Gevo Inc (NASDAQ:GEVO), a renewable fuels company focused on the production of sustainable aviation fuel (SAF), provided investors with a sweeping update on the company and its projects.
On June 8, 2022, the Englewood, Colorado-based company successfully closed a registered direct offering of 33.3 million shares to institutional investors for net proceeds of $139.2 million. This, combined with the firm’s existing cash, equivalents, restricted cash and marketable securities, provides Gevo with around $555.7 million to fund operations and projects.
As part of the offering, Gevo issued 33.3 million Series 2022-A warrants with an exercise price of $4.37 per share. If all 33.3 million Series 2022-A warrants were to be exercised in cash at the exercise price of $4.37 per share, Gevo will get an additional $145.7 million.
The company said the recent offering has boosted its balance sheet, which is expected to help the financing of Gevo’s Net-Zero 1 project (NZ1).
In a statement, Gevo CEO Patrick Gruber said: “While this has been a productive quarter and year to-date, the financial markets have been chaotic. Our recent decision to issue equity was made to ensure Gevo’s balance sheet could withstand the challenging financial markets that we expect over the next two years while continuing to move forward with our NZ projects.”
“As we move closer to FID and financial close on the debt component for NZ1, it should be clear to investors that Gevo has the capital needed to execute its development plan and that the value proposition of the SAF that will be produced by NZ1 is remarkable.”
Gruber noted that as demand from the aviation industry outstrips supply, there should be “opportunities for early movers, like Gevo, to create additional, accretive partnerships that will benefit our stockholders”.
Gevo is in the process of developing additional plant sites to meet demand under its existing SAF and hydrocarbon supply agreements, and some of the proceeds are expected to be used to advance those efforts.
Market development
Gevo now has more than 200 million gallons per year (MGPY) of predominantly take-or-pay, financeable SAF and hydrocarbon fuel supply agreements, which are expected to support project debt financing. This level of demand would require three additional plants of equal size to the expected capacity of NZ1 (currently expected to be approximately 55 million gallons per year) to be built over the next four years to satisfy those agreements, said the firm.
Based on current market projections, collectively, these agreements represent nearly $1.2 billion in expected sales per year, said the company.
Net-Zero 1 status
Gevo’s NZ1 project is on schedule with initial volumes of SAF expected to be delivered in 2025 to fulfill a portion of existing SAF and hydrocarbon supply agreements. NZ1 is expected to produce 55 MGPY of SAF or 62 MGPY of total hydrocarbon volumes, which would satisfy part of the 200 MGPY of financeable SAF and hydrocarbon supply agreements that are currently in place.
- Key NZ1 development milestones through year-end 2022:
- Close the purchase of the land for NZ1 in Lake Preston, South Dakota
- Execute commercial development, build, own and operate agreements for water, wind energy and green hydrogen
- Select engineering, procurement and construction (EPC) contractor
- Select fabricator for hydrocarbon plant modules
- Substantial completion of front-end engineering design
- Break ground and begin site preparation at Lake Preston
- Order long lead equipment
Through first-half 2023:
- Close the construction financing, including non-recourse debt
Additional plant sites
Gevo said it is the process of identifying and performing early site development work for additional SAF production locations. The sites include several greenfield locations and Gevo is also pursuing prospects with several existing ethanol plant sites, including those of ADM.
RNG project status
Gevo’s renewable natural gas (RNG) project in Northwest Iowa has been producing biogas and is now upgrading and injecting RNG into the natural gas pipeline. The RNG project generates renewable natural gas captured from dairy cow manure. When at full operational capacity, the RNG project is expected to generate around 355,000 MMBtu of RNG per year, which will be transported and sold in California by BP Canada Energy Marketing Corp and BP Products North America Inc.
Contact the author Uttara Choudhury at uttara@proactiveinvestors.com
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