Production of new biofuel resumes at Minnesota plant

A converted ethanol plant in Luverne, Minn., has resumed making a higher-value alcohol nearly eight months after halting commercial production to correct problems with the new process, the owner announced Tuesday.

Unless further problems occur, Gevo Inc. can lay claim to being the world's first commercial producer of corn-based isobutanol, a chemical cousin to ethanol that is usually refined from petroleum. The company has long seen a lucrative market for isobutanol, not only as a biofuel for vehicles and jets, but as an ingredient used by chemical producers to make bioplastics and other products.

"It is definitely an important technological achievement, and Gevo should rightly be seen as a leader," said Pavel Molchanov, an analyst for Raymond James.

Upon news that the isobutanol plant resumed production, Gevo's share price surged nearly 20 percent to $2.07 on Tuesday. That's still a fraction of the stock's value shortly after its 2011 initial stock offering, when shares briefly traded at more than $25.

Executives said the plant's 30 employees have been working since last September to reduce unwanted yeasts, bacteria and other microbes that competed with Gevo's bioengineered yeast and reduced output of the alternative alcohol.

Gevo said that over the past two weeks it has restarted part of the plant's fermenting equipment, and output will be increased in the third and fourth quarters. For the first time, the company said it has achieved full-scale operation of its proprietary Gevo Integrated Fermentation Technology, which separates isobutanol.

"I can now say that it runs beautifully," said Patrick Gruber, CEO of the Englewood, Colo.-based company, in a statement.

Molchanov estimated the company won't achieve full output of isobutanol for another year, but he said the company needs time to get it right.

"It is industrial biotech," he said. "Whether it is producing vaccines or a biofuel like this, there is always a technologically complicated process. It is always a good idea for a company to take things slow, rather than rush the process."

Piper Jaffray analyst Mike Ritzenthaler said in a research note that "the phased restart of Luverne has surpassed its most difficult and important hurdle…." He estimated the plant can produce 3 million to 5 million gallons of isobutanol per year at its current output. The plant's capacity is 18 million gallons annually.

Brett Lund, Gevo's executive vice president and general counsel, said in an interview that the first batches of isobutanol will be processed into jet fuel for the U.S. Air Force. He said the company also has contracts to supply isobutanol to the Army and Navy.

Although isobutanol can be mixed with gasoline to run cars and trucks, Gevo executives initially plan to make it for other uses, including chemical products such as paraxylene used in bottles and fibers.

For two years, Gevo has been locked in a patent battle with Butamax Advanced Biofuels, a joint venture of Dupont and BP, which also has developed technology to ferment corn into isobutanol.

In March, Gevo won a major victory when Butamax conceded it couldn't win the first trial in Delaware based on a federal judge's adverse pretrial ruling. Butamax is appealing the ruling, however.