Gevo, Inc., a developer of net-zero hydrocarbon fuels and chemicals, has received a conditional commitment for a loan guarantee with disbursements totaling $1.46 billion (excluding capitalized interest during construction) from the U.S. Department of Energy Loan Programs Office for its Net-Zero 1 project in South Dakota.
With capitalized interest during construction, the DOE loan facility has a borrowing capacity of $1.63 billion, Gevo said in a news release.
The NZ1 facility is being built in Lake Preston, South Dakota. It will use 100-percent U.S.-sourced feedstocks and is designed to produce approximately 60 million gallons of sustainable aviation fuel (SAF), approximately 1.3 billion pounds of protein and animal feed products, and approximately 30 million pounds of corn oil per year.
The design capability of the NZ1 facility, when combined with the Gevo business system, is expected to yield SAF with a net-zero carbon footprint on a lifecycle basis, including through the burning of the fuel. Gevo net-zero SAF projects are expected to catalyze the accelerated adoption of climate smart agricultural practices, support rural jobs and economic development, and reinforce domestic energy security.
NZ1 is the first-ever large-scale alcohol-to-jet (ATJ) project to receive a DOE LPO conditional commitment and is expected to provide critical new opportunities for South Dakota workers, farmers, and residents. We believe Gevo’s proprietary ATJ plant design represents the lowest cost-per-ton of carbon abatement among all of the current SAF production technologies.
“This marks a watershed moment for the Net-Zero 1 project and a critical step forward in Gevo’s mission to transform the aviation industry by providing a scalable, sustainable, and economical renewable-carbon-based jet fuel—SAF,” said Gevo CEO Dr. Patrick Gruber. “This valuable commitment to help finance NZ1, if finalized, should also attract other capital investments to unlock SAF commercialization given the robust due diligence conducted by the agency. The due diligence work by the DOE has been incredibly detailed and thorough, and the benefit is a substantially reduced execution risk profile for the project. We are grateful for the support from the Department of Energy’s Loan Programs Office.”
“NZ1 is the largest economic development project in South Dakota history,” said Gevo’s Senior Vice President of Public Affairs, Lindsay Fitzgerald. “We expect that NZ1 will kickstart new growth in the economy, create jobs, and present additional opportunities for the agricultural community in the region around Lake Preston, across South Dakota, and even reaching other states.”
According to a recent report from Charles River Associates (“CRA”), Net-Zero 1 is projected to generate significant economic and climate benefits. Specifically, the plant is expected to create more than 1,300 indirect jobs during its construction phase and 100 permanent jobs at the plant itself. This is in addition to hundreds of local indirect jobs created across the agricultural, manufacturing, and transportation industries, generating an annual economic impact of over $100 million.
The project design and engineering; and the operating and financing model, should serve as a template for future Gevo net-zero projects—potentially accelerating the timeline of SAF commercialization. Gevo also expects to track and verify the sustainability and carbon intensity of its products through its wholly owned subsidiary, Verity Holdings, LLC.
We believe this conditional commitment milestone reduces execution risk for securing the remaining large-scale equity investors who would accompany the proposed DOE-guaranteed debt and Gevo equity. Currently, the project is projected to generate high teens returns to equity investors.
While this conditional commitment indicates DOE’s intent to finance the project, DOE and the company must satisfy certain technical, legal, environmental, commercial, and financial conditions before the Department can enter into definitive financing documents and fund the loan guarantee.
Citi is acting as financial advisor to Gevo. Latham & Watkins LLP is acting as legal counsel to Gevo.
