Gevo Inc. (GEVO), a U.S. biofuel producer backed by French oil company Total SA (FP) and specialty-chemicals maker Lanxess AG (LXS), received a patent for mechanical systems it struggled to implement at its Minnesota factory.
The U.S. Patent & Trademark Office recognized Gevo’s proprietary “platform-separation unit,” which lowers the cost of producing isobutanol, the Englewood, Colorado-based company said today in a statement.
Gevo halted isobutanol production Sept. 24 at its Luverne, Minnesota, plant, which wasn’t meeting goals, and shifted to ethanol while it adjusts the separation system, according to General Counsel Brett Lund. When the plant went into operation in May, the company said it would be making 1 million gallons (3.8 million liters) a month by the end of the year. It’s completed about 100,000 gallons of isobutanol since then.
“It wasn’t working at the optimal rate and cost structure,” Lund said in an interview yesterday. “Rather than making the changes at a big, commercial plant level, it’s much more efficient, both from a timing and cost perspective, to make those changes at a smaller, lab scale.”
Halting isobutanol production illustrates the difficulties in shifting technology from a lab setting that’s easily controlled to a commercial facility, said Pavel Molchanov, an analyst at Raymond James & Associates Inc. in Houston.
“Scaling up fermentation is always hard,” he said in an interview. “It’s a trial and error process. It’s not linear. It’s not straightforward.” Molchanov rates the shares the equivalent of a buy with a 12-month price target of $5.
Gevo processes corn into isobutanol that may be blended with gasoline or refined into jet fuel and specialty chemicals.
The company’s so-called GIFT system, or Gevo integrated fermentation technology, lets it extract isobutanol in vapor form during production, which is 16 times more concentrated than competing systems that distill it from a liquid, Lund said.
“This is the only commercially viable way to separate isobutanol as it’s produced,” he said. “The difference is in the cost. When you’re trying to make a fuel or a chemical that sells for maybe $5 a gallon, you can’t afford a costly distillation process.” Lund expects the Luverne plant to resume isobutanol production next year.
Gevo has lost 39 percent of its market value since the Luverne plant shifted to ethanol. It fell 5.2 percent to $2.01 at the close today in New York.
The reaction of the market “was really exaggerated,” Molchanov said.
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