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GEVO: Avfuel Corp. and the “Fly Green Day” at the Van Nuys Airport

IN FOCUS: GEVO, AVFUEL CORPORATION AND THE “FLY GREEN DAY” AT VAN NUYS AIRPORT   

The alphaDIRECT Insight

An important element of the “Fly Green Day” held at Van Nuys Airport on January 17 was to demonstrate that renewable jet fuel can become a main stream drop-in alternative to today’s fossil-based jet fuel. With a multi-year supply agreement in place, Gevo and Avfuel are collaborating to grow the use of Gevo’s ATJ in order to help the aviation industry with their goal of converting some of the jet fuel in North America to sustainable jet fuel by 2020 and beyond. This alphaDIRECT Management series focuses on Gevo and its competitive advantages, and its collaboration with Avfuel Corporation during the “Fly Green Day” event at Van Nuys Airport as a first-of-its-kind within the general and business aviation sector.

 

Shawn Severson: Thank you very much Pat and Keith for taking the time to speak with us today and the alphaDIRECT Investor Network. Could both give us a bit of your background and a bit about your company before we begin?

Patrick Gruber: Absolutely, Shawn. Keith, would you like to go first?

Keith Sawyer: Sure, that’s great Pat, thank you. And thanks for this opportunity, folks. I’m Keith Sawyer, the manager of alternative fuels at Avfuel Corporation, a leading independent global supplier of aviation fuel and services. A large part of our business is in the United States and Canada. Prior to joining Avfuel in late 2016, I spent 40 years with Chevron Corporation in various product groups in the upstream and downstream businesses, largely focused on the supply chain and business development. The work that I’m doing with Avfuel, as well as Pat and his colleagues at Gevo, is in line with my background.

Patrick Gruber: That’s great, Keith, thanks. I’m the CEO of Gevo, Inc. and I’ve been pioneering renewable resource-based products for most of my 30-plus year career. It’s always been a quest of mine to help replace fossil-based products that pollute by making greenhouse gases, and other emissions, with drop-in products that are cleaner, greener, and eventually cheaper, particularly as oil prices climb.

Shawn Severson: Pat, can you give investors a brief overview of what renewable isobutanol is and how it is transformed into sustainable jet fuel for aircraft?

Patrick Gruber: Isobutanol is actually one of the flavor characteristics of Scotch whiskey. Scotch whiskey is made by fermentation that is distilled, but there’s lots of ethanol in a Scotch whiskey. What we’ve done is genetically engineered a yeast to produce isobutanol instead of producing ethanol. The yeast eats sugars and produces isobutanol. We take the isobutanol produced, which has four carbons, and we apply chemistry to it, catalytic chemistry, in a simple process. During this catalytic process we strip off the alcohol group as water, which leaves four carbons behind. We connect two of those four carbon groups together and that makes isooctane. If we add another four-carbon unit we have twelve carbons and that makes jet fuel. Now of course you have a little bit of distribution around these things, a mix of chain lengths, but generally centered around twelve carbons is what jet fuel is comprised of.

This process is different from other processes, especially petrochemical processes, in that we’re starting with a very clean renewable carbon-based chemical, isobutanol. We use chemistry to create two different products, jet fuel and isooctane, both of which are valuable. That’s different than if we produced a mishmash to begin with, which is typical in the chemical industry.  Here you’d have lot of what people refer to as cats and dogs, heavies and lights, the byproducts, or co-dependent products that have low value, we don’t have that. Our process produces high value products straight away, and cleanly.

Shawn Severson: Is that unique to Gevo or is that widely available commercially?

Patrick Gruber: Great question, Shawn. This is unique for Gevo. We’re transforming and moving from a water-based system into an organic petrochemical system. Petrochemical people hate water in their production processes, but biological systems have to be in water. Gevo is focusing on this crossover piece of chemistry, which is unusual and unique, and chemical companies generally aren’t used to it. What makes our technology distinct is this very efficient transformation of isobutanol into two products, jet fuel and isooctane.

Shawn Severson: Alright, thanks Pat. Keith, what are Avfuels’ target markets, the size of the market and how does it differ from the commercial aviation industry that most people are familiar with like United or Alaska Air?

Keith Sawyer: Avfuel’s target markets for sustainable alternative jet fuel come from the company’s various market segments—in particular for this product, business aviation, fixed base operators and cargo operators.

In terms of business aircraft, you’re talking about an expansive market—many times more than the commercial fleet. There are about 20,000 active business aviation aircraft in the world that fly missions almost on a twenty-to-one basis as compared to commercial aviation. So, naturally, one of our target markets for the sustainable product is these aircraft, which are typically owned by corporate flight departments, some of which have their own fuel farms. This distinct piece of the aviation business is quite significant. The people who fly in business aviation aircraft are often influencers and decision makers in business, so it makes sense to reach out to them for commitments on this new, sustainable product as potential early adopters.

This also means targeting where these aircraft are flying—fixed base operations. We supply a large volume of fuel and services to 650-plus Avfuel-branded fixed base operators who cater to business aviation aircraft. We’re working diligently with these customers on education of SAJF.

However, business aviation’s volume is only around 2.5 billion gallons in the United States compared to 26.5 billion gallons of the total jet fuel demand in the U.S., with the largest component being commercial airlines and cargo carriers. With this in mind, we’re also looking at a number of the small cargo airlines that feed into the majors, such as FedEx and UPS at the regional hubs, as potential SAJF users.

 

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