After nearly five years of start-up struggles, Gevo Inc. said Wednesday that it will continuously produce a new, corn-based biofuel at its Luverne, Minn., plant in 2016 — and make some money at it.
The company, which in 2011 converted the Minnesota ethanol plant to produce an alcohol cousin called isobutanol, said it will increase production of the new biofuel next year to 750,000 gallons to 1 million gallons — a seven- to tenfold increase.
It will be the first time the plant continuously produces isobutanol, which is sold as fuel for jet engines and boat and small engines, and as an ingredient in solvents and other chemicals. Until now, isobutanol has been fermented in batches while the Luverne plant is producing mostly ethanol.
"We have crossed the valley of death and come out," Gevo Chief Executive Pat Gruber said of the difficulties perfecting the isobutanol fermentation process amid cash-draining patent litigation. "Now it is about adding production capacity, selling product, improving the economics [and] making isobutanol and hydrocarbon products into a big business."
In August, Gevo and competitor Butamax Advanced Biofuels, a venture of BP and DuPont, announced they settled multiple lawsuits over patents to produce isobutanol, agreeing to cross-license their technologies. Litigation costs have been a major drain on Gevo's cash.
Gevo, which never turned a profit, said the continuous production of isobutanol at Luverne aims for a "positive contribution" to margins. The company still projects corporate-wide losses in the future. Ethanol still will be produced, and will remain a larger contributor to revenue, the company said.
Gruber said Gevo plans to invest another $5 million at Luverne to increase its distillation and yeast-production capacities. Those investments will help cut the cost of making isobutanol by 50 percent to $3 to $3.50 per gallon, he said. In the long term, the company aims to reduce costs further as production is scaled up, but Gruber offered analysts on a conference call no indication when that will be.
The news got a favorable reaction from analyst Jeffrey Osborne at investment banker Cowen and Co. In a research update, he said the "very constructive" initiatives "will likely have a near-term impact on the business."
