ENGLEWOOD, Colo. - Gevo , Inc. (NASDAQ: NASDAQ:GEVO), a renewable chemicals and advanced biofuels company, has announced the acquisition of Red Trail Energy's ethanol production and carbon capture assets for $210 million. The deal is expected to position Gevo for positive Adjusted EBITDA in 2025, leveraging synergies with existing projects and enhancing its net-zero hydrocarbon fuel strategy.
The acquisition includes a 65 million gallon per year ethanol facility and a carbon capture and sequestration (CCS) site with a 1 million metric ton annual capacity. Currently, the CCS operations sequester 160,000 metric tons of carbon per year. Gevo plans to retain the approximately 50 full-time employees working at the acquired facilities.
The transaction aligns with Gevo's focus on carbon abatement and expands its footprint for future sustainable aviation fuel (SAF) production. The integration of the Red Trail Energy assets is expected to strengthen Gevo's capabilities in feedstock procurement, plant operations, and carbon abatement.
Gevo's CEO, Dr. Patrick Gruber, emphasized the acquisition's role in advancing the company towards self-sustainability and profitability. Red Trail Energy's CEO, Jodi Johnson, expressed confidence in Gevo's leadership and its vision for a sustainable future.
The acquisition is set to close by the first quarter of 2025, subject to regulatory approvals and financing. Gevo anticipates funding the purchase through asset-level debt and cash from its balance sheet.
This strategic move is part of Gevo's broader mission to transform renewable energy into sustainable fuels and chemicals with a net-zero carbon footprint. The company operates one of the largest dairy-based renewable natural gas facilities in the U.S. and is the first to run a production facility for specialty alcohol-to-jet fuels and chemicals.
The information in this article is based on a press release statement from Gevo.
In other recent news, Gevo, Inc. has made significant strides in its business operations. The company has successfully secured an additional 180-day compliance period from Nasdaq to meet the exchange's minimum bid price requirement. Additionally, Gevo has inked a deal with Shell (LON:SHEL) Global Solutions Deutschland GmbH to supply a sustainable fuel blendstock for motorsport use, a move that is expected to reduce carbon emissions in the racing industry.
In terms of financial updates, Gevo reported progress in its Q2 2024 earnings call, emphasizing its NZ one project and RNG business. The company is targeting an annual production capacity of 500,000 million BTUs for its RNG business and is in the process of securing a Department of Energy loan guarantee of approximately $900 million.
The industrial organic chemicals manufacturer has also revised its employment agreements with top executives. CEO Patrick Gruber will maintain his role with an annual base salary of $650,000 and is eligible for a target annual bonus of 100% of his base salary. President and COO Christopher Ryan's amended agreement includes a base salary of $431,600, with an 80% target bonus.
Furthermore, Gevo has partnered with Google (NASDAQ:GOOGL) to integrate AI tools into its Verity platform. These recent developments underscore Gevo's commitment to its strategic projects and executive team.
InvestingPro Insights
Gevo, Inc.'s recent acquisition of Red Trail Energy's ethanol production and carbon capture assets marks a significant step forward in their strategic expansion. With a focus on the financial health and market performance of the company, InvestingPro provides some key insights that are particularly relevant in the context of this acquisition.
InvestingPro Tips highlight that Gevo holds more cash than debt on its balance sheet, which is a positive indicator of the company's financial stability and could be a contributing factor in its ability to fund the acquisition through cash reserves. Additionally, the fact that Gevo is trading at a low Price / Book multiple suggests that the company's market valuation may not fully reflect its asset value, potentially offering an attractive entry point for investors.
From the real-time data provided by InvestingPro, we observe that Gevo has a market capitalization of $172.74 million, which reflects its size and market presence in the renewable energy sector. Despite a significant revenue growth of 98.34% in the last twelve months as of Q2 2024, the company has a negative Gross Profit Margin of -105.98%, indicating that it is currently not profitable. Moreover, the Price / Book ratio stands at 0.33, reinforcing the tip regarding its low valuation relative to its book value.
While Gevo's stock price has seen a strong return over the last three months, with a 20.87% increase, the company does not pay a dividend to shareholders, which may be a consideration for those looking for income-generating investments. It is also worth noting that analysts do not anticipate the company will be profitable this year, aligning with the negative Gross Profit Margin observed.
For readers interested in deeper analysis or seeking additional insights, there are 12 more InvestingPro Tips available for Gevo at https://www.investing.com/pro/GEVO. These tips could provide further context on the company's financial health and market performance, which are critical factors to consider in light of the recent acquisition news.
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