One Good Thing about our annual, annual extension. It gives the SkunK a chance to look over some of the Ethanol Plant 10-Ks. . .
This one is from RTE in Richardton, North Dakota. If you haven't spent any time on on highway 85 around Teddy Roosevelt's National Park, RTE is less than 200 miles to the GERS seed crushing plant.
Corn oil is mentioned throughout the 10-k, but with some variance. Look for yourself. These four quotes I will use as being representative.
(On the other hand, I run the risk of being accused of intentionally leaving something out - so I will have to publish the whole 61 pages of small print on my blog! APRIL FOOLS! I'll give you the link instead!)
"During 2008, the Company entered into an agreement to operate a third party’s corn oil extraction equipment to be installed in our Plant. Due to the downturn in the economy that occurred during the last six months of 2008, the third party we contracted with was unable to obtain financing for its operation until December 2008. The third party is still in the final processes of negotiating the financing and has received initial approval subject to certain conditions. As part of their financing arrangement, significant changes were made to the original contract we signed in March 2008. We are still negotiating certain aspects of the agreement with the third party. As of March 15, 2009, we do not know whether we will be able to reach an agreement on the contract terms nor whether the third party will be able to meet the conditions necessary for final approval of their financing." p. 3
AND
"Corn Oil Extraction – we are currently negotiating the terms of an agreement to add corn oil extraction equipment to our facility. At this time we are not certain whether we will be able to reach agreement with the counter party to the agreement. If we do reach an agreement, we project that the equipment will be operational during the third quarter of 2009." p. 22
AND
"Due to the nature of the agreement being negotiated, there are no commitments associated with our corn oil extraction agreement." p. 30
AND
"In an effort to diversify its revenue stream, the Company entered into an agreement in March 2008 to operate third party corn oil extraction equipment that will be added to its facility. The agreement has a term of 10 years commencing from the date when the equipment installation is complete. As of March 15, 2009, corn oil extraction equipment had not yet been installed at the Company’s facility. The third party that the Company contracted with ran into financing issues. Late in 2008 they received approval for their financing package contingent on certain conditions being met. As part of the financing arrangement, the terms of the original contract entered in to in March 2008 were changed significantly. The Company is currently in negotiations with the third party related to several of the terms that changed. We currently do not have a time frame for when the corn oil extraction equipment may be installed at our facility." p. F-22
Here is the link:
******
What does the SkunK think he learned from all this?
1. Lack of financing has put this COES back in play, negotiations are ongoing, "no commitments."
2. These 10 year contracts do not begin at signing - but rather at start up. With all the schedule slips - this is some "good news".
3. GE financing deal created "significant changes" to original COES contract.
4. After this was filed on 6 March: "Although the Company is otherwise in compliance with the ECCA Agreement, the ECCA Agreement is terminated.", negotiations continue with RTE.
Depending on how you see things, you will have to decide if RTE or us shareholders are out of the loop on number 4. Like usual, the answers we deduct in GERS-land are usually obvious (and opposite). So far the SkunK has either been right or wrong on all his predictions. lol
Good Luck,
SkunK
(Right now my gut tells me a 60% chance we will get the annual before the April 15th deadline-The extension will give you an opportunity to digest the other 10-ks in your portfolio. I like a Tuesday release for "good news" - so maybe around the 7th at COB. A "bad news" annual release might be a 10 April Friday release close to 5:30PM ET - late after hours and in conjunction with Easter Weekend.)
PS- ARE things still tough in Ethanol Country??? Read this excerpt from the RTE Annual:
"We have been notified by FNBO that we were in violation of certain of the covenants in our loan agreements at December 31, 2008 and that we were granted a waiver of these covenant violations. These include the covenants requiring a minimum working capital balance, minimum net worth and a minimum fixed charge coverage ratio."
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