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REGI: Its Technology Roadmap

IN FOCUS: RENEWABLE ENERGY GROUP INC., AND ITS TECHNOLOGY
ROADMAP INCLUDING BIO-SYNFINING AND INTEGRATED PRODUCTION
TECHNOLOGIES.

The alphaDIRECT Insight

We believe REG has industry leading technology including the ability to work with a wide range of feedstocks. Specifically, the company has the ability to use lower cost feedstocks as well as those with less carbon intensity. In our view, feedstock flexibility as well as the ability to produce consistency in quality are critical technical aspects as feedstock availability varies widely by geography and commodity prices. Furthermore, we believe scale is a key competitive advantage in order to locally source and supply and to generate economies of scale.

Shawn Severson: Thank you Brad, David and Lynn, for taking the time to speak with us again today.  The last time that we spoke, we discussed Renewable Energy Group and its market strategy.  Today our focus will be on the next generation biofuel platform in your technology roadmap.  For investors still new to REG, can you start by giving us a brief overview of your different technologies – for example, biodiesel process, bio-synfining and gas to liquids?

Brad Albin:  Yes, thank you. Over the years, we’ve built and continue to optimize three significant technologies.  We have a fleet of 12 biodiesel plants utilizing different technologies to produce biodiesel – ten being located in the US and two in Germany.  We have Bio-Synfining® technology that is currently  producing renewable diesel at our 75 mmgy renewable diesel plant in Geismar, LA.  REG Synthetic Fuels, based in Tulsa oversees our technology for the  renewable diesel portion of our business that Lynn Tomlinson runs.  Lynn has also done a lot of work and proven a gas-to-liquids technology that we can ulitize when market conditions are favorable.

Shawn Severson: Thank you very much.  Let’s dig into your different technologies a bit more starting with your Bio-Synfining technology. Could you provide us with a general overview of the technologies that enable REG to utilize a variety of feedstocks to produce renewable diesel and biodiesel and also talk a bit about some of the benefits of multi feedstock capabilities for these technologies?

Brad Albin:  Our main focus and expertise at REG is our ability to take all different types of feedstocks and in the most efficient and optimal way and convert them into high quality fuels that customers want. The different chemistries like transesterification and esterification used to produce biodiesel from pure feedstocks have been around for many years.  However, our ability to use the lower cost and lower carbon intensity  feedstocks is significant in many ways. We have built IP and the significant know-how necessary to convert those feedstocks that have many incoming impurities.   We have a company that pushes the envelope on lower carbon intensity products for the market place. We also have one of the greatest teams assembled with the ability to take those feedstocks, convert them into high quality fuel and deliver them to customers. The base of all of this is the lower carbon intensity solutions, or green solutions, to meet the world’s growing appetitie for cleaner solutions.

Lynn Tomlinson:  The Bio-Synfining process is built upon the knowledge that REG has fleetwide and how we handle different feedstocks. We pride ourselves on the fact that we can run the same low cost and lower carbon intensity feedstocks at the majority of our plants, making them very interchangeable in respect to our procurement side.  In Geismar, we create a very consistent product utllizing our hydro-deoxegenation and hydro-isomerization IP and know-how despite the non virgin quality of the feedstock which has given us a real boost in the success of our Bio-Synfining technology.  We also have proven the process can utilitze coproducts from our biodiesel plants which can reduce the cost of goods by using them as feedstocks in the Bio-Synfining plant.

Brad Albin: Thanks, Lynn.  Dave, do you want to add to that?

Dave Slade:  From a technical perspective, we focus our energy on feedstock flexibility. This is critical for us because it keeps our feedstock supply flexible  and allows us to exploit new feedstocks as they become available in the market.  The world is moving toward having greater and greater interest in low carbon intensity energy sources, particularly low carbon fuels.  Many of these newer feedstocks that have recently been commercialized were previously considered waste materials which are typically lower in quality and more difficult to run. Because they create a product that has a lower carbon intensity, or lower greenhouse gas emissions from the life cycle standpoint, we are placing our focus here.  This allows us to capture value on a product that has greater interest in the market, whether that’s in the U.S. or abroad.

The advantages of our Bio-Synfining process allow us to produce a consistent and high quality renewable diesel with a low cloud point, no matter the feedstock.

Biodiesel is an oxygenated fuel which results in lower overall tailpipe emissions and also is a bit more challenging from a cold flow perspective in the northern areas in the winter months. So, as we change blends of feedstocks, we are doing a lot of work on the downstream side to predict and anticipate what’s going to happen in the field to ensure that our sales folks and our distribution team can properly distribute those products into the appropriate markets to the right customers and maximize profitabilty.  This requires a lot of coordination between our procurement, supply chain and sales and marketing teams selling appropriately, making happy customers and doing our best to keep things moving at high rates in spite of changes in feedstock supply throughout the year.

Brad Albin: Historically, all of the original plants ran a virgin, highly refined feedstock of soybean oil in the U.S. and rapeseed oil in Europe, which today are relatively easy to run but can be higher in cost and receive a lower value assoicaited with LCFS scores higher carbon intensity which translates to lower margins. We made a decision long ago to transition to lower in cost, higher in impurity feedstocks.  We have mastered and will continue to optimize the capability of running multiple feedstocks.

We have been able to build a fleet of plants and a system that is considerably robust and flexible. While others have struggled, we are able to pick and choose what we buy in the market to meet customer demands and support the compliance pieces, like RINs and carbon credits, resulting in optimized profitability.

 

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