What happened
Shares of Gevo (GEVO 2.99%) were all over the place today as the stock opened down sharply this morning before surging and then pulling back. The news driving the movement was a business update explaining the company's capital position and plans with its Net-Zero 1 project, though investors didn't seem to know what to make of the news.
The stock was down as much as 12.9% this morning before jumping to a 12.5% gain. As of 3:33 p.m. EST, however, those gains had faded and shares were down 7.7%.
A Gevo biofuel plant. Image source: Gevo.
So what
In an update this morning, Gevo said that it expected to produce 45 million gallons of gasoline and jet fuel per year from its Net-Zero 1 plant in South Dakota, all of which will have a "net zero" greenhouse gas footprint. It also expects the plant to produce 350 million pounds of high protein animal feed annually. That volume of fuel would be worth approximately $100 million a year, while the animal feed is likely worth less than that.
Gevo also said the preliminary capital cost estimates for Net-Zero 1 were in the range of $700 million to $800 million.
The company now has $535 million in cash and virtually no debt following a stock sale that closed earlier this week, and it said it would be able to fund 100% of the equity investment for Net-Zero 1.
Now what
On a generally wild day on the market, investors seemed to struggle to make sense of Gevo's announcement. The renewable energy stock has surged in recent months as the company announced the Net-Zero 1 project, and on hopes that the Biden administration will unleash a boom in green energy and alternative fuels.
But with the stock's recent growth, high expectations are already baked in and investors should be aware that it will take time for Net-Zero 1 to come on line. The company said one of its key initiatives in 2021 was to complete front-end engineering for Net-Zero 1, indicating that construction is unlikely to begin on the key project until at least next year.
