Next-gen biofuel developer Gevo inspired chatter in the greentech world last week when it filed its S-1, planning to raise up to $150 million in an IPO. Of course, the amount that Gevo will actually raise won’t be finalized until shortly before it hits the public markets, and Lux research analyst Samhitha Udupa told me in an interview on Monday that she thinks Gevo will likely raise between $80 million and $100 million — a good deal less than the $150 maximum offering.
“I think the $150 million is a little high,” said Udupa, but “I think they are in good shape for an IPO, and I think there will be investor interest.” Udupa tells me she has been following Gevo over the past two years, and helped write a report for Lux Research, which was published back in February, ranking the various biofuel startups by viability.
In the report Udupa gave Gevo a solid score, ranking it with “Dominant Status” out of the competing startups alongside Amyris (who also has filed for an IPO and is also backed by Vinod Khosla). The report cited Gevo’s low capital-intensive business model, partnerships and pilot production progress as keys for its high ranking.
Five-year-old Gevo has engineered enzymes that can convert waste and other cellulosic feedstocks into alternative fuels and chemicals like isobutanol, which can be used in the existing petroleum supply chain, as well as for plastics, fibers and polymers. The company plans to commercialize its technology by retrofitting corn ethanol plants to produce isobutanol, and will either create joint ventures with ethanol producers or buy off ethanol plants to make the conversions.
Compared to competitors that are funneling hundreds of millions into building their own biofuel plants, Gevo anticipates that it will spend $22 million to $24 million to retrofit a 50-million-gallon-per-year ethanol plant, and $40 million to $45 million for a 100-million-gallon-per-year ethanol plant. The company already has several key partnerships including with ethanol project designer ICM, with which it has retrofitted an ethanol plant in St. Joseph, Miss., that can produce 1 million gallons of fuel per year.
However, Udupa thinks that there are several reasons that the $150 million maximum is a high figure. First off, the company’s financials are in the state of a pre-commercial company — for 2009, Gevo generated $660,000 and lost $19.89 million. As of March 31, 2010, Gevo says it had accumulated a deficit of $50.3 million.
In addition the market to produce and sell isobutanol also has significant risks. Udupa pointed out to me that products like butanol have largely been specialty chemicals at a premium price. In addition she said she thinks that DuPont has a patent on producing isobutanol that appears to be more efficient than Gevo’s.
When I asked her if she thought Gevo might end up pulling its IPO, as several greentech firms have done as of late, she said “The IPO is on target with their plans, and unless there’s some sudden dip in the market, I don’t see them pulling it.” Overall “They have a pretty good shot,” said Udupa.
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