Gevo Inc (NASDAQ:GEVO) said it has signed a “take-or-pay” agreement with Delta Air Lines (NYSE:DAL) Inc to supply 75 million gallons of sustainable aviation fuel (SAF) per year for seven years.
Based on current assumptions, including those around future pricing of commodities and the future values of certain environmental benefits, Gevo said it estimates that the agreement should generate about $2.8 billion of revenue, inclusive of the value from environmental benefits.
The agreement replaces the existing agreement signed with Delta in 2019 to purchase 10 million gallons per year and bolsters Delta's commitment to incorporating SAF into its operations.
READ: Gevo says oneworld Alliance members plan to purchase up to 200M gallons annually of its sustainable aviation fuel
"On behalf of the entire team at Gevo, I want to congratulate our partners at Delta for their leadership in continuously pushing the aviation industry towards net-zero emissions,” said Gevo CEO Patrick Gruber in a statement.
“Delta makes for a great customer, recognizing that big change is needed. I also appreciate their faith in what we are doing at Gevo. Net-zero jet fuels matter. We expect production from our first Net-Zero plant to begin in 2025. To meet the demand that we now have under contract, we need to develop and build more than one Net-Zero plant. This is a happy problem to have.”
Kelly Nodzak, Delta's director of Global Jet Fuel Procurement, added: "SAF is a critically important lever we have available today to help our industry reduce the lifecycle carbon emissions from aviation fuel. That's why we are working to develop the market and a broader understanding of the effectiveness of SAF, which can reduce lifecycle emissions up to 80% when used in pure form compared to fossil jet fuels."
Gevo has remained focused on sustainability at every stage of production. It has developed two alcohol-to-jet pathways that can utilize various low-carbon feedstocks grown using sustainable agriculture. These feedstocks can then be converted, in some cases, to high-value nutritional products and energy-dense liquid hydrocarbons, including SAF.
Gevo's production processes will incorporate renewable energy, including wind turbines, biogas, and combined heat and power systems (CHP) to increase efficiency and reduce carbon intensity to net-zero levels, which the customer can then pass on through the fuel.
The agreement is subject to certain conditions precedent, including Gevo developing, financing, and constructing one or more production facilities to produce the SAF contemplated by the agreement. A copy of the agreement between Delta and Gevo has been filed with the US Securities and Exchange Commission on Form 8-K.
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