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Executives

Julie Dawoodjee - Vice President of Investor Relations & Communications

Unknown Speaker -

Dan Cohrs - Chief Financial officer, Executive Vice President and Treasurer

D. Ramsbottom - Chief Executive Officer, President and Executive Director

Analysts

Pavel Molchanov - Raymond James & Associates, Inc.

Matthew Farwell - Imperial Capital, LLC

Unknown Analyst -

Jeremy Sussman - Brean Murray, Carret & Co., LLC

Rentech (RTK) Q3 2011 Earnings Call August 10, 2011 1:00 PM ET

Operator

Ladies and gentlemen, thank you for standing by. Welcome to the Rentech Third Quarter 2011 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded, Wednesday, August 10 of 2011. I would now like to turn the conference over to Julie Dawoodjee, Vice President of Investor Relations. Please go ahead, ma'am.

Julie Dawoodjee

Thank you. Welcome to Rentech's 2011 Fiscal Third Quarter Conference Call for the quarter ended June 30, 2011. During this call, Hunt Ramsbottom, President and CEO of Rentech, will summarize our company's progress during the quarter. Dan Cohrs, our Chief Financial Officer, will give a financial review of the fiscal period and provide comments on Rentech's financial position. We will then open the lines for questions. [Operator Instructions]

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. They can be identified by the use of terminology such as may, will, believe, expect and other comparable terms. You are cautioned that while forward-looking statements reflect our good-faith belief and best judgment based upon current information, they are not guarantees of 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 August 10, 2011, 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 laws.

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

D. Ramsbottom

Thank you, Julie. Good morning, everyone, and thank you for joining us today. During this call, I'd like to discuss how we have taken recent steps to unlock the value of REMC, secure a source of ongoing capital to fund our alternative energy business, restructure our balance sheet to further strengthen our liquidity, adopt frameworks for R&D and project development that are intended to reduce our potential needs for capital and ensure we'll create value with our capital spending, and seek accretive acquisitions in the alternative energy space to gain more immediate access to cash flows in this business segment.

I'd like to walk you through each one of these initiatives. Unlocking the value of REMC. Last week Rentech's nitrogen partners filed a registration statement with the SEC for initial public offering of the REMC fertilizer business. We're excited about the opportunity this presents us with, although we're very limited as to what we can say about the proposed IPO while the registration statement is in the normal SEC review process. The completion of the IPO is subject to numerous factors, including market conditions and we can assure you that this will be successfully completed.

But I wanted to give you a brief overview of what the offering could mean for Rentech's shareholders. In July, we formed a new limited partnership called Rentech Nitrogen Partners to hold our fertilizer assets upon the successful completion of initial public offering. On August 5, Rentech Nitrogen Partners filed an S-1 registration statement proposing to become a publicly traded limited partnership, commonly referred to as master limited partnership or MLP. The MLP structure provides tax advantages, because MLPs are not subject to entity-level federal income taxes. The MLP will be managed and controlled by a general partner, which would be owned exclusively by Rentech and Rentech will select the general partners' board members.

We intend to apply to the New York Stock Exchange for a listing of the MLP's common units, representing limited partner interests under the symbol RNF. There are a number of publicly traded fertilizer companies today, but there are only 2 other pure-play public nitrogen fertilizer companies in the Americas and Western Europe, CBR Partners and Terra Nitrogen, both of which are also structured as MLPs. We currently intend to maintain majority ownership of Rentech Nitrogen Partners upon the closing of the IPO. The S-1 lists the proposed maximum aggregate offering price as $250 million, but that number is subject to change and all decisions regarding this transaction size and valuation are subject to market conditions at the time of the offering.

As stated in the S-1, we plan to grow the fertilizer business organically, as well as through selective acquisitions of similar assets. In response to increased demand for ammonia in RMC's market over the last 10 years. We commenced an expansion project at our facility that's designed to increase ammonia production capacity. We've begun work on certain long lead time items, and we are continuing to evaluate the market to determine the benefits of the expansion project. The completion of the project requires a finalization of a budget, ongoing engineering work and additional funding, which could come from IPO proceeds or from capital raised at the plant level.

A successful IPO would mean -- would help us secure a source of ongoing capital to fund our alternative energy business. We believe that the public MLP structure of our fertilizer assets would provide value to Rentech shareholders if the IPO is completed, by giving us access to capital for our businesses on attractive terms, without issuing Rentech's stock. The MLP will distribute cash generated in each quarter, as described in the S-1, following the IPO cash distributions received by Rentech from the MLP would be in proportion to its ownership. As an expected majority owner, we'd receive the majority of the distributions.

We're restructuring our balance sheet to further strengthen our liquidity. We have $57.5 million of convertible notes outstanding at Rentech, well in advance of the April 2013 maturity date we expect to exchange our outstanding notes for new debt or equity securities or pay them off depending on market conditions and other factors.

We adopted R&D and project development frameworks intended to reduce our capital needs and ensure we spend our capital wisely. Our synthetic fuels technologies have been successfully demonstrated at our PDU over the last 3 years. The R&D spending for our base technologies is now focused on cost to optimization of these technologies for commercial projects we're currently pursuing. We're seeking grants and partnership funding that could provide a substantial portion of our funding needs for development of next-generation technologies that would increase product yields. This funding model has proven successful so far, with ClearFuels and Rentech jointly receiving a grant for up to $23 million from the U.S. Department of Energy to demonstrate the integrated Rentech ClearFuels biofuel technology at our PDU. The deal reimburses 62% of the project costs, which significantly reduces our R&D expense related to the demonstration of the Rentech ClearFuels gasifier. This project is on time and under budget, with production of the fuels from biomass expected at the PDU by the end of this calendar year. The successful demonstration is an important step in our effort to obtain a significant portion of funding for our Olympiad renewable jet fuel project from Canada's SDTC fund.

We've also begun collaborating with the Canadian Saskatchewan Research Council and with the DOE's National Renewable Energy Lab on next generation technologies, with the goal of significantly increasing the yields of drop-in fuels from each ton of biomass feedstocks. The PDU is a valuable asset providing a platform for Rentech and other institutions to accelerate the demonstration of bioenergy technologies. We intend to lower our R&D costs by attracting costs-sharing partners to our PDU. We also plan to leverage and enhance the PDU by opening up to other technology providers who wish to demonstrate their technologies. We can offer them speed to market as they leverage the PDU's existing infrastructure. Securing co-funding of our R&D would free up capital, supplementing our cash balance to provide for more funding for growth.

Now let's turn to commercial activities. In the past month, we've secured the final air permit for our Port St. Joe Project, entered into term sheets for the majority of the project's feedstock requirements and we're working towards concluding the final EPC contract price. We're actively working on power projects with potential projects, with partners that have sites and feedstocks. These projects are smaller in scale than the Port St. Joe Project and their capital costs would fit within our current projected liquidity levels. This model would allow us to self-fund the commercial deployment of our gasification technologies and projects that can provide shorter payback periods. These smaller scale projects complement our development pipeline, which prioritizes gasification projects. They are less capital-intensive and less complex than fuels project. Going forward, we intend to keep development spending at relatively low levels, as we work toward the point of construction financing as we're doing with the Port St. Joe Project. This means relatively low levels of spend while we work to secure feedstock and offtake and initiate for many more.

For domestic projects, we won't be focusing on DOE funding. We are in negotiations with potential partners who may arrange for debt and equity investments for the Port St. Joe Project, as well as other projects. Additionally, to reduce our capital and development risk profile, we're reviewing the projects in our pipeline and collaborating with multiple technology companies and developers who have structured their projects around our technologies. The benefit of doing so allows us to have multiple ongoing projects, while keeping capital and resource investments low. We may take these projects over, as with the case with Port St. Joe, be an equity investor in these projects or license our technologies into them. This approach enables us to spread capital among more projects, increasing our commercial opportunities rather than the capital being more heavily focused on one particular project.

Our strategy also includes pursuing accretive acquisitions. To further reduce our risk profile and shorten the timeline to generate cash flows from our alternative energy business, we may seek to acquire companies that we have identified that, one, have existing operating facilities and come with cash flows and alternative energy technologies; two, have existing facilities at which we can add our technologies.

The R&D and project frameworks we have adopted are designed to reduce our potential needs for capital, and ensure that we spend our capital more wisely towards projects that generate value to shareholders and be accretive to cash flows. If the pending IPO or the fertilizer business is successful, we will be in the enviable position of having 2 publicly traded companies with access to capital. With a projected heavy cash balance sheet and relatively low debt, we will be selective in our investments.

I'd now like to turn the call over to Dan, who will provide you more details on the financial performance of the quarter.

Dan Cohrs

Thank you, Hunt. Good morning, everyone. Results for the third fiscal quarter and for the first 9 months were substantially better than last year, with year-to-date EBITDA at REMC up almost $46 million from last year. For the third quarter, revenues were up 47% to $74.4 million, as we saw higher sales prices for all of our nitrogen products. We had increased sales volumes for UAN, and that was partially offset by lower sales volumes for ammonia, as we converted more ammonia to UAN to optimize margins. Gross profit was up 146% for the quarter to $37.4 million. In addition to the higher product prices, we benefited from lower nat gas prices during those periods.

SG&A was up about 9% from this third quarter versus last third quarter, due to a few additional employees and also due to an accrual for some sales-based incentive bonuses at REMC. R&D for the quarter was up more on a percentage basis to $8 million. That was a $3 million increase from the quarter a year ago. Most of that increase is due to the construction of the Rentech ClearFuels gasifier and the expenses from consolidating ClearFuels during that period, as well as an increase in modifications and repairs of the PDU, but primarily due to the construction of the ClearFuels gasifier, net of DOE reimbursements. Other expense for the 3 months period increased mainly due to the loss on extinguishment of debt related to the repayment of our old term loan as we entered into a new and larger credit agreement with improved terms.

There were similar patterns for the 9-month period ended June 30. Revenues were up 46%. Gross profit was up 275% due to similar factors, primarily higher product prices in our nitrogen products.

We ended the quarter with consolidated cash and cash equivalents of $104 million, $82.8 million of that at Rentech, $21.4 million at REMC. During the quarter, nitrogen prices improved substantially compared to the third quarter in the prior year. This quarter, we had ammonia prices averaging $642 per delivered ton, compared to $414 per delivered ton last year. UAN prices averaged $312 this quarter versus $210 for the year ago. And for the 9-month period, we saw similar increases with ammonia averaging $583 per ton in the most recent 9-month period, up from $373 in the year-ago period; UAN prices, $259 this year versus $185 last year. Significant increases in every period this year. For the first 9 months of fiscal 2011, REMC had EBITDA of $68 million, and consolidated EBITDA was $27.6 million.

With almost $83 million of cash at Rentech as of June 30, we do not expect to require additional capital to continue our activities for the next 12 months at levels similar to those we budgeted for fiscal year 2011. We do anticipate that additional capital would be required if we begin construction of the Port St. Joe Project or another project, or if we were to use cash for an acquisition. If the IPO at Rentech Nitrogen Partners is successful, we expect the proceeds to repay REMC's outstanding $150 million term loan and refinance the completion of the expansion project at REMC. Also as noted in the S-1, we expect to receive a portion of the net proceeds from the anticipated $250 million IPO at Rentech, and we would receive our quarterly pro-rata cash distributions from Rentech Nitrogen following a successful IPO.

The possible IPO gives us an opportunity to monetize our NOLs in the short term. Our net operating loss carryforwards, applicable to federal income taxes, currently exceed $160 million. We expect a substantial portion of those NOLs would be applied against taxable gains that would be recognized in connection with the completion of the IPO by Rentech Nitrogen Partners, as well as against taxable income allocated to Rentech from the partnership in the future. We implemented a tax benefit preservation plan to protect the value of those loss carryforwards.

As we close, I want to re-emphasize what Hunt has already told you. At the same time we're strengthening our liquidity, we intend to reduce our spending and deploy our capital wisely by leveraging partners and outside developers and developing prototypes of smaller projects that can be more manageable for our balance sheet. I'll now turn it back over to the operator, and then Hunt and I will answer questions. But first, please note that because Rentech Nitrogen Partners is in registration with the SEC, we will be very restricted in talking about the nitrogen fertilizer business. So please understand that as we take your questions.

Question-and-Answer Session

Operator

[Operator Instructions] The first question comes from the line of Matt Farwell from Imperial Capital.

Matthew Farwell - Imperial Capital, LLC

Just a couple of questions on the nitrogen fertilizer business. But just looking back, it appears that you had some resales during the quarter which caused the EBITDA margin to fall a little bit. Could you provide some more color on that? How many tons were resold? And of which product? Was it UAN or was it ammonia?

Dan Cohrs

Matt, it's Dan. We actually just haven't put out details, so I really can't put out details on the call. But it was ammonia. We did resell ammonia. And it's correct, that did compress the margins slightly. We made a profit on those sales. But of course, the margin on reselling product would be lower than the margin on product that we produced.

Matthew Farwell - Imperial Capital, LLC

Okay. And is that something that will continue in the business? Or what was the nature of the reselling? Were there 1:22 AM just opportunities to distribute the products?

Dan Cohrs

Yes, I mean occasionally we see these opportunities where there might be a barge of ammonia available, and our guys know the market very well. And some of is done purely to make a profit because we see an opportunity. And some of it is done for relationship reasons with customers, where we can get them some additional product and still make money doing it. So it's very opportunistic. And of course, we only do it when we are really comfortable that we can generate a profit by buying and then selling product.

Matthew Farwell - Imperial Capital, LLC

Okay. Can you give any color on your plans for preselling next year? You have given some implicit guidance in the S-1. Does that imply that you are preselling product at this point?

Dan Cohrs

Yes, I really just can't comment beyond the S-1. I think in prior periods, we have noted that sales are developing, but we really just can't say anything. As you can understand, we're very restricted about what we can talk about with REMC right now.

Matthew Farwell - Imperial Capital, LLC

Right, right. Can you say how large or what -- can you say how large the ammonia expansion will be? You've talked about an expansion of the ammonia capacity, but you haven't really given any numbers.

Dan Cohrs

We can't yet.

D. Ramsbottom

Yes. We can't, Matt, yet for the same reasons that Dan's articulating, and we're just finalizing it. We've got a pretty good handle on it, we just can't talk about it.

Matthew Farwell - Imperial Capital, LLC

That's fine. So on the alternative energy business, you discussed some maybe new strategies how to reduce the cash burn in that business. And yet, you're still -- you say that you're fully budgeted. Should we expect the cash spread in that business to decline going forward? Can you provide some more color on that strategy?

D. Ramsbottom

Yes, I mean, think from our perspective, the answer is yes, you can. And we've identified ways to do that. You can certainly expect less cash spend next year. We're right in the middle of our budgeting cycle right now, so we'll have more color on that certainly on the next call. But that's the intended goal right now, we've identified ways to do that. And I think the overall theme there generally is, Matt, that we know that, that business -- we know if that business, if we're successful with the IPO, we'll have cash. And the goal there will be to get some cash flowing assets in there as quickly as possible and reduce spend. And we've identified ways to do that going forward. So again, we're right in the middle of budgeting cycle right now and that's the intended goal.

Matthew Farwell - Imperial Capital, LLC

Okay. And lastly on the Port St. Joe Project, are you in touch with other ways of acquiring debt financing now that the loan guarantee is no longer an option?

D. Ramsbottom

Yes, we are. I mean, that's what I was implying in the formal presentation, that we have identified in negotiations for partners in debt and equity.

Operator

The next question comes from the line of Jeremy Sussman from Brean Murray.

Jeremy Sussman - Brean Murray, Carret & Co., LLC

Hunt, can you give us a sense, or Dan. You talked about ammonia pricing this quarter at $642 a ton. Can you give us a sense of where pricing is at now? And just in general, what are you seeing in the marketplace?

D. Ramsbottom

My general counsel is holding up a sign right now that says I can't comment beyond the S-1.

Dan Cohrs

But I think you could probably go look at -- it's public. There's other published reports out there in the marketplace that you can have a go look at, from CDR and others that would identify that.

Jeremy Sussman - Brean Murray, Carret & Co., LLC

Yes, understood. That's quite all right. Switching to the alternative fuels business, Port St. Joe, Olympiad and, I guess, maybe Rialto. Can you give us a sense of maybe which one would be at the top of your priority list? And on the back of that, maybe sort of, I guess, a rough timeline as to how we should think about things --

D. Ramsbottom

Clearly we're still working Port St. Joe very hard. I mean, as we said last time on Rialto, since we got the note from the DOE and we finished the engineering with Fluor. We're still doing value engineering and re-evaluating that, but that is behind Port St. Joe. So the development efforts today are on Port St. Joe and that's where we're working with these potential partners for debt and equity. And I think the stated timeline right now, because we've got to go live with the PPAs right now, mid-2013, I think it's the public timeline we've put out, which we've not changed. In Olympiad, publicly, I think it's been stated to come onstream in 2015. And again, that's all subject to things going well with the gasifier, which we expect. That's going very well in Colorado and things are going very well with the SDTC funding in Canada at this juncture. So again those, in terms of Port St. Joe and Olympiad, those are the timelines that we're kind of -- emphasis right now is to try and get this funding on board and wrap things up in Florida for the time line that we've put out.

Jeremy Sussman - Brean Murray, Carret & Co., LLC

That's very helpful. And just the last question, I believe you mentioned that you hope to have -- that you expect to have biomass up at the PDU by year end. Is that correct?

D. Ramsbottom

Yes. Yes.

Jeremy Sussman - Brean Murray, Carret & Co., LLC

Can you give us a sense of how far along are you? And is this sort of a calendar year fourth quarter type event?

D. Ramsbottom

It is. It is. I think we've stated it publicly will be producing fuels in calendar fourth quarter. Mechanical completion will be prior to that, and everything's on schedule and on budget. So we're excited about that gasifier coming onstream, and we expect a lot of activity around that.

Operator

[Operator Instructions] The next question is from the line of Matthew Doddson [ph] from Edmans Partners [ph].

Unknown Analyst -

I just wanted to follow-up with a question from one of the other callers. So can you talk a little bit about the fuel side of the business? And you've talked about how you want to reduce the spend and you're in your budgeting process. And so far in the 9 months, you've lost about $42 million there, and also like $15.5 million this quarter. Can you help us understand kind of where you're targeting that loss to go to? I mean, you went to $10 million a quarter or can you give us some kind of sense?

D. Ramsbottom

All I can tell you is it will be less. When you're literally in the middle of budgeting process right now, I would be remiss to give you a number because literally we're going to each department as we speak. So anything I'd give you would not be correct today. So our fiscal year starts October 1 and certainly our goal is to present the board the budget before that time. So I don't want to give you a number before I give the board a number.

Unknown Analyst -

Now can you give us a sense at all of a timeframe of when you think you could potentially get to break even in the business?

D. Ramsbottom

Again, let us go through this process, that would be beneficial, and that won't be long.

Unknown Analyst -

Okay. And then another question. You have the converts that are due in '13, I guess if the transaction is successful, will you be able to take cash from there and pay off the converts? Because it seems like that's the only -- I mean, that's an issue for your stand-alone company to stay solvent, et cetera. So can you talk a little bit about that?

Dan Cohrs

Yes, we expect to do 1 of 3 things with the converts, and we don't know which one we would actually execute. But we think it should be possible to exchange those convertibles for either new convertibles or some other security. Conceivably, we would also use proceeds to pay them off for cash. But there is no definite plan yet as to exactly which one of those alternatives we will choose.

Operator

The next question comes from the line of Robert Pope [ph], private investor.

Unknown Speaker

So just to dive into this R&D line a bit. We dived up to $8 million from a level of $6 million. Just when ClearFuels -- when the build on ClearFuels for the gasifier ends, will we go down back to a level of $6 million to $7 million and then the partnerships that you highlighted brings us down from that level? Or are we structurally at this new $8 million quarterly level when we build down from that level?

Dan Cohrs

It's Dan Cohrs. I can't really give you a specific forecast because we haven't put that up. But your logic is absolutely correct. Right now, we're seeing net spending, net of the DOE reimbursements, driving our R&D spending up. And so as that project completes, you'll no longer have that factor in there. And as we go forward, we do expect to have grants and/or partnership funding that would help to pay for our R&D going forward. So I think it's fair to say that if we're successful with that program, you're likely to see net R&D spending at lower levels in the future than it has been in the past, if you take out even the blip due to the construction of the ClearFuels gasifier.

Unknown Speaker

Okay. And great, I was encouraged to hear about the efforts to bring on partners. But help me to understand the dynamic of these relationships. I mean, you guys are positioned at PDU, or it's just that really the technology that the company's at competitive advantage and hopefully ultimately achieving competitive returns in a project yield build. So I'm just a little confused how bringing upon partners, while it may -- it's a good thing to bring down R&D, to what extent are you compromising that technology or giving that away. Help me just think through that issue strategically.

D. Ramsbottom

I think, obviously, whoever we partner with and enjoy the relationship with, we'll guard our IP or we may share some of the IP. But I think from our perspective, we'll take that on a case-by-case basis. And depending on what the partner wants to utilize the technology for and what the arrangement looks like, it'll be different for each one. So IP is important to us, obviously, and we will guard that. But depending on what that partner brings to the table, the important goal is to commercialize the technologies and doing that with a commercial partner who has long term objectives that are aligned with ours, there may be some sharing in that.

Unknown Speaker

Okay. And then Dan, can you help me just with the -- I just confused the 9 months cash flow statement, but net income $7 million, which includes the close to $10 million loss on the debt. And you went from $85 million to $150 million. So $65 million plus the $7 million is $72 million. But the cash increased by $27 million. I know there's some CapEx, but could you just help me flip that, because I don't understand how cash only grew by $27 million, given the sources of cash in the quarter?

Dan Cohrs

Someone smarter than I am once said, I don't do math in public. So I have to say I'll have to go offline with some of those numbers to help you out with that.

Unknown Speaker

Okay, okay. Yes, we'll circle back after the call. And I was encouraged, just on the -- I know you couldn't say so much on the Rentech Nitrogen. But am I hearing this right that this will be protected from -- you're going to transfer all of those NOLs there so that this will be paying very minimal cash taxes up to $160 million of pretax profits? Is that the right way to look at this?

Dan Cohrs

Yes. Our NOLs today are more than $160 million. And we do believe we can use those NOLs against any gains that we see in the MLP transaction, which could be very significant if that transaction is successful. So yes, we do believe we can use those NOLs to shelter those gains.

Unknown Speaker

Okay. And is it true -- or I don't see just when you talk about your sort of your maintenance cap that's in the range of 10 to 20 SG&A. And is it too early to talk about those numbers? Obviously, we can play around with gross profits for the business, but some of them are line items to get us to free cash, can you comment on those at this point?

Dan Cohrs

No, I don't think so. I'm not exactly sure on your question right now.

Unknown Speaker

Well, I'm just trying to think about the ultimate when we think about stand-alone Rentech Nitrogen, the level of just a range of SG&A you'll need there and maintenance cap on an ongoing basis. I'm not exactly trying to -- we can talk about that offline.

Dan Cohrs

I'll just have to refer you to the S-1. There's some comments like that in the S-1 for the...

Unknown Speaker

Okay. I read through a bunch of things going on. I'll study that. Okay.

Operator

The last question comes from the line of Pavel Molchanov from Raymond James.

Pavel Molchanov - Raymond James & Associates, Inc.

Just wanted to ask about the DOE. Did they give a reason for not approving the Port St. Joe loan agreement, because it seems like you guys were very, very close to securing that.

D. Ramsbottom

They did give a reason. And the reason basically was that they sort of -- it was kind of nebulous, to be honest with you. They drew a line in the sand and they said that we're going to try to get these projects that, in their view -- and at the time, I think the project that they submitted go through 1705 did have permits, and I'm just taking some subjective viewpoints here, I think, that they weren't permitted. We were close to permitting, but we're about a month away. So it wasn't a very definitive -- it was a blanket letter that, as you probably know, everybody got the same letter. And I think it was not, in my view, a very scientific approach, because we got a number of calls immediately after saying, "Stay in the game," and they had to draw a line somewhere and they did. So I think it just came down to okay, these guys are permitted, they're not, even though we're only a month away. So we weren't given real clear reasons which is why we've found that to not be a reliable source of funding. And I don't know if you've heard differently the marketplace. Or Dan, you want to add anything or...

Dan Cohrs

Let me just add one comment to that, which is that the way the that we loan program evolved in general, this is not just Rentech but in general, the terms that were available in the Loan Guarantee Program were not exactly what we thought they might be as we launched into that program almost 2 years ago. The original program talk -- there was authorized talks about 80% of project costs and tenors that were 90% of project life and a number of other things. And the way the program eventually evolved, the requirements that the government required were not nearly as attractive as what we originally hoped it might be. So the program itself really changed significantly over time or evolved.

D. Ramsbottom

So I just think there's a number of factors that they put together, and we would not have gotten involved, as you all know, unless we were invited to get involved in that project by both the DOE and the folks that were involved. So everybody knows it was a discouraging time for us, but it wasn't quite clear exactly what the reasons were, which is why it's not a very reliable source for us or anybody.

Pavel Molchanov - Raymond James & Associates, Inc.

Okay. Are you currently pursuing any possibilities for the 2012 round? Or do you plan to?

D. Ramsbottom

I think right now, we are going to look at it. I think there's a lot of movement in Washington right now, and we're assessing it. I've get some calls, and there are some folks right now who are not in, the last couple of weeks. But once we see exactly what's being presented, now that we've gotten a little smarter about these programs, we'll ask tougher questions going in before we get involved.

Operator

Mr. Ramsbottom, I will now turn the call back to you. Please continue with your presentation or closing remarks.

D. Ramsbottom

In summary, we've taken bold steps to further our businesses. If the IPO of the nitrogen fertilizer assets is completed, we believe it would unlock the value of REMC, while providing an ongoing source of capital on a tax advantage basis to fund our alternative energy business.

We have 2 priorities in alternative energy: spend our capital wisely and generate cash flows as quickly as possible. We look forward to sharing with you our continued progress in alternative energy business and our fertilizer segments. And we'll speak with you in our fiscal fourth quarter earnings call. Thank you and have a great week.

Operator

Thank you. Ladies and gentlemen, that does conclude the conference call for today. We thank you for your participation and ask that you please disconnect your lines. Thank you, and have a good day.

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