Gevo Provides Business Update
September 08 2020 - 9:00AM
Gevo, Inc. (“Gevo”) (NASDAQ: GEVO), today provided an update on its
business and strategic plans.
Highlights:
- Gevo recently raised approximately $46 million, net of
expenses, from a Registered Direct Offering and approximately $16
million as a result of warrant exercises. This capital infusion
substantially improves Gevo’s ability to execute on its strategic
plans.
- Gevo continues to pursue a licensing and developer strategy
that is expected to enable the construction of up to three
production facilities and capacity expansions. The production
facilities and expansions are needed to provide the product
required under its existing and expected, future take-or-pay,
off-take agreements. The licensing and developer strategy
should reduce or eliminate the need for Gevo construction capital
by utilizing project-level debt and third-party equity.
- Gevo continues to seek a targeted capital raise of ~$200
million of project-level equity using a project financing structure
to build up to three production facilities. The first expanded
production facility or project is expected to be located at Gevo’s
current production facility located in Luverne, Minnesota.
- As previously announced, Gevo engaged Citigroup Global Markets
Inc. (“Citigroup”) to lead a process to develop the three projects
and procure the capital needed by Gevo to build up to three
production facilities. Gevo expects it will take
approximately one year to develop and close the financing for the
first project. Assuming Gevo successfully closes on a
financing in the next 12 months, Gevo would expect production of
hydrocarbon fuels from the first project in late 2023 or early
2024.
“We currently have approximately $81 million in cash on the
balance sheet. This cash will provide us with the ability to
eliminate the White-box convertible note on the maturity date at
the end of the year. I am pleased to say that we now have more
financial resources to execute on our strategy. We plan to
use those resources to complete critical work related to full
engineering, site access and development, and permitting work
necessary to fully develop our initial three production facilities
to project finance standards. Furthermore, we will continue to
develop the marketplace and try to obtain more renewable
hydrocarbon offtake contracts,” said Patrick Gruber, Chief
Executive Officer of Gevo.
Business and Strategy Review
Marketplace Development
Gevo will continue to develop the marketplace and try to create
additional customer demand for its next generation of renewable
premium gasoline, jet fuel and diesel fuel products that have the
potential to achieve zero carbon emissions, while addressing the
market need of reducing greenhouse gas emissions with sustainable
alternatives.
Utilizing Special Purpose Entities for Production
Facilities Construction
Gevo’s strategy is to act as the licensor of its technology and
project developer. This strategy is intended to allow Gevo to
recapture the capital deployed to develop projects, with such
capital recoveries occurring at financial closings of any
successful development projects. Gevo’s current strategy is for any
production facilities to be owned by Special Purpose Entities
(“SPEs”) that will be non or limited-recourse companies. Gevo
intends to negotiate minority ownership interests in the SPEs. The
developer business model is expected to provide Gevo with fee
income streams from SPEs for value-added functions around
technology licensing, project management, and operations and
maintenance. There is no assurance that Gevo will be successful in
executing this licensing and developer project finance
strategy.
Update on Project Financing Efforts
In April 2020, Gevo engaged Citigroup to help secure project
finance funding to develop and establish production capabilities
for its contracted products across up to three production
facilities. To facilitate this expansion, Gevo estimates the
project capital cost would be around $700 million, including $200
million of equity and $500 million of debt. Gevo is still in
the early phase of the Citigroup process of securing financing with
the process slowed somewhat due issues related to the COVID-19
pandemic. Gevo expects it will take approximately one year to
develop and close the financing for the first project. Production
of hydrocarbon fuels from the first project is not expected prior
to late 2023 or early 2024.
Gevo believes the following additional key milestones are
important to potential project investors: finalizing and
acquiring the rights to the additional production facility sites,
completing engineering work to finalize the exact capital
requirements, securing additional take-or-pay contracts and
developing plans to mitigate various financial risks associated
with the proposed projects. On a proforma modeling basis, which
incorporates a range of assumptions, the production facilities in
the SPEs should yield greater than 20% levered internal rate of
returns for investors. Gevo cannot assure whether it will be
successful in securing investors for its potential development
projects on acceptable terms or at all.
Capital Deployment
Going forward, Gevo intends to use its cash to secure additional
customers, further develop the marketplace for its low-carbon
fuels, fund incremental process improvements, engineering, and site
development and permitting. Gevo believes its stronger
capitalization provides it the needed flexibility and financial
strength to manage through the development process of securing
project financing as well as to weather unexpected challenges.
About Gevo
Gevo is commercializing the next generation of renewable premium
gasoline, jet fuel and diesel fuel with the potential to achieve
zero carbon emissions, addressing the market need of reducing
greenhouse gas emissions with sustainable alternatives. Gevo uses
low-carbon renewable resource-based carbohydrates as raw materials,
and is in an advanced state of developing renewable electricity and
renewable natural gas for use in production processes, resulting in
low-carbon fuels with substantially reduced carbon intensity (the
level of greenhouse gas emissions compared to standard petroleum
fossil-based fuels across their lifecycle). Gevo’s products perform
as well or better than traditional fossil-based fuels in
infrastructure and engines, but with substantially reduced
greenhouse gas emissions. In addition to addressing the problems of
fuels, Gevo’s technology also enables certain plastics, such as
polyester, to be made with more sustainable ingredients. Gevo’s
ability to penetrate the growing low-carbon fuels market depends on
the price of oil and the value of abating carbon emissions that
would otherwise increase greenhouse gas emissions. Gevo believes
that its proven, patented, technology enabling the use of a variety
of low-carbon sustainable feedstocks to produce
price-competitive low carbon products such as gasoline components,
jet fuel, and diesel fuel yields the potential to generate project
and corporate returns that justify the build-out of a multi-billion
dollar business. Learn more at our website: www.gevo.com
Forward-Looking Statements
Certain statements in this press release may constitute
"forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. These forward-looking
statements relate to a variety of matters, including, without
limitation, statements related to Gevo’s plans and strategy, Gevo’s
ability to repay its debts, Gevo’s use of cash, the projected
proforma 20% investment returns of the projects in the SPEs, the
Citigroup project finance process, Gevo’s ability to raise capital
to fund its projects, Gevo’s expectations regarding the structure
and terms of any project finance transaction, Gevo’s
expectations regarding project capital costs, Gevo’s ability to
produce its products, Gevo’s ability to realize revenue from its
proposed projects, and other statements that are not purely
statements of historical fact. These forward-looking statements are
made on the basis of the current beliefs, expectations and
assumptions of the management of Gevo and are subject to
significant risks and uncertainty. Investors are cautioned not to
place undue reliance on any such forward-looking statements. All
such forward-looking statements speak only as of the date they are
made, and Gevo undertakes no obligation to update or revise these
statements, whether as a result of new information, future events
or otherwise. Although Gevo believes that the expectations
reflected in these forward-looking statements are reasonable, these
statements involve many risks and uncertainties that may cause
actual results to differ materially from what may be expressed or
implied in these forward-looking statements. For a further
discussion of risks and uncertainties that could cause actual
results to differ from those expressed in these forward-looking
statements, as well as risks relating to the business of Gevo in
general, see the risk disclosures in the Annual Report on Form 10-K
of Gevo for the year ended December 31, 2019, and in subsequent
reports on Forms 10-Q and 8-K and other filings made with the U.S.
Securities and Exchange Commission by Gevo.
Investor and Media ContactIR@gevo.com +1
720-647-9605
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