Tues
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Valuation Ratios |
IPO Mrkt |
Price / |
Price / |
Price / |
Price / |
% offered |
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annualizing Sept 9 mos |
Cap (mm) |
Sales |
Earnings |
BookValue |
TangibleBV |
in IPO |
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Gevo (GEVO) |
$363 at $14, range mid-point |
8.5 |
-8 |
3.1 |
3.0 |
28% |
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BUSINESS |
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. Development stage renewable chemicals and advanced biofuels company. |
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. Strategy is to commercialize biobased alternatives to petroleum-based products using a combination of synthetic biology and chemical technology. |
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TECHNOLOGY |
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. Technology platform consists of proprietary biocatalysts and a proprietary isobutanol separation unit. |
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. To establish isobutanol production in a commercial industrial setting, GEVO is now completing the development of its second-generation biocatalyst
Currently is optimizing the yeast’s performance to achieve commercial performance targets. As of October 2010, GEVO’s second-generation biocatalyst has achieved a fermentation time of 52 hours and achieved approximately 94% of the theoretical maximum yield of isobutanol from feedstock, meeting GEVO’s targeted fermentation performance criteria well in advance of the planned commercial launch of isobutanol production in the first half of 2012 |
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COMPETITION |
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GEVO’s isobutanol is targeted to three main markets: direct use as a solvent and gasoline blendstock, use in the chemicals industry for producing plastics, fibers, rubber and other polymers and use in the production of hydrocarbon fuels. |
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In the diesel fuels market, competitors such as Amyris provide alternative hydrocarbon diesel fuel. GEVO believes its technology provides a 20% higher yield on feedstock than the isoprenoid fermentation pathway developed by Amyris, which GEVO believes will yield an approximately 20% production cost advantage. |
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Biofuels companies will provide substantial competition in the gasoline market. |
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. These biofuels competitors are numerous and include both large established companies and numerous startups. Government tax incentives for renewable fuel producers and regulations such as the RFS2 help provide opportunities for renewable fuels producers to compete.
. In particular, in the gasoline and gasoline blendstock markets Virent offers a competitive process for making gasoline and gasoline blendstocks.
. However, GEVO believes it has the advantage of being able to target conversion of isobutanol into specific high-value molecules such as isooctane, which can be used to make gasoline blendstocks with a higher value than whole gasoline, which GEVO does do not believe Virent’s process can match. |
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In the jet fuel market, |
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GEVO will face competition from companies such as Synthetic Genomics, Inc., Solazyme, Inc., Sapphire Energy, Inc. and Exxon-Mobil Corporation, which are pursuing production of jet fuel from algae-based technology. LS9, Inc. and others are also targeting production of jet fuels from renewable biomass. GEVO may also face competition from companies working to produce jet fuel from hydrogenated fatty acid methyl esters. |
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Plastics, fibers, rubber and other polymers market competition |
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. There is also one small company in France, Global Bioenergies, S.A., pursuing the direct production of isobutylene from renewable carbohydrates.
. Through analysis of the fermentation pathway, GEVO believes that the direct production of butenes such as isobutylene via fermentation will have higher capital and operating costs than production of butenes derived from GEVO’s isobutanol. |
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Hydrocarbon fuels market competition |
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Beyond direct use as a fuel additive, isobutanol can be converted into many hydrocarbon fuels and specialty blendstocks, offering substantial potential for additional demand in the fuels markets. GEVO says it will compete with the incumbent petroleum-based fuels industry, as well as biofuels companies. |
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Renewable isobutanol competition |
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Many production and technology supply companies are working to develop ethanol production from cellulosic feedstocks, including Shell Oil, BP, DuPont-Danisco Cellulosic Ethanol LLC, Abengoa Bioenergy, S.A., POET, LLC, ICM, Mascoma, Range Fuels, Inbicon A/S, INEOS New Planet BioEnergy LLC, Coskata, Archer Daniels Midland Company, BlueFire Ethanol, Inc., KL Energy Corporation, ZeaChem Inc., Iogen Corporation, Qteros, Inc., AE Biofuels, Inc. and many smaller start-up companies. |
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. GEVO believes it is a leader in the development of renewable isobutanol via fermentation of renewable plant biomass. Competitors include Butamax, a joint venture between BP and DuPont, and Butalco GmbH, a development stage company based in Switzerland.
. GEVO believes it has a very competitive position in the development of renewable isobutanol production. |
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Gasoline blendstock and solvent markets competition |
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. Competitors are focused on the development of n-butanol, a related compound to isobutanol. These companies include Cathay Industrial Biotech Ltd., METabolic EXplorer S.A., TetraVitae Bioscience, Inc., Cobalt Technologies, Inc. and Green Biologics Ltd.
. GEVO understands that these companies produce n-butanol from an acetone-butanol-ethanol, or ABE, fermentation process primarily for the small chemicals markets. ABE fermentation using a Clostridia biocatalyst has been used in industrial settings since 1919.
. As discussed in several academic papers analyzing the ABE process, such fermentation is handicapped in competitiveness by high energy costs due to low concentrations of butanol produced and significant volumes of water processed.
. It requires higher capital and operating costs to support industrial scale production due to the low rates of the Clostridia fermentation, and results in a lower butanol yield because it produces ethanol and acetone as by-products.
. GEVO believes its proprietary process has many significant advantages over the ABE process because of its limited requirements for new capital expenditures, its production of almost pure isobutanol and its limited energy costs and water usage in production.
. GEVO believes these advantages will produce a lower cost isobutanol compared to n-butanol produced by ABE fermentation. N-butanol’s lower octane rating compared to isobutanol gives it a lower value in the gasoline blendstock market, but n-butanol can compete directly in many solvent markets where n-butanol and isobutanol have similar performance. |
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Gasoline blendstock market isobutanol |
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. Competes with non-renewable alkylate and renewable ethanol. According to the RFA, the global market for ethanol as a fuel blendstock was approximately 20 billion gallons in 2009, and GEVO estimates the total potential global market for isobutanol as a gasoline blendstock at 40 BGPY.
. Alkylate is a premium value gasoline blendstock typically derived from petroleum. However, petroleum feeds for alkylate manufacture are pressured by continued increases in the use of natural gas to generate olefins for the production of alkylate, due to the low relative cost of natural gas compared to petroleum. Alkylate has a low RVP and high octane rating. Ethanol is renewable and has a high octane rating, and although it has a high RVP, ethanol receives a one pound RVP waiver in a large portion of the US gasoline market.
. Renewability is important in the US because the RFS2 mandates that a minimum volume of renewable blendstocks be used in gasoline each year. A high octane rating is important for engine performance and is a valuable characteristic because many gasoline blendstocks have lower octane ratings. Low RVP is important because the EPA sets maximum permissible RVP levels for gasoline.
. Ethanol’s vapor pressure waiver is valuable because it offsets much of the negative value of ethanol’s high RVP. GEVO believes that its isobutanol will be valued for its combination of low RVP, high octane and renewability.
. GEVO believes that with this combination of properties its isobutanol is targeted to compete effectively in the portions of the gasoline market where ethanol blending is not allowed, as well as in regions with particularly low RVP limits. |
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INTELLECTUAL PROPERTY |
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As of December 31, 2010, GEVO has submitted 184 patent applications in the US and in various foreign jurisdictions |
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USE OF PROCEEDS |
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$89mm |
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. Intends to use all or a portion of the net proceeds of this offering, together with existing cash and cash equivalents, to acquire access to ethanol facilities through direct acquisition and joint ventures, and retrofit those facilities to produce isobutanol.
. GEVO completed its acquisition of Agri-Energy in September 2010, at which time Agri-Energy became a subsidiary of Gevo Development. GEVO does not have any other agreements or commitments for any other specific acquisitions at this time.
. A portion of the net proceeds of this offering may be used to complete the retrofit of Agri-Energy’s ethanol production facility in Luverne, Minnesota.
. May use a portion of the proceeds for working capital |
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Gevo (GEVO) |
GEVO, C, 5 |
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Post IPO shares: 26mm |
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Biofuels |
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Englewood CO |
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2009 |
Sept9mos10 |
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IPO Mkt |
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Ethanol Revenues ($mm) |
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$40 |
$32 |
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Cap (mm) |
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Grant Revenues ($mm) |
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$0.7 |
$1.2 |
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$363 |
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Gross margin % of rev |
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9% |
11% |
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Net income (loss) |
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-$21 |
-$34 |
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Net loss % of revenue |
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-53% |
-108% |
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Valuation Ratios |
IPO Mrkt |
Price / |
Price / |
Price / |
Price / |
% offered |
|
annualizing Sept 9 mos |
Cap (mm) |
Sales |
Earnings |
BookValue |
TangibleBV |
in IPO |
|
Gevo (GEVO) |
$363 |
8.5 |
-8 |
3.1 |
3.0 |
28% |
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SCORECARD |
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Mgt |
Market |
Market Do- |
Proprie- |
Total |
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1-5, 5 is high |
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Growth |
mination |
tary |
rating |
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20 is perfect |
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1 |
2 |
1 |
1 |
5 |
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