AY-YI YI-YA AAAY, Gevo Just Can’t Stop Dancin’
by Jim Lane (Biofuels Digest) … But there’s something so cool in that technology that we can’t take our eyes off the company and its progress, even though looking at the balance sheet can feel like watching a car crash in slow motion. This week, Gevo executed a series of moves including signing up its first direct customer for hydrocarbons for the proposed expansion of its Luverne, Minnesota plant. The highlight was a five-year offtake agreement with Haltermann Carless, ETS Racing Fuels and EOS.
Let’s look into that.
In the first phase, HCS will purchase $2-$3 million worth of isooctane produced at Gevo’s demonstration hydrocarbons plant located in Silsbee, Texas. This first phase is expected to commence in 2017 and would continue until completion of Gevo’s future, large-scale commercial hydrocarbon plant, which is likely to be built at Gevo’s existing isobutanol production facility located in Luverne, Minnesota.
In the second phase, HCS will agree to purchase approximately 300,000 to 400,000 gallons of isooctane per year under a five-year offtake agreement. Gevo would supply this isooctane from its first large-scale commercial hydrocarbons facility, which is likely to be built at Gevo’s existing isobutanol production facility located in Luverne, Minnesota.
The LOI establishes a selling price that is expected to allow for an appropriate level of return on the capital required to build out Gevo’s existing production facility in Luverne, Minnesota.
What’s HCS up to? They’ll market and distribute Gevo’s products globally on a non-exclusive basis, and the intent of the two companies is to establish further offtake arrangements for other products such as Gevo’s alcohol-to-jet fuel, also known as ATJ, and its isobutanol.
“When we produce ATJ, we also produce other products such as isooctane and isooctene. We believe that a binding offtake agreement with HCS Holding is one more piece of the puzzle to validate our case for expanding the Luverne plant,” continued Dr. Gruber (Dr. Patrick Gruber, Gevo’s Chief Executive Officer).
Since money is unlikely to fall from the sky like manna from heaven, the likely solution is an offtaker who steps forward out of the desire for the product.
We suspect the inflection point might be renewable jet fuel.
After all, airlines have seen enough pressure on their sustainability goals from regulators, have seen enough shaking heads when it comes to the prospects for a solar plane any time in the next 50 years, and enough companies that can produce jet fuel decide to make renewable diesel. Airlines and the companies in their supply chain have figured out that there’s little hope that, on the numbers, anyone is going to be supplying jet fuel so long as the California Low Carbon Fuel Standard offers big support for diesel and nothing for jet.
And they have also calculated that the technology case for making $3 renewable jet fuel is pretty good right now, and it might be time to lock in some long-term supply contracts and some long-term feedstock contracts.
Yes, airlines are enjoying low fuel prices now, but someone has to ask how long the public will permit concentrated amounts of CO2 to be vented at 35,000 feet, where it can do some damage — without extracting a carbon fee for skyfill. READ MORE and MORE (Biomass Magazine) and MORE (Gevo)