Gevo signs Letter of Intent with HCS Holding for commercial supply of isooctane
US advanced biofuels company has announced that it has entered into a Letter of Intent (LOI) with HCS Holding (HCS) to supply isooctane under a five-year offtake agreement.
HCS is a manufacturer of specialty products and solutions in the hydrocarbons sector, operating under the brands Haltermann Carless, ETS Racing Fuels and EOS. HCS is owned by HIG Capital. Haltermann Carless, one of the oldest companies in the world of chemistry, is expected to be the direct customer with Gevo under the proposed offtake agreement.
The LOI contemplates an offtake agreement that will have two phases. In the first phase, HCS will purchase isooctane produced at Gevo's demonstration hydrocarbons plant located in Silsbee, Texas.
This first phase is expected to commence in 2017 and would continue until completion of Gevo's future, large-scale commercial hydrocarbon plant, which is likely to be built at Gevo's existing isobutanol production facility located in Luverne, Minnesota. Gevo expects revenue in the range of $2-3 million per year from the first phase.
In the second phase, HCS will agree to purchase approximately 300,000 to 400,000 gallons of isooctane per year under a five-year offtake agreement.
Gevo would supply this isooctane from its first large-scale commercial hydrocarbons facility, which is likely to be built at Gevo's existing isobutanol production facility located in Luverne, Minnesota. The LOI establishes a selling price that is expected to allow for an appropriate level of return on the capital required to build out Gevo's existing production facility in Luverne, Minnesota.
It is the intent of Gevo and HCS to establish further offtake arrangements for other products such as Gevo's alcohol-to-jet fuel (ATJ) and isobutanol. HCS is expected to market and distribute Gevo's products globally on a non-exclusive basis.
"Haltermann Carless and HCS will serve as a major and substantial offtaker of Gevo's renewable isooctane from Gevo's demonstration plant and a vital offtaker from Gevo's first commercial hydrocarbon plant. Gevo and HCS agree to evaluate options to make the partnership most impactful and provide maximum credibility for Gevo's next generation technology," said Henrik Krüpper, chief sales officer and member of the HCS Group GmbH's Executive Committee.
"We are very pleased to establish this commercial relationship with HCS Holding, which is world renowned in the industry for the high quality of its performance fuels. We expect that they will be an important customer and partner for Gevo," said Patrick Gruber, Gevo's CEO.
"When we produce ATJ, we also produce other products such as isooctane and isooctene. We believe that a binding offtake agreement with HCS Holding is one more piece of the puzzle to validate our case for expanding the Luverne plant," continued Gruber.