Business Context and Reporting Period
Company: Green Plains Renewable Energy, Inc.
Filing Type: Form 8-K (Current Report)
Date of Report: January 23, 2006
Event: Entry into a Material Definitive Agreement (Lump-Sum Design Build Contract) with Fagen, Inc. for the engineering, design, procurement, construction, and startup of a new Plant.
Key Financial Metrics and Contract Terms
- Total Contract Value: $55,881,454 (subject to adjustments).
- Initial Payment: $5,000,000 (less retainage) upon notice to proceed.
- Retainage: 10% of monthly applications, capped at $2,794,073, released upon substantial completion.
- Termination Costs (Without Cause): Includes payment for work executed, reasonable costs, subcontractor settlements, 15% overhead/profit margin, and a $1,250,000 fee for use of Fagen's work product if construction resumes without Fagen.
- Project Timeline: Estimated substantial completion within 485 days after notice to proceed (not prior to March 1, 2006).
Material Changes and Obligations
This filing represents a new material obligation rather than a change in historical financial performance. The company has committed to a fixed-price construction agreement with specific payment milestones and liability structures. The filing does not provide historical revenue, profit, cash flow, or debt metrics for the company.
Outlook, Risks, and Contingencies
- Price and Time Adjustments: The contract price and completion date may be adjusted for "differing site conditions" (concealed physical conditions differing from expectations) or hazardous conditions at the site.
- Force Majeure: Fagen may stop work or adjust timelines due to floods, earthquakes, strikes, terrorism, war, or government actions.
- Completion Risks: There is no assurance the 485-day timetable will be met due to weather, strikes, or other uncontrollable factors.
- Dispute Resolution: Disputes must be resolved through non-binding mediation followed by binding arbitration; court appeals are not permitted.
- Company Responsibilities: Green Plains is responsible for site preparation, obtaining specific permits (septic, railroad, TTB, etc.), and procuring utilities (water, electricity, gas).
Investor Verification Checklist
- Verify the company's current liquidity and ability to fund the $5,000,000 initial payment and subsequent monthly progress payments.
- Confirm the status of required permits (septic, railroad, TTB, water appropriation) which are the company's responsibility.
- Assess the risk of "differing site conditions" at the specific construction location that could trigger cost overruns.
- Review the company's capital structure to ensure it can absorb potential termination costs (including the $1,250,000 work product fee) if the project is halted.
- Monitor the "notice to proceed" date, as the 485-day completion clock cannot start before March 1, 2006.