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Gevo flushed with $535M in cash and no significant debt as it announces key business updates and initiatives for 2021

Published: 09:32 27 Jan 2021 EST

Gevo Inc - Gevo Inc flushed with about $535 million in cash and no significant debt as it announces key business updates and initiatives for 2021
Gevo said preliminary capital estimates for Net-Zero 1 are $700 million - $800 million

Gevo Inc (NASDAQ:GEVO) (FRA:ZGV3) announced Wednesday key business updates and initiatives for 2021, noting it has about $535 million in cash and no significant debt.  

The company recently announced the concept of Net Zero Projects to produce energy-dense liquid hydrocarbons using renewable energy and Gevo’s proprietary technology. Gevo is currently developing its Net-Zero 1 Project at Lake Preston, South Dakota. 

Gevo also last week closed a registered direct offering priced at-the-market under Nasdaq rules of an aggregate of 43,750,000 shares of common stock at $8 each to raise $321.7 million, adding significantly to its runway heading into 2021. 

READ: Gevo Inc unveils Net-Zero 1 project to turn renewable energy into liquid hydrocarbons

The company expects the Net-Zero 1 project would have the capability to produce around 45MGPY of liquid hydrocarbons (jet fuel and renewable gasoline) that when burned, should have a “net-zero” greenhouse gas footprint as measured across the whole of the lifecycle. In addition, Net-Zero 1 is expected to produce at least 350,000,000 lbs/yr of high protein animal feed. 

To reduce and eliminate the fossil resources used in the plant, it is expected to have an anaerobic digestion wastewater treatment plant that is capable of generating enough biogas to run the plant and supply a combined heat and power unit, capable of meeting about 30% of the plant’s electricity needs. The remaining 70% of electricity to run the plant is expected to come from wind power. Net-Zero 1 may also obtain renewable natural gas (RNG) using manure from dairy or beef cows.

Gevo said preliminary capital estimates for Net-Zero 1 are $700 million-$800 million (including on-site renewable energy generation). The company is in the process of completing front-end engineering and project planning to determine capital costs for Net-Zero 1 with more precision.

Key corporate highlights

  • Gevo intends to use its $535 million cash to fund capital projects, working capital and for general corporate purposes;
  • Has enough cash to fund 100% of the equity investment that is expected for Net-Zero 1. Gevo may bring in appropriate strategic or financial partners as equity investors. Gevo expects to establish Net-Zero 1 in a special purpose entity. The full financing of Net-Zero 1 can only be completed after the front-end engineering phase is completed;
  • Has about 198 million shares of common stock issued and outstanding;
  • Has about 48MGPY of contracts signed for a mix of jet fuel and renewable gasoline products, representing around $1.5 billion of revenue across the life of the contracts. If Gevo secures additional take-or-pay contracts, Gevo would have to acquire and develop additional Net-Zero production sites;
  • Has optioned the right to purchase around 240 acres of land near Lake Preston, South Dakota. This site is attractive because of its abundant sustainable corn supply, high protein feed demand, rail transportation, and renewable energy potential;
  • Is planning to close and begin construction of its first RNG project in 2021. The NW Iowa Project will produce RNG by using anaerobic digesters to convert manure from dairy cows into RNG. RNG production is expected to begin in 2022. Citigroup is arranging the debt financing. Gevo plans to sell most of the gas to the RNG market in California and use some of the bio-gas generated from this project at its renewable hydrocarbons plant, for example, at Lake Preston, Luverne, and/or another site; and
  • Hired Citigroup to assist in the financing of the Net-Zero production facilities and the RNG project. The Net-Zero 1 financing process is dependent on completing the front-end engineering work, expected to be completed in December 2021. Gevo expects financing for Net-Zero 1 to close in the first half of 2022.

Key Initiatives for 2021

  • Complete front-end engineering work for Net-Zero 1 by year-end of 2021;
  • Gevo anticipates signing take-or-pay contracts with additional customers in 2021. Additional contracts are expected to support additional Net-Zero projects;
  • Secure additional plant sites for Net-Zero 2 and/or 3 to accommodate additional offtake agreements that Gevo may sign this year;
  • Close financing for Gevo’s NW Iowa Project and commence construction; and
  • Secure investment agreements with strategic and financial project investors for Net-Zero projects if terms are attractive.

Contact the author: patrick@proactiveinvestors.com

Follow him on Twitter @PatrickMGraham

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