SAF producer Gevo using $1.5B loan to open plant in 2028

Net-zero hydrocarbon fuels and chemicals producer Gevo aims to open a sustainable aviation fuel plant in Lake Preston, S.D., by the end of 2028, following a final investment decision later this year. The U.S. Department of Energy (DOE) in October gave a conditional commitment for a $1.46 billion loan , with a borrowing capacity of $1.63 billion, to support Englewood, Colo.-based Gevo’s Net-Zero 1 project. NZ1 is the first large-scale alcohol-to-jet fuel project to receive a DOE Loan Programs Office conditional commitment. [caption id="attachment_57146497" align="aligncenter" width="1005"] Gevo plans to build a sustainable aviation fuel plant in South Dakota. (Courtesy/Gevo)[/caption] NZ1 requires about $2 billion in capital, Erin Heitkamp, vice president of supply chain development at Gevo, told Cargo Facts at the CNS Partnership Conference in Miami this month. In addition to the DOE loan, funding will come from equity investors. “We have to have all of our off-take agreements in place,” Heitkamp said. “The DOE really wants to see 100% of the projected fuel production committed in long-term optic agreements.” As such, Gevo has been working on deals the DOE finds acceptable and has dozens of agreements in place. Gevo and Dublin-based SAF market accelerator Future Energy Global (FEG) signed an offtake agreement in April for carbon abatement attributes, to enable carriers and other companies to reduce carbon emissions through SAF. Under the multi-year agreement, FEG will acquire Gevo's Scope 1 and Scope 3 emissions credits from 10 million gallons per year of fuel to be produced at Gevo’s South Dakota plant. Gevo is also developing new projects. The company bought the ethanol production plant and carbon capture and sequestration assets of Red Trail Energy for $210 million in February. This includes an ethanol plant outside Richardton, N.D. “The ethanol production capacity is already there,” Heitkamp said. “We would add on the ethanol-to-SAF component, and we'd have carbon capture on site, which is critical to our business model plan.” SAF investment To scale up SAF production, producers need government and aviation industry support , especially financially, Heitkamp said. “All new industries, innovation requires government support — not forever, but in the beginning,” she said. “Our independent, third-party analysis suggests that our operating or cash cost will be on par [with], if not lower than, petroleum-based jet fuel production operating costs, but we have to pay for the infrastructure . … So, you need that capital.” But the SAF industry cannot rely solely on government funding — it needs to generate buy-in from the aviation industry. “To get that capital you need … revenue certainty,” Heitkamp said. “Whether it's a lender like the DOE or a bank, or if it's an equity investor, they all want the same thing. They want assurance that they're going to get their money back when they make that investment.” That requires ensuring that the framework determining how much carbon is abated is accurate and up to date . And, investors are looking for more certainty about incentive value. “Where you have a low carbon fuel standard market, there's so much volatility in that that it drives uncertainty,” Heitkamp said. “Investors look at it and they say, ‘OK, well, the value is at $56 a credit today, but two days ago, it was at $45 and the projection is it's going to be at $30 in the future.’ There isn't a lot of confidence that that value will be there.” Government policies like tax credits and fixed-dollar amounts help assuage investor hesitation driven by market uncertainty. “The financing piece is absolutely critical,” Heitkamp said. “You need some combination of the equity capital, debt capital and incentive dollars to come to the table to get the production capacity.”

SAF producer Gevo using $1.5B loan to open plant in 2028

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