Key Developments In Carbohydrate-to-Hydrocarbon Production and Net-Zero Project with CEO Dr. Patrick Gruber



KEY POINTS
  • Dr. Patrick Gruber talks about the ‘Billion Gallon’ initiative and the importance of the GREET model to account for emissions across the lifecycle.
  • Gevo created an Alcohol-to-Jet Synthesized Paraffinic Kerosene (ATJ-SPK) pathway based on patented technologies such as genetically engineered yeast to produce isobutanol (IBA), a four-carbon alcohol that serves as a building block for SAF and other energy-dense renewable hydrocarbons.
  • Gevo entered into a strategic alliance with Axens North America, Inc. that gives it exclusive rights to commercialization of ethanol-to-jet (ETJ) and SAF projects in North America. Gevo will also leverage Axens’ technologies, proprietary catalysts and equipment, and engineering packages, as well as its expertise and processes.
  • Gevo signed an MoU with Archer-Daniels-Midland Company (“ADM”) to support the output of 500M gallons of SAF and other renewable hydrocarbons. ADM would supply about 900MG of ethanol each year. The production would likely begin in about 2025-2026.
  • Gevo’s Net-Zero 1 project is on track. The company selected Kiewit Energy Group Inc. to carry out the Front-End Engineering Design (FEED). Kiewit is expected to provide the engineering, procurement & construction services after completion of the FEED phase. The plant is expected to go live by 2024.
  • The company was awarded a patent for the process to upgrade or convert ethanol and bio-based alcohols derived from carbohydrates to drop-In hydrocarbon fuels in September 2021. This opens up a previously inaccessible technology and pipeline to hydrocarbons.
  • The company acquired the patent estate of Butamax to add around 600 patents to its portfolio, which provides Gevo with full ownership over the entire known isobutanol patent portfolio of Butamax. The company’s IP portfolio is now believed to be worth more than $400 million.
  • The company also signed a Letter of Intent with Chevron USA Inc. to develop one or more facilities to produce SAF from inedible corn. Chevron would have offtake rights for 150M gallons of SAF per year.
  • 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 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 ~$20 billion pipeline of contract negotiations. Facilitating even part of this pipeline would require multiple Net-Zero plants with each producing an estimated $150-160 million in EBITDA per year at the plant level based on the company’s current assumptions. This is backed by over $550 million in cash, cash equivalents, restricted cash, and marketable securities 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 Net-Zero 1 is not expected to begin production of hydrocarbons until 2024.

Dr. Patrick Gruber talks about the ‘Billion Gallon’ initiative and the importance of the GREET model to account for emissions across the lifecycle.

EXECUTIVE DISCUSSION

Executives in Focus: Dr. Patrick Gruber has been with Gevo since 2007 and serves as CEO & Director.

Shawn Severson: We’re speaking with Patrick Gruber of Gevo about the significant events of the previous few months, as well as the commercial development of carbohyrdrate-to-ethanol-to-jet (CETJ) technology and a few investor-related topics. Gevo has fascinating technology and a slew of essential patents. What distinguishes the CETJ strategy from the current renewable hydrocarbons strategy used at Net-Zero plants? Let's look at how the production process works and how CETJ compares to Gevo.

Patrick Gruber: Let's start with the technologies and what they imply. Isobutanol is four-carbon alcohol produced via fermentation. Then we join these items chemically to make octane with eight carbons and jet fuel with twelve carbons. But the broad category of technology is alcohol-to-hydrocarbons or alcohol-to-jet. The advantag...

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