Water Tower Research released an updated initiation of coverage report on Gevo, Inc, noting 'renewable hydrocarbons are seeing clearer paths to commercialization amid carbon emissions reductions driven by increased regulatory scrutiny and corporate responsibility.'
Gevo is a next generation “low-carbon” fuel company focused on the development and commercialization of renewable alternatives to petroleum-based products.
The research firm also noted Gevo’s potential offtake agreement pipeline is approaching $20 billion, with $1.6 billion inked to date.
“Gevo has a proven technology and production process that is scalable today with key short-term target markets in sustainable aviation fuel (SAF) and renewable gasoline,” Shawn Severson, president of Water Tower Research wrote.
The low carbon fuel firm is currently developing its first Net-Zero project in Lake Preston, South Dakota. The project is expected to produce renewable hydrocarbon products that when burned, have the potential to yield net-zero greenhouse gas emissions when measured across the entire lifecycle of the products.
The project is reported to be progressing well with initial engineering work underway and the next phase of engineering work expected to be completed by the end of the year.
“The closing of debt financing and commencement of construction is expected to occur in the 1H22,” Severson added.
Gevo’s offtake agreement pipeline of almost $20 billion was another positive factor that analysts believe will contribute to Gevo’s investor appeal.
“Facilitating even part of this pipeline would require multiple Net-Zero plants with each producing an estimated $150-160 million in EBITDA per year at the plant level based on the company’s current assumptions,” the report stated. “This is backed by over $550 million in cash, cash equivalents, restricted cash, and marketable securities on the company’s balance sheet.”
The completion of the Net-Zero project will be a significant catalyst to both the company, and the carbon sector.
“Although commercial production has been proven, this is still a major step and plants at this scale can experience unforeseen problems,” wrote Severson. “Another problem is simply the long runway to production and sales. Investors will have to be patient as Net-Zero 1 is not expected to begin production of hydrocarbons until 2024.”
Shares of Gevo, Inc were trading for $5.21 at 3:00pm EST.
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