Colorado's Gevo sees renewable fuels interest taking off, eyes multiple plants to make it
Gevo CEO Pat Gruber with an ear of corn, which his company turns into renewable jet fuel, in a file photo from after the first commercial flights using renewable jet fuel.
By Greg Avery
Senior Reporter, Denver Business Journal
May 17, 2021, 9:55am EDT
Gevo Inc. is in talks with buyers interested in more than $10 billion of its low-carbon biofuel, and the plant it plans in South Dakota could be one of many it soon needs.
“It's likely that we could have more than one net-zero plant being built at the same time in the coming years,” said Patrick Gruber, CEO of Gevo Inc. (Nasdaq: GEVO).
The second and third net-zero fuel plants could both start being built before the first is complete, based on the demand for its low-carbon fuel that’s shown by contracts it’s actively negotiating, the Greenwood Village-based company said.
“People want this stuff fast,” Gruber said. “People are figuring out that we have a solution here.”
Gevo updated analysts after reporting its first-quarter results, and the information caused shares in the company to jump 23% in trading Friday to $5.86 a share.
Gevo makes renewable low-carbon jet fuel and gasoline from plant carbohydrate feedstocks, and it’s building a system in Iowa to turn dairy cow manure into natural gas it plans to sell to buyers in California.
The company’s centerpiece is a design for the Lake Preston, South Dakota, plant that can take corn or other plant material and turn it into 45 million gallons of refined fuel annually. That plant, which Gevo calls Net-Zero 1, would make fuel in a process that doesn’t generate carbon dioxide emissions but yields fuel, power that the plant itself could use and 300 million pounds a year of high-protein animal feed plus corn oil, too.
The fuel itself produces no sulfur dioxides during combustion, unlike fossil fuels, and has lower nitrogen oxides and particulates than traditional fuels, the company says. It can be burned by typical engines, either by itself or as a blend with fossil fuels to reduce emissions.
One of its buyers is Scandinavian Airlines System, which has contracted to buy about $100 million worth of fuel from Gevo over several years starting in 2024, the company says.
Gevo’s getting a lot of questions about whether it’s airlines or companies in the fuel supply chain industry that are negotiating the other contracts that might drive it to build additional production plants. Gevo can’t reveal that now, Gruber said, other than to say it’s a mix of customer types and sizes.
“We are sworn to secrecy about these things,” he said.
The contracts in its development pipeline exceed 393 million gallons of renewable fuel per year, the company says.
Gevo sold $458 million in stock earlier this year to fund the development of the first net-zero biofuel plant it’s planning.
Design is on schedule and the project is on track to start commercial fuel production in 2024. The company hired Koch Project Solutions, a Koch Industries company, in January to help it with project design.
The interest from buyers is prompting the company to consider whether two other plants could be built quickly enough to go into production that same year. It’s not clear where the other two plants might be.
The company’s design can use a variety of plant carbohydrates as a feedstock for the fuel, meaning Gevo could develop fuel production plants internationally using crops other than corn, Gruber said.
Each production plant would generate $100 million in annual cash flow, before taxes and debt expenses, Gevo said.
That would be a big change from Gevo’s current sales. It reported no first-quarter revenue at all.
Gevo stopped producing ethanol at its Luverne, Minnesota, plant last year early in the Covid-19 pandemic that crashed fuel prices. The company has been conducting maintenance ahead of restarting and producing isobutanol there next month.
The isobutanol production would be used at its Silsb