Gevo, Inc. (NASDAQ: GEVO), a leading carbon abatement company that
commercializes drop-in fuels and chemicals for difficult to
decarbonize sectors, today provided a business update. Gevo also
expects to publish an updated corporate investor presentation to
its website.
RNG: Non-GAAP cash EBITDA of $7-16 million is
expected in 2024, depending upon the timing of the approval of the
permanent CARB Carbon Intensity pathway. This is expected to
further increase if California Low Carbon Fuel Standard (LCFS)
prices increase and the Biogas Production Tax Credit (PTC) is
implemented. The Biogas PTC is a 2025-2027 credit defined in the US
Inflation Reduction Act (IRA), subject to final rules issued by US
Treasury. There can be no guarantee that LCFS prices will increase
or US Treasury rules, if issued, will result in the amounts
expected.
See “Non-GAAP Financial Information” below.
Net-Zero 1 Development: Net-Zero 1 is in the
diligence phase of the US Department of Energy (DOE) Loan Guarantee
Program to secure construction funding. The engineering for the
project is substantially complete and is in the value engineering
phase in preparation for finalizing the fully installed contracted
price. We are also ordering long-lead equipment. The engineering,
procurement and construction (“EPC”) contract with McDermott has
been substantially negotiated except for the contracted
construction price. Net-Zero 1 is a purpose-built plant targeting
zero or negative Carbon Intensity by taking advantage of a number
of climate-smart practices, behind the meter wind and hydrogen, and
a sophisticated plant design. While we welcome the recent guidance
on indicating GREET for the SAF section of the IRA, we are
evaluating how the GREET model will be adapted for use in the IRA
and the economic impact to the project. We expect the DOE loan
guarantee program process to be the rate limiting step to financial
close. We have also identified attractive sites for additional
Net-Zero plants.
Verity: Verity, an end-to-end carbon accounting
solution SaaS (Software as a Service) business built on proprietary
distributed ledger technology, expects to announce its first
revenue in 2024 and to pursue scalable customer growth in 2025.
Verity is a capital light, fixed fee and profit sharing business.
Based on a market and business analysis by a well known global
consulting firm, the initial target market for Verity is estimated
to be $1.5-3 billion in the United States.
ETO: Our Ethanol-to-Olefins (“ETO”) technology
pilot plant has started production and is operating as
expected.
2024 Expected Uses of Cash
Discretionary Project Development and Growth Uses of
Cash: We believe we have significant flexibility over the
timing and amount of our discretionary growth spending related to
our projects. The majority of Gevo’s expected uses of cash in 2024
from discretionary growth spending is related to the development of
growth projects, primarily driven by Net-Zero 1.
Net-Zero 1 Project Development: Uses of
cash are projected to be $125-175 million in 2024.
- This spend includes long-lead equipment, related wind and
onsite hydrogen projects and value engineering to advance a
financeable EPC contract.
- We expect this spend, plus the previous spend of approximately
$111 million as of end of 2023 and other associated costs, to be
fully recoverable at financial close from project-level debt and
equity sources of capital, as is customary in project
financings.
- We anticipate reinvesting all or a portion of the development
recoveries into the project alongside third-party, project level
equity at financial close at rates of return commensurate with our
developer role.
- After financial close of the project, we expect that project
construction through startup and commissioning would be fully
funded with no additional cash commitments from Gevo.
- The engineering would result in a modularized, reusable and
purpose built alcohol-to-jet plant design. We believe such design
will be highly beneficial to the buildout of future alcohol-to-jet
projects and the use of ethanol to make SAF.
- Multiple patents have been filed
on this plant design.
NZ and Other Projects Development: Expected
uses of cash of $20-60 million in 2024. This includes some
non-recurring project development costs related to Net-Zero 1 and
other Net-Zero alcohol-to-jet, the Luverne facility and other
projects.
In 2023, Gevo engaged an independent third party audit firm to
perform a cost allocation analysis. The purpose of this analysis
was twofold: (1) to document to third parties our project
development costs for recovery purposes (e.g., recovery at Net Zero
1 financial close); (2) to more accurately reflect the
discretionary, non-recurring and growth project development related
nature of such costs. The independent auditor based its analysis on
the Treas. Reg. §1.482 transfer pricing guidelines, which set forth
the arm’s length principle, whereby related parties shall operate
in such manner as would true commercial parties. As a result of
this analysis, the audit firm identified a substantial amount of
costs historically classified as GAAP G&A that may be
classified as project development.
Research & Development: Expected uses of
cash of $10-12 million in 2024, which includes feasibility and
scaleup of our ETO technology as well as improvements on our
isobutanol fermentation and other R&D.
Non-Discretionary, Non-Growth Project Related Uses of
Cash
General & Administrative (“G&A”):
Expected G&A uses of cash of $5-9 million. This 2024 expected
use of cash excludes a portion of spend historically categorized as
G&A, which is instead included above under the heading
“Additional NZ and Other Growth Projects Development”. This
categorization reflects Gevo’s view of the run-rate required
G&A to operate the business, exclusive of projects that are
expected to be growth-related, non-recurring and (for Net-Zero 1)
reimbursable upon project-level financing.
Luverne Facility: Expected facility idling use
of cash of $2-4 million, driven by the Luverne, Minnesota
demonstration facility that is currently in care and maintenance
status. We are developing plans to restart Luverne to serve certain
specialty markets. We believe we have included appropriate capital
in case of such restart under the heading “NZ and Other Projects
Development”.
2024 Guidance Summary |
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($
in millions) |
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RNG non-GAAP cash EBITDA |
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3Q 2023, reported |
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$1.7 |
Annualized 3Q 2023 |
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$6.8 |
Annualized expected sensitivities: |
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With Permanent CARB CI Pathway |
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$12 - 16 |
With LCFS Prices at $200/MT |
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$30 - 38 |
With Biogas PTC (2025-2027) |
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$50 - 60 |
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Verity |
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First revenue year |
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2024 |
Scalable growth year |
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2025 |
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2024 Expected Uses of Cash |
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Dec. 31, 2023 cash, equivalents |
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and restricted cash |
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$376 |
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Discretionary Growth / Project |
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Development |
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Net-Zero 1 Project Development |
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$125 - 175 |
until Financial Close |
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Additional NZ Project Developments |
$20 - 60 |
Research & Development |
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$10 - 12 |
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Non-Discretionary, Run-Rate Spend |
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General & Administrative |
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run-rate, non-discretionary |
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$5 - 9 |
Luverne Facility |
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$2 - 4 |
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Remaining cash, equivalents and |
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restricted cash before RNG, Verity, |
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investment income, interest and other |
$116 - 214 |
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See “Non-GAAP Financial Information” below.
Non-GAAP Financial InformationThis press
release contains a financial measure that does not comply with U.S.
generally accepted accounting principles (GAAP)—non-GAAP cash
EBITDA (earnings before interest, taxes, depreciation and
amortization)—because this non-GAAP financial measure excludes the
impact of items that management believes affect comparability or
underlying business trends.
Non-GAAP cash EBITDA is calculated by adding back depreciation
and amortization and non-cash stock-based compensation to GAAP loss
from operations.
This measure supplements the company’s financial results
prepared in accordance with GAAP. Gevo management uses this measure
to better analyze its financial results and to help make managerial
decisions. In management’s opinion, this non-GAAP measure is useful
to investors and other users of the company’s financial statements
by providing greater transparency into the ongoing operating
performance of Gevo and its future outlook. This measure should not
be deemed to be an alternative to GAAP requirements. The non-GAAP
measure presented here is also unlikely to be comparable with
non-GAAP disclosures released by other companies. See the table
below for a reconciliation of GAAP to our non-GAAP measure.
Reconciliation of GAAP to Non-GAAP Financial
Information(Unaudited, in thousands)
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Three Months Ended |
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Nine Months Ended |
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September 30, 2023 |
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June 30, 2023 |
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September 30, 2023 |
|
December 31, 2022 |
Non-GAAP Cash EBITDA
(Gevo NW Iowa RNG): |
|
|
|
|
|
|
|
|
|
|
|
|
Loss from operations |
|
$ |
(230 |
) |
|
$ |
(3,481 |
) |
|
$ |
(3,711 |
) |
|
$ |
(4,088 |
) |
Depreciation and
amortization |
|
|
1,914 |
|
|
|
3,185 |
|
|
|
5,099 |
|
|
|
313 |
|
Stock-based compensation |
|
|
18 |
|
|
|
42 |
|
|
|
59 |
|
|
|
7 |
|
Non-GAAP cash EBITDA (loss)
(Gevo NW Iowa RNG) |
|
$ |
1,702 |
|
|
$ |
(254 |
) |
|
$ |
1,447 |
|
|
$ |
(3,768 |
) |
About GevoGevo’s mission is to transform
renewable energy and carbon into energy-dense liquid hydrocarbons.
These liquid hydrocarbons can be used for drop-in transportation
fuels such as gasoline, jet fuel and diesel fuel, that when burned
have potential to yield net-zero greenhouse gas emissions when
measured across the full life cycle of the products. 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 life cycle). 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.Gevo believes that the Argonne National Laboratory GREET
model is the best available standard of scientific-based
measurement for life cycle inventory or LCI.
Learn more at Gevo’s website: www.gevo.com
Forward-Looking StatementsCertain 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
expected results of the Company’s RNG and other business lines,
Verity revenue, guidance from the Treasury Department, pricing of
LCFS credits, timing or value of the expected CARB CI pathway,
expected uses of cash and the Company’s growth projects. These
forward-looking statements are made based on 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, 2022
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.
IR ContactEric Frey, Vice President of
Finance & StrategyIR@gevo.com
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