Green Plains Inc. (GPRE), the ethanol production giant, has been on a tumultuous journey of transformation. Facing a volatile ethanol market and compressed protein prices, the company has been working tirelessly to diversify its portfolio and unlock hidden value. While many analysts are focused on the company's promising foray into high-protein feed ingredients and clean sugar technology, a quiet revolution is brewing in Nebraska that could be the true catalyst for Green Plains' resurgence.

The company's recent Q1 2024 earnings call transcript reveals a tantalizing glimpse of this revolution. Buried within discussions of plant refreshes, margin pressures, and strategic reviews, lies a nugget of information that could rewrite the narrative for Green Plains – a potential $100 million annualized EBITDA contribution from carbon capture at its Nebraska facilities alone, starting in the second half of 2025. This revelation, seemingly overlooked by other analysts, hints at a massive financial windfall, driven by the 45Z Clean Fuel Production Credit, a key provision of the Inflation Reduction Act.

To fully grasp the significance of this carbon-driven opportunity, we need to rewind the clock to 2023. Green Plains embarked on a strategic partnership with Nebraska Biofuels, a company uniquely positioned in the carbon capture landscape. Unlike other pipeline projects facing regulatory hurdles and land acquisition challenges, Nebraska Biofuels already boasts a fully operational trunkline, a repurposed natural gas pipeline ready to transport captured CO2 to sequestration sites in Wyoming. This crucial advantage, coupled with Wyoming's proactive approach in issuing Class VI well permits for CO2 injection, puts Green Plains' three Nebraska ethanol plants (representing 287 million gallons of capacity) on the fast track to decarbonization.

The Q1 2024 transcript indicates that the final pieces of the puzzle are falling into place. Nebraska Biofuels is actively constructing laterals to connect Green Plains' facilities to the pipeline, while Green Plains itself is finalizing orders for compression equipment, crucial for capturing CO2 emissions. This progress paints a clear picture – the Nebraska carbon capture project is on track to commence operations in mid-2025.

EBITDA Contribution Projections (Millions USD)

Now, let's delve into the potential financial impact. The transcript casually mentions a $100 million EBITDA contribution from carbon capture in Nebraska alone. This figure implies an estimated $0.35 per gallon uplift to the base ethanol margin (calculated as $100 million divided by 287 million gallons). While this estimate doesn't include additional earnings from 45Q credits or the sale of voluntary carbon offsets, it already presents a compelling case for Green Plains' future profitability.

Furthermore, Green Plains is exploring capital redeployment strategies to maximize its early-mover advantage in Nebraska. The company is actively reviewing opportunities to expand production capacity at its Central City and Wood River facilities by 30 million to 40 million gallons each. This expansion would capitalize on the early days of the 45Z Clean Fuel Production Credit and position Green Plains as a preferred supplier of low-carbon intensity ethanol, a highly sought-after feedstock for emerging alcohol-to-jet sustainable aviation fuel (SAF) producers.

The recent update to the GREET model, used for calculating SAF tax credits, further underscores the potential of Green Plains' decarbonization strategy. The update acknowledges the efficacy of carbon capture in lowering CI scores, making US corn-based ethanol a viable feedstock for SAF production. This development could fundamentally revalue Green Plains' asset base, particularly its Nebraska facilities, which are poised to become early players in the burgeoning SAF market.

While the market grapples with the short-term challenges facing Green Plains, the long-term potential of its carbon capture initiative is undeniable. This underappreciated development in Nebraska could be the catalyst that finally unlocks the value hidden within Green Plains' sprawling platform, transforming the company from an ethanol producer struggling in a volatile market to a low-carbon fuel powerhouse driving the transition to a more sustainable future.

Hypotheses and Projections

Hypothesis 1: Carbon Capture EBITDA in Nebraska

Assuming a conservative $0.35 per gallon uplift from carbon capture on 287 million gallons in Nebraska, Green Plains could generate $100.45 million in additional annualized EBITDA.

Hypothesis 2: Potential Expansion Impact

If Green Plains expands its Nebraska facilities by a combined 70 million gallons, the potential carbon capture EBITDA could reach $125 million annually.

Financial Data

Market Cap: $1,180,583,680

EBITDA (Q1 2024): -$21,500,000

Projected 2025 EBITDA (excluding base ethanol): $300,000,000

"Fun Fact: Green Plains' journey started with a focus on cattle feeding before venturing into ethanol production. The company now embraces cutting-edge technologies like high-protein extraction, clean sugar production, and carbon capture, showcasing its adaptability and commitment to innovation in the agricultural and energy landscape."