Gevo Secures Conditional Commitment from U.S. Department of Energy Loan Programs Office for its Net-Zero 1 Sustainable Aviation Fuel Plant in South Dakota

October 17, 2024

Print This Article Share it With Friends

(Gevo) This conditional commitment signals the strength of the project to finance the world’s first large-scale net-zero-emissions alcohol-to-jet production facility -- Gevo, Inc. (NASDAQ: GEVO), a leading developer of net-zero hydrocarbon fuels and chemicals, is pleased to announce it received a conditional commitment for a loan guarantee with disbursements totaling $1.46 billion (excluding capitalized interest during construction) from the U.S. Department of Energy (“DOE”) Loan Programs Office (“LPO”) for its Net-Zero 1 project (“NZ1”) in South Dakota. With capitalized interest during construction, the DOE loan facility has a borrowing capacity of $1.63 billion.

The NZ1 facility is being built in Lake Preston, South Dakota. It will use 100-percent U.S.-sourced feedstocks and is designed to produce approximately 60 million gallons of sustainable aviation fuel (“SAF”), approximately 1.3 billion pounds of protein and animal feed products, and approximately 30 million pounds of corn oil per year. The design capability of the NZ1 facility, when combined with the Gevo business system, is expected to yield SAF with a net-zero carbon footprint on a lifecycle basis, including through the burning of the fuel. Gevo net-zero SAF projects are expected to catalyze the accelerated adoption of climate smart agricultural practices, support rural jobs and economic development, and reinforce domestic energy security.

NZ1 is the first-ever large-scale alcohol-to-jet (“ATJ”) project to receive a DOE LPO conditional commitment and is expected to provide critical new opportunities for South Dakota workers, farmers, and residents. We believe Gevo’s proprietary ATJ plant design represents the lowest cost-per-ton of carbon abatement among all of the current SAF production technologies.

“This marks a watershed moment for the Net-Zero 1 project and a critical step forward in Gevo’s mission to transform the aviation industry by providing a scalable, sustainable, and economical renewable-carbon-based jet fuel—SAF,” said Gevo CEO Dr. Patrick Gruber. “This valuable commitment to help finance NZ1, if finalized, should also attract other capital investments to unlock SAF commercialization given the robust due diligence conducted by the agency. The due diligence work by the DOE has been incredibly detailed and thorough, and the benefit is a substantially reduced execution risk profile for the project. We are grateful for the support from the Department of Energy’s Loan Programs Office.”

“NZ1 is the largest economic development project in South Dakota history,” said Gevo’s Senior Vice President of Public Affairs, Lindsay Fitzgerald. “We expect that NZ1 will kickstart new growth in the economy, create jobs, and present additional opportunities for the agricultural community in the region around Lake Preston, across South Dakota, and even reaching other states.”

According to a recent report from Charles River Associates (“CRA”), Net-Zero 1 is projected to generate significant economic and climate benefits. Specifically, the plant is expected to create more than 1,300 indirect jobs during its construction phase and 100 permanent jobs at the plant itself. This is in addition to hundreds of local indirect jobs created across the agricultural, manufacturing, and transportation industries, generating an annual economic impact of over $100 million.

The project design and engineering; and the operating and financing model, should serve as a template for future Gevo net-zero projects—potentially accelerating the timeline of SAF commercialization. Gevo also expects to track and verify the sustainability and carbon intensity of its products through its wholly owned subsidiary, Verity Holdings, LLC.

We believe this conditional commitment milestone reduces execution risk for securing the remaining large-scale equity investors who would accompany the proposed DOE-guaranteed debt and Gevo equity. Currently, the project is projected to generate high teens returns to equity investors.

While this conditional commitment indicates DOE’s intent to finance the project, DOE and the company must satisfy certain technical, legal, environmental, commercial, and financial conditions before the Department can enter into definitive financing documents and fund the loan guarantee.

For more information, review the DOE’s announcement blog LPO Announces Conditional Commitment to Gevo Net-Zero for Corn Starch-to-Sustainable Aviation Fuel Facility in South Dakota | Department of Energy

ADVISORS

Citi is acting as financial advisor to Gevo. Latham & Watkins LLP is acting as legal counsel to Gevo.

INVESTOR CALL

A conference call will be held on Thursday, October 17, 2024 at 9:00am ET to discuss the announcement.

To participate in the live call, please register through the following event weblink: https://us06web.zoom.us/webinar/register/WN_nWu63-22QpWuF9SeBcNEfQ

A webcast replay will be available after the conference call ends on October 17, 2024. The archived webcast and accompanying presentation materials will be available in the Investor Relations section of Gevo's website at www.gevo.com.

ABOUT GEVO

Gevo's mission is to convert renewable energy and biogenic carbon into sustainable fuels and chemicals with a net-zero or better carbon footprint. Gevo’s innovative technology can be used to make a variety of products, including SAF, motor fuels, chemicals, and other materials. Gevo’s business model includes developing, financing, and operating production facilities for these renewable fuels and other products. It currently runs one of the largest dairy-based renewable natural gas (“RNG”) facilities in the United States. It also owns the world’s first production facility for specialty ATJ fuels and chemicals. Gevo emphasizes the importance of sustainability by tracking and verifying the carbon footprint of its business systems through its Verity subsidiary.

Learn more at Gevo’s website: www.gevo.com READ MORE

Related articles

US offers conditional loan guarantees worth about $3 bln for two sustainable aviation fuel projects (Reuters)
Boom! US DOE loan Program Office drops $2.9B in conditional loan guarantee commits to Gevo, Montana Renewables (Biofuels Digest)
LPO Announces Conditional Commitment to Montana Renewables to Significantly Expand US Sustainable Aviation Fuel Production (Department of Energy)
Colorado company's biofuel plant wins $1.5 billion DOE commitment (Denver Business Journal)
Gevo discusses DOE loan guarantee, Red Trail Energy acquisition (Ethanol Producer Magazine)

Excerpt from Reuters: The agency's Loan Programs Office said the funding of up to $1.44 billion to Calumet's (CLMT.O), opens new tab unit would support the expansion of its facility in Montana.

The facility will utilize vegetable oils, fats, and greases to produce SAF, renewable diesel, and renewable naphtha.

If finalized, the loan guarantee would fund facility expansion to produce about 315 million gallons per year of biofuels, most of which will be SAF, the agency said.

The White House aims to meet all of the U.S.'s aviation fuel demand with SAF by 2050 and to supply at least 3 billion gallons of SAF annually by 2030.

Once the Montana facility reaches full capacity, its output would represent 10% of the SAF Grand Challenge goal of 3 billion gallons annually by 2030, DOE said. READ MORE

Excerpt from Biofuels Digest: Boom! Two massive loan guarantees one on top of the other. Cynics might sense a panic to get long-studied projects out the door, others might breathe a sigh of relief that these two conditional commitments made it through the process.

Gevo’s Net-Zero 1 is the first-ever large-scale alcohol-to-jet project to receive a DOE LPO conditional commitment and is expected to provide critical new opportunities for South Dakota workers, farmers, and residents. We believe Gevo’s proprietary ATJ plant design represents the lowest cost-per-ton of carbon abatement among all of the current SAF production technologies.

This conditional commitment supports the Biden-Harris Administration’s goal of increasing U.S. production of SAF to 3 billion gallons per year by 2030 and 35 billion gallons per year by 2050. SAF is the only viable near-term option to decarbonize the airline industry, which is responsible for 11% of U.S. transportation emissions or 3.3% of total U.S. emissions.

Welcome? Yes. Overdue? Some say. Enough? No. There are more in the hopper at the LPO, let’s see how many get through the long wait, which remind many of the opening hour at a prized sale of Taylor Swift tickets. Many are called, few are chosen, fewer still can survive the wait. For these two, it’s on to finalization of the guarantee — so, not out of the woods, but good to see. READ MORE