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Gevo (GEVO) – Management makes case that market is bigger than expected

Energy
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Tuesday, August 09, 2022

Gevo (GEVO)
Management makes case that market is bigger than expected

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 lifecycle 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 lifecycle). 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.

Michael Heim, CFA, Senior Research Analyst, Noble Capital Markets, Inc.

Refer to the full report for the price target, fundamental analysis, and rating.

Gevo reported 2022-2Q results generally in line with expectations. Revenues are modest ($0.1m vs. $0.3m and our $1.0m est.). Operating costs have become more stable and predictable leading to steady EBITDA losses ($11.0m vs. $17.2m and our $11.4m est.). Net losses met expectations ($16.1m or $0.06 p/s vs. $19.1m or $0.09 p/s and our $14.0m or $0.06 p/s). The real story, however, is not near-term results but plant developments, financing, and contract signings.

Gevo was active in all aspects of the business. The company signed five new take-or-pay jet fuel contracts and now totals 350m gal./year or $2.2 billion. This is more contracted outtake than the projected NZ1 plant production. Management’s vision is to use NZ1 to demonstrate economics but has a clear eye on replicating the project. In fact, it plans to continue to sign contracts for production beyond 2027. Speaking of NZ1, Gevo has recently purchased land for the plant and says it is on schedule for a 2025 start-up….

This Company Sponsored Research is provided by Noble Capital Markets, Inc., a FINRA and S.E.C. registered broker-dealer (B/D).

*Analyst certification and important disclosures included in the full report. NOTE: investment decisions should not be based upon the content of this research summary. Proper due diligence is required before making any investment decision. 

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