Gevo, a developer of net-zero hydrocarbon fuels and chemicals, entered into a definitive agreement to acquire the ethanol production plant and carbon capture and sequestration (CCS) assets of Red Trail Energy for $210 million.

The Adjusted EBITDA from Red Trail Energy ethanol and CCS assets, when combined with Adjusted EBITDA from Gevo’s renewable natural gas (RNG) business, and other businesses, including Verity, is expected to make Gevo’s Adjusted EBITDA positive in 2025.

The purchase price includes the ethanol production asset and the CCS asset. Gevo expects that its capability of marketing carbon abatement in conjunction with delivery of advanced liquid fuels should deliver superior value to shareholders.

This acquisition is consistent with Gevo’s strategy while providing a Net-Zero site for future sustainable aviation fuel (SAF) production that is well positioned to serve the US and Canadian markets.

Gevo says that the acquisition is synergistic with Gevo’s Net-Zero 1 SAF project in Lake Preston, South Dakota, by providing access to a wholly owned CCS site and additional supply of low carbon intensity (CI) ethanol.

The acquisition includes existing CCS assets with total sequestration capacity of 1 million metric tons per year, of which 160,000 metric tons per year are currently being utilized. This site could accommodate many future Net-Zero-type and related projects.

This acquisition also expands the footprint and platform for Gevo for future alcohol-to-jet (ATJ) SAF at an operating site with existing low-carbon ethanol supply and CCS. Gevo expects to expand the site to include net-zero SAF production, leveraging the low-carbon ethanol combined with defossilized energy.

The low-carbon ethanol plant has a capacity of 65 million gallons per year. The CCS site has been in operation since 2022, currently capturing 160,000 metric tons of carbon annually and generating monetizable tax credits under section 45Q of the tax code.

Ownership of the CCS asset, which is on well-located acreage in the core of the Broom Creek formation and provides carbon sequestration expansion potential of more than five times current operations by utilizing available pore space and wellhead capacity. One of the few operating CCS sites in the country, the large capacity enables the future production of defossilized energy and steam needed for net-zero fuels and chemicals and provides opportunities for Net-Zero 1, if needed.

The 65 mgpy ethanol facility is located on 500 acres with pore space lease agreements for 5,800 acres in the Broom Creek formation, which has pore space sufficient for 1 million metric tons of carbon capture and sequestration annually. The permitted CCS well currently sequesters approximately 160,000 metric tons of carbon annually. In addition, the facility generates more than 200,000 tons annually of distiller grains and vegetable oil co-products. The facility distributes its low-carbon ethanol across the US and Canada, including low-carbon demand markets in Oregon, Washington, British Columbia and Alberta. Gevo expects to retain all of the approximately 50 full-time employees currently operating the assets being acquired.

The transaction is expected to close by the first quarter of 2025, subject to receipt of regulatory approvals and the satisfaction of other customary closing conditions, including obtaining the approval of Red Trail Energy’s equity holders and the procurement of financing for the acquisition. Gevo expects to finance the transaction with a combination of asset level debt and cash from the balance sheet.