Rentech (RTK) 2011 Earnings Call March 16, 2012 3:00 pm ET Executives Julie Dawoodjee - Vice President of Investor Relations & Communications D. Hunt Ramsbottom - Chief Executive Officer, President and Executive Director Dan J. Cohrs - Chief Financial Officer, Executive Vice President, Treasurer and Principal Financial Officer for Rentech Nitrogen Partners LP Analysts Matthew Farwell - Imperial Capital, LLC, Research Division Pavel Molchanov - Raymond James & Associates, Inc., Research Division Lucas Pipes - Brean Murray, Carret & Co., LLC, Research Division Anatol Feygin Jay Traeger Unknown Analyst Chris Orski Derek Christopher Schrier - Indaba Capital Management , LLC Presentation Operator
Now I would like to turn the call over to Hunt Ramsbottom, President and CEO of Rentech.D. Hunt Ramsbottom Thank you, Julie. Good morning, everyone, and thank you for joining us today. We ended 2011 with strong results at our fertilizer subsidiary, Rentech Nitrogen. On the alternative energy side we began implementing our cost reduction strategy, then ended the year with a strong balance sheet. With consolidated cash of approximately $237 million of which $193 million was held at Rentech. Rentech Nitrogen's S-1 forecast calls for cash available for distribution of $2.34 per unit for the 12 months ending September 30, 2012. As a holder of 23.25 million units of Rentech Nitrogen, our share would be approximately $54 million. We're committed to maintaining a strong cash position at Rentech, reducing our R&D and development expenses and considerably investing in opportunities with attractive returns. High return, conservative investment opportunities in alternative energy are limited today, so we're looking more broadly and beyond our current technology portfolio. On our December earnings call, I outlined our parameters for investments and energy projects. We are considering projects with projected returns that meet our guidelines. We expect to limit our investments and projects that would use our technologies to a maximum of $40 million in any one opportunity. Before we invest significant capital, the complete financing package for the project must be in place. We're very mindful of the challenges the alternative energy industry faces as we evaluate potential investment opportunities. But we also see opportunities to invest in potentially undervalued assets. Despite the common impression in the marketplace, we see opportunities that could provide attractive returns and near-term cash flow, and do not depend on unproven technologies. As of today, we have not committed to any investment opportunities and we'll evaluate any investments carefully and patiently.
As a general partner of Rentech Nitrogen, we are also evaluating potential brownfield projects and acquisition that can qualify to the MLP structure. These assets could be acquired directly by Rentech Nitrogen or they could be developed or purchased by Rentech and then sold to Rentech Nitrogen. We have assets that we can leverage to create value. Our conditional wood allotment of 1.3 million annual tons in Northern Ontario is an extraordinary asset. And we are studying ways to generate cash flow from that wood in the near-term. As we continue our longer-term efforts to qualify for the Canadian government's support for a fuels plant.Similarly, we are also evaluating proposals to use our 450-acre site in Natchez, Mississippi. In ways that are not limited to our technologies. As we evaluate opportunities, we weigh each of their risks, returns and time to generate cash flows. We will selectively pursue those that will develop an underlying cash flowing business at Rentech and drive shareholder value in the near- and long-term. Let's talk about R&D and our cost reduction strategy. As I've stated in December, we're focused on the operational phase of the integrated bio-refinery demonstration project at our technology center in Denver. The IBR project was mechanically complete in November. We expected to complete the DOE require 2,000 operational hours with the IBR project in early April, however, we've experienced some start-up problems that are typical in any new plant. The largest of which related to feedstock handling system. The start-up issues have pushed the anticipated completion date of the IBR operational requirement to mid-summer. In December, we also indicated that once we completed the IBR operational requirement, we'd then assess the need for any continued operation of the research Center. We believe this value in continuing the operation of our integrated, natural gas and biomass to synthetic fuels plant in Denver while potential partners are visiting the facility. We therefore expect to continue operations of the plant for a period beyond the requirements of the DOE grant. Because our monthly expenses are running below those we previously forecasted, we expect our cash operating and capital spend, including continued operation facility to be less than previously forecasted to operate through September, 2012. Read the rest of this transcript for free on seekingalpha.com