Shares of Gevo Inc (NASDAQ:GEVO) which have been on a wild ride are shooting up again Friday on word that the biofuel maker has entered into a long-term agreement to supply its renewable alcohol-to-jet fuel (ATJ) to Avfuel Corp starting in July.
Gevo shares were up 16.7% to US$9.37 before the bell.
“We are pleased to have a customer and partner like Avfuel. It has tremendous reach with more than 650 Avfuel-branded locations and 3,000-plus fueling locations worldwide to a vast scope of customers. We appreciate its vision and leadership in working with us to bring a better and more sustainable fuel to the market place,” said Gevo CEO Patrick Gruber.
“Not only can we reduce greenhouse gas emissions, but we also can produce a higher quality product than petroleum-based jet fuel from a technical standpoint. The whole supply chain should benefit, as well as the end customer,” he added.
READ: Gevo shares still accelerating after EPA green lights increased mix of gasoline additive isobutanol
Avfuel is a leading global supplier of aviation fuel and services to industry consumer groups. The supply agreement with Avfuel is significant as it is Gevo’s first long-term commercial supply agreement for its ATJ.
Investors are keeping their foot on the gas pedal this week, they initially drove Gevo shares up almost fourfold to US$12.70 on Monday, with the stock adding another 71% to US$21.99 in midday trade easily blowing past a 52-week high of US$14.80. However, Gevo had closed 35.9% lower on Thursday to US$8.03 on a broad market pullback and profit taking.
The surge had come in the wake of the Environmental Protection Agency’s approval of the ethanol-free gasoline additive isobutanol at a 16% blend level in gas for on-road use in automobiles. Gevo can produce isobutanol, ethanol and high-value animal feed at its production facility in Luverne, in Minnesota.
The supply agreement envisages two phases. During the first phase, Gevo will supply Avfuel from its smaller-scale hydrocarbon processing facility it operates in Silsbee, Texas, in partnership with South Hampton Resources, Inc. Currently, the Silsbee Facility has the capacity to produce approximately 70,000 gallons of renewable hydrocarbon products per year, 50% of which is ATJ and 50% of which is isooctane.
During the first phase, Gevo expects to construct a larger-scale hydrocarbon facility at its existing ethanol and isobutanol production facility located in Luverne, Minnesota, to produce larger quantities of ATJ.
After completing the Luverne hydrocarbon facility, the second phase of the supply agreement would commence, which has a term of five years. The agreement can naturally be extended by mutual agreement. The company said in a statement that during the second phase, Gevo would supply Avfuel with larger volumes of ATJ, ramping up to 1 million gallons of unblended ATJ per year, which when blended with conventional jet fuel, would produce “many millions of gallons” of finished ASTM D1655 jet-fuel product for distribution per year.