Rentech, Inc. (RTK)

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Rentech (RTK)

Q2 2011 Earnings Call

May 10, 2011 1:00 pm ET


Julie Dawoodjee - Vice President of Investor Relations & Communications

Dan Cohrs - Chief Financial Officer, Executive Vice President and Treasurer

D. Ramsbottom - Chief Executive Officer, President and Executive Director


Unknown Speaker

Steve Emerson - Emerson Investment Group

Matthew Farwell - Imperial Capital, LLC

Jeremy Sussman - Brean Murray, Carret & Co., LLC



Ladies and gentlemen, thank you very much for standing by, and welcome to the Rentech Second Quarter 2011 Earnings Conference Call. [Operator Instructions] As a reminder, today's conference is being recorded on Tuesday, May 10, 2011. It's now my pleasure to turn the conference over to Julie Dawoodjee, Vice President of Investor Relations at Rentech. Please go ahead.

Julie Dawoodjee

Thank you. Welcome to Rentech's 2011 fiscal second quarter conference call for the period ended March 31, 2011. 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 the financial review of the fiscal period and provide comments on Rentech's financial position. We will then open the lines for questions. [Operator Instructions]

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, belief 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 May 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 applicable laws.

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

D. Ramsbottom

Thank you, Julie. Good morning, everyone, and thank you for joining us today. This quarter, we announced strong results and some important news about our development of our biomass projects. The quarter's results reflect the strong market fundamentals for nitrogen fertilizer. We are reiterating our recent increase and our projection for the plant's estimated EBITDA to approximately $75 million for the fiscal year. Dan and I will discuss REMC's bullish outlook later during the call. Because this market looks so attractive, we're evaluating an expansion of the plant. The preliminary indication is that the expansion looks like it could generate very attractive returns on capital. In 2009, we launched our renewable energy strategy, and we're seeing tangible progress in this area of our business. We've made significant announcements about our Port St. Joe Project, changes in our plan for Rialto and our selection for the largest conditional award of Crown timber supplies ever made by the Province of Ontario in its competitive wood supply process. We also exercised our option to take ownership of ClearFuels. Together, these developments have brought a lot of momentum to our business development strategy.

Our Port St. Joe Project is a renewable power project located in the Panhandle region of Florida. It's designed to use our Rentech-SilvaGas biomass gasifier to provide synthesis gas to a combined-cycle power plant. We anticipate the plant will produce 55 megawatts of renewable power for about 930 dry tons a day of woody biomass. We've been tracking this project since our acquisition of SilvaGas in 2009. Now that the project has achieved significant commercial financing and permitting milestones, we've decided that the timing was right for us to acquire the project and take over as a developer. We believe that owning and having control of this project maximizes its chances of success and will have greater value to us than licensing our technology into it. We expect this project to be the first commercial deployment of our Rentech-SilvaGas biomass gasifier with a combined-cycle power plant for renewable power production. We acquired the project from Biomass Energy Holdings for no initial consideration. BEH would be eligible to recover from the project its development costs and a small carried interest in the project when it reaches financial close. The Port St. Joe Project is now our most advanced stage alternative energy project. We have a 20-year Power Purchase Agreement for about 90% of the project's power output. The remaining 10% of the power output will be sold on a merchant basis. 100% of the project's biomass supply is covered under letters of intent from local suppliers. We've signed a detailed term sheet with White Construction for the engineering, procurement and construction work for the project. We're currently completing the engineering activities that enable us to negotiate definitive fixed price, lump sum turnkey EPC contract based on the commercial terms defined in the term sheet.

All preconstruction permit applications have been filed, the draft air permit has been issued for public comment by the Florida Department of Environmental Protection. The documents for the federal environmental review of the project are being written and will soon be ready for submittal. The project is expected to qualify for federal cash grant equal to 30% of eligible project costs under the U.S. Department of Treasury's Section 1603 Grant Program for renewable power projects. This equates to approximately $65 million of cash that would be received within 90 days of the facility's in service date in 2013. The project's total cost is estimated at $225 million, based on feasibility engineering. We've received a detailed term sheet from the DOE for Section 1705 loan guarantee, which would provide the majority of the capital for the project. We're engaged in due diligence, in negotiating of terms and we're working with the DOE to close on financing before the September 30 deadline. The project's relatively smaller size and simplicity maximize its chances of success. The key milestones for Port St. Joe Project under 1705 are as follows: finalize the definitive lump sum turnkey EPC contract in July; turn letters of intent for the biomass supply into long-term definitive supply agreements; begin construction by the end of September. We have a project team dedicated to this project working to ensure that these deadlines will be met on time.

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