Switching from ethanol to SAF should reduce execution risk, says top analyst


Last October, Gevo (GEVO) has formed a strategic alliance with Axens, with the aim of accelerating the commercialization of sustainable ethanol jet (ETJ) projects.

This collaboration is why the renewable fuel startup is switching to using ethanol fermentation technology rather than isobutanol fermentation technology for the production of sustainable aviation fuel (SAF ) and other renewable hydrocarbon products at Net-Zero 1, the Company’s proposed biorefinery.

The goal of Gevo’s Net Zero concept is to produce liquid hydrocarbons using renewable energy sources such as wind, renewable natural gas and biogas so that these emit zero net greenhouse gas emissions. greenhouse when used in engines.

Since the company can leverage previous engineering work related to ethanol and add 15 MGPY of renewable hydrocarbon capacity while being guaranteed by Axens that the conversion process from ethanol to SAF takes place, management is confident that this decision reduces the risk profile of the project on several fronts.

There are other benefits too, says HC Wainwright analyst Amit Dayal. “We believe this move also opens up another monetization opportunity with a more direct route to offer this plant design to other ethanol plant operators, who may seek to enter the SAF market,” explained the 5 star analyst.

Management also noted that by early 2023, all financial deals for Net-Zero 1 should be complete – potentially with the addition of a debt offering. While this exceeds Dayal’s previous forecast for a mid-2022 close, the project’s completion should not be delayed as the company’s balance sheet should be able to fund all necessary investments and maintain online investments. By the end of 2024, the company expects the project to be “mechanically complete” and fully operational the following year.

Overall, Dayal has maintained a Buy rating and is sticking to a price target of $18, suggesting a whopping 407% upside margin over the next year. (To see Dayal’s record, Click here)

Two other analysts recently reviewed Gevo’s outlook and, like Dayal, they take the bullish route; the additional positive reviews give the title a consensus Strong Buy rating. Adding to the good news, the $13 average price target calls for year-over-year gains of a bountiful 311%. (See Gevo stock forecast on TipRanks)

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Disclaimer: Opinions expressed in this article are solely those of the featured analyst. The Content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.

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