Gevo, Inc CEO Patrick Gruber said on an earnings call this week that the company, a developer of low carbon fuels and chemicals, will forgo for now the high-cost equity and debt proposals it has received from potential investors for the construction of its first sustainable aviation fuel plant in South Dakota.
Instead, the company will seek a low-interest loan from the DOE – a decision that will delay the in-service date of its first SAF facility, known as Net Zero 1, by about a year, Gruber said.
Net Zero 1, in Lake Preston, South Dakota, is expected to be the first of several SAF projects the company is seeking to build using a modularized construction method, Gruber said. Using corn as feedstock, it would have the capability to produce approximately 60 million gallons per year of liquid hydrocarbons in the form of jet fuel and renewable gasoline. The plant is also expected to produce at least 420,000,000 pounds per year of high-value nutritional products.
The company expects to eventually secure third-party debt and equity investment in its net-zero projects, and to make money through development, fees, licenses, and a “carry” in the project – an equity interest that doesn’t necessarily require a cash investment, according to Gruber.
However, Gruber added that, in the current environment, “interest rates are high and expected to go higher.” After discussions with potential equity investors, Gruber said Gevo believes that the correct approach is to secure the DOE loan guarantee. The DOE process will delay financial close into 2024 and startup of Net Zero 1 to at least 2026, Gruber said.
In late April, Gevo gave notice that its offtake arrangement with Trafigura had been canceled. Gevo last year decided to utilize ethanol fermentation technology instead of isobutanol fermentation technology to produce SAF, requiring an amendment to the Trafigura deal that the parties could not agree to.
“This gives us a little more breathing room,” Gruber commented on the call, noting that airlines would step up for the lost offtake.
Addressing specifically the benefits to Gevo in delaying the Net Zero 1 project to pursue the DOE loan, Gruber noted the company doesn’t need to make orders for long-lead items between now and then.
“It gives us time to get the financing in order, make sure we’ve got everything in order to do the best deal,” he said. “We’ve got to go along with [the DOE] path. It helps with the overall financing.”
Gruber noted during the call that Gevo is looking at existing brownfield sites to build additional SAF plants, at a cost of roughly $400m – $500m depending on existing infrastructure.
