Gevo (GEVO) skyrockets on 300% on it’s biggest deal ever, a $1 billion dollar long term revenue contract with Trafigura. GEVO announced today that it has entered into a binding Renewable Hydrocarbons Purchase and Sale Agreement, dated August 17, 2020 (the “Agreement”) with Trafigura Trading, a wholly-owned subsidiary of Trafigura Group.
The Agreement is a long term, take or pay contract and is the largest contract in Gevo’s history. Trafigura is one of the world’s leading independent commodity trading companies with over $171B and over $54B in revenue and assets, respectively. Under this contract Trafigura is expected to take delivery of 25MPGY of renewable hydrocarbons, the majority of which is expected to be low-carbon premium gasoline with a smaller portion of the volume for sustainable aviation fuel (“SAF”), starting in 2023.
This commitment will support Trafigura’s efforts to develop the market for low-carbon fuels including low-carbon premium gasoline. The Agreement will also enable Trafigura to supply SAF to both US and international customers whose interest is growing in low-carbon jet fuel.
This is our largest single contract to date, and with it, brings Gevo to over $1.5B of revenue in long term contracts when added to the other contracts we have in place. As drop-in fuels, Gevo’s renewable, very high-octane gasoline and SAF are a perfect fit with Trafigura’s existing fuels business and will allow them to integrate these low-carbon options seamlessly into their supply chains. We expect that our low-carbon fuels will enable certain of Trafigura’s customers to substantially lower their carbon footprint.
Patrick Gruber, CEO at GEVO
Having produced SAF and other hydrocarbons for nearly a decade, Gevo has a unique business system as it integrates sustainable agriculture and biorefining to produce SAF and low-carbon premium gasoline. For every gallon of low-carbon premium gasoline or SAF produced, Gevo produces about ten pounds of protein for the food chain, delivering substantially all of the nutritional value of corn to the food chain. The farmers who supply Gevo on average are capturing carbon, building up their soil with regenerative agriculture techniques. Utilizing a low-carbon ecosystem is vital to Gevo. Gevo began to use ISCC+ and Roundtable on Sustainable Biomaterials (RSB) certified corn for its Luverne, Minnesota facility while displacing fossil-derived power and heat with wind turbines and the upcoming implementation of biogas from dairy manure generated nearby. The execution of this circularity is unique and Gevos’ SAF is expected to have greenhouse gas profile reduction of 70% compared to the fossil-based jet fuel alternative. Eventually, it may be possible through soil carbon sequestration to completely decarbonize jet fuel through the use of Gevo’s SAF.
Today’s agreement is a natural fit between our companies that will help drive the expansion of our renewable fuels product offering. We look forward to continuing to make a positive impact on the transition towards a low carbon economy.
Robert Kreider, Head of Strategic Management & Development at Trafigura North America
The Agreement is subject to certain conditions precedent, including Gevo acquiring a production facility to produce the renewable hydrocarbon products contemplated by the Agreement and closing a financing transaction for sufficient funds to acquire and retrofit the production facility contemplated by the Agreement. A copy of the Agreement between Trafigura and Gevo has been filed with the U.S. Securities and Exchange Commission on Form 8-K.
Is GEVO a reliable investment?
Shares of Gevo (GEVO) appear to be a very good investment option, the Money Midnight Indicator is expecting its price to increase considerably in the next several months. The majority of the metrics point to this investment being highly attractive.
