RENEWABLE ENERGY GROUP, INC. MANAGEMENT REPORT OF FINANCIAL POSITION AND RESULTS OF OPERATIONS (Form 10-Q)

We encourage you to read this Management's Discussion and Analysis of Financial
Condition and Results of Operations in conjunction with the accompanying
condensed consolidated financial statements and related notes. Forward-looking
statements contained in this report present management's views only as of the
date of this report. Except as required under applicable law, we do not intend
to issue updates concerning any future revisions of management's views to
reflect events or circumstances occurring after the date of this report.

Goal

We are one of North America's largest producers of advanced biofuels focused on
providing cleaner, lower carbon transportation fuels. We utilize a nationwide
production, distribution and logistics system as part of an integrated value
chain model designed to convert natural fats, oils and greases into advanced
biofuels. We believe our fully integrated approach, which includes acquiring
feedstock, operating biorefineries, distributing fuel through a network of
terminals, and managing biorefinery facility construction and upgrades,
positions us to serve the market for cleaner transportation fuels.

In addition to our acquisition of Keck Energy in September 2018, we opened our
first REG branded fueling station in July 2019 adjacent to our biorefinery in
Seneca, Illinois to serve a variety of customers from trucking fleets and local
diesel vehicle owners. In June 2020, we entered into an agreement with a third
party pursuant to which it agreed to exclusively sell REG branded fuels at
certain of its cardlock locations. In October 2021, we entered into a long-term
agreement with GoodFuels, a leading supplier of sustainable marine biofuels and
global producer and supplier of renewable fuels, for the supply and development
of sustainable marine biofuel solutions for the global shipping industry. In
November 2021, we entered into a partnership with Canadian Northern Railway to
test biodiesel and RD blends for their locomotive fleet. In December 2021, we
acquired Amber Resources, a California-based distributor of biobased diesel,
petroleum diesel and lubricants. This acquisition will help enable us to access
a larger network of end customers. These are part of our downstream strategy,
which is focused on three important objectives: margin expansion across the
value chain, including by directing production to the most profitable
geographies; realization of higher biodiesel values through blends of biodiesel
into petroleum and RD; and increased demand for our biodiesel via sales of 100%
pure biodiesel, or B100, to end consumers.

In October 2020, we announced our plan to expand the effective capacity of our
Geismar, Louisiana biorefinery. The Geismar project involves both an improvement
project for the existing operations at the site as well as the capacity
expansion.
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The Geismar project is expected to take total annual site production from 90
million to 340 million gallons, enhance existing operations and improve
operational reliability and logistics. The expansion is expected to be
mechanically complete in 2023 with full operations in early 2024. We have
received all required permits to proceed with construction and officially broke
ground to start the construction process in the fourth quarter of 2021. The
capital cost for the Geismar project is estimated to be $950 million and is
funded with a combination of cash on hand, marketable securities, borrowings
under our credit facilities, and proceeds from our public offering of common
stock that closed in March 2021 and proceeds from our issuance of Green Notes
that closed on May 20, 2021, as discussed below. In addition, in connection with
the expansion we have entered into a long-term marine terminal lease for
terminal and logistics services that will require a separate capital outlay. We
have also agreed to construction contracts for large parts of the work
associated with the improvements and expansion. There can be no guarantee that
we will be able to complete this project in a timely manner or increase the
capacity of our biorefinery at Geismar, Louisiana on time, at our estimated
budget, or at all. The improvements and expansion are subject to a number of
conditions and risks.

On March 19, 2021, we completed an equity offering pursuant to which we sold
5,750,000 shares of common stock to various underwriters at a price of $67.00
per share before underwriting discounts and commissions. The net proceeds from
the offering were $365.3 million. We currently intend to use the net proceeds
from this offering for working capital and other general corporate purposes,
which may include the repayment of our existing indebtedness and the funding of
capital expenditures, including capital expenditures related to the improvements
and expansion of our Geismar, Louisiana biorefinery.

On May 20, 2021, we completed the sale and issuance of $550.0 million aggregate
principal amount of our Green Notes. We recorded $14.6 million in legal,
professional and underwriting fees related to the issuance of the Green Notes.
We currently intend to use the net proceeds from this offering for capital
expenditures related to the improvements and expansion of its Geismar, Louisiana
biorefinery.

On November 2, 2021, we entered into an agreement with Booster Fuels, in which
REG made a $10 million convertible note investment in Booster. Booster is a
mobile fuel delivery provider that delivers of a variety of fuel types, allowing
us to further expand on our downstream reach. During the first quarter of 2022,
we made an additional investment of $10 million in Booster.

On March 30, 2022, we announced a new line of fuels, EnDura Fuels®. The EnDura Fuels® range is comprised of 5 different fuels that provide cleaner burning, lower emission fuels that we believe will strengthen our position in the biodiesel and renewable diesel markets and provide solutions in the transportation industry to meet sustainability and business. growth goals.

We believe that the execution of these strategies will enable us to expand our
margins, diversify sources of profitability, manage our business through varying
market conditions, and increase shareholder value.

In September 2021, we announced the closure of the Houston, Texas biorefinery.
Production at this facility ceased in November 2021. The Houston plant's
nameplate capacity was 35 mmgy. As a result, we now own and operate a network of
11 biorefineries. Nine biorefineries are located in the United States and two in
Germany. Ten biorefineries produce biodiesel and one produces RD. Our eleven
bio-based diesel production facilities have an aggregate nameplate production
capacity of 470 million gallons per year ("mmgy").

We are a lower carbon bio-based diesel producer. We primarily produce our
bio-based diesel from a wide variety of low carbon feedstocks, including
distillers corn oil, used cooking oil and inedible animal fat. We also produce
bio-based diesel from virgin vegetable oils, such as soybean oil or canola oil.
We believe our ability to process a wide variety of feedstocks at most of our
facilities provides us with a competitive advantage over many bio-based diesel
producers, particularly those that rely primarily on a single feedstock such as
virgin vegetable oils.

We also sell petroleum-based heating oil and diesel fuel, which enables us to
offer a variety of fuel products to a broader customer base. We sell heating oil
and ultra-low sulfur diesel, or ULSD, at terminals throughout the northeastern
United States, as well as BioHeat® blended heating fuel at one of these terminal
locations. In 2018, we expanded our sales of biofuel blends to Midwest and West
Coast terminal locations and look to potentially expand in other areas across
North America and internationally.
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The table below reflects our gallons sold in the three months ended
March 31, 2022 and 2021 (totals may not add due to rounding):

                                                                                                   Gallons sold (millions)
                                                                                      Three months ended              Three months ended
                                                                                        March 31, 2022                  March 31, 2021

Biodiesel produced by REG:

                                                     Biodiesel - U.S.                            65.0                           71.3
                                                     Biodiesel - International                   12.0                            8.2

                                                     RD                                          16.3                           12.8
                                                                                                 93.3                           92.3

Third-party bio-based diesel:

                                                     Biodiesel                                    3.6                            3.3
                                                     RD                                           9.6                           14.5
                                                                                                 13.2                           17.8

Petroleum-based diesel and Other
Petroleum-based products                                                                         50.9                           24.1
Total                                                                                           157.4                          134.2


During 2021, we sold 621 million gallons of fuel, which included 463 million
bio-based diesel gallons produced at REG facilities, 80 million bio-based diesel
gallons we purchased from third parties and 78 million petroleum-based diesel
gallons.

Our activities are organized into three reportable segments: the Bio-diesel segment, the Services segment and Corporate and others.

Bio-based diesel sector

Our Biodiesel segment includes:

•the operations of the following biodiesel production refineries:

• a biodiesel production facility with a nominal capacity of 30 mmgy located at Ralston, Iowa;

• a biodiesel production facility with a nominal capacity of 45 mmgy located at Danville, Ill.;

• a biodiesel production facility with a nominal capacity of 30 mmgy located at Newton, Iowa;

• a biodiesel production facility with a nominal capacity of 60 mmgy located at Seneca, Illinois;

• a biodiesel production facility with a nominal capacity of 30 mmgy located nearby Albert Lea, Minnesota;

• a biodiesel production facility with a nominal capacity of 30 mmgy located at Mason City, Iowa;

• an RD production unit with a nominal capacity of 75 mmgy located at Geismar, Louisiana;

• a biodiesel production facility with a nominal capacity of 27 mmgy located in Emden,
Germany;

• a biodiesel production facility with a nominal capacity of 23 mmgy located in Oeding,
Germany;

• a biodiesel production facility with a nominal capacity of 100 mmgy located at Gray’s Harbour, Washington; and

• a biodiesel production facility with a nominal capacity of 20 mmgy located in DeForest,
Wisconsin.

•purchases and resales of bio-based diesel, the renewable portion of sales of
biodiesel and RD blended with petroleum-based diesel and other petroleum based
products acquired from third-parties, RINs and LCFS credits (each as defined
herein), and raw material feedstocks acquired from third parties; and

•Incentives received from federal and state renewable fuels programs.


The nameplate capacity listed above, which is based on original plant design, is
distinguished from a facility's effective capacity, which represents the maximum
average throughput that satisfies certain defined technical constraints.
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We derive a small portion of our revenues from the sale of co-products of the
bio-based diesel production process. For the three months ended March 31, 2022
and 2021, our revenues from the sale of co-products were less than 5% of our
total Bio-based Diesel segment revenues. For the three months ended March 31,
2022 and 2021, revenues from the sale of petroleum-based heating oil and diesel
fuel acquired from third parties, along with the sale of these items further
blended with biodiesel produced by our facilities or purchased from third
parties, were approximately 16% and 8% of our total revenues, respectively.

In accordance with EPA regulations, we generate 1.5 to 1.7 RINs for each gallon
of bio-based diesel we produce and sell in the United States. RINs are used to
track compliance with RFS2, using the EPA moderated transaction system, or EMTS.
RFS2 allows us to attach between zero and 2.5 RINs to any gallon of bio-based
diesel we sell. When we attach RINs to a sale of bio-based diesel gallons, a
portion of our selling price for a gallon of bio-based diesel is generally
attributable to RFS2 compliance; but no cost is allocated to the RINs generated
by our bio-based diesel production because RINs are a form of government
incentive and not a result of the physical attributes of the bio-based diesel
production. In addition, RINs, once obtained through the production and sale of
gallons of bio-based diesel, may be separated by the acquirer and sold
separately. We regularly obtain RINs from third parties for resale, and the
value of these RINs is reflected in "Prepaid expenses and other assets" on our
Condensed Consolidated Balance Sheets. At each balance sheet date, this RIN
inventory is valued at the lower of cost or net realizable value and any
resulting adjustments are reflected in our cost of goods sold for the period.
The cost of RINs obtained from third parties is determined using the average
cost method. Because we do not allocate costs to RINs generated by our bio-based
diesel production, fluctuations in the value of our RIN inventory represent
fluctuations in the value of RINs we have obtained from third parties.

The table below summarizes our RINs balances available to be sold and the median
closing price per RIN at March 31, 2022 and December 31, 2021 according to OPIS:

                                                         Quantity                                      OPIS Median Closing Price per RIN
                                       March 31, 2022                December 31, 2021             March 31, 2022            December 31, 2021
Bio-based diesel RINs                     12,566,585                        31,702,718          $            1.48          $             1.51
Advanced biofuels RINs                     1,738,668                           684,773          $            1.48          $             1.51


We generate LCFS credits for our low carbon fuels when our qualified low carbon
fuels are imported into states that have adopted an LCFS program and sold for
qualifying purposes. As a result, a portion of the selling price for a gallon of
bio-based diesel sold into an LCFS market is also attributable to LCFS
compliance. Like RINs, LCFS credits that we generate are a form of government
incentive and not a result of the physical attributes of the bio-based diesel
production. Therefore, no cost is allocated to an LCFS credit when it is
generated, regardless of whether the LCFS credit is transferred with the
bio-based diesel produced or held by us. LCFS prices in 2021 began to decline
for California LCFS credits as the supply of these type of LCFS credits began to
match the demand for the credits resulting in a market correction of prices,
while Oregon CFP credit prices remained relatively consistent. During 2022,
prices began to decline for California LCFS credits as the supply of these type
of LCFS credits began to match the demand for the credits resulting in a market
correction of prices, while Oregon CFP credit prices remained relatively
consistent.

The table below summarizes the approximate amounts of our LCFS credits available for sale and the median closing price per LCFS credit at March 31, 2022 and
December 31, 2021 according to OPI:

                                                   Quantity                                   OPIS Median Closing Price per LCFS Credit
                                 March 31, 2022               December 31, 2021               March 31, 2022            December 31, 2021
California LCFS                        13,157                            18,690          $              122.00          $           149.75
Oregon CFP                                431                               797          $              120.00          $           124.00


Services Segment

Our Services segment, which primarily provides services to our Biodiesel segment, includes:

•biodiesel facility management and operation services, in which we provide day-to-day management and operation services to biodiesel production facilities; and

•construction management services, where we act as construction management and general contractor for the construction of biodiesel production facilities.

Corporate sector and others

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Our Corporate and Other segment includes:

•trading activities related to heating oil and petroleum-based diesel fuel, including the petroleum portion of sales of biodiesel and RD blended with petroleum-based diesel and petroleum-based products acquired from third parties ;

•business activities, which include head office expenses such as compensation, benefits, occupancy costs and other administrative costs, including management fees; and

• Revenue activities (expenses) not associated with reportable segments, such as corporate general and administrative expenses and shared services expenses.

Impact of COVID-19 on our business

In March 2020, the World Health Organization declared COVID-19 a global pandemic
and recommended containment and mitigation measures worldwide. The COVID-19
pandemic has negatively impacted the global economy, disrupted consumer spending
and global supply chains, and created significant volatility and disruption of
financial markets.

We established a COVID-19 Emergency Response Team ("ERT") to monitor the health
of our employees and mitigate the infection risk of our employees. We have
implemented several initiatives in response to the COVID-19 pandemic, such as
remote workplace requirements for all office and administrative employees,
social distancing protocols for our production employees and any visitors to our
facilities, and additional paid time off for employees as needed in order to
deal with health or family issues related to COVID-19. As more states, counties
and schools have been re-opening and with the continued successful distribution
of COVID-19 vaccines, we do not anticipate having to curtail or cease our
operations due to COVID-19 in the foreseeable future.

For a more in-depth discussion of the uncertainties and business risks associated with the COVID-19 pandemic, see Part II, Item 1A, “Risk Factors”.

Factors Affecting Our Results of Operations

The principal factors affecting our results of operations and financial
conditions are the market prices for bio-based diesel and the prices for the
feedstocks used to produce bio-based diesel, as well as governmental programs
designed to create incentives for the production and use of cleaner renewable
fuels.

Government programs promoting the production and use of bio-based diesel

Bio-based diesel has always been more expensive to produce than petroleum-based diesel. The growth of the biodiesel industry is largely the result of federal and state programs that require or encourage the production and use of biodiesel, allowing biodiesel to be competitive with petroleum-based diesel.

The RFS2 bio-based diesel requirement was implemented in 2010, stipulating
volume requirements for the amount of bio-based diesel and other advanced
biofuels that must be utilized in the United States each year. Under RFS2,
Obligated Parties, including petroleum refiners and fuel importers, must show
compliance with these standards. Currently, biodiesel and RD satisfy three
categories of an Obligated Party's annual renewable fuel required volume
obligation, or RVO-bio-based diesel, advanced biofuel and renewable fuel. The
final or proposed RVO targets for the bio-based diesel and advanced biofuels
volumes for the years 2017 to 2022 as set by the EPA are as follows:

                                         2017                    2018                    2019                     2020                     2021                       2022**
                                     2.00 billion            2.10 billion            2.10 billion             2.43 billion             2.43 billion
Bio-based diesel                        gallons                 gallons                 gallons                 gallons                  gallons       

2.76 billion gallons

                                     4.28 billion            4.29 billion            4.92 billion             4.63 billion             5.20 billion
Total Advanced biofuels                  RINs*                   RINs*                   RINs*                 RINs*, **                RINs*, **       

5.77 billion RIN*


*Ethanol equivalent gallons (defined as 1 RIN per gallon based on the RIN
production of ethanol, where biodiesel equates to 1.5 RINs per gallon and RD
equates to 1.7 RINs per gallon)
**Proposed RVO

The federal biodiesel mixture excise tax credit, or the BTC, has historically
provided a $1.00 refundable tax credit per gallon to the first blender of
bio-based diesel with petroleum-based diesel fuel. The BTC became effective
January 1, 2005, but since January 1, 2010 it has been allowed to lapse and then
been reinstated a number of times. The BTC is currently in place through
December 31, 2022.

As a result of this history of retroactive reinstatement of the BTC, we and many
other bio-based diesel industry producers have adopted contractual arrangements
with customers and vendors specifying the allocation and sharing of any
retroactively
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incentive restored. The net benefit of BTC was allocated to our corresponding adjusted quarterly earnings before interest, taxes, depreciation and amortization (“Adjusted EBITDA”) when the activity giving rise to the retroactive credit was conducted.

Fluctuations in biodiesel and feedstock prices

Our operating results generally reflect the relationship between the price of
bio-based diesel, including credits and incentives, and the price of feedstocks
used to produce bio-based diesel.

Bio-based diesel is a cleaner low carbon, renewable alternative to
petroleum-based diesel fuel and is primarily sold to the end user after it has
been blended with petroleum-based diesel fuel. Bio-based diesel prices have
historically been heavily influenced by petroleum-based diesel fuel prices.
Accordingly, bio-based diesel prices have generally been impacted by the same
factors that affect petroleum prices, such as crude oil supply and demand
balance, worldwide economic conditions, wars and other political events, OPEC
production quotas, changes in refining capacity and natural disasters.

Regulatory and legislative factors also influence the price of bio-based diesel.
LCFS credits, established by the California Low Carbon Fuel Standard regulation,
which is a rule designed to reduce greenhouse gas emissions associated with
transportation fuels used in California and the Oregon Clean Fuel Program, have
had an increasing impact on our bio-based diesel pricing in those states. In
addition, bio-based diesel RIN pricing, a value component that was introduced
via RFS2 in July 2010, has had a significant impact on our bio-based diesel
pricing in the U.S. The following table shows for 2020, 2021 and the first three
months of 2022 the high and low average monthly contributory value of RINs, as
reported by OPIS, to the average B100 spot price of a gallon of biodiesel, as
reported by OPIS, in terms of dollars per gallon.

                    [[Image Removed: regi-20220331_g1.jpg]]


At the beginning of 2022, the value of RINs, as reported by OPIS, to the average
B100 spot price of a gallon of biodiesel was $1.94 per gallon. The value of RINs
to the average B100 spot price of a gallon of biodiesel increased to $2.22 per
gallon at the end of March 2022. It reached a high of $2.47 per gallon of
biodiesel in March 2022 and a low of $1.88 per gallon in January 2022. D4 RIN
values trended higher throughout the first three months of 2022, supported by D6
RIN values in which the D4 category can be used to satisfy an Obligated Party's
D6 RIN obligation along with an increase in feedstock pricing relative to ULSD
as seen in the heating oil to soybean oil ("HOBO") spread. During 2020, RINs
were negatively impacted by the overall decrease in demand for transportation
fuels due to COVID-19, which translates into reduced volume obligations for
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Obligated parties under the RFS. We enter into forward contracts to sell RINs and use risk management position limits to manage exposure to RINs.

During the first three months of 2022 and the full year 2021, feedstock expense
accounted for 88% and 87%, respectively, of our production cost, while methanol
expense accounted for 2% and 3%, respectively, and chemical catalysts for 2%,
for both periods of our production costs.

Feedstocks for bio-based diesel production, such as distillers corn oil, used
cooking oil, animal fat, canola oil and soybean oil, are commodities and market
prices for them will be affected by a wide range of factors unrelated to the
price of bio-based diesel and petroleum-based diesel. There are a number of
factors that influence the supply and price of our feedstocks, such as the
following: bio-based diesel demand; export demand; government policies and
subsidies; weather conditions; ethanol production; cooking habits and eating
habits; number of restaurants near collection facilities; hog/beef/poultry
supply and demand; palm oil supply; soybean meal demand and/or production, and
crop production both in the U.S. and South America. Increasing production of
bio-based diesel and, particularly recent prospective expansion of RD capacity,
and the development of alternative fuels and renewable chemicals also put
pressure on feedstock supply and availability to the bio-based diesel industry.
The bio-based diesel industry may have difficulty procuring feedstocks at
economical prices if competition for bio-based diesel feedstocks increases due
to newly added production capacity.

During 2021 and the first three months of 2022, 78% and 75%, respectively, of
the feedstocks used in our operations were comprised of distillers corn oil,
used cooking oil and inedible animal fats, with the remainder coming from virgin
vegetable oils.

The recent increase in CME Soyoil Futures price has correlated with an increase
in price for all of our feedstocks. This has increased the cost of producing
bio-based diesel at our refineries.

The graph below illustrates the spread between the cost of producing one gallon
of biodiesel made from soybean oil to the cost of producing one gallon of
biodiesel made from the specified low carbon feedstock for the period January
2020 to March 2022. The results were derived using assumed conversion factors
for the yield of each feedstock and subtracting the cost of producing one gallon
of biodiesel made from each respective low carbon feedstock from the cost of
producing one gallon of biodiesel made from soybean oil.

                    [[Image Removed: regi-20220331_g2.jpg]]

(1)Used cooking oil ("UCO") prices are based on the monthly average of the daily
low sales price of Gulf of Mexico used cooking oil as reported by The Jacobsen
(based on 8.5 pounds per gallon).

(2)Distillers corn oil ("DCO") prices are reported as the monthly average of the
daily distillers corn oil market values delivered to Illinois as reported by The
Jacobsen (based on 8.2 pounds per gallon).

(3) Choice White Grease (“CWG”) prices are based on the monthly average of the Low Daily Prices of Missouri River choice white grease as listed by The Jacobsen (based on 8.0 pounds per gallon).

(4)Soybean oil (crude) ("SBO") prices are based on the monthly average of the
daily closing sale price of the nearby soybean oil contract as reported by CME
(based on 7.5 pounds per gallon).

Our results of operations generally will benefit when the spread between
bio-based diesel prices and feedstock prices widens and will be harmed when this
spread narrows. The following graph shows feedstock cost data for choice white
grease,
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soybean oil and distillers corn oil on a per gallon basis compared to the per
gallon sale price data for biodiesel, and the spread between biodiesel and each
of choice white grease, soybean oil and distillers corn oil, from January 2020
to March 2022.

                    [[Image Removed: regi-20220331_g3.jpg]]

(1)Biodiesel prices are based on the monthly average of the midpoint of the high and low prices of B100 (Chicago SME) as reported by OPIS.

(2) Soybean oil (crude) prices are based on the monthly average of the daily closing price of the nearby soybean oil contract as reported by CME (based on 7.5 pounds per gallon).

(3)Choice white grease prices are based on the monthly average of the daily low
price of Missouri River choice white grease as reported by The Jacobsen (based
on 8.0 pounds per gallon).

(4) Distillery corn oil prices are based on the monthly average of the daily low price of Illinois corn oil distillers as reported by The Jacobsen (based on 8.2 pounds per gallon).

(5) Difference between the price of biodiesel and the price of premium white grease.

(6) Difference between the price of biodiesel and the price of soybean oil (crude).

(7) Differential between the price of biodiesel and the price of distillers corn oil.


During the first three months of 2022, the average NY Harbor ULSD price was
$3.07 per gallon, up $0.69 from the fourth quarter of 2021 average of $2.38 per
gallon. NY Harbor ULSD prices increased sharply during the first three months of
2022, from a low of $2.36 per gallon in January 2022 to a high of $4.44 per
gallon in March 2022. Stable demand and low stocks supported prices in January
through February with a sharp rally and significant volatility occurring in the
month of March following the Russian invasion of Ukraine. NYMEX ULSD stocks
remain below the 5-year average with transportation and heating demand
continuing to remain firm as prices have increased.

The U.S. biodiesel price increased significantly during the first three months
of 2022. The average U.S. biodiesel price, as indicated by the Chicago SME B100
price reported by OPIS, was $6.05 per gallon for the first three months of 2022.
During the first three months of 2022, B100 reached a high of $7.18 in March
2022 and a low of $5.20 in January 2022. Biodiesel prices increased primarily
due to the increase in RIN, energy and agricultural commodity prices.

The average soybean oil price for the first three months of 2022 was $0.68 per
pound. Soybean oil prices ranged from a high of $0.76 per pound in March 2022 to
a low of $0.56 per pound in January 2022. Grains markets reacted similarly to
energies with geopolitical risk in focus as potential supply disruptions in the
Black Sea region along with reductions to South American crop production
estimates have provided support to markets.
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Risk management

The profitability of producing bio-based diesel largely depends on the spread
between prices for feedstocks and bio-based diesel, including incentives, each
of which is subject to fluctuations due to market factors and each of which is
not significantly correlated. Adverse price movements for these commodities
directly affect our operating results. We attempt to protect cash margins for
our own production and our third-party trading activity by entering into risk
management contracts that are intended to mitigate the impact on our margins
from price volatility in feedstocks and bio-based diesel. We create offsetting
positions by using a combination of forward fixed-price physical purchases and
sales contracts on feedstock and bio-based diesel and risk management futures
contracts, swaps and options primarily on the New York Mercantile Exchange
("NYMEX") NY Harbor ULSD and CME Soybean Oil; however, the extent to which we
engage in risk management activities varies substantially from time to time, and
from feedstock to feedstock, depending on market conditions and other factors.
In making risk management decisions, we utilize research conducted by outside
firms to provide additional market information in addition to our internal
research and analysis.

Distillers corn oil, used cooking oil, inedible animal fat, canola oil and
soybean oil were the primary feedstocks we used to produce bio-based diesel in
2021 and the first three months of 2022. We utilize several varieties of
inedible animal fat, such as beef tallow, choice white grease and poultry fat
derived from livestock. There is no established futures market for these low
carbon feedstocks. The purchase prices for low carbon feedstocks are generally
set on a negotiated flat price basis or spread to a prevailing market price
reported by the USDA price sheet or The Jacobsen. Our efforts to risk manage
against changing prices for distillers corn oil, used cooking oil and inedible
animal fat have involved entering into futures contracts, swaps or options on
other commodity products, such as CME soybean oil and NYMEX NY Harbor ULSD.
However, these products do not always experience the same price movements as low
carbon feedstocks, making risk management for these feedstocks challenging. We
manage feedstock supply risks related to bio-based diesel production in a number
of ways, including, where available, through long-term supply contracts. The
purchase price for soybean oil under these contracts may be indexed to
prevailing CME soybean oil market prices with a negotiated market basis. We
utilize futures contracts, swaps and options to risk manage, or lock in, the
cost of portions of our future feedstock requirements generally for varying
periods up to one year.

Our ability to mitigate our risk of falling bio-based diesel prices is limited.
We have entered into forward contracts to supply bio-based diesel. However,
pricing under these forward sales contracts generally has been indexed to
prevailing market prices, as fixed price contracts for long periods on
acceptable terms have generally not been available. There is no established
derivative market for bio-based diesel in the United States. Our efforts to
hedge against falling bio-based diesel prices generally involve entering into
futures contracts, swaps and options on other commodity products, such as diesel
fuel and NYMEX NY Harbor ULSD. However, price movements on these products are
not highly correlated to price movements of all of the contract components in
aggregate of bio-based diesel.

We generate 1.5 to 1.7 bio-based diesel RINs for each gallon of bio-based diesel
we produce and sell in the United States. We also obtain RINs from third-party
transactions which we hold for resale. There is no established futures market
for bio-based diesel RINs, which severely limits the ability to risk manage the
price of RINs. We enter into forward contracts to sell RINs, and we use risk
management position limits to manage RIN exposure, however, pricing under those
forward contracts generally has been indexed to prevailing market prices as
fixed price contracts for long periods have generally not been available.

As a result of our strategy, we frequently have gains or losses on derivative
financial instruments that are conversely offset by losses or gains on forward
fixed-price physical contracts on feedstocks and bio-based diesel or
inventories. Gains and losses on derivative financial instruments are recognized
each period in operating results while corresponding gains and losses on
physical contracts are generally not recognized until quantities are delivered
or title transfers which may be in the same or later periods. Our results of
operations are impacted when there is a period mismatch of recognized gains or
losses associated with the change in fair value of derivative instruments used
for risk management purposes at the end of the reporting period but the purchase
or sale of feedstocks or bio-based diesel has not yet occurred resulting in the
offsetting gain or loss that will be recognized in a later accounting period.

We recorded a risk management loss of $63.6 million of our financial derivative instruments business for the three months ended March 31, 2022compared to a loss of $1.8 million and for the three months ended March 31, 2021. Changes in the value of these forward contracts, swaps or option instruments are recognized in current income.

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Growing importance of DR

RD is made from the same renewable resources as biodiesel but uses a different
production process. The result is a renewable fuel that is chemically identical
to and a drop-in replacement for petroleum diesel. RD is a relatively new fuel
but has quickly become popular because it reduces emissions and delivers strong
performance. RD can also be blended with biodiesel. Our proprietary blend of RD
and biodiesel which we call REG Ultra Clean® captures the best properties of the
two fuels.

RD has become an increasingly significant part of our business. RD carries a
premium price to biodiesel as a result of a variety of factors including the
ability to blend it with petroleum diesel seamlessly, better cold weather
performance, and because it generates more RINs on a per gallon basis. Our RD
production facility in Geismar, Louisiana generated a significant portion of our
adjusted EBITDA in 2021 and in the first three months of 2022. We experienced
two fires at this facility in 2015 that each resulted in the plant being shut
down for a certain period of time. If production at this facility were
interrupted again due to severe weather or a global pandemic such as COVID-19,
it would have a disproportionately significant and material adverse impact on
our results of operations and financial condition.

Seasonality

Our operating results are influenced by seasonal fluctuations in the demand for
biodiesel. Our biodiesel sales tend to decrease during the winter season due to
reduced blending concentrations to adjust for performance during colder weather.
Colder seasonal temperatures can cause the higher cloud point biodiesel we make
from inedible animal fats to become cloudy and eventually gel at a higher
temperature than petroleum-based diesel, RD, or lower cloud point biodiesel made
from soybean oil, canola oil or distillers corn oil. Such gelling can lead to
plugged fuel filters and other fuel handling and performance problems for
customers and suppliers. Reduced demand in the winter for our higher cloud point
biodiesel can result in excess supply of such higher cloud point biodiesel and
lower prices for such biodiesel. In addition, most of our biodiesel production
facilities are located in colder Midwestern states in proximity to feedstock
origination, and our costs of shipping can increase as more biodiesel is
transported to warmer climate geographies during winter. To mitigate some of
these seasonal fluctuations, we upgraded our Newton and Danville biorefineries
in 2018 to produce distilled biodiesel from low-cost feedstocks, which has
improved cold-weather performance.

RIN prices may also be subject to seasonal fluctuations. The RIN is dated for
the calendar year in which it is generated, commonly referred to as the RIN
vintage. Since only 20% of the annual RVO of an Obligated Party (as defined
under the RFS2) can be satisfied by prior year RINs, most RINs must come from
biofuel produced or imported during the RVO year. As a result, RIN prices can be
expected to decrease as the calendar year progresses if the RIN market is
oversupplied compared to that year's RVO and increase if the market is
undersupplied. The table below provides a comparison between actual RIN
generation and RVO level for Advanced Biofuel as set by the EPA, together with
the impact of the SREs.
                             RIN Generation (Advanced       Finalized RVO level for        Estimated Advanced Biofuel
        Period               Biofuel)                       Advanced Biofuel               RVO Exempted due to SREs
         2017                4.23 billion RINs              4.28 billion RINs*             0.40 billion RINs
         2018                4.34 billion RINs              4.29 billion RINs*             0.32 billion RINs
         2019                4.87 billion RINs              4.92 billion RINs*             **
         2020                5.28 billion RINs              4.63 billion RINs*, ***        **
         2021                5.67 billion RINs              5.20 billion RINs ***          **


*Ethanol equivalent gallons
**Not yet determined
*** Proposed amount

Industry capacity, production and imports

Our operating results are influenced by our industry's capacity and production,
including in relation to RFS2 production requirements. Under RFS2, Obligated
Parties are entitled to satisfy up to 20% of their annual requirement with prior
year RINs. Bio-based diesel production and/or imports, as reported by EMTS, were
2.88 billion gallons for 2020. The amount of bio-based diesel produced and/or
imported into the U.S. in 2021 was 3.09 billion gallons. In the first three
months of 2022, according to EMTS data, 0.78 billion gallons of bio-based diesel
were produced and/or imported into the U.S., compared to the equivalent 0.64
billion gallons over the same period in 2021.
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Critical accounting policies

Our discussion and analysis of our financial condition and results of operations
is based upon our financial statements, which have been prepared in accordance
with accounting principles generally accepted in the United States. The
preparation of these financial statements requires us to make estimates and
judgments that affect the reported amount of assets, liabilities, equities,
revenues and expenses and related disclosure of contingent assets and
liabilities. We evaluate our estimates on an ongoing basis. We base our
estimates on historical experience and on various other assumptions that we
believe to be reasonable under the circumstances, the results of which form the
basis for judgments we make about the carrying values of assets and liabilities
that are not readily apparent from other sources. Because these estimates can
vary depending on the situation, actual results may differ from the estimates.

We have disclosed under the heading "Critical Accounting Policies" in our Annual
Report on Form 10-K for the year ended December 31, 2021 the critical accounting
policies which materially affect our financial statements. There have been no
material changes from the critical accounting policies previously disclosed. You
should carefully consider the critical accounting policies set forth in our
Annual Report on Form 10-K.

Operating results

Three months completed March 31, 2022 and 2021

Set forth below is a summary of certain financial information (dollars in
thousands and gallons in millions except for per gallon data) for the periods
indicated:

                                                                  Three Months Ended
                                                                      March 31,
                                                                 2022           2021

  Gallons sold                                                    157.4          134.2

  Average bio-based diesel price per gallon                   $    5.21      $    3.70

  Revenues                                                    $ 935,989      $ 539,744
  Costs of goods sold                                           868,239        465,942
  Gross profit                                                   67,750         73,802
  Selling, general and administrative expenses                   48,712     

31,177

  (Gain) on disposal of property, plant and equipment            (1,935)             -
  Impairment of assets                                            2,748            822
  Income from operations                                         18,225         41,803
  Other expense, net                                             (5,327)          (948)
  Income tax expense                                               (421)        (1,633)

  Net income                                                  $  12,477      $  39,222

  Effect of participating share-based awards                         85     

639

Net income available to ordinary shareholders of the Company $12,392

 $  38,583


Results of Operations:

Revenues. Our total revenues for the first quarter of 2022 increased
significantly by $396.2 million, or 73%, compared to the same quarter in 2021.
The significant increase in revenues was primarily attributable to a substantial
increase in the average bio-based diesel price per gallon. In the first three
months of 2022, ULSD prices averaged $3.07 per gallon compared to $1.75 per
gallon in the same period in 2021. The significant increase in ULSD prices was
partially attributable to general market optimism and improving demand stemming
from the easing of lockdown measures in the United States and internationally,
as well as the conflict between Russia and Ukraine causing volatility in the
commodities market and particularly crude oil. The heightened volatility
impacted prices for both ULSD and feedstocks, causing the heating oil to soybean
oil ("HOBO") spread to move substantially throughout the period. In addition,
RIN values trended higher throughout the first three months of 2022. As a result
of these factors, our average selling price significantly increased by $1.51, or
41%, in the three months ended March 31, 2022, compared to the same period in
2021.

The increase in the average sales price contributed to a $202.6 million increase
in revenues for the three months ended March 31, 2022, when applied to the
number of gallons sold in the comparable 2021 period. The increase in RIN prices
also
                                       35
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positively affected separated RIN sales resulting in a revenues increase of
$81.9 million, or an increase of 277%, for the three months ended March 31, 2022
compared to the same period in 2021. The increase in gallons sold for the three
months ended March 31, 2022 accounted for revenues increasing by $120.9 million,
using the average selling price for bio-based diesel for the three months ended
March 31, 2021.

Costs of goods sold. Our costs of goods sold increased $402.3 million, or 86%,
for the three months ended March 31, 2022, compared to the same period in
2021. Costs of goods sold as a percentage of revenues was 93%, for the three
months ended March 31, 2022, and 86% for the three months ended March 31, 2021.
The increase in costs of goods sold was primarily driven by significantly higher
feedstock costs in the quarter compared to same period in 2021, as described
below. The increase was also driven up by risk management losses of $63.6
million, in the three months ended March 31, 2022 compared to losses of $1.8
million in the same period in 2021. For the three months ended March 31, 2022,
risk management losses resulted primarily from significant increases in ULSD
prices.

We experienced significantly higher costs across all of our feedstocks in the
three months ended March, 2022. Average prices for low carbon feedstocks used in
our production were $0.62, per pound for the three months ended March 31, 2022,
as compared to $0.36 per pound for the three months ended March 31, 2021.
Average soybean oil costs were $0.68 per pound for the three months ended
March 31, 2022, as compared to $0.45 per pound for the three months ended
March 31, 2021. Average canola oil costs were $0.66 per pound for the three
months ended March 31, 2022, as compared to $0.43 per pound for the three months
ended March 31, 2021. Average distillers corn oil costs were $0.62 per pound for
the three months ended March 31, 2022, as compared to $0.36 per pound for the
three months ended March 31, 2021.

Selling, general and administrative expenses. Our selling, general and
administrative expenses were $48.7 million for the three months ended March 31,
2022, or 5% of total revenue for the period, and $31.2 million, or 6% of total
revenue, for the same period in 2021. The increase of $17.5 million, or 56%,
resulted primarily from higher professional service expense incurred as a result
of the proposed Merger and from higher employee related compensation and
benefits.

Impairment of assets. During the three months ended March 31, 2022, the Company
recorded impairment charges of $2.7 million related to certain property, plant
and equipment due to the change in the intent to utilize these assets and that
the carrying amounts of these assets deemed not recoverable given the assets'
deteriorating physical conditions identified during the period. During the same
periods of 2021, we recorded impairment charges of $0.8 million related to
certain property, plant and equipment as the carrying amounts of these assets
were deemed not recoverable given the assets' deteriorating physical conditions
identified during the period.

Other expense, net. Other expense was $5.3 million for the three months ended
March 31, 2022, compared to $0.9 million for the same period in 2021. Other
expense is primarily comprised of loss on debt extinguishment, interest expense,
interest income and other non-operating items. The change in other expense for
the three months ended March 31, 2022 was due to interest expense of $7.5
million primarily due to the issuance of our Green Notes, compared to interest
expense of $1.1 million for the same respective period in 2021. The increase in
Other expense, net was slightly offset by Other income in the three months ended
March 31, 2022 of $1.7 million, compared to Other income of $1.4 million, for
the same period in 2021.

Income tax expense. We recognized an income tax expense of $0.4 million for the
three months ended March 31, 2022, as compared to an income tax expense of $1.6
million for the same period in 2021. Our tax provision for an interim period is
determined using an estimate of our annual effective tax rate, adjusted for
discrete items arising in that period. Our effective tax rate differs from the
statutory tax rate primarily due to the fact that we have a valuation allowance
on our domestic deferred tax assets.

Effects of Participating Share-Based Awards. The effects of participating share-based awards were $0.1 million for the three months ended March 31, 2022
compared to $0.6 million for the same period in 2021.

Non-GAAP Financial Measures:

Adjusted EBITDA

Earnings before interest, taxes, depreciation and amortization ("EBITDA") and
adjusted EBITDA are not measures of financial performance under GAAP. We use
EBITDA and EBITDA adjusted for certain additional items, identified in the table
below, or Adjusted EBITDA, as a supplemental performance measure. We present
EBITDA and Adjusted EBITDA because we believe they assist investors in analyzing
our performance across reporting periods on a consistent basis by excluding
items that we do not believe are indicative of our core operating performance.
In addition, we use Adjusted EBITDA to evaluate, assess and benchmark our
financial performance on a consistent and a comparable basis and as a factor in
determining incentive compensation for our executives.
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                                                              Three months ended       Three months ended
(In thousands)                                                  March 31, 2022           March 31, 2021
Net income                                                    $        12,477          $         39,222
Adjustments:
Income tax expense                                                        421                     1,633
Interest expense                                                        7,479                     1,117
Depreciation                                                           10,497                    10,915
Amortization of intangible and other assets                             1,757                       671
EBITDA                                                        $        32,631          $         53,558

(Gain) on sale of assets                                               (1,935)                        -

Loss on debt extinguishment                                                 -                     1,922

Interest income                                                          (496)                     (652)
Other expense, net                                                     (1,656)                   (1,439)
Expenses related to Proposed Plan of Merger                             6,636                         -
Impairment of assets                                                    2,748                       822

Stock compensation                                                      2,256                     1,844

Adjusted EBITDA                                               $        40,184          $         56,055




Adjusted EBITDA is a supplemental performance measure that is not required by,
or presented in accordance with, generally accepted accounting principles, or
GAAP. Adjusted EBITDA should not be considered as an alternative to net income
(loss) or any other performance measure derived in accordance with GAAP, or as
an alternative to cash flows from operating activities or a measure of our
liquidity or profitability. Adjusted EBITDA has limitations as an analytical
tool, and should not be considered in isolation, or as a substitute for any of
our results as reported under GAAP. Some of these limitations are:

•Adjusted EBITDA does not reflect our cash expenditures or the impact of certain cash charges which we consider not to be indicative of our ongoing operations;

•Adjusted EBITDA does not reflect changes or cash requirements for our working capital requirements;

•Adjusted EBITDA does not reflect interest expense, or cash requirements to service interest or principal payments, on our debt;

•although depreciation and amortization are non-cash charges, depreciated assets will often need to be replaced in the future, and Adjusted EBITDA does not reflect the cash requirements for such replacements;

• Non-recurring and non-operating expenses related to the proposed merger with
Chevron were added back to Adjusted EBITDA;

•stock-based compensation expense is an important element of our long term
incentive compensation program, although we have excluded it as an expense when
evaluating our operating performance; and

•Other companies, including other companies in our industry, may calculate these measures differently than we do, which limits their usefulness as a comparative measure.

Cash and capital resources

Our principal sources of liquidity are existing cash balances, marketable
securities, cash generated by our operations and our ability to borrow under our
revolving credit facilities, or such credit facilities as we may be able to
obtain from time to time. Our principal uses of liquidity are paying the costs
and expenses associated with our operations, servicing outstanding indebtedness
and making capital expenditures. Our cash requirements will also depend on
capital expenditures in connection with future facility projects, such as our
announced capacity expansion of our Geismar, Louisiana biorefinery and
expenditures in connection with future acquisitions of assets or businesses that
are complementary to our operations or part of our growth strategies.

On March 19, 2021, we completed an equity offering pursuant to which it sold
5,750,000 shares of common stock to various underwriters at a price of $67.00
per share before underwriting discounts and commissions. The net proceeds from
the offering were $365.3 million. We currently intend to use the net proceeds
from this offering for working capital and other general corporate purposes,
which may include the repayment of our existing indebtedness and the funding of
capital expenditures, including capital expenditures related to the improvements
and expansion of our Geismar, Louisiana biorefinery.
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On May 20, 2021, we completed the sale and issuance of $550.0 million aggregate
principal amount of our Green Notes due 2028. We recorded $14.6 million in
legal, professional and underwriting fees related to the issuance of the Green
Notes. We currently intend to use the net proceeds from the Green Notes for
capital expenditures related to the improvements and expansion of its Geismar,
Louisiana biorefinery.

Sources of liquidity. At March 31, 2022, the total of our cash and cash
equivalents and marketable securities was $787.4 million, compared to $956.2
million at December 31, 2021. At March 31, 2022, we had total assets of $2,628.0
million, compared to $2,558.9 million at December 31, 2021. At March 31, 2022,
and December 31, 2021, we had term debt before debt issuance costs of $550.0
million. Our debt is subject to various financial covenants. We were in
compliance with all financial covenants associated with our borrowings as of
March 31, 2022.

Our term debt (in thousands) is as follows:

                                                March 31, 2022       December 31, 2021
5.875% Senior Secured Green Notes, due 2028    $       550,000      $       

550,000



A full description of our credit facilities and other agreements related to our
outstanding indebtedness is included under the heading "Liquidity and Capital
Resources" in our Annual Report on Form 10-K for the year ended December 31,
2021.


In addition, we had revolving debt (in thousands) as follows:

                                                              March 31, 2022           December 31, 2021
Amount outstanding under line of credit                     $             -          $                -

Maximum available to be borrowed under the line of credit $249,095

$249,666


On September 30, 2021, we amended the M&L and Services Revolver in order to
increase the maximum commitment under the M&L and Services Revolver from $150.0
million to $250.0 million subject to an accordion feature which allows the
subsidiary borrowers to request commitments for additional revolving loans in an
aggregate amount not to exceed $50.0 million (prior to September 30, 2021) and
$100.0 million (on and after September 30, 2021). Availability under this credit
agreement is subject to a borrowing base and if availability is less than 10% of
the maximum commitment, ($15.0 million prior to giving effect to the amendment
and $25.0 million after giving effect to the amendment), then the subsidiary
borrowers are required to maintain a fixed charge coverage ratio of at least 1.0
to 1.0. As of March 31, 2022, the subsidiary borrowers would have been able to
satisfy that fixed coverage if availability was less than 10% of the maximum
commitment.

Cash flows. The following table presents information regarding our cash flows
and cash and cash equivalents for the three months ended March 31, 2022 and 2021
(in thousands):

                                                               Three Months March 31,
                                                                2022             2021
Cash used in operating activities                          $    (106,518)     $ (60,996)
Cash used in investing activities                                (46,123)   

(14,357)

Cash provided by (used in) financing activities                   (5,327)   

326,893

Net change in cash, cash equivalents and restricted cash (157,968)

251,540

Cash, cash equivalents and restricted cash at end of period $343,703

$339,535


In the first three months of 2022, we used $106.5 million of cash in operations
primarily due to a build in inventory of $97.1 million, an increase in accounts
receivable of $52.3 million in line with increased sales for the period and an
increase in prepaid expenses and other assets of $42.6 million. The increase in
prepaid expenses and other assets is largely due to an increase in cash
collateral paid to derivative counterparties. The cash used was partially offset
by increases in accounts payable of $50.6 million. In the first three months of
2021, we used $61.0 million of cash in operations primarily due to a build in
inventory of $80.7 million, a decrease in accounts payable of $24.9 million and
an increase in prepaid expenses and other assets of $16.2 million. The cash used
was partially offset by net income of $39.2 million.
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We used $46.1 million of cash in investing activity in the first three months of
2022, compared to $14.4 million in the first three months of 2021. The increase
in cash used by investing activities was primarily due to our use of $58.5
million of cash for property, plant and equipment purchases and plant upgrades
in 2022 compared to $10.5 million in 2021. Partially offset by cash provided by
the maturity of $8.9 million of marketable securities, compared to net purchases
of $2.4 million in high quality marketable securities in 2021.

Cash flows used in financing activities for the three months ended March 31,
2022 was $5.3 million compared to cash provided financing activities of $326.9
million for the three months ended March 31, 2021. The $332.2 million decrease
was primarily due to the three months ended March 31, 2021 reflecting the net
proceeds of $365.7 million from the equity offering in March 2021, partially
offset by cash paid for notes payable of $27.2 million.

Capital expenditures. During the three months ended March 31, 2022, our capital
expenditures were $58.5 million compared to $10.5 million in 2021 over the same
time period. Both periods' capital expenditures involve various plant
optimization projects and the Geismar expansion.

In October 2020, we announced our plan to expand the effective capacity of our
Geismar, Louisiana biorefinery. The Geismar project involves both an improvement
project for the existing operations at the site as well as the capacity
expansion. The Geismar project is expected to take total annual site production
from 90 million to 340 million gallons, enhance existing operations and improve
operational reliability and logistics. The expansion is expected to be
mechanically complete in 2023 with full operations in early 2024. We have
received all required permits to proceed with construction and officially broke
ground to start the construction process in the fourth quarter of 2021. The
capital cost for the Geismar project is estimated to be $950 million and is
funded with a combination of cash on hand, marketable securities, borrowings
under our credit facilities, and proceeds from our public offering of common
stock that closed in March 2021 and proceeds from our issuance of Green Notes
that closed on May 20, 2021, as discussed below. In addition, in connection with
the expansion we have entered into a long-term marine terminal lease for
terminal and logistics services that will require a separate capital outlay. We
have also agreed to construction contracts for large parts of the work
associated with the improvements and expansion. There can be no guarantee that
we will be able to complete this project in a timely manner or increase the
capacity of our biorefinery at Geismar, Louisiana on time, at our estimated
budget, or at all. The improvements and expansion are subject to a number of
conditions and risks.

We estimate that the capital spending for the project has been approximately 10%
in 2021 and will be approximately 40% in 2022, with the remainder of spend
slated for 2023. At the end of March 2022, almost all of the long lead equipment
for the project had been purchased. For capital spend beyond Geismar, we remain
on track with our board-approved plan of approximately $90.0 million, which
includes investments in low cost, high return projects, environmental, health
and safety projects and growth projects.

Off-balance sheet arrangements

We have no off-balance sheet arrangements that have or are reasonably likely to
have a current or future effect on our financial condition, changes in financial
condition, revenues or expenses, results of operations, liquidity, capital
expenditures or capital resources that is material to investors.

Recent accounting pronouncements

For a discussion of new accounting pronouncements affecting the Company, see “Note 2 – Summary of significant accounting policies” to our condensed consolidated financial statements.

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