Gevo, Inc. (NASDAQ: GEVO), a leading developer of net-zero
hydrocarbon fuels and chemicals, is pleased to announce that it has
entered into a definitive agreement to acquire the ethanol
production plant and carbon capture and sequestration (“CCS”)
assets of Red Trail Energy, LLC (“Red Trail Energy”) for $210
million.
Acquisition highlights:
- The Adjusted EBITDA1 from Red
Trail Energy ethanol and CCS assets, when combined with Adjusted
EBITDA1 from Gevo’s renewable natural gas (“RNG”) business, and
other businesses, including Verity, is expected to make Gevo’s
Adjusted EBITDA positive in 2025.
- The purchase price includes the
ethanol production asset and the CCS asset. Gevo expects that its
capability of marketing carbon abatement in conjunction with
delivery of advanced liquid fuels should deliver superior value to
shareholders.
- This acquisition is consistent
with Gevo’s strategy while providing an ideal Net-Zero site for
future sustainable aviation fuel (“SAF”) production that is well
positioned to serve the U.S. and Canadian markets.
- Synergistic with Gevo’s Net-Zero
1 SAF project in Lake Preston, South Dakota, by providing access to
a wholly owned CCS site and additional supply of low carbon
intensity (“CI”) ethanol.
- The acquisition includes existing
CCS assets with total sequestration capacity of 1 million metric
tons per year, of which 160,000 metric tons per year are currently
being utilized. This site could accommodate many future
Net-Zero-type and related projects.
- Accelerates Gevo’s fundamental
capabilities related to feedstock procurement, plant operations,
and the business of carbon abatement, which are expected to benefit
Net-Zero 1 and other future SAF projects.
STRATEGIC RATIONALE
This acquisition accelerates Gevo’s mission to transform
renewable carbon and photosynthetic energy into net-zero liquid
transportation fuels and chemicals while abating carbon.
- Expands the footprint and platform for Gevo
for future alcohol-to-jet (“ATJ”) SAF at an operating site with
existing low-carbon ethanol supply and CCS. Gevo expects to expand
the site to include net-zero SAF production, leveraging the
low-carbon ethanol combined with defossilized energy.
- Accelerates cash
flow focused on Gevo’s core business of carbon abatement
via fuel products and is synergistic with its Net-Zero projects.
Gevo plans to continue operating the Red Trail Energy facility
while integrating Gevo’s proprietary solutions to further enhance
the plant’s efficiency, sustainability and further reduce the
ethanol CI.
- Provides operating assets that have
years of demonstrated financial performance, including:
- Low-carbon ethanol plant with 65 million gallons per year of
capacity.
- Operating CCS site that has been in operation since 2022,
currently capturing 160,000 metric tons of carbon annually and
generating monetizable tax credits under section 45Q of the tax
code.
- The plant has a long track record of safe, reliable operations.
Gevo plans to retain the employees currently operating the plant
and CCS well.
- CCS site that can be used for
Gevo’s own fuel and chemical products and energy production.
- Ownership of the CCS asset, which is on
well-located acreage in the core of the Broom Creek formation and
provides carbon sequestration expansion potential of more than five
times current operations by utilizing available pore space and
wellhead capacity. One of the few operating CCS sites in the
country, the large capacity enables the future production of
defossilized energy and steam needed for net-zero fuels and
chemicals and provides opportunities for Net-Zero 1, if
needed.
- Underscores Gevo’s
dedication to providing innovative solutions that address
the challenges of global climate change, U.S. energy security, and
rural community development.
MANAGEMENT COMMENTARY
Gevo CEO, Dr. Patrick Gruber:“We accomplish
several things with this investment. It immediately puts us on a
path to becoming self-sustaining and profitable as a company in
advance of our Net-Zero 1 project’s commercial operation. Not only
are we securing an excellent site for additional SAF asset
deployment, but we also mitigate risk around carbon sequestration
regarding our Net-Zero 1 plant site in South Dakota. This
acquisition gives us the opportunity to build capability as a
company and is a terrific training ground for our Net-Zero 1
project, as we inherit a trained cadre of employees who understand
plant operations.”
“Carbon abatement for fuels and chemicals is core to our
business. This acquisition enables immediate market development for
sequestered carbon. We expect our ownership of these assets to
generate significant near-term and long-term value for our
shareholders, while adding new jobs and economic growth to rural
communities in the region.”
Red Trail Energy CEO, Jodi Johnson:“We are
proud of what we have accomplished at Red Trail Energy and are
excited about the future under Gevo’s leadership. Gevo’s vision for
a sustainable future aligns with our philosophy of ‘our farms, our
fuel, our future.’ We are confident this acquisition will drive
positive change in the renewable energy sector.”
Gevo President and COO, Dr. Chris Ryan:“As
Net-Zero 1 and other production facilities come online, the
infrastructure and resources that we will have acquired in North
Dakota offer tremendous flexibility for how we might operate in the
area. We believe this site is ideal for production of sustainable
aviation fuel using Gevo’s integrated alcohol-to-jet technology and
defossilized energy, combined with CCS. The CCS well gives us
optionality for our Net-Zero 1 carbon sequestration needs. The
regional synergies with Net-Zero 1, our development facility in
Luverne, Minnesota, and our RNG operations in Northwest Iowa, are
fantastic.”
“These assets and their operating team have a strong track
record of safe and reliable operations and financial performance.
We plan to immediately begin optimizing the asset with partners
through combined heat and power, which will further lower the
carbon intensity and increase annual carbon sequestration. This not
only decarbonizes the current ethanol production further, but also
enables the site for net-zero SAF and chemical production.
“I want to welcome the employees of the Red Trail Energy
facilities to the Gevo family. We look forward to building upon
your cultural commitment to safety, regulatory compliance,
operational excellence, and rural communities. I also want to thank
our advisors, all of whom were integral in supporting this
transaction, positioning Gevo to embark on this exciting phase in
the growth of our company.”
ASSET OVERVIEW
The 65 million gallon per year ethanol facility is located on
500 acres with pore space lease agreements for 5,800 acres in the
Broom Creek formation, which has pore space sufficient for 1
million metric tons of carbon capture and sequestration annually.
The permitted CCS well currently sequesters approximately 160,000
metric tons of carbon annually. In addition, the facility generates
more than 200,000 tons annually of distiller grains and vegetable
oil co-products. The facility distributes its low-carbon ethanol
across the U.S. and Canada, including low-carbon demand markets in
Oregon, Washington, British Columbia and Alberta. Gevo expects to
retain all of the approximately 50 full-time employees currently
operating the assets being acquired.
TRANSACTION DETAILS
The transaction is expected to close by the first quarter of
2025, subject to receipt of regulatory approvals and the
satisfaction of other customary closing conditions, including
obtaining the approval of Red Trail Energy’s equity holders and the
procurement of financing for the acquisition. Gevo expects to
finance the transaction with a combination of asset level debt and
cash from the balance sheet.
ADVISORS
Ocean Park Securities, LLC is acting as exclusive financial
advisor to Gevo and Faegre Drinker Biddle & Reath LLP is acting
as legal advisor.
ACQUISITION CONFERENCE CALL
A conference call will be held on Thursday, September 12 at
9:30am ET to discuss the transaction.
To participate in the live call, please register through the
following event
weblink: https://register.vevent.com/register/BI3c47bd93746a4b0db48b282f193b5e02
After registering, participants will be provided with a dial-in
number and pin. To listen to the conference call (audio only),
please register through the following event
weblink: https://edge.media-server.com/mmc/p/a2fikoqy
A webcast replay will be available after the conference call
ends on September 12, 2024. The archived webcast will be available
in the Investor Relations section of Gevo's website at
www.gevo.com.
The accompanying presentation materials will be available in the
Investor Relations section of Gevo’s website at www.gevo.com.
Further information regarding the purchase agreement is included
in the Current Report on Form 8-K which Gevo will file with the
U.S. Securities and Exchange Commission.
ABOUT GEVO
Gevo’s mission is to convert renewable energy and biogenic
carbon into sustainable fuels and chemicals with a net-zero or
better carbon footprint. Gevo’s innovative technology can be used
to make a variety of products, including SAF, motor fuels,
chemicals, and other materials. Gevo’s business model includes
developing, financing, and operating production facilities for
these renewable fuels and other products. It currently runs one of
the largest dairy-based RNG facilities in the United States. It
also owns the world’s first production facility for specialty ATJ
fuels and chemicals. Gevo emphasizes the importance of
sustainability by tracking and verifying the carbon footprint of
their business systems through its Verity subsidiary.
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 STATEMENTS
This release contains “forward-looking statements” within the
meaning of the federal securities laws. All statements other than
statements of historical fact are forward-looking statements,
including statements related to the expected closing of the
acquisition or the timing thereof, the expected effect of the
acquisition on Adjusted EBITDA, and our future prospects as a
combined company, including our plans for the site and synergies
with our other projects. These statements relate to analyses and
other information, which are based on forecasts of future results
or events and estimates of amounts not yet determinable. We claim
the protection of The Private Securities Litigation Reform Act of
1995 for all forward-looking statements in this release.
These forward-looking statements are identified by the use of
terms and phrases such as “anticipate,” “assume,” “believe,”
“estimate,” “expect,” “goal,” “intend,” “plan,” “potential,”
“predict,” “project,” “target” and similar terms and phrases or
future or conditional verbs such as “could,” “may,” “should,”
“will,” and “would.” However, these words are not the exclusive
means of identifying such statements. Although we believe that our
plans, intentions and other expectations reflected in or suggested
by such forward-looking statements are reasonable, we cannot assure
you that we will achieve those plans, intentions or expectations.
All forward-looking statements are subject to risks and
uncertainties that may cause actual results or events to differ
materially from those that we expected.
Important factors that could cause actual results or events to
differ materially from our expectations, or cautionary statements,
include among others, failure to obtain required regulatory
approvals in a timely manner or at all; failure to satisfy any
other conditions to the closing of the transaction in a timely
manner or at all; the occurrence of any event that could give rise
to termination of the definitive agreement, including the inability
to obtain acceptable financing; the risk that anticipated benefits,
including synergies, from the proposed transaction may not be fully
realized or may take longer to realize than expected, including
that the transaction may not be accretive within the expected
timeframe or to the extent anticipated; failure to successfully
integrate Red Trail Energy’s assets and employees; unanticipated
costs of acquiring or integrating Red Trail Energy’s assets,
including as a result of the financing of the acquisition; the
effect of the announcement of the proposed transaction on our
ability to retain and hire key personnel and maintain relationships
with Red Trail Energy’s customers, suppliers and other third
parties; changes in legislation or government regulations affecting
the proposed transaction or the parties; and other risk factors or
uncertainties identified from time to time in Gevo’s filings with
the US Securities and Exchange Commission (“SEC”). All written and
oral forward-looking statements attributable to us, or persons
acting on our behalf, are expressly qualified in their entirety by
the cautionary statements identified above and in the section
entitled “Risk Factors” and elsewhere in our Annual Report on
Form 10-K for the year ended December 31, 2023 as
well as other cautionary statements that are made from time to time
in our other SEC filings and public communications. You should
evaluate all forward-looking statements made in this release in the
context of these risks and uncertainties.
We caution you that the important factors referenced above may
not reflect all of the factors that could cause actual results or
events to differ from our expectations. In addition, we cannot
assure you that we will realize the results or developments we
expect or anticipate or, even if substantially realized, that they
will result in the consequences or affect us or our operations in
the way we expect. The forward-looking statements included in this
release are made only as of the date hereof. We undertake no
obligation to publicly update or revise any forward-looking
statement as a result of new information, future events or
otherwise, except as otherwise required by law.
INVESTOR CONTACT
Eric Frey, PhDVice President of Finance &
StrategyIR@Gevo.com
PUBLIC AFFAIRS CONTACT
Lindsay Fitzgerald Senior Vice President of Public
AffairsPR@gevo.com
1 Adjusted EBITDA is a non-GAAP measure calculated as earnings
before interest, taxes, depreciation and amortization, inclusive of
the value of monetizable tax credits such as 45-Q and 45-Z and
excluding project development costs.
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