Here’s the lead-in to Keith Kohl’s latest teaser pitch for his Topline Trader newsletter ($1,999/yr, 90-day refund period):

“Big Oil’s Most Profitable Takeover Target

“Patent-Protected Technology Makes a New Kind of Jet Fuel Possible… Major Airlines Are Already Scrambling for Every Drop Available … and Investors Who Get in on the Firm Behind It All Could Pocket 5,500% Gains”

And it’s about a “green” aviation fuel that’s apparently in high demand…

“… the $500 billion Inflation Reduction Act…

“… it contains a HUGE moneymaking opportunity for everyday Americans.

“I’m talking about a massive cash injection for a groundbreaking fuel.

“Insiders predict this new fuel market will soar 71x within a few short years.

“I’m NOT talking about hydrogen, nuclear, batteries, or anything like that.

“And this isn’t some moonshot technology, either.

“This is a new kind of jet fuel.

“Airlines are already scrambling for it already…

“United Airlines, American Airlines, Delta, British Airways, Alaska Airlines, Finnair, Japan Airlines, Qatar Airways…

“They’re all buying every single drop that’s available as we speak.”

And Kohl thinks the new government push for this fuel will create some serious riches…

“… this cash injection is being prepared as we speak.

“I’m talking about $4.59 billion helping this sector get off the ground.

“Let me put that number into perspective…

“The industry behind this fuel is valued at just $219 million.

“In other words, we’re looking at a windfall that’s over 20x bigger than this entire market.

“This is like a tidal wave hitting a kayak.”

So the big picture here is the push to make aviation more “green” — which is a big deal, since jet fuel is a big part of energy consumption and emissions (roughly 10% of transportation emissions in the US, and possibly 2.5% of total global C02 emissions), and since there is no viable path for batter-powered aviation to replace large airplanes (there are some small electric planes, and presumably those will keep getting better, but there’s not going to be any way to fly 200 people across the ocean under battery power anytime soon).

The push is on to reach “net zero” carbon emissions in most industries, and aviation is no different — most of the talk is about 2050, there’s a recognition that this problem doesn’t have an obvious solution yet, but it’s also quite possible that the timeline will accelerate if we find anything that really works to reduce emissions for wide-body aircraft. And most of the big airlines and engine companies are working on solutions, often in partnership with each other and with energy companies.

So what’s being teased by Keith Kohl? As you might expect, it’s a “one tiny company” story…

“I’ve found a little-known company from Colorado that’s at the heart of this story.

“It already has signed contracts to deliver this fuel to some of the biggest aviation giants in the world.

“According to my estimations, a $5,000 stake into this play could potentially turn into as much as $283,250.”

OK… so what’s the solution from this “tiny company?” Some clues:

“This fuel is called sustainable aviation fuel, or SAF for short.

“It’s made from renewable biomass or waste resources…

“And delivers the performance of petroleum-based jet fuel but with a tiny fraction of its carbon footprint.

“However, it’s not easy to make SAF.

“Production can be extremely complex. It requires advanced technology processes that only a few small companies have mastered.

“That’s why so little SAF is available….

“SAF meets less than 0.1% of global jet fuel demand.

“In short, supply MUST grow by a factor of 1,000.

“If it doesn’t, Wood Mackenzie’s chief analyst Simon Flowers predicts that ‘the world may be sleepwalking into a supply crunch.’

“That’s why investing in the best SAF company is the smartest move you could make today.”

Other hints about this Sustainable Aviation Fuel….

“SAF can be used without making changes to aircraft designed for kerosene…

“And without any changes to existing infrastructure.

“It can replace kerosene right now — and it’s happening as we speak.

“This fuel can even be blended with kerosene to phase out fossil fuels.”

And other clues about this little company?

“The stock still trades for less than $5…

“But it already has massive contracts with aviation giants like Delta, Trafigura, Air Total, SAS, and American Airlines….

“If You Buy Just One Stock This Decade, It Should Be This One

“… its CEO has recently met in the White House with representatives from the Department of Energy…

“The Department of Transportation…

“And even NASA to lay out the expansion of SAF production.

“This firm owns the patent-protected technology to convert biomass into high-quality SAF in a simple catalytic process.”

And Kohl shows a blurred-out image of that patent, which he says is key…

“… this patent is the reason I believe this firm will dominate the SAF market.

“This lucrative technology forms an impenetrable moat around its business, igniting the opportunity for an incredible payday.

“But it’s not just this firm’s proprietary technology that’s behind this firm’s impending dominance…

“This firm’s management team has more than 140 years of combined experience in the chemicals and fuels industries.

“We have every reason to assume this company will crush it.

“In fact, I fully expect it to become the Exxon, Chevron, or BP in this sector.

“It has already supplied low-carbon biofuel for the U.S. Army’s Black Hawk helicopters…”

And this is the part that made me perk up my ears… apparently this company isn’t building its own refineries or supply networks, it’s licensing its technology and patents, which makes the buildup seem a lot less risky:

“… this firm doesn’t have to increase production capacity itself to earn a ton of cash.

“It can license its patent-protected method to companies all around the world.

“That way, it cashes in a royalty with every gallon of SAF sold.”

He also hints at the possibility of a takeover, with oil giants acquiring biofuels and alternative fuel companies… and he particularly hints that Chevron is already partnered with them and may be intersted… so what’s the story?

Well, the Mighty, Mighty Thinkolator chugged along for just a moment or two before spitting out our answer: This is the little renewable biofuels company Gevo (GEVO).

And yes, GEVO is based in Colorado, and does have deals with many airlines to sell sustainable aviation fuel, though at this point their revenue is very low. Here’s how they describe themselves:

“GEVO IS A LEADING RENEWABLE CHEMICALS AND ADVANCED BIOFUELS COMPANY.

“We are dedicated to delivering low carbon sustainable fuels and chemicals. CO2, THE greenhouse gas is our renewable carbon source. We know it’s possible to replace the non-sustainable, greenhouse gas generating fossil carbon-based chemicals and fuels used all across the world today with renewable carbon alternatives. Our technologies make it possible. We want it all: fuels for cars, airplanes, trucks, small engines, boats, and ships. We want to replace the carbon source for major packaging plastics like polyester and polypropylene. Done right, we enable production of protein that helps feed the world. With sustainable farming, we can help farmers capture CO2 in the soil, improving soil quality. Together, with our customers and partners we can change what’s possible, and do our part to positively change the world.”

Their big push is transportation fuels, and they are specifically focused on SAF, as teased, with hopes to reach a billion gallons a year of production by 2030. The current production is extremely low in that context, with several plants that are producing hundreds of thousands of gallons a year of various biofuels. The idea, basically, is that you’re replacing fossil fuels with fermented fuels — which doesn’t reduce the CO2 emissions, since you’re still burning essentially the same fuel and generating CO2 to the same degree, but it becomes “net zero” because the plants you’re using as your biomass to create the fuel will consume as much CO2 as you’re emitting when you burn the fuel. Instead of a one-time use of a fossil resource, it’s a cycle that can, at least theoretically, be maintained without increasing the carbon dioxide in the atmosphere. That patent Keith Kohl refers to as “key” is here, if you’d like to judge for yourself (it’s all Greek to me, sadly), and the company’s general Investor Presentation is here if you’d like to see how they’re selling themselves.

GEVO has a few small irons in the fire, including a plant that generates renewable natural gas from dairy cow manure and methane, but their big project right now is Net-Zero 1, which is a planned $800 million project in South Dakota that they think can produce 62 million gallons of fuel per year starting in 2025, and they believe they can copy this design to scale up at other locations in the future, and can also build on the existing ethanol capacity to “decarbonize” and great SAF from those existing facilities. That would require moving beyond just licensing their intellectual property, they think they’ll have to be a project developer and a co-investor in the equity of these plants.

GEVO got most of its financing back in 2020 and early 2021, raising a total of about $525 million, and that’s also when they really kick-started this strategy of building Net-Zero Projects, including the first mention of this South Dakota project… so that’s been the primary focus over the past two years, doing the early work to plan and move that South Dakota plant forward, signing offtake agreements and joint venture deals with airlines and other customers, and using their capital to fund the equity portion of the deal.

That South Dakota project is apparently still moving forward, they’ve partnered with a potential green hydrogen company on that one as well now, but they have also entered into some joint development agreements with big companies like Phillips 66, ADM, and LG Chem to move forward on other green chemical projects which might result in royalties or milestone payments. They don’t seem to have a big commitment from any partners to push their initial Net-Zero 1 project into development, so that’s delayed right now. Here’s what CEO Patrick Gruber said last quarter:

“We are pleased to announce the agreement with ADM and Phillips 66. This is another example of Gevo’s commitment to further the development of SAF production facilities. We believe that this agreement with ADM and Phillips 66 provides ongoing affirmation of Gevo’s selection of Axens as its technology partner. Of course, we believe that Axens’ technology is proven and ready for scale and that the agreement demonstrates our leadership in the support of the development of SAF production facilities. We intend to support the development and commercialization of other projects in a similar way….

“We continue to have discussions with potential equity partners for NZ1, and we are working through the Department of Energy’s loan guarantee program process. We believe that the DOE loan guarantee program offers the best lending rates and terms available for NZ1. It is in stockholders’ best interest to pursue the lowest cost debt available, that is, the DOE loan guarantee. The trade-off, however, is a longer process that will likely delay the financial close of NZ1. We continue to advance the development of our projects with a focus on getting them ready for financial close utilizing third party equity partners. The sustainable aviation fuel plant design that we are pioneering for NZ1, and related-equipment, are designed to be copied for other sites. As a project developer, we want to be positioned to bring multiple projects forward for investment as they mature and when the overall financial markets settle down and become less volatile. Finally, part of our business model is to be a licensor/enabler of large capital deployment projects that we expect will earn us fees and royalties, similar to the agreement we recently entered into with ADM and P66.”

So that means the flagship NZ1 project is significantly delayed (by about two years) from what was originally expected in early 2021, they now say that the DOE loan process will probably push into 2024, and that building the project will take 2-3 years after that, so perhaps investors have gotten a bit impatient. The stock is down at about $1.25 now, which means that it trades for significantly less than its cash on the books — they have about $450 million in cash left over from those financings a couple years ago, and no debt yet, but the stock market is valuing the company at about $300 million. They’re burning through about $10-20 million per quarter right now, but the likelihood is that they will be using all that cash, and maybe quite a bit more, once they finally move forward with their capital-intensive projects like NZ1 and get access to some debt funding to go along with their equity.

It’s always tempting to buy into “net cash” companies, since cash on the books is the easiest thing to value, and we see that sometimes with biotech stocks… but we should remember, of course, that just like biotech companies who are sometimes sitting on big piles of cash, investors won’t get that cash — the company is going to use it.. The primary benefit for investors is that it makes these startup, pre-revenue companies less fragile — GEVO has a few years to go before they’ll generate meaningful revenue with their sustainable aviation fuels, most likely, and the surplus cash will hopefully help them to survive those years and get outside financing if things are delayed even further (or the market crashes before they really get moving).

Analysts are penciling in 2025 as the big year for GEVO’s breakthrough, their estimate is that revenue will jump from the current ~$10 million a year from small projects, joint ventures and pilot plants to $350 million two years from now, leading to positive cash flow (and maybe even profits). That may be a little premature, if they’re counting on the Net-Zero 1 project, but those other joint ventures could lead to meaningful milestone payments before NZ1 is built.

So… interesting speculation, and it is in a hot area where there is a lot of industry focus. I don’t know if they’ll be able to scale up fast enough to satisfy investors or generate some real profitability, and the world of biofuels has brought us a lot of overhyped companies who ended up in bankruptcy, which might make it hard for investors to stay patient and hopeful with this one… but they do at least have multiple projects in the works to try to jump start SAF production, both in their plants and elsewhere, and they should have enough cash to at least push forward with building one meaningful plant that can produce sustainable aviation fuel, maybe starting construction as soon as next year.

It does seem like a high-risk, high-reward company, particularly if any of their joint venture partners put in enough capital to kick-start royalty-generating projects before GEVO’s own plant(s) are in operation, but waiting for government loan programs might push off any investor excitement into next year… you never know what will really kick-start sentiment in these kinds of stories. Sound like the kind of flyer you’d like to take? Too risky? Have other favorites in the sustainable fuels space? Let us know with a comment below… thanks for reading!

P.S. We haven’t heard from many Topline Trader subscribers in the past, the service was initially biotech-focused (trading around FDA catalyst dates), and we have only covered the newsletter once (when Kohl was pitching a couple “Quantum Computing” stocks back in 2021), so readers would like to hear from actual subscribers… have you tried Topline Trader? Was it worth it… or not so much? Let your fellow invesetors know on our Topline Trader Reviews page. Thanks!