GPRE

Business Context and Reporting Period

Company: Green Plains Renewable Energy, Inc. (Green Plains)

Reporting Period: Quarter and six months ended May 31, 2006

Status: Development stage company incorporated in June 2004. The Company is constructing a 50 million gallon dry mill fuel-grade ethanol plant in Shenandoah, Iowa, with an expected completion date in late Spring 2007. It has no operating revenues from ethanol production as of the reporting date.

Key Financial Metrics

Note: Net income is driven entirely by interest income on cash reserves from the November 2005 IPO, offset by operating expenses. The Company has an accumulated deficit of $325,883 from inception.

Material Changes vs. Prior Period

• Profitability Shift: The Company reported a net income of $110,037 for the quarter ended May 31, 2006, compared to a net loss of $231,524 in the same period in 2005. This reversal is due to significant interest income ($565,126) earned on IPO proceeds, whereas the prior period had negligible interest income ($242).
• Operating Expenses: Operating expenses increased to $455,089 for the quarter (from $231,766 in 2005) due to increased general and administrative costs, consulting fees, and costs associated with commencing construction at the Shenandoah site.
• Asset Base: Total assets increased to $41.6 million from $34.6 million at November 30, 2005. This includes a significant increase in Property and Equipment (net) to $11.4 million, reflecting construction in progress, and the acquisition of Superior Ethanol, LLC.
• Liquidity: Cash and cash equivalents grew to $25.6 million from $5.8 million at the end of the prior fiscal year, bolstered by the IPO and warrant exercises.

Outlook, Guidance, and Risks

Management Commentary and Outlook

• Construction Status: Construction on the Shenandoah plant commenced in the quarter. The Company expects the plant to be in production by no later than May 1, 2007.
• Future Projects: The Company plans to build two additional 50 million gallon plants (Superior, IA and Atlantic, IA). However, it has not secured funding for these projects and estimates a need for approximately $90-$94 million per plant.
• Revenue Expectations: No operating revenues are expected for the remainder of 2006. Future profitability depends on the successful completion and operation of the ethanol plants.

Risks and Contingencies

• Funding Risk: While funding for the Shenandoah plant is secured ($47M debt commitment + equity), funding for future plants is not guaranteed.
• Rail Line Reimbursement: The Company paid $3.5 million to renovate a BNSF rail spur. Reimbursement is contingent on meeting annual volume thresholds; there is no assurance these will be met.
• Commodity Price Risk: Future operations will be sensitive to corn and natural gas price fluctuations. The Company intends to use hedging strategies but has not yet begun production.
• Regulatory Approvals: Construction and operation depend on obtaining necessary permits and approvals, which are not guaranteed.

Investor Verification Checklist

• Construction Progress: Verify the physical progress of the Shenandoah plant against the $55.9 million contract with Fagen, Inc. and the projected May 2007 completion date.
• Debt Covenants: Review the $47 million loan agreement with Farm Credit Services of America, specifically the free cash flow payment requirements (65% of available FCF) and dividend restrictions (limited to 40% of net profit).
• Rail Line Usage: Monitor the Company's ability to meet the BNSF volume thresholds required to recover the $3.5 million rail line investment.
• Capital Needs for Expansion: Assess the feasibility of raising the estimated $180-$188 million required for the proposed Superior and Atlantic plants, given the current lack of secured funding.
• Interest Income Sustainability: Recognize that current net income is derived from interest on cash reserves and will decline as funds are deployed for construction.