Gevo signs largest renewable fuels ‘take or pay’ deal with Trafigura
Gevo, Inc. (NASDAQ: GEVO) has signed a binding renewable hydrocarbons purchase and sale agreement, with Trafigura Trading LLC, a wholly-owned subsidiary of Trafigura Group Pte Ltd. The agreement, dated August 17, 2020, is a long-term, ‘take or pay’ contract and is the largest contract in Gevo’s history.
The Trafigura Group Pte. Ltd. is one of the world’s leading independent commodity trading companies with more than USD171 billion in revenues and more than than USD54 billion in assets. Trafigura Group is a Singapore-domiciled trading company founded in 1993 that trades in base metals and energy.
Under this contract, Trafigura is expected to take delivery of 25 million gallons per year (MPGY) of renewable hydrocarbons, the majority of which is expected to be low-carbon premium gasoline, with a smaller portion of the volume for sustainable aviation fuel (SAF), starting in 2023.
This commitment will support Trafigura’s efforts to develop the market for low-carbon fuels, including low-carbon premium gasoline. The agreement will also enable Trafigura to supply sustainable aviation fuel to both U.S. and international customers whose interest is growing in low-carbon jet fuel.
“This is our largest single contract to date, and with it, brings Gevo to over USD1.5 billion of revenue in long-term contracts when added to the other contracts we have in place. As drop-in fuels, Gevo’s renewable, very high-octane gasoline and SAF are a perfect fit with Trafigura’s existing fuels business and will allow them to integrate these low-carbon options seamlessly into their supply chains. We expect that our low-carbon fuels will enable certain of Trafigura’s customers to substantially lower their carbon footprint,” said Patrick Gruber, chief executive officer of Gevo.
“Today’s agreement is a natural fit between our companies that will help drive the expansion of our renewable fuels product offering. We look forward to continuing to make a positive impact on the transition towards a low carbon economy,” said Robert Kreider, head of the Strategic Management and Development Group, North America, for Trafigura.
The agreement is subject to certain conditions precedent, including Gevo acquiring a production facility to produce the renewable hydrocarbon products contemplated by the agreement and closing a financing transaction for sufficient funds to acquire and retrofit the production facility .
Having produced SAF and other hydrocarbons for nearly a decade, Gevo has a unique business system as it integrates sustainable agriculture and biorefining to produce SAF and low-carbon premium gasoline. For every gallon of low-carbon premium gasoline or SAF produced, Gevo produces about 10 pounds of protein for the food chain, delivering substantially all of the nutritional value of corn to the food chain. Utilising a low-carbon ecosystem is vital to Gevo. Gevo began to use ISCC+ and Roundtable on Sustainable Biomaterials (RSB) certified corn for its Luverne, Minnesota, U.S.A., facility while displacing fossil-derived power and heat with wind turbines and the upcoming implementation of biogas from dairy manure generated nearby. The execution of this circularity is unique and Gevos’ SAF is expected to achieve a greenhouse gas profile reduction of 70% compared to the fossil-based jet fuel alternative. Eventually, it may be possible through soil carbon sequestration to completely decarbonise jet fuel through the use of Gevo’s sustainable aviation fuel.