Renewable Energy Group, Inc.

Thank you, Rob. Good afternoon, everyone, and welcome to our fourth quarter and full year 2019 earnings conference call.With me today is our President and Chief Executive Officer, CJ Warner; and our Chief Financial Officer, Chad Stone.

Let me cover a few housekeeping items, before I turn the call over to CJ.First, I would like to remind everyone that this call is being webcast and is available at the Investor Relations section of our website at regi.com. A replay will be available on our website, beginning later this afternoon.

The webcast includes an accompanying slide deck which will appear automatically with the webcast. You will need to advance the slides manually as we prompt you.

For those of you dialing in, the slide deck can be downloaded along with the earnings press release, in the Investor Relations section of our website.Turning to slide 3. We would like to advise you that some of the information discussed on this conference call will contain forward-looking statements.

These statements involve risks, uncertainties and assumptions that are difficult to predict and such forward-looking statements are not a guarantee of performance. The Company's actual results could differ materially from those contained in such statements.

Several factors could cause or contribute to those differences. These factors are described in detail in the Risk Factors and other sections of our Annual Report on Form 10-K and subsequent quarterly reports on Form 10-Q, which are on file with the SEC.

These forward-looking statements speak only as of the date of this call. The Company undertakes no obligation to publicly update any forward-looking statement, based on new information or revised expectations.Today's discussion also includes non-GAAP financial measures.

We believe these metrics will help investors assess the operating performance of our core business. Please see the press release or the appendix to the accompanying slide deck, for a reconciliation of the non-GAAP measures to the most comparable GAAP measure.Let me also point out, as you know, near the end of last year, the Biodiesel Mixture Excise Tax Credit, or BTC was retroactively reinstated for 2018 and 2019.

It was also put in place for 2020 through 2022. The net benefit of that retroactive reinstatement for both years is reflected in our GAAP financial statements in the fourth quarter of 2019, as shown on slide 4.

Because the credit relates to our 2018 and 2019 operations, our adjusted EBITDA and other line items reflect an allocation of the net benefit of the credit to our 2018 and 2019 results by quarter to reflect the period in which the associated gallons are sold. Chad will provide more detail on this when he reviews our financial statements.With that, let me turn the call over to our president and CEO, CJ Warner.

CJ?

Thanks, Todd. And good afternoon, everyone.2019 presented significant challenges to our industry, calling for strict focus on optimization and operational efficiencies.

REG rose to this challenge. Over the course of the year, we adjusted our approach to focus on profitable gallons beyond BTC, and as a result and despite a very difficult margin environment, returned a solid performance in the second half.As shown on slide 5, in the fourth quarter, we generated $572 million of revenue after adjusting for the BTC.

Adjusted EBITDA was $16 million without the BTC, a 60% increase over the third quarter, and $65 million with the fourth quarter BTC allocation.For the full year, as shown on slide 6, we sold 700 million gallons of fuel and produced 495 million gallons. After allocating the 2019 portion of the BTC, this generated $2.4 billion of revenue and $218 million of adjusted EBITDA.

On a comparative basis, adjusted EBITDA was down year-over-year due to very tough market conditions. Spreads tightened from lower energy prices and increased feedstock costs.

RIN values were also depressed due to extended uncertainties about BTC reinstatement and expanding small refinery exemptions.The challenges presented by our overall margin environment in 2019 are highlighted in slide 7, where you can see the decline in the value of the HOBO plus RIN spread. Chad will provide more details of the year-over-year comparisons during his update.Standing back from this, we're pleased with our growing momentum, building upon underlying business performance improvements, a more certain regulatory environment, and our early gains from strategic initiatives.

Let's start with REG's underlying performance improvement efforts. See slide 8 to follow along in this section.2019 second half results were solid, buoyed by continuing focus on margin and profitable markets nationally and globally.

We continued optimizing our sales by directing production to the most profitable geographies. Europe and the Nordics have emerged as attractive and promising markets for us now with the increasing renewable diesel exports routed to the Nordics given the strong demand for carbon reduction there.In the fourth quarter, we shipped over half of our renewable diesel produced at Geismar to Norway, and for the full year of over 35%.

The biodiesel market in Europe has improved substantially as well. In particular for the lower carbon used cooking oil based biodiesel that we produce in Germany.

And the U.S. continued to offer attractive margins in specific geographies, especially on the West Coast, with strong LCFS incentives there.California was our highest volume state for both biodiesel and renewable diesel in 2019.

In the fourth quarter, we increased biodiesel gallons sold in California by over 32% over the fourth quarter 2018. For the full year, we sold 66% more biodiesel in California over 2018.Over the course of the year, we expanded blended biodiesel volumes in line with our downstream margin capture strategy.

Recall that the downstream strategy is focused on 3 important objectives: Margin expansion across the value chain; realization of higher biodiesel values through blends of biodiesel into petroleum and renewable diesel; and increased demand for our biodiesel via sales of B100 to end consumers.Focusing on the blending aspect of our strategy, blended volumes expanded substantially in 2019. Our blended fuel gallons grew 29% in fourth quarter and 65% for the year.

We sold nearly 116 million blended gallons for the year. In 2019, our average blend of biodiesel into petroleum diesel was 12%.

We sold 45 million gallons of REG's proprietary Ultra Clean, a low carbon fuel for diesel engines. That is 135% more compared to full year 2018.

We added 19 new end-user customers this past year.We are learning and being able to sell directly to end user customers, increases enthusiasm for higher biodiesel blends. We continue to experience through our distribution and cardlock businesses that moving right through the value chain to serve our customers directly, both increases our margin capture and enables us to expand the blending percentages of biodiesel.

With high quality and the confidence that great customer service inspires, our customers are able to reduce their carbon footprint seamlessly.As we move forward, it's important to note that California cleared the way for storing biodiesel blends of up to 20% or B20 in underground storage tanks. This began on January 1, 2020 and is a significant increase from the prior 5% limitation, enabling higher biodiesel blends and substantially increasing sales potential in California.

We're already seeing an increase in customer demand for higher blends there.We are seeing a significant downstream margin capture opportunity from blending. Our customers are recognizing that high-quality biodiesel blends can provide all the function of 100% biodiesel or petroleum diesel rather, and the robust low-carbon aspects of renewable diesel.Turning from downstream to upstream.

Our flexible feedstock capability, coupled with our procurement team’s experience enabled us to optimize by adjusting buying patterns and usage to the more advantaged feedstock as price differentials fluctuated.As you can see from slide 9, the volatility and differential between feedstock types is high. Our flexible feedstock capabilities enable us to take advantage of these movements to optimize our feed mix.Another area of underlying performance improvement is operational excellence.

We focus on continuous improvement, which has resulted in consistent organic growth in our manufacturing production capability, as shown in slide 10. As part of this effort, we realized higher capacity utilization at Geismar in 2019, increasing production by over 7% year-over-year and resulting in 85 million gallons produced.

At the same time, we reduced incremental biodiesel production in response to the compressed margin environment. This focus on the optimization of our diverse fleet coupled with all of our other underlying performance improvement activities that I noted earlier, regional pipeline optimization, blended fuel sales, feedstock flexibility and operational excellence enabled us to generate positive adjusted EBITDA before BTC in six of the last eight quarters, despite the extremely challenging margin environment.Let's turn now to the regulatory environment.

We are immensely grateful for Congress's strong support of our industry with the BTC reinstatement and extension. As noted earlier, we will receive nearly $500 million net benefit from the 2018 and 2019 BTC.

BTC uncertainty has now been removed and replaced with unprecedented certainty. The cash we will receive from the retroactive reinstatement will help us to position the Company for expanded growth and financial sustainability, both of which were -- will fuel our engine to deliver growing volumes of low-carbon sustainable products.Another important area on the regulatory front is the renewable fuel standards.

We are very pleased with the favorable ruling by the 10th Circuit Court of Appeals related to small refinery exemptions. We are hopeful that this will return the total volume of SREs to a de minimis amount.

We will continue to monitor developments in the RFS program as details are being finalized.At the state level, it's important to note that the California LCFS carbon reduction requirements continue to escalate. The reduction is increasing from 6.25% in 2019 to 7.5% in 2020, as shown on slide 12.

This is a 20% increase.With better visibility to cash generation resulting from more certain market conditions and our strong balance sheet, REG's forward focus will be on investing for growth while sustaining attractive profitability and returning value to our shareholders. Along these lines, let's take a moment to discuss our planned capital allocation.Chad will provide details in a moment.

For now, I'd like to emphasize that we're taking a disciplined and strategic approach. First, as a base point, we will continue to invest in safety and reliability on a consistent basis to ensure ongoing safe and strong operations.

Second, as a key element of our continuous improvement approach, we will allocate capital to a select group of high-return, rapid payback projects. Third, we will invest for growth and significant shareholder returns, basing our decisions on strong IRR, including buyback considerations and strategic fit.

Overall, including safety and reliability investments, our ROIC target is greater than 15%. We have established an internal hurdle rate for growth projects of 20% IRR.Let's now turn to growth.

As evidenced by the 29% CAGR in gallons sold since 2010, as shown in slide 13, REG is a growth company. And our forward strategy outlines two specific areas of focus, expanding our renewable diesel participation and moving downstream in the value chain to capture full value for biodiesel.For renewable diesel, as you know, we have been developing the design for a 250 million gallon per year facility.

While we were disappointed with the cancellation of the project in Washington State, we have other excellent renewable diesel projects in the works. The engineering design we have developed utilizes our proprietary BioSynfining process technology and can be readily deployed by us for use at other locations.

We are currently in the highly active process of evaluating alternative sites. And expansion of our existing operations that Geismar is only one of the exciting options we're considering.Turning to our downstream strategy, as described earlier, we are making very encouraging progress as we move downstream in the value chain.

These initial entries into the downstream business have encouraged us to expand our participation, and we are actively exploring various options to accelerate that effort. An important part of our downstream strategy that goes beyond blending is our B100 initiative.

We're deploying fuel delivery technology that allows diesel vehicles to operate on B100, reliably in any weather. An example we’re proud to share is our effort with the City of Ames, which is successfully operating several other snow plows on B100 using this technology, The City Council are very pleased to be able to reduce the city's carbon profile in a seamless way.We expect to continue to accelerate on both of our areas of focus, expansion of renewable diesel and downstream participation in 2020.

Fueling our strategy for growth is society's accelerating expectations of having low-carbon options available. As a direct result, we are seeing increased socially driven policies at the state and municipal levels.As shown on slide 15, you can see some of these policies.

Much of the world hears intensely about reducing carbon emissions, and REG fuels reduce carbon emissions by up to 85%. The world also cares about sustainability.

And our fuels are made with renewable feedstocks including waste. Our renewable products are key components for the transition away from dependence upon fossil fuels.As you can see on slide 16, in 2019, our REG produced fuel reduced carbon emissions compared to petroleum diesel by 3.7 million metric tons, which is the equivalent of 9.1 billion miles driven by an average petroleum passenger vehicle, or 8.5 million barrels of oil.

Sustainability and climate risk are becoming extremely important for investors. The recent well-publicized pieces from BlackRock and State Street are about the latest examples.Furthermore, every day, we see individual companies step up their efforts as well.

For instance, recently BP and Delta Air Lines made commitments to become carbon neutral. We expect this momentum to continue to build and we are ideally positioned to be an integral part of it.

In fact, because of the green attributes of our fuels, we are convinced that they deserve and will command a premium price relative to petroleum diesel.Our fuels deliver value beyond just the BTUs. And customers can gain from a carbon reduction from our low carbon diesel without having to make large associated investments in alternative infrastructure.In summary, we are intent on continuing to create shareholder value through the pursuit of growth initiatives, expanding margins, and leveraging our innate value as a carbon reduction leader.Now, I'll turn the call over to Chad to review our financial performance for the fourth quarter and the year.

Chad?

Thank you, CJ, and good afternoon, everyone.We're very excited to report our 2019 results which cap off 3 years in a row with adjusted EBITDA of over $200 million. We are in a great position with the strong balance sheet, improving underlying performance, enabling profitability beyond the BTC, and certainty with the incentives in place for the next three years.As CJ mentioned, the last two years and especially 2019 was really challenging.

We are proud of the resilience of our business model, which we believe is proven out under a variety of regulatory and margin scenarios, and that our scale and expertise provide a foundation for us to be a leader in the low-carbon fuel industry.Let me first cover fourth quarter results on slide 17 and then we'll offer perspective looking at the full year.Gallons sold were at the midpoint of our guidance. Renewable diesel demand was strong while biodiesel demand was down.

We increased exports of renewable diesel for the Nordics. In addition, we almost doubled the volume of third-party renewable diesel we sold, which we are continuing to grow as a complement to our third-party biodiesel tradings we have always done.

We sold 5 million more gallons from Geismar and 5.3 million more gallons of third-party renewable diesel in the fourth quarter of 2019 compared to the fourth quarter of 2018. Biodiesel gallons were down in North America as we passed on sales when profitability did not meet our hurdles.

Gallons produced were also down as scheduled, mainly due to the reduced sales of biodiesel in North America. On the other hand, production of renewable diesel at Geismar was up 5% year-over-year as our organic growth efforts continue to come through.

Even with gallons sold down slightly, we realized better pricing due to the mix shift to renewable diesel.Revenue, as adjusted for the BTC impacts was essentially flat, as shown on slide 18. Adjusted EBITDA was $65 million for the fourth quarter, which was within our guidance range.

Adjusted EBITDA reflected decrease in risk management of $45 million and a $15.9 million decrease in North American biodiesel margins, driven mostly by lower spreads. These challenges were offset by improvements to underlying performance including an increase in total renewable diesel gallon sold at 10.3 million gallons and an increase in biodiesel and renewable diesel sales into the most attractive low carbon fuel markets, which is the North American West Coast in the Nordics.Solid fourth quarter results capped off what we consider to be a good second half of 2019.

Full year results are on slide 19 and 20. For the year, we increased gallons sold by 8%, mostly due to increases in REG-produced renewable diesel and third-party renewable diesel.

Comparable revenue was flat impacted by a lower average selling price, partially offset by the increase in gallons sold.Full year adjusted EBITDA was $218 million, which is down from the record $388 million generated in 2018. The decrease in adjusted EBITDA resulted from a decrease in risk management of $47 million and a $193 million decrease in North American biodiesel margins, driven mostly by lower spreads.As previously noted, due to an administrative change, income from California LCFS credits for 2019 only included three quarters compared to 2018, which included four quarters.

This negative impact was approximately $30 million, which is not reflective of company performance and is a onetime occurrence. All of these challenges were offset by improvements to underlying performance including an increase in total renewable diesel gallons of 38 million gallons, and an increase in biodiesel and renewable diesel sales into the most attractive low carbon fuel markets.Slide 21 shows our trailing 12-month adjusted EBITDA, which smoothes as seasonality and better reflects our cash flow generating capability and earnings power.Slide 22 shows trailing 12-month ROIC, which was over 15% for 2019.

For 2019, we recognized a small tax benefit. Going forward, we expect our tax rate to continue to be less than 5% for the foreseeable future.

Our blended average interest rate continues to be low and was less than 4%.Turning to the balance sheet on slide 23. Naturally, the major impact is from the BTC.

Accounts receivables reflect the gross amount of the BTC to us, which has a partial offset in the accounts payable line for amounts we share with others. As CJ mentioned, the net benefit to us is almost exactly $0.5 billion, with $239 million for 2018 and $261 million for 2019.

We expect to collect all of the funds during the first half of 2020.Looking at the other line items, the only notable changes were cash and marketable securities which were lower over the year. The decrease in cash and marketable securities is due to cash used for operation, repayment of debt, repayment -- or repurchases of convertible notes as well as cash invested in our plans.

Additionally, the balance on the line of credit increased for the same reason.Our 2019 convertible bonds matured in June, which we settled with cash for the principal and shares for the premium. We also repurchased $10.8 million in principal of our 2036 pounds in December, and in the first quarter of this year.Slide 24 gives details on our recent convertible bound repurchases.

Additionally, we paid off debt and our Danville and Grays Harbor plans in January of this year, which was approximately $13 million in total.We will continue with our disciplined approach to capital allocation as we deploy cash from the BTC proceeds along with cash generated from operations. Our total CapEx budget for 2020 is $60 million.

This includes approximately $20 million for safety, reliability and asset integrity for our existing fleet; $20 million of high-return rapid payback projects that we tend to recoup our investment in less than two years; and $20 million for Board approved growth projects. Additional major capital would require a separate Board approval.As CJ mentioned before, our internal threshold for growth projects is a 20%, IRR.

And overall, inclusive of safety and reliability investments, our ROIC target is greater than 15%. And of course, we will continue to focus on shareholder returns.

In February, the Board approved an additional $100 million repurchase authorization. We still have $58 million remaining from the prior authorization.

So, we now have a total of $158 million authorized. After the recent convertible bond repurchases, we have $85.5 million in principal still outstanding.Now, I'll turn the call back to CJ to discuss the outlook.

CJ?

Thanks, Chad.Before I give specific numbers, I want to set the context for 2020. We are optimistic about the year ahead.

REG is in an excellent position and well capitalized. We are operating profitably.

And our industry has a far higher level of certainty with the BTC in place for the next three years at a minimum. Having said that, we continue to be in a period of adjustment following the BTC reinstatement, and we have potentially significant impact from the coronavirus that none of us can predict at present.

We will be watching margins closely and are prepared to respond with appropriate optimization. Our general sentiment is [Technical Difficulty] although we cannot count on a full year emergent environment being as strong as our first quarter performance is shaping up to be.It is important to note that we're closely monitoring the coronavirus or COVID-19 as we assess the impact on our business.

Supply chain for our German operations include used cooking oil from China and this has been impacted. As part of our business continuity planning, we have secured feedstock apply for our Germen plants for the next 90 days.

We are continuing to work our business continuality plans to manage a potentially extended situation.With that in context, let's get down to numbers as shown on slide 27. For the full year, we're targeting gallons sold in the range of 640 million to 680 million.

We expect to produce 500 million to 530 million gallons and will fulfill the excess demand through third-party gallons. For 1Q, we expect gallons sold in the range of 130 million to 145 million.

Our forecasted gallons sold for the first quarter of 2020 are down from first quarter 2019 due primarily to lower volume of heating oil sold in the northeast as a result of a historically warm winter there. We expect adjusted EBITDA in the range of $50 million to $65 million for the first quarter.This estimate for the first quarter is based on actual performance through February 24th and takes into account existing forward contracts expected to be fulfilled and existing spot margins through the end of the quarter.

Any changes to the ULSD prices, margins, RINs or LCFS credit values, or level of market volatility through the end of the quarter, could affect actual results. We have included $17 million of risk management gains in our guidance which reflects our estimate for the quarter as of February 24th, based on the ULSD forward curve.Beyond the first quarter, given the market adjustments noted above and the unknown impact from the coronavirus, our ability to predict margin becomes less precise.

Nevertheless, we remain optimistic about the year ahead and will continue to focus on underlying performance and optimization.Now, I'd like to turn the call over to the operator for the question-and-answer segment of our call. Rob?

Good evening. First, congratulations on the strong quarter and booking at 500 million from the blenders credits, it’s been a lot of work over the last few years.

Thanks, Craig.

So, the first operating question I wanted to ask about is Geismar. Can you maybe discuss margins at Geismar?

Are they comparable to what we’re seeing from other renewable diesel facilities these days? Do you expect it to remain fairly stable this year?

And the $5 million increase at Geismar, were you specifically referring to the fourth quarter, or was this in the 7% for the full year?

Yes. Okay.

So, three questions, Craig. So, on margin specifically, because of the way we're structured, we don't, as you know, disclose the specifics.

But, we see others -- and from that we can tell you that we are competitive with what we produce and value that we create at Geismar. We are a good strong operation, and what's coming through from that is what’s the volume increase year-on-year, and that $85 million was a ratable number for the whole year.

Yes. That 7% was up early number and the 5 million was full year.

So, 85 million versus 80 last year. That is great progress.

Is there a potential maybe to go to $90 million there this year?

We’ll keep working and our track record is to keep finding small things that add up to be -- the team down there continues to do that.

So, then, just to talk numbers, right, because that's what matters at the end of the day. Renewable diesel, I don't think there's any facility operating with less than $2, a gallon today to sort of peak of people sending into California somewhere between 265 and 270 a gallon.

Given the relative size of Geismar versus other facilities out there, I'd expect you to be at the midpoint of that range. Is that a fair assumption?

We can't really report anything specific, Craig. But, you're not far off.

So, I would say -- I think your model is doing you well.

So, then, the other side of house is the biodiesel side. And this is where REGI has made tremendous progress over the last several years, invested a lot of money in differentiated front end capability to give you the feedstock flexibility.

Our good friends, Mr. Wheeler, at the EPA, who I guess got smacked down pretty hard, but 10 circuit.

Has done some damage to profitability in your slides or and in your conversation. You mentioned this $35 million year-over-year step down in EBITDA on an adjusted basis for the fourth quarter, sort of seeing something like in the range of $0.20 a gallon plus from the headwinds out there.If we were to see reallocation of those gallons or proper resolution of the misdeeds of the EPA, would you expect the profitability maybe to normalize, up something in the range of that $0.20 a gallons?

Is that a fair way to look at the macro impact?

Craig, I think, it might be a little bit early to start modeling and putting in because the conversation still remains really live. So,, what we're hearing, of course, is the 10th Circuit Court ruling, which was positive, but we're also hearing an ongoing attempt to try to dampen the effects for refining.

And we don't know what that's going to be in terms of the RVO. So, that's why we said what we said, which is we're feeling optimistic about it.

But, we have to watch it really closely before we could actually call it and say what's going to happen.

Yes. I'll add to that, Craig, that what you actually did see in our results throughout the year, particularly in the first half of the year is depressed win values and tight margins in response to that uncertainty that was being created.

And so, yes, had a lot of pressure on RINs, the ruling is very favorable and supportive going forward. And as volumes pick up, you'd expect that that would cause margins to improve from current spreads.

That's very helpful. Thank you.

So, people are all really interested in your plans for growth in green diesel. I guess, Phillips 66…

We lost you, Craig.

How about now?

Better.

So, green diesel is where everybody wants to see the growth over the next couple of years. And the unfortunate dissolution of the joint venture with Phillips 66 is not necessarily a bad thing.

It maybe offers you an opportunity to go out there and get a better partner, one closer to what you might call an ideal partner. But, can you maybe describe for us what you would look at as an ideal partner?

And is it possible that you could look to go it alone on the next phase of growth in renewable diesel for REGI?

Great questions, Craig, and ones we have worked through ourselves in order to create a framework of what our pivot ought to look like and what we're aiming for. And going alone is definitely one of the possibility as we look at the bookings.

But partnerships are important too and valuable, and oftentimes we bring balanced capabilities to the table. So we definitely be looking for in a partnership, someone with likeminded strategies, so we have some alignment there, but possibly different things that we could each bring to the table.

So, if we can each bring something that the other couldn't do by themselves, that makes a really nice and strong partnership.

Great. The next subject I just wanted to touch on is the self-blending, blending your own biodiesel with diesel to sell to direct customers.

Growth this past year to 116 million gallons, up from 70 the prior year, it's a pretty nice $45 million, $46 million increase. Can you maybe describe the number of terminals, or if this is better utilization across your terminals you're serving to get those growth gallons?

And can you maybe frame out for us what you think a fair outlook for 2020 might be? How many terminals you expect to build?

And is there spare capacity in your existing terminals to see growth gallons at this point?

Yes. So, really important to start with, we don't actually build terminals, we contract with existing available capacity, so that we're capable of moving into different regions.

So, it's not a big capital thing for us. So, I want to make sure that’s clear.

But to answer your question, it's much more broad. There's a wide variety of things, our team is capable of doing, in order to expand that blending.

And it really is all about variety of things that happen in the downstream strategy. Expanding our exposure to different terminals where we can get closer to customers is definitely one of those things.

Moving further downstream to have some of these direct sale customers that we've described that we're expanding is another very important way. The cardlock is an important way; expanding into distribution is an important way.

So, we have a very wide multipronged strategy we're able to do this. And that's why you're seeing this rapid percentage increase that you're seeing year-on-year.

Great. And then, last question, if I may.

You did mention increasing blended volumes of biodiesel in California as something that was accommodated by the regulatory change at the end of the year. Can you maybe frame out for us the approximate volumes that you're blending at the tail end of 2019 and what the growth potential is over the course of 2020?

Yes. I think that -- Craig, it's Chad.

The growth potential in California you've seen in some of the slides we share in our investor deck, is really large and growing. And practically speaking, last year until California got themselves comfortable that they could go from a 5% limit to 20% limit, it was just a kind of a technical limitation.

So, in theory, your limit quadrupled. As CJ said earlier, we don't give individual state specific gallons.

But, approaching a third of our gallons could go out to incentivize West Coast markets, because of the low-carbon fuel premium that we enjoy. And so, it's a very large and growing volume.

And I think there's some statistics that CJ rattled off earlier that grew significantly year-over-year for us. And so, it certainly is an attractive market.

You're seeing what we've talked about in the past, largely all renewable diesel is getting incentivized into California and the West Coast, Canada, and the Nordics, whichever one pays the best premium. And so, that's the dynamic of the sales mix, we've been staying really on top of.

Just a point of clarification, Chad. I think, you said a third of your gallons.

Are you referring to gross gallons including Geismar or a third of the biodiesel gallons?

That would be renewable diesel and biodiesel gallons in total.

Just with respect to the market environment, post the BTC billing this to 2022 now. Does this invite more competition you feel?

If you could add a little bit further on how we should view some of these competitive factors with this BTC now sort of restated and visibility for the next 3 years in this pretty good?

Great question and insightful. The certainty is a bit of a double edged sword.

For the most part, it's much better than it was when we were in the -- caught in the middle mode of the market. But, you're right that it can invite additional incremental gallons.

For the most part, we expect those to be lower margin. And it also makes it a little bit more competitive in terms of BTC percentage sharing.

So, we need to be aware of that and that's a little bit of what we're seeing as the market is shaking itself out.And if you look at the slide that we showed with HOBO plus RIN, you can see after the BTC was announced, there was a pretty big market adjustment. And some of that is as everyone's trying to figure things out, some volumes are coming in, some are going out.

And it's going to be a period of learning and lining out I would say probably over the next 3 months. We're still sort of in that mode in the winter season, and getting into the summer I think will help us get to more of a ratable place.

Amit, this is Chad. I'll add to see CJ’s color there.

If you put it in the context of what was happening through 2019, as RIN prices were weak, there was SRE, small refinery exemptions, uncertainty in the marketplace and the long extended tax credit had lapsed for going on two years. In the second half of the year, you saw a number of announcements where biodiesel production capacity shut down and came off line, if you tallied up each one of them.

It was a little bit north of 300 million gallons. So, that's the context of production that came off line because they couldn't make it through the challenging environment.

But post BTC world, some of that will come back up on line. Our new Boston plant, we told you that that was shut down and isn't going to -- we weren't going to ramp that back up.

We also said the -- or others, the Flint Hills project in Beatrice, closed down and that shuttered for good. So that was another 55 million gallons that won't be coming back on line.

But, other than that, we don't see a lot of greenfield biodiesel out there. There's not greenfield biodiesel.

There are announced long lead time renewable diesel projects, but it'll be a while before they'll be available in the marketplace to compete.

That's really helpful, guys. Thank you so much for that.

And then, just a little bit more clarity I guess on your growth initiatives, both on the capacity expansion front and the downstream efforts. Is there a timeline within which maybe we can get a little bit more concrete color on what path you choose and what projects et cetera you might pick to -- from a growth perspective on those fronts?

Well, what I can say Amit is we are definitely working on it assiduously and actively. And when it comes to commercial deals, one can never actually predict exact timing.

But, I would say, you can easily expect more than one thing to happen in 2020, and sooner rather than later would be our plan.

Understood. Thank you for that.

And with respect to the buybacks. You've added $100 million to the facility already that was in place.

Have these levels -- I mean, the stock still raise -- looks pretty attractive. Is this already in effect or does this go into effect at some point in the future?

Could you give any color on your efforts on that front?

Yes, Amit. That's $158 million as our Board authorized and that’s our authority to execute on.

So, it's in place today.

Awesome. I’ll take my other questions offline.

Thank you so much, and congratulations on a strong start to the year.

Yes. Thank you.

Hi, team. Thanks for taking my question.

And congrats on the flood of cash you're about to get from the BTC. My first question here is, basically, I'm looking at your forward guidance.

And in 2019, you sold about 700 million gallons or just over that figure. But, in 2020, your guidance is for the 640 million to 680 million gallon range.

I was kind of hoping you could give us a little bit of a breakdown of why that number should be expected to drop quite as much as that as it's I think a little bit lower than we were expecting?

So, Patrick, it’s Chad, I'll take the first stab at it. So first of all, I would say, keep in mind, the Northeast is going through what I understand is like the third warmest winter in recorded history.

And because of that there's a lot less bio heat and heating oil going in there. So, we've got lower gallons, which don't tend to be our highest profit margin gallons, anyway.

So, there's a bit of that going on with heating oil into the Northeast. You also have a small impact for New Boston being outside of our mix.

That's offset by our plants running at higher run rates and better run rates, and improved mechanical availability.The other thing I would point to is, if you look at the last quarter of 2019, the tax credit had lapsed for a long period of time. We were being very careful not to just produce gallons at a loss with upside on BTC.

We had plenty of upside exposure to the BTC. We didn't want to run plants at a loss and be dependent on Congress -- to the timing of Congress.

So, those are the 3 or 4 biggest things I would say influenced the total gallons. But otherwise, there's a better trend underlying that of operational performance improving and mechanical availability, every single year has been better on our existing fleet.

Patrick, this is CJ. And just to add to that.

Thank you, Chad. Underlying some of my comments about optimization in mix is really this change in strategy that Chad is referring to, which is a focus on more of the profitable gallons, which actually result sometimes in letting go some of the marginal gallons.

And in the past, we may have been focusing specifically on volume as our primary metrics. And volume of course is an important steer, but you need to look underneath.

So, the REG gallons are definitely going up within that change. Some of the biodiesel gallons are also going up, especially the one session route to these premium markets.

And a great bulk of the difference in that you're seeing with the total year-on-year is actually petroleum gallons. And those are the gallons that we were blending in with biodiesel to get to heating oil.

And so, it belies of ultimate profitability if you just look at volume without being able to see the mix.

As a follow-up question on that. I know you said you guys saw pretty decent level of sales uplift in California over the last year.

At the beginning of this year, I know the rule that will allow storage of B20 and underground tanks is taking effect. You expect that this will add additional potential volumes into that market, and have you started to see any of that quite yet?

Definitely, it's a really great change for us, because we can sell B20 instead B5, and we are seeing some enthusiastic uptake of that already in this earliest part of the year.

Okay. That’s awesome.

So, one other question that I was thinking about recently is I believe the Puget Sound is currently in process at looking at potentially uptaking an LCFS type program. I would imagine you guys are pretty close to that situation.

So, if there's any updates or insight you can give us into how all of that's playing out? That would be very helpful.

Actually, the whole state continues to look at a low-carbon fuel standard as well. It's been a very lively debate now for a while.

I believe that the debate continues without resolution, but it's definitely a lively debate.

And I’ll just a little bit of color to that too. I think you're hearing from the Puget Sound, because of frustration that the state keeps getting really close to the finish line over the last 3, 4, 5 years and the populated counties, I think 80% of the refined fuel goes through there.

And it's the large portion of the population is right around the Puget Sound. They've basically thrown their hands up in the air saying we're not going to wait for the state to act.

We're going to try to do it where all the fuel is anyway. And so, that's why you see -- they believe they can come to a more streamlined resolution and they believe they have the authority to do it.

Okay, that's very helpful. So, one last question for me is, in 2019, you guys deferred spending on Seneca expansion project.

And I know it was partially completed. I assume that that is underway currently with the capital that you guys have recently unlocked through the BTC.

So, I was hoping you could give us an update on that. And then, potentially how your cardlock stations have been doing and any plans to expand that sort of operation into the future as well?

Yes. Seneca project is back underway.

We're happy to report, and making good progress. And just to be clear, this project is about improving the performance of that existing plant.

It's not expanding volume, but it's definitely expanding margin for the plant, and its IRR was well above 20%. So, we're happy to get that back on track.In terms of the cardlock, that’s been an excellent experience too.

And there's been several different things that we're learning, which was the whole intent because what we want to do is optimize that approach, understand what we need to do to make subsequent projects work very well, very quickly. So, we're not complete with the projects, but we're getting great results and continuing to learn to improve.

Okay, excellent. Thank you for answering all my questions.

We're looking forward to hosting you and the team at our conference in Las Vegas later this month.

Thanks. We’re looking forward too.

Hi. So, first off, just want to see, just given the guidance that you're providing in Q1 and then the commentary around corona, what kind of impact are you thinking there could be on your feedstock as you go forward, especially as far as sourcing goes?

So, the biggest thing we're seeing Hamed so far is use cooking oil that's imported from China. So, as I mentioned in my comments, for us, that impacts our European operation more directly than anywhere else.

To forward planning, we're still getting come through. So, it hasn't completely stopped as a supply chain, but it is slowing down, in keeping with all the news that you hear, in multi-industries about things slowing down in terms of exports out of China.

So that's the first thing and probably the most poignant, which is why our business continuity plan is focusing on that. Everything else is a bit more broad.

A lot of our supply is domestic, and we don't actually see an effect, at least at present. But you really can't project what's going to happen going forward, if literally everything shuts down for a couple of weeks, while everyone's in quarantine.

So, what we need to do is think about business continuity plans, having enough feedstock ready to go if something like that were to happen, and in fact, having enough people trained to make up for anyone who might be out. So we're working on all of those things in order to manage through what's really an unknown potential at this point.

Hamed, this is Chad. I was just going to comment, there's a bit of a derivative impact, depending on whether or not that's impacting worldwide fuel consumption and demand and worldwide fuel -- fuel prices, all our sales are indexed and forwarded based on ultra-low sulfur diesel.

So, that would have a derivative effect on the former book and risk management and things like that. So, we just are watching closely.

Okay. And then, just talking about the current environment.

How are you strategizing, given that BTC is back and your competitors to come back on line and produce a lot more product than you’re expecting or happened last year?

It's a whole strategy, Hamed. So, it's about being very efficient, so that we are a low cost operator.

It's about having great customers and great channels, both from a feedstock and supply perspective. So that all the way up and down the value chain, we have premium routes.

Is there a risk that your feedstock could get cornered in the market by one or two competitors?

Yes. I'll take a stab at that Hamed.

We have hundreds of feedstock suppliers. So, we're buying far and wide, and our goal is to have a real diverse supply.

And you’ve talked about us even expanding out internationally and sourcing feedstock around the world to ensure -- because we do see that there are untapped feedstock sources out in the marketplace around the world that isn't currently going into biodiesel and renewable diesel. So, we've got a diverse North American and European base, and we're also sourcing feedstock around the world.

And last question is, just given the amount of cash that's coming on board, why is CapEx so low, or in vice versa, why is your stock buyback program low? So, there's this delta here, right?

There's going to be a lot of cash on your balance sheet. Why are you carrying so much cash in the balance sheet?

The capital plan is actually based on specific capital projects that are on the books and approved. So, in my comments, what I meant when I said additional major capital would need to be approved separately by the Board is that we certainly intend to do that and will have the capability of doing it.

But we're waiting until we have the specific major capital investment ready to go, as opposed to establishing a large budget without knowing what's going into it.

Thanks, Rob. So, to wrap up, I'd like to highlight that REG was recently included in Corporate Knights Carbon Clean 200 list.

This list is created as a world’s prominent list of firms according to the size of clean revenue from products and services that provide solutions for the planet. This is a great example of the ESG value that REG brings to society.

We're proud to be executing on our mission to build a sustainable company, making sustainable products and creating value for our shareholders and society at large.And now, before we close, Todd is going to mention upcoming investor events for REG. Todd?

Thanks, CJ. Slide 29 shows our upcoming conferences.

We will be attending the 32nd Annual ROTH Conference on March 16th at the Ritz Carlton in Laguna Niguel in Orange County. Attendance at this conference is invitation-only.

So, please contact your ROTH sales representative, if you want to attend or schedule one-on-one meetings with us on March 16th or 17th.On March 25th, CJ is scheduled to present on the biodiesel panel at the Piper Sandler 20th Annual Energy Conference in Las Vegas. We will also host investor meetings throughout Tuesday, March 24th and Wednesday, March 25.

Attendance at this conference is by invitation-only for clients of Piper Sandler. Investors should contact your Piper Sandler sales representative to secure a meeting.Thank you all again.

This concludes the call and you may now disconnect.