Gevo to acquire North Dakota ethanol plant expanding platform for SAF, hydrocarbons, chemicals

Gevo Inc. announced Sept. 12 that it has entered into a definitive agreement to acquire the 65-million-gallon-per-year ethanol production plant and carbon capture and sequestration (CCS) assets of Red Trail Energy LLC 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.

According to Gevo, this acquisition is consistent with its strategy while providing an ideal Net-Zero site for future sustainable aviation fuel (SAF) production that is well positioned to serve the U.S. and Canadian markets.

The company added that the purchase 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, according to Gevo, could accommodate many future Net-Zero-type and related projects.

The company said the acquisition strategically expands the footprint and platform for for future alcohol-to-jet (ATJ) SAF at an operating site with existing low-carbon ethanol supply and CCS.

Gevo said it expects to expand the site to include net-zero SAF production, leveraging the low-carbon ethanol combined with defossilized energy.

Gevo plans to continue operating the Red Trail Energy facility while integrating its proprietary solutions to further enhance the plant’s efficiency, sustainability and further reduce the ethanol CI.

“We accomplish several things with this investment,” said Gevo CEO Patrick Gruber. “It immediately puts us on a path to becoming self-sustaining and profitable as a company in advance of our Net-Zero 1 project’s commercial operation. Not only are we securing an excellent site for additional SAF asset deployment, but we also mitigate risk around carbon sequestration regarding our Net-Zero 1 plant site in South Dakota. This acquisition gives us the opportunity to build capability as a company and is a terrific training ground for our Net-Zero 1 project, as we inherit a trained cadre of employees who understand plant operations. Carbon abatement for fuels and chemicals is core to our business. This acquisition enables immediate market development for sequestered carbon. We expect our ownership of these assets to generate significant near-term and long-term value for our shareholders, while adding new jobs and economic growth to rural communities in the region.”

Red Trail Energy CEO Jodi Johnson added, “We are proud of what we have accomplished at Red Trail Energy and are excited about the future under Gevo’s leadership. Gevo’s vision for a sustainable future aligns with our philosophy of ‘our farms, our fuel, our future.’ We are confident this acquisition will drive positive change in the renewable energy sector.”

Chris Ryan, Gevo’s president and chief operating officer, said, “As Net-Zero 1 and other production facilities come online, the infrastructure and resources that we will have acquired in North Dakota offer tremendous flexibility for how we might operate in the area. We believe this site is ideal for production of sustainable aviation fuel using Gevo’s integrated alcohol-to-jet technology and defossilized energy, combined with CCS. The CCS well gives us optionality for our Net-Zero 1 carbon sequestration needs. The regional synergies with Net-Zero 1, our development facility in Luverne, Minnesota, and our RNG operations in Northwest Iowa, are fantastic. These assets and their operating team have a strong track record of safe and reliable operations and financial performance. We plan to immediately begin optimizing the asset with partners through combined heat and power, which will further lower the carbon intensity and increase annual carbon sequestration. This not only decarbonizes the current ethanol production further, but also enables the site for net-zero SAF and chemical production.”

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.

Ocean Park Securities LLC is acting as exclusive financial advisor to Gevo and Faegre Drinker Biddle & Reath LLP is acting as legal advisor.