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Rentech (NASDAQ:RTK)

Q4 2011 (Quarter Ending 12/31/2011) 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

Chris Orski

Derek Christopher Schrier - Indaba Capital Management , LLC

Operator

Ladies and gentlemen, thank you for standing by, and welcome to the earnings call for the quarter ended December 31, 2011 conference call. [Operator Instructions] As a reminder, this conference is being recorded Friday, March 16, 2012. I would now like to turn the conference over to Julie Dawoodjee, Vice President of Investor Relations and Communications for Rentech. Please go ahead, ma'am.

Julie Dawoodjee

Thank you. Welcome to Rentech's Conference Call for the quarter ended December 31, 2011. During this call, Hunt Ramsbottom, President and CEO of Rentech, will summarize our company's activities during the quarter. Dan Cohrs, our Chief Financial Officer, will give a financial review of the period and provide comments on Rentech's financial position.

We will then open the line 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 terminologies such as may, will, expect, believe 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 March 16, 2012, 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. 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.

We updated the guidance we provided on December 15 to reflect these savings, you can find details in the press release we should this morning. In summary, we expect to spend at least $1 million less than previously projected for total expenses, including PDU operations through end of this September. Our total projected cash spend for operating and capital expenses for the 12 months ending September 30 is now approximately $42 million to $44 million, which is a 34% to 37% reduction in total cash expenses compared to the prior year. Looking further ahead, in 2013, we plan for R&D spending and our current technologies to come down significantly because we will either have secured a partner to continue to fund your technology the development or we will have all the demonstrations scale data the we need and complete operations of the PDU. In summary, we recognize the challenges in the alternative energy sector. We are on track to reduce our expenses related to this business segment, and we will continue to drive down our cost structure as we seek the highest value use of our current technologies.

We instituted a share repurchase program to buyback up to $25 million of Rentech common stock. The program is expected to be effective on or about March 20. We believe the repurchase of our common stock at attractive prices is a good investment and it highlights our commitment to use our capital to maximize value for our shareholders.

At Rentech Nitrogen, we're focused on safe operations, maximizing margins and maintaining high unstrained times. Growing cash flows through organic growth, accretive acquisitions and development opportunities are also priorities. Any acquisition we pursue at Rentech Nitrogen will be accretive to projected cash distributions per unit.

The 2 expansions we had underway at the plant are on schedule and within budget. We continue to expect each project to generate returns of greater than 20%. The project to increase urea capacity by 17,500 tons annually for the Diesel Exhaust Fluid market is on track to be completed by the end of this calendar year. We intend to market our DEF production for a major distributor. And we will begin seeing this project's contribution to cash in 2013. The project to expand ammonia capacity production by 70,000 tons annually and to increase on-site storage capacity by 20,000 tons is moving forward within budget with major long-lead equipment already on order. The project is on track to be completed by the end of the calendar year 2013.

Rentech Nitrogen recently secured $100 million multiple draw CapEx facility to finance this project. The plant repaid and terminated the bridge loan provided by Rentech that was put in place to continue the expansion project while the CapEx facility was being finalized. Due to the work done at the plant during the turnaround September and October, 2011, including upgrade work related to the capacity project, we achieved higher production rates and improved efficiency during the past 4 months compared to the historical averages following a turnaround. Our standard policy is to match our natural gas purchases with presales so that we lock in our product margins. With natural gas prices at very low levels, we went beyond that and purchased 3.5 million MMBtus of forward commitments at an average price of $3.19 per MMBtu, excluding transportation costs. Over 1/2 of these forward commitments were purchased below $2.90 per MMBtu. These purchases should help us achieve favorable markets.

Product shipments during this 3 months ending December 31 were in line with our expectations. We have a strong product pricing in our spring forward sales book. We believe we've probably gauged the market and sold a significant portion of our spring book during the September, October window last year when pricing for spring deliveries without a premium. We sold limited additional tonnage in late December through February when product prices were softer. The premium pricing we've captured is reflected in the average presold product -- product prices for spring delivery. Of $741 per ton of ammonium and $386 per ton of UAN, which are well above prices offered during the last December through February timeframe.

We've seen product prices strengthened recently and anticipate further nitrogen price appreciation as spring season develops. We see factors such as record forecasted planted acres, and high corn prices as positive indicators to support our view. However, it is difficult to predict where prices will peak at this time. We feel it's very reasonable to expect a prolonged and robust application window due to an early start on nitrogen application because of favorable weather and large corn acreage forecast. When we report again in may, we should've a better view of summer ammonia and UAN value would trade.

Dan, will now provide further details and the results for the period. Dan?

Dan J. Cohrs

Good morning, everyone. The results we announced are for the 3 months ended December 31, 2011. That's the stub period as we transition to a calendar year reporting period from our old fiscal year ending September 30. And the consolidated results included both Rentech Nitrogen and the alternative energy segment. Revenues hit $63.1 million, which is up 47% from the quarter a year ago that's due to higher sales prices. The gross profit margin on the product sales hit 46%, up from 38% last year. That's a gross profit margin adjusted to reflect product sales only. We exclude the impact of natural gas used during the turnaround and the effect of gas that we sold from inventory. Those higher margins were due to higher sales prices and then partially offset by lower margins we received on 12,000 tons of purchased ammonia that we sold. We booked $3 million of turnaround expenses this quarter, whereas there were none in the last quarter a year ago. Consolidated SG&A was up about $2.8 million. If we break that down at Rentech or the Alternative Energy segment increase was about $900,000, most of that was due to the change of fiscal year end and expenses associated with that change, as well as some nonrecurring consultancies. Otherwise, SG&A in the alternative energy segment would have been slightly down. At Rentech Nitrogen, SG&A was up about $1.9 million that's almost completely due to the effect of becoming a public company and a change in fiscal year and about $1 million of that $1.9 million should be nonrecurring. We do expect to see higher SG&A going forward at Rentech Nitrogen as a public company.

On the R&D site, spending dropped about $1.2 million from the quarter last year to a grade of $4.2 million this year. That reflects our cost reduction strategy and also the fact that we operated the PDU for 25% fewer days this year.

We recorded $10.3 million of expenses due to the loss on extinguishment of our old debt and that brought us down to a loss per share of $0.04. If we calculate earnings per share before that cost of debt extinguishment, we would have earned the $0.01 this year. So we wouldn't have a positive $0.01 per share this year without debt extinguishment. At Rentech Nitrogen, the delivered tons for our 2 main products were down slightly year-over-year and that reflected the fact that we had a turnaround. So total tons of ammonia and UAN were at 120,000 in this most recent quarter compared to 123,000 last year and the mix changed. The ammonia tons increased from 44 to 55, the UAN tons dropped from 79,000 to 65,000. Prices were up significantly. For ammonia, the price hits $684 per delivered product in this quarter, that's up 34% from the prior year. For UAN, the prices for delivered product averaged $307 per ton, that's up 59% from the year-ago quarter.

The natural gas that we used in production, and let me emphasize this is production gas, this is different than the gas expense you would see in our the cost of sales. But the gas we actually used in production during this quarter dropped to 2.3 million BTUs -- or million BTUs, and that's down from 2.8 million Btus and that reflects the effect of the turnaround. The average cost of that gas was $4.71, down from $4.82 in the quarter a year ago.

Maintenance CapEx was $2.5 million, slightly down from $2.7 million last year. We recently upsized the revolving working capital facility of Rentech Nitrogen up to $35 million from $25 million. We have not drawn on it and we do not project that we will use it this year but it's there to provide additional financials flexibility for seasonal working capital needs which can fluctuate quite a bit throughout the year. Rentech Nitrogen also closed on a $100 million multiple draw term loan to fund all of the expected CapEx for the ammonia and storage capacity expansion project currently underway.

That product facility has an interest rate option at LIBOR plus 375 basis points. That's a very significant improvement over the last term loan that we syndicated before the IPO.

The CapEx facility can be drawn until February, 2014 to fund expansion-related expenses. It requires amortization payments, which are expected to begin in spring of 2014.

In the first 2 years of amortization, 2.5% per quarter of the principal outstanding on the facility must be repaid. And in final year, 25% must be repaid. The revolving facility and the term loan are both at Rentech Nitrogen. They're not guaranteed by Rentech and both of those facilities were arranged and led by GE Capital. Simultaneously, with the closing of those new loans, Rentech Nitrogen terminated the bridge loan facility that have been provided by Rentech. That was put in place in December, 2011 to fund the expansion project while the CapEx facility was being negotiated and syndicated. Rentech Nitrogen has drawn $8.5 million on the CapEx facility to repay all of the outstanding principal under that bridge loan facility and to pay fees associated with the new credit facility. During the 12 months ending September 30, 2012, Rentech Nitrogen expects to have an expecting balance on that CaPex facility of about $20 million to $22 million and incur interest expense of about $1.3 million. In the November 3rd prospectives, the forecast for cash available for distribution is $2.34 per unit for the 12 months ending September 30, 2012 before any debt service. Rentech Nitrogen expects to pay its first cash distribution to unit holders in mid-May for the period started with the closing of the IPO, that's November 9, 2011 and that period ends on March 31, 2012.

Rentech, the parent, will receive 60.8% of those distributions. At Rentech, as of December 31, 2011, we have $114 million in net operating loss carryforwards applicable to our federally taxable income including our share of income from Rentech Nitrogen. This is higher than the estimate of $90 million we had previously provided. For the Alternative Energy segment, the total cash operating expenses and capital expenditures are projected to be about $42 million to $44 million for the 12 months ending September 30, 2012, breaking that down about $20 million of cash SG&A is expected and note that, that's just cash SG&A, SG&A on the income statement would be higher because it includes noncash compensation expenses but for this purpose, we're just focusing of the cash spend. In addition to the $20 million of SG&A, we expect about $20 million to $22 million in R&D expenses and that assumes that we run the PDU through the end of September. Costs about $2 million in capitalized expenses mainly for information technology systems.

Based on the forecast in Rentech nitrogens prospectus, Rentech's shares of cash available for distribution for the 12 months ending September 30 would be $54.4 million and that compares to the $42 million to $44 million of cash operating expense and CapEx that we're projecting. This projection of cash spending excludes any share repurchases, repayment of debt or tax benefits. I'll now turn it back over to the operator and then Hunt and I will answer your questions.

Question-and-Answer Session

Operator

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

Matthew Farwell - Imperial Capital, LLC, Research Division

I'm just wondering if you can update us on your plans to address the convert.

D. Hunt Ramsbottom

Yes, I think we said all along we know it's top of mind that we have over a year to deal with -- we have the cash to deal with it and we'll continue to look at it in the next few months.

Matthew Farwell - Imperial Capital, LLC, Research Division

Okay. Any plans other than just paying it off with the cash that you have? Or are you potentially looking at refinancing it with another piece of debt?.

D. Hunt Ramsbottom

I think we're looking at everything. I mean that's our job to look at everything and I, and Dan and the team are assessing all the above and over the next few months since we're not in a hurry here. I just saw my speaker flashing, are you hearing me okay? So the answer is all of the above and we're looking at those in were not pressed on time but we certainly are having our conversations internally.

Operator

Our next question comes from the line of Pavel Molchanov with Raymond James.

Pavel Molchanov - Raymond James & Associates, Inc., Research Division

I apologize if you guys covered this earlier but what percentage of your calendar 2012 gas supply has been hedged at this point or locked in?

Dan J. Cohrs

This is Dan Cohrs. We actually have not disclosed that as a percentage of the calendar year. We did disclose it earlier as 84% of the amount we need through September 30. So that 12-month period ending September 30 which is our old fiscal year, we are 84% hedged. We just haven't put that out yet for the full calendar year.

Pavel Molchanov - Raymond James & Associates, Inc., Research Division

Okay, understood. And then on the renewable side, obviously, you're looking at the Canadian projects, a few other things, but what are the, I guess, what are the key criteria before you decide to pull the trigger on one of these?

D. Hunt Ramsbottom

I think there's a number of criteria that we have outlined is returns, we want to see returns, we want to see cash flow. In the near future we want to see partners at the table and I think those are the criteria. It has to have a cash flowing opportunity. It's got to have the feedstock lockdown, the typical things you'd see in development feedstock, solid offtake, partners at the table and cash returns in the near future. I think that's exactly how we're approaching it. And there are some opportunities and you're active in this space and we believe there's opportunities out there, we have to make sure that -- that's all lined up. We don't want to take a lot of risks in this space right now.

Pavel Molchanov - Raymond James & Associates, Inc., Research Division

When you say near-term cash flow, what's, I guess what's near term? It's probably not 2012 that wouldn't be realistic but is it kind of a 2013 timeframe? If you made an investment decision today?

D. Hunt Ramsbottom

How did I know you're going to ask that. I would say 24 months or less is the way we're looking at these.

Pavel Molchanov - Raymond James & Associates, Inc., Research Division

Okay. Understood. What -- how many projects are you currently assessing?

D. Hunt Ramsbottom

We are looking at quite a few. And both -- I have to be careful here, both in the segment that we've been focused on and there's some thing in periphery on the segment that we've been looking at. But all in the areas that we have expertise in, but there's a fairly active -- very, very active internal group now looking at a number of opportunities in North America.

Dan J. Cohrs

Pavel, just to be clear we're looking at things that do not necessarily use our technologies. We are not just talking about development projects. As we had in the past so we're looking at acquisitions and projects that do not necessarily use our technologies but that are in areas that we have expertise in.

Operator

Our next question comes from the line of Lucas Pipes with Brean Murray, Carret & Co.

Lucas Pipes - Brean Murray, Carret & Co., LLC, Research Division

Could you maybe break down the kind of your rough cash balance at the moment?

Dan J. Cohrs

Yes. We disclosed that. At the moment, no, as of December 31, we disclosed that the number is...

D. Hunt Ramsbottom

It was about $237 million consolidated, about $193 million at the parent, as of December.

Lucas Pipes - Brean Murray, Carret & Co., LLC, Research Division

Okay. And then, I mean, that leaves plenty of cash even after the convert and the share repurchases. If you had to kind of prioritize your uses of cash would that be additional share repurchases first and then maybe some M&A. Or how do you look at that?

D. Hunt Ramsbottom

Yes. Great question, and I think all those, whether it's share repurchase whether it's an acquisition, it's all going to be about how we can get the highest return for our shareholders in the near and medium term. And that's exactly how we're looking at everything that we do.

Lucas Pipes - Brean Murray, Carret & Co., LLC, Research Division

Great. That's helpful. And then maybe to turn to the PDU really quickly. Could you maybe provide a little bit more details in regards to how this process is evolving with potential partners? What the interest is looking like at the moment? And how long do you expect to run it kind of past September 30?

D. Hunt Ramsbottom

Right. So right now, as we indicated, it's -- we'll go through September, and we do have probably the highest level of activity we've ever had. And I think a lot it has to do with certainly starting up the gasifier and it also has a lot to do with natural gas being at the prices they are. I remember we've been operating a gas-to-liquids plant here for a better part of 3 years. And what we've seen is this R&D process is not a straight line and we're seeing terrific results on our fuels technology. The best the company has ever seen in its history. And with the start up of the gasifier in combination with the natural gas been running this, we've got a high level of activity and we want to make sure that we play that out. So and as we stated earlier, we'll run through September, we'll continue to assess the IBR project and how these partnerships play out. Knowing that as we turn the quarter toward next fiscal year, that as I mentioned in the -- in this -- in the early part of the call that this R&D spend -- expense will continue to come down if we don't see those relationships bear fruit. Either way it's going to come down. You can put it that way.

Operator

Our next question comes from the line of Anatol Feygin with Loews Corporation.

Anatol Feygin

Two I guess. One is why not pay a partial distribution for the balance of calendar Q4, and two, if can you just walk me through the share repurchase. Why it was -- why it will only be effective March 20, and how you guys plan to implement it?

Dan J. Cohrs

Yes. Hi, this is Dan. On the distribution, I'm not quite sure I understand your question. Which -- we're paying a distribution that stars on the IPO date and ends at the end of the March 31 quarter. Are you asking why not pay one for the December 31 quarter?

Anatol Feygin

Correct. Right. Why not pay out the stock distribution?

Dan J. Cohrs

Yes, when we did the IPO, we just made the decision that we would have a full quarter under our belt before we end the distribution. So from the time we filed the IPO that's been the plan all along. It's really that simple so we'll be paying that distribution following the first full quarter ending March 31. On the share repurchase, your question was...

D. Hunt Ramsbottom

Why March 30?

Dan J. Cohrs

Oh yes, we're -- it's an open market repurchase program and need to be in an open window period before we can put anything into effect. And so leading up to this earnings release, of course we are in a blackout period so we -- effectively we couldn't do anything. Now that we have fully disclosed, we can open the window period and potentially buy shares if we like the price.

Operator

Our next question comes from the line of Jay Traeger with Park West Asset Management.

Jay Traeger

So I was just wondering if it would be possible to license partner or sell the demonstration unit or other projects so that you're not putting more capital into them? Because I think our input would be to reduce the level of spend and focus on creating shareholder value through proper allocation of capital and not necessarily through acquisitions or investments on the alternative energy side.

D. Hunt Ramsbottom

We agree. And that's what we're doing.

Jay Traeger

Okay. So, I mean is it possible to look into licensing or selling the demonstration unit to someone with a lower cost of capital than you?

D. Hunt Ramsbottom

I think that's we said, that's what we're doing. And as I've said in the script that's what we're doing. When we said we're talking to partners it's exactly that. That's to license and participate in the operational -- operations of the PDU. So, folks would have a global reach in the balance sheet.

Jay Traeger

Okay. So when you talk about putting no more than $40 million into any one project, is that your equity capital that you would be talking about the $40 million or the total capital that you would expect to need?

D. Hunt Ramsbottom

Not up to $40 million would be our contribution.

Jay Traeger

Because that's a pretty meaningful amount to spend. So I guess I'm a little confused as to the message. If you say you're focused on reducing levels of spend but also say you'll put up $40 million. Because that's a pretty meaningful percentage of the cash balance.

D. Hunt Ramsbottom

Well, the $40 million is not for the PDU. The $40 million would be the growth cash flow opportunities for the business.

Operator

Our next question comes from the line of Jason Lever [ph] with Midas Capital.

Unknown Analyst

Yes. I am -- I'm wondering on the distribution, I think the -- your estimate was to get $2.34 per share of RNF that you own. That I believe is on the old fiscal 2012. Are you going to update it to the new fiscal 2012 estimate? Is there -- do you have plans to update it to that?

D. Hunt Ramsbottom

Yes, I would expect in the future, we will switch over to giving guidance for the full calendar year. Right now, we just wanted to speak in terms of the September 30 period so it's all apples-to-apples, as to what's in the prospectus and what we've been saying in the past.

Unknown Analyst

Right. Okay. Because that would really give you -- because this number you're -- we're really looking at is -- it's only about 7 weeks of the quarter, so it's a little short of the year. And I think it maybe doesn't give the right impression for your full earnings power. And just one other follow up on -- if you could just go through again the options on the -- for the -- in the 2013 the R&D to come down I believe on the IBR. In other words either you have a partner, what are the other options?

D. Hunt Ramsbottom

Well, as we said, we have a partner that will participate fully in the R&D facility. License -- there's a number of opportunities that you could go. Licensing, partnering and help operate, they could take over operations, partner on the operations to reduce spend, a license and a combination of that, or just reducing it down to a smaller group of folks out there. So there's a very long menu here and then the menu's getting shorter.

Operator

Our next question comes from the line of Chris Brown [ph].

Unknown Analyst

If you look at Rentech Nitrogen as its own independent company, then Rentech has cash and securities of about $750 million. You guys trade with a market capital of about $440 million. So the market is going to see the net present value of all of your businesses x Rentech Nitrogen, or about negative $310 million. Getting back to the shareholder value question, will you commit to shareholders that there's a certain ceiling on how much money you're willing to lose in the part of the business outside of Rentech Nitrogen? Because I think right now the market doesn't have any confidence in how big that number might be.

D. Hunt Ramsbottom

I think, hopefully, we're conveying to everybody that we are being very mindful of the spend and very mindful of what we'll do with our cash. And I guess I'll play back the tape, our stock is up 100% since last summer and we think we've created some pretty good shareholder value over that period of time. Our incentive program that the Board has put in place, the bulk of that is $3 or more. So we are highly incentive and I think we are proving out over the last 6 or 7 months with 100% appreciation and stock. And the way we're articulating, the way we're going to go forward in terms reducing our spend in R&D and development and being conservative with cash, I think, hopefully, that message is coming through.

Unknown Analyst

You guys have such a phenomenally high cost of capital right now that -- I mean, to do anything other than buyback stock with the cash you have, you would have to have one of the most amazing investment opportunities in the history of earth.

D. Hunt Ramsbottom

We can debate that all day long and it depends on your time horizon versus ours.

Operator

Our next question comes from the line of Chris Orski with Bow Street.

Chris Orski

I just want to follow up on that last question. Can you give us a sense of what kind of return hurdles you're looking at as you evaluate investment projects?

D. Hunt Ramsbottom

Yes. Well, we haven't been like specific publicly but I think we could certainly give you a rough guideline for how we think about it. If we're looking at very conservative investments with cash flows in the very near term, like within 12 months or even current, we'd be looking for returns on capital and I'm talking unlevered returns on capital now. Certainly, at least in the mid teens if we're looking at something that has a little further to -- longer time to develop the new capital business, it's going to go up from there and if we -- if it's a project that's employing any form of technology at all, we're going to be looking at the mid-20s or higher. Just as rough guidelines.

Chris Orski

And you sort of mentioned they're not going to be, sort of, your core technologies, what kind of other stuff -- is it going to be other fertilizer-type assets? Or what other stuff are you looking at? And what sort of are the core competencies you evaluate non-fertilizer, non kind of Fischer-Tropsch technologies?

D. Hunt Ramsbottom

Well I think, as we said in the script, we're looking at opportunities in the fertilizer space and around that space and we're also looking at opportunities that don't include our technologies. And I don't think we all can sit here and talk about exactly what those are today. And when and if we do anything it'll hit the criteria that we've outlined.

Operator

We have a follow-up question from Anatol Feygin with Loews Corporation.

Anatol Feygin

Just a quick follow up on the gas hedges. Dan, you said 84% in the release through September 30, are there any gas hedges that go out beyond 9/30?

Dan J. Cohrs

Not at this point today. No, I think we're only up to 9/30 or within -- inside of 9/30.

Operator

The next question comes from the line of Alex Lerner [ph] from Indaba Capital.

Derek Christopher Schrier - Indaba Capital Management , LLC

It's actually Derek Schrier. Thank you guys it's great news here about your plans to build shareholder value and return capital. With regard to the stock buyback program though, you didn't implement 10b5 plan so that you could buy outside the windows. Is that -- was that something you considered and decided not to do? Or is that something you perhaps would consider going forward?

D. Hunt Ramsbottom

We haven't ruled that out. We simply haven't put it in place. And of course we could only put that in place during an open window period. But that's not ruled out.

Derek Christopher Schrier - Indaba Capital Management , LLC

Okay. We think it we would be a great idea, obviously, to be more opportunistic. Secondly, what should be our expectation in terms of how much of the dividends that you have received from RNF stock would be returned and passed through to Rentech shareholders?

D. Hunt Ramsbottom

Well I think the only direct way those of you passed back in the foreseeable future would be through the share repurchase program if we purchase any shares in the open market.

Derek Christopher Schrier - Indaba Capital Management , LLC

It seems like it'd be an important way to return value to shareholders to pass through some of that cash. So we think it's important that you -- we think about anything in the -- tremendous demonstration of value.

D. Hunt Ramsbottom

We understand. And that's why we've authorized a share repurchase program so we completely understand what you're saying.

Derek Christopher Schrier - Indaba Capital Management , LLC

Okay. We're looking -- we hope to their side, we really hope that, that is put to work.

D. Hunt Ramsbottom

Okay.

Operator

And that was the last question. I'm turning the call over to you, sir.

Julie Dawoodjee

Hi, this is Julie. We would like to thank everyone who participated on the call today. I encourage you to contact me if you have any questions about the quarter. Thank you for joining us.

Operator

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

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