Gevo Provides Business Update
- Expected Non-GAAP cash EBITDA of $7-16 million in 2024
- Net-Zero 1 project in diligence phase of US DOE Loan Guarantee Program
- Verity project expects first revenue in 2024
- Detailed expected uses of cash in 2024
- Non-GAAP financial information provided
- There is no guarantee that LCFS prices will increase or that the US Treasury rules will result in the expected amounts
- Luverne Facility expected to have idling use of cash of $2-4 million
Insights
The update from Gevo, Inc. indicates a strategic focus on carbon abatement technologies with anticipated positive financial outcomes. The expected non-GAAP cash EBITDA of $7-16 million in 2024, hinging on regulatory approvals, suggests a potential uplift in profitability contingent on external factors such as the CARB Carbon Intensity pathway approval and the Biogas Production Tax Credit. The company's financial health appears robust with a substantial cash reserve of $376 million as of December 31, 2023. However, the projected uses of cash for Net-Zero 1 Project Development and other growth initiatives, totaling $155-247 million, will significantly draw down these reserves. The anticipated full recovery of development costs at financial close is a critical factor for the company's capital structure and future investment capacity.
Investors should note the sensitivity of Gevo's financial performance to regulatory and market changes, particularly the LCFS prices and Biogas PTC. The company's strategic investment in the Verity SaaS platform and its estimated initial target market of $1.5-3 billion demonstrate diversification and innovation in revenue streams. However, it is important to monitor the execution and market adoption of this new offering. Gevo's R&D investment in Ethanol-to-Olefins technology and the successful operation of its pilot plant could enhance its competitive edge in sustainable fuel production.
Gevo's focus on Net-Zero 1, a plant designed to achieve zero or negative Carbon Intensity, positions the company at the forefront of climate-smart practices. The project's alignment with the US Department of Energy's Loan Guarantee Program underscores the strategic alignment with federal clean energy initiatives. The company's investment in long-lead equipment and the advanced stage of engineering signify a commitment to the project's timely execution. However, the statement that the DOE loan guarantee process could be a rate-limiting step indicates potential delays in financial closure and project commencement.
The company's emphasis on modularized, reusable plant design for alcohol-to-jet fuel production, with multiple patents filed, could offer long-term advantages in scalability and cost efficiency. This design approach could become a standard in the industry, providing Gevo with a competitive advantage. The company's proactive engagement in cost allocation and the use of Treas. Reg. §1.482 transfer pricing guidelines for project development cost recovery demonstrates a strategic approach to financial management and compliance.
Gevo's business update reflects a strategic alignment with environmental policies such as the California Low Carbon Fuel Standard and the Biogas Production Tax Credit outlined in the US Inflation Reduction Act. The company's anticipation of increased RNG non-GAAP cash EBITDA with the implementation of these policies indicates a strong interdependence between regulatory developments and Gevo's financial performance. The company's pursuit of the DOE Loan Guarantee Program for Net-Zero 1 development is indicative of the growing importance of government support in advancing sustainable energy projects.
The company's evaluation of the GREET model adaptation for the Inflation Reduction Act and its economic impact on the Net-Zero 1 project highlights the complexities and uncertainties involved in regulatory compliance and its financial implications. Gevo's proactive approach in identifying additional sites for Net-Zero plants suggests a long-term commitment to expanding its carbon abatement technology footprint, which may be favored by future policy developments aimed at reducing carbon emissions.
ENGLEWOOD, Colo., Jan. 24, 2024 (GLOBE NEWSWIRE) -- Gevo, Inc. (NASDAQ: GEVO), a leading carbon abatement company that commercializes drop-in fuels and chemicals for difficult to decarbonize sectors, today provided a business update. Gevo also expects to publish an updated corporate investor presentation to its website.
RNG: Non-GAAP cash EBITDA of
See “Non-GAAP Financial Information” below.
Net-Zero 1 Development: Net-Zero 1 is in the diligence phase of the US Department of Energy (DOE) Loan Guarantee Program to secure construction funding. The engineering for the project is substantially complete and is in the value engineering phase in preparation for finalizing the fully installed contracted price. We are also ordering long-lead equipment. The engineering, procurement and construction (“EPC”) contract with McDermott has been substantially negotiated except for the contracted construction price. Net-Zero 1 is a purpose-built plant targeting zero or negative Carbon Intensity by taking advantage of a number of climate-smart practices, behind the meter wind and hydrogen, and a sophisticated plant design. While we welcome the recent guidance on indicating GREET for the SAF section of the IRA, we are evaluating how the GREET model will be adapted for use in the IRA and the economic impact to the project. We expect the DOE loan guarantee program process to be the rate limiting step to financial close. We have also identified attractive sites for additional Net-Zero plants.
Verity: Verity, an end-to-end carbon accounting solution SaaS (Software as a Service) business built on proprietary distributed ledger technology, expects to announce its first revenue in 2024 and to pursue scalable customer growth in 2025. Verity is a capital light, fixed fee and profit sharing business. Based on a market and business analysis by a well known global consulting firm, the initial target market for Verity is estimated to be
ETO: Our Ethanol-to-Olefins (“ETO”) technology pilot plant has started production and is operating as expected.
2024 Expected Uses of Cash
Discretionary Project Development and Growth Uses of Cash: We believe we have significant flexibility over the timing and amount of our discretionary growth spending related to our projects. The majority of Gevo’s expected uses of cash in 2024 from discretionary growth spending is related to the development of growth projects, primarily driven by Net-Zero 1.
Net-Zero 1 Project Development: Uses of cash are projected to be
- This spend includes long-lead equipment, related wind and onsite hydrogen projects and value engineering to advance a financeable EPC contract.
- We expect this spend, plus the previous spend of approximately
$111 million as of end of 2023 and other associated costs, to be fully recoverable at financial close from project-level debt and equity sources of capital, as is customary in project financings.
- We anticipate reinvesting all or a portion of the development recoveries into the project alongside third-party, project level equity at financial close at rates of return commensurate with our developer role.
- After financial close of the project, we expect that project construction through startup and commissioning would be fully funded with no additional cash commitments from Gevo.
- The engineering would result in a modularized, reusable and purpose built alcohol-to-jet plant design. We believe such design will be highly beneficial to the buildout of future alcohol-to-jet projects and the use of ethanol to make SAF.
- Multiple patents have been filed on this plant design.
NZ and Other Projects Development: Expected uses of cash of
In 2023, Gevo engaged an independent third party audit firm to perform a cost allocation analysis. The purpose of this analysis was twofold: (1) to document to third parties our project development costs for recovery purposes (e.g., recovery at Net Zero 1 financial close); (2) to more accurately reflect the discretionary, non-recurring and growth project development related nature of such costs. The independent auditor based its analysis on the Treas. Reg. §1.482 transfer pricing guidelines, which set forth the arm’s length principle, whereby related parties shall operate in such manner as would true commercial parties. As a result of this analysis, the audit firm identified a substantial amount of costs historically classified as GAAP G&A that may be classified as project development.
Research & Development: Expected uses of cash of
Non-Discretionary, Non-Growth Project Related Uses of Cash
General & Administrative (“G&A”): Expected G&A uses of cash of
Luverne Facility: Expected facility idling use of cash of
| 2024 Guidance Summary | ||||
| ($ in millions) | ||||
| RNG non-GAAP cash EBITDA | ||||
| 3Q 2023, reported | ||||
| Annualized 3Q 2023 | ||||
| Annualized expected sensitivities: | ||||
| With Permanent CARB CI Pathway | ||||
| With LCFS Prices at | ||||
| With Biogas PTC (2025-2027) | ||||
| Verity | ||||
| First revenue year | 2024 | |||
| Scalable growth year | 2025 | |||
| 2024 Expected Uses of Cash | ||||
| Dec. 31, 2023 cash, equivalents | ||||
| and restricted cash | ||||
| Discretionary Growth / Project | ||||
| Development | ||||
| Net-Zero 1 Project Development | ||||
| until Financial Close | ||||
| Additional NZ Project Developments | ||||
| Research & Development | ||||
| Non-Discretionary, Run-Rate Spend | ||||
| General & Administrative | ||||
| run-rate, non-discretionary | ||||
| Luverne Facility | ||||
| Remaining cash, equivalents and | ||||
| restricted cash before RNG, Verity, | ||||
| investment income, interest and other | ||||
See “Non-GAAP Financial Information” below.
Non-GAAP Financial Information
This press release contains a financial measure that does not comply with U.S. generally accepted accounting principles (GAAP)—non-GAAP cash EBITDA (earnings before interest, taxes, depreciation and amortization)—because this non-GAAP financial measure excludes the impact of items that management believes affect comparability or underlying business trends.
Non-GAAP cash EBITDA is calculated by adding back depreciation and amortization and non-cash stock-based compensation to GAAP loss from operations.
This measure supplements the company’s financial results prepared in accordance with GAAP. Gevo management uses this measure to better analyze its financial results and to help make managerial decisions. In management’s opinion, this non-GAAP measure is useful to investors and other users of the company’s financial statements by providing greater transparency into the ongoing operating performance of Gevo and its future outlook. This measure should not be deemed to be an alternative to GAAP requirements. The non-GAAP measure presented here is also unlikely to be comparable with non-GAAP disclosures released by other companies. See the table below for a reconciliation of GAAP to our non-GAAP measure.
Reconciliation of GAAP to Non-GAAP Financial Information
(Unaudited, in thousands)
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, 2023 | June 30, 2023 | September 30, 2023 | December 31, 2022 | |||||||||||||
| Non-GAAP Cash EBITDA (Gevo NW Iowa RNG): | ||||||||||||||||
| Loss from operations | $ | (230 | ) | $ | (3,481 | ) | $ | (3,711 | ) | $ | (4,088 | ) | ||||
| Depreciation and amortization | 1,914 | 3,185 | 5,099 | 313 | ||||||||||||
| Stock-based compensation | 18 | 42 | 59 | 7 | ||||||||||||
| Non-GAAP cash EBITDA (loss) (Gevo NW Iowa RNG) | $ | 1,702 | $ | (254 | ) | $ | 1,447 | $ | (3,768 | ) | ||||||
About Gevo
Gevo’s mission is to transform renewable energy and carbon into energy-dense liquid hydrocarbons. These liquid hydrocarbons can be used for drop-in transportation fuels such as gasoline, jet fuel and diesel fuel, that when burned have potential to yield net-zero greenhouse gas emissions when measured across the full life cycle of the products. Gevo uses low-carbon renewable resource-based carbohydrates as raw materials, and is in an advanced state of developing renewable electricity and renewable natural gas for use in production processes, resulting in low-carbon fuels with substantially reduced carbon intensity (the level of greenhouse gas emissions compared to standard petroleum fossil-based fuels across their life cycle). Gevo’s products perform as well or better than traditional fossil-based fuels in infrastructure and engines, but with substantially reduced greenhouse gas emissions. In addition to addressing the problems of fuels, Gevo’s technology also enables certain plastics, such as polyester, to be made with more sustainable ingredients. Gevo’s ability to penetrate the growing low-carbon fuels market depends on the price of oil and the value of abating carbon emissions that would otherwise increase greenhouse gas emissions. Gevo believes that its proven, patented technology enabling the use of a variety of low-carbon sustainable feedstocks to produce price-competitive low-carbon products such as gasoline components, jet fuel and diesel fuel yields the potential to generate project and corporate returns that justify the build-out of a multi-billion-dollar business.
Gevo believes that the Argonne National Laboratory GREET model is the best available standard of scientific-based measurement for life cycle inventory or LCI.
Learn more at Gevo’s website: www.gevo.com
Forward-Looking Statements
Certain statements in this press release may constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements relate to a variety of matters, including, without limitation, statements related to expected results of the Company’s RNG and other business lines, Verity revenue, guidance from the Treasury Department, pricing of LCFS credits, timing or value of the expected CARB CI pathway, expected uses of cash and the Company’s growth projects. These forward-looking statements are made based on the current beliefs, expectations and assumptions of the management of Gevo and are subject to significant risks and uncertainty. Investors are cautioned not to place undue reliance on any such forward-looking statements. All such forward-looking statements speak only as of the date they are made, and Gevo undertakes no obligation to update or revise these statements, whether as a result of new information, future events or otherwise. Although Gevo believes that the expectations reflected in these forward-looking statements are reasonable, these statements involve many risks and uncertainties that may cause actual results to differ materially from what may be expressed or implied in these forward-looking statements. For a further discussion of risks and uncertainties that could cause actual results to differ from those expressed in these forward-looking statements, as well as risks relating to the business of Gevo in general, see the risk disclosures in the Annual Report on Form 10-K of Gevo for the year ended December 31, 2022 and in subsequent reports on Forms 10-Q and 8-K and other filings made with the U.S. Securities and Exchange Commission by Gevo.
IR Contact
Eric Frey, Vice President of Finance & Strategy
IR@gevo.com
FAQ
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