Verbio Vereinigte Bioenergie AG
XETRA:VBK
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Verbio Vereinigte Bioenergie AG
Earnings Call Analysis
Q4-2024 Analysis
Verbio Vereinigte Bioenergie AG
Verbio achieved record production volumes in 2023/2024, with biodiesel production up 4% year-on-year and a remarkable 64% increase in bioethanol volumes, largely due to the acquisition of South Bend. Despite these production milestones, the company's EBITDA fell short of initial expectations of EUR 200-250 million, reaching only EUR 121.6 million due to market distortions from fraudulent Chinese biodiesel imports and increased costs associated with U.S. growth investments amounting to EUR 25 million.
In Q4 alone, Verbio reported an EBITDA of EUR 39.5 million, reflecting improvements year-over-year thanks to wider biodiesel and bioethanol spreads. However, total sales dipped to EUR 197 million due to accounting changes and the operational structure in Canada that affects revenue recognition, resulting in an overall EBITDA of EUR 28.5 million compared to a loss of EUR 10 million in the previous year.
The positive EBITDA trend was propelled by higher sales prices and improved feedstock procurement strategies. The decline in greenhouse gas quota prices has negatively impacted earnings, dropping from EUR 250 per tonne of CO2 savings in mid-2023 to below EUR 100 in early 2024. A cautious approach to pricing assumed stable margins for bioethanol moving into the next period amid expectations of significantly improved market conditions.
For the upcoming fiscal year 2024/2025, Verbio expects EBITDA to range between EUR 120 million and EUR 160 million, projecting approximately 15% growth year-over-year at the midpoint. While improvements in North America are anticipated, these will be somewhat offset by market dynamics affecting greenhouse gas pricing. Growth in RNG production is also expected to surpass 1 terawatt hour in Europe for the first time.
Verbio is focused on ramping up operations in new facilities, particularly in Nevada and South Bend, which are expected to contribute positively to earnings as they reach full production capacity. However, achieving this requires navigating the complexities of new technology and market entry challenges, particularly in the U.S. market where competitive dynamics are changing rapidly.
Recent discussions surrounding the greenhouse gas quota legislation are likely to have significant implications for pricing and market stability. The anticipated suspension of quota rollovers in 2025 could lead to increased prices for CO2 savings, affecting overall demand and investment in the biofuel sector. Current estimates suggest a shift towards a higher demand for CO2 savings, which could bolster Verbio’s market position, pending legislative confirmation.
Looking ahead, Verbio expresses cautious optimism about improving market conditions and aims to navigate a landscape altered by recent regulatory changes. CEO Claus Sauter emphasizes the importance of strategic investments in infrastructure and technology while continuing to advocate for more stringent controls on biodiesel imports to ensure fair competition.
Overall, Verbio's strategy remains focused on scaling production capacity and leveraging emerging market opportunities in both Europe and North America. With a solid foundation established through recent acquisitions and production enhancements, the company is positioned to benefit from increasing global demand for sustainable biofuels in the coming years.
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Good afternoon, and a warm welcome to everybody. Thanks for joining the Verbio Q4 Fiscal Year '23/'24 Earnings Call. I'm very honored to have with me the management of Verbio SE, Mr. Claus Sauter, the CEO; and also Mr. Olaf Troeber, who is the CFO. Both will be hosting and presenting the results today. The presentation will be followed by a Q&A. Please use the chat box on the lower right-hand corner, to enter your questions, we will address them during the Q&A in the aftermath of the presentation. I'm looking forward to interesting insights and happily hand it over to Mr. Claus Sauter.
Thank you very much. Good afternoon, everyone, and welcome to today's earnings call. I'm here with Olaf Troeber, our CFO; and with Alina Kohler, our Investor Relations Manager. It's great to have you join us on the call. We will cover our fourth quarter and full year 2023, 2024 results.
Despite the challenging market environment, I am pleased that we were able to post a good set of results for the full year, and in Q4, especially. In line with our latest expectations that we shared in our Q3 earnings call in May, we will go into more details later. But now let me first reiterate some of our highlights from the past year. At the end of the call, we'll give you an idea of what to expect for the running business year.
So first of all, the group highlights. Turning now to focus on our delivery for 2023, 2024. We were able to make significant progress. And with this implemented the elements of the strategy presented at the Capital Markets Day in September 2023. First, we have achieved record production volumes exceeding 1 million tonnes of liquid biofuels for the first time. We also grew our RNG production to a new record of 1.1 terawatt hours. With these products, as well as any trading products, we increased the CO2 savings that our customers can achieve through our product by 1 million tonnes to 4.4 million tonnes of CO2 savings.
Second, we were making great progress in scaling our own technology abroad. Following initial hiccups and delays, we have announced that Nevada is now running on small volumes. We had started the second RNG production line in March using corn as a feedstock. After commencing the commercial manufacture of ethanol this summer, we have now switched to using stillage to produce RNG.
Meanwhile, we have managed to increase the production availability at South Bend, Indiana, South Bend Ethanol by approximately 20% in 2024 versus 2023, which none of the previous owners managed to do. We have also started the build-out of the RNG facility and take all our learnings from Nevada to ensure a smoother journey at South Bend Ethanol.
In Europe, we have held our groundbreaking ceremony for the specialty chemicals facility in Bitterfeld, which will be using our Biodiesel based on rapeseed oil as input. This is a major step for us as well as we will tap into new and very promising market going forward.
Lastly, I want to highlight the launch of a trading unit based in Geneva in Switzerland in order to be better map the global flow of goods, of product, of feedstocks and to anticipate them more quickly.
Now let's switch to the key figures in the financial year. Let me now give you a quick overview of our 2023/2024 key figures. As mentioned, we achieved record production volumes for all our main products. Our biodiesel production volumes increased by 4% year-on-year, mostly driven by a better utilization in Canada. Bioethanol volumes increased by 64% year-on-year, mainly due to the acquisition of South Bend in May, but also some production growth in Europe. Our EBITDA for 2023/2024, was EUR 121.6 million, while the results didn't meet our initial expectations of EUR 200 million to EUR 250 million due to continued pressure from fraudulent Chinese biodiesel imports and the associated supposed CO2 reduction, we are in line with our most recent guidance.
Please keep in mind that in 2023/2024, our European business had to [ stomach ] not only the distortion of markets in Europe, but also the costs of our growth investments in the United States which totaled approximately to EUR 25 million. Our net debt at the year-end was up to EUR 32.9 million due to mainly growth investments of more than EUR 180 million. Importantly, we improved our cash generation significantly. The equity ratio at the year-end stood at 67.4%, and remained largely stable.
The investment tax credit for our RNG facility in Nevada, that we successfully sold in Q4, impacted the equity ratio negatively as it is accounted for as an investment grant and hence, increases the liabilities.
Let me now hand over to my colleague, Olaf to run through our Q4 results.
Thanks, Claus, and good afternoon, everyone joining for our fourth quarter. In the fourth quarter, we reported an EBITDA of EUR 39.5 million, in line with expectations. This is an impressive improvement year-over-year and quarter-on-quarter. And these improvements are primarily due to the widening of biodiesel spreads. The Bioethanol spreads in Europe and North America also contributed to the positive trend compared to the previous quarter. Although sales prices increased strongly and our volumes sold were also slightly up year-over-year.
Sales declined to EUR 197 million for 2 reasons. Firstly, due to permanent accounting changes in the recognition of trading revenues, which are now presented on a net basis within the results from commodity forward contracts led to a correction in revenues and cost of materials of EUR 74 million and EUR 72 million, respectively, for the 9-month period 2023/'24. Please note, this affected both segments but had no effect on the EBITDA level.
Secondly, as also discussed in our last earnings call, Canada currently operates through processing contracts, which reduces revenues and material costs alike and, hence, clearly lifts our EBITDA margin. There was a significant improvement in EBITDA to EUR 28.5 million from a negative EUR 10 million in the previous year, thanks to higher sales prices for biodiesel in Europe and beneficial rapeseed oil procurement.
Lower greenhouse gas quota prices and premiums had a negative impact on earnings in comparison with the same quarter in the previous year. As I said, prices have strongly recovered in our fourth quarter, which you can see in the right chart. It depicts the development of 10 -- minus 10 biodiesel prices and rapeseed oil prices. As we buy our feedstock approximately 2 to 3 months in advance it becomes quite clear that our own spreads outperformed the market spreads, which are shown on the left side.
This dynamic also explains our quarter-on-quarter EBITDA improvements. The background to the firming up of price levels were the higher prices of raw materials as well as declines in the volumes of imports from China. Beyond this, there is continued demand for biodiesel based on rapeseed oil, in particular, because the quality of the product from China does not meet European specifications for blending purposes and hence needs to be upgraded.
Let me turn to the Bioethanol/Biomethane segment. The decline in ethanol and greenhouse gas quota prices compared to the same quarter of the previous year was almost offset by the higher sales volumes. Nevertheless, Verbio did record a decline in revenues due to the trading-related correction as I described previously. EBITDA fell year-over-year from EUR 36 million to EUR 10 million as better ethanol spreads were not able to offset the fall in greenhouse gas quota prices and premiums and the ramp-up costs in the United States.
However, in comparison with the previous quarter, there was a notable effect in particular from the attractive margin situation in Europe and in North America. As a result, the Bioethanol/Biomethane segment generated the best segment result in the -- of the financial year 2023/'24 in the fourth quarter.
Let's have a quick look at the price and spread development for Bioethanol. The spreads we are holding up at an attractive level, thanks particularly to the bioethanol prices, as you can see in the chart on the right-hand side, reflected by the top light green line. The recovery of prices in Q3 or Q4, can be explained by the decline in imports in the first quarter of 2024 primarily from Brazil, which led to a fall in the volumes of inventories of ethanol in Rotterdam. The increasing demand also supported which meant better spreads year-over-year but also quarter-on-quarter.
Well, as explained before, the greenhouse gas quota surplus led to a sharp fall in prices. The greenhouse gas quota price which according to market information was still at EUR 250 per tonne of CO2 savings in mid-2023 was most recently down to well below EUR 100 per tonne for the 2024 quarter.
So that's all for the past, let's now turn to our guidance, which we had already published in an adhoc release on September 10. We expect an EBITDA of EUR 120 million to EUR 160 million. At the midpoint, this implies a 15% growth year-over-year. To bridge last year's result with this year's guidance, we need to take into account our key drivers. While we expect to post a slightly positive EBITDA result in North America, part of these gains will be offset by a negative impact from the greenhouse gas quota.
Please keep in mind that the entire calendar year 2023 and hence, also our first half of 2023/2024, we were still benefiting from very attractive locked-in prices, which are at much lower levels in calendar year 2024. And while we do foresee a recovery of market prices in the future, as Claus will address in a minute, the timing is difficult to forecast.
In detail, in the Bioethanol/Biomethane segment, the ramp-up of the plant in Nevada, Iowa and the increased production in South Bend, Indiana, will have a positive effect on earnings compared to the previous year, in view of the attractive, I would say, very attractive margin situation in North America.
Back to Europe, we expect an increasing plant capacity utilization accompanied by stable margins for ethanol. And it's fair to note our RNG production is also expected to increase further so that the 1 terawatt hour mark will be exceeded in Europe for the first time ever. The -- for the biodiesel in Europe, we expect the capacity utilization to remain high in the 2024/'25 financial year, which already has begun.
Average margins are expected to fall compared to the previous year due to the tense vegetable oil situation. Contracts guaranteeing a good margin are in place for the Canadian biodiesel production for the current calendar year 2024. Overall, we expect to have a net debt position of no more than EUR 190 million by year-end. CapEx will be focused on our key projects for the South Bend Ethanol and the ethanolysis plant here at the Bitterfeld side. But now back to Claus, who will give you an overview of the current status of the greenhouse gas quota market, and we'll have some final words on the strategy execution.
Thank you very much, Olaf. So let's look a little bit into the future. Supply side, constraints and rising demand set stage for a surge in greenhouse gas quota market. Why we believe this? So lot -- a lot has happened in the past few weeks, which should support the greenhouse gas market going forward.
Let's focus on the supply side first. We have discussed the elimination of upstream emission reduction as a compliance option for 2025 in our last earnings call. What is new is that projects with the volume of approximately 4 million tonnes of CO2 savings could retroactively be canceled as well according to the German Bundesrat. We are not sure how this will be done in reality. I have no clue, but the step is clearly necessary. The consideration itself marks a great success and may be linked to the efforts of the initiative against climate fraud IKS, in which we are actively working together with 70 other partners, companies, associations to combat fake climate protection.
For everybody who is here in Germany should know this TV report about UER -- and yes -- this is, let's say, very impressive what happened there. So the picture is from ZDF frontal investigation. At this location, one should actually be able to see a new ER project that generates CO2 savings. Instead, what you can see is the picture is an empty chicken coop, which is worth EUR 80 million in CO2 savings.
Aside from the politically willingness to cancel quotas retroactively, some players have on their own decided to let go of these projects. There was an announcement from Rosneft recently and Rosneft, for example, has canceled 500,000 tonnes of CO2 savings which would be worth close to EUR 50 million at today's prices.
Furthermore, as you can see from the chart, the monthly exports from China have decreased strongly and with it, the share that goes to Europe. In the past few months, we have also seen investment freezes, project stops and insolvencies in the biofuel space across the media which should support prices going forward. It also makes it clear that the market for greenhouse gas quotas must recover because increasing quota prices are needed to ensure that investments in climate protection and transport sector is economically feasible.
However, all of these measures and constraints can only truly be effective when control measures are in place. So that -- as soon as we see a higher price environment, no incorrectly declared product can come in anymore. We need effective barriers which should be implemented with RED III.
On the demand side, the annual mandates increase, coupled with the phase out of UER leads to the biggest increase in required CO2 savings in 2025 since 2020, when the greenhouse gas quota started or when UERs started. Furthermore, last week, the Ministry of Environment -- German Ministry of Environment, has proposed the suspension of the rollover option to use greenhouse gas quotas generated in the past to fulfill the obligation in 2025 and 2026. Still some details of the implementations are yet to be clarified for the industry. But overall, this is encouraging to finally see a response to the critical issues.
Lastly, the implementation of RED III also holds potential on the demand side. In addition to road and rail, shipping and air traffic are to be included. Meanwhile, we continue to focus on our core projects. Those include bringing Nevada to full utilization levels within this financial year, continue our building works at South Bend Ethanol and specialty chemical facility in Bitterfeld, Germany.
And now we are open for the Q&A session. Thank you very much.
Thank you very much indeed for these insights, Mr. Sauter, Mr. Troeber. We do have some questions that I would like to read one by one.
We have -- the first questions come from Mr. Cuadrado of Kepler Cheuvreux. And there are actually 4 questions rolled into one, and I would like to address one after the other. The first one is, last year, you highlighted that U.S. activities were still unaccretive to group margins. What is the outlook for the new fiscal year now that Nevada plant is ramping up and South Bend keeps improving?
Okay. Olaf, your part?
Okay. As Claus pointed out before, we expect South Bend further improving due to the increased production. So our technicians made a very good job. We face a higher capacity utilization. And as you know, it's very, very important that you have a high capacity utilization with respect to any bioethanol plant.
Concerning Nevada, I think we also pointed out before, that we expect over the course of the financial year, an EBITDA of 0, which is back end loaded, meaning that we are starting with a negative EBITDA in the first and second quarter and then moving towards a positive EBITDA in the second and especially in the third and especially the fourth quarter.
All right. Let's continue with question number two. Could you maybe share with us which are the key assumptions and it gets a little more granular in terms of ethanol, biodiesel spreads, greenhouse gas quota prices in Germany and natural gas prices in Europe at the middle point of your EBITDA guidance?
Right. especially in U.S., we currently face healthy bioethanol margins. And we trust these margins or market spreads. That means we consider higher margins within the driving season and lower margins. If you're not facing the driving season, it would be then the December and the winter season and more or less spring.
Canada, we pointed out, we have a merging contract in place. That means we just calculate with the margin not a spread. And with respect to biodiesel Europe, I pointed out already that we incorporated the high margins or healthy margins, we are facing currently. And we had a little bit cautious, more cautious approach for the third and fourth quarter where we said, okay, we planned with a lower margin for the biodiesel segment.
Then let's -- coming back to bioethanol, Europe. We more or less calculated with stable margins. That means a little bit higher ethanol prices than we face currently. We had prices that came down the last couple of weeks, but we expect it will go up again and more or less stable grain prices. Regarding the greenhouse gas quota, we already expected an increase in the price, a slight increase in the price of the greenhouse gas quota from a level of EUR 120.
But I would rather like to hand over to Claus because with respect to greenhouse gas quota, there is a lot going on, and it's a little bit difficult to frame this into figures for planning purposes.
Thank you, Olaf. Yes. There's a big change now with this draft, with this legal draft from Friday. We are right now negotiating the new contract for 2025, with the obligated parties. And they were quite relaxed until Thursday last week because they have a lot of CO2 savings on their balance sheet. But since Friday, there is a different game. If they are not able to forward 2024 quotas into 2025 and 2026 -- and what we highlighted already that there is a significant increase in the demand. Yes, it will be a completely different change. And we see it already that the 2025 quota CO2 is increasing.
So it's far too early to adjust something on our planning. But I think with our assumptions with an increasing quota price, we are completely on the right side, not only with the arguments, what we mentioned that it must grow because insolvencies, postponements of other investments. So this is really a game changer since Friday. But as I said, far too early to adjust anything.
And finally, we have to wait until it is really passed this new legislation. But market situation for 2025 and also 2026 is quite promising. Our let's say, we were surprised from this announcement on Friday, to be honest. And it looks a little bit like a firefighting mode that the German ministry sees now that there is a lot of a fraud.
You remember that I highlighted this already 1.5 years ago. So now it's a reality. But they have to find a way to cancel CO2 savings, which we have finally not delivered, but it will take much longer than until the beginning of 2025. So this is a fast shot, which will help for 2025 and 2026. But the details, the real details also about canceling the CO2 savings going forward into 2030, implement clear rules to avoid frauds like this in the future will take a little bit longer, but they will be implemented with RED III.
Okay. So far for, this question. Read the next one.
The next one is also still from Kepler Cheuvreux. Can you maybe update us on the ongoing negotiations, if any, about enhanced certification on biodiesel imports from Asia? Is that a feasible scenario to avoid new fraudulent volumes?
I think these questions I answered already, there will be something for sure. But to figure out the details and how to make it and also the consequences if fraud is happening again, that must be discussed in detail in spring 2025. So therefore, I appreciate very much the draft from Friday because it helps us now that we are not facing this surplus from 2024 into 2025 and 2026. So we are in a good way.
Great. Lastly, which is the level of CapEx assumed for the new year to reach the net debt guidance set for the new fiscal year?
Olaf?
As you pointed out already, the average for the next 3 years will be approximately EUR 140 million. For this year, we estimated up to EUR 200 million in investments, but the pity actually is with regard to all the prepayments we have to make for the big equipment in South Bend, either you pay on the last day in June or the first day of July, you always have these cash or liquidity fluctuations. And therefore, we decided not to provide a band. We rather provided you the figure max or up to minus net debt of EUR 190 million.
Moving on to questions coming from Leon Muhlenbruch of MWB. First question he is asking about the EU tariffs on biodiesel, what are your expectations? Are they going to come under fire? Are they going to be there for a while? How do you see the impact of that?
Well, the antidumping duties, which were announced by the European Union is comparable what with the draft, what we see on Friday. It is not solving the problem. That is not the solution. The solution must be that we need mechanisms to control imports, to control feedstock streams. This is not our job. This is the job from regulator and one, we have nothing against biodiesel imports they are coming from China or elsewhere as long as it is fair.
By the way, with our strategy, we are also focusing on a global business and global business means the availability or the possibility to import product. But what we need is to ensure that the biodiesel, which is imported is really made from the feedstock, which is written on the certificate.
So there is a lot of product coming into Europe, ethanol from the U.S., from South America. The big problem with China was always -- there was no possibility to go there and control the streams. And that has to be stopped. So we are not focusing on the antidumping duties because that is not solving the problem. It helps, and we see that it helps because the imports are going down. We are on a lower level now with the imports than 2021. It helps, but it is not solving the problem.
And as long as this problem is not solved, we will not see additional investments in Europe. So therefore, we need, first of all, clear regulation. What is happening is a control of the feedstocks in the country, the product is coming from is not possible, then I would say it's not possible to accept it.
And finally, this is not only affecting us. It is affecting renewable hydrogen, CO2-efficient steel, all that stuff. So we need a stable regulation there. And second, there need to be a consequence for the companies who are buying this product. We need more focus on compliance. Right now, obligated parties can trust 100% on the papers what they are getting. There is no need to follow the value chain. There is no need to make additional analysis. So in the United States, this is completely different.
If you're buying a RIN where no product was behind it, the obligated party has to find a solution on themselves and it costs money because you pay twice. So we need a system like this also in Europe. And I'm quite positive that it will come, finally, after our announcement that we say, hey, guys, look, Chinese -- China is cheating, became true. We were on the right way. We were not blaming somebody, there is nothing. We were on the right way. And now everybody has to admit from the government and also from the ministries.
More general question about margin developments and margins in general Europe versus the U.S. The question reads, why do you expect so much higher margins from the U.S. market respectively, lower margins in Europe in comparison?
Well, as I said in Europe, especially with the oversupply, we were cautious to define a reasonable margin. But since Friday, we have a new game. In the United States, the margins were very healthy why? We are expecting a record corn harvest, which is beginning next week. So very high yields. Weather was perfect in the Midwest, record corn production and cheap corn means cheap ethanol. So U.S. ethanol at the moment is by far the cheapest ethanol in the world. And why the prices developed so well in the margins in the last month, it was because export numbers were double or triple as high as estimated.
So the U.S. is exporting ethanol. The world is feeded with U.S. ethanol, and that will continue as long as we have cheap corn. Cheap corn means cheap ethanol and cheap ethanol, if it's the cheapest in the world, will accelerate export numbers. And at least we expect that will last until the new seeding in spring 2025.
Let's continue on the things that changed last Friday, and there's a question coming from [indiscernible]. Actually, 2 questions, but the first one, fits right in what you just said. Do you have an expected timing of the draft that was published last Friday?
Affected parties like companies, associations can answer or bring their thoughts in for that draft until Monday next week, October 1. So you can see here everything is very much accelerated because the target is that this new regulation should be in place from January 1, 2025.
Yes. So we expect that the timeline will be like this. We have some thoughts from the industry, also from us. We are preparing that. We will send these to the ministry then there will be some negotiations. So I expect that during November, it will pass the German Parliament to be in place from January 1, 2025. So I am -- well, we are quite confident that the time line will stay.
Question on a little more detail concerning greenhouse quotas and write-off on finished good. [indiscernible] also asked, there has been again significant write-offs on finished goods, leaving them at around EUR 214 million. What is the per ton assumption of the remaining greenhouse gas quota on stock, if you have a number?
First of all, the decline in the stocks and raw materials and finished goods is not only affected by a write-down. It's also affected by lower prices. And please understand that we are not going to provide this figure here. There might be some interested parties also joining this call. And yes, please accept it.
All right. The next question comes from Roland Vetter, who is with Praxis Partners. If I'm not wrongly informed, and he follows up to the rollover of the greenhouse gas quotas or the non-possible rollover. And the question reads, the German government, as you already alluded to, proposed a lot to suspend rollover of greenhouse gas tickets for 2025 and 2026. And how likely do you think this law will be implemented? And if implemented, what do you expect will be the impact on the industry and Verbio? And just as important, would that potentially mean an upgrade to your guidance for the next financial year?
As I said, it is far too early. We are confident that it will come. It's necessary for the industry. But at least if I say I'm 90% or 95%, there is still some uncertainty of 5%, 10% as long as it didn't pass the parliament, we don't know it. But you can see already the effect, I mentioned it, that 2025 CO2 prices indication because right now, nobody has CO2 -- 2025 CO2 quotas. So that will really lift the whole market. But please, let us figure it out. We gave our guidance. We don't want to correct it now because of a draft.
But just to give you a feeling no more UERs and the normal quota increase in 2025 is about 4.5 million tonnes of CO2 savings. That's a lot with parallel decrease on Chinese imports, which had since 2020, a significant part of the overall system. So yes, I think the discussions what we are doing right now with the oil companies are getting completely different spin in the next weeks.
As you know that Verbio is very strong on low greenhouse gas biofuels. So our biofuels have high greenhouse gas savings. And the share or the amount of advanced biofuels we increased the last years. So if -- and it looks like that greenhouse gas prices will be lifted furthermore. I don't expect levels like we had 2 years ago at EUR 450. But I see the price is significantly higher what we have today and what is in our planning.
Once we have our new contracts made and once we have clarity, if the draft will really pass the parliament, we can do a new calculation. And when we see that, yes, we are too far away with our existing guidance, we will correct it.
I've got 3 questions, both -- all 3 of them related to the U.S., all 3 coming from [ Pamela Stinger ] [indiscernible]. And let me start out with the first one, can you provide a little bit more detail and color to the tax credit sale in the U.S.
Well, detail -- the tax credit was about $40 million, and we had to give some discount, which I don't want to disclose, which was single digit. And yes, the process was straightforward, very smooth, much easier than I expected, and the money is on our account. So everything is fine.
All good.
All good. All good. All good. It's the U.S., not so complicated like in Europe, easy going.
Very good. Nevada, can you provide a little bit more color to the expected production ramp-up and the expected contribution of Nevada to results in the current fiscal year '24/'25?
Well, Olaf mentioned it, we are in the ramp-up phase. The plan is that we want to be on full utilization until the end of the business year. So right now, it goes slow, but we will accelerate latest in spring. Yes, it's not too easy, to be honest. It's a new technology for the operators there, new company, new technology, new products, renewable natural gas made from stillage for the U.S. market, where we are mainly focusing on the voluntary market. So we are building up new market for a new product. We will also have biofertilizer. So we are -- this is also something new recycling fertilizer for the Midwest.
We are also talking with DC, with the EPA, Environmental Protection Agency, to get there some more support. Right now, we are asking for a grant related to a program, which is focusing on what we are doing here. So let's see what is coming out. But as I said, it's a new technology, new teams, new product, not only the RNG, also the biofertilizer. So the target is to be EBITDA neutral until the end of the business year.
South Bend is progressing very well. That was an existing ethanol plant. Compared with Nevada, it was relatively easy. I don't -- I hope nobody from our engineers is listening. So it was relatively easy. We ramped up the capacity by 20%. We reduced costs and that was really a very, very nice success. South Bend is profitable.
And now we come to the next step that we start the investment there. And this is also our focus at the moment. So first of all, the proof of concept with Nevada, and the second one is South Bend. And furthermore, we have no plans now to really roll it out. Rolling out will be done once we show the competitive advantage of Nevada with the rest of the U.S. ethanol industry.
Super. Last question regarding the U.S. is. And I'm sure that is a question that comes up in any -- in every discussion with whatever company you have it with. Political environment in the U.S. and consequences of an election victory of either the Democrats or the Republicans, would you a, see an impact on your business depending on the outcome of that election? And what's your opinion on that presently?
No, I don't see any impact. The big support for what we are doing in the Midwest is the IRA, Inflation Reduction Act. And we were talking already about it. That was made by the Democrats. But who has the biggest advantage from the IRA, this is the Midwest. And traditionally, these are Republican states. So finally, why Trump administration should do something negative which will hurt the Midwest corn farmer. So I don't see it anyway.
I was talking about a competitive advantage. So if U.S. ethanol industry will suffer on lower margins, our technology has there an advantage because we are not making ethanol and feed, we are making ethanol and RNG. And RNG production, once you have the technology, is more profitable than just making feed. So no, I don't expect any negative impact from the election in November.
And the last question, which probably won't take too much of your time. It is concerning potential price development, price increases and of course, the impact on your forecast. It is written, if I understand Mr. Sauter, price increase is more likely in the year 2025 and further on? And if that happens, what does that mean for your guidance or your business outlook?
It's difficult to say. As I said, since Friday, we saw already an increase by 50% for the 2025 quota. But if I look into this draft, right now, nobody has 2025 quota because if there will be no -- if there is no possibility to bring 2024 and 2025, nobody has it. So let's see. Everything is just speculation, but I think there is some probability that quota prices will go up again beyond EUR 300 per metric ton, but we will see.
Right now, I would say, the industry, especially the obligated parties are shocked. They were very relaxed on our first discussions for 2025 and 2026 biofuels. But since Friday, they are shocked because they expected to be able to use their surplus for the next 2 years, and it looks very much like that is over. But it is difficult to say. Let's wait. It's just -- it's even not one week.
All right. A quick word on India, maybe question was quite brief, but certainly it's interesting. What about India?
Well, India, we have there our plant. Unfortunately, we are just running at 50%, 60% utilization because the market demand in this area is not big enough. I will be in India 2 weeks ago -- in 2 weeks, and we'll talk with the Ministry of Petroleum and Gas, Mr. Hardeep Puri, from whom we get very much support.
Indian oil -- for example, the Indian oil company is our main customer, but it's not enough. I think they never expected that we are able to ramp up that plant and that we are able to run -- to produce renewable natural gas based on rice straw based on paddy, how they call it, because we are right now the only company that -- there is a lot of companies looking into that market the big Adani's and Ambani's announcement from 50 and 100 plants there in India -- biogas plants. And they also started already with investments.
But the only company who is really producing is Verbio. So I'm confident, but India takes always longer than what we think about. But we have there a plant, we are producing. We are EBITDA neutral, but that was not the reason why we went to India. So let's see how we will go on. But first of all, that plant must be profitable, and then we can think about next steps. But what I can say is in India is regarding biofuel is a lot of in the market. Now E10, so 10% ethanol was recently implemented, nearly 80% of the sugar plants are now also producing ethanol. So there is a lot of movement in the market also with biogas. It's accelerating. But let's see, as I said before, first of all, I want to see the proof of concept and then we can go further.
The 2 final questions. The second to last comes from [indiscernible]. When will you sell the stock of greenhouse gas quota which you have on your balance sheet? And what does that depend on the timing?
It depends on the pricing. We want to get a reasonable price. We are not desperate to sell our greenhouse gas savings on any price, especially when the pricing is not fair. So that was the reason why we spent so much effort and so much energy joining this initiative, for example, but stop it. So it looks like that our strategy to keep it on the books was the right strategy. So we are able to carry it forward to 2025 and there is a high probability that we will get a much better price in 2025 than 2024.
So yes, we need to know the clear effects of the draft from Friday, we see already some effects. And yes, profit maximization is our target. And I think even if it's on our balance sheet and we need working capital for it, it was a good decision.
Bringing us to the last question, which is -- and I'm going to read it because it's very specific. Does Verbio have a stance on controversial flows of unrefined liquid dextrose ultrafiltration retentate based ethanol from the U.S. to Europe?
No.
That's a very short, very specific answer. Thank you. Thank you so much.
This is a very specific question, but who is asking this question is very well informed. No, we don't have that stream yet. Okay. So no more questions?
We have no more questions. We are very good in time, an hour and 5 minutes. I want to take this opportunity to thank both of you, of course, Mr. Sauter, Mr. Troeber for your time, and your insights and your explanations of the fiscal year '23/'24 numbers. I want to thank the whole IR team of Verbio as well for putting this all together. Looking forward, to hearing more, especially of that draft that is -- that was developed on Friday and see how that develops.
We will be sending out a short feedback form to all the participants who were on this call and, of course, from our end, a big thank you to each and every participant, not only for being there, but also for asking questions, making this a very lively call. Thank you so much.
Thank you very much as well. Maybe a final statement from me. What I want to emphasize is, okay, the results from this business year compared what we achieved already. This is a little bit disappointing. But if you take into account the environment, the circumstances where we were able to make that result then I have to say that this is an extraordinary result because we were really facing hard market relations. So finally, looking forward to what happened recently, looking forward to 2025, 2026, 2027 when the demand for biofuel will still increase.
Thank you very much to everybody who joined that call, who is a shareholder, who has invested in Verbio, and we made a good job. Under these circumstances, we made really a good job. We are still there compared with previous years. It is still a good result. And I think a lot of decisions what we made even to step back from some investments, some opportunities was the right decision. So even if it doesn't sound like this, I'm quite positive for the next years coming. I'm looking forward to be implemented in the discussions about the RED III implementation to be part of it.
I think our government, Ministry of Environment, has to admit that they made crazy mistakes. We are talking about billions of lost money for some fraud. And it's only their fault, nobody else, they didn't check properly the papers what they get on the table. So it was difficult to go through these times. Even if we were mentioning these problems with not enough control, fraud, stuff like this. So it was necessary that a situation like this happened. Unfortunately, some companies went bankrupt. Unfortunately, some companies had to do huge down rights, stopped projects.
But we continue to follow our way, not with the same speed like we wanted to do. I come back to our Investors Day [indiscernible] in fall last year. So -- but we keep line, and it looks like that most of the challenges and problems we were facing the last 2 years are coming to an end.
So thank you very much, Mr. Naas for leading that call. Thank you very much to Olaf. Thank you very much to Alina. Thank you very much to everybody who was joining that call. And let's see how fast we can come out with adjustment from our guidance. Thank you very much. Have a nice day.
Thank you.