Biofuel Maker Gevo Prices High at $15; Shares Trade Up

Gevo is officially a public company. The biofuel maker priced its shares at $15 — at the high end of its range — raising $95.7 million after offering expenses, and shares started trading on the Nasdaq this morning under the symbol GEVO (s gevo). In morning trading, Gevo shares are up as high as $16.49, reports the Wall Street Journal (s nws). We’ll be tracking the stock throughout the day.

That Gevo shares priced high and are now rising is good news to investors Khosla Ventures and Virgin Green Fund, which backed Gevo early on. The company was originally looking to raise closer to $150 million, when it filed its S-1 last summer, but since then, lowered that target.

Gevo takes a slightly different approach to the biofuel market: It retrofits old corn ethanol plants to enable them to turn cellulosic feedstocks like agriculture waste into isobutanol, a fuel additive and precursor to plastics and other products. So the company is largely using existing facilities, which is much cheaper than building a plant from scratch, and can sell into both bioproducts and biofuels. If the biofuel markets stumble, it has other industries to sell into.

Gevo is retrofitting an ethanol plant in Luverne, Minn. to produce about 18 million gallons of isobutanol per year, and says its retrofit model could allow it to scale up to 50 million gallons-per-year for about $24 million, or 100 million gallons for $40 million to $45 million. This will be its first commercial plant, which it hopes to get ready for production in the first half of 2012. Empty ethanol plants aren’t necessarily hard to come by; oil refining giant Valero bought up seven plants from bankrupt corn-to-ethanol maker VeraSun in 2009.

Gevo’s core intellectual property is what it calls its “Gevo Integrated Fermentation Technology, or GIFT,” which is tech to produce and separate isobutanol. GIFT contains biocatalysts that convert sugars from a feedstock (plant waste, energy crops etc) into isobutanol through fermentation, and a separation unit that separates isobutanol from water during the fermentation process.

The company generated revenues of $32.78 million for the nine months ended Sept. 30, 2010, and lost $33.61 million over that same period. While that’s actually close to break even, Gevo isn’t commercially selling isobutanol just yet, so the bulk of those revenues come from selling ethanol (after its acquisition of Agri-Energy). This is something next-gen biofuel producers commonly do to book revenue before the product is ready.

One hurdle the company faces is that Gevo is defending itself against a lawsuit filed by a joint venture between DuPont (s dft) and BP (s bp), called Butamax Advanced Biofuels. The JV says Gevo has “infringed its patent for certain recombinant microbial host cells that produce isobutanol and methods for production of isobutanol using such host cells,” according to the latest S1.

Gevo says it has letters of intent for its isobutanol from customers including chemical company Lanxess, French oil giant Total’s (s tot)  subsidiary Total Petrochemicals USA, plastic maker Toray Industries, airline company United Air Lines (s ual) and oil industry technology developer CDtech.

While much of Gevo’s product has been using its biocatalysts in the corn ethanol production process, Gevo says it has been working with Cargill to develop a future-generation yeast biocatalyst specifically designed to produce isobutanol from cellulosic feedstocks.

Gevo plans to use the IPO proceeds to acquire access to ethanol plants through acquisitions and joint ventures, and retrofit those facilities to produce isobutanol. As of Dec. 31, 2010, Gevo’s backers included Khosla Ventures (26.8 percent), Virgin Green Fund (10.5 percent), Total Energy Ventures International (9.2 percent), Burrill (7.1 percent), and Malaysian Capital (6.3 percent). Khosla Ventures has to be happy today.

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