Gevo Restarts Production of Isobutanol in March 2016 Following Completion of Capital Projects

April 04, 2016

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(Gevo) Gevo, Inc.(NASDAQ:GEVO) today announced financial results for the three months endedDecember 31, 2015. Key highlights for Gevo included:

Gevo restarted the production of isobutanol at its production facility in Luverne, Minnesota following the completion of capital projects designed to decrease the cost of production for isobutanol by bringing “in-house” parts of the process that have previously been done by third parties. Gevocontinues to target isobutanol production levels at Luverne in the range of 750,000 to 1 million gallons in 2016, and a decrease in the variable cost of isobutanol production at Luverne to a range of $3.00-$3.50/gallon**, enabling isobutanol to be produced at a positive contribution margin, based on an expected average selling price for isobutanol of between $3.50-$4.50/gallon.

On March 28, 2016, Gevo announced that ASTM International Committee D02 on Petroleum Products, Liquid Fuels, and Lubricants and Subcommittee D02.J on Aviation Fuel passed a concurrent ballot this week approving the revision of ASTM D7566 (Standard Specification for Aviation Turbine Fuel Containing Synthesized Hydrocarbons) to include alcohol to jet synthetic paraffinic kerosene (ATJ-SPK) derived from renewable isobutanol (the “D02.J Ballot”). The D02.J Ballot passed two levels of ASTM technical scrutiny: subcommittee and main committee ballot and is in the final stages of Society Review. The ASTM process is substantially complete as it relates to the approval of the D02.J Ballot. In order to fully complete the process, the ASTM still needs to close the Society Review, perform a final ballot tally, and publish the revision of ASTM D7566 (Standard Specification for Aviation Turbine Fuel Containing Synthesized Hydrocarbons) on its website. It is expected that these final actions will be completed by the ASTM in early April.

Gevo entered into a license agreement and joint development agreement with Porta Hnos. S.A. (Porta) to construct multiple isobutanol plants in Argentina using corn as a feedstock, the first of which is expected to be wholly owned by Porta and is anticipated to begin producing isobutanol in 2017. The first plant is expected to have a production capacity of up to five million gallons of isobutanol per year. Once the plant is operational, Gevo expects to generate revenues from this licensing arrangement, through royalties, sales and marketing fees, and other revenue streams such as yeast sales. The production capacity of any additional plants is still to be determined.

“We are very pleased to have restarted the production of isobutanol at Luverne. The capital improvement projects came in on time and on budget. While we expect that there will be a learning curve associated with operating the new equipment, the production and cost targets that we set out in September 2015 remain the same. As we ramp up the isobutanol production levels at Luverne, we expect to be able to announce new customer relationships across all our core markets, namely the alcohol-to-jet fuel (ATJ), marina, off-road, isooctane and solvents markets,” said Dr. Patrick Gruber, Chief Executive Officer.

* - ‘non-GAAP cash EBITDA loss’ is calculated by adding back depreciation and non-cash stock compensation to GAAP Loss From Operations
** - Assumes corn price of $3.65 per bushel and nets the value of the isobutanol distiller’s grains (the “iDGs™”)

Financial Highlights

Revenues for the fourth quarter of 2015 were $7.3 million compared with $9.5 millionin the same period in 2014. During the fourth quarter of 2015, revenues derived at theLuverne plant were $6.5 million, a decrease of $2.3 million from the same period in 2014. This decrease was primarily a result of lower ethanol production, as well as lower ethanol prices.

During the fourth quarter of 2015, hydrocarbon revenues were $0.2 million, a decrease of $0.3 million from the same period in 2014. This decrease was primarily a result of timing of shipments of finished products from Gevo’s hydrocarbons demonstration plant located in Silsbee, Texas.

Gevo also generated grant revenue of $0.5 million during the fourth quarter of 2015, an increase of $0.4 million from the same period in 2014. Gevo’s grant revenue is primarily generated through the work it is doing with the Northwest Advanced Renewables Alliance to produce isobutanol from cellulosic feedstocks, such as wood waste, which can then be converted into Gevo’s ATJ.

Cost of goods sold decreased by $1.9 million during the three months ended December 31, 2015, compared with the same quarter in 2014, due primarily to a decrease in ethanol production, as well as a cessation of isobutanol production while Gevo was installing new capital equipment at Luverne, which is designed to decrease the cost of production of isobutanol. The primary expense decreases related to raw materials of$0.6 million, other variable costs of production of $0.8 million and repairs and maintenance of $0.3 million.

Gross loss was $1.7 million for the three months ended December 31, 2015.

Research and development expense decreased by $1.1 million during the three months ended December 31, 2015, compared with the same quarter in 2014, due primarily to a$0.3 million decrease in employee-related and lab consumable expenses and a $0.7 million decrease in costs related to the South Hampton facility.

Selling, general and administrative expense decreased by $1.5 million during the three months ended December 31, 2015, compared with the same quarter in 2014, due primarily to decreases in legal costs of $2.0 million and consulting and professional fees of $0.6 million, offset by an increase in employee-related expenses of $1.0 million.

Loss from operations in the fourth quarter of 2015 was $6.6 million, compared with$8.9 million in the same quarter in 2014.

Cash EBITDA loss in the fourth quarter of 2015 was $4.2 million, compared with $6.7 million in the same quarter in 2014.

Interest expense in the fourth quarter of 2015 was $2.1 million, which was flat in comparison to the same quarter last year.

During the three months ended December 31, 2015, the estimated fair value of the derivative warrant liability decreased by $2.9 million primarily associated with the decrease in the price of Gevo’s common stock in the quarter.

Gevo also incurred a non-cash gain of $0.3 million during the quarter due to the quarterly mark-to-market valuation of the 2017 Notes.

During the three months ended December 31, 2015, there was no change in the value to the embedded derivatives in the convertible notes issued in 2012 (2022 Notes), as the derivatives have had no meaningful value since the third quarter of 2014.

One holder exchanged $2.5 million aggregate principal amount of outstanding 2022 Notes for 1,107,833 shares of Gevo’s common stock during the three months endedDecember 31, 2015. The holder agreed to waive any accrued but unpaid interest on the exchanged notes. No holders of the 2022 Notes converted any notes during the quarter.

The net loss for the fourth quarter of 2015 was $8.0 million, compared with $11.1 million during the same period in 2014.

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A replay of the call and webcast will be available two hours after the conference call ends on March 29, 2016. To access the replay, please dial 1 (888) 843-7419 (inside the US) or 1 (630) 652-3042 (outside the US) and reference the access code 42188401. The archived webcast will be available in the Investor Relations section of Gevo'swebsite at www.gevo.com.

About Gevo

Gevo is a leading renewable technology, chemical products, and next generation biofuels company. Gevo has developed proprietary technology that uses a combination of synthetic biology, metabolic engineering, chemistry and chemical engineering to focus primarily on the production of isobutanol, as well as related products from renewable feedstocks. Gevo’s strategy is to commercialize biobased alternatives to petroleum-based products to allow for the optimization of fermentation facilities’ assets, with the ultimate goal of maximizing cash flows from the operation of those assets.Gevo produces isobutanol, ethanol and high-value animal feed at its fermentation plant in Luverne, Minnesota Gevo has also developed technology to produce hydrocarbon products from renewable alcohols. Gevo currently operates a biorefinery in Silsbee, Texas, in collaboration with South Hampton Resources Inc., to produce renewable jet fuel, octane, and ingredients for plastics like polyester. Gevo has a marquee list of partners including The Coca-Cola Company, Toray Industries Inc. and Total SA, among others. Gevo is committed to a sustainable bio-based economy that meets society’s needs for plentiful food and clean air and water. READ MORE and MORE (Biomass Magazine) and MORE (Biofuels Digest)