(C) South Dakota Searchlight This story was originally published by South Dakota Searchlight and is unaltered. . . . . . . . . . . Gevo trumpets cash on hand, growth potential for sustainable jet fuel in earnings call • South Dakota Searchlight [1] ['John Hult', 'More From Author', '- March'] Date: 2024-03-08 Converting ethanol to jet fuel is the cheapest and simplest way to help airlines across the U.S. hit their carbon reduction targets, according to the head of a Colorado-based firm that hopes to build a zero-emissions fuel production plant in Lake Preston. Gevo Chief Executive Officer Patrick Gruber delivered that message Thursday on an earnings call, the same day Gov. Kristi Noem signed bills into law that could help clear a path for a carbon pipeline critical to the future of the $1 billion-plus Net Zero-1 project. Opponents of the pipeline have questioned Gevo’s financial stability and the feasibility of its plans, pointing to the company’s low stock price and its current lack of large-scale production facilities. On Thursday, Gruber repeated a line that he and other executives have used several times in public forums since the release of a business update in January. “We believe Gevo is undervalued, given our balance sheet and growth potential,” he said. “We plan to address that first through execution and second by getting our message out.” The company ended the fourth quarter with $375.6 million in cash, Gruber told investors, and will invest up to $175 million in its sustainable jet fuel plans this year. Gruber touted an analysis from McKinsey Global Institute requested by the company to “challenge our assumptions” on the market possibilities for its approach to sustainable aviation fuel. The analysis concluded that ethanol, as opposed to other potential feedstocks for low- or no-carbon jet fuel, would have a competitive advantage in the emerging marketplace. Just one U.S. company currently produces such fuel, in its case using beef tallow to refine the product. Major airlines have committed to incorporating more of it into their fuel streams in hopes of hitting their own carbon reduction targets, but the ultimate source material for creating that sustainable fuel is an open question. The McKinsey report, Gruber said, “reaffirmed that the NZ1 plant design would be expected to deliver the lowest cost of carbon abatement.” “Think of it as more carbon reduction per gallon,” Gruber said during the earnings call. “That means more carbon abatement per gallon, more bang for the buck, if you will. All of this should result in a competitively priced product for customers and less burden on consumers and taxpayers.” Gruber also pointed to the profitability of Gevo’s renewable natural gas facility in Iowa, which sold more than 90,000 mBTUs of gas in the fourth quarter. He also talked about the growth potential for Verity, a software startup from Gevo that tracks the carbon footprint of individual farm fields as a way to prove carbon abatement to regulators, customers and investors. The initial target market for Verity in the U.S. is estimated to be about $1.5 billion to $3 billion, Gruber said, citing the McKinsey report. Gevo did not offer a copy of the full report, as such analyst reports contain details that could guide investors and thereby create liability for analysts. The information and cost comparisons in the report are included in a corporate presentation on Gevo’s website. Gevo and carbon pipelines Gevo’s facility would be among the nearly 60 Midwestern ethanol facilities that hope to connect to a multistate, $8 billion carbon capture pipeline proposed by Iowa-based Summit Carbon Solutions. Ethanol production emits carbon dioxide, a contributor to climate change. The pipeline would capture it and send it to North Dakota for underground storage, an activity incentivized with federal tax credits. Summit was denied a permit from the South Dakota Public Utilities Commission after a similar project, the now-scuttled Navigator CO2 Ventures, failed to earn commission approval. Summit has stated its intention to reapply. The 2024 legislative session that ended Thursday saw a host of proposals on pipeline permitting, siting and eminent domain, the legal process by which a company can take private land for a project that would benefit the public. Three measures passed in the final days of session. Debate on carbon pipelines has plugged along for about two years, initially colored by Summit and Navigator’s proposals and the role of carbon sequestration for the future of Midwestern ethanol. Gevo’s Net-Zero 1 project, described by Gov. Noem as the largest economic development project in South Dakota history, became a larger part of 2024 discussions on pipelines last fall, when it began to stress the importance of the pipeline to its own ambitions. SUPPORT NEWS YOU TRUST. DONATE Gevo’s earnings call was scheduled for Thursday long before lawmakers passed and Noem signed three bills that aim to simplify the process for pipeline permitting but also write landowner protections into state law and require annual payments to counties. Gevo owns 240 acres of land in the Lake Preston area for its flagship project. The facility would produce ethanol and convert it to jet fuel, but Gevo has yet to begin building as it awaits a $950 million federal loan guarantee. To get that guarantee for a South Dakota project, Gruber told South Dakota Searchlight last month, Gevo needs to connect to the carbon capture pipeline. Doing so would reduce the carbon intensity score of the plant and make it eligible for per-gallon carbon reduction credits from the federal government. Gevo also aims to build a wind farm to power the plant to reduce the carbon footprint of its fuel, and plans to pay farmers a premium for corn grown using a set of carbon friendly practices, including low- or no-till farming. “Our NZ-1 needs good corn, but … we’re getting our low (carbon intensity) scores from wind power, from how we’ve done production of natural gas, and of course, the (carbon capture and sequestration pipeline),” Gruber said. Critics question carbon market All public companies are required to disclose any potential risk factors for investors in their annual reports to the U.S. Securities and Exchange Commission. The legally required risk sections of Gevo’s annual reports point to factors applicable to companies engaged in the pursuit of profits for unproven industries like sustainable aviation fuel production. “We do not expect to achieve profitability during the foreseeable future and may never achieve it,” Gevo’s 2022 annual report reads in the legally required risk disclosure section. That exact verbiage appears in its 2023 annual report, filed with the SEC just moments before the company’s earnings call. The company lost $98 million in 2022 and $59.2 million in 2021. The listed risks also include competition from more well-established companies, market acceptance of its products and a host of other potential pitfalls. While the Iowa gas plant is profitable and the company has other avenues for growth outside of sustainable aviation fuel, Gruber made it clear on the call that the company’s financial goals and the future of Net-Zero 1 are one in the same. “The main mission of Gevo is to get the NZ1 operating,” Gruber said. One week ago, Gevo filed a report with the U.S. Securities and Exchange Commission noting that it is at risk of being delisted from the NASDAQ exchange, as its stock has traded below $1 for more than 30 days. If the price stays below $1 for 180 days, it will be delisted. On the earnings call, one analyst asked Gruber about the “perceived risk” of changes to carbon credits in the event of a change in presidential administrations. Carbon credits for sustainable jet fuel are built into President Joe Biden’s Inflation Reduction Act. Conservative organizations have called on former President Donald Trump to repeal that law if he wins the White House in November. On the floor of the South Dakota House of Representatives and South Dakota Senate, lawmakers opposed to the pipeline bills talked about carbon abatement as a sham. At one point, for example, Spearfish Republican Rep. Scott Odenbach said he rejects the notion that carbon is a risk and not “plant food.” Sen. Al Novstrup railed against the use of taxpayer money for sequestration projects that he argued will have no impact on the climate. Trump, however, extended the tax credits that Summit Carbon Solutions aims to cash in on. Gruber told investors that “carbon value is political,” but said he’s confident that both sides of the aisle see the importance of the economic development that accompanies it. He also pointed to New Mexico, which recently became the fourth state to enact a clean fuel standard, as proof that carbon capture will maintain its place in the U.S. economy for the foreseeable future. “It looks like there’s more than enough carbon value in the marketplace to accommodate variations of things that might change to some degree,” Gruber said. [END] --- [1] Url: https://southdakotasearchlight.com/2024/03/08/gevo-trumpets-cash-on-hand-growth-potential-for-sustainable-jet-fuel-in-earnings-call/ Published and (C) by South Dakota Searchlight Content appears here under this condition or license: Creative Commons BY-ND 4.0. via Magical.Fish Gopher News Feeds: gopher://magical.fish/1/feeds/news/sdsearchlight/