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1 Energy Pavel Molchanov, (713) , Published by & Associates March 19, 2012 Industry Brief Energy: Stat of the Week Four-Star Biofuels: How the Pentagon Is Outpacing Civilians in Gen2 Adoption It is no secret that a disproportionate share of the modern world s technological innovations has come courtesy of what Dwight Eisenhower called the military-industrial complex. Computers, satellites, GPS navigation, the Internet all this, and lots more, originated with R&D that was conducted, or at least funded, by the U.S. military. The basic premise is simple: the Department of Defense (DoD) is often willing to support pre-commercial technologies that the civilian agencies not to mention many private sector players may be less inclined to take a bet on. The newest area of focus for the DoD is energy more specifically, renewable energy, and even more specifically, advanced biofuels. While energy independence has long received lip service from Washington politicians, the fact that the U.S. is getting closer to that point has almost nothing to do with public policy; rather, it s a function of the oil and gas industry s technological progress (e.g., shale plays). The DoD, however, is actually putting its money where its mouth is in terms of providing tangible support not just rhetoric for companies that could eventually be significant fuel suppliers for the armed forces. This comes at a time when geopolitical threats to oil supply abound including, but by no means limited to, Iran s threat to shut down the Strait of Hormuz. In this Stat, we discuss the DoD s interest in biofuels and quantify the market opportunity. The Pentagon: America s largest consumer of energy. As the largest consumer of energy in the U.S., the DoD accounts for ~2% of nationwide energy consumption. On a typical day, the DoD consumes roughly 3.8 billion kwh of electricity and 330,000 Bbls of oil. That s almost 0.4% of global oil consumption on par with Sweden or Ukraine and it amounts to roughly 5 billion gallons of fuel each year. As for the DoD s energy policy, the most recent update, Energy for the Warfighter: Operational Energy Strategy, released in June 2011, lays out three priorities. More fight, less fuel encompasses energy efficiency, seen in the context of all-in fuel costs that can exceed $100 per gallon at a forward operating base. Also of note, three of the Army s four least-efficient vehicles are you guessed it fuel haulers. More capability, less cost refers to the fact that the DoD is increasingly integrating considerations of how energy is transported and consumed into operational planning, e.g., reducing the need for air delivery of fuel, which is 10x more expensive than ground delivery. The most relevant one for purposes of this Stat is more options, less risk, which explicitly states, Most military operations depend on a single energy source, petroleum, which has economic, strategic, and environmental drawbacks The Department needs to diversify its energy sources. In this context, the DoD has adopted a formal (albeit voluntary) target of sourcing 25% of energy consumption from renewables by The DoD is serious about early adoption of Gen2 biofuels. En route to its 2025 target, the DoD has emerged as a leader in the early adoption of next-generation (Gen2) biofuels. The Air Force and Navy account for ~64% and ~19% of the DoD s total fuel costs, respectively, and as such, they have aggressive renewable fuel targets. The Navy has the stated goal of sourcing 50% of all (non-nuclear) fuels from renewable sources by 2020, which includes marine fuel for the conventionally powered surface fleet as well as jet fuel for naval aviation. Similarly, the Air Force aims to acquire 50% of its jet fuel for domestic operations from alternative blends by These targets are directly relevant for Gen2 biofuels, as both branches need drop-in biofuels (which are interchangeable with petroleum). Ethanol, whether corn-based or cellulosic, is used as an oxygenate in gasoline, but it is not suitable for large vessels or aircraft. In addition, the DoD stipulates three other requirements: (1) global access, i.e., the fuels should be suitable for production in various geographies; (2) lifecycle All other 17% Please read domestic and foreign disclosure/risk information beginning on page 7 and Analyst Certification on page 7. Navy 19% Source: Department of Defense DoD Fuel Costs greenhouse gas emissions should be no worse than petroleum s; and (3) the effect on food prices must be taken into account. On all these metrics, various subtypes of Gen2 biofuels screen quite well. Air Force 64% 2012 & Associates, Inc., member New York Stock Exchange/SIPC. All rights reserved.

2 So, how much demand could the DoD s renewables targets imply for Gen2 biofuels? As an obvious caveat, there is no precise answer, given the much broader ongoing changes in where and how the military operates. However, given the size of the addressable market, there is no doubt that volumes will ultimately be significant. Let s take a look at the Navy first. The Navy s ~200 non-nuclear vessels and 3,700+ aircraft consume, in aggregate, ~1.3 billion gallons per year. Assuming flat overall fuel consumption, the Navy s 50% renewables target implies biofuel demand of ~650 million gallons by We d also note that Navy Secretary Ray Mabus has been the most vocal backer of biofuels in the DoD and, quite possibly, the entire federal government. Meanwhile, the Air Force, with its 5,500+ aircraft, consumes ~2.5 billion gallons of jet fuel per year. If we assume that (1) the Air Force achieves its goal of reducing jet fuel usage by 10% by 2015, and (2) jet fuel for domestic use is 40% of its total fuel consumption, the implied demand for alternative jet fuel from the Air Force would be ~450 million gallons by To put this in perspective, we project total domestic Gen2 biofuel production in 2012 of only ~300 million gallons. (For details on the overall Gen2 production ramp-up, see our Stat of the Week from November 7, 2011, Gen2 Biofuels: Despite Growing Pains, Billion-Gallon Milestone Within Reach. ) The DoD s portfolio approach to biofuels: multiple products, multiple feedstocks, multiple suppliers. To be clear, the DoD s biofuel strategy is in an early phase. Volumes being purchased thus far are still on a pre-commercial scale, and we don t envision that changing much in This is not due to a lack of demand but rather the simple fact that the industry is not currently in a position to supply large volumes. As a result, the DoD s current efforts aim at supporting the industry s scale-up, which entails and the DoD readily acknowledges this paying above-market prices. The Navy and Air Force have implemented test programs for alternative fuels, and the Defense Logistics Agency is signing contracts (and expanding existing ones) with Gen2 biofuel developers to secure supply. Below we provide some examples of biofuel companies that have been working with the DoD. While not a comprehensive list, this will illustrate the wide range of the product and feedstock types that the DoD has been testing. Accelergy (synthetic fuels). In collaboration with Great Plains Oil & Exploration (a supplier of camelina a distant relative to canola), Accelergy has provided the Air Force with synthetic jet fuel made from a combination of camelina and coal. Cobalt Biofuels (n-biobutanol). In 2010, Cobalt entered into a Cooperative Research and Development Agreement with the Navy to develop technology for converting biobutanol into biojet and renewable diesel. Gevo (isobutanol). In 3Q11, Gevo signed a contract to supply 11,000 gallons of jet fuel to the Air Force (at $59/gal), which will conduct engine testing and a flight demonstration. The Air Force has committed to buying more upon successful completion. Rentech (synthetic fuels). Rentech has sold synthetic jet fuel to the Air Force for performance and emissions testing, and its diesel has been tested in the Army s development-stage Land and Sea Special Operations (LASSO) light utility vehicle. Solazyme (algae-based oils). In 2009, the Navy ordered 20,000 gallons of Solazyme's HRF-76 Naval Distillate, the renewable equivalent of the Navy s main shipboard fuel. One year later, an additional 150,000 gallons was ordered. The June 2011 test flight of the MH-60S Seahawk helicopter, using a 50% biofuel blend, involved the first-ever military aircraft to fly with algae-based jet fuel. In March 2012, the frigate USS Ford sailed from Everett, Washington to San Diego, also using a 50% biofuel blend. Sustainable Oils (biojet). Both the Air Force (A-10 Thunderbolt II, C-17 Globemaster III, F-15 Eagle, F-16 Fighting Falcon, F-22 Raptor) and the Navy (F/A-18 Super Hornet) have conducted test flights at a 50% biofuel blend using biojet produced by Sustainable Oils from camelina. In total, Sustainable Oils has provided nearly 500,000 gallons of biojet to the DoD (through May 2011). Syntroleum (renewable diesel). In December 2011, Dynamic Fuels (a joint venture between Syntroleum and Tyson Foods that uses animal fats and greases as feedstock), in collaboration with Solazyme, signed a contract to supply the Navy with 100,000 gallons of jet fuel and 350,000 gallons of marine distillate. At $12 million ($27/gal), this was the U.S. government s largest Gen2 biofuel order ever. Part of the fuel is set to be used by a Navy carrier group during a Pacific maritime exercise in the summer of Conclusion A key differentiator of the next-generation (Gen2) biofuel industry compared to many other areas of clean tech is that the economics of most Gen2 biofuels do not depend on subsidies. Gen2 companies that use traditional feedstocks (sugarcane, corn, plant oils) tend to focus on high-value markets such as specialty chemicals which are never subsidized while those that are using cellulosic biomass and other low-value feedstocks can compete with petroleum directly on cost. Insofar as Washington has been offering policy support, it has mainly been via the Renewable Fuels Standard. However, the Department of Defense has emerged as a leader in the early adoption of Gen2 biofuels by supporting the industry s scale-up with increasing (though still pre-commercial) fuel purchases and joint R&D programs. We estimate that the targets of the Navy and Air Force will create an addressable market of ~650 million gallons by 2020 and ~450 million gallons by 2016, respectively. For context, we project total domestic Gen2 biofuel production in 2012 of only ~300 million gallons. The DoD s focus on biofuels presents opportunities for a wide range of public and private companies. Of course, strategic partnerships with private sector players (oil and gas majors, refiners, chemical companies, airlines, and/or feedstock suppliers) remain vital, but the DoD s importance for Gen2 commercialization should not be underestimated & Associates, Inc., member New York Stock Exchange/SIPC. All rights reserved. 2

3 Company Citations Company Name Ticker Exchange Currency Closing Price RJ Rating RJ Entity Gevo, Inc. GEVO NASDAQ $ RJ & Associates Rentech, Inc. RTK AMEX $ RJ & Associates Solazyme, Inc. SZYM NASDAQ $ RJ & Associates Notes: Prices are as of the most recent close on the indicated exchange and may not be in US$. See Disclosure section for rating definitions. Stocks that do not trade on a U.S. national exchange may not be approved for sale in all U.S. states. NC=not covered & Associates, Inc., member New York Stock Exchange/SIPC. All rights reserved. 3

4 2012 & Associates, Inc., member New York Stock Exchange/SIPC. All rights reserved. 4

5 Weekly Oilfield Review For Week Ending: 3/16/ Month Oil Calendar Strip 12 Month Gas Calendar Strip Brent Henry Hub $ $ $ $ $90.00 $80.00 $70.00 $60.00 $50.00 $40.00 $6.50 $5.50 $4.50 $3.50 $ This Last Beginning Last This Last Beginning Last Week Week of Year Year Week Week of Year Year Price $ $ $ $ Price $2.93 $2.85 $3.38 $4.58 Percent Change 0.1% 9.9% 8.6% Percent Change 2.5% -13.3% -36.1% Source: Bloomberg Source: Bloomberg 16-Mar-12 9-Mar Mar-11 Change From: This Last Last Last Last Week Week Year Week Year 1. U.S.Rig Activity U.S. Oil 1,317 1, % 57.0% U.S. Gas % -24.2% U.S. Miscellaneous U.S. Total 1,984 1,973 1, % 15.3% U.S. Horizontal 1,180 1, % 19.7% U.S. Directional % -1.3% U.S. Offshore % 72.0% U.S. Offshore Gulf of Mexico Fleet Size % -7.3% # Contracted % 7.2% Utilization 64.3% 64.3% 55.6% 0.0% 15.6% U.S. Weekly Rig Permits * 1,431 1,456 1, % -3.2% 2. Canadian Activity Rig Count % -11.8% 3. Stock Prices (3/16/12) OSX % -8.5% S&P 500 1, , , % 9.8% DJIA 13, , , % 11.6% S&P 1500 E&P Index % -5.6% Alerian MLP Index % 8.5% 4. Inventories U.S. Gas Storage (Bcf) 2,369 2,433 1, % 46.4% Canadian Gas Storage (Bcf) % 134.6% Total Petroleum Inventories ('000 bbls) 869, , , % -1.9% 5. Spot Prices (US$) Oil (W.T.I. Cushing) $ $ $ % 5.1% Oil (Brent) $ $ $ % 10.6% Gas (Henry Hub) $2.01 $2.21 $ % -49.5% Residual Fuel Oil (New York) $18.48 $18.36 $ % 12.1% Gas (AECO) $1.83 $1.75 $ % -50.9% UK Gas (ICE) $9.72 $9.63 $ % -8.9% Sources: Baker Hughes, ODS-Petrodata, API, EIA, Oil Week, Bloomberg * Note: Weekly rig permits reflect a 1 week lag 2012 & Associates, Inc., member New York Stock Exchange/SIPC. All rights reserved. 5

6 Weekly Coal Review For Week Ending: 3/16/ Month Big Sandy Barge Prices 12 Month Powder River Basin 8800 Prices $90.00 $17.00 $75.00 $15.00 $13.00 $60.00 $11.00 $45.00 $9.00 $7.00 $30.00 $ This Last Beginning Last This Last Beginning Last Week Week of Year Year Week Week of Year Year Price $56.50 $57.50 $67.50 $77.70 Price $7.10 $8.55 $12.00 $13.95 Percent Change -1.7% -16.3% -27.3% Percent Change -17.0% -40.8% -49.1% Source: Bloomberg Source: Bloomberg 16-Mar-12 9-Mar Mar-11 Change From: This Last Last Last Last Week Week Year Week Year 1. Coal Prices Eastern U.S. CSX 1% $56.50 $57.50 $ % -27.3% Western U.S. Powder River 8800 $7.10 $8.55 $ % -49.1% 2. Production 9-Mar-12 2-Mar Mar-11 Eastern U.S. 8,439 8,282 8, % -3.1% Western U.S. 10,722 11,288 12, % -13.1% Total 19,161 19,570 21, % -9.0% Source: Bloomberg 2012 & Associates, Inc., member New York Stock Exchange/SIPC. All rights reserved. 6

7 Important Investor Disclosures & Associates (RJA) is a FINRA member firm and is responsible for the preparation and distribution of research created in the United States. & Associates is located at The Financial Center, 880 Carillon Parkway, St. Petersburg, FL 33716, (727) Non-U.S. affiliates, which are not FINRA member firms, include the following entities which are responsible for the creation and distribution of research in their respective areas; In Canada, Ltd., Suite 2200, 925 West Georgia Street, Vancouver, BC V6C 3L2, (604) ; In Latin America, Latin America, Ruta 8, km 17, 500, Montevideo, Uruguay, ; In Europe, European Equities, 40, rue La Boetie, 75008, Paris, France, This document is not directed to, or intended for distribution to or use by, any person or entity that is a citizen or resident of or located in any locality, state, country, or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation. 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Other factors may include but are not limited to: overall ratings from internal (other than investment banking) or external parties and the general productivity and revenue generated in covered stocks. The views expressed in this report accurately reflect the personal views of the analyst(s) covering the subject securities. No part of said person's compensation was, is, or will be directly or indirectly related to the specific recommendations or views contained in this research report. In addition, said analyst has not received compensation from any subject company in the last 12 months. Ratings and Definitions & Associates (U.S.) definitions Strong Buy (SB1) Expected to appreciate, produce a total return of at least 15%, and outperform the S&P 500 over the next six to 12 months. For higher yielding and more conservative equities, such as REITs and certain MLPs, a total return of at least 15% is expected to be realized over the next 12 months. Outperform (MO2) Expected to appreciate and outperform the S&P 500 over the next months. For higher yielding and more conservative equities, such as REITs and certain MLPs, an Outperform rating is used for securities where we are comfortable with the relative safety of the dividend and expect a total return modestly exceeding the dividend yield over the next months. Market Perform (MP3) Expected to perform generally in line with the S&P 500 over the next 12 months. Underperform (MU4) Expected to underperform the S&P 500 or its sector over the next six to 12 months and should be sold. Suspended (S) The rating and price target have been suspended temporarily. This action may be due to market events that made coverage impracticable, or to comply with applicable regulations or firm policies in certain circumstances, including when may be providing investment banking services to the company. The previous rating and price target are no longer in effect for this security and should not be relied upon & Associates, Inc., member New York Stock Exchange/SIPC. 7

8 Ltd. (Canada) definitions Strong Buy (SB1) The stock is expected to appreciate and produce a total return of at least 15% and outperform the S&P/TSX Composite Index over the next six months. Outperform (MO2) The stock is expected to appreciate and outperform the S&P/TSX Composite Index over the next twelve months. Market Perform (MP3) The stock is expected to perform generally in line with the S&P/TSX Composite Index over the next twelve months and is potentially a source of funds for more highly rated securities. Underperform (MU4) The stock is expected to underperform the S&P/TSX Composite Index or its sector over the next six to twelve months and should be sold. Latin American rating definitions Strong Buy (SB1) Expected to appreciate and produce a total return of at least 25.0% over the next twelve months. Outperform (MO2) Expected to appreciate and produce a total return of between 15.0% and 25.0% over the next twelve months. Market Perform (MP3) Expected to perform in line with the underlying country index. Underperform (MU4) Expected to underperform the underlying country index. Suspended (S) The rating and price target have been suspended temporarily. This action may be due to market events that made coverage impracticable, or to comply with applicable regulations or firm policies in certain circumstances, including when may be providing investment banking services to the company. The previous rating and price target are no longer in effect for this security and should not be relied upon. European Equities rating definitions Strong Buy (1) Expected to appreciate, produce a total return of at least 15%, and outperform the Stoxx 600 over the next 6 to 12 months. Outperform (2) Expected to appreciate and outperform the Stoxx 600 over the next 12 months. Market Perform (3) Expected to perform generally in line with the Stoxx 600 over the next 12 months. Underperform (4) Expected to underperform the Stoxx 600 or its sector over the next 6 to 12 months. In transacting in any security, investors should be aware that other securities in the research coverage universe might carry a higher or lower rating. Investors should feel free to contact their Financial Advisor to discuss the merits of other available investments. Rating Distributions Coverage Universe Rating Distribution Investment Banking Distribution RJA RJL RJ LatAm RJA RJL RJ LatAm Strong Buy and Outperform (Buy) 56% 67% 38% 14% 41% 15% Market Perform (Hold) 38% 32% 56% 5% 31% 3% Underperform (Sell) 6% 1% 7% 3% 0% 0% Suitability Categories (SR) For stocks rated by & Associates only, the following Suitability Categories provide an assessment of potential risk factors for investors. Suitability ratings are not assigned to stocks rated Underperform (Sell). Projected 12-month price targets are assigned only to stocks rated Strong Buy or Outperform. Total Return (TR) Lower risk equities possessing dividend yields above that of the S&P 500 and greater stability of principal. Growth (G) Low to average risk equities with sound financials, more consistent earnings growth, possibly a small dividend, and the potential for long-term price appreciation. Aggressive Growth (AG) Medium or higher risk equities of companies in fast growing and competitive industries, with less predictable earnings and acceptable, but possibly more leveraged balance sheets. High Risk (HR) Companies with less predictable earnings (or losses), rapidly changing market dynamics, financial and competitive issues, higher price volatility (beta), and risk of principal. Venture Risk (VR) Companies with a short or unprofitable operating history, limited or less predictable revenues, very high risk associated with success, and a substantial risk of principal. Relationship Disclosures expects to receive or intends to seek compensation for investment banking services from the subject companies in the next three months. Company Name Disclosure Gevo, Inc. & Associates makes a NASDAQ market in shares of GEVO & Associates, Inc., member New York Stock Exchange/SIPC. All rights reserved. 8

9 Stock Charts, Target Prices, and Valuation Methodologies Valuation Methodology: The methodology for assigning ratings and target prices includes a number of qualitative and quantitative factors including an assessment of industry size, structure, business trends and overall attractiveness; management effectiveness; competition; visibility; financial condition, and expected total return, among other factors. These factors are subject to change depending on overall economic conditions or industry- or company-specific occurrences. Only stocks rated Strong Buy (SB1) or Outperform (MO2) have target prices and thus valuation methodologies. Target Prices: The information below indicates target price and rating changes for the subject companies included in this research. Security Price $28.00 $26.00 $24.00 $22.00 $20.00 $18.00 $16.00 $14.00 $12.00 $10.00 $8.00 $6.00 $4.00 3/19/09 4/17/09 6/29/09 7/28/09 8/25/09 9/23/09 10/21/09 11/18/09 12/17/09 Gevo, Inc. (GEVO) 3 yr. Stock Performance 1/19/10 2/17/10 3/17/10 4/15/10 5/13/10 6/11/10 7/12/10 8/9/10 9/7/10 10/5/10 11/2/10 11/29/10 12/27/10 MO2 $ /22/11 2/19/11 MO2 $23.00 MO2 $ /19/11 4/14/11 5/12/11 MO2 $24.00 MO2 $ /8/11 7/5/11 7/30/11 8/25/11 9/21/11 10/18/11 MO2 $ /11/11 12/7/11 1/3/12 MO2 $11.50 Analyst Recommendations & 12 Month Price Objective SB1: Strong Buy NA: Not Applicable MO2: Outperform NM: Not Meaningful MP3: Market Perform UR: Under Review MU4: Underperform S: Suspended 1/28/12 2/23/12 Update Date Closing Price Target Price Rating 2/15/ /1/ /11/ /6/ /13/ /29/ /15/ Date: 03/16/12 Price Rating Change Target Price Change Coverage Suspended Target Price and Rating Change Split Adjustment Valuation Methodology: Our valuation methodology for Gevo is primarily based on discounted cash flow, using 2015 as the terminal year and 20% as the discount rate. MU4 NM MP3 NM Rentech, Inc. (RTK) 3 yr. Stock Performance Update Date $2.60 $2.40 $2.20 $2.00 $1.80 $1.60 $1.40 $1.20 $1.00 $0.80 $0.60 $0.40 $0.20 $0.00 3/19/09 4/16/09 6/25/09 7/23/09 8/18/09 9/15/09 10/12/09 11/9/09 12/7/09 1/1/10 2/1/10 3/1/10 3/29/10 4/26/10 5/21/10 6/21/10 7/19/10 8/13/10 9/13/10 10/11/10 11/5/10 12/2/10 12/28/10 1/25/11 2/19/11 3/19/11 4/14/11 5/12/11 6/9/11 7/6/11 8/3/11 8/27/11 9/24/11 10/21/11 11/16/11 12/10/11 1/6/12 Closing Price Target Price 2/2/12 2/29/12 Rating 8/19/ NM 3 3/19/ NM 4 Security Price Analyst Recommendations & 12 Month Price Objective SB1: Strong Buy NA: Not Applicable MO2: Outperform NM: Not Meaningful MP3: Market Perform UR: Under Review MU4: Underperform S: Suspended Date: 03/16/12 Price Rating Change Target Price Change Coverage Suspended Target Price and Rating Change Split Adjustment 2012 & Associates, Inc., member New York Stock Exchange/SIPC. All rights reserved. 9

10 Solazyme, Inc. (SZYM) 3 yr. Stock Performance MO2 $25.00 MO2 $28.00 MO2 $12.50 MO2 $13.00 Update Date Closing Price Target Price Rating Security Price $29.00 $27.00 $25.00 $23.00 $21.00 $19.00 $17.00 $15.00 $13.00 $ /1/ /11/ /6/ /31/ $9.00 $7.00 3/19/09 4/17/09 6/29/09 7/28/09 8/25/09 9/23/09 10/21/09 11/18/09 12/17/09 1/19/10 2/17/10 3/17/10 4/15/10 5/13/10 6/11/10 7/12/10 8/9/10 9/7/10 10/5/10 11/2/10 11/29/10 12/27/10 1/22/11 2/19/11 3/19/11 4/16/11 5/17/11 6/14/11 7/9/11 8/5/11 9/1/11 9/29/11 10/26/11 11/19/11 12/15/11 1/12/12 2/8/12 3/3/12 Analyst Recommendations & 12 Month Price Objective SB1: Strong Buy NA: Not Applicable MO2: Outperform NM: Not Meaningful MP3: Market Perform UR: Under Review MU4: Underperform S: Suspended Date: 03/16/12 Price Rating Change Target Price Change Coverage Suspended Target Price and Rating Change Split Adjustment Valuation Methodology: Our valuation methodology for Solazyme is primarily based on discounted cash flow, using 2015 as the terminal year and 20% as the discount rate. Risk Factors General Risk Factors: Following are some general risk factors that pertain to the projected target prices included on research: (1) Industry fundamentals with respect to customer demand or product / service pricing could change and adversely impact expected revenues and earnings; (2) Issues relating to major competitors or market shares or new product expectations could change investor attitudes toward the sector or this stock; (3) Unforeseen developments with respect to the management, financial condition or accounting policies or practices could alter the prospective valuation; or (4) External factors that affect the U.S. economy, interest rates, the U.S. dollar or major segments of the economy could alter investor confidence and investment prospects. International investments involve additional risks such as currency fluctuations, differing financial accounting standards, and possible political and economic instability. Specific Investment Risks Related to the Industry or Issuer Company-Specific Risks for Gevo, Inc. Lack of Near-Term Profitability We do not believe that Gevo will achieve sustained profitability until 2015 at the earliest. Similarly, the company's negative cash flow from operations represents another financial challenge and may necessitate outside financing in the future. Advanced Biofuels Commercialization Risk As is true of many early-stage industries, commercialization of advanced biofuels entails numerous risks. For example, in order to become cost-competitive with conventional biofuels (as well as petroleum fuels), Gevo must reduce the production cost of its products through improvements in yields and other manufacturing efficiencies. In addition, if Gevo eventually diversifies its feedstock mix beyond corn, it is important to underscore that the development of technology for converting sugar derived from non-food renewable biomass sources into a commercially viable biofuel is still in its early stages. Joint Venture Risk A core element of Gevo s growth strategy is to partner with ethanol plant owners in order to retrofit the plants to produce isobutanol. This strategy entails several risks, including potential changes in transaction terms and uncertain timing of transactions. Crude Oil and Corn Price Risk The biofuels produced by Gevo s plants will compete with conventionally refined petroleum fuels. Their price is linked to the price of crude oil. A significant decline in oil prices may render biofuels uneconomic. Gevo s plants also face the risk that their principal feedstock, corn, may significantly rise in price, therefore harming profitability. Competitive Market Environment Gevo operates within the competitive markets for fuels and chemicals. The company's ability to continue developing new product innovations and introducing these into rapidly evolving markets is essential for future success. Several of the company's competitors are larger and have greater financial resources. Government Policy Risk Many national and local policy measures benefit the biofuel industry in the U.S. and internationally. Any of these measures can be amended, suspended, or repealed, and such action could reduce demand for biofuels & Associates, Inc., member New York Stock Exchange/SIPC. All rights reserved. 10

11 Company-Specific Risks for Solazyme, Inc. Lack of Near-Term Profitability We do not believe that Solazyme will achieve sustained profitability until 2014 at the earliest. Similarly, the company's negative cash flow from operations represents another financial challenge and may necessitate outside financing in the future. Advanced Biofuels Commercialization Risk As is true of many early-stage industries, commercialization of advanced biofuels entails numerous risks. For example, in order to become cost-competitive with conventional biofuels (as well as petroleum fuels), Solazyme must substantially reduce the production cost of its products through improvement in yields and other manufacturing efficiencies. In addition, if Solazyme eventually diversifies its feedstock mix beyond sugarcane, it is important to underscore that the development of technology for converting sugar derived from non-food renewable biomass sources into a commercially viable biofuel is still in its early stages. Crude Oil and Sugarcane Price Risk The biofuels produced by Solazyme's plants will compete with conventionally refined petroleum fuels. Their price is linked to the price of crude oil. A significant decline in oil prices may render biofuels uneconomic. Solazyme's plants also face the risk that their principal feedstock, sugarcane, may significantly rise in price, thereby harming profitability. Solazyme's partnerships with Latin American sugarcane producers reduce feedstock-related risk but do not eliminate it. Risk Associated With Industry Partnerships Solazyme's commercialization plans are heavily dependent on its industry partnerships. For example, the first commercial plant is being built via a joint venture with Roquette. Solazyme is also in discussions regarding production partnerships with Bunge (BG) and Ecopetrol (EC). All such partnerships are subject to terms and conditions that may limit Solazyme's flexibility and may not prove economically advantageous. Competitive Market Environment Solazyme operates within the competitive specialty chemicals and biofuel markets. The company's ability to continue developing new product innovations and introducing these into a rapidly evolving market is essential for future success. Several of the company's competitors are larger and have greater financial resources. Government Policy Risk Many national and local policy measures benefit the biofuel industry in the U.S. and internationally. Any of these measures can be amended, suspended, or repealed, and such action could reduce demand for biofuels. Additional Risk and Disclosure information, as well as more information on the rating system and suitability categories, is available at rjcapitalmarkets.com/searchfordisclosures_main.asp. Copies of research or summary policies relating to research analyst independence can be obtained by contacting any & Associates or Financial Services office (please see raymondjames.com for office locations) or by calling , toll free or sending a written request to the Equity Research Library, & Associates, Inc., Tower 3, 6 th Floor, 880 Carillon Parkway, St. Petersburg, FL For clients in the United Kingdom: For clients of & Associates (RJA) and Financial International, Ltd. (RJFI): This report is for distribution only to persons who fall within Articles 19 or Article 49(2) of the Financial Services and Markets Act (Financial Promotion) Order 2000 as investment professionals and may not be distributed to, or relied upon, by any other person. For clients of Investment Services, Ltd.: This report is intended only for clients in receipt of Investment Services, Ltd. s Terms of Business or others to whom it may be lawfully submitted. For purposes of the Financial Services Authority requirements, this research report is classified as objective with respect to conflict of interest management. RJA, Financial International, Ltd., and Investment Services, Ltd. are authorized and regulated in the U.K. by the Financial Services Authority. For institutional clients in the European Economic Area (EEA) outside of the United Kingdom: This document (and any attachments or exhibits hereto) is intended only for EEA institutional clients or others to whom it may lawfully be submitted. For Canadian clients: Review of Material Operations: The Analyst and/or Associate is required to conduct due diligence on, and where deemed appropriate visit, the material operations of a subject company before initiating research coverage. The scope of the review may vary depending on the complexity of the subject company s business operations. This report is not prepared subject to Canadian disclosure requirements & Associates, Inc., member New York Stock Exchange/SIPC. All rights reserved. 11

12 releasable research is RJA client For Latin American clients: Registration of Brazil-based Analysts: In accordance with Regulation #483 issued by the Brazil Securities and Exchange Commission (CVM) in October 2010, all lead Brazil-based Research Analysts writing and distributing research are CNPI certified as required by Art. 1 of APIMEC s Code of Conduct ( They abide by the practices and procedures of this regulation as well as internal procedures in place at Brasil S.A. A list of research analysts accredited with the APIMEC can be found on the webpage ( certificacao/profissionais Certificados). Non-Brazil-based analysts writing Brazil research and or making sales efforts with the same are released from these APIMEC requirements as stated in Art. 20 of CVM Instruction #483, but abide by recognized Codes of Conduct, Ethics and Practices that comply with Articles 17, 18, and 19 of CVM Instruction #483. Proprietary Rights Notice: By accepting a copy of this report, you acknowledge and agree as follows: This report is provided to clients of only for your personal, noncommercial use. Except as expressly authorized by, you may not copy, reproduce, transmit, sell, display, distribute, publish, broadcast, circulate, modify, disseminate or commercially exploit the information contained in this report, in printed, electronic or any other form, in any manner, without the prior express written consent of. You also agree not to use the information provided in this report for any unlawful purpose. This This report and its contents are the property of and are protected by applicable copyright, trade secret or other intellectual property laws (of the United States and other countries). United States law, 17 U.S.C. Sec.501 et seq, provides for civil and criminal penalties for copyright infringement & Associates, Inc., member New York Stock Exchange/SIPC. All rights reserved. 12