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Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Thank you for standing by, and welcome to the Delek US 4Q Earnings Call. [Operator Instructions] I would like to hand the conference over to your speaker today, Blake Fernandez. Thank you. Please go ahead.
Thank you and good morning. I would like to thank everyone for joining us on today's conference call and webcast to discuss Delek US Holdings' fourth quarter 2019 financial results.
Joining me on today's call is Uzi Yemin, our Chairman, President and CEO; Assi Ginsburg, EVP and CFO; Louis LaBella, EVP and President of Refining as well as other members of our management team. The presentation materials used during today's call can be found on the Investor Relations section of the Delek US website.
As a reminder, this conference call may contain forward-looking statements as that term is defined under the federal securities laws. Please see Slide 2 for the safe harbor statement. In addition to reporting financial results in accordance with generally accepted accounting principles or GAAP, we report certain non-GAAP financial results. Investors are encouraged to review the reconciliation of these non-GAAP financial measures to the comparable GAAP results, which can be found in the press release, which is posted on the Investor Relations section of our website.
Our prepared remarks are being made, assuming that earnings press release has been reviewed, and we are covering less segment and market information that is incorporated into the fourth quarter press release. On today's call, Assi will review the financial performance, and Louis will cover operations for the quarter, then Uzi will offer a few closing strategic comments.
With that, I'll turn the call over to Assi.
Thank you, Blake. Financial results were enhanced by Biodiesel Tax Credit, which was approved by Congress retroactively for 2018 and 2019. You can see on Slide 3, on an adjusted basis for the fourth quarter 2019, Delek US reported a net loss of $8.5 million or $0.11 per share, compared to net income of $165.7 million or $2.03 per diluted share in the prior year period.
Our adjusted EBITDA was $66 million in the fourth quarter 2019 compared to $287.4 million in the prior year period. I would like to point out, the 2018 portion of the BTC is reflected in the adjusted results for 2018. Adjusted results this quarter included $31.1 million of benefit from the BTC for the first three quarters of 2019. However, this was partially offset by $23.9 million of after-tax headwinds. These include environmental and employee expenses and operational factors, such as accelerated maintenance and the product inventory builds along with unplanned expense and repairs. We expect many of these items to normalize in the future. Finally, we had $39 million of hedging losses in the quarter of which approximately $17 million was unrealized .
On Slide 4, we provided the cash flow waterfall, in the fourth quarter of 2019, we generated cash flow for approximately $127 million from continuing operation, which includes a working capital detriment of $10 million. Cash capital expenditure was $107 billion, excluding a $51.5 million contribution to Wink to Webster. In February, we contributed 15% Wink to Webster investment, totaling $145.6 million to a new JV with Wink to Webster partner.
With the strengths of our combined investments, the JV successfully secured project financing. The new JV structure will benefit our financial position and results in an immediate $69 million cash distribution of previously invested capital, which future expected Wink to Webster capital requirements finance at 100%. As a reminder, we expect total capital requirements for Wink to Webster of $340 million to $380 million.
Slide 5, highlights our capitalization. We ended the fourth quarter with $955 million of cash on a consolidated basis and $1.1 billion of net long term debt. Excluding the net debt of Delek Logistics of $828 million, we had a net long-term debt of approximately $284 million as of December 31, 2019.
On Slide 6 we’ve provided first quarter guidance, it may be helpful in modeling the company. With that, I would turn the call over to Louis to discuss the operation.
Thanks, Assie. During the fourth quarter, our total refining system, crude oil throughput, was approximately 272,000 barrels per day, which reflects downtime at Krotz Springs where we elected to accelerate maintenance on the reformer. I would also point out that Big Springs sales volumes were reduced to build product inventory in advance of the turnaround in January.
As shown on Slide 6, for the first quarter 2020, we expect crude throughput to average between 245,000 barrels per day and 255,000 barrels per day. This reflects a major turnaround at Big Springs refinery. On Slide 7, I want to highlight our capital spending, capital expenditures during the fourth quarter were $103 million compared to $106 million in the fourth quarter of 2018. Our full year 2019 capital program was $428 million. This is expected to decline 24% to approximately $325 million this year. This amount excludes the Wink to Webster connector where financing will be provided by the joint venture.
The 2020 capital program is broken down by segments as followed. $205 million is our refining segment; $23 million is our logistics segment; $26 million is our retail segment; and $72 million at the corporate level. The Big Spring Gathering system is included at the corporate level and will comprise approximately a $52 million this year. As a reminder, CapEx excludes JV investments like Red River and Wink to Webster.
Finally, I would like to highlight that we are increasing our EBITDA forecast for the Big Spring Gathering System in 2022, by $5 million to a range of $45 million to $55 million.
Next, I will turn the call over to Uzi for closing comments.
Thank you, Louis, and good morning everybody.
Our company has strong financial performance in 2019, delivering $696 million of EBITDA and $659 million of adjusted EBITDA in an environment that where Midland discounts evaporated. During the year in refining, we brought online the alkylation unit at Krotz Springs will performed a turnaround and completed vacuum tower work at El Dorado. This facility is not positioned to run higher utilization rates with improve distillate yield and has bare crude optionality. In retail, we continued to high grade our portfolio through select asset sales, while adding new stores to the market. Renewable continues to be a growth area where we acquired our third biodiesel plant in October. This business tends to benefit from the recent passage of the biodiesel tax credit, which was extended through 2022.
Moving to our core focus, the midstream growth projects including Wink to Webster, Red River expansion and Big Spring Gathering System should enhance performance over the coming years, which while providing more stability to our earnings system – I'm sorry, earnings stream. Overtime, we feel this should be rewarded through higher valuation multiple. As we grow the midstream, we're looking to simplify the capital structure of DKL along with potential asset dropdown opportunities from the sponsor DK.
As shown on Slide 8, cash returned to shareholders remain a priority. In 2019, we repurchased $178 million of our stock. Our share count has been reduced by 17% from the peak in the second quarter of 2018. Our Board of Directors has approved a 3.3% increase in our regular quarterly dividend from the third quarter 2019 level. This marks our seven consecutive increase since the first quarter of 2018.
Finally, I'd like to be a little person here, and thank my dear friend Assi for serving the company for the last 15 years. Assi, has been a huge asset to the company and to myself. Assi how elected to move back to Israel, to be with his family as we all know, they're already in Israel and the company couldn't be what it is without Assi. So I'd like to wish him good luck.
With that, I'd like to open the call for questions.
[Operator Instructions] Your first question comes from the line of Silvio Micheloto of Mizuho. Your line is open.
Hi. Sorry, this is Paul Sankey here from Mizuho. We bid you, not for the first time, Assi, all the best, and many thanks for everything you've done over the years. Uzi, can you talk about the retail sector and the plans that you have there? You mentioned that you sold some stations and added some. But I think in the current environment, people are very interested about your exposure to resale. Could you talk a little bit more about that and where we go from here? Thanks.
Yes, absolutely. Good morning, Paul. I guess obviously retail for us is something that we have done for years. At the same time, we weren't shy to extract value out of retail. As we all know, EBITDA from retail is around $40 million and what we are doing is that we divest some stores here and there, collect the cash, and then take that cash and build the future stores. As we speak we have two stores under construction and two more are coming later next year. Our plans are to convert the old stores and divest them and make them – and invest in the big stores, which is obviously part of our cash flow. So I wouldn't be surprised to see that EBITDA continue to grow is the stores that we are building are showing probably return – only few of them returned between 25% to 30%. So if we look at the history, don't be surprised if that over the next two years, three years the EBITDA of the retail will grow to $50 million, $60 million, $70 million.
That's helpful. Thanks, Uzi. Secondly, you had some – well, you had some hedging losses in the quarter. Can you talk about the current market environment as you see it and anything that you might be thinking about in terms of hedging one way or the other? Thanks a lot, Uzi.
Yes. Hedging, obviously, is a part of our box tool. If you look at – we had a hedging last quarter. Some of it will reverse itself in the first quarter, that's perfectly fine. We'll look at it on a regular basis. If you look at what happened last year, second quarter we had a big hedging gain and this time we had hedging loss because of different things that we did, including inventory.
I want to be clear Paul, I read many notes that saying that Delek has a miss and we had anywhere between $0.08 to $0.38. However, the actual number – the GAAP number of Delek in the fourth point was $0.44 positive. And when you look at GAAP by the end of the day, it all reflects itself in the cash and I saw a couple of notes asking about the cash situation. Well, we can call it one time, we can call it non-recurring, we can call it whatever we want. But cash is cash and that the $0.44 actual GAAP number in the fourth quarter reflects itself in the cash situation, including the hedging.
Okay. And anything – finally for me on the market, I was – while I was part of the question essentially, how do you see the market developing over the course of 2020? Thanks.
Well I wasn't in the camp or we weren't in the camp of IMO would be a great benefit. I don't think that – we don't think that IMO is here to stay at the same time we see several incidents in several refineries and gasoline market is pretty strong so far for the year. So it depends on how quickly these facilities that can come back to play and also, if the VGO blending continues, then we may have a good summer ahead us in terms of gasoline.
Thank you.
Your next question comes from the line of Manav Gupta of Crédit Suisse. Your line is open.
Hey, first of all congrats, Assi for all that you've done for Delek. My question relates to Slide 7. Uzi or Assi whoever wants to address this? Your CapEx expenditure is showing as $428 million in 2019 versus $325 million in 2020, which is about 24% decline. But this doesn't include the JV spending. Can you give us the numbers with the JV spending, because a major portion of the decline will happen in the JV spending? So I'm trying to understand apples-to-apples 2019 versus 2020, included with JV spending what are the numbers?
So if you look at the 2019, we have spent $428 million. In addition to that, it’s a Wink to Webster roughly $75 million in that period.
Okay?
When you look at 2020, we have $325 million, but at this time we will receive $50 million from Wink to Webster, so that’s $325 million is actually going to be $275 million, because we are receiving $50 million because we closed the project financing. So from a cash flow perspective this year is a much, I would say lighter on money going out the door.
Perfect. So that's what I wanted to make sure, I understand that point. The second point, Assi and Uzi, Uzi more you talked about El Dorado last quarter; we understood there was a turnaround. Slightly disappointed to see the gross margin this quarter; El Dorado is a much better asset than a sub-par $5 gross margin. Can you help us understand what happened at El Dorado and why it won't happen going ahead?
Yes. So in El Dorado we were still ramping up on – during the fourth quarter and – coming out of that work on the vacuum tower. That is running also make that inventory. So we are in shape, the tower is still performing well, where our diesel yield is still where its expected and what we predicted and we're ready to run the barrels in 2020.
Thanks guys. Thanks for taking my questions.
Thank you, Manav.
Your next question comes from the line of Brad Heffern of RBC. Your line is open.
Hey, good morning everyone. I guess in the release and the prepared comments you talked about simplifying the capital structure of the MLP. I assume that means some sort of IDR conversion. But can you put any more color around that and then also talk about any timeline for the drops?
So as you know, we've been building at Delek, a large gathering system that we feel that as it mature, the right place for that system it needs to be at the DKL – part of the DKL business model. We wanted to achieve that together with a potential idea of simplification and the idea was to do it throughout 2020 and we're looking at the market, making sure that they will support the transaction and we're also preparing the DKL balance sheet to do it. So I would say it’s a 2020 target.
Okay. Thank you. And then I guess just on cash returns to the shareholders. Obviously you've increased the dividends, I think seven out of eight quarters now. The yields that close to 5% – are you at the point where you think it's competitive and the dividends in the right place or should we expect to continue increases? And then I noticed that you didn't give a guidance for repurchases in the first quarter. So is that program becoming more – less formalized at this point?
Well we obviously want to continue to retain the excess cash flow to shareholders and in the upcoming quarters we have a big amount of cash coming between the BTC refund which is $80 million or something million. The money that we already got that is not on the balance sheet from the refinance of the – or the project financing and also the tax refund that is showing up. So we will see how the cash shapes up but I don't see any reason why your dividend, we won't continue to be very competitive.
Thank you.
Your next question comes from the line of Benny Wong of Morgan Stanley. Your line is open.
Hey, good morning guys. Thanks for taking my question. My first question is around Big Spring. Obviously you guys took out the guidance there of your outlook, and you guys are spending about $50 million there. Just wondering how much more runway is there to grow that business and what are the factors you're thinking are balancing to regulate the potential for growing faster there?
Well it's just a matter of returns. We have a hurdle of around 20% for this type of business. And there is, if you look at Benny, if you look at the stats from risk standpoint, you see that Howard County and Martin County continued to grow despite the fact that other counties are declining. And as you know, we are in Howard County and Martin County. So if we meet the 20% threshold, which you will start seeing the benefit this quarter, but mainly next year, then we will continue to look into that. Our situation is that we continue to produce cash and we despite what market calls miss, cash is coming in. So for us it's just meaning the hurdle of at least 20% in that area and also balancing it with other needs.
Understood. I appreciate those thoughts, Uzi. And my next question is more for you, if I may. I was just wondering if – if you able to share some thoughts in terms of your potential role with Delek going forward. As I understand it looks like your contract might be coming up later this year. I think there's many of us in the investment community that obviously don't want to see you go anywhere. But just curious in terms of how you're thinking about the future and if there's been any preliminary conversations and understanding between you and the company?
Not only prem. We are in discussions, and the company has or the Board has express desire for me to stay. Obviously, I'm still young and enjoy what I do. So I don't see any reason to believe that we won't extend that agreement. We usually do it for three years and I don't see any reason why it won't happen this time again.
That's great to hear. Thanks, Uzi.
Thanks, Benny.
Your next question comes from the line of Neil Mehta of Goldman Sachs. Your line is open. Neil Mehta, your line is open.
Hey, thanks. Thanks so much, appreciate you guys taking the time. Assi, I guess the first question is for you, which is can you talk a little bit about the CFO transition? We're going to miss you a ton here and the decision behind that? And then Uzi, as you think about backfilling the CFO role and [indiscernible] for you, how do you think about the characteristics will want in that seat?
Sure. So after 15 years with Delek, I've made a decision to go back and be with my family in Israel. As you know I tried it before, but then I always – Uzi always able to convince me to come here and support the company. But as I see my family grow up and I'm away from them I decided that, that I want to be close to home and this was the only driver for me doing it. And I will let Uzi discussed the – what's the capabilities and how the new role will look like.
Well, obviously Assi have been with us for a long time and it's painful for me on one end, but I'm very happy for him that he's joining his family. I know it's hard to commute and for me it's something that is – something sad personally because I'll miss him, but I'm glad for his decision.
In terms of the role, as we all know we – CFO is a very important role. We have several very, very, very good candidates that we are going to finalize it over – hopefully over the next three, four weeks and we'll notify the market about these candidates. Some of them are very well known to you guys.
Great. Well congratulations Assi and looking forward to that update, Uzi. The follow-up question is just on the macro and in particular, Midland has traded decently above WTI now for a sustained period of time. And that's what Big Spring currently down for turnaround. I guess the concern would be as Big Spring comes up, does that continue – create a further bid, an inversion of that Midland differential? So just if you could talk through the crude flows and the different moving pieces of supply demand as we think about that Midland TI differential? And then if you want to layer onto that, your views on your ability to access different types of crude, given that the investments that you have made in projects like Red River to play different arbitragers against each other?
That's a great question. It has several components. I'll let Avigal, who deals with that every day to take it.
Hey, Neil good morning. How are you?
Good. Thank you.
So we all see Midland is premium to WTI and all the time we find it hard to believe that the source of the build is going to be more expensive than the clearing point. So we believe that at some point, something fundamental going to make the market change. Obviously, we've all seen that coming without the announcement of the new pipe; it's not surprise to anyone that Midland is being credit premium. And we were ready for that with the reputable investment exactly to diversify our crude. So we – all of that was well known since we also – we also EPIC and obviously W2W and that premium is well expected and we have lineup other alternative for the second half of 2020.
Neil, just to remind you that the expansion in the second half of the year is about 65,000 barrels a day. So that'll be incremental access to the second half through Red River.
Great.
Your next question comes from the line of Theresa Chen of Barclays. Your line is open.
Good morning. I also like to offer my congratulations to Assi on your retirement. Second time around, thank you for all of your effort and hard work over the years. Maybe a follow-up on Neil's question around the Midland differs. So I believe some of this pressure has been a result of line fill on Gray Oak and EPIC has been reported in the news. How long do you think this is going to go on for? And when do you think we might see some easing in the interim just from that alone?
Well I guess pinning down the exact timing, I'm not sure I am smart enough to give you that. However, I want to be clear we see that – but we as a company, already doing – taking steps to change our crude fleet. So if we are doing that, I'm sure others do the same thing, especially in light of the fact that there's a lot of – there are lots of barrels still flowing between Midland and Cushing on several pipelines.
So while I don't know how long this can stay, I don't believe that the source of the barrel can be more expensive than the destination for extensive period of time. They're just not economics. Something would happen and somebody will do something different. Similar to what we are talking about, converting these wells. Also, some people will do what we basically did. We canceled. We had a pipeline – angled pipeline, 35,000 barrels. We canceled that T&D. So more and more people will just don't ship what they use to ship if this stays for a while. If I need to get, this is a few months situation, but I'm not smart enough to pin down the exact time.
Got it. And then switching gears a bit, touching on the earlier comments about the DKL dropdown and looking at the markets to support the transaction. Just with the AMZ at 184 today, what are your financing options and assumptions, Uzi and would you be open to going to the private markets perhaps for more economic financing?
First, I'll start by saying that a few days ago the transaction looked much better for both companies and the changes in the MLP market last few days impacting some of the economics in the transaction. With that being said, the Delek Logistics, the high yield bond is trading very well above par.
In addition to that, our revolver is still unfunded by $250 million. So we have basically, just for a drop, we have the capacity on hand to do it without utilizing the market. And, in Delek, we are always happy to accept Delek Logistics as mean of funding, especially when you look at the 12% yield that they are currently providing. And we don't like those returns. If the market will improve, I see less likelihood of that going to the private market, but as I mentioned, more probably Delek would accept those shares as mean of payment.
Got it. And with the cash portion of the proceeds, since it sounds like a portion or all of this could be done with debt what are the current plans for that cash?
Well we think that we want to maintain the cash level of our company. We feel comfortable I know that you guys need to look at the stock price. The number one thing for us is to continue to provide cash so we can continue to implement our strategic plan. So we will take that cash and then look at the different ways to invest that either through place to generate more EBITDA or return cash to shareholders.
Thank you.
Your next question comes from the line Phil Gresh of JPMorgan. Your line is open.
Yes. Hi. Good morning. Just a follow-up to the previous question and thinking about the cash you are getting from the drops. How do you think about consolidated and parent financial leverage, in a current environment with Krotz where they are, tight Midland differential and what level of net leverage, especially on a consolidated basis you're comfortable with?
So on a consolidated basis, we have roughly $1.1 billion of debt as you know, and we finished the year with $700 million of EBITDA. So it's a 1.5 times leverage, I think, we saw other companies in the past, energy companies that even two times to 2.5 times leveraged. If you look at, as our bond is trading very, very well and we think that at these levels of two times, 2.5 times leverage, the company is in a very good shape financially.
I would like to mention that, we need to remember one thing. Delek invested hundreds of millions of dollars in Wink to Webster and gathering businesses over the last 2.5 years. All of the debt is sitting on our books and none of the EBITDA there yet. So when we think about their Delek ability to produce EBITDA, when we look at 2021, we expect additional of over a $100 million of EBITDA coming from those assets. So I think right now we're in the transition here that we are being penalized for making the investment, but we don't see the EBITDA.
In addition to that, as Uzi mentioned, during Q1, we received already back net $50 million from the project financing because we are already invested and between Q1 and Q2 we expect BTC and tax refund of additional $150 million. Those three together will take, Delek US at the parents' level to be in a net cash position. And that's the position we really like to be.
Well, thanks for all those details. Especially led to my follow-up question with this JV financing structure, how do we think, given a very clear color on kind of the cash-in cash-out in 2020, but once this project comes on stream without getting too detailed into modeling, maybe you could just give us some color about how that financing structure impacts what we actually see in the financial statement. Thanks.
So as you know, we closed the project financing. The interest on the project financing is extremely low, it's a LIBOR plus 1.5 and we have good opportunity to lock the LIBOR in the treasuries at a very low level, at this point we probably going to hedge 75% of it. The way it's going to show up on the financial, there will be exactly like Red River. So it will be net of the interest costs at the project level. So if net-net, we expect, let's say 20% return on the project, which is a $70 million EBITDA from the current project, we will have to pay roughly $10 million a year of interest costs. So the distribution will be around $60 million a year, assuming a 20% return. So that's what the way we see it on the P&L. And then, debt will not be on the balance sheet and what you'll see is investment in the equity method similar to where they were.
Okay, great. Thank you very much.
I will say one more thing. We're not anticipating any amortization of debt in the first few years of the project. So all of the cash flow will go to Derek.
Okay. All right. Thanks.
Your next question comes from the line of Roger Read of Wells Fargo. Your line is open.
Yes, thanks, good morning. And Assi, let me say thanks for everything over the years. Congratulations to you for moving on and all the best in back in Israel.
Thank you, Roger.
A couple of questions. One, just to follow up on what was a pretty major topic on the last call, the upgrades at El Dorado, just curious now that you've had, I guess probably by this point a full quarter to run it, if not a calendar quarter, how that's performing. Is it in line with your expectations better than, and are there some other opportunities we should be thinking about across the rest of the units where you might be able to tweak some things this year?
Yes. Roger. So looking at the unit and you're exactly right. Looking at the unit, it's still producing. As we expected with the diesel yield as well as making spec asphalt product right-off the bottom of the tower. We look for all opportunities now, have a variety of different crews to try to optimize the unit to make the most money that we can going-forward, so we've been working really strong with commercial and seeing what's out there available that's around us that we can bring into the refinery and capture that.
And Roger, I would just add, I think Louis mentioned earlier, but in the fourth quarter in particular, the facility was ramping back up in October, which was when crack spreads were strongest during the quarter. So we weren't able to really capture the benefit of that. And so the facility was really online contributing in November, December when cracks had gotten weaker. So we would expect a better contribution into 1Q, 2Q, et cetera.
Great. Thanks for that. And then coming back to some of the discussion earlier about, switching crews, you're running backing-off a maybe a mispriced Midland barrel towards something at Cushing or even local. We've heard previously that it's better to run a pure Cushing barrel than what's sometimes called a Franken[ph] barrel out of excuse [indiscernible] lot of Midland versus a Franken barrel out of Cushing. So just curious as you change the crudes in the units, do we have to think about any sort of impacts on yields that might be a little bit more on the negative side? In other words, we have to see an even wider shift in crude just to get a major change in crude feed stock?
Roger, It depends on the configuration of every a unit. But there is – to what you say there is a merit. And we need to every LP when we change crude slate, we look at the quality of the barrel at the same time. However, just to remember that we – because of our gathering system and the way we are doing stuff, we can maintain some of the quality of the barrel. So it depends on the specific refinery and the specific situation at the time.
I'm going to tell you though that under scenario for $1, $1.20, there's already incentive for us to change to a Cushing barrel versus a Midland barrel.
Yes, that's what I would though have expected. One last follow-up, just because you mentioned it in the opening remarks on the renewables and I know you all made some acquisitions as well, some investments. How do you see – as you mentioned earlier about retail EBITDA growth in the coming years. How do you see renewables growth ex-the tax credit, because we'll never know if that's going to get renewed from time-to-time, but just the sort of underlying part of that business may be volumes as well as an EBITDA thought process.
Well, first it was renewed until 2022 that just the fact. Second, biodiesel is an opening for us to look at other opportunities. We don't want to be in a situation that we invest in the returns of 10%, 12%. If you remember, as we are controlling alone, alone with the renewable diesel, not biodiesel in California and then we sold it. So it depends on the market, it depends on the feedstock, this is an area that we need to look at. I want to be honest though. We don't believe always in food based energy, so that's something that we just need to remember.
That's fair. Thank you.
Thanks Roger.
Your next question comes from the line of Paul Cheng of Scotiabank. Your line is open.
Hey guys. Good morning.
Good morning, Paul.
Thank you, Uzi.
Assi, just want to say congratulations for your second retirement and wish you the best of luck and have fun in Israel. Thank you for all the help over the years. We will miss you. Just a couple of quick question on the financing side, if I can get correctly that the rest of the need for the Webster project is all going to be project financing, right? So you're saying that this several years that you're not going to see an impact with payment, when that principal is going to start to be repay and when that you will be reporting pay-off?
So as you mentioned first, going forward, all of the investments will become from the paid by, basically the JV financing that. Because, we’ve already put 100% of the equity, the way the project work, we put the first 20% of the equity of the needs and then the put all the rest. The deal that we have is basically a three years deal. And usually after that you're doing a bond that is also a very likely amortized, mostly with the balloon. So as I mentioned this will turn eventually into a bond, most likely investment grade bond and we will see very light amortization on it in the next few years.
I see, so that if you don't turn you into a bond then, and after you come on stream after three years, that start to have that piece that repayment, but you return it to bond most likely by that?
Yes. It's project finance, it's not a permanent finance. It's there, but construction by another plus another two years. And then after that, look at the shippers of this pipeline. Exxon, Plains, Delek, MPLX. So with the quality shippers, we don't see an issue of turning it into a bond.
And with the hedging position, can you tell us that what product and what warning that you have hedged in the first quarter and in the second quarter?
Well, I don't think, go ahead, Avigal.
Paul, we have a lot of different positions that we really don't disclose any of the details around it. So unfortunately, we're just not going to get into that level of detail on it.
Okay. That's fine. And for the Big Spring, I assume that the turnaround is a full plant turnaround?
That is correct. Would be completed sometime early March.
Okay. And for the renewable diesel, is the product being sold only in California?
I'm sorry.
Is the renewable diesel that you guys produced, is that all being sold in California.
No, not at all. Nothing is being sold in California.
Is that opportunity given that in a kind of funding, that's another low carbon tax credit?
Well, we are producing a biodiesel and not renewable diesel. So what we are doing is we're blending all these gallons into the diesel that we sell. And that's the reason we are not splitting. We don't split the most people split the dollar. 50:50, we don't split it. That's the reason you see the full benefit of $80 million in the quarter.
I see. Okay. Will do. Thank you.
Thank you.
Your next question comes from the line of Jason Gabelman of Cowen. Your line is open.
Hi, good morning. I just wanted to go back to the cash flow for a second. I think you mentioned there was a $15 million inflow to offset the equity payments to Wink to Webster. Then there's going to be an additional amount that comes in and then an additional, call it $70 million from the blenders tax credit. So how much is that all to together coming in terms of cash flow outside of normal operations?
So between Q1 and Q2, net we would have received $50 million, from the Wink to Webster financing. We would have received $98 million of BTC and we would receive $48 billion of tax refund, when you combine them all, it's $196 million that we expect to receive between Q1 and Q2. Most of it will be in Q2.
All right. Was there any other one-time cash inflows, in 4Q, you could call out?
You saw there was some tax benefits of over at $30 million is a result of the fact that we put in service towards the end of the year. A big part of the gathering system that we stopped producing cash. So you'll see the cash flow and when you get it, there's I think $36 million of tax in flows in Q4.
It's deferred tax.
Got it. Okay. And then just on this biodiesel acquisition that you made, is there any material earnings impact that you expect in 1Q as a result?
Well, biodiesel in general, we said that we are going to – with the dollar now in place, the three plans are going to be between around $10 million, if you will for the year.
Got it. All right, great. Thanks a lot.
Ladies and gentleman, we have come to the end of our time and I will turn it back to the management for closing remarks.
Well, thank you everybody for listening to us this morning. I'd like to thank my friends around the table. I'd like to thank the Board of Directors for their supporting or their belief in us. And also I'd like to thank all investors for you interest in us. But mainly I'd like to think our employees who make this company what it is. Have a great day. We'll talk to you soon.
This concludes today's conference call. Thank you for participating. You may now disconnect.