Item 1.01. Entry into a Material Definitive Agreement.
As of July 22, 2021, Gevo NW Iowa RNG, LLC (the “Company”), a wholly owned subsidiary of Gevo, Inc., entered into a Base Contract for Sale and Purchase of Natural Gas (the “Base Contract”) with BP Canada Energy Marketing Corp. and BP Products North America Inc. (collectively, the “Buyer” and, together with the Company, the “Parties” and, each, a “Party”) pursuant to which, together with the Special Provisions attached to and forming part of the Base Contract (the “Special Provisions”), the Biogas Supply Addendum – Vehicle Fuel Segment-Supply Side (the “Biogas Addendum”), and the related transaction confirmation (the “Transaction Confirmation” and, together with the Base Contract, the Special Provisions, and the Biogas Addendum, the “Agreement”), the Company has agreed to supply pipeline biogas to the Buyer. Under the Agreement, the Company will deliver to the Buyer biogas produced at the Company’s biogas facility located in northwest Iowa (the “Facility”). The Buyer will pay the Company a price for the biogas calculated based on the daily midpoint price for natural gas reported by a major gas price index for that day at the defined delivery point in addition to the value of a portion of the Renewable Identification Numbers (“RINs”) and the credits under California’s and Oregon’s Low Carbon Fuel Standard Programs (“LCFS Credits”) generated by the biogas as further described below.
Under the terms of the Agreement, the Buyer will sell the biogas to certain enumerated vehicle fuel producers, and the Company will receive a defined percentage of the value of the RINs and LCFS Credits generated by the Buyer in respect of the sales of biogas.
The Transaction Confirmation was executed and the Agreement became effective on August 5, 2021 and will continue in full force and effect until 120 months after the later of the commercial operation date of the Facility and January 1, 2022 (unless earlier terminated pursuant to its terms). Either Party may terminate the Agreement if the Facility is not able to deliver biogas by a specified outside date and Buyer may terminate the Agreement if the Company fails to execute a contract with a third party in connection with verification of the environmental attributes of the natural gas.
Either party may terminate the Transaction Confirmation if the applicable laws giving rise to RINs and LCFS Credits are repealed or generation of RINs or LCFS Credits or the sale of biogas otherwise becomes illegal or impossible and the parties cannot agree to renegotiated commercial terms. In addition, the Company may terminate the Transaction Confirmation if the provisions of the Agreement would prevent the Company from refinancing its Solid Waste Facility Revenue Bonds, Series 2021, issued by the Iowa Finance Authority on April 15, 2021 and the Company and the Buyer cannot amend the Agreement in such a way as to allow the Company to obtain the refinancing.
All biogas delivered by the Company shall meet the pressure, quality and heat content requirements of the Receiving Transporter (as defined in the Agreement). As between the Company and Buyer, the Company will be liable for all claims arising from the failure of biogas delivered by the Company to meet such quality requirements. In connection with the Agreement, Buyer is providing a parent company guaranty to the Company.
The Agreement contains certain customary representations, warranties, covenants and confidentiality provisions, and also contains mutual indemnification obligations.
The foregoing description of the Agreement does not purport to be complete and is subject to, and qualified in its entirety by, the full text of the Base Contract, the Special Provisions, the Biogas Addendum and the Transaction Confirmation, copies of which are attached hereto as Exhibits 10.1, 10.2, 10.3 and 10.4 to this Current Report on Form 8-K and are incorporated herein by reference.