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Rentech Inc. (NASDAQ:RTK)

F1Q09 Earnings Call

February 10, 2009 1:00 pm ET


Julie Dawoodjee – Director of Investor Relations

D. Hunt Ramsbottom – President, Chief Executive Officer, Director

Dan J. Cohrs – Chief Financial Officer, Executive Vice President

John Diesch – Senior Vice President of Operations


[Ankush Alawanahan] for John Bridges – JP Morgan

Jeremy Sussman – Natixis Bleichroeder, Inc.

[Julie Kazoom] – Simmons and Company

[Thomas Dresser] – Private Investor


Welcome to the Rentech fiscal 2009 first quarter earnings conference call. (Operator Instructions) I would now like to turn the conference over to Julie Dawoodjee, Director of Investor Relations. Please go ahead, ma'am.

Julie Dawoodjee

Thank you. I would like to welcome all of you to Rentech's 2009 fiscal first quarter conference call for the period ended December 31, 2008. Before we begin our prepared remarks I would like to cover some administrative aspects of this conference call.

Hunt Ramsbottom, President and CEO of Rentech, will provide opening remarks highlighting our company's progress during the fiscal quarter. John Diesch, Senior Vice President of Operations will discuss our nitrogen fertilizer business, and Dan Cohrs, our Chief Financial Officer, will give a financial review of the first quarter and will provide comments on Rentech's financial position.

We will then open the lines for questions and ask that you limit yourself to one question, so that we may get to as many questions as possible.

Please be advised that certain information discussed on this conference call will contain forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. The can be identified by the use of terminology such as may, will, expect," believe and other comparable terms. You are cautioned that, while forward-looking statement reflect our good faith belief and best judgment based upon current information, they are not guaranteed a future performance and are subject to known and unknown risks and uncertainties, and risk factors detailed from time to time in the company's periodic reports and registration statements filed with the Securities and Exchange Commission.

The forward-looking statements in this call are made as of February 10, 2009 and Rentech does not undertake to revise or update these forward looking statements, except to the extent that it is required to do so under applicable law.

Now I would like to turn the call over to Hunt Ramsbottom, President and CEO of Rentech.

Hunt Ramsbottom

Thank you, Julie. Good morning, everyone, and thank you for joining us today. This morning we will review developments since our recent call in December and spend time focusing on the role of our nitrogen fertilizer business, Rentech Energy Midwest Corporation, or REMC, and then wrap up with a financial overview.

We intend to periodically introduce you to key members of our senior team and focus on special projects, so today we'll spend time on REMC.

REMC helps to differentiate us from other emerging alternative energy companies. Most importantly, we expect REMC to provide us with sufficient cash flows to enable us to continue developing our synthetic fuels business in this fiscal year without the need to raise additional capital in this difficult market.

We believe we have the funds necessary to continue our development activities in a disciplined manner, having significantly reduced our overhead spending. REMC also provides us with significant operating and technical expertise that can be directly applied to our synthetic fuels operations.

Our Products Demonstration Unit, or PDU, in Commerce City, Colorado, provides us with a distinct competitive advantage over other companies in our sector. To our knowledge, the PDU is the only operating synthetic transportation fuels facility in the United States. We have produced thousands of gallons of ultra-clean synthetic fuels and other products at the PDU, enabling us to be the only U.S.-based company that is capable of producing and providing these types of products to potential customers, including the United States Air Force.

We previously announced that the Air Force conducted laboratory testing on small samples of our synthetic jet fuel. Their testing confirmed that the quality and characteristics of our RenJet fuel meet the Air Force's specifications for these fuels. As a result, the Air Force recently purchased additional quantities of RenJet for performance and emissions testing in a turbine engine.

The Air Force's fuel purchased at preliminary testing marks an important milestone for Rentech, as it represents the first sale of our synthetic jet fuel, validating the demand for fuels produced from the Rentech process.

The successful operation of the PDU also positions us well to focus on the commercial deployment of the Rentech process. We are pursuing both renewable and fossil-based development activities. Renewable facilities typically would be smaller in scale and require less capital to build than fossil facilities.

The smaller economic scale for these plants is driven by both their simpler design and by feedstock costs, which can be much lower for waste materials than for fossil feedstocks. In fact, biomass can even have a negative feedstock cost when tipping fees are included. The demand for renewable fuels and energy has been on the rise, due to their environmental benefits.

We're moving forward with our preliminary engineering work for potential renewable facilities, on acquiring sites at which to locate these facilities, and on securing feedstock sources and technologies for these projects. We have made significant progress toward identifying biomass gassifiers that can be commercially viable and can produce syngas levels that are compatible with our requirements.

We continue to move forward with low cost but high impact development activities on our proposed Natchez project. During this challenging macroeconomic environment, we are committed to prudently moving the project forward while seeking partners.

We recently selected an engineering firm who will serve as our environmental consultant to assist us with a permitting process for the Natchez project. By engaging our consultants now, we expect to be able to prepare all necessary air, water and construction permit applications for the Natchez project, and submit them to the Mississippi Department of Environmental Quality this summer. We currently expect to receive the permits in 2010.

We expect the new stimulus package and other government programs to provide financial support of about $30 billion in direct funding of new energy projects. The federal government should be able to leverage that amount many times over in the form of federal loans, loan guarantees or energy projects. We are actively engaged in seeking some of this assistance for our projects.

Our synthetic fuels plants will help promote energy independence, create American jobs and produce fuels that are cleaner than petroleum fuels. Converting biomass to clean fuel has obvious environmental benefits. We recently reported on two separate studies, which showed the fuels from Fischer-Tropsch plants using coal or petroleum coke as feedstock have lower carbon footprints than comparable petroleum-based fuels when CO2 sequestration is used.

We recently announced the results of a Rentech-commissioned and independently reviewed lifecycle assessment of the greenhouse gas emissions from our proposed Natchez facility, assuming petroleum coke is the feedstock. The facility is designed to capture approximately 80% of the carbon dioxide generated in the production process, to be sold under a long-term agreement with Denbury Resources for enhanced oil recovery in the region.

The Well-to-Wheels Greenhouse Gas Analysis concluded that the fuels from our proposed facility would produce 11% to 23% fewer carbon dioxide emissions than would result from refined oil, ranging from Arabian Light, Alaska North Slope to Venezuelan Crude. These reductions can be achieved without the addition of biomass. If we were to co-feed even a small portion of biomass at the Natchez facility, we could further reduce our carbon footprint.

These findings were in line with the recently published separate report by the U.S. Department of Energy, which concluded that coal-based synthetic fuels facilities can yield a 5% to 12% reduction in greenhouse gas emissions when compared to conventional fuels produced at a standard U.S. refinery. In addition, the NATL study reported that greenhouse gas emission reductions of up to 75% can be achieved by adding up to 30% biomass as a co-feed.

With these two separate studies, both of which are based on similar technology and cover emissions profiles of both coal and petroleum coke feedstock, we are confident that we have an attractive and credible environmental profile.

The DOE study also emphasized that Fischer-Tropsch synthetic fuels provide an attractive solution for producing affordable low-carbon fuel from domestic sources, thereby enhancing energy security, helping to reduce the impact of high and volatile oil prices on the U.S. economy and mitigating greenhouse gas emissions linked to climate change.

Recognition like this from objective governmental agencies that synthetic fuels can be clean and effective solutions for energy independence will help in our efforts to obtain long-term DoD contracting for these fuels.

In fact, just last month, Kevin Billings, Acting Assistant Secretary to the Air Force, was quoted as saying that he expects Congress to reopen the discussion on whether to allow the DoD to provide long-term contracts and other financial incentives to domestic producers of synthetic fuels. That’s encouraging especially in light of that fact that in December Air Force Secretary Michael Donnelly signed a policy memo committing the Air Force to purchasing synthetic fuel blends for 50% of its fewer requirements from domestic sources by 2016.

The Air Force plans to complete testing and certification of aircraft fleet systems on a 50/50 blend of alternative and conventional fuel by 2011. Fuels produced on the Fischer-Tropsch process on which Rentech's technology pays are the only alternative fuel type currently certified or used by United States Air Force.

Now in civilian aviation the FAA is working on certifying a 50% blend of synthetic fuel, currently scheduled for approval this summer. In addition the International Air Transport Association wants its 230 member carriers to be using 10% alternative fuels by 2017. Based on 2008 estimates, that would equate to $17 billion of demand for alternative jet fuel.

We’re having direct discussions with a number of major airlines who are very interested in synthetic fuels for all the reasons I’ve discussed. Even today some international flights fly using a blend containing synthetic fuels.

Our RenJet and Rendiesel fuels are biodegradable, cleaner burning and have a longer shelf life than traditional petroleum dry fuels. The lower density of RenJet fuel will enable aircraft to have a lower take off weight, which conserves fuel and therefore lowers operating costs. Alternatively the lower density of RenJet fuel could allow aircraft to carry heavier payloads with the same volume of fuel when compared to this new jet fuel.

Rennet's clean synthetic fuel can also be used without modifying existing jet or diesel engines or distribution systems. If our nation began switching to diesel usage, we could save a significant amount of fuel consumption, given that diesel provides anywhere from 20 % to 40% better mileage over gasoline.

In addition to the amount of environmental benefits we expect demand for synthetic fuels to be driven by the desire to secure domestically produced fuels. We expect synthetic fuel to be economic – will be economic compared to petroleum as a global economy recovers and crude prices rise.

The DOE’s energy information agency published its annual energy outlook last month, forecasting that crude prices will begin to rise in 2010 as the economy rebounds and global demand grows more rapidly than liquid supply from producers outside OPEC.

The EIA projects crude will rise rapidly starting in 2010 to $127 per barrel in 2015 and $189 per barrel in 2030. All of this is very encouraging for the alternative energy segment of our business. Now I’d like to introduce John Diesch, Senior Vice President of Operations, who will discuss the fertilize and manufacturing segment of our business.

John oversees the day-to-day management of all of our operating assets including the PDU and REMC, and will manage our commercial fuels plants as they come on line. John has held various managerial roles at REMC for 10 years, most recently serving as the facility's president. John?

John Diesch

Thank you, Hunt, and good morning everyone. REMC is located in East Dubuque, Illinois manufactures of a variety of nitrogen fertilizer products. This facility has been operating for nearly 45 years. Besides being the only nitrogen manufacturing facility in Illinois, REMC is one of the largest producers of ammonia fertilizer products in the upper Midwest, the largest corn-growing region in the world.

REMC provides nutrients for nearly four million acres of farmland, which equates to about 5% of 2009 forecasted corn acres. Our products help meet the increasing need for nitrogen to restore the fertility and productivity of the soil. In addition to helping maximize land productivity a portion of the corn grown by Midwestern farmers using our fertilizer products supports the ethanol industry. In this way REMC is supporting Rentech’s mission of helping America reduce its dependency on foreign oil for transportation fuels.

REMC is a fully integrated nitrogen fertilizer production complex. Natural gas is a raw material required to produce all of the fertilizer products and also provides the heat source for the plant. The first step in the production process of ammonia is to take natural gas, which consists mainly of methane, and separate the hydrogen from the carbon along with the addition of heat and a nickel catalyst.

Air is then added. The nitrogen from the air is combined with the hydrogen and an iron catalyst under high-pressure produce ammonia. The carbon combines with the oxygen in the air to produce carbon dioxide. The carbon dioxide created in this process is captured and used as a raw material to produce urea, or liquefied and sold to the food and beverage industry.

We can produce nearly 290,000 tons per year of ammonia. Approximately half is sold as ammonia and half is upgraded to other nitrogen fertilizer products such as urea, nitric acid and UAN a solution of urea and ammonia nitrate. Most of these products are sold to reliable and loyal customers within a 150-mile radius of our plant and most of our sales take place through our distributor Agria, a large fertilizer manufacturer and distributor.

Our proximity to our customers provides REMC with a competitive advantage over producers who have to pay to transport the fertilizer products further distances to sell in our markets. In addition to our advantageous location, the plant's flexibility and multiple product lines also give us a competitive advantage.

We have the ability to adjust production rates and products enabling us to achieve maximum returns based on market conditions. Like any industry supply and demand dynamics have an impact on nitrogen pricing. Global grain demand will be a strong global driver of nitrogen demand; by 2010 crop projection worldwide call for 57.5 million more acres of cropland requiring 3.5 million more tons of nitrogen per year.

Nitrogen is an important nutrient required for maximum crop yield and must be replenished and applied every crop year, unlike other types of fertilizer such as potash and phosphate. And while the price of corn and nitrogen have come down along with other commodities in this economic downturn, so is natural gas allowing us to maintain profitable margins.

Current planting expectations of about 85 million acres for the 2009 corn crop year continue to be very supportive of strong nitrogen consumption and pricing. REMC’s geographical location positions us to benefit from the strong prospects for corn. Since we are located in the middle of the Corn Belt region we have a cost advantage and are less vulnerable to transportation bottlenecks such as barge shortages.

This advantage continues to increase with the volatility of diesel prices. We see this in terms of inbound freight costs in all forms of transportation for competitors trying to bring product into our trade zone, and customers who want to purchase as close to home as possible. Transportation by rail is becoming increasingly difficult and expensive due to rising domestic railroad tariffs, diesel costs and decreased ammonia rail fleets coming on line.

Compounding these transportation issues is the fact that ammonia pipelines are fully subscribed. In addition, with only 32 active barges on the inland river system, the industry sometimes experiences transportation bottlenecks. Since we sell the majority of our products within the 150-mile radius of the facility and most of our product is delivered by truck directly from the plant, we not only avoid the logistical and transportation issues faced by other providers in providing ammonia products to the farmers in the Corn Belt region, but we also save on transportation costs.

We enter into pre-pay agreements for future nitrogen product deliveries based on the supply and demand dynamics of the products. When we enter into pre-pay agreements, we lock in the sales price and the margin by purchasing natural gas for future delivery at fixed prices. We collect a percentage of the full contract value, which can vary in cash up front, and collect remaining contract value upon delivery of the product.

For fiscal 2009 we have delivered or contracted for delivery, about 2/3 of our production capacity. Since we’ve also purchased most of the gas we need for the presale production we have locked in most of our margins for the year. REMC’s business is seasonal, based on the planting, growing and harvesting cycles.

Typically our third fiscal quarter, which runs April through June, has the highest volume of tons shipped and corresponds to end user application of fertilizer products in the spring season. Historically our first fiscal quarter which runs from October through December has the second highest volume of tons shipped corresponding to end user application of fertilizer after fall harvest.

The presales typically take place during a four-month period leading up to either the spring or fall application. During this period we are also building inventory as we operate the plant at full capacity year round. Despite some reports in the marketplace of soft spot prices during the winter months, we’re currently signing presale contracts for spring delivery very close to the stronger prices that were budgeted.

During the first quarter of this fiscal year there was a reduction in fall fertilizer application due to rainy fall weather and following the rain delay plant and harvesting cycle for 2008. The combined impact was a marked decrease in the volume shipped in the first quarter of fiscal 2009.

We believe that the reduction in shipments in the first quarter of fiscal 2009, compared to the first quarter of fiscal 2008, is a result of weather and the timing of seasonal fertilizer application and does not represent a trend indicative of results for the remaining quarters of fiscal 2009. Because of lower product applications in the fall, producer's tanks were nearing capacity which led to some inventory management issues and the lower price small sales we saw in the market.

Going forward we believe that fundamental factors such as forecast corn acreage and pent up demand for nitrogen fertilizer due to the weather interrupted fall applications indicate strong demand for nitrogen fertilizer products and possible spot shortages in the spring 2009 planting season.

Despite the soft economy corn acreage still looks like it may be comparable to last year, keeping in mind that the ethanol mandates create significant incremental demand for corn. With that, I would like to turn the call back to Hunt.

D. Hunt Ramsbottom

Thank you, John. And now I'd like to turn the call over to Dan Cohrs.

Dan J. Cohrs

Thanks, Hunt. Good morning, everyone. I'll go over some financial highlights of our first quarter of fiscal 2009. We reported consolidated revenues up 5.5% from $47.5 million a year ago to $50.1 million this year. Gross profit declined just slightly from $10.3 million to $9.7 million. The net loss which was $23.4 million last year, declined to a loss of $4.3 million this year. On a per share basis, the last year's loss was $0.14 compared to the first quarter of this year, which was a loss of $0.03.

Now all of those numbers are before any adjustments for write-downs or impairments. We had several fairly large one-time items in each of those quarters. This year we had a $10.1 million write-down of inventory which was due to the decline in natural gas prices. So we took a $10.1 million expense through cost of sales, but the benefit of that write-down and the benefit of those lower gas prices will come through in future quarters.

So to try to give you some more apples-to-apples comparisons with last year's first quarter, the adjusted for that $10.1 million inventory write-down this year and also for an $8.6 million impairment on the REMC conversion that was booked last year, together was a small write down of inventory that occurred last year for total write-down last year of $8.7 million. So again, we're adjusting for an $8.7 million write-down last year versus the $10.1 million write-down this year.

Adjusting to net income for all of that would have given us a loss last year of $14.7 million and a profit, a net income profit this year, of $5.8 million. The total impact of those adjustments would have been $0.05 last year and $0.06 this year on a per share basis.

Let's focus for a second on SG&A. We've been talking about our efforts to reduce SG&A and reduce our corporate expense run rate. SG&A was down 32% year-over-year from the first quarter of last year to this year; $8.8 million last year, $6 million this year. Every major component of our SG&A declined over that time reflecting the broad cost cutting that we've been implementing.

Within all that, let's look at the R&D expense. The R&D expense that we reported last year was $16 million versus $5.4 million this year. Now the PDU construction last year accounted for $12.5 million of the $16. So if we take that out, keeping in mind that the $12.5 million for us even though it's construction expense is booked as R&D expense and therefore passed through the P&L. So let's take out that $12.5 million and try to get a more apples-to-apples comparison.

We spent $3.5 million in last year's quarter and $5.4 million on this year's quarter on a combination of R&D and PDU operations. The increase really would be accounted for by the operation of the PDU. If we focus just on R&D, our pure R&D spending is down in line with the other reductions in our corporate overhead of roughly 25%.

So adjusting for PDU construction and the REMC impairment, but keeping the PDU operations in there our total operating expenses declined from $12.6 million in last year's quarter to $11.8 million for an overall decline in operating expenses, including the expenses of operating the PDU, of about 6.3%.

Now let's focus for a second on REMC. We reported an increase in revenue of 6.7%, up from $46.9 million last year. We reported $50 million of revenue this year. Gross profit was down just slightly from $9.8 million to $9.6 million. Again, that reflected that $10.1 million write down of inventory that passed through cost of sales.

That also affected EBITDA which was $9.6 million this year, $10.3 million last year. So a slight decline in EBITDA, but keep in mind that that $10.1 million write-down from the cost of sales will actually come through as benefits in the future quarters as we report EBITDA through the year.

The delivered prices for REMC's products in the quarter went like this. The ammonia prices were up 53% year-over-year. In last year's first quarter, our average price for a delivered ton of ammonia was $439. This year it was $671. For UAN, the price increase was 42% year-over-year, $236 last year and $336 this year. So you can see these price increases more than compensated for the decline in tonnage that John talked about due to bad weather and all in all it gave us a revenue increase year-over-year.

Looking ahead we've already delivered or presold about 2/3 of our production for the fiscal year of 2009. We've locked in gross margins through March 2009 on most of those presales through purchases of natural gas. Given the margin resulting from these presale contracts in addition to the strong spring season we're expecting, we have continued confidence that EBITDA at REMC will be well in excess of $50 million in this fiscal year.

We've given you at the consolidated level – we've given you guidance that said we expect to be positive EBITDA this year. In the first quarter, if you calculate the EBITDA it would come in at a negative $0.8 million. So we're actually very close to break even in the quarter. That's up $22.5 million from the quarter a year ago. And again, one more time, that was impacted by the $10.1 million write-down of inventory. So as we work our way through the rest of these quarters the benefit of those lower gas prices will start to come through in the future quarters.

Looking at the cash balances for a second, you'll probably notice that our cash balance declined sequentially from the fourth quarter by about $35 million. To understand that, keep in mind that the first quarter, October through December, is a period of product deliveries, not product presales. In 2008, many of our presale contracts had 100% down payments earlier in the year. So the cash for the fall deliveries was collected at the time of contract signing earlier in the year. The deliveries in the fall, therefore, caused us to recognize revenue, but did not generate cash in the quarter.

As we move into the Spring selling season, we expect to increase cash balances as we collect on the remaining balance of existing presale contracts, new presale contracts and on spot sales. The pattern of cash through the year depends not only on the inherent seasonality of the business as John discussed, but also on the nature and extent of those presale contracts in that particular season.

During the quarter, some specific uses of cash included increases in inventories of $7.2 million as we built inventories for the spring, prepayments on our senior loan of $5.6 billion, capital expenditures of $3.5 million and we reduced our accounts payable by $3.4 million as we continue to clean up some of our remaining payables from the PDU construction and other operations. That's about almost $20 million of specific cash usage in that list I just read.

Overall, we continue to benefit from our expense reduction efforts, R&D expenses are down significantly after completion of PDU construction and more fundamentally we've reduced all of our overhead spending and we're on track to reduce corporate spending by 25% year-over-year. Now that we've successfully modified the loan agreements, we expect our liquidity needs for the full fiscal year 2009 to be funded by the [R&D] cash flows. Thanks very much and I'll turn the call back over to Hunt.

D. Hunt Ramsbottom

Thanks, Dan. And now I'd like to turn it back to the operator for questions.

Question-and-Answer Session


(Operator Instructions) Your first question comes from analyst John Bridges – JP Morgan

[Ankush Alawanahan] for John Bridges – JP Morgan

I have two questions. One I just wanted to make sure we understand it correctly when you say that the Q1 fertilizer sales were impacted due to the weather and you don’t expect that to be representative going forward. Then would it be fair to assume that this means that seasonality that we saw in Q1 of '09 was a deviation from the historical seasons past and do you expect this deficit to be made up during the reset of the year in the following quarters?

John Diesch

Yes, I definitely do. It was related to weather conditions with a late harvest which pushed in to cold weather as well as we had some wet weather right towards the end and the farmers just couldn’t get in the field to apply the nitrogen. The farmer makes a decision in the fall what he's going to put in for the following year for a crop and he absolutely has to put nitrogen down. So what he doesn’t get down in the fall he's going to put down in the spring time.

So we fully expect that nitrogen that was not put down in the fall to be put down and applied in the spring. And this actually is probably – it's our expectation is to create some bottlenecks in the transportation systems because there's limited access to be able to move tons around the country which is positive for us because we sit in the middle of the Corn Belt.

We don’t have to deal with those transportation issues because the majority of our production moves out by truck. So we fully expect to see all the nitrogen that was not applied in the fall to be applied in the spring time.

[Ankush Alawanahan] for John Bridges – JP Morgan

Okay. Then on the margins, you said you've logged in now, you've pre-sold 2/3 the sales on the fertilizer business and if you look at the 10-Q it seems that the gas prices logged in are even logged in even a much lower percentage of gas. So do you expect to benefit out of the falling gas prices and do you expect the margins to expand as we progress through the year?

Dan J. Cohrs

We will exceed margin expansion through the year we believe, because having taken that 1$0.1 million write-down now effectively we'll be bringing the cost of sales through in future periods at lower prices than we actually contracted for. So we're effectively recognizing those higher prices now by taking that write-down so future periods will be showing prices closer to the market prices.

[Ankush Alawanahan] for John Bridges – JP Morgan

Okay. And these total sales that have been logged are they pretty much spread over the rest of the year or are they majorly in the next two quarters?

D. Hunt Ramsbottom

It would be the next two quarters, through the spring time, so these are sales related to spring applications.

Dan J. Cohrs

And [Ankush], just to be clear the 2/3 includes the first quarter which we've already delivered. So we're talking about two thirds of the deliveries for the entire fiscal year have been either delivered or locked in. If you start from today forward it's no longer two thirds because we've already delivered some of those in the first quarter.


Your next question comes from Jeremy Sussman – Natixis Bleichroeder, Inc.

Jeremy Sussman – Natixis Bleichroeder, Inc.

I want to get into a little more on the synthetic fuel side. You mentioned and sent out a press release obviously a few weeks ago the Air Force is now buying your synthetic RenJet fuel after successful lab testing.

So can you give us a little bit of a sense of maybe the feedback you received from them so far, any timeline for testing and then even the potential for some sort of commercialization with a long-term supply agreement?

D. Hunt Ramsbottom

The testing has been successful and I think from their perspective they will buy as much as Rentech will sell to them. And the testing is, like I said, it has been ground and we want to move toward air, but we're also dealing with the other branches of the armed services Army and Navy at this juncture.

I think from our perspective, as you well know, they have tried to move beyond the five-year contracting authority and especially in this environment ten-year contracting authority is better for them and for us to get the industry off the ground. I would have to say that their alternative fuels push in all branches of the military is significant. And I think that we are already seeing progress and conversations again in the House and the Senate on contracting authority.

So again they could do five-year today and five-year options. We continue to push for the ten-year alternative because we think that, especially in this environment, will be easier to get these plants financed. And right now and again the conversations are ongoing and they are absolutely committed to moving toward these fuels. They've not let up at all.

Jeremy Sussman – Natixis Bleichroeder, Inc.

That's definitely encouraging. So can you maybe elaborate a little bit in terms of what you are lobbying for regarding the benefits for either renewables synthetic fuels from the proposed or I guess now the passed stimulus?

D. Hunt Ramsbottom

Yes, I think suffice it to say we are in the middle of all of it. We are – I think right now there's $2 to $4 billion available for CCS, carbon sequestration funding for fossil plants. We're in the thick of that. We are working on some fossil based loan applications and direct loan programs and there will be a number of renewable-based project fundings available for low carbon or zero carbon fuels. And in particular what we're calling BioJet fuels from renewable sources of which I think we're probably the only one that can produce that today.

So it's a long menu, Jeremy, that we could probably go offline and talk about this but I think it's much more expanded than historically when we applied for just getting a loan guarantee for, for instance, REMC, for that conversion.

So we fall into many buckets. We don’t want to overdo our welcome there but there's two or three things we've taken a rifle approach upon which includes also the DoD contracting authority. So if you go narrow it down if you look at fundings available for carbon sequestration which is Natchez, funding for renewable projects, zero carbon fuels, we qualify with some projects we're working on there and then you've got DoD contracting authority. So there's two or three buckets we fall into very nicely.


Your next question comes from the line of [Julie Kazoom] – Simmons and Company.

[Julie Kazoom] – Simmons and Company

Last quarter you had mentioned that for full year '09 you're expecting a decline in your corporate cash burn of 25% from the '08 level. Just curious if this is now that we're one quarter into the year, if this is still what you're targeting?

D. Hunt Ramsbottom

Yes, we're still on track for that and you'll see that in the reduction in our SG&A levels and also reduction in R&D spend.

[Julie Kazoom] – Simmons and Company

Okay, and also you mentioned some difficulty getting financing partners for the Natchez facility. Just wondering how that search is going?

D. Hunt Ramsbottom

Everyone understands the macroeconomic environment today and as I said during my part of the script here is that we are still proceeding with the project. Just announcing proceeding was permitting and again we do have – we are still in conversations with partners and off takers for that project.

Most of the folks that we are in discussions with have a longer term view as we do, on where crude prices will fall. As I said in my script also, the airlines and commercial aviation and department of defense are extremely interested in seeing this facility get off the ground to start an industry.

So I would say that the conversations are ongoing. We have probably in the last quarter slowed down a bit just because of the world we live in, but the off takers remain steadfast in their commitment to these fuels and the facility.


Your next question comes from [Thomas Dresser] – Private Investor.

[Thomas Dresser] – Private Investor

Just a quick questions, did you go through the rest of the projects that are listed on the Web page that we haven’t discussed at this point and is there any activity left there or are they now on back burners?

D. Hunt Ramsbottom

No there is activity but they are back burner. Our primary focus was on these renewable projects that I've discussed and Natchez facility. We continue to move very slowly and keep those on the back burner, but we're not putting a lot of effort due to this economic environment into those projects right now.


There are no further questions at this time. Are there any closing remarks?

D. Hunt Ramsbottom

Yes, just a couple here. Just to reiterate the highlights from today's call, is our PDU is the only operating synthetic transportation fuels facility in the United States. We've sold synthetic jet fuel to the United States Air Force within 90 days of our full production run validating market demand for the fuels produced from our process.

We are seeing market demand for our fuels. The U.S. Air Force, commercial airlines and other users have expressed interest due to the quality, performance and environmental characteristics of our fuels. Forecasted high crude prices expected to be seen as early as 2010 also drive demand for synthetic fuels.

Two separate studies have shown that our technologies can produce synthetic fuels with a lower carbon foot print than conventional fuels. We are reaffirming our guidance for positive consolidated EBITDA for 2009.

We expect REMC to provide us with sufficient cash loans to enable us to continue developing our synthetic fuels business in a disciplined manner for fiscal year without the need to raise additional capital.

The development of our commercial projects fits with the priority of the new administration and will enable the development of national security, domestic jobs and a cleaner environment. We believe all of these factors help differentiate Rentech from other emerging alternative energy players.

We continue to build on theses differentiating characteristics and look forward to speaking with you when we announce our fiscal 2009 second quarter results. Thank you for your time.


Ladies and gentlemen, that does conclude the conference call for today. We thank you for your participation and ask that you please disconnect your line.

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