Business Context and Reporting Period
Company: Green Plains Renewable Energy, Inc.
Filing Type: Form 10-Q (Unaudited)
Reporting Period: Three months ended February 28, 2005
Status: Development stage company incorporated June 29, 2004. The company is organized to construct and operate a 50 million gallon dry mill fuel-grade ethanol plant in Shenandoah, Iowa. It has no current operating revenues and is dependent on securing financing to proceed with construction.
Key Financial Metrics
| Metric | Three Months Ended Feb 28, 2005 | Inception (June 29, 2004) through Feb 28, 2005 |
|---|---|---|
| Revenues | $0 | $0 |
| Operating Expenses | $110,714 | $161,019 |
| Net Loss | $(109,491) | $(159,486) |
| Loss Per Share (Basic/Diluted) | $(0.14) | $(0.24) |
| Cash and Cash Equivalents | $528,324 | $528,324 |
| Total Assets | $538,770 | $538,770 |
| Total Liabilities | $24,968 | $24,968 |
| Stockholders' Equity | $513,802 | $513,802 |
| Net Cash Used in Operating Activities | $(90,251) | $(96,946) |
| Net Cash Used in Investing Activities | $(7,518) | $(10,518) |
| Net Cash Provided by Financing Activities | $0 | $635,788 |
Material Changes and Operational Status
- Revenue Generation: The company generated no revenue during the period or since inception. It remains in the pre-construction development phase.
- Capital Structure: The company has raised approximately $637,500 in seed capital. It has 765,000 shares of common stock outstanding.
- Financing Needs: The project requires an estimated $75.9 million to complete. The company plans to raise a minimum of $29.7 million and a maximum of $35.3 million via an initial public offering (IPO), with the balance to be secured through debt financing and grants.
- Debt Status: The company currently has no outstanding debt but anticipates significant borrowing (approx. $36 million to $41.7 million) contingent on the success of the equity offering.
- Cost Savings: Management noted a potential savings of approximately $1.5 million regarding natural gas pipeline costs, as an existing pipeline may be upgraded rather than building a new one.
Guidance, Outlook, and Risks
- Outlook: Management expects to spend the next 24 months on financing, design, and construction. Profitability is not expected until the plant is fully operational.
- Financing Contingency: The IPO escrow will not close until minimum proceeds are raised AND a written letter of commitment for debt financing is obtained. If these conditions are not met by November 29, 2005, investor funds will be returned.
- Grant Uncertainty: The company anticipates applying for USDA Commodity Credit Corporation grants (potential max $7.5 million) and local TIF financing, but there is no assurance of award. Failure to secure TIF financing could increase debt requirements significantly.
- Market Risks: Future operations will be sensitive to corn and natural gas price fluctuations. The company plans to use hedging strategies (futures/options) to manage these risks once operational.
- Operational Risks: The company currently lacks an experienced general manager and relies on its board for record-keeping. There is no assurance that necessary financing will be secured or that the plant can be built and operated profitably.
Investor Verification Checklist
- Financing Commitments: Verify if the company has secured the required debt financing commitments necessary to close the IPO escrow.
- Grant Applications: Confirm the status of applications for USDA grants and local TIF financing, as these significantly impact the debt load.
- Construction Timeline: Assess the feasibility of the 24-month construction timeline given the current lack of a general manager and operational staff.
- Commodity Hedging: Review the specific hedging strategies planned for corn and natural gas to mitigate future margin risks.
- Capital Adequacy: Monitor cash burn rate against the $528,324 cash balance to ensure sufficient runway to reach the IPO closing or secure alternative funding.