Gevo, Inc. has closed a $68,155,000 “Green Bond” private activity bonds offering to finance the construction of its renewable natural gas (RNG) project in Northwest Iowa. The RNG Project will generate RNG captured from dairy cow manure.
The feedstock for the RNG Project will be supplied by three dairy farms located in Northwest Iowa totaling more than 20,000 milking cows. When fully operational, the RNG Project is expected to generate approximately 355,000 MMBtu of RNG per year. Gevo is working with a major RNG dispenser to finalize an agreement to sell the RNG into the California market.
RNG sale revenues are expected to benefit from California’s Low Carbon Fuel Standard (LCFS) program and the US Environmental Protection Agency’s Renewable Identification Number (RIN) program. Some RNG may be used by Gevo as process energy in its Net-Zero 1 Project or Gevo’s other future Net-Zero projects.
Gevo fully funded the RNG Project’s development costs and 100% of its equity capital from cash reserves. Gevo received approximately $9.3 million in reimbursement for development, long lead equipment, and financing costs incurred during the development period upon closing of the Green Bond Offering.
Construction of the RNG Project is expected to begin by the end of April 2021 and start up is expected in early 2022. Gevo will submit an LCFS pathway application to the California Air Resources Board and expects to realize full cash flows from LCFS credits and RINs in the second half of 2022. The RNG Project is then expected to generate cash for Gevo of approximately $9 to $16 million per year (including the LCFS credits and RINs).
The proceeds of the Green Bond Offering, combined with Gevo equity, will be used to finance the construction of the RNG Project which comprises:
Three anaerobic digesters and related equipment situated on dairy farms located Northwest Iowa that will produce partially conditioned raw biogas from cow manure;
Gathering pipelines to transport biogas to a centrally located gas upgrade system;
A centrally located gas upgrade system located in Doon, Iowa that will upgrade biogas to pipeline quality RNG and interconnect to Northern Natural Gas’ interstate pipeline; and
Other related improvements.
Gevo will also use the proceeds to capitalize a portion of the interest due on the bonds during the construction period; and to pay a portion of the costs of issuing the bonds.
Gevo’s mission is to transform renewable energy and carbon into energy-dense liquid hydrocarbons. These liquid hydrocarbons can be used for drop-in transportation fuels such as gasoline, jet fuel and diesel fuel, that when burned have potential to yield net-zero greenhouse gas emissions when measured across the full life cycle of the products.
Gevo uses low-carbon renewable resource-based carbohydrates as raw materials, and is in an advanced state of developing renewable electricity and renewable natural gas for use in production processes, resulting in low-carbon fuels with substantially reduced carbon intensity (the level of greenhouse gas emissions compared to standard petroleum fossil-based fuels across their life cycle).