Business Context and Reporting Period
Company: Green Plains Renewable Energy, Inc. (Green Plains)
Reporting Period: Quarter ended February 28, 2006
Status: Development stage company incorporated in June 2004. The Company is focused on constructing a 50 million gallon dry mill ethanol plant in Shenandoah, Iowa. It has no operating revenues and is currently in the pre-construction and site preparation phase.
Key Financial Metrics
| Metric | Q1 2006 (3 Months) | Q1 2005 (3 Months) | Inception to Feb 28, 2006 |
|---|---|---|---|
| Revenues | $0 | $0 | $0 |
| Operating Expenses | $123,811 | $110,714 | $903,662 |
| Interest Income | $135,639 | $1,223 | $467,741 |
| Net Income (Loss) | $11,828 | $(109,491) | $(435,921) |
| Cash and Equivalents | $5,424,561 | $528,324 | $5,424,561 |
| Short-term Securities | $24,599,884 | N/A | $24,599,884 |
| Total Assets | $35,609,741 | N/A | $35,609,741 |
| Total Liabilities | $69,132 | N/A | $69,132 |
| Stockholders' Equity | $35,540,609 | N/A | $35,540,609 |
Liquidity: The Company holds approximately $30 million in liquid assets (cash and securities) derived primarily from an IPO closed in November 2005. It has secured a $47 million loan facility for construction, though no principal payments are due until late 2007.
Material Changes vs. Prior Period
- Profitability Shift: The Company reported a net income of $11,828 for the quarter, a reversal from the $109,491 net loss in the same period in 2005. This was driven by $135,639 in interest income on invested IPO proceeds, which significantly exceeded operating expenses.
- Asset Composition: Significant new assets were capitalized, including $3.5 million in recoverable rail line costs and $778,709 in site development costs, reflecting progress on the Shenandoah plant project.
- Acquisition: On February 22, 2006, the Company acquired Superior Ethanol, LLC for 100,000 shares of common stock. This subsidiary holds options on real estate for potential future plants in Superior and Atlantic, Iowa.
- Debt Financing: The Company entered into a Master Loan Agreement on February 6, 2006, securing up to $47 million in construction and working capital loans, a material change from the prior period where no such facility was in place.
Outlook, Risks, and Management Commentary
Outlook and Guidance: Management expects to spend the next 24 months on design and construction of the Shenandoah plant, with production targeted for no later than May 1, 2007. The total project cost is estimated at approximately $82.6 million. The Company anticipates significant losses until the plant is operational.
Capital Requirements: While funding for the Shenandoah plant is largely secured via equity and debt, the Company estimates it needs approximately $94 million for a proposed plant in Superior, Iowa, and an undetermined amount for a plant in Atlantic, Iowa. No funding is currently secured for these additional projects.
Risks and Contingencies:
- Construction Risk: There is no assurance that the plant will be completed on time or within budget, or that it will operate profitably.
- Rail Line Reimbursement: The Company paid $3.5 million to upgrade a rail spur. Reimbursement is contingent on meeting annual volume thresholds; if thresholds are not met, the Company may not recover these costs.
- Commodity Price Risk: Future operations will be sensitive to corn and natural gas prices. The Company plans to use hedging strategies but has not yet begun production.
- Regulatory Risk: Operations depend on obtaining necessary permits and maintaining compliance with environmental regulations.
Investor Verification Checklist
- Verify the status of the $47 million loan facility with Farm Credit Services of America and confirm all conditions precedent for funding have been met.
- Confirm the timeline and budget adherence for the $55.9 million design-build contract with Fagen, Inc.
- Assess the likelihood of meeting the rail volume thresholds required to recover the $3.5 million rail line investment.
- Monitor the progress of permitting for the Shenandoah plant and the feasibility studies for the Superior and Atlantic sites.
- Review the Company's cash burn rate against the $30 million in liquid assets to ensure sufficiency through the construction phase.