Gevo Inc (NASDAQ:GEVO) Shares Tick Higher on Plant Update


Gevo Inc (NASDAQ:GEVO) shares were up nearly 1% on Monday to $4.09 but retreated 2.69% in after-hours trading to $3.98. The company has a market cap of $11.90 billion at 6.82 million shares outstanding. Share prices have been trading in a 52-week range of $3.20 to $27.20 so there’s considerable upside.

Gevo Inc is a renewable chemicals and next generation biofuels company that developed a technology that uses a combination of synthetic biology, metabolic engineering, chemistry and chemical engineering to focus primarily on the production of isobutanol, as well as related products from renewable feedstock.

The company has two operating segments: the Gevo, Inc. segment and the Gevo Development/Agri-Energy segment. Its Gevo, Inc. segment is responsible for research and development activities related to the future production of isobutanol, including the development of its biocatalysts, the production and sale of biojet fuel, its Retrofit process and the next generation of chemicals and biofuels that will be based on its isobutanol technology. Its Gevo Development/Agri-Energy segment is responsible for the operation of its Agri-Energy Facility and the production of ethanol, isobutanol and related products.

In a press release this week, Gevo Inc provided an update on the operations of its production facility in Luverne for Q4 2016. Some highlights included the production of approximately 190,000 gallons of isobutanol, the highest quarterly production level in the company’s history, demonstration of an isobutanol fermentation production capacity of approximately 1.5 million gallons per year based on the results measured across the last 6 weeks of production in the quarter, and a record production in switching the Luverne Plant to the Side-by-Side mode of production, surpassing production cost targets, demonstrating variable costs of production of less than the targeted $3.00-3.50 per gallon, and a continuation of ethanol production to 2.8 million gallons in the quarter.

I was extremely pleased with the isobutanol production process in the fourth quarter. Our operators have got the process down to a standard routine, operating in 5-day batch-to-batch cycles. We have continued to improve the costs of our isobutanol batches, better than we expected.  We achieved record quarterly production results for isobutanol since switching the Luverne Plant to SBS. As compared to the third quarter of 2016 (our previous best quarter), we increased overall isobutanol production by approximately 25%, batch size by approximately 15% and number of batches by 10%. These results will be extremely helpful in guiding the design of our planned expansion of the Luverne Plant. I congratulate our team in Luverne for the excellent work they have done,” said Dr. Patrick Gruber, Gevo’s Chief Executive Officer.

However, it’s worth noting that Gevo Inc took the Luverne Plant offline in December 21 last year to perform unplanned necessary repairs and maintenance on certain components of the plant’s regenerative thermal oxidizer, which is in charge of controlling pollution. The plant is still in offline mode as of this writing, costing the company some revenues.

We are currently taking advantage of the RTO being offline to make further equipment upgrades, to avoid having to take the plant offline for this in the future. We have significantly improved our capital structure and balance sheet over the past few quarters, which has given us the ability to perform maintenance and upgrades now designed to avoid production disruptions in the future. While the expense associated with the work we are doing on the RTO is relatively low, our stronger balance sheet that we have today makes these types of investment decisions very straightforward,” explained Dr. Gruber.

With that, Gevo Inc shares could continue to trade at the bottom of its long-term range until the Luverne plant resumes operations.

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