Gevo announces cost-saving initiatives, new technology

By Erin Voegele | January 21, 2015

Gevo Inc. has announced several cost-saving initiatives aimed at improving its overall cash flow. The actions are expected to decrease the company’s average monthly corporate-wide EBITDA burn rate by 40 percent this year, from $2.5-2.75 million in 2014 to $1.5-1.75 million in 2015.

The actions include staff reductions. According to the company, headcount at its headquarters in Englewood, Colorado, has been reduced from 56 to 33. The staff reductions come primarily from the company’s technology group. “While this decision translates into meaningful costs savings for the company, it has also been driven by the advanced stage of Gevo's isobutanol technology and thus fewer resources are needed at this time. Gevo has determined this to be an opportune time to scale down the team to focus primarily on technology optimizations, as well as to support the commercial operations at Luverne and isobutanol licensing,” said Gevo in a statement. In addition, Patrick Gruber, CEO of Gevo, has volunteered to take 25 percent of his base salary in the form of Gevo stock, through a deferred compensation program.

In a statement, Gevo also indicated it has developed potentially disruptive new technologies that use ethanol as a feedstock to produce hydrocarbons, renewable hydrogen, and other chemical intermediates. The company said the technologies could augment its use of isobutanol as a feedstock for its alcohol-to-hydrocarbons business. “The process produces tailored mixes of isobutylene, propylene, hydrogen and acetone, which are valuable as standalone molecules, or as feedstocks to produce other chemical products and longer chain alcohols,” Gevo said in a statement. “This new technology has the potential to address additional markets in the chemicals and plastics fields, such as renewable polypropylene for automobiles and packaging and renewable hydrogen for use in chemical and fuel cell markets.”

This year, Gevo said it is targeting to sign a binding agreement with at least one licensee for isobutanol technology. The company also aims to establish new strategic partnerships to accelerate the development of its hydrocarbons business, including its new ethanol-to-hydrocarbon technology.

Regarding the Luverne, Minnesota, plant, Gevo said it expects to operate the facility to maximize cash flow while continuing to optimize its isobutanol technology at the commercial scale. As a result, the company may produce ethanol in all four of the plant’s fermenters. However, Gevo also said it does anticipate continuing some level of isobutanol production going forward to ensure the company has sufficient volumes to meet ongoing demand from customers.

While Gevo recently announced it had met its 2014 target of producing more than 50,000 gallons of isobutanol per month at Luverne, the company now estimates that current monthly isobutanol production capacity is approaching 75,000-100,000 gallons per month. “Given the progress made to date at a commercial scale at Luverne, Gevo is looking to accelerate its licensing program with existing partners, as well as establishing new relationships with new potential licensees,” said the company.

Gevo also said it expects to maintain its litigation spend to continue to support the value of its intellectual property.

Earlier this month, Gevo filed a notice with the U.S. Securities and Exchange Commission announcing it has received approval from the Listing Qualifications Department of the Nasdaq Stock Market LLC to transfer its common stock listing from the Nasdaq Global Market to the Nasdaq Capital Market, effective Jan. 5.

In June, the company received a notice from Nasdaq indicating that it did not meet the minimum $1 per share requirement required for continued listing on the NASDAQ Global Market. The company had until Dec. 29 to regain compliance with the minimum per share price. To regain compliance during that time period, the closing bid price of the company’s common stock would be required to be $1 per share for a minimum of 10 consecutive businesses days at any time before the Dec. 29 deadline. According to an 8-K filing made by Gevo in July, if the company did not regain compliance with the minimum share price by Dec. 29, it may be eligible for an additional 180 compliance period if it transferred the listing of its common stock to the NASDAQ Capital Market and met all the continued listing requirements for market value of publicly held shares and all other initial listing standards, with the exception of the bid price.

In the 8-K filed on Jan. 2, Gevo indicated that it has now received an additional 180 day calendar day compliance period due to the transfer of its common stock listing to the Nasdaq Capital Market. The new compliance deadline is set for June 29. Within the filing, Gevo said it “intends to monitor the bid price of its common stock and its minimum market value of listed securities and will consider options available to it to achieve compliance.”