Gevo, Inc. has announced a definitive agreement to purchase Red Trail Energy's ethanol production plant and carbon capture and sequestration (CCS) assets for $210 million. The acquisition is expected to accelerate Gevo's efforts in producing sustainable aviation fuel (SAF) and advancing its carbon abatement strategies.
Financial Impact: The combined Adjusted EBITDA from Red Trail Energy's assets and Gevo's existing businesses, including renewable natural gas (RNG) and other ventures like Verity, is projected to turn Gevo's Adjusted EBITDA positive by 2025.
Expansion of SAF Production: The acquisition provides Gevo with an ideal site for future SAF production, enhancing its capacity to serve both U.S. and Canadian markets. The facility's existing low-carbon ethanol supply and CCS capabilities align with Gevo's Net-Zero 1 SAF project in Lake Preston, South Dakota.
Carbon Sequestration Capacity: Red Trail Energy's CCS assets include a permitted well currently sequestering approximately 160,000 metric tons of carbon annually, with a total capacity of 1 million metric tons per year. This offers significant expansion potential for future net-zero projects.
Operational Synergies: The deal accelerates Gevo's capabilities in feedstock procurement and plant operations, benefiting its Net-Zero 1 project and other future SAF initiatives. Gevo plans to retain all 50 full-time employees currently operating the acquired assets.
Dr. Patrick Gruber, CEO of Gevo, stated that the acquisition positions the company on a path to profitability ahead of the Net-Zero 1 project's commercial operation. "We are securing an excellent site for additional SAF asset deployment and mitigating risk around carbon sequestration for our Net-Zero 1 plant," he said. Gruber emphasized that owning these assets would generate significant near-term and long-term value for shareholders while contributing to economic growth in rural communities.
Jodi Johnson, CEO of Red Trail Energy, expressed confidence in Gevo's leadership. "Gevo's vision for a sustainable future aligns with our philosophy of 'our farms, our fuel, our future.' We believe this acquisition will drive positive change in the renewable energy sector," Johnson commented.
Dr. Chris Ryan, President and COO of Gevo, highlighted the strategic advantages of the acquisition. "The infrastructure and resources we're acquiring offer tremendous flexibility for future operations," he noted. Ryan added that the assets have a strong track record of safe and reliable operations, and plans are in place to optimize the facility further, lowering carbon intensity and increasing carbon sequestration.
Located on 500 acres, the 65-million-gallon-per-year ethanol facility comes with pore space lease agreements covering 5,800 acres in the Broom Creek formation. The facility produces over 200,000 tons annually of distiller grains and vegetable oil co-products. Its low-carbon ethanol is distributed across the U.S. and Canada, catering to low-carbon demand markets in states and provinces like Oregon, Washington, British Columbia, and Alberta.
The acquisition is expected to close by the first quarter of 2025, pending regulatory approvals, approval from Red Trail Energy's equity holders, and financing procurement. Gevo plans to finance the deal through a combination of asset-level debt and cash on hand.
This strategic move underscores Gevo's commitment to transforming renewable resources into net-zero fuels and chemicals while addressing global climate challenges. By integrating Red Trail Energy's assets, Gevo aims to enhance its operational capabilities and accelerate the commercialization of sustainable energy solutions.
