Business Context and Reporting Period
This Form 8-K Current Report, filed on September 23, 2016, by Green Plains Inc. (GPRE), details the completion of a significant asset acquisition and a related "Drop Down Transaction" involving its subsidiary, Green Plains Partners LP (the Partnership). The reporting period focuses on events occurring on September 23, 2016, regarding the purchase of three ethanol plants and the subsequent transfer of storage assets to the Partnership.
Key Financial Metrics and Transaction Details
- Acquisition Cost: GPRE acquired three ethanol plants for approximately $237 million in cash, plus working capital adjustments.
- Production Capacity: The acquired plants have a combined annual production capacity of 236 million gallons.
- Drop Down Transaction: The Partnership purchased ethanol storage assets from GPRE subsidiaries for $90 million in cash.
- Financing: The $90 million cash consideration for the storage assets was financed through borrowings under the Operating Company's 5-year, $155 million revolving credit facility.
- Ownership Structure: As of September 23, 2016, GPRE owned a 62.5% limited partner interest in the Partnership (4,389,642 common units and 15,889,642 subordinated units) and a 2% general partner interest.
Material Changes and Agreements
The filing reports the completion of the acquisition of three ethanol plants located in Madison, Illinois; Mount Vernon, Indiana; and York, Nebraska, from Abengoa BioEnergy entities. Concurrently, GPRE sold specific ethanol storage assets associated with these plants to the Partnership. Several agreements were amended or entered into to facilitate this transaction:
- Asset Purchase Agreement: Formalized the sale of storage assets to the Partnership.
- Second Amendment to Omnibus Agreement: Established the Partnership's obligation to reimburse GPRE for general and administrative costs related to the new assets.
- Amendment No. 2 to Operational Services Agreement: Mandated GPRE to second employees to provide management and operational functions for the storage assets.
- Amendment No. 2 to Ethanol Storage and Throughput Agreement: Increased the minimum throughput obligation for Green Plains Trade Group LLC from 246.5 million gallons to 296.6 million gallons per calendar quarter.
Guidance, Outlook, and Risks
The filing does not provide specific forward-looking financial guidance, revenue projections, or margin outlooks for the upcoming fiscal periods. However, it notes that the terms of the Drop Down Transaction were approved by the Partnership's conflicts committee, which relied on an opinion from an independent financial advisor stating the consideration was fair to the Partnership and common unitholders. The filing indicates that required financial statements and pro forma information for the acquired businesses will be filed by amendment within 71 calendar days of this report.
Investor Verification Checklist
- Verify the final purchase price of the three ethanol plants after working capital adjustments are finalized.
- Review the upcoming pro forma financial statements (due within 71 days) to assess the impact of the $237 million acquisition on leverage and liquidity.
- Confirm the utilization of the $155 million revolving credit facility following the $90 million draw for the storage asset transaction.
- Monitor the operational integration of the new 236 million gallon capacity and the ability to meet the increased 296.6 million gallon quarterly throughput commitment.