Next generation biofuels company Gevo has reaffirmed its focus on the commercial development of renewable jet fuel, renewable isooctane, isobutanol and related products, in its corporate update for 2018. The commitment comes amid a range of cost saving measures at the company which have seen staff reductions and pay cuts.
According to the update, issued on the company’s investor relations website, Gevo aims to "aggregate enough confirmed commercial off-take to support the capital expense of expanding its Luverne, Minnesota facility." The company plans to expand its business development capabilities in 2018 to achieve this goal.
In the coming year, Gevo is expecting to improve cash flow out of the Luverne Facility by optimising the plant’s ethanol production processes, developing value added products for ethanol and animal feed produced at the plant and further lowering the cost of the plant’s carbohydrate feedstock. According to the update, these initiatives are also expected to improve the cost of producing Gevo’s isobutanol.
Cost saving measures
In a bid to cut corporate expenses, Gevo has implemented a number of methods. The company’s Chief Financial Officer, Mike Willis, has entered into a mutual separation agreement and is expected to leave the company in early January. Meanwhile, other executive officers have volunteered to take a reduction in compensation, such as Gevo CEO Dr. Patrick Gruber, who has agreed a salary reduction of 30%.
Compared to 2017, the company’s staffing levels at Englewood, Colorado will be reduced by approximately 40%, and Gevo employees will forego their 2017 annual cash bonus.
Chicken and egg
"In 2017, we again showed that isobutanol can be produced in full scale equipment, we were able to meet the variable cost targets that we set out for our isobutanol production and we continued to demonstrate that there is growing demand for our products. That said, we have a "chicken and egg" problem,” said Dr. Gruber.
“Large scale product demand requires us to drive cost out of our production processes, which we expect to be able to achieve through greater production scale. However, raising the capital necessary to expand the Luverne Facility is more easily achieved, and at lower cost of capital, if we had large scale offtake agreements with customers. In 2017, we did make progress in this regard, including the contract we signed with HCS Holding (Haltermann Carless) to supply isooctane, but we need more. In 2018 the goal is to obtain off-take agreements for our products that will support financing the Luverne Facility expansion. Concurrently, we are looking extensively into ways to extend our cash runway as far as possible to give us the time to land and negotiate these contracts properly.”
Dr. Gruber continued: "We also see significant opportunity to improve the performance of the Luverne Facility in the near term, which is expected to benefit the company regardless of whether we are producing ethanol, isobutanol, or both. Luverne is an excellent plant site given the low cost and low environmental footprint of its corn supply."
Another significant announcement in the company’s 2018 update is that Gevo expects to sign its first commercial license in India in 2018, through its partnership with Praj Industries.