Gevo to boost economic viability of isobutanol with $5 million in upgrades

September 24, 2015 |

In Colorado, Gevo said it will increase isobutanol production at Luverne to a range of 750,000 to 1 million gallons in 2016, up 7-10x from expected 2015 production levels. Doing so will decrease the variable cost of producing isobutanol at Luverne to a range of $3.00-$3.50/gallon, a decrease of approximately 50% from the current cost of production, enabling isobutanol to be produced at a positive contribution margin, based on an expected average selling price for isobutanol of between $3.50-$4.50/gallon.

Increase sales of isobutanol into core markets such as the alcohol-to-jet (ATJ), marina, off-road, isooctane and solvents markets are expected, halping to achieve an average quarterly corporate-wide EBITDA burn rate (excluding stock-based compensation) of $3.5-$4.5 million per quarter, versus a comparable quarterly burn rate of $6.0 million realized over the first half of 2015.

Underpinning the improvements will be approximately $5.0 million of capital expenditures that Gevo intends to deploy at Luverne over the next 3-6 months. These capital improvements are primarily designed to decrease the cost of production for isobutanol by bringing “in-house” parts of the process that have previously been done by third parties. Key equipment to be installed at the plant include a distillation system to purify isobutanol on-site, an addition to our seed train to allow Gevo to produce its yeast on-site and a stainless steel fermenter to replace one of the existing carbon steel fermenters that has reached the end of its useful life.

The installation of this equipment is expected to significantly decrease Gevo’s cost of production of isobutanol, with a goal of producing isobutanol at Luverne at a positive contribution margin in 2016. While Gevo currently has the capability of producing higher isobutanol volumes at Luverne, it has chosen to limit production in 2015 given its existing isobutanol cost structure. Current demonstrated fermentation performance is already believed to be sufficient to achieve Gevo’s isobutanol production volume goals in 2016, having already demonstrated yields of 1.80-1.85 gallons per bushel and batch sizes of 16-18 thousand gallons per batch at Luverne. A decrease in production costs resulting from the new capital deployment is expected to enable Gevo to meaningfully increase isobutanol production levels at Luverne without increasing Gevo’s cash burn rate.

Gevo: The Digest’s 2015-5 Minute Guide

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Category: Fuels

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