Gevo closes $68M ‘Green Bond’ offering to finance construction of its renewable natural gas project in Northwest Iowa

Gevo Inc (NASDAQ:GEVO) 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 project will generate RNG captured from dairy cow manure, or what's called feedstock. In a statement, Gevo said the feedstock for the RNG project will be supplied by three dairy farms in northwest Iowa involving over 20,000 milking cows. When fully operational, the RNG project is expected to generate about 355,000 MMBtu of RNG per year.  READ: Gevo names industry veteran Paul Bloom as its CTO and Chief Innovation Officer The company said it is working with a major RNG dispenser to finalize an agreement to sell the RNG into the California market, where RNG sale revenues are expected to benefit from the state’s Low Carbon Fuel Standard (LCFS) program and the US Environmental Protection Agency’s Renewable Identification Number (RIN) program.  The company added it may use some of the RNG as process energy in its Net-Zero 1 project or 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 about $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 and start-up is expected in early 2022. Gevo said it will submit an LCFS pathway application to the California Air Resources Board; it 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 million to $16 million per year. “We have a good team that has shown they can develop and finance RNG projects,” said CEO Patrick Gruber. “We expect to use these capabilities going forward to develop additional RNG projects. We are also pleased that our dairy partners will reap benefits from the RNG Project given that the manure digesters should improve the farms’ sustainability and lay the groundwork for more efficient recycling of nutrients and better soil health.” The proceeds of the offering, combined with Gevo equity, will be used to finance the construction of the RNG Project which is comprised of three anaerobic digesters and related equipment situated on the dairy farms that will produce partially conditioned raw biogas from cow manure. In addition, gathering pipelines will transport biogas to a centrally located gas upgrade system in Doon, Iowa that will upgrade biogas to pipeline quality RNG and interconnect to Northern Natural Gas’ interstate pipeline.  Contact the author: patrick@proactiveinvestors.com Follow him on Twitter @PatrickMGraham