US-headed biofuels- and biochemicals producer and process developer Gevo, Inc., has announced that it has entered into a definitive agreement to acquire the ethanol production plant and carbon capture and sequestration (CCS) assets of Red Trail Energy, LLC (Red Trail Energy) for US$210 million.
The 65 million (US) gallon (≈ 246 million litre) per year Red Trail Energy ethanol facility is located on 500 acres with pore space lease agreements for 5,800 acres in the Broom Creek Formation, which has pore space sufficient for 1 million tonnes of carbon capture and sequestration (CCS) annually.
We accomplish several things with this investment. It immediately puts us on a path to becoming self-sustaining and profitable as a company in advance of our Net-Zero 1 project’s commercial operation. Not only are we securing an excellent site for additional SAF asset deployment, but we also mitigate risk around carbon sequestration regarding our Net-Zero 1 plant site in South Dakota. This acquisition gives us the opportunity to build capability as a company. It is a terrific training ground for our Net-Zero 1 project, as we inherit a trained cadre of employees who understand plant operations, said Dr Patrick Gruber, CEO of Gevo.
The permitted CCS well currently sequesters approximately 160,000 tonnes of carbon dioxide (CO2) annually.
Carbon abatement for fuels and chemicals is core to our business. This acquisition enables immediate market development for sequestered carbon. We expect our ownership of these assets to generate significant near-term and long-term value for our shareholders while adding new jobs and economic growth to rural communities in the region, Dr Patrick Gruber said.
In addition, the facility generates more than 200,000 tonnes annually of distiller grains and vegetable oil co-products.
As Net-Zero 1 and other production facilities come online, the infrastructure and resources that we will have acquired in North Dakota offer tremendous flexibility for how we might operate in the area. We believe this site is ideal for the production of sustainable aviation fuel using Gevo’s integrated alcohol-to-jet technology and defossilized energy, combined with CCS. The CCS well gives us optionality for our Net-Zero 1 carbon sequestration needs. The regional synergies with Net-Zero 1, our development facility in Luverne, Minnesota, and our RNG operations in Northwest Iowa, are fantastic, said Dr Chris Ryan, President and COO at Gevo.
The facility distributes its low-carbon ethanol across the United States and Canada, including low-carbon demand markets in Oregon (OR), Washington (WA), British Columbia (BC), and Alberta (AB).
We are proud of what we have accomplished at Red Trail Energy and are excited about the future under Gevo’s leadership. Gevo’s vision for a sustainable future aligns with our philosophy of ‘our farms, our fuel, our future.’ We are confident this acquisition will drive positive change in the renewable energy sector, said Jodi Johnson, CEO at Red Trail Energy.
The transaction is expected to close by the first quarter of 2025, subject to receipt of regulatory approvals and the satisfaction of other customary closing conditions, including obtaining the approval of Red Trail Energy’s equity holders and the procurement of financing for the acquisition.
These assets and their operating team have a strong track record of safe and reliable operations and financial performance. We plan to immediately begin optimizing the asset with partners through combined heat and power, which will further lower the carbon intensity and increase annual carbon sequestration. This not only decarbonizes the current ethanol production further but also enables the site for net-zero SAF and chemical production, said Dr Chris Ryan.
Gevo expects to finance the transaction with asset-level debt and cash from the balance sheet.
Ocean Park Securities, LLC is acting as exclusive financial advisor to Gevo and Faegre Drinker Biddle & Reath LLP is acting as legal advisor.
I want to welcome the employees of the Red Trail Energy facilities to the Gevo family. We look forward to building upon your cultural commitment to safety, regulatory compliance, operational excellence, and rural communities. I also want to thank our advisors, all of whom were integral in supporting this transaction, positioning Gevo to embark on this exciting phase in the growth of our company, ended Dr Chris Ryan.
