ENGLEWOOD, US: Gevo Inc (GEVO) has entered into a supply agreement with HCS Holding GmbH (HCS) to supply renewable isooctane under a five-year offtake agreement.
HCS is a leading global supplier of high-quality hydrocarbon speciality products. Haltermann Carless, a subsidiary of HCS and one of the oldest companies in the world of chemistry, is expected to be the direct customer with Gevo under the supply agreement.
The supply agreement is dependable with the letter of intent with HCS that Gevo announced earlier this year.
The supply agreement has two phases:
In the first phase, HCS will purchase isooctane produced at Gevo’s demonstration hydrocarbon plant located in Silsbee, Texas. This first phase commences in May 2017 and would continue until completion of Gevo’s first large-scale commercial hydrocarbon plant. Gevo estimates that this could generate up to $2-3 million of gross revenue per year.
In the second phase, HCS has agreed to purchase 300,000 gallons of isooctane per year with an option to purchase an additional 100,000 gallons of isooctane per year, under a five-year offtake agreement.
The supply agreement contains a selling price that is expected to allow for an appropriate level of return on the capital required to build out Gevo’s existing production facility in Luverne, Minnesota. Gevo would supply this isooctane from its first commercial hydrocarbon facility, which is expected to be built at Gevo’s existing isobutanol production facility located in Luverne, Minnesota (the “expanded Luverne plant”). Based on Gevo’s current estimates, this supply agreement would represent approximately 10-15 percent of the isooctane production from the expanded Luverne plant.
“Sustainability is a key element of our business strategy. With Gevo we have found the ideal partner to further expand our advanced ecological-sound portfolio for our customers. Gevo has created a unique product with very large potential that fits well into our long-term strategy. As our relationship with Gevo builds, we look forward to marketing other bio-based materials,” said Henrik Krupper, HCS chief commercial officer.
“The agreement with HCS is a key milestone for Gevo and represents our first definitive purchase agreement for long-term supply from our first commercial scale hydrocarbon site. We are reaching a critical commercial inflection point and excited to work with marque customers like HCS. We are making good progress towards the goals we set out at the beginning of the year and are actively pursuing additional agreements,” said Dr Patrick Gruber, CEO of Gevo.
Read More: Gevo signs 5-year isooctane supply agreement with HCS
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