Moving Toward a Carbon Neutral Future

Key Points

  • GEVO produces advanced hydrocarbons such as jet fuel, gasoline, and diesel fuel from sustainable carbohydrates with a net zero carbon potential.
  • Fuel products are true drop-in replacements and compatible with existing engines and distribution infrastructure.
  • Gevo believes it has a strong set of patents and process knowledge and that its technology is proven at commercial scale.
  • 17MGPY in off takes signed with marquee customers such as Delta Air Lines, Halterman Carless, SAS, Air Total and AvFuel
  • The company is planning an aggressive capacity expansion to facilitate revenue growth driven by existing off-take agreements.
  • The company expects revenues to grow from $33 million in 2018 to $46-56M by 2021 and $330-413M by 2023/24 assuming capacity is in place.
  • Gevo believes that based on the take-or-pay contracts that project financing can be obtained.

Catalyst Monitor

  • Signing additional off-take agreements.
  • Successfully restructuring the capital table and addressing convertible notes due Dec. 31st, 2020.
  • Additional voluntary or mandated carbon reduction initiatives around the globe.
  • Clarity on how the capacity expansion plans would be structured and financed. Signing a finance deal.
  • Begin production of low-carbon ethanol to improve the cash flow profile of the company. This estimated to have an impact on cash flow in 4Q2020.

Our Insight

The Opportunities

Gevo believes it is the leader in the development and commercialization of low carbon footprint hydrocarbons for jet fuel and gasoline and is commercially ready. The business pipeline has expanded rapidly with significant offtake agreements of 17 MGPY of hydrocarbons with marquee customers set for delivery in 2023. Regulations such as the European Green Deal as well as ESG principals are driving demand for renewable fuels globally. Gevo expects revenues to grow from $33 million in 2018 to $46-56M by 2021 and $330-413M by 2023/24 assuming capacity is in place. The intermediate step to produce and sell low-carbon ethanol is almost complete and this should improve cash flow.

The Obstacles

The first issue to address is the disposition of the convertible notes the company has outstanding due December 31st, 2020. There are various outcomes that could all impact the company differently. The second is obtaining growth capital for capacity expansion. Gevo is working on procuring equipment finance for Phase 1 and Phase 2 would need approximately $250 million based on 20MGPY in hydrocarbons but has flexibility to adjust plant size and capital needs. The company believes that project finance at the plant level will resolve this and is currently exploring options and partners.