Key Events Update: Entered Strategic Alliances, Received Patent Approval, and Announced Setting Up of Alcohol to Hydrocarbon Pilot Plant



KEY POINTS
  • On October 12, 2021, Gevo entered into a strategic alliance with Axens North America Inc. to fast track the commercialization of Ethanol-to-Jet fuel (ETJ) and Sustainable Aviation Fuel (SAF) projects in the US. Axens will contribute more than 60 patents, engineering packages, proprietary catalysts, technology and equipment through the alliance.
  • On October 07, 2021, Gevo announced selection of Kiewit Energy Group Inc. to carry out the Front End Engineering Design (FEED) of its Net-Zero 1 project. Kiewit will also provide the engineering, procurement & construction services after completion of FEED phase.
  • On September 23, 2021, Gevo announced the acquisition of the Butamax patent estate and added patents for the production of renewable isobutanol and derivative renewable fuel products. This also added to Gevo’s IP investment portfolio value of $412 million.
  • On September 20, 2021, Gevo announced that US Department of Energy's Argonne National Laboratory has partnered with it to perform critical lifecycle analysis of its Net-Zero technology using the Greenhouse gases, Regulated Emissions, and Energy use in Technologies (GREET) model. The model would analyze Gevo’s data to evaluate carbon footprints of Gevo’s fuels and will provide ideas to further reduce their carbon footprints.
  • On September 09, 2021, Gevo and Chevron USA Inc. signed a Letter of Intent to jointly develop one or more new facilities to produce SAF from inedible corn and reduce the life cycle carbon intensity of aviation fuel. The facilities will use Gevo’s proprietary technology and Chevron will have offtake rights for 150 million gallons of SAF per year.
  • On September 07, 2021, Gevo announced plans to set up alcohol to hydrocarbon pilot plant at the Luverne facility. The installation is likely to start in 3Q22 with demonstration production by 4Q22. Gevo plans to use the Luverne facility for technology development and testing, which is likely to facilitate smooth startup of Net-Zero 1 and future Net-Zero projects.
  • Our prior content on GEVO can be accessed HERE.
OUR INSIGHTS

The Opportunities

Gevo is approaching the tipping point in terms of the commercialization of its renewable hydrocarbon technology. Building off of the Net-Zero concept, the company believes it has a clear pathway to significant cash flow. This is no longer just an idea but is being validated by the company’s inking of $1.6 billion in offtake agreements as part of a ~$14 billion pipeline of contract negotiations. Facilitating even part of this pipeline would require multiple Net-Zero plants with each producing over $100 million in EBITDA at the plant level. This is backed by over $500 million in cash on the company’s balance sheet. The company also expects its RNG plant to begin generating cash flow in late 2022 providing a near-term source of cash.

The Obstacles

A Net-Zero plant has not yet been constructed and will be a significant undertaking. Although commercial production has been proven, this is still a major step and plants at this scale can experience unforeseen problems. This is especially noteworthy given it is the first of its kind. Another problem is simply the long runway to production and sales. Investors will have to be patient as Plant 1 is not expected to begin production of hydrocarbons until 2024.

On October 12, 2021, Gevo entered into a strategic alliance with Axens North America Inc. to fast track the commercialization of Ethanol-to-Jet fuel (ETJ) and Sustainable Aviation Fuel (SAF) projects in the US. Axens will contribute more than 60 patents, engineering packages, proprietary catalysts, technology and equipment through the alliance.

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