Rentech, Inc. (RTK)

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Rentech, Inc. (RTK)

F1Q11 Earnings Call

February 10, 2011 1:00 pm ET


Julie Dawoodjee - Vice President, Investor Relations and Communications

D. Hunt Ramsbottom - President and Chief Executive Officer

Dan J. Cohrs - Executive Vice President and Chief Financial Officer


Matthew Farwell - Imperial Capital

Lucas Pipes - Brean Murray, Carret & Co.

Pavel Molchanov - Raymond James

David Neuhauser - Livermore Partners



Welcome to the Rentech's First Quarter 2011 Earnings Call. During the presentation, all participants will be in a listen-only mode. Afterwards we'll conduct a question-and-answer session. (Operator Instructions) As a reminder, this conference is being recorded Thursday, February 10, 2011.

I would now like to turn the conference over to Julie Dawoodjee, Vice President of Investor Relations. Please go ahead, ma'am.

Julie Dawoodjee

Welcome to Rentech's 2011 fiscal first quarter conference call for the period ended December 31, 2010. During this call, Hunt Ramsbottom, President and CEO of Rentech, will summarize our company's progress during the quarter. Dan Cohrs, our Chief Financial Officer, will give a financial review of the fiscal period and provide comments on Rentech's financial position. We will then open the lines for questions. We ask that you limit yourself to one question so that we may get to as many of your questions as possible.

Please be advised that certain information discussed on this conference call will contain forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. They can be identified by the use of terminology such as may, will, expect, believe and other comparable terms.

You are cautioned that, while forward-looking statements reflect our good faith beliefs and best judgment based upon current information, they are not guarantees of future performance and are subject to known and unknown risks and uncertainties and risk factors detailed from time to time in the company's periodic reports and registration statements filed with the Securities and Exchange Commission.

The forward-looking statements in this call are made as of February 10, 2011 and Rentech does not undertake to revise or update these forward-looking statements except to the extent that it is required to do so under the applicable law.

Now I would like to the turn the call over to Hunt Ramsbottom, President and CEO of Rentech.

D. Hunt Ramsbottom

Thank you, Julie. Good morning, everyone and thank you for joining us today. We're pleased to announce that we reported a significant improvement in first quarter results from a year ago. The quarter's results reflect exceptionally strong rebound in the nitrogen fertilizer market, which is expected to continue. I'll talk more about this robust outlook for REMC later on the call.

As we announced this morning, we are encouraged to be entering into the due diligence phase of the DOE Loan Guarantee Process on the Rialto Project. This is an important step forward because it opens the dialogue with the Loan Guarantee Program Office for detailed due diligence which could lead to the negotiation of terms and conditions of a potential loan guarantee.

The DOE specified in this letter and inviting us into the diligence that they expect a more conservative capital structure than we had hoped including less leverage and a significant higher requirement for project equity. It seems the more conservative terms reflect the requirements of not just the DOE but of other government entities that are involved in the approval process for loan guarantees.

We believe that any terms we're offered will have some flexibility and that continued progress on reducing the commercial risks in the project through finalizing contracts could lead to the negotiation of loan guarantee terms that are more favorable. We've made great strides in the commercial aspects of this project. We are in term sheet discussions with fuel distributors, including integrated oil companies for the Rialto Project's remaining renewable RenDiesel output that's not already contracted with ASIG and the 8 airlines at LAX.

We're also in exclusive negotiations for fixed-price, long-term power purchase agreement for the project's renewable power output. The next step, after finalizing the PPA, is to pursue approvals with the California Public Utilities Commission. The air permit work and all other pre-construction permit activities are on schedule. We expect the environmental impact report required by the California Environmental Quality Act to be ready for comment in mid-March. The air permit final design updates our nearly complete and will be submitted to the permitting agency within the next couple of weeks. The documents for the federal and environmental review of the project are being written and will soon be ready for submittal now that the DOE is engaged.

Front-End Engineering and Design or FEED for the project is about 95% complete. All piping and instrumentation diagram reviews as well as site model have been completed. Fluor is currently preparing a cost estimate and assembling its final report, which will include drawings, equipment data sheets and specifications, process descriptions, and heat and material balances.

We expect all FEED work to be completed on schedule within the next few weeks. We're also evaluating alternative forms of financing, including municipal bonds for financing of waste processing facilities and potential US DOE Loan Guarantees. Alternative financing would not require us to stay on the same tight schedule required by the American Reinvestment and Recovery Act that authorize the loan guarantee program. Setting our own deadlines would allow us to spend more time optimizing the engineering and reducing the project cost.

With respect to Natchez, we continue to work on configurations of a smaller scale project, which we expect to develop at the site. We're having detailed discussions with large-scale resource owners who would provide feedstock for the potential project. We're pleased with the significant headway we're making in securing feedstocks in other North America projects.

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