Gevo must prove commercial production, assert Cowen & Co analysts

March 23, 2014 |

In New York, Cowen & Co analysts Rob Stone and James Medvedeff wrote that, in the case of Gevo and its upcoming earnings announce, the “Need for commercialization progress trumps Licensing LOIs, minor legal setback.” The analysts wrote that “A nascent licensing model would enable high margin revenue with minimal capital outlay. However, we believe it will only become viable after commercial production is proven. Similarly, the IP case with Butamax remains moot for now. Under terms announced on March 6, Porta Hnos, S.A. would become the exclusive licensee for GIFT technology in Argentina. Reportedly, Porta designed over half of the ethanol plants in Argentina, owns and operates a small plant (about 44MM liters/year), and is working on two more (size unspecified). Previously GEVO announced a licensing LOI with farmer-owned co-op IGPC Ethanol, which has a 150MM liter/year plant in Ontario. More LOIs could emerge, but conversion to contracts likely requires proof of commercial viability. Stone and Medvedeff concluded: “We believe the Luverne plant is producing small amounts of isobutanol from standard corn mash feedstock, and that it is being successfully converted into jet fuel for military test programs, albeit at high cost. However, commercial success depends on consistent, repeatable, high volume production at expected fermentation metrics, which may still be several quarters away.”

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