State board backs bonds for Lake Preston biofuel project
May 11, 2023
PIERRE, S.D.–A massive aviation biofuel project in Lake Preston got a $187 million boost from the Governor’s Office of Economic Development (GOED) on Wednesday.
GOED’s Finance Authority Board of Directors signed off on bonding of up to $187 million for Gevo Net-Zero 1 without any debate or discussion during its monthly meeting in Pierre.
John Hult with South Dakota Searchlight reports the bonds fell under GOED’s “livestock nutrient management” bond program, but Gevo is not involved in any livestock operations, according to Heather Manuel, the company’s head of corporate communications.
Instead, Manuel said, the board’s vote clears a path for the Colorado-based company to utilize private activity bonds to cover the cost of its solid waste and sewer system. Such bonds can help a company secure better terms from financiers and spare them from some tax liability, but the company – not taxpayers – is liable for the debt.
“The bonds do not carry any financial risk to the state of South Dakota,” Manuel said.
Gevo plans to invest around $850 million in a facility that aims to turn corn into 55 million gallons of “sustainable aviation fuel” each year. The company has 240 acres of land near Lake Preston for the project, which it says will create 1,000 jobs during construction and 90 permanent positions for Kingsbury County and produce $500 million a year in economic activity.
Gevo’s Net-Zero 1 operations will also produce corn oil and feed for livestock, both of which are byproducts of the ethanol production process, and promise to be fueled entirely by renewable energy sources. Company partner Zero6 is working to build a $120 million wind farm for that purpose.
Construction has yet to commence in Kingsbury County, however. During a Wednesday earnings call with investors, Gevo CEO Patrick Gruber said high interest rates have pushed the company to work on securing Department of Energy loans to secure the rest of its financing.
Construction will not commence until the financing is secure, Gruber said.
“This will delay the timeframe for a financial close, pushing financial close into 2024 based on current expectations and assumptions,” Gruber said.
The earliest possible start for operations in Kingsbury County would be 2026, he added.
Wednesday’s vote on private activity bonds is just the latest show of support from state government in South Dakota. The company was granted a $12.2 million tax rebate from GOED’s Board of Economic Development last October. That vote came about a month after the project’s ceremonial groundbreaking on Sept.15.
That groundbreaking, attended by Lt. Gov. Larry Rhoden, was heralded as “the largest economic investment in the state’s history” in a press release from Gov. Kristi Noem. Rhoden used similar verbiage at the event, echoing the company’s fact sheet on the project.
Noem used the line again during her State of the State address in December. The project also got a shout-out in a March news release from the National Governors Association, which touted the $1.7 billion of investment facilitated by GOED in South Dakota over the past year.
The sales and use tax rebate for the company was granted last fall through GOED’s Reinvestment Payment Program, which launched in 2013 under Gov. Dennis Daugaard.
“Reinvestment payments are intended for projects that would not have occurred without the payment,” according to the office’s website.
Following the Wednesday vote, Manuel sent a statement thanking the state for its continued support.
“This is an important milestone in our capital formation for NZ1 and our long-term partnership with the State of South Dakota,” Manuel wrote.
Taken together, the May and October votes for incentives from GOED amount to about a quarter of Gevo’s currently projected costs for Net-Zero 1.
The project represents a major investment for Gevo, which has been expanding its footprint recently and hopes to capitalize on agreements with major air carriers by building out several facilities in the coming years.
The company’s finances saw a boost at the end of 2022, according to filings with the Securities and Exchange Commission. It reported $40.8 million in cash and cash equivalents in December of 2021. One year later, its books showed $237.1 million in cash and total assets of $700.7 million – up from $645.3 million the year before.
The filings also show that $4.2 million of its $6.3 million in inventory at the end of 2022 came from “Environmental Attributes,” which are renewable energy credits tied to its renewable natural gas operations. The company reported no environmental attribute dollars at the end of 2021.
The company’s renewable natural gas is produced from manure at a facility in northwest Iowa, which picked up steam throughout 2022.