Gevo provides project updates including expected deliverables through 1st half of next year

Gevo Inc. provided an update Oct. 10 on the company and projects currently in process.

Market Development Gevo now has approximately 375 million gallons per year (mgy) of predominantly take-or-pay, financeable sustainable aviation fuel (SAF) and hydrocarbon fuel-supply agreements, which are expected to support project debt financing.

This level of demand would require multiple plants to be built over the next four years to satisfy those agreements.

Based on current market projections and certain assumptions, collectively, these agreements represent approximately $2.3 billion in expected annual sales.

Offtake partners include Trafigura, Kolmar, Delta Airlines, American Airlines, Alaska Airlines, Finnair, Japan Airlines, British Airways, Aer Lingus, and SAS.

Inflation Reduction Act The Inflation Reduction Act, signed into law in August by U.S. President Joe Biden, is helpful to many companies in the renewable energy industry and is a positive signal for SAF specifically.

The first phase of this two-phased approach to encouraging investment in the SAF industry creates an SAF blenders tax credit for the 2023-’24 period with a value potential of $1.25 [to $1.75] per gallon. In the second two-year phase, 2025-’27, it created a clean fuel production credit (CFPC) that has a credit of $1.75 per gallon for domestically produced, net-zero carbon intensity (CI) score SAF.

The value of both credits is based on the CI score of the fuel produced and requires a minimum 50 percent reduction in greenhouse-gas (GHG) emissions.

Gevo, like other net-zero businesses, is expected to benefit from such a program because of the expected low CI score of Gevo products.

Net-Zero 1 Status Following the recent groundbreaking ceremony in Lake Preston, South Dakota, the Net-Zero 1 project is on schedule with initial volumes of SAF expected to be delivered in 2025.

NZ1 is expected to produce approximately 55 mgy of SAF, or 62 mgy of total hydrocarbon volumes, which would satisfy part of the 375 mgy of financeable SAF- and hydrocarbon-supply agreements that are currently in place.

The transition to an ethanol-to-SAF design from Gevo’s original isobutanol-to-SAF and isooctane design continues to yield improved output expectations as pre-project planning has been completed through phase 2 of front-end loading work (FEL-2).

The results of this work, combined with support from the CFPC, have led to the forecast project EBITDA for NZ1 to be in the range of between $300 and $325 million per year, a 56 percent increase at the mid-point from the prior estimate of $200 million per year.

The total installed cost for NZ1, including the capital required for the alcohol-to-jet fuel plant as well as any site-development costs, is currently forecasted to be approximately $850 million, a 33 percent increase from the prior estimate of $640 million. This increase is primarily due to increased steel, equipment, and supply-chain costs related to the inflationary environment.

Progress on Key NZ1 Development Milestones

Through year-end 2022 Gevo has:

• Closed the purchase of the land for NZ1 in Lake Preston, South Dakota

• Executed development agreements for wind energy and green hydrogen

• Broken ground and begun site preparation at Lake Preston

Through year-end 2022 Gevo intends to:

• Select engineering, procurement, and construction (EPC) contractor

• Select fabricator for hydrocarbon plant modules

• Achieve substantial completion of front-end engineering design

Through the first half of 2023 Gevo intends to:

• Close the construction financing, including nonrecourse debt

• Order long-lead equipment

Throughout the remainder of 2022 and 2023, Gevo expects to update stockholders about certain key milestones related to the development, financing, and construction of NZ1 as well as subsequent Net-Zero plants.

Updates to those milestones will be found in the company’s press releases and investor presentations in the investor-relations section of Gevo’s website.

Additional Plant Sites Gevo continues to make steady progress on securing future SAF-production locations beyond NZ1. These future sites must offer an appealing mix of attributes that enable the company to produce low-cost fuels with the lowest carbon footprint possible. Gevo’s preferred list of partners and locations with decarbonization in mind are continuously being refined and the company is engaged in preliminary feasibility and development discussions with several of them, including ADM.

RNG Project Status Gevo’s renewable natural gas (RNG) project in Northwest Iowa continues to ramp up its production. The company recently received notice from the federal Renewable Fuel Standard that the RNG produced qualifies for renewable identification numbers (RIN) credits.

Gevo will begin to recognize revenue for RNG sales in the third quarter of this year; however, initial revenue will be limited to the value of the commodity, exclusive of environmental credits and will represent a partial quarter. Some sales revenue from environmental attributes are expected in the fourth quarter; however, the full extent of the available credits will begin contributing to revenue in 2023 due to timing of the approval and documentation process for California’s Low Carbon Fuel Standard credits.

The RNG project is expected to generate project EBITDA1 in the range of $16 million to $22 million per year beginning in 2023, depending on a variety of assumptions, including the value of credits under the federal RFS and the LCFS in California.

Verity Tracking and USDA Grant Gevo is proud to have been tentatively awarded up to $30 million by USDA to advance its Climate-Smart Farm-to-Flight initiative. This award and program are expected to be finalized in the coming months.

Gevo will be working with its strong team of partners in the Lake Preston, South Dakota, area to lower the company’s carbon footprint throughout the SAF business system as well as within other projects in Gevo’s portfolio of projects.

Gevo plans to deliver a high-quality carbon accounting system that will help reward growers who adopt farming methods that reduce GHG emissions. This accounting system will focus on the importance of immutable tracking and tracing of carbon-intensity scores that begins at the farm level and follows the molecules through the production of SAF and finally to its ultimate use in a jet engine.

Gevo plans to accomplish these goals through further development and implementation of Verity Tracking, which is a blockchain-enabled solutions platform for carbon tracking throughout an entire business system.

Chevron Conversations between Chevron and Gevo continue as each company evaluates how best to structure their relationship going forward. Chevron and Gevo have mutually agreed upon an extension to the letter of intent between the parties that allows these discussions and negotiations to continue.

“With the bulk of the engineering and design work for Gevo’s NZ1 project in South Dakota nearing completion and our RNG project in Iowa up and running, a portion of our team can shift their focus to the development and planning for projects beyond NZ1,” said Patrick Gruber, CEO of Gevo. “We now have approximately 375 mgy of commercial offtake commitments. Our team will take all that we have learned, and continue to learn, from the design and construction process for NZ1 and leverage that growing knowledge base as we plan and design each subsequent plant. Gevo has developed an outstanding set of partners with the capability to help execute our plans. We are excited to get on with building out capacity and getting product to the market at commercial scale. NZ1 is going to demonstrate how a commercial-scale SAF plant can achieve net-zero greenhouse-gas emissions. The passage of the Inflation Reduction Act is a game changer and is expected to reward companies like ours that drive to net-zero emissions.”