remain reasonable and achievable. I'll remind you, the $400 million private activity bond allocation from the state of Louisiana we announced earlier provides a strong foundation for the financing of Origin 2. Again, in combination with some of the non-volume cap tax-exempt financing structures. This could enable the debt financing of Origin 2 using entirely tax-exempt bonds. We're continuing to work with the state and local agencies in Louisiana on our bond financing, and we're pleased to report that Origin 2 financing remains on track.
We're also continuing to work with financial institutions on other forms of traditional private financing, federal loan programs, including through the USDA and the Department of Energy. You know, I should also just reiterate some of the federal programs that Rich mentioned earlier, including the recently passed Inflation Reduction Act, which can also provide incremental sources of funds for Origin 2.
Great. Really appreciate all of that extra color, Rich, John and Nate. That'll conclude the Q&A portion of today's call. I'll now turn it back to Rich for closing remarks.
Thanks, Ashish, and thank you all for joining us today, and we look forward to keeping everyone updated on our progress. This concludes the call.
This concludes today's conference call. Thank you for attending.
The host has ended this call. Goodbye.