Gevo, Inc. (NASDAQ: GEVO) (“Gevo” or the “Company”), a renewable
fuels company focused on the production of sustainable aviation
fuel (“SAF”), today provides an update on the Company and projects
currently in process.
Market DevelopmentGevo now has approximately
375 million gallons per year (“MGPY”) of predominantly take-or-pay,
financeable SAF and hydrocarbon fuel supply agreements, which are
expected to support project debt financing. This level of demand
would require multiple plants to be built over the next four years
to satisfy those agreements. Based on current market projections
and certain assumptions, collectively, these agreements represent
approximately $2.3 billion in expected annual sales. Offtake
partners include: Trafigura, Kolmar, Delta Airlines, American
Airlines, Alaska Airlines, Finnair, Japan Airlines, British
Airways, Aer Lingus, and SAS.
Inflation Reduction ActThe Inflation Reduction
Act (“IRA”) which was signed into law in August of this year is
helpful to many companies in the renewable energy industry and is a
positive signal for SAF specifically. The first phase of this
two-phased approach to encouraging investment in the SAF industry
creates a SAF blenders tax credit for the 2023-2024 period with a
value potential of $1.25 per gallon. In the second two-year phase,
2025-2027, it created a Clean Fuel Production Credit (“CFPC”) that
has a credit of $1.75 per gallon for domestically produced,
net-zero carbon intensity (“CI”) score SAF. The value of both
credits is based on the CI score of the fuel produced and requires
a minimum 50% reduction in greenhouse gas (“GHG”) emissions. Gevo,
like other net-zero businesses, is expected to benefit from such a
program because of the expected low CI score of Gevo products.
Net-Zero 1 StatusFollowing the recent
groundbreaking ceremony in Lake Preston, South Dakota, the Net-Zero
1 (“NZ1”) project is on schedule with initial volumes of SAF
expected to be delivered in 2025. NZ1 is expected to produce
approximately 55 MGPY of SAF, or 62 MGPY of total hydrocarbon
volumes, which would satisfy part of the ~375 MGPY of financeable
SAF and hydrocarbon supply agreements that are currently in
place.
The transition to an ethanol-to-SAF design from Gevo’s original
isobutanol-to-SAF and isooctane design continues to yield improved
output expectations as pre-project planning has been completed
through phase 2 of front-end loading work (“FEL-2”). The results of
this work, combined with support from the CFPC, have led to the
forecast Project EBITDA1 for NZ1 to be in the range of $300-$325
million per year, a 56% increase at the mid-point from the prior
estimate of $200 million per year. The total installed cost for
NZ1, including the capital required for the alcohol-to-jet fuel
plant as well as any site development costs, is currently
forecasted to be approximately $850 million, a 33% increase from
the prior estimate of $640 million. This increase is primarily due
to increased steel, equipment, and supply chain costs related to
the inflationary environment.
Progress on Key NZ1 Development
MilestonesThrough year-end 2022:
√ Close the purchase of the land for NZ1 in Lake Preston, South
Dakota√ Execute development agreements for:
√ Wind energy- Wastewater
(design no longer requires)√ Green hydrogen
• Select engineering, procurement, and construction (“EPC”)
contractor• Select fabricator for hydrocarbon plant
modules• Substantial Completion of Front End Engineering
Design√ Break ground and begin site preparation at Lake
Preston
Through first-half 2023:
• Close the construction financing, including non-recourse
debt• Order long lead equipment
Throughout the remainder of 2022 and 2023, Gevo expects to
update stockholders about certain key milestones related to the
development, financing, and construction of NZ1 as well as
subsequent Net-Zero plants. Updates to those milestones will be
found in the Company’s press releases and investor presentations in
the Investor Relations section of Gevo’s website.
Additional Plant SitesGevo continues to make
steady progress on securing future SAF production locations beyond
NZ1. These future sites must offer an appealing mix of attributes
that enable the Company to produce low-cost fuels with the lowest
carbon footprint possible. Gevo’s preferred list of partners and
locations with decarbonization in mind are continuously being
refined and the Company is engaged in preliminary feasibility and
development discussions with several of them, including ADM.
RNG Project StatusGevo’s renewable natural gas
(“RNG”) project in Northwest Iowa (the “RNG Project”) continues to
ramp up its production. The Company recently received notice from
the federal Renewable Fuel Standard (“RFS”) that the RNG produced
qualifies for Renewable Identification Numbers (“RINs”). Gevo will
begin to recognize revenue for RNG sales in the third quarter of
2022; however, initial revenue will be limited to the value of the
commodity, exclusive of environmental credits and will represent a
partial quarter. Some sales revenue from environmental attributes
are expected in the fourth quarter of 2022; however, the full
extent of the available credits will begin contributing to revenue
in 2023 due to timing of the approval and documentation process for
the Low Carbon Fuel Standard (“LCFS”) credits.
The RNG Project is expected to generate Project EBITDA1 in
the range of $16-$22 million per year beginning in 2023,
depending on a variety of assumptions, including the value of
credits under the federal RFS and the LCFS in California.
Verity Tracking & U.S. Department of Agriculture
GrantGevo is proud to have been tentatively awarded up to
$30 million by the U.S. Department of Agriculture to advance its
Climate-Smart Farm-to-Flight initiative. This award and program are
expected to be finalized in the coming months.
Gevo will be working with its strong team of partners in the
Lake Preston, South Dakota area to lower the Company’s carbon
footprint throughout the SAF business system as well as within
other projects in Gevo’s portfolio of projects. Gevo plans to
deliver a high-quality carbon accounting system that will help
reward growers who adopt farming methods that reduce greenhouse GHG
emissions. This accounting system will focus on the importance of
immutable tracking and tracing of carbon-intensity scores that
begins at the farm level and follows the molecules through the
production of SAF and finally to its ultimate use in a jet engine.
Gevo plans to accomplish these goals through further development
and implementation of Verity Tracking, which is a
blockchain-enabled solutions platform for carbon tracking
throughout an entire business system.
ChevronConversations between Chevron and Gevo
continue as we each evaluate how best to structure our relationship
going forward. Chevron and the Company have mutually agreed upon an
extension to the letter of intent between the parties that allows
these discussions and negotiations to continue.
Management CommentDr. Patrick Gruber, CEO of
Gevo commented, “With the bulk of the engineering and design work
for Gevo’s NZ1 project in South Dakota nearing completion and our
RNG project in Iowa up and running, a portion of our team can shift
their focus to the development and planning for projects beyond
NZ1. We now have approximately 375 MGPY of commercial offtake
commitments. Our team will take all that we have learned, and
continue to learn, from the design and construction process for NZ1
and leverage that growing knowledge base as we plan and design each
subsequent plant. Gevo has developed an outstanding set of partners
with the capability to help execute our plans. We are excited to
get on with building out capacity and getting product to the market
at commercial scale. NZ1 is going to demonstrate how a commercial
scale SAF plant can achieve net-zero greenhouse gas emissions.” Dr.
Gruber continued, “The passage of the Inflation Reduction Act is a
game changer and is expected to reward companies like ours that
drive to net-zero emissions.”
Upcoming Investor ConferencesPresentations
provided in conjunction with these events will be available on
Gevo's website at www.gevo.com in the Investor Relations section on
the morning of the respective presentation. Members of Gevo’s
senior management will participate in the following hosted investor
events:
Capital One Investor
Conference – December 6, 2022, in Houston,
TX
About Gevo Inc.
Gevo’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 lifecycle 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 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 it possesses the
technology and know-how to convert various carbohydrate feedstocks
through a fermentation process into alcohols and then transform the
alcohols into renewable fuels and materials, through a combination
of its own technology, know-how, engineering, and licensing of
technology and engineering from Axens North America, Inc., which
yields the potential to generate project and corporate returns that
justify the build-out of a multi-billion-dollar business.
Gevo believes that Argonne National Laboratory GREET model is
the best available standard of scientific based measurement for
life cycle inventory or LCI.
Important Cautions Regarding 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, Gevo’s NZ1 project, including the timing of NZ1, the
total installed capital estimate for NZ1, the financial projections
in this press release, the RNG Project, Gevo’s business development
activities, Gevo’s ability to successfully develop, construct and
finance its projects, whether Gevo’s supply agreements are
financeable, Gevo’s ability to achieve cash flow from its planned
projects, Chevron and whether Gevo and Chevron will enter into
binding, definitive agreements, and other statements that are not
purely statements of historical fact. 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, 2021, 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.
Company Contact:John Richardson (Director of
Investor Relations)Gevo, Inc.Tel: 720-360-7794E-mail:
IR@gevo.com
_________________________________1 Project EBITDA is a non-GAAP
financial measure that we define as total operating revenues less
total operating expenses for the project.
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