Gevo's RNG project achieves financial closing

By Gevo Inc. | April 19, 2021

Gevo Inc. announced on April 15 that it has closed a $68.155 million “Green Bond” private activity bonds offering to finance the construction of its renewable natural gas (RNG) project in Northwest Iowa. The RNG project will generate RNG captured from dairy cow manure.

The feedstock for the RNG project will be supplied by three dairy farms located in Northwest Iowa totaling over 20,000 milking cows. When fully operational, the RNG project is expected to generate approximately 355,000 MMBtu of RNG per year. Gevo is working with a major RNG dispenser to finalize an agreement to sell the RNG into the California market. RNG sale revenues are expected to benefit from California’s Low Carbon Fuel Standard program and the U.S. EPA’s renewable identification number (RIN) program. Some RNG may be used by Gevo as process energy in its Net-Zero 1 Project or Gevo’s other future Net-Zero projects.

Gevo fully funded the RNG project’s development costs and 100 percent of its equity capital from cash reserves. Gevo received approximately $9.3 million in reimbursement for development, long lead equipment, and financing costs incurred during the development period upon closing of the Green Bond Offering. Construction of the RNG project is expected to begin by the end of April 2021 and start up is expected in early 2022. Gevo will submit an LCFS pathway application to the California Air Resources Board and expects to realize full cash flows from LCFS credits and RINs in the second half of 2022. The RNG Project is then expected to generate cash for Gevo of approximately $9 to $16 million per year (including the LCFS credits and RINs).

“The RNG project is expected to serve as an important component of Gevo’s Net-Zero strategy, and I want to thank President and Chief Operating Officer Chris Ryan and his team for their hard work and commitment that allowed us to accomplish this goal, and to Chief Financial Officer Lynn Smull and his team, and to Citigroup, for getting the debt deal done. We have a good team that has shown they can develop and finance RNG projects. We expect to use these capabilities going forward to develop additional RNG projects,” said Patrick R. Gruber, CEO of Gevo. “We are also pleased that our dairy partners will reap benefits from the RNG project given that the manure digesters should improve the farms’ sustainability and lay the groundwork for more efficient recycling of nutrients and better soil health.”

The proceeds of the Green Bond Offering, combined with Gevo equity, will be used to finance (1) the construction of the RNG project which is comprised of (A) three anaerobic digesters and related equipment situated on dairy farms located Northwest Iowa that will produce partially conditioned raw biogas from cow manure, (B) gathering pipelines to transport biogas to a centrally located gas upgrade system, (C) a centrally located gas upgrade system located in Doon, Iowa that will upgrade biogas to pipeline quality RNG and interconnect to Northern Natural Gas’ interstate pipeline, and (D) other related improvements; (2) to capitalize a portion of the interest due on the bonds during the construction period; and (3) to pay a portion of the costs of issuing the bonds.

For more information and details about the Green Bond Offering, please see the Current Report on Form 8-K that Gevo filed with the U.S. Securities and Exchange Commission on April 15, 2021.