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What You Need to Know From Gevo's IPO Filing

Biofuel and biochemical startup Gevo, which is backed by Khosla Ventures and Virgin Green Fund, filed to raise up to $150 million in an IPO late yesterday. Here’s what you need to know about Gevo’s financials, its commercialization plan, its partnerships and its backers.

Plans for commercialization: Gevo says it wants to commercialize its technology by the first half of 2012.

Addressable market: Gevo says that products derived from its isobutanol could be used in 40 percent of the global petrochemicals market place, and that the potential global market for isobutanol is 1,008 billion gallons per year.

Gevo’s Product: Gevo sells what it calls “Gevo Integrated Fermentation Technology, or GIFT,” which is tech to produce and separate of isobutanol. GIFT contains biocatalysts that convert sugars from a feedstock (plant waste, energy crops etc) into isobutanol through fermentation, and a separation unit that separates isobutanol from water during the fermentation process.

Ethanol retrofits: Gevo says GIFT can retrofit ethanol facilities in a low-cost capital way, because the GIFT isobutanol production is very similar to ethanol production: The plant just switches out the biotcatalyst and adds in the separator. For a 50-million-gallon-per-year ethanol plant, the retrofit will cost about $22 to $24 million, and for a 100-million-gallon-per-year ethanol plant, it’d cost between $40 and $45 million. The retrofit process takes about 14 months, Gevo estimates.

Proceeds of IPO: Gevo says it will use the IPO proceeds to acquire access to ethanol plants through acquisitions and joint ventures, and retrofit those facilities to produce isobutanol.

ICM Partnership: Gevo says it has already retrofitted an ethanol plant in St. Joseph, Miss., in conjunction with ethanol company ICM, that can produce 1 million gallons of fuel per year. ICM has designed 60 percent of the ethanol plants in the U.S., and is Gevo’s exclusive engineering and construction contractor for the retrofit of ICM-designed ethanol plants. In return, Gevo is ICM’s exclusive technology partner for the production of butanols, pentanols and propanols from the fermentation of sugars. Gevo says working with ICM it hopes to produce and sell over 500 million gallons of isobutanol in 2014.

Agri-Energy acquisition: Gevo says earlier this month it entered into an acquisition agreement with Agri-Energy, whereby Gevo will pay $20.7 million for an ethanol plant in Luverne, Minn. that can produce 22 million gallons per year, and which it will retrofit for isobutanol. This will be Gevo’s first commercial facility that will produce isobutanol in the second half of 2012. It should be noted that Gevo has incorporated the revenues and earnings from Agri-Energy’s businesses into its financials, and that Gevo raised a $12.5 million loan from TriplePoint to buy the plant.

Cargill partnership: While much of Gevo’s product has been using its biocatalysts to be used in the corn ethanol production process, Gevo says it has been working with Cargill to develop a future-generation yeast biocatalyst specifically designed to produce isobutanol from cellulosic feedstocks.

Isobutanol jet fuel: Gevo says it has a potential commitment from United Airlines (s uaua) to purchase isobutanol-based jet fuel.

Financials: Compared to other next-gen biofuel companies Gevo is able to operate on relatively low capital requirements. For 2009 it had total operating expenses of $19.23 million. But since the company is pre-commercial, it isn’t bringing in much revenue, and of course, isn’t profitable. For 2009, Gevo generated $660,000 and lost $19.89 million. As of March 31, 2010, Gevo says it has accumulated a deficit of $50.3 million. Gevo says it has $32.43 million in cash and cash equivalents.

EPA Approval: Gevo needs to get EPA approval to sell its isobutanol products, and as the company notes in its risk factors section, that may take years. Currently, Gevo is in the first stage of the EPA approval process. Gevo’s biocatalyst is a “genetically modified organism” which is considered a new chemical under the EPA’s Toxic Substances Control Act program.

Low Blend: Gevo also notes in its risk factors that there’s a risk that, under actual automotive engine conditions, isobutanol could “face significant limitations, making it unsuitable for use in high percentage gasoline.” Current regulations also limit the fuel to low percentage blends.

Competitors: Gevo’s S-1 names competitors including: Codexis (s cdxs), Novozymes, Danisco and DuPont (s dd), Royal DSM, Mascoma, BP (s bp), Range Fuels, Coskata, Shell Oil, Abengoa Bioenergy, POET, ICM, Archer Daniels Midland Company (s adm), BlueFire Ethanol, KL Energy, ZeaChem, Iogen, Qteros, AE Biofuels, Virent Energy Systems, Synthetic Genomics, Solazyme, Sapphire Energy, Exxon-Mobil (s xom), LS9, and Amyris Biotechnologies.

Backers: As of July 31, 2010, Gevo’s backers included Khosla Ventures (40.6 percent), Virgin Green Fund (15.2 percent), Total Energy Ventures International (12.7 percent), Burrill Life Sciences Capital (10.3 percent) and Malaysian Life Sciences Capital (9.1 percent). Gevo says it has raised $73.65 million.

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5 Responses to “What You Need to Know From Gevo's IPO Filing”

  1. Another development stage company. Speaks for itself. At least they are raising money for their own development rather than raising money to convince someone else to prove it at commercial scale under a license (e.g. PetroAlgae)
    I like the idea of retrofitting ethanol plants—if it works. I can’t figure out the technology but at least an impressive group of prior investors is at least qualified to have done so.
    Nitty point but whose idea was it to use the acronym “GIFT” for the technology.? More than a little presumptuous.
    Always hate investing in companies that license key technology. Too much risk of fights with licensors
    They have some working capital in hand and at least no one appears to be attempting to bail out by selling into the offering.
    Too risky and early stage but not the worst of class.