Gevo Inc

Company Overview

Gevo, Inc. (Nasdaq: GEVO), a Delaware corporation founded in 2005, is a growth-oriented, carbon abatement company with the mission of solving greenhouse gas emissions for those sectors of the transportation industry that are not amenable to electrification or hydrogen. We believe that the market size for hydrocarbon fuels will continue to remain significant in the long-term even with the rapid adoption of electric vehicles and hydrogen technologies.

We are focused on transforming renewable energy into energy-dense liquid hydrocarbons that can be used as renewable fuels, such as SAF, with the potential to achieve a “net-zero” greenhouse gas (“GHG”) footprint. We believe that this addresses the global need of reducing GHG emissions with “drop in” sustainable alternatives to petroleum fuels. We use the Argonne National Laboratory’s Greenhouse gases, Regulated Emissions, and Energy use in Transportation model (the “GREET Model”) to measure, predict and verify GHG emissions across the life cycle of our products. Our “net-zero” concept means the production of drop-in hydrocarbon fuels and chemicals by using sustainably grown feedstocks (e.g., low till, no-till and dry corn cultivation, or other carbohydrate sources); renewable, substantially decarbonized energy sources; and process technologies to lower GHG emissions, resulting in an expected net-zero carbon footprint from the full life cycle of the fuel measured from the capture of renewable carbon through the burning of the fuel.

Our primary market focus, given current demand and growing customer interest, is hydrocarbon fuels, and SAF in particular. We believe that SAF from carbohydrates to alcohol is the most economically viable approach for carbon abatement. We also have commercial opportunities for other renewable hydrocarbon products, such as RNG; hydrocarbons for gasoline blendstocks and diesel fuel; ingredients for the chemical industry, such as ethylene and butenes; plastics and materials; and other chemicals. Global fuel consumption by commercial airlines continues to remain strong, with global fuel consumption at more than 100 billion gallons per year (“BGPW”) and growing.

We believe that there is a growing and significant market demand for SAF production generally based on a number of factors, including:

We believe that we possess the ability to convert various carbohydrate feedstocks through a fermentation process into alcohols and then transform the alcohols into renewable fuels and materials, through a combination of licensing of technology and engineering from third parties, and our own proprietary technology, know-how, and engineering. While we expect our major capital deployments to focus on the production of SAF, we recognize there are opportunities to operate in several different renewable fuels and materials markets and we will pursue those opportunities when appropriate based on customer interest, access to capital, and expected investment returns.

Our SAF production process uses carbohydrates as a feedstock. Carbohydrates are plant matter that result from photosynthesis. Photosynthesis is the natural process by which carbon dioxide is captured from the air by plants, which are very efficient at capturing carbon dioxide from the atmosphere. The carbon in carbohydrates is renewable because its source is carbon dioxide from the atmosphere. The carbohydrates are fermented to produce alcohol intermediate products (e.g., ethanol or isobutanol). The alcohol-based intermediates are then chemically processed to make renewable hydrocarbons. To achieve net-zero carbon intensity (“CI”) across the whole life cycle of the products, we believe:

We believe sustainably grown industrial field corn (i.e., corn that is grown with precision agricultural techniques and low-till or no till cultivation to conserve nutrients, prevent water runoff, and erosion) is the best feedstock to commercialize our SAF with initially because:

We believe that utilizing sustainable agriculture practices to help solve GHG problems is a breakthrough that addresses the problem of GHGs without compromising sustainability or food supply. We also believe that it will be possible to create an incentive structure that rewards farmers to lower the CI score of their agricultural products and create a cycle of continuous improvement to their overall sustainability footprint.

Building Out Production Capacity to Meet Demand

We believe that we will be able to develop the marketplace, customers and production capacity to achieve at least 1 billion gallons of sales in the next decade. Two approaches will be required to achieve this objective. The first approach, the development of greenfield sites (i.e., the development of a project on an undeveloped site), allows us to optimize production and the integration of technology. The second approach, leveraging installed alcohol production capacity, has the advantage that the fermentation capacity already exists via existing ethanol plants. Those existing ethanol plants would need to be decarbonized and hydrocarbon production capacity would need to be installed.

Our concept of “Net-Zero Projects” is a series of planned facilities to produce energy dense liquid hydrocarbons using renewable energy and our proprietary technology. The concept of a Net-Zero Project is to convert renewable energy (such as, photosynthetic, wind, renewable natural gas, and biogas) from a variety of sources into energy dense liquid hydrocarbons that when burned in traditional engines, have the potential to achieve net-zero GHG emissions across the life-cycle of the liquid fuel based on the GREET Model, the pre-eminent science-based life-cycle analysis model. The GREET Model takes into account emissions and impacts cradle-to-cradle for renewable resource-based fuels including inputs and generation of raw materials, agriculture practices, chemicals used in production processes of both feedstocks and products, energy sources used in production and transportation and the end use of the products, which for fuel products is usually burning to release energy.

Using sustainably grown corn or low CI corn as an input at a Net-Zero Project would comprise the following steps: (i) process the corn kernels to produce protein, oil and carbohydrate; (ii) ferment the carbohydrate into an alcohol; and (iii) convert the alcohol to SAF and other renewable hydrocarbon products. The combination of renewable carbon obtained from the carbohydrates, plus the reduction/elimination of fossil-based energy creates the advantage in driving the CI score to achieve net-zero. In addition to those practices, there is potential to sequester renewable carbon in the soil during corn production, and from capturing the CO2 from the production process, which should cause the CI scores to become negative across the whole life cycle of the product as measured by the GREET Model.

Greenfield Projects

Our initial greenfield Net-Zero Project, Net-Zero 1 (“NZ1”), is expected to be located in Lake Preston, South Dakota, and is designed to produce approximately 65 million gallons per year (“MGPY”) of total hydrocarbon volumes, including 60 MGPY of SAF. The plant is expected to be powered by wind-based electricity. The liquid hydrocarbons, when burned, are expected to have a net-zero GHG footprint. Along with the hydrocarbons, NZ1 is expected to produce approximately 695,000 tons per year of high-value protein products for use in the food chain and more than 34 million pounds per year of corn oil. Our products will be produced in three steps: the first step is milling the corn to produce the carbohydrates needed for the production of SAF while simultaneously enabling the production of protein and oil; the second step produces alcohols using carbohydrate-based fermentation; and the third step is the conversion of the alcohols into hydrocarbons.

We completed the value engineering on our NZ1 project and are proceeding with detailed engineering, modularization design, and capital costs updates. We are currently refining project cost estimates with engineering, procurement, and construction (“EPC”) partners to identify cost saving opportunities, and currently expect to finance the construction of NZ1 at the subsidiary level using a combination of Company equity and third-party capital, to include non-recourse debt. The Company expects to have invested a cumulative total of $236 to $286 million of cash equity in the project at financial close. Cash distributions from future NZ1 earnings would be proportionate to Gevo’s ownership in NZ1 under this expected financing structure. The use of project debt and third party equity allows us to conserve capital for use on other growth projects. We expect to apply similar development and financing strategies to future Net-Zero Projects to enable growth of SAF production to meet demand for SAF.

We have substantially completed the engineering design of NZ1. We have substantially completed value engineering and we are now focusing on detail engineering with our EPC partners, to reduce and contractually finalize a negotiated lump-sum, fixed price agreement whereby the EPC partners will build and deliver the plant. This detail engineering work is focused specifically on increasing the modularization of component parts on the NZ1 plant design, which means that we expect that the process equipment would be built into modules at a factory, then the modules would be assembled onsite at NZ1, with the goal of minimizing specialized field work typical in plant construction of this type. This approach is expected to lower the risk and cost of, and access to, skilled labor at the site and reduce the supply chain constrictions for some of our long-lead equipment. Increasing the modularization of the plant design is also expected to reduce our spend in advance of securing third-party equity and debt financing for NZ1 and increase the certainty of construction schedule for those counterparties.

In order to achieve full construction financing for NZ1, we need to secure third-party equity and debt. Upon receiving an invitation from the U.S. Department of Energy (“DOE”), we submitted a Part II Application for a DOE loan guarantee for a direct lending from Federal Financing Bank. In August 2023, Gevo was invited to enter the due diligence and term sheet negotiation phases with DOE. Given the current interest rate environment and general macroeconomic conditions, a DOE-guaranteed loan is our most attractive debt option and is expected to offer the lowest cost of debt for the project. We expect that obtaining a DOE-guaranteed loan will have the benefit of reducing the overall amount of equity required to finance NZ1 and should result in higher project equity returns for investors which should increase the likelihood of Gevo successfully financing NZ1. The DOE loan application process is expected to be complete in 2024. We expect that our NZ1 plant start-up date will occur twenty-four to thirty months after the financing of NZ1 closes, the timing of which is uncertain. In parallel with the DOE-guaranteed loan process, we continue to explore debt financing for NZ1 without the benefit of the DOE-guaranteed loan. We are also working to secure CCS access at the site.

We are evaluating and performing early site development work at several sites in the U.S. for other greenfield sites. These sites include several greenfield locations that are particularly advantageous in terms of potential economics, opportunities to decarbonize, and time to market. In addition, we are pursuing potential Net-Zero Projects with several existing ethanol plant sites. Existing ethanol plants need to be decarbonized with renewable energy or de-fossilized energy and/or carbon sequestration. Gevo has developed a preferred list of potential partners and sites with decarbonization in mind and is engaged in preliminary feasibility and development discussions with several of these potential partners. We plan to give priority to existing industrial plant sites that have attractive potential economics and high predictability of timeline for decarbonization.

Leveraging Existing Alcohol Production Capacity

Based upon what we have learned as we develop and engineer NZ1, we believe that it should be possible, practical and financially attractive to convert existing ethanol plants to allow for the production of SAF and other renewable hydrocarbon products. In order to accomplish this conversion, three critical things are required: (i) the energy for the converted plant needs to be de-fossilized to achieve the CI scores required for the market; (ii) a hydrocarbon production plant needs to be built; and (iii) the plant needs to have access to carbon capture and sequestration (“CCS”).

We believe that there are several existing ethanol plants that could be attractive for an alcohol-to-jet (“ATJ”) plant that would be largely copied from our NZ1 Project.

Renewable Natural Gas

Our RNG and biogas projects generate incremental profit and create a long-term option to potentially supply RNG to our Net-Zero Projects as part of our long-term strategy to decarbonize SAF and other hydrocarbon fuels.

We finished the development and construction of our first RNG facilities in northwest Iowa in 2022. RNG has value in markets such as California as well as in our hydrocarbon production process by helping us achieve carbon negative GHG emissions on our renewable hydrocarbon products. The end products resulting from such a decarbonization process have lower CI scores and increased market value, in addition to having a more positive impact on the environment. Our initial RNG project, Gevo NW Iowa RNG, LLC (“Gevo RNG”), was developed to generate RNG captured from dairy cow manure which is supplied by three dairies located in Northwest Iowa. Animal manure is digested anaerobically to produce RNG. We financed the construction of the Gevo RNG project in April 2021 with the $68,155,000 of Solid Waste Facility Revenue Bonds (Gevo NW Iowa RNG, LLC Renewable Natural Gas Project), Series 2021 (Green Bonds) (the “2021 Bonds”) issued by the Iowa Finance Authority in a public offering for the benefit of Gevo RNG.

The Gevo RNG project started up and began producing and injecting initial volumes of biogas in 2022, during the project’s testing and ramp-up period. The project achieved stable production levels and surpassed our annual production target of 310,000 MMBtu for 2023. In addition, we completed an expansion to the Gevo RNG project to increase its annual design capacity from 355,000 million British thermal units (“MMBtu”) to 400,000 MMBtu.

Gevo was granted registration approval by the U.S. Environmental Protection Agency (“EPA”) in 2022, allowing us to participate in its Renewable Fuel Standard Program (“RFS Program”) to receive renewable identification numbers (“RINs”). During the first quarter of 2023, we received approval for a temporary pathway under California’s Low Carbon Fuel Standard (“LCFS”) program. We realized substantial sales for our environmental attributes of both LCFS credits and RINs in 2023.

We believe the trust and reputation we have attained in the RNG industry, in combination with our understanding of the various and complex environmental attributes, gives us a competitive advantage. We intend to leverage our relationships to identify and execute new project opportunities. Typically, new development opportunities come from our existing relationships with dairy owners who value our reputation in the industry.

We exercise financial discipline in pursuing projects by targeting attractive risk-adjusted project returns, whether selling RNG into the markets or using it to lower CI scores at our Net-Zero Projects. We will monitor biogas supply availability across our portfolio and seek to maximize our production by expanding operations when economically feasible.

Competitive Advantages

We believe that our vertically integrated set of technologies and business systems (including our extensive portfolio of several hundred patents and patent applications, trade-secrets, and proprietary production technologies) creates competitive advantage through (i) access to multiple opportunities to drive the CI score of our products down, (ii) opportunities to address needs in the chemicals, food, feed, plastics and materials markets, (iii) to drive production costs very low to maximize margins, (iv) deploy production technology that is readily scalable and robust from an operating point of view, (v) through Verity Tracking, and (vi) modular design of production facilities which can help to facilitate rapid deployment of production assets. The vertical business systems enable Gevo to capture value from selling protein and vegetable oil, capturing biogenic carbon, and generating carbon value at state and federal levels.

Carbohydrates as Feedstocks

Carbohydrate feedstocks exceed all other potential renewable carbon feedstock sources by several orders of magnitude on a worldwide basis. In the Midwest region of the U.S. corn is an ideal feedstock for multiple reasons. On a per acre basis, field corn (not food corn) is one of the most productive crops to produce protein and oil, as well as carbohydrates. The non-carbohydrate co-products from the field corn kernel represent the majority of the nutritional value of the kernel and could be delivered into the food chain. By selling the protein, oil and animal feed into the food chain markets, it would offset a portion of the cost of acquiring the corn. We believe about 50% of the cost of corn can be offset by manufacturing valuable products for the food chain. The remaining carbohydrates are used as a feedstock for fermentation.

We believe that in the U.S., carbohydrates produced from corn are the most sustainable and lowest cost renewable carbon source that can be used as feedstock for alcohol to hydrocarbon processes to produce hydrocarbon fuels. In the future, we expect to evaluate the commercial use of carbohydrates from sources other than corn (e.g., of sugar cane, molasses or other cellulosic sugars derived from wood, agricultural residues and waste) as the cost to acquire those carbohydrates becomes competitive, and the sustainability profile (and related CI scores) become acceptable. We expect our future feedstocks to be chosen on the collective basis of (i) cost, (ii) carbon and/or sustainability footprint with associated value, (iii) positive contribution to food chain where possible, and (iv) availability of the feedstock at a practical scale.

Proprietary Carbohydrate Conversion Technologies

Three technologies are required to convert carbohydrates to SAF and other renewable hydrocarbons: (i) the fermentation process to convert carbohydrates to alcohols; (ii) the chemical processing technology to make the hydrocarbon fuel products; and (iii) the technology and know-how to mitigate the fossil based GHG emissions from the integrated fermentation and fuel production plants.

We have two ways of producing alcohols via fermentation from carbohydrates: (i) ethanol, which has two carbons, and (ii) isobutanol, which has four carbons. Ethanol can be a building block for SAF, diesel fuel, naptha and chemical products. Isobutanol can be a building block for gasoline hydrocarbons, SAF and chemical products. Ethanol technology is well known and readily available. Isobutanol technology is relatively new and has yet to be scaled to the size of current ethanol production, but it offers long-term potential in enabling lower CI scores and allowing for the production of chemical products, and high value gasoline hydrocarbons.

We believe that we possess proprietary know-how to integrate alcohol production and chemical processing to make SAF and other renewable hydrocarbons that should lower the CI score of our renewable hydrocarbon products, and have filed patents on the overall process.

Alcohols can be converted to hydrocarbon products with catalytic chemical processing techniques analogous to those used in the petrochemical industry. We have been working with Axens North America, Inc. (“Axens”) to use their technology on this process since they have already scaled it up and they have licensed to many commercial production facilities. Axens brings technologies with over 60 related patents, engineering packages, proprietary catalysts and certain proprietary equipment required to convert alcohols into SAF and they will provide certain process guarantees to us.

Integration of the production systems with various renewable or de-fossilized energy sources will be essential. Our Net-Zero plant concept depends upon a variety of decarbonization methods to ensure the operability of the plant while also reducing and eliminating the need for fossil-based energy. We have partnered with companies such as Zero6 Energy, formerly Juhl Energy, to develop the technology suite for this decarbonization.

We own and operate a development scale plant in Luverne, Minnesota (the “Luverne Facility”). This development scale plant enables us to solve the practical issues involved with scale up of new technologies and testing of new unit operations. Gevo may use the Luverne Facility in the future to prove out processes, process concepts, unit operations and for other purposes in order to optimize feedstocks and the processes used for producing hydrocarbons from alcohols. Currently, the activities at the Luverne Facility are minimized to care and maintenance, as the Company has shifted focus to the Net-Zero Projects.

Verity

It is critical that we can prove the CI of our products, ensuring that these values are accurate and auditable. The mission of Verity (“Verity”), including Verity Tracking and Verity Carbon Solutions, is to document CI and other sustainability attributes and apply Distributed Ledger Technology, commonly referred to as blockchain, to create a record of the products throughout the entire business system. Verity starts by calculating carbon intensity of feedstocks from data collected at the farm and field level. We plan to track these feedstocks through production at our plants where we intend to use a mix of renewable electricity, biogas, renewable hydrogen and other potentially decarbonized energy sources in production. The CI data would then be combined to deliver a comprehensive CI reduction in a finished renewable fuel. The resulting CI reduction value has potential to be quantified as a digital asset and monetized in voluntary or compliance carbon markets, and providing compliance needs for tax incentives while preventing double-counting. We believe that in the future, regenerative agricultural practices have the potential to sequester large quantities of soil organic carbon while improving soil health.

There is increasing regulatory and stakeholder pressure on global corporations to lower emissions. These trends are driving demand for carbon credits, giving rise to two sets of markets, the regulated compliance carbon market and the unregulated voluntary carbon market, both of which could grow meaningfully in the coming decades. The total value of major compliance carbon markets is expected to be greater than $800 billion in 2023, according to Bloomberg. Verity intends to document and account for carbon capture in conjunction with scientifically supported measurement techniques. The potential for Verity is broad and could be applicable to tracking the CI of various items beyond Gevo’s internal businesses, including, but not limited to, renewable fuels, food, feed and industrial products through their respective business systems and value chains. Our robust scientific measurement, reporting, and verification plan and approach is expected to provide a high-quality credit that should meet regulated compliance and unregulated carbon markets.

In March 2023, we entered into a joint development framework agreement with Southwest Iowa Renewable Energy; in August 2023, we entered into a joint development framework agreement with a second ethanol producer in the Midwest that has over 100 million gallons of capacity; and in October 2023 we entered into an agreement with a third ethanol producer in the Southwest. These agreements include commercial terms and profit-sharing frameworks. As we grow Verity as an externally facing business, we are working to sign up additional ethanol and biofuel customers. Each of these agreements will focus on implementing Verity technology and developing the market for carbon credits to help farmers and biofuel producers quantify the CI reductions for their products.

During the second quarter of 2023, we launched the Verity Tracking platform (the “Platform”) with farmers in the Lake Preston, South Dakota area who participated in our 2022 grower program. In its initial release, the Platform allows the users to measure, report, verify, and view the CI scores at both the farm average and field-by-field levels. The Platform provides insights into the contributors and removers behind the CI, helping users to understand the factors that drive differences in CI performance between fields. Users can also compare their scores with the U.S. national average calculated by the GREET model.

Our Facilities and Projects

Development Scale Facility

As described above, we currently own a development scale plant, the Luverne Facility. The Luverne Facility was originally constructed in 1998 and is located on approximately 55 acres of land containing approximately 50,000 square feet of building space. In 2022, the activities at our Luverne Facility were transitioned to care and maintenance, market development, and customer education, as we shifted focus to our Net-Zero Projects. The workforce adjustment allowed us to retain key personnel and redeploy some resources to our NZ1 and RNG projects to provide valuable knowledge and experience for the future strategic growth of the Company. The Luverne Facility is well equipped and positioned as a development site as it provides a unique opportunity to showcase our decarbonization and business systems and raise awareness for future partnerships, investors, and local communities, even though operations at the site have been minimized. Future operations, if any, will be tailored to support a focus on advancing our technology, testing, optimizing alternative feedstocks and yeast strains, and unit operations as well as partnership development for fuels and specialty chemicals with integrated solutions for GHG reductions. We continue to evaluate incentive opportunities recently introduced by the Inflation Reduction Act, which may positively impact the future economics of our operation at Luverne.

RNG Facilities

We developed Gevo’s initial RNG project, Gevo RNG, in Northwest Iowa to generate RNG captured from dairy cow manure which is supplied by three dairies located in Northwest Iowa. Gevo RNG has a designed capacity of 400,000 MMBtu of RNG per year. The RNG is sold into the California market under dispensing agreements BP Canada Energy Marketing Corp. and BP Products North America Inc. (collectively, “BP”) have in place with Clean Energy Fuels Corp., the largest fueling infrastructure in the U.S. for RNG. We commenced construction of the Gevo RNG project in April 2021, and in the third quarter of 2022, the Gevo RNG project ramped up production of biogas, raw biogas upgrading to RNG and the injection of RNG into an interconnected natural gas pipeline.

We have four leases for land and three fuel supply agreements related to the Gevo RNG project. Under these contracts, we lease land from dairy farmers on which we have built a gas upgrading unit, three anaerobic digesters, related equipment and pipelines. These leases expire at various dates between 2031 and 2050.

Development Properties

In July 2022, we purchased approximately 240 acres of land for NZ1 in Lake Preston, South Dakota, followed by a groundbreaking ceremony in Lake Preston in September 2022. Refer to the section entitled “Greenfield Projects” above for additional information about NZ1.

Headquarters

Our corporate headquarters and research and development laboratories are located in Englewood, Colorado and are leased. Our lease terminates in January 2029 and the leased space is approximately 19,241 square feet.

Competition

We face competitors in each market that we focus on, some of which are limited to individual markets, and some of which will compete with us across all of our target markets. Many of our competitors have greater financial resources, more comprehensive product lines, broader market presence, longer standing relationships with customers, longer operating histories, greater production capabilities, stronger brand recognition and greater marketing resources than we do which could make it difficult for us to compete.

Our renewable hydrocarbons, including SAF, compete with the incumbent petroleum-based fuels industry, as well as renewable fuels companies. The incumbent petroleum-based fuels industry makes the vast majority of the world’s gasoline, jet and diesel fuels and blendstocks. The petroleum-based fuels industry is mature and includes a substantial base of infrastructure for the production and distribution of petroleum-derived products, however, the industry faces challenges from its dependence on petroleum. High and volatile oil prices should provide an opportunity for renewable producers relying on biobased feedstocks like corn, which in recent years have had lower price volatility than oil, to compete.

Renewable fuels companies may provide substantial competition in the hydrocarbon fuels markets. These renewable fuel competitors are numerous and include both large established companies and numerous startups. Government tax incentives for renewable fuel producers and regulations such as the Inflation Reduction Act Clean Fuel Production Credit, RFS Program, California LCFS program, and programs emerging in other states such as Illinois help provide opportunities for renewable fuels producers to compete. We believe that we have the advantage of being able to target conversion of alcohols into specific high-value molecules such as SAF, other renewable hydrocarbons and various chemical products.

Intellectual Property and Technologies

We seek protection for our intellectual property under patent, copyright, trademark and trade secret laws.

Since the Company was founded, we have submitted hundreds of patent applications in the U.S. and in various foreign jurisdictions. These patent applications are for our technologies and specific methods and products that support our business. We continue to file new patent applications, for which terms extend up to 20 years from the filing date in the U.S. and for various terms in international jurisdictions. We expect to continue to develop and build our intellectual property portfolio to address unmet technology and market needs going forward.

We have filed and prosecuted, and intend to continue to file and prosecute, patent applications and maintain trade secrets, as is consistent with our business plan, in an ongoing effort to protect our intellectual property.

We have a strong proprietary technology position. Our technology pathway converts carbohydrates to alcohols via a fermentation process. The alcohols are then converted to hydrocarbon fuels using a catalytic chemical process. By using renewable energy across the production process, in combination with sustainable feedstocks, like low carbon non-food corn, the GHG emissions can be substantially reduced or eliminated as measured across the whole of the life cycle. The processes used to convert carbohydrates to drop in hydrocarbons using isobutanol as the intermediate alcohol is protected by a global patent portfolio with more than 300 patents, as well as proprietary processes and know-how. Certain production technology to convert ethanol to hydrocarbons has been exclusively licensed to Gevo in the U.S. by Axens, and incorporates more than 60 patents, as well as proprietary production technology and know-how. Additionally, we have multiple patents and patent applications covering the ethanol to hydrocarbons routes.

We have a proprietary fermentation yeast biocatalyst that has been designed to consume carbohydrates and produce isobutanol as a product. Our technology team developed our proprietary biocatalyst to efficiently convert fermentable sugars of all types into isobutanol by engineering isobutanol pathways into the biocatalyst. The advantage of this biocatalyst is that it (i) works in large scale fermentation systems, and (ii) can operate in complex biological mixtures such as corn mash or molasses and produce a suitable clean isobutanol product. The technology is designed to use carbohydrate feedstocks, similar to ethanol technology. For example, carbohydrates from non-food corn, sugar cane, molasses or cellulosic sugars each could be used depending upon cost and availability. While we believe that the majority of the development work on a commercially viable isobutanol producing yeast is complete, we expect to continue to make additional improvements targeted to improve its performance.

Government Regulation - Environmental Compliance

Regulation by governmental authorities in the U.S. and other countries is a significant factor in the development, manufacture and marketing of second-generation renewable fuels. In particular, renewable fuels are subject to rigorous testing and premarket approval requirements by the EPA’s Office of Transportation and Air Quality and regulatory authorities in other countries. In the U.S., various federal and, in some cases, state statutes and regulations also govern or impact the manufacturing, safety, storage and use of renewable fuels. The process of seeking required approvals and the continuing need for compliance with applicable statutes and regulations requires the expenditure of substantial resources.

We are subject to various federal, state and local environmental laws and regulations, including those relating to the discharge of materials into the air, water and ground, the generation, storage, handling, use, transportation and disposal of hazardous materials and the health and safety of our employees. These laws and regulations require us to obtain environmental permits and comply with numerous environmental restrictions as we construct and operate isobutanol assets. They may require expensive pollution control equipment or operational changes to limit actual or potential impacts to the environment. A violation of these laws, regulations or permit conditions can result in substantial fines, natural resource damage, criminal sanctions, permit revocations or facility shutdowns.

There is a risk of liability for the investigation and cleanup of environmental contamination at each of the properties that we own or operate and at off-site locations where we arrange for the disposal of hazardous substances. If these substances are or have been disposed of or released at sites that undergo investigation or remediation by regulatory agencies, we may be responsible under the Comprehensive Environmental Response, Compensation and Liability Act or other environmental laws for all or part of the costs of investigation and remediation. We may also be subject to related claims by private parties alleging property damage and personal injury due to exposure to hazardous or other materials at or from the properties. Some of these matters may require us to expend significant amounts for investigation and cleanup or other costs. We are not aware of any material environmental liabilities relating to contamination at or from our facilities or at off-site locations where we have transported or arranged for the disposal of hazardous substances.

In addition, new laws, new interpretations of existing laws, increased governmental enforcement of environmental laws or other developments could require us to make significant additional expenditures. Continued government and public emphasis on environmental issues can be expected to result in increased future investments in environmental controls at our facilities which cannot be estimated at this time. Present and future environmental laws and regulations applicable to our operations, more vigorous enforcement policies and discovery of currently unknown conditions could all require us to make substantial expenditures. For example, our air emissions are subject to the Clean Air Act, the Clean Air Act Amendments of 1990 and similar state and local laws and associated regulations. Under the Clean Air Act, the EPA has promulgated National Emissions Standards for Hazardous Air Pollutants (“NESHAP”), which could apply to facilities that we own or operate if the emissions of hazardous air pollutants exceed certain thresholds. If a facility we operate is authorized to emit hazardous air pollutants above the threshold level, then we might still be required to come into compliance with another NESHAP at some future time. New or expanded facilities might be required to comply with both standards upon startup if they exceed the hazardous air pollutant threshold. In addition to the costs for achieving and maintaining compliance with these laws, more stringent standards may also limit our operating flexibility.

As a condition to granting the permits necessary for operating our facilities, regulators could make demands that increase our construction and operations costs, which might force us to obtain additional financing. For example, unanticipated water discharge limits could sharply increase construction costs for our projects. Permit conditions could also restrict or limit the extent of our operations. We cannot guarantee that we will be able to obtain or comply with the terms of all necessary permits to complete the retrofit of an ethanol plant. Failure to obtain and comply with all applicable permits and licenses could halt our construction and could subject us to future claims.

Our products benefit from the RFS Program in that our RNG is currently eligible for Renewable Identification Numbers (“RINS”) that have value based on the current RFS Program. The RFS Program could change, impacting our products, positively or negatively.

Various systems are being put in place around the world to measure CI and the reduction of GHGs, with the intent of creating a system to monetize the value of the reduction of carbon. In order to benefit from such systems, companies need to have their products qualified through a regulatory process. There is no guarantee that any benefit could be gained. In 2019, we submitted a design pathway application to the California Air Resources Board to gain approval for low-carbon intensity ethanol utilizing beef manure biogas as a process input under the LCFS, and we may also seek approval under similar programs in the future.

People and Culture

Higher Purpose

Our employees strive to make environmental and social impacts in the world. Our employees are also guided by our code of business conduct and ethics, which helps them to uphold and strengthen our standards of integrity and innovation while continuously improving our environment, health, safety and sustainability. Our world and business may change, but our core values are a constant in everything we do.

Employees

As of December 31, 2023, we had 103 employees in North America. We also retain consultants, independent contractors, and temporary and part-time workers. None of our facilities in the U.S. are covered by collective bargaining agreements. The Gevo team is made up of scientists, research and development experts, software developers, data engineers, operations, administrative and business development professionals, skilled trades and energy technicians.

Human Rights

Gevo honors human rights and respects the individual dignity of all people globally. Our commitment to human rights requires that we understand and carry out our responsibilities consistent with our values and practices. We strive to ensure that human rights are upheld for our employees and all workers in our supply chain. Our commitment to human rights is defined in the code of business conduct and ethics, our supplier code of conduct, our dealer code of conduct and related policies and practices, which establish clear guidelines for our employees, suppliers and dealers while helping to inform our business decisions. We do not tolerate human rights abuses, such as forced labor, unlawful child labor or human trafficking. We are proud to contribute to the places where we work and support the residents of these places.

Code of Business Conduct and Ethics

We are committed to conducting business in accordance with the highest ethical standards. This means how we conduct ourselves is more than just a matter of policy and law, it is a reflection of our core values. Our code of business conduct and ethics provides specific guidance to all of our employees, outlining how they can and must uphold and strengthen the integrity that defines us. We maintain a global compliance hotline to allow for concerns to be brought forward.

Health and Safety

We strive to achieve safety excellence through increased focus on leading indicators, risk reduction, health and safety management systems, and prevention to protect the public health and environmental quality in our communities, as well as the health and safety of our employees, customers and neighbors. We strive to comply with all health and safety laws and regulations that apply to our business. We provide site safety orientation for all employees and guests as well as periodic refresher training for employees at a level appropriate for their role. We have received no violations and are proud that we have never had a fatality at a Gevo facility. During 2023, we had one reportable injury, no lost time incidents, and a total recordable injury rate of 0.93.

We are serious about maintaining the well-being of our employees and families, paying 100% of the premiums for health, dental and vision insurance for whole families. Despite the significant increases in premium costs, we continue to pay the premiums for disability and life insurance to assist in maintaining living standards when issues arise. We continue to be agile in addressing employee needs in the quickly evolving environment while being transparent across the workforce.

Diversity and Inclusion

In order to ensure that each of our employees can bring their full selves to work, we strive to foster a diverse, equitable, and inclusive workplace where all voices are heard and included. We continue to champion policies, practices and behaviors that amplify innovation on behalf of people, community and the planet. Diversity, equity and inclusion (“DEI”) are critical to our success as an organization. Incorporating DEI into our business practices enhances innovation and enables our best talent to thrive in an environment where diverse perspectives are celebrated. This requires deliberate intention and action on the part of every employee and leader. We will continue to push forward on the path to a more diverse, equitable and inclusive culture and have committed to interview and consider at least one qualified woman and person of color for every open role, vice president and higher, including at the senior executive level and the Board of Directors.

We are proud of the vibrant tapestry of people represented within our team, including individuals of African descent, Latinx heritage, and Asian backgrounds, as well as individuals of diverse sexual orientations and gender identities.

Building a diverse and inclusive workforce is a top priority at Gevo. While we acknowledge that we have further progress to make, we are proud of the significant strides we have taken in recent years. In 2023, our non-management workforce saw a surge in female representation (35%) and increased representation across several minority groups including Hispanic/Latino (10%) and Black/African American (3%). At the leadership level, female representation increased to 33%, and we are actively developing programs to cultivate talent from diverse backgrounds for future leadership roles.

We recognize that our diversity journey is ongoing, and we haven't yet reached our full potential. The decline in the overall diversity percentage of our leaders (from 22% in 2022 to 15% in 2023) reflects a decrease from the prior year of 7%. This shift underscores the importance of maintaining momentum in expanding representation across all backgrounds. We are transparent about our data and committed to using it to guide our progress. We will continue to hold ourselves accountable and report regularly on our diversity and inclusion efforts.

Board composition fosters diverse perspectives and strengthens the Board’s ability to understand and address the needs of a broad stakeholder base. With 33% female representation among independent directors, the Board demonstrates a dedication to gender equality and harnesses the talents of a wider pool of leadership. The inclusion of 17% Hispanic independent board directors reflects the Company's commitment to diversity in its leadership and aligns with the demographics of its customers and communities

Attraction, Retention and Engagement

We are currently operating in an extremely challenging talent market. Market hiring surges, increased attrition and shifting work expectations have significantly impacted the attraction and retention of talent, creating a hyper-competitive marketplace. We understand that our long-term success will require a differentiated, targeted approach to talent attraction and retention. In response to these challenges, we took a number of actions in 2023 in an effort to enhance our ability to attract and retain diverse talent:

We are committed to providing employment opportunities for people in our local communities. We partner with local technical colleges and universities to offer scholarships, tuition reimbursement and internships to students in the Energy programs and partner with them in showcasing non-traditional careers to achieve gender equity. Our continued support of this scholarship program has awarded four scholarships to date.

Our employees are highly engaged with our mission. We promote discussion and alignment through monthly town hall sessions with all employees, led by our CEO, Patrick Gruber, as well as fostering open-door conversations with all members of management.

Further, we found that our employees could be effective while working outside the Gevo offices. Gevo’s management philosophy is to lead with trust in our employees and support a culture which enables employees to do their best work. And, as a company focused on reducing the world’s carbon footprint, we hold that value for our employees as well and encourage them to reduce their personal carbon footprint and work from their homes, as their respective positions allow. This policy has allowed us to attract talent we might not otherwise have if we had restricted hiring to certain geographies.

Available Information

Our Annual Reports on Form 10-K, Quarterly Reports on Form 10‑Q, Current Reports on Form 8-K and any amendments to those reports (including related exhibits and supplemental schedules) filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, are made available, free of charge, through our website, as soon as reasonably practicable after such reports have been filed with, or furnished to, the SEC. Our website address is www.gevo.com. Information on our website is not incorporated by reference into, and does not constitute a part of, this report.