Gevo Inc. has completed its deal to buy Red Trail Energy LLC’s ethanol production plant and carbon capture and sequestration assets for $210 million.

The deal’s assets include the plant and pore space and will be renamed “Net-Zero North,” according to Gevo’s Feb. 3 press release.

Gevo plans to expand the plant’s capabilities to produce sustainable aviation fuel and permanently sequester biogenic CO2 to produce low-carbon products. It is expected to contribute up to $60 million of adjusted EBITDA to Gevo, and the company plans to capitalize on the ethanol plant’s eligibility for the 45Z tax credit.

“We like the potential annual Adjusted EBITDA of $30 million to $60 million, synergies with the existing Gevo platform of assets, and having CCS assets in the Gevo portfolio as a risk mitigation tool for carbon sequestration for our Net-Zero 1 (“NZ1”) plant under development in South Dakota,” Gevo CEO Patrick Gruber said in the announcement.

Gevo said it funded the transaction with a combination of Gevo equity capital and a $105 million senior secured term loan facility from private-investment firm Orion Infrastructure Capital. Orion will also be investing $5 million in equity into Net-Zero North, with the plan to provide another $100 million in debt for mutually agreed upon future growth projects.

The local community in North Dakota “understands how oil and gas, pipelines, carbon capture and regenerative agriculture all fit together,” Gruber said. “Net-Zero North provides the fundamental pieces of the puzzle towards cost-effective energy production, such as SAF, while addressing the market demand for cost effective, lower-carbon-footprint products.”

Ocean Park Securities LLC acted as exclusive financial adviser and sole lead arranger on the debt financing for Gevo.

Comments