Gevo’s Net-Zero 1 SAF plant development ‘on track’
Gevo senior management on the third quarter earnings call informed that its Net-Zero 1 Sustainable Aviation Fuel (SAF) project is on track and in formal due diligence.
“Our Net-Zero 1 Alcohol-to-Jet SAF plant is three months into the formal due diligence and term sheet negotiation phase for a US Department of Energy loan guarantee,” said Dr. Patrick Gruber, CEO, Gevo.
“We said in August that it would take up to 12 months to complete the process, and based upon the positive progress we have made this quarter, we believe we are on track.”
Gevo is currently developing Net-Zero 1 SAF plant at Lake Preston, South Dakota. The company is targeting to begin production at the plant by 2026. The project will have nameplate SAF production capacity of 65m gallons per year.
Moreover, the company’s SAF project pipeline includes three more SAF projects with 325m production capacity and other licensing partnerships with third party SAF producers using Gevo’s technology.
“We are in process of licensing technology and/or enabling others to build plants, where Gevo doesn’t invest (around 500m gallons of ATJ capacity in current licensing/enabling pipeline),” the company claimed in its latest investor presentation.
Commenting on the investments during the quarter, Gevo’s CFO Lynn Smull said that: “We invested and capitalized $12m cash in capital projects comprised of $8.7m into Net-Zero 1 … $1.4m into other Net-Zero projects, and $0.2m into our hydrocarbon skid.”
He further said the company during the third quarter invested $19.9m of capital to allow the purchase of wind and hydrogen equipment to support Net-Zero 1.
“On Net-Zero 1, we are working to de-risk the project to non-recourse standards to obtain the DOE loan guarantee and attract the third-party equity capital necessary to finance the construction budget and all the project finance elements such as interest during construction, various reserves, and transaction costs,” Smull added.
Commenting on the regulatory environment of SAF, Dr. Gruber said the big question around the economics of SAF is all around the ruling for the Inflation Reduction Act (IRA) bill under section 40B and 45Z.
Sections 40B and 45Z of the IRA provide tax credits for the production and use of SAF. Section 40B provides a tax credit of $1.25 per gallon of SAF sold or used in the United States in 2023 and 2024. The credit is increased by $0.01 for each percentage point by which the lifecycle greenhouse gas emissions reduction of the SAF exceeds 50%.
Meanwhile, Section 45Z provides a tax credit for the production of clean transportation fuel, including SAF. The credit is $0.20 per gallon for non-aviation fuels and $0.35 per gallon for aviation fuels.
“We believe we have the lowest cost route to make SAF, and particularly when you take into account the CI score. So, we know there’s a market here for our stuff. We just got to be able to finalize pricing. We won’t be able to do that until we see that IRA bill rule,” Smull added.