RENEWABLE ENERGY GROUP, INC. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Form 10-K)

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The following discussion and analysis should be read in conjunction with our
consolidated financial statements and notes thereto that appear elsewhere in
this report. This discussion contains forward-looking statements reflecting our
current expectations that involve risks and uncertainties. Actual results may
differ materially from those discussed in these forward-looking statements due
to a number of factors, including those set forth in the section entitled "Risk
Factors" and elsewhere in this report.
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Objective

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 bio 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. 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.

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,
which tend to be higher in price. We believe our ability to process a wide
variety of feedstocks at most of our facilities provides us with a cost
advantage over many bio-based diesel producers, particularly those that rely
primarily on higher cost 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
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Midwest and Western coast terminal locations and look to potentially expand into other areas through North America and internationally.

In May 2019, we sold the core assets of REG Life Sciences that comprised our
Renewable Chemicals segment. As a result, the former Renewable Chemicals segment
and the operations of the Renewable Chemicals segment have been classified as
discontinued operations for all periods covered by this report.

The table below reflects our gallons sold in the years ending in 2021 and 2020 (totals may not add up due to rounding).

                                                                                                                Gallons sold (millions)
                                                                                                     Year ended                  Year ended December
                                                                                                  December 31, 2021                    31, 2020

Bio-based diesel produced by REG:

                                                     Biodiesel - United States                            348.0                             375.2
                                                     Biodiesel - International                             41.0                              50.1

                                                     RD                                                    74.0                              76.4
                                                                                                          463.0                             501.7

Third-party bio-based diesel:

                                                     Biodiesel                                             22.5                              20.9
                                                     RD                                                    57.6                              39.8
                                                                                                           80.1                              60.7

Petroleum-based diesel                                                                                     78.2                              88.1
Total                                                                                                     621.3                             650.5

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 biodiesel production refineries as included in point 2 of part I of this document;

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

•Incentives received from federal and state renewable fuels programs.

We derive a small portion of our revenues from the sale of co-products of the
bio-based diesel production process. In 2021 and 2020, our revenues from the
sale of co-products were less than five percent of our total Bio-based diesel
segment revenues. During 2021 and 2020, 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 5% of our total
revenues for both periods.

In accordance with EPA regulations, we generate 1.5 to 1.7 RINS, for each gallon
of bio-based diesel we produce. RINs are used to track compliance with the 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 Consolidated Balance
Sheet. At each balance sheet date, this RIN inventory is valued at the lower of
cost or net realizable value and 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.
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The value of RINs significantly decreased during the first quarter of 2019 and
remained relatively low through the first half of 2020. The prices of RINs
started to move up in the second half of 2020 in part due to the 10th Circuit
Court of Appeals ruling invalidating the process the EPA had been using to grant
SREs. In 2021, RIN prices increased rapidly due to continued support to not
issue more SREs and the significant increase in feedstock and ULSD prices.

The table below summarizes our RIN balances available for sale and the median closing price per RIN at December 31, 2021 and 2020 according to OPIS:

                                                           Quantity                                      OPIS Median Closing Price per RIN
                                        December 31, 2021              December 31, 2020           December 31, 2021           December 31, 2020
Bio-based diesel RINs                      31,702,718                          3,962,710          $            1.51          $             1.02
Advanced biofuels RINs                        684,773                            817,464          $            1.51          $             1.02


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 2020 were high relative
to historic prices throughout the year, only declining for short periods of
time. We believe these high prices were largely attributable to growing demand
for LCFS credits. During 2021, 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 LCFS
credit prices remained relatively consistent.

The below table summarizes the approximate amounts of our LCFS credits available
to be sold and the median closing price per LCFS credit at December 31, 2021 and
2020 according to OPIS:

                                                      Quantity                                 OPIS Median Closing Price per LCFS Credit
                                   December 31, 2021              December 31, 2020          December 31, 2021         December 31, 2020
California LCFS                           18,690                              2,618          $       149.75          $           199.00
Oregon LCFS                                  797                              8,967          $       124.00          $           123.00


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

Our Corporate and Other segment includes:

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

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

• Revenue/(expense) activities 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.

In response to the outbreak and business disruption, we have prioritized the
health and safety of our employees. We have established a COVID-19 Emergency
Response Team ("ERT") to monitor the health of our employees and mitigate the
infection risk of our employees. Based on input from the ERT, we have
implemented several initiatives in response to the COVID-19
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pandemic, such as a 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.

Market demand for fuels was significantly impacted by COVID-19 in 2020, with
significant signs of recovery in 2021. There continues to be economic activity
and loosening of restrictions as more of the U.S. population gets vaccinated. We
are optimistic that the U.S. economy is rebounding from the COVID-19 pandemic.
The extent of the impact of the COVID-19 pandemic on our business remains
uncertain and difficult to predict, as the duration and severity of the global
pandemic evolves and variant strains of COVID-19 arise. We cannot estimate the
duration and severity of the COVID-19 pandemic, or its overall impact on our
business. We continue to monitor the impact of the COVID-19 pandemic and will
adjust our operations, as necessary. We believe we have sufficient cash on hand,
our investments in short-term marketable securities and the cash available to us
to manage the anticipated impact of COVID-19 on our business operations for the
foreseeable future. We do not currently plan or anticipate any changes to our
workforce due to COVID-19.

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

Factors Affecting Our Results of Operations

The primary factors affecting our operating results and financial conditions are market prices for biodiesel and the feedstocks used to produce biodiesel, as well as government programs designed to create incentives for the production and use of fuels cleaner renewables.

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 RINs*


*Ethanol equivalent gallons
**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 was retroactively reinstated on
December 20, 2019 for the fiscal years 2018 and 2019. The BTC was also extended
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 reinstated incentive. The reinstatement of the 2018 and 2019 BTC
resulted in an $483 million net benefit to our net income for the year ended
December 31, 2019. The BTC net benefit was allocated to the corresponding
quarterly non-GAAP adjusted earnings before interest, taxes, depreciation, and
amortization ("Adjusted EBITDA") when the business giving rise to the
retroactive credit was conducted. For the years ended December 31, 2019 and
2018, the reinstatement of the 2018 and 2019 BTC resulted in a net benefit to
our Adjusted EBITDA of $254 million and $229 million, respectively.

Fluctuations in biodiesel and feedstock prices

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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, which
requires a 10% reduction of the average carbon intensity of Oregon's
transportation fuels from 2015 levels by 2025, has had an increasing impact on
our bio-based diesel pricing. 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. The following table shows for 2019, 2020
and 2021 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-20211231_g4.jpg]]

At the beginning of 2021, the value of RINs, as reported by OPIS, to the average
B100 spot price of a gallon of biodiesel was $1.48 per gallon. The value of RINs
to the average B100 spot price of a gallon of biodiesel grew to $2.26 per gallon
at the end of December 2021. It reached a high of $3.07 per gallon of biodiesel
in June 2021 and a low of $1.40 per gallon in January 2021. D4 RIN values
trended higher throughout 2021, 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 translated into reduced volume obligations for Obligated Parties under the
RFS. We enter into forward contracts to sell RINs and we use risk management
position limits that are intended to manage RIN exposure.

During 2021 and 2020, feedstock expense accounted for 87% and 80% of our direct
production cost, respectively. Methanol expense accounted for 3% and 3%,
respectively, and chemical catalysts for 2% and 3%, respectively of our costs of
goods sold.
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Feedstocks for bio-based diesel production, such as distillers corn oil, used
cooking oil, inedible 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 and 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.

In 2021 and 2020, 78% and 65% of the raw materials used in our operations, respectively, consisted of distiller corn oil, used cooking oil and inedible animal fats, with the remainder coming from vegetable oils virgins.

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
2019 to December 2021. 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-20211231_g5.jpg]]


(1)Used cooking oil prices ("UCO") are based on the monthly average of the daily
low sales price of C.I. adjusted Gulf of Mexico yellow grease as reported by The
Jacobsen for the period of January 1, 2019 through June 30, 2019. The prices
from July 1, 2019 through December 31, 2021 are based on the monthly average of
the daily low sales price of Gulf of Mexico used cooking oil (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
daily low prices of Missouri River choice white grease as reported 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 CBOT
(based on 7.5 pounds per gallons).

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 and soybean oil on a per gallon basis compared to the per gallon sale
price data for biodiesel, and the spread between biodiesel and each of soybean
oil and choice white grease from January 2019 to December 2021.
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                    [[Image Removed: regi-20211231_g6.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 sale price of the nearby soybean oil contract as reported by CBOT (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)Distiller corn oil prices are based on the monthly average of the daily low
price of Illinois distillers corn oil as reported by the Jacobsen (based on 8.2
pounds per gallon)
(5)Spread between biodiesel price and choice white grease price.
(6)Spread between biodiesel price and soybean oil (crude) price.
(7)Spread between biodiesel price and distillers corn oil price.

During 2021, NY Harbor ULSD prices ranged from a low of $1.46 per gallon at the
start of January to a high of $2.59 per gallon in October with an average price
for the year of $2.07 per gallon. COVID Omicron variant severely shocked the
market in November into mid-December, but by late December demand destruction
concerns abated and employment numbers continued to improve. Despite these
indications, OPEC+ has remained at its set re-supply level rather than increase
supply, and U.S. shale producers continue to slowly add new oil well rigs.
Commodity prices have broadly rallied and relatively higher levels of inflation
have supported the broader commodity asset class. In November, the EPA released
proposed RVO with a 2022 increase in biomass based diesel demand providing
support for 2022 D4 RIN values.

The U.S. biodiesel prices increased significantly during 2021. The average U.S.
biodiesel price, as indicated by the Chicago SME B100 price reported by OPIS,
was $5.23 per gallon for 2021. During 2021, B100 prices reached a high of $6.15
in June and a low of $3.72 in January.

CBOT soybean oil prices ranged from a low of $0.42 per pound in January to a
high of $0.72 per pound in June with an average price for the year of $0.58 per
pound. The soybean complex rebounded from the November Omicron variant scare and
ended the year higher as South American dry weather raised concerns about
production and the United States faced a lysine shortage for animal feed,
creating demand for soybean meal. Choice white grease prices ranged from a low
of $0.30 in January to a high of $0.64 per pound in August with an average price
for the year of $0.49 per pound.
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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 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 NY
Harbor ULSD and CBOT 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 are the primary feedstocks we used to produce bio-based diesel in
2019, 2020 and 2021. 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 CBOT soybean oil and New York Mercantile Exchange 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 CBOT 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 New York Mercantile Exchange NY Harbor ULSD. However, price movements
on these products are not highly correlated to price movements 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. We also obtain RINs from third party transactions which we
hold for resale. There is no effective 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 and thus the
offsetting gain or loss will be recognized in a later accounting period.

We had risk management gains of $2.4 million from our derivative financial
instrument trading activity for the year ended December 31, 2021, compared to
risk management gains of $36.9 million for the year ended December 31, 2020.
Changes in the value of these futures or swap instruments are reflected in
current income or loss, generally within our cost of goods sold. In general,
risk management gains and losses resulting from fluctuations in feedstock and
energy prices are largely offset by an inverse gain or loss on physical product
purchases and sales.

Increasing importance of RD

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,
and a drop-in replacement, to petroleum diesel. RD is a relatively new fuel but
has
                                       40
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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 2020 and in 2021. 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 a fire 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
bio-based diesel. 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 have upgraded our Newton and
Danville biorefineries 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 20% of the annual RVO of an Obligated Party 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. See chart below for
comparison between actual RIN generation and RVO level for advanced biofuel as
set by the EPA.

                        RIN Generation (Advanced           Finalized RVO level for          Estimated Advanced Biofuel
      Year              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. Bio-based diesel
production and/or imports, as reported by EMTS, were 2.65 billion gallons in
2019, 2.88 billion gallons in 2020, and 3.09 billion gallons in 2021.

According to the U.S. Energy Information Administration, the amount of imported
biodiesel gallons qualifying under RFS2 increased from 423.7 million gallons in
2019 to approximately 476.4 million gallons in 2020. The amount of imported
biodiesel was at approximately 552.6 million gallons through November 30, 2021.

Components of income and expenses

Continuous operations:

We derive revenue from our Biodiesel segment from the following sources:

                                       41
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•sales of biodiesel and RD produced at our facilities, including RINs and LCFS
credits, transportation, storage and insurance costs to the extent paid for by
our customers;

•the resale of finished bio-sourced diesel, RD, RIN and LCFS credits acquired from third parties, and raw materials acquired from others;

•revenues from our sales of heating oil and ultra-low sulfur diesel, or ULSD, acquired from third parties, as well as the sale of these petroleum-based products blended with bio-based diesel;

•sales of glycerine, other co-products of the bio-sourced diesel production process; and

• Incentive payments from federal and state governments, including BTC, and the USDA Advanced Biofuel Program.

We derive revenue from our Services segment from the following sources – primarily internal:

•fees received from operations management services we provide for biodiesel production facilities, generally based on production rates and profitability of the managed facility; and

•amounts received for services we rendered in our role as general contractor and construction manager for upgrades and repairs to our biodiesel production facilities.

Cost of goods sold for our Biodiesel segment includes:

•with respect to our production facilities, expenses incurred for feedstocks,
catalysts and other chemicals used in the production process, leases, utilities,
depreciation, salaries and other indirect expenses related to the production
process, and, when required by our customers, transportation, storage and
insurance;

•with respect to fuel and RINs acquired from third parties, the purchase price
of bio-based diesel and RINs on the spot market or under contract, and related
expenses for transportation, storage, insurance, labor and other indirect
expenses;

•adjustments made to reflect the decline in cost or market value of our finished goods inventory, including RIN acquired from third parties;

•expenses for the purchase of domestic fuel oil and ULSD acquired from third parties; and

•changes during the applicable accounting period in the market value of derivative and hedging instruments, such as exchange-traded contracts, related to feedstocks and basic petroleum products.

The cost of goods sold for our Services segment includes:

•with respect to our facility management and operations activities, primarily
salary expenses for the services of management employees for each facility and
others who provide sourcing, marketing and various administrative functions; and

•with respect to our construction management services activities, primarily our
payments to subcontractors constructing the production facility and providing
the bio-based diesel processing equipment, and, to a much lesser extent,
salaries and related expenses for our employees involved in the construction
process.

Selling, general and administrative expenses include expenses generally involving general corporate functions in our domestic and international offices, as well as research and development activities.

Impairment of property, plant and equipment represents non-cash impairment charges of certain property, plant and equipment.

Other income (expense), net is primarily comprised of the gain (loss) on debt
extinguishment, gain on lease termination, interest expense, interest income and
other non-operating items.

Discontinued Operations:

There was no activity classified as discontinued operations for the fiscal year
ended December 31, 2021 or 2020. Net loss from discontinued operations for the
fiscal year ended December 31, 2019 was attributable to costs that primarily
relate to certain pre-existing contractual agreements and legal and professional
fees related to the disposition and wind-down of our Life Sciences operations.

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
                                       42
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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 believe that the following critical accounting policies affect our most important judgments used in the preparation of our consolidated financial statements:

Income taxes

Our income tax provision, deferred income tax assets and liabilities, and
liabilities for unrecognized tax benefits represent the Company's best estimate
of current and future income taxes to be paid. We are subject to income taxes in
the U.S. and several non-U.S. jurisdictions. Our annual effective tax rate is
based on income tax laws, statutory tax rates, taxable income levels and tax
planning opportunities available in various jurisdictions where we operate.
These tax laws are complex and require significant judgment to determine the
consolidated provision for income taxes. Changes in tax laws, statutory tax
rates, and estimates of our future taxable income levels could result in actual
realization of deferred taxes being materially different from amounts provided
for in the consolidated financial statements.

Deferred income taxes represent temporary differences between the tax and the
financial reporting basis of assets and liabilities, which will result in
taxable or deductible amounts in the future. Deferred tax assets also include
loss carryforwards and tax credits. We assess deferred tax assets on an
individual jurisdiction basis, and are regularly assessed for the likelihood of
recoverability from estimated future taxable income, reversal of deferred tax
liabilities and tax planning strategies. To the extent we determine that it is
more likely than not a deferred income tax asset will not be realized based on
an assessment of positive and negative evidence including historical earnings,
future taxable income that incorporates prudent and feasible tax planning
strategies, and the scheduled reversals of deferred tax assets and liabilities,
a valuation allowance is established. The recoverability analysis of the
deferred income tax assets and the related valuation allowances requires
significant judgment and relies on estimates. Changes in tax statutes, the
timing of deductibility of expenses or expectations for future performance could
result in material adjustments to our valuation allowances, which would increase
or decrease tax expense.

The indefinite reinvestment in the earnings of non-US subsidiaries assertion is
determined by management's judgment about and intentions concerning future
investment in operations. Management's judgment is that we are not indefinitely
reinvested in the undistributed earnings of our non-US subsidiaries at December
31, 2021. The assertion regarding undistributed non-US earnings does not have a
material impact on our consolidated financial statements.

Revenue recognition

Revenue is recognized when a customer obtains control of promised goods or
services in an amount that reflects the consideration the entity expects to
receive in exchange for those goods or services. We have generally a single
performance obligation in our arrangements with customers. We believe for most
of our contracts with customers, control is transferred at a point in time,
typically upon delivery to the customers. When we perform shipping and handling
activities after the transfer of control to the customers (e.g., when control
transfers prior to delivery), they are considered as fulfillment activities, and
accordingly, the costs are accrued for when the related revenue is recognized.
Taxes collected from customers relating to product sales and remitted to
governmental authorities are excluded from revenues. We generally expense sales
commissions when incurred. We record these costs within selling, general and
administrative expenses.

Revenues associated with governmental incentive programs are recognized when the
amount to be received is determinable, collectability is reasonably assured and
the sale of product giving rise to the incentive has been recognized. Our
revenue from governmental incentive programs is generally comprised of amounts
received from the USDA Advanced Biofuel Program, or the USDA Program, and the
biodiesel tax credit. In connection with the biodiesel tax credit, we file a
claim with the Internal Revenue Service for a refund of excise taxes each week
for gallons we have blended to B99.9 and sold. The biodiesel tax credit provided
a $1.00 refundable tax credit per gallon.


                                       43
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Operating results

Closed fiscal years December 31, 2021 and December 31, 2020

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

                                                          Twelve Months Ended
                                                              December 31,
                                                         2021             2020
Gallons sold                                               621.3            650.5
Average bio-based diesel price per gallon            $      4.46      $      2.91

Revenues                                             $ 3,244,050      $ 2,137,148
Costs of goods sold                                    2,874,157        1,868,794
Gross profit                                             369,893          268,354
Selling, general and administrative expenses             140,511          

119,302

Gain on disposal of property, plant and equipment (1,462)

(205)

Impairment of property, plant and equipment                7,359           

22,404

Income from operations                                   223,485          

126,853

Other income (expense), net                              (24,145)           

1,889

Income tax benefit (expense)                              14,479           (5,929)

Net income                                               213,819          122,813

Effects of participating share-based awards               (2,128)          

(2,398)

Net income available to ordinary shareholders $211,691 $120,415


Results of Operations:

Revenues. Our total revenues increased $1.1 billion, or 52%, to $3.2 billion for
the year ended December 31, 2021, from $2.1 billion for the year ended
December 31, 2020. The significant increase in revenue was primarily
attributable to a substantial increase in the average bio-based diesel price per
gallon. In 2021, ULSD prices averaged $2.07 per gallon, compared to $1.25 per
gallon in 2020. The significant increase in ULSD prices resulted from general
market optimism and improving demand stemming from the easing of lockdown
measures in the United States and internationally, particularly when compared to
2020 where prices hit historical lows due to the onset of the COVID-19 pandemic
and strict lockdowns and only slowly recovered. RIN values trended higher
throughout 2021 along with an increase in feedstock pricing relative to ULSD
values as seen in the heating oil to soybean oil spread. As a result of these
factors, our average selling price significantly increased by $1.55, or 53%, in
2021 compared to 2020. Sales of LCFS credits and separated RINs were $158.9
million and $355.5 million for the year ended December 31, 2021 compared to
$131.3 million and $129.7 million for the year ended December 31, 2020. The
increase in total revenues was partially offset by a decrease in total gallons
sold of 29.2 million gallons, or 4%, from 2021 compared to 2020, as a result of
our focus on product mix and optimization of gallons sold.

The increase in the average sales price contributed to a $1.0 billion increase
in revenues for the year ended December 31, 2021, when applied to the number of
gallons sold in 2020. The increase in RIN prices also positively affected
separated RIN sales resulting in a revenue increase of $225.8 million, or an
increase of 174% for the year ended December 31, 2021, compared to 2020. The
decrease in gallons sold for the year ended December 31, 2021, accounted for a
revenue decrease of $130.2 million, using the average selling price for
bio-based diesel for the current period. Also negatively affecting revenues was
the $14.5 million decrease in government incentives revenue in 2021, caused by
lower BTC revenues due to lower gallons sold.

Costs of goods sold. Our costs of goods sold increased $1.0 billion, or 54%, to
$2.9 billion for the year ended December 31, 2021, from $1.9 billion for the
year ended December 31, 2020. Costs of goods sold as a percentage of revenues
were 89% and 87% for the years ended December 31, 2021 and 2020, respectively.
The increase in costs of goods sold was primarily driven by significantly higher
feedstock costs in the year ended December 31, 2021 compared to 2020, as
described below. The increase was also driven by lower risk management gains of
$2.4 million for the year ended December 31, 2021, compared to gains of $36.9
million in 2020.

We experienced significantly higher costs across all of our feedstocks in the
year ended December 31, 2021. Average prices for low carbon feedstocks used in
our production process for the years ended December 31, 2021 and December 31,
2020, were $0.52 and $0.29 per pound, respectively. Average soybean oil costs
for the years ended December 31, 2021 and December 31, 2020 were $0.60 and $0.32
per pound, respectively. Average canola oil costs for the years ended
December 31,
                                       44
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2021 and December 31, 2020 were $0.62 and $0.32 per pound, respectively. Average
distillers corn oil costs were $0.52 and $0.27 per pound, respectively, for the
years ended December 31, 2021 and December 31, 2020.

Selling, general and administrative expenses. Our selling, general and
administrative, or SG&A, expenses increased $21.2 million, or 18%, to $140.5
million for the year ended December 31, 2021, compared to $119.3 million for the
year ended December 31, 2020. As a percentage of revenues, our SG&A expenses
were 4.3% and 5.6% for 2021 and 2020, respectively. The $21.2 million increase
year over year resulted primarily from higher employee related compensation and
benefits and legal and professional expenses.

Impairment of property, plant and equipment. In 2021, we recorded a property,
plant and equipment impairment of approximately $7.4 million, related to certain
biodiesel 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. During 2020 we recorded $22.4 million, of which
$19.0 million relates to certain equipment that we determined will not be used
in future RD production expansions. The remaining impairment was related to
impairment charges against certain biodiesel property, plant and equipment as
the carrying amounts of these assets were deemed not recoverable given the
assets' economic obsolescence identified during the period.

Other income (expense), net. Other expense was $24.1 million for the year ended
December 31, 2021, compared to other income of $1.9 million for the year ended
December 31, 2020. Other income (expense) is primarily comprised of interest
expense, interest income, gain (loss) on debt extinguishment, gain on
termination, and other non-operating items. In 2021, we had interest expense of
$21.9 million primarily due to the issuance of our Green Notes, compared to
interest expense of $7.9 million for the same period in 2020. We also had a $4.4
million loss on debt extinguishment and in 2021 compared to a $1.8 million gain
on debt extinguishment in the same period in 2020. We had a gain on lease
termination for the year ended of December 31, 2020 of $4.5 million.

Income tax benefit (expense). Income tax benefit recorded during the year ended
December 31, 2021 was $14.5 million, compared to an income tax expense of $5.9
million for the year ended December 31, 2020, the change for which is primarily
resulting from the $6.1 million release of a valuation allowance in a non-US
jurisdiction due to a change in judgement about our ability to realize the
benefit of deferred tax assets, and the $13.1 million release of a valuation
allowance in the US due to the recording of deferred tax liabilities in the
acquisition of Amber Resources that will offset future deferred tax assets. At
December 31, 2021 and December 31, 2020, we had net deferred income tax assets
of approximately $394.4 million and $381.2 million, respectively, with a
valuation allowance of $392.9 million and $387.8 million, respectively. As a
result, our effective tax rate was (7.3)% and 4.6% for the years ended
December 31, 2021 and 2020, respectively.

Effects of participating share-based awards. Effects of participating restricted
stock units was $2.1 million and $2.4 million for the years ended December 31,
2021 and 2020, respectively.

Closed fiscal years December 31, 2020 and December 31, 2019

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

                                       45
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                                                                           Twelve Months Ended
                                                                              December 31,
                                                                        2020                 2019

Gallons sold                                                             650.5                700.3

Average bio-based diesel price per gallon (ASP with BTC net profit allocated to the corresponding period of $3.21 for the year ended December 31, 2019)

                                      $      

2.91 $3.62

Revenues from continuing operations                                $ 2,137,148          $ 2,625,216
Costs of goods sold from continuing operations                       1,868,794            2,111,324
Gross profit from continuing operations                                268,354              513,892
Selling, general and administrative expenses                           119,302              118,209

Gain on disposal of property, plant and equipment                         (205)                   -
Impairment of property, plant and equipment                             22,404               12,208
Income from operations                                                 126,853              383,475
Other income (expense), net                                              1,889              (11,550)
Income tax benefit (expense)                                            (5,929)                 570

Net income from continuing operations                                  122,813              372,495

Net loss from discontinued operations                                        -               (9,667)
Net income                                                             122,813              362,828

Effects of Participating Share-Based Awards on Continuing Operations

                                                              (2,398)              (8,238)

Net income from continuing operations available to ordinary shareholders

                                                       $   120,415          $   364,257
Net loss from discontinued operations available to common
stockholders                                                       $         -          $    (9,667)


Continuing Operations:

Revenues. Our total revenues decreased $488.1 million, or 19%, to $2.1 billion
for the year ended December 31, 2020, from $2.6 billion for the year ended
December 31, 2019. Due to the retroactive reinstatement of the BTC in December
2019 for the 2018-2019 periods, in the fourth quarter of 2019, we recognized
$490.6 million of BTC government incentives revenue net of sharing with
customers, $227.9 million of which was attributable to sales in 2018 and
$262.7 million of which was attributable to sales in 2019. In contrast, 2020
total revenues only included the 2020 BTC. The decrease in total revenues was
also driven by a decrease in total gallons sold of 49.8 million gallons, or 7%,
and a decrease in average selling price including the BTC allocation to the
period in which the gallons were sold of $0.30. Sales of LCFS and separated RINs
were $131.3 million and $129.7 million for the year ended December 31, 2020 as
compared to $106.5 million and $98.3 million for the year ended December 31,
2019 offset the overall decrease in biomass-based diesel revenues in 2020.

Biomass-based diesel revenues including government incentives decreased $487.8
million, or 19%, to $2.1 billion during the year ended December 31, 2020, from
$2.6 billion for the year ended December 31, 2019. The decrease in revenues was
largely attributable to the recognition in the fourth quarter of 2019 of BTC
revenue relating to operations in both 2019 and 2018, while 2020 only included
BTC revenue related to 2020 operations. Gallons sold decreased 49.8 million, or
7%, to 650.5 million during the year ended December 31, 2020, compared to 700.3
million during the year ended December 31, 2019. The decrease in gallons sold
for the year ended December 31, 2020 accounted for a revenue decrease of $144.9
million using 2020 average sales pricing. Our average biomass-based diesel sales
price per gallon including the BTC net benefits decreased $0.71, or 20%, to
$2.91 during the year ended December 31, 2020 compared to $3.62 during the year
ended December 31, 2019. When allocating the BTC net benefits to the period in
which the associated gallons were sold, our average biomass-based diesel sales
price decreased $0.30, or 9%, compared to $3.23 for 2019. This decrease was
mainly due to the lower energy prices in 2020 as a result of the COVID-19
pandemic and OPEC production policies. The decrease in average sales price with
allocated BTC net benefits from 2020 to 2019 contributed to a $210.1 million
revenue decrease when applied to the number of gallons sold during 2019.

Costs of goods sold. Our costs of goods sold decreased $242.5 million, or 11%,
to $1.9 billion for the year ended December 31, 2020, from $2.1 billion for the
year ended December 31, 2019. Costs of goods sold as a percentage of revenues
were 87% and 80% for the years ended December 31, 2020 and 2019, respectively.

Biomass-based diesel costs of goods sold as a percentage of revenues increased
in 2020 mainly due to a 7% decrease in gallons sold as well as an increase in
average costs for feedstocks. Average low carbon feedstocks prices for the years
ended
                                       46
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December 31, 2020 and December 31, 2019, were $0.29 and $0.26 per pound,
respectively. Average soybean oil costs for the years ended December 31, 2020
and December 31, 2019 were $0.32 and $0.31 per pound. We recorded risk
management gains of $36.9 million from our derivative financial instrument
activity in 2020, compared to risk management losses of $28.9 million for 2019,
contributing to a reduction in the overall costs of goods sold. Our risk
management gains and losses are directly impacted by any volatility in the
energy and commodities market.

Selling, general and administrative expenses. Our selling, general and
administrative, or SG&A, expenses increased $1.1 million, or 1%, to $119.3
million for the year ended December 31, 2020, compared to $118.2 million for the
year ended December 31, 2019. As a percentage of revenues, our SG&A expenses
were 5.6% and 4.5% for 2020 and 2019, respectively. The increase year over year
was driven largely by lower total revenues in 2020.

Impairment of property, plant and equipment. We recorded a property, plant and
equipment impairment in 2020 of approximately $22.4 million, of which $19.0
million relates to certain equipment that we determined will not be used in
future RD production expansions. In addition, we recorded impairment charges
against certain biodiesel property, plant and equipment as the carrying amounts
of these assets were deemed not recoverable given the assets' economic
obsolescence identified during the period. During 2019, we recorded a $12.2
million impairment charge mainly due to the closure of the New Boston refinery.

Other income (expense), net. Other income was $1.9 million for the year ended
December 31, 2020, compared to other expense of $11.6 million for the year ended
December 31, 2019. Other income (expense) is primarily comprised of interest
expense, gain on debt extinguishment, gain on lease termination, and other
non-operating items. In 2020, we had a gain on lease termination of $4.5 million
related to the termination of a terminal lease at our non-operational New
Orleans facility compared to the absence of lease terminations in 2019. We also
had a $1.8 million gain on debt extinguishment and in 2020 compared to a $0.5
million gain on debt extinguishment, a difference of $1.3 million. The $14.3
million net increase in other income (expense) in 2020 was primarily due to the
items noted above as well as lower interest expense of $5.3 million between the
periods.

Income tax benefit (expense). Income tax expense recorded during the year ended
December 31, 2020 was $5.9 million, compared to income tax benefit of $0.6
million for the year ended December 31, 2019, with the increase in expense
primarily resulting from additional tax expense incurred in connection with the
repurchase of a greater amount of our 2016 convertible debt in 2020 compared to
repurchases in 2019, and taxable profits in our foreign operations. At December
31, 2020 and 2019, we had net deferred income tax assets of approximately $381.2
million and $343.9 million, respectively, with a valuation allowance of $387.8
million and $350.9 million, respectively. As a result, our effective tax rate
was 4.6% and 0.2% for the years ended December 31, 2020 and 2019, respectively.

Effects of participating share-based awards. Effects of participating restricted
stock units was $2.4 million and $8.2 million for the years ended December 31,
2020 and 2019, respectively.

Discontinued Operations:

For the year ended December 31, 2020, there was no activity classified as
discontinued operations. Net loss from discontinued operations for the year
ended December 31, 2019 of $9.7 million was attributable to the research and
development activities at the REG Life Sciences business and costs to sell the
business.

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.
                                       47
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                                                                                                       Year ended                                                                                      Year ended
(In thousands)                                                                                        December 31,                                                                                    December 31,
                             1Q-2021           2Q-2021            3Q-2021           4Q-2021               2021                1Q-2020           2Q-2020           3Q-2020           4Q-2020               2020
Net income (loss)          $ 39,222          $  79,516          $ 42,467          $ 52,614          $      213,819          $ 74,667          $ (1,685)         $ 22,663          $ 27,168          $      122,813
Adjustments:
Interest expense              1,117              4,271             8,619             7,942                  21,949             2,946             1,664             1,544             1,757                   7,911
Income tax (benefit)
expense                       1,633              2,250               652           (19,014)                (14,479)            1,331             1,630             1,046             1,922                   5,929
Depreciation                 10,915             11,088            11,098            10,329                  43,430             8,934             9,103             9,388             9,890                  37,315
Amortization of intangible
and other assets                671                918               876             1,010                   3,475               353               318               591               510                   1,772
EBITDA                       53,558             98,043            63,712            52,881                 268,194            88,231            11,030            35,232            41,247                 175,740

Gain on sale of assets            -                (39)                -            (1,423)                 (1,462)                -              (187)                -               (18)                   (205)

(Gain) loss on debt
extinguishment                1,922              2,527                 -                 -                   4,449            (1,172)             (619)              (18)                -                  (1,809)
Gain on lease termination         -                  -                 -                 -                       -                 -            (4,459)                -                 -                  (4,459)
Interest income                (652)              (399)             (424)             (592)                 (2,067)                -              (550)             (777)             (898)                 (2,225)
Other (income) expense,
net                          (1,440)              (543)             (258)            2,055                    (186)              304            (1,665)             (817)              870                  (1,308)
Impairment of assets            822                916             3,498             2,123                   7,359                 -                 -            19,256             3,148                  22,404

Executive severance               -                663                 -                 -                     663                 -                 -                 -                 -                       -
Stock compensation expense    1,844              1,962             1,964             2,227                   7,997             1,367             2,611             1,811             1,909                   7,698

Adjusted EBITDA            $ 56,054          $ 103,130          $ 68,492          $ 57,271          $      284,947          $ 88,730          $  6,161          $ 54,687          $ 46,258          $      195,836


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
or any other performance measure derived in accordance with GAAP, or as
alternatives 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;

•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 other 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 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.
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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. 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 our Geismar, Louisiana
biorefinery.

Sources of liquidity. At December 31, 2021 and 2020, the total of our cash and
cash equivalents and marketable securities was $956.2 million and $354.0
million, respectively. At December 31, 2021, we had total assets of $2,558.9
million, compared to $1,461.4 million at December 31, 2020. At December 31,
2021, we had term debt before debt issuance costs of $550.0 million, compared to
term debt before debt issuance costs of $67.0 million at December 31, 2020. Our
debt has terms which may subject us to various financial covenants. We were in
compliance with all financial covenants associated with the borrowings as of
December 31, 2021.

Our term debt (in thousands) is as follows:

                                                                          December 31,
                                                                     2021               2020

5.875% Senior Secured Green Notes, due 2028                      $ 550,000  

$ – 4.00% Convertible Senior Notes, $59,619 capital insured at December 31, 2020due in June 2036

                                               -             47,057

REG Ralston term loan, variable interest rate LIBOR plus 2.25%, maturing in October 2025

                                               -             13,241

REG Capital term loan, fixed interest rate of 3.99%, maturing in
January 2028

                                                             -              6,665
Other                                                                    -                 14
Total debt before debt issuance costs                            $ 550,000  

$66,977

Senior Convertible Bonds 2036

In the first half of 2021, we received notices of conversions related to the
2036 Convertible Senior Note in total principal amounts of $59.6 million. We
elected to settle the respective principal balance of $59.6 million in cash and
settle the conversion premium by issuing 4,684,263 shares of common stock from
treasury stock. The 2036 Convertible Senior Notes were fully converted as of
June 2021 and all obligations thereto have been satisfied and discharged.

During 2020, we used the remaining $67.8 million under our 2019 Program to
repurchase $27.8 million principal amount and approximately $8.1 million under
our 2020 Program to repurchase $2.2 million principal amount of the 2036
Convertible Senior Notes, reflecting the conversion premium, after tax impact,
of $52.7 million and gains on debt extinguishment of $1.8 million.

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

the 31st of December,

                                                                2021        

2020

    Amount outstanding under lines of credit                 $       -     

$-

Maximum available to be borrowed under lines of credit $249,666 $149,666



On September 30, 2021, the Company 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. Prior to giving effect to this amendment, as of December
31, 2020, the subsidiary borrowers would not have been able to satisfy that
fixed charge coverage ratio if availability was less than 10% of the maximum
commitment.

Cash flow. The following table presents information regarding our cash flows and our cash, cash equivalents and restricted cash for the years ended December 31, 20212020 and 2019:

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                                                                             Year Ended
                                                                            December 31,
                                                          2021                  2020                  2019
                                                                           (in thousands)
Cash provided from (used in) operations               $ (16,241)         $       543,430          $ (46,708)
Cash provided from (used in) investing activities      (369,309)                (333,910)             5,670
Cash provided from (used in) financing activities       799,626                 (175,114)           (32,052)

Net change in cash, cash equivalents and restricted cash

                                                    414,076                   34,406            (73,090)
Cash, cash equivalents and restricted cash end of
period                                                $ 501,871          $  

88 218 $53,436


In 2021, we used $16.2 million of cash for operations, compared to $543.4
million provided from operations in 2020 and $46.7 million used in operations in
2019. Cash used in operations for 2021 was primarily driven by a $235.5 million
build in inventory, compared to a build of $47.9 million in 2020, and a draw of
inventory of $7.2 million in 2019. The cash used in operations in 2021 was
partially offset by net income from continuing operations of $213.8 million,
compared to net income of $122.8 million in 2020, and $372.5 million in 2019. In
2020, cash provided from operating activities was impacted by a reduction of
accounts receivables of $715.7 million largely due to the receipt of cash
related to the 2018 and 2019 BTC, compared to the large accounts receivable
build of $786.2 million in 2019, primarily due to the receivables related to the
2018 and 2019 BTC. In 2020, the cash provided from operations was partially
offset by a reduction of accounts payable of $266.7 million, also largely
related to the payments to vendors and customers for BTC sharing agreements.
This was compared to the large build of accounts payable of $279.4 million in
2019 related to the sharing agreements for the BTC.

We had cash used in investing activities of $369.3 million, $333.9 million and
cash provided from investing activities of $5.7 million for 2021, 2020 and 2019,
respectively. In 2021, the cash used was due primarily to the net marketable
securities purchases of $193.3 million, compared to net purchases of $270.5
million in 2020 and net maturities of $51.1 million. Cash paid for property
plant and equipment of $99.5 million in 2021 compared to $63.6 million in 2020,
and $42.5 million in 2019. Contributed to the cash used in 2021 was the cash
paid for the acquisition of Amber Resources of $76.5 million, compared to no
cash paid for acquisitions for 2020 or 2019.

We had net cash flows provided from financing activities of $799.6 million in
2021, cash used in financing activities of $175.1 million and $32.1 million for
2020 and 2019, respectively. Cash provided from financing activities in 2021 was
primarily due to cash received from the net proceeds of $535.4 million from the
Green Notes issuance in May 2021 and $365.3 million from the equity offering in
March 2021. Partially offsetting the cash flows provided from financing
activities in 2021 and the primary driver for the cash used in financing
activities for 2020 and 2019 was repayments on debt of $78.0 million in 2021,
$92.3 million in 2020 and $80.4 million in 2019. In 2020, cash used in financing
activities was also driven by the net repayments on revolving lines of credit of
$77.0 million compared to net borrowings on the lines of credit in 2019 of
$62.9 million.

Capital expenditures: During 2021, our capital expenditures were $99.5 million
involving various plant optimization projects and the Geismar improvement and
expansion. During 2020, our total capital expenditures were $63.6 million
involving various project, the majority of which were at the Emden (Germany),
Seneca, and Geismar facilities.

In October 2020, we announced that we 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 and capacity
expansion. The Geismar project is expected to take total annual site production
capacity from 90 million to 340 million gallons, enhance existing operations and
improve operational reliability and logistics. The improvement and expansion
project 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, which is financed through a combination of cash on hand and
marketable securities resulting from our offerings of common stock that closed
in March 2021 and proceeds from our issuance of Green Notes that closed in May
2021 or from borrowings under our credit facilities. In connection with the
planned improvements and expansion, we have entered into construction and marine
terminal lease agreements with total commitments as of December 31, 2021 of
$500.9 million. There can be no guarantee that we will be able to 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 will be approximately 15%
in 2021, 45% in 2022, with the remainder of spend slated for 2023. At the end of
December 2021, almost all of the long lead equipment for the project had been
purchased.

In addition, our budgeted capital expenditures for all other projects for 2022
are approximately $90.0 million, which includes investments in low cost, high
return projects, environmental, health and safety projects and growth projects.
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Contractual obligations:

See Notes 10, 11, 13 and 18 to Section 8 for more details on our contractual obligations.

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 that affect us, see “Note 2 – Summary of significant accounting policies” to our consolidated financial statements.

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