Wednesday, October 12, 2022
Gevo’s mission is to transform renewable energy and carbon into energy-dense liquid hydrocarbons. These liquid hydrocarbons can be used for drop-in transportation fuels such as gasoline, jet fuel, and diesel fuel, that when burned have potential to yield net-zero greenhouse gas emissions when measured across the full lifecycle of the products. Gevo uses low-carbon renewable resource-based carbohydrates as raw materials, and is in an advanced state of developing renewable electricity and renewable natural gas for use in production processes, resulting in low-carbon fuels with substantially reduced carbon intensity (the level of greenhouse gas emissions compared to standard petroleum fossil-based fuels across their lifecycle). Gevo’s products perform as well or better than traditional fossil-based fuels in infrastructure and engines, but with substantially reduced greenhouse gas emissions. In addition to addressing the problems of fuels, Gevo’s technology also enables certain plastics, such as polyester, to be made with more sustainable ingredients. Gevo’s ability to penetrate the growing low-carbon fuels market depends on the price of oil and the value of abating carbon emissions that would otherwise increase greenhouse gas emissions. Gevo believes that its proven, patented, technology enabling the use of a variety of low-carbon sustainable feedstocks to produce price-competitive low carbon products such as gasoline components, jet fuel, and diesel fuel yields the potential to generate project and corporate returns that justify the build-out of a multi-billion-dollar business.
Michael Heim, CFA, Senior Research Analyst, Noble Capital Markets, Inc.
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Gevo Provides Expanded Project Update. Gevo broke ground on its Net-Zero 1 (NZ1) Aviation Fuel plant in South Dakota on September 15, 2022. Fuel is expected to be produced and delivered in 2025. On October 11, 2022, management updated the expected cost of the plant to be $850 million (was $640 million) and the projected EBITDA from the plant to be $300-$325 million (was $200 million). Higher costs reflect higher steel, equipment and supply chain costs while higher EBITDA reflects improved output expectations.
Gevo Provides Company Projection Update. Gevo indicated: 1) Take or Pay outtake agreements are now 375 million gallons vs. a previous estimate of 350 million, 2) Sales are expected to be $2.3 billion vs. previous estimate of $2.1 billion, and 3) The Inflation Reduction Act phase II includes a $1.75 per gallon tax credit which was in line with previous assumptions.
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This Company Sponsored Research is provided by Noble Capital Markets, Inc., a FINRA and S.E.C. registered broker-dealer (B/D).
*Analyst certification and important disclosures included in the full report. NOTE: investment decisions should not be based upon the content of this research summary. Proper due diligence is required before making any investment decision.