Letter of intent (LOI) with Chevron (CVX) is a game changer. Not only does the addition of a major integrated oil company as a partner and investor validate the renewable fuels concept, visibility improves on the funding and off take fronts. LOI is subject to finalizing terms of the co-investment agreement and the fuel supply agreement by May 31, 2022. CVX also receives 15 million warrants with a minimum strike price of $8.50/share.Co-investment agreement improves funding. CVX expects to co-invest in renewable fuel plants with total capacity of up to 150 MGPY. With current project cost estimates of $980 million for a 46 MPGY plant and a debt/equity mix of 65/35, the co-investment could approach $1.0 billion, or 49% interest in three plants at $345 million/plant. In addition, the warrants could generate an additional $127.5 million of cash.Fuel supply agreement (FSA) with CVX not quantified, but it should add materially to current contract portfolio of 54 MGPY. The LOI is subject to a FSA that will define the total supply commitment from CVX. Given the co-investment agreement, it stands to reason that the FSA volume will have a positive impact on the current contract portfolio, which will enhance the visibility on moving forward on several plants, with the potential to upsize the targeted capacity beyond 46 MGPY per plant.ATM offering refreshed to $500 million, but shareholders must approve any expansion of current authorization for 250.0 million shares. Currently, there are 201.9 million shares outstanding and 18.4 million are reserved so 29.7 million shares are available to issue. Given 2Q2021 cash of $567 million, we don't believe that GEVO needs capital right now. We expect the ATM will be used opportunistically and see the minimum strike price of $8.50/share on the CVX warrants as the lowest price that would activate the ATM.Maintain Outperform rating and price target of $16/share. The potential for renewable fuels remains very high and adding a major partner is a game changer. Also, progress on the RNG and Net Zero One plants is positive. We remain positive on the stock’s high risk/high reward profile despite the 37%-plus move yesterday since 1Q2021 capital raises improved the funding fairway and the co-invest and FSA LOI bolsters the development plan. Read More >>