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Rentech (NASDAQ:RTK)

Q4 2007 Earnings Call

December 14, 2007 1:00 pm ET

Executives

Julie Dawoodjee - Director of Investor Relations

Hunt Ramsbottom - President and Chief Executive Officer

Douglas M. Miller - Chief Operating Officer

Merrick Kerr - Chief Financial Officer

Debra Harshman - Chief Accounting Officer

Analysts

John Bridges - JP Morgan

Michael Molner –Goldman Sachs

Will Burns - Johnson Rice

Pearce Hammond - Simmons & Co., International

Julian Mesheer - Sherwood Investments

Pavel Molchanov -Raymond James

Jan Coulter - Prime Investor

Operator

Good afternoon, everyone and welcome to the Rentech Fiscal Year 2007 Fourth Quarter and Full Year Earnings Call. This conference is being recorded.

At this time I would like to turn the call over to Miss 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 2007 Fourth Quarter and Full Year Conference Call.

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 the company’s progress during the quarter and Merrick Kerr our Chief Financial Officer will give a fiscal review of the fourth quarter and full year, and will provide comments4 on Rentech’s financial position. We will the open the lines for questions and ask that you limit your call 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 Revision Reform Act of 1995. They can be identified by the use of this terminology such as: may, will, expect, believe and other comparable terms. You are cautioned that while forward-looking statements reflect our good faith beliefs and judgment based on current information, they are not guaranteed as future performance and are subject to known an 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 December 14, 2007 and Rentech does not undertake to revise or update these forward-looking statements except to the extent that it is required to do so.

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

Hunt Ramsbottom

Thank you, Julie, and good morning everyone. Thank you for participating in Rentech’s 2007 Fourth Quarter and Full Year Conference Call for the period ended September 30, 2007.

As many of you are aware, our patented Rentech process can turn any carbon-bearing feedstock into ultra-clean synthetic fuels and chemicals. The process is one of the most promising methods to provide our nation with a scalable solution for domestic production of clean fuels that can not only increase national energy security but also address the growing energy demand and the tightening supply.

As I’ve shared with you in the past the management team has identified several objectives that will enable the company to accomplish of becoming the leading technology provider for the production of ultra-clean synthetic fuels both domestically and internationally. The most significant of these objectives are:

1) The implementation of a plan to reduce the carbon footprint of office facilities.

2) The completion of a demonstration unit to provide product for testing to enhance the Rentech process.

3) The commercial deployment of the Rentech process in an environmentally sound and economic manner.

4) The deployment of a project pipeline with strategic partners to accelerate the commercial deployment of the Rentech process.

5) The expansion of the Rentech through domestic and international licensing. We believe that the accomplishment of these objectives will increase shareholder value and have thus spent the last year focused on these priorities.

I would like to take a few moments to share with you the strides we’ve made this year toward these objectives. In order to provide a scalable solution to our nation’s growing need for fuel, we’ve determined that we will use coal, petroleum coke and biomass as primary feedstock in our commercial-scale facilities. We intend to reduce the carbon footprint of our fuels plants by capturing carbon dioxide produced during the process and finding commercial uses for the captured carbon dioxide where possible.

Carbon captured in sequestration enables the carbon dioxide emissions from the production of the fuel from the Rentech process to be comparable to or lower than those generated in the production of petroleum derived diesel. We conducted multiple studies and determined that blending a biomass with coal or pet-coke can further reduce the greenhouse footprint of our fuels to a level significantly below that of petroleum derived fuels. These findings were recently validated by an independent study conducted by the Department of Energy’s National Energy Technology Laboratory. The DOE study found that with carbon-capture and sequestration as well as biomass co-feed the carbon dioxide emissions for the production of [fisotrope] fuels can be 20% lower than those generated in the production of petroleum derived diesel.

As a result this year we implemented our carbon reduction plant to further reduce the carbon footprint of our facilities. There are four distinct parts to our carbon reduction plan: first we test various feedstocks at our production demonstration unit or PDU; second we intend to install a commercial biomass gas intensifier at Rentech Energy Midwest or REMC; third, we intend to produce fuels on a large promotional scale through co-feeding of biomass with coal or pet-coke at our facilities; fourth we intend to produce renewable ultra-clean synthetic fuels at small scale stand-alone biomass facilities.

We believe the introduction of the carbon reduction plan I just outlined will enable this company to address not only this country’s growing need for domestically produced fuel supplies but also address our nation’s emissions problems.

Our second objective, I mentioned earlier is to have a demonstration unit to provide product for testing purposes and to enhance the Rentech process. Our PDU located outside Denver in Commerce City, Colorado is nearing completion. We remain on schedule to begin synthetic fuel production there on a demonstration scale in the spring of 2008. The PDU will initially produce syngas from natural gas through steam methane reforming, and then through the application if solid feedstocks including coal, Pet-coke and biomass.

The PDU is a critical objective as we believe it will enable us to demonstrate the Rentech process which will support the expansion of our process through domestic and international licensing. In addition the products produced by the PDU will be tested by potential customers, which we believe will enhance the ability to enter into long-term contracts for the products that will be produced at our commercial facilities. In fact we look forward to providing the United States Air Force with sample products from the PDU in 2008 for testing.

We announced last week that the commercial deployment of the Rentech process will take place in Adams County, Mississippi near the city of Natchez. We’re excited to have what we believe in Natchez to be an ideal site for the construction of a synthetic fuels plant in the U.S. The site offers possible product distribution, feedstock access and most importantly a carbon dioxide solution. We believe that building our first commercial scale reactor at Natchez will enable us to achieve the objective of the commercial deployment of the Rentech process in an environmentally sound and economic manner. This is because the Natchez site offers an exceptional carbon reduction solution in that we’ll be selling the carbon dioxide produced at the facility to Danbury Resources under a long-term contract for enhanced ore recovery in the region.

With the carbon capture and sequestration plan as well as the biomass blend the carbon emissions from the production of fuels at Natchez are expected to be substantially lower than those generated from the production of petroleum derived fuels. The fuels produced at the facility will be among the most greenhouse gas friendly fuels available in this country. In addition, we believe the sequestration agreement with Danbury adequately mitigates the economic risk of the facility should proposed greenhouse gas legislation be enacted.

Based on preliminary estimate, we believe we can build a comparable production capacity at Natchez for about half the cost of the original conversion at REMC. The site offers an expansion platform into a large volume fuel and chemicals production facility which enables us to benefit from the economy at that scale. Our first commercial synthetic fuels plant will have a commercial scale reactor capable of producing 1,600 barrels a day of synthetic fuels from the Rentech process.

In the second phase of Natchez we’re targeting to produce an additional 28,000 barrels per day of clean fuels and chemicals at the site. We believe that the deployment of the Rentech process in a commercial scale reactor at Natchez is a critical step in the commercialization of our process and will increase the value of our technology.

Another objective we have is the development of a project pipeline with strategic partners to accelerate the commercial deployment of our process. We count Domingo County Redevelopment Authority, The Salina Group, and Peabody Energy among our strategic partners. We pent the last quarter focusing on how to best facilitate the use of our process at multiple sites. We believe pursuing a phased approach starting with production on a small commercial scale of up to 3,000 barrels per day and then scaling up to as much as 50,000 barrels a day. We believe the staged approach with the Natchez site will enable the plant to come online sooner, be easier to finance and will provide us with valuable design, cost and efficiency improvements for the second stage of our expansion.

Accordingly, our project with the Domingo County Redevelopment Authority in West Virginia will now also be constructed in multiple phases. The first phase of Domingo County is expected to produce approximately 3,000 barrels per day. The ultimate build-out will total 30,000 barrels a day of synthetic fuels production. We’re in the feasibility stage of this coal-biomass project having already identified poultry wastes from the area as potential biomass feedstock. The coal feedstock is planned to be a low cost waste coal which would improve the yield of useable coal from existing mines.

We have also commissioned Marshall University to conduct a study detailing the economic impact the project will have in the area. The study will by the end of 2007 and based on preliminary results we expect the report findings to have a positive influence in encouraging state support for the project.

Our stand-alone biomass facility under the joint development agreement with Salina Group continues to progress. We’re currently in site-evaluation which includes the evaluation of existing landfills for the location of the facility. This will allow the use of existing landfill location permits for this facility and also extend the life of the existing landfill by using the municipal waste at the landfill as feedstock. The facility is expected to be 1,500 to 3,000 barrels per day stand-alone biomass facility and is expected to be the first commercial biomass fuel production facility in this country.

We continue to pursue additional opportunities for domestic and international stand-alone biomass facilities in addition to the purposed plant in Northern California. We also remain committed to the project under the joint development agreement with Peabody both in Montana and in Kentucky.

As we announced last week, we’ll continue to monitor the economic and public policy factors, including legislation addressing carbon dioxide to determine whether the conversion at REMC may be appropriate at a later date. We will therefore continue to pursue our permitting efforts at REMC so that we’ll be prepared to move forward quickly should conditions change, such as the proposed construction of a carbon dioxide pipeline in the region by the Midwestern Governor’s Association. A future conversion at REMC would entail converting the feedstock from meth-gas to coal using gasification technology, and then suing the excess capacity of those gasifiers to deploy the Rentech process to produce ultra-clean fuels. Peabody Energy still maintains its 20% equity option in the project should we proceed with the conversion.

On licensing, DKRW will continue to develop [fisotrope] coal to diesel facility in its existing site-license agreement with Rentech. Upon successful completion of this project DKRW subsidiary would use the Rentech process and purchase catalyst developed by Rentech for the plant. In addition, Rentech would receive license fees based on current production capacity and achievement of certain milestones as set forth in the agreement. Rentech and DKRW still maintain the license agreement under which DKRW will use the Rentech process in any domestic or international fishotrope fuels plant DKRW builds. We also continue to pursue domestic an international licensing agreements for the Rentech process.

As you can see we’ve made significant strides against the objectives we’ve identified and that will enhance shareholder value and put us on the path to becoming a leading technology provider of ultra-clean synthetic fuels. To sum up, what we’ve done here at Rentech over the last year to enhance shareholder value.

1) We implemented a carbon reduction plan that will not only help reduce our nation’s emissions problem but will help mitigate the cost of potential greenhouse gas legislation.

2) We’re nearing completion if the PDU and will begin fuel production on a demonstration scale in the spring of 2008. Completion and start-up at the PDU will enable us to begin providing potential customers product for testing purposes, including the Air Force in 2008. It will also demonstrate the Rentech process to potential partners and licensees.

3) We expect to build the first commercial reactor at Natchez for initial production if 1.600 barrels a day at a cost that is currently estimated to be less than half of the conversion at REMC. This means the overall capital costs to commercialize our technology at Natchez should be less expensive than the planned REMC conversion which increased the likelihood of the facility being constructed and financed. In addition, by deferring the conversion at REMC we are able to preserve and build on the enhanced value of the REMC photolyzer plant which is profitable and provides cash flow to support our commercial plans.

4) We have developed string relationships with partners. We are moving forward with projects with our partners for the deployment of the Rentech process at multiple sites using a phased approached that we believe will bring these plants on line sooner, increase our ability to finance the plants and provide valuable design, cost and efficiency improvements.

Next, I’d like to lay out some of the milestones to look forward to in 2008 to enhance general value and provide progress toward our goal of becoming a leading technology provider of synthetic fuels:

1) Fuel production at the PDU in the spring of 2008.

2) Completing the purchase of the Natchez site.

3) Filing of permit applications for the Natchez project.

4) Selection of the gasifiers for our first commercial facility in Natchez.

5) Selection of the feedstock for the Natchez project. Continued progress on our project pipeline and strategic partnerships and finally continued strong performance at REMC.

I look forward to your questions in a few moments, but first let me turn the call over to Merrick Kerr our Chief Financial Officer.

Merrick Kerr

Good morning, everyone.

As Hunt as mentioned, REMC’s performance has been strong and continues to exceed our expectations. Due to the timing of the acquisition of REMC on equal points 2006, fiscal year 2006 does not include the full year of results for the manufacturing of nitrogen products. In addition the field petroleum mud-logging on November 15, 2006 for approximately $5.4 million resulting in the revenue and cost of sales for that segment in classified and discontinued operations. During the fourth quarter fiscal 2007, we recognized revenues of $29.6 million and a gross profit of $2 million compared to revenues of $26.8 million and a gross profit of 1.2 million in a corresponding period of fiscal 2006. We recorded a net loss reflected on the shareholders of 20.8 million because of a 38.2 million one time non-cash impairment for a loss of $0.14 per share for the quarter compared to a net loss reflected upon the shareholders of 8.5 million or a loss of $0.06 per share in the corresponding period of fiscal 2006.

The one time non-cash impairment is related to cost through fiscal 2007 for the REMC conversion project last week. Including the impairment net worth applicable to common shareholders was 58.9 million or a loss of $0.46 per share. During fiscal 2007, we recognized revenues of 142.3 million and a gross profit of 15.8 million compared to revenues of 44.5 million and a gross profit of .4 million in the corresponding period of fiscal 2006. We recorded a net loss applicable to common shareholders of 53.5 million before the one-time non-cash impairment for a loss of $0.35 per share for fiscal 2007 compared to a net loss applicable to common shareholders of 48.7 million or a loss of $0.40 per share for the corresponding period in fiscal 2006, including the impairment the net loss applicable to common shareholders of 91.7 million or a loss of $0.61 per share.

Our profit for 2007 was 16.8 million compared to .4 million for the comparable period of 2006. The increase in gross profit and the improved gross margins were due to improved sales prices higher demand and reduced average natural gas costs at REMC.

General administrative expenses were 28.1 million during the year, up .8 million from the corresponding period of fiscal 2006 when these expenses were 27.3 million. In fiscal 2007 information technology enhancement were 2.2 million. We experienced entry fees and other general administrative expenses during the year in various categories including equipment fees, insurance and consulting expenses. An offset to these increases was the $4.4 million decline in non-cash stock-based compensation and a charge for $1 million in fiscal 2006 for a break-fee leading to a financial arrangement with no corresponding charge in the coming year.

Research and development expenditures during the year were $43.1 million compared to 12.1 million during the same period last year. Expenses were related to the design and procurement of equipment for and construction of the PDU accounted for 70% of 44.1 million of current year R&D expenses. The remaining 9 million of fiscal year 2007 R&D expenses related to process development and product updating work.

Operating expenses for fiscal 2007 included the non-cash impairment of $48.2 million arising from the deferral of the REMC conversion project. We also expect to incur $8 million of cash charges in the first quarter of fiscal 2008. During fiscal 2007 REMC generated net income of 11.9 million. Estimated construction costs of the PDU are approximately 61 million, including approximately 7 million for the steam methane reformer. Through the end of fiscal 2007 we have spent 44.3 million of that 61 million.

As of September 30, 2007 we had cash and cash equivalents in marketable securities for 56 million as well as no borrowings on the 30 million revolving working capital line of credit at REMC.

Looking forward, as of the end of last week Natchez phase one, the production of 1,500 barrels per day of synthetic fuels at our Rentech strategic fuels and chemicals complex in Mississippi had an lower overall capital cost than the REMC conversion project. Our running estimates for the cost of Natchez phase one are approximately $460 million which is about half of the estimated cost of commercializing our technology at REMC.

We currently anticipate raising the finance for Natchez phase one sometime in the next 15 to 20 months. We expect the financing to be a combination of any of the following:

portions of the $2.75 billion inducement resolution of tax exempt and taxable bonds approved by the Mississippi Business Finance Corporation; contributions from potential equity partners, equity issued at the corporate level and project finance. We are also pursuing Federal and State grants and loan programs to provide financing or financing support for the facility. We do not anticipate any significant equity raises between now and the commencement of construction of phase one at Natchez, which as I said is expected sometime in the next 15 to 20 months.

As I mentioned REMC has performed well as stabilized natural gas prices and increased ammonia photolyzer prices have contributed to improved operating margins at the plant. As of today we have locked in ammonia margins for approximately 66% of our fiscal 2008 production at an average sales price $462 per ton. This is in comparison to our average sale price of ammonia of $351 per ton in fiscal 2007 and $300 per ton in fiscal 2006. We have also locked in margin for approximately 50% percent of our fiscal 2008 production for an average sales price of $255 per ton. This is in comparison to our average sales price of $209 per ton in fiscal 2007 and $161 per ton in fiscal 2006.

REMC generated approximately $20 million in EBITDA in fiscal 2007. And if that market remains strong for REMC products for the remainder of the fiscal year, as we believe it will we expect to generate over $45 million in EBITDA in fiscal 2008 which is a year-over-year increase of 75%. This would be an outstanding return for a plant that we purchased over 19 months ago for $50 million plus working capital. REMC is a valuable asset of the company and it has exceeded our expectations. Increased capital from REMC as well as the lower cost commercialization plant at Natchez will enable us to move forward to the commercialization of our technology with a significant reduction in our need for additional capital.

With that I’d like to hand the call back to Hunt.

Hunt Ramsbottom

Thank you, Merrick.

And now I’d like to turn it back to the operator for questions.

Question-and-Answer Session

Operator

[Operator instructions] We’ll take our first question from John Bridges from JP Morgan.

John Bridges – JP Morgan

You mentioned the R&D budget for this year as being 43 million, what do you expect that to be for 2008 and how do you expect to book that? I’m thinking that expenses are going to be a growing concern without much R&D in them.

Merrick Kerr

The ongoing R&D expense will be possible when we complete the PDU. The completion of the PDU will continue to be charged through the P&L account as R&D. there will be the operating cost of running the PDU which will probably be in the range of about $1 million a month when we’re running it on natural gas. Incremental R&D that we’ll discontinue to do on the capital which is probably more than 600,000 to 700,000 a month range.

John Bridges – JP Morgan

Roughly what do you think it’s going to be on our end?

Merrick Kerr

Probably 18 to 20 million.

John Bridges – JP Morgan

Less than the 43 of last year?

Merrick Kerr

Significantly less.

Hunt Ramsbottom

It will be less than last year.

John Bridges – JP Morgan

When do you expect to publish the 10-K?

Merrick Kerr

Today.

John Bridges – JP Morgan

Great.

Operator

Thank you. Moving on we’ll take our next question from Michael Molner from Goldman Sachs.

Michael Molner – Goldman Sachs

Good afternoon, guys. Just a quick one on the fertilizer business, I appreciate you giving some of those numbers in you locked in at what price. For the current quarter can you just break down ASP and tons to go up to the 29.9?

Merrick Kerr

Sure we can, it was 12,500 tons of ammonia, and about 74,000 tons of UAM. I should probably point out at this point that the plant was down for about three weeks in September for maintenance turn-around on the plant which we do every two years. That’s probably why you see a little bit if reduction in the margin in the fourth quarter. We had three weeks that the plant was down, then the expense related to the turn-around.

Michael Molner – Goldman Sachs

Okay and just to double check the whole 29-5/8 dip in revenue is due to these tins that were sold, there’s nothing else in there?

Merrick Kerr

There are other products in there that do account for about 20 million of the total. The others come from urea and CO2 sales.

Michael Molner – Goldman Sachs

What I’m trying to get at is in total how many tons times whatever price to get to the 29 million. I want to make sure I don’t put in the wrong number and come to something grossly incorrect.

Merrick Kerr

The other main numbers that you want to look at are about 26,000 tons of CO2 sold as well.

Michael Molner – Goldman Sachs

Okay, thank you.

Operator

Moving on, we’ll take our next question from Will Burns from Johnson Rice.

Will Burns - Johnson Rice

Good afternoon, all, or at least it’s afternoon over here. On the timing of the Natchez land purchase, do you have any idea when you might close that and have you disclosed what kind of cost that may be?

Merrick Kerr

It’ll be before April, and it’s about 9.5 million

Will Burns - Johnson Rice

Very good. I have a separate question. I wonder if you could shed any light on the DKRs having the opportunity of going coal –to-gasoline, I was just wondering what kind of technology is involved, if you could shed any light on that for me?

Hunt Ramsbottom

I think you’d probably have to get DKR to shed light on that and what technology they’re using.

Will Burns - Johnson Rice

Fair enough then thank you.

Operator

Thank you. Moving on we’ll take our next question from Pearce Hammond from Simmons.

Pearce Hammond – Simmons and Co. International

What are you expecting cash burn to be for the next year?

Merrick Kerr

We’re still running at corporate cash burn around just over S2 million a month. It’s based on how much we spend on R&D which we told you, and the development of the project Hunt-Wine, and then Natchez phase one. In terms of straight it’s just over $2 million a month. After that it’s discretionary spending.

Pearce Hammond – Simmons and Co. International

If you’re at $2 million a month and the Natchez land purchase you said will cost 9.5 million, then R&D you were saying would be roughly half of what it was this year, so that puts the total in the 20 million range, is that all reasonable?

Merrick Kerr

That’s reasonable.

Pearce Hammond – Simmons and Co. International

Okay. With the change in direction at Natchez, I know REMC as a strategic asset, but would you consider selling it?

Hunt Ramsbottom

Right now we are looking at REMC as an asset to this company. In fact we’re looking increasing production to get more production. We’re looking at all aspects to increase the value of that. We’re very bullish on that business.

Pearce Hammond – Simmons and Co. International

Thanks, Hunt.

Operator

Moving on we’ll take our next question from Julian Mesheer from Sherwood Investments.

Julian Mesheer - Sherwood Investments

Good afternoon, gentlemen. I noticed the fiscal year jump-in revenue showed 197% increase year-over year and if I count out the fertilizer plant the SG&A has actually declined year-over-year by 2.9%. Obviously that’s a great leveraging of your SG&A. How does management plan to further leverage your SG&A in the next 12 months? And I understand you’ve also already outlined 31% expectation of the increase in some of the fertilizer prices and the 22% increase you’re expecting on some of the other fertilizers. What do you guys have in mind for next year to replicate these outstanding leverage numbers?

Hunt Ramsbottom

Julian, I think we’ll continue to look for ways to increase production, de-bottle-neck the plants, make sure that we get maximum volume from them. We have stocked up, and those of you who have been around a couple of years, we’ve done significant staffing in the last two years. We’ve got the folks on board that we need to build the company on. We’re in good shape. We don’t plan any additional hires. Anything we do from here will just be leveraging corporate overhead.

Julian Mesheer - Sherwood Investments

Given the total loss, including the impend charge which obviously is non-cash is 91.7 million for last year. The value of that asset has increased by obviously way more than that amount for you as a company. Do you expect to have a similar sort of increase in the next 12 months?

Merrick Kerr

I think, as I said, it depends on the market turn-around. What I think an over 75% improvement on the EBITDA is something that is very achievable as we look forward now. Given that we still have a significant portion of our production open for the spring plant impediment which is where we achieve our highest price.

Julian Mesheer - Sherwood Investments

Thank you, gentlemen, good luck.

Operator

Moving on we’ll take our next question from Pavel Molchanov from Raymond James.

Pavel Molchanov - Raymond James

Good morning, guys. Just a question on the political convention right now, it seems like the energy bill will pass. Coal-to –liquid is a knock-down priority in Washington. Any thoughts on where that might emerge over the next year or two?

Hunt Ramsbottom

Yes, we do, obviously we track this. I get daily updates from our guys in Washington. There are a few things I think we can look at that are beneficial for us as we see it today. I think doubling of the ethanol mandate to 15 billion gallons by 2015 obviously is very good for REMC. The planned demand will push demand for that plant. For coal-to-liquids we continue to be included in the farm bill for the extension of the tax credit. All bio-fuels will flow through the farm bill and we will be included in that as it stands today. We’re expecting passage on that in early to mid-January. That appears to be going through just fine. We’ll get the tax credits along with the other bio-fuels.

We view that as very positive. Also the creation of the bio-diesel mandate which will create an automatic market for any diesel fuel that we produce from 100% biomass. The Selena project is already working on that. We will qualify for the bio-diesel mandate and receive tax credit there. We’re feeling pretty encouraged right now.

Pavel Molchanov - Raymond James

Got it, thank you very much.

Operator

Moving on, we’ll take a follow-up question from John Bridges from JP Morgan.

John Bridges - JP Morgan

Hi, guys. You’re giving the benefits on the farm bill. Is there anything in pending legislation that’s going to help the Natchez project?

Hunt Ramsbottom

The farm bill will because hopefully if this continues these tax cuts will continue to be extended as we’ve seen historically. We’re hoping that that $0.50 will continue to be baked in, in Natchez, and we will get credit for biomass production that we produce from fuels from the bio-diesel mandate out of Natchez also.

John Bridges - JP Morgan

I was wondering if there was anything in particular you’re looking for that you’d like to see before you push the button on Natchez.

Hunt Ramsbottom

No, right now the models we run for Natchez, anything that we get from both State and Federal government enhances the value of that plant.

John Bridges - JP Morgan

Okay. Could you give us some guidance as to how much was being spent for the conversion process? How much can we expect to take out next year?

Merrick Kerr

The amount that we wrote off in the impairment that we took was the total. I can’t think exactly what the amount was. That’s how much was invested last fiscal year.

John Bridges - JP Morgan

Okay, thanks very much.

Hunt Ramsbottom

The majority was in 2007 – of the 38.

Operator

Moving on we’ll take our next call from Pearce Hammond from Simmons and Co. International.

Pearce Hammond – Simmons and Co. International

When you bought the REMC plant what multiple of EBITDA did you pay? I remember that plant was about $0 to $10 million in EBITDA at the time.

Hunt Ramsbottom

Pearce, the EBITDA was zero when we bought it. That was an unusual time, we were modeling that plant, gas prices were $12 - $13, and the prices were in the high twos, low threes. Historically it had zero to five, and in good years maybe 10 or 12 EBITDA. We were running scenarios on that plant which were break-even during this conversion. Or if we had to shut it down we knew what that number was just to shut it down and run it as a distribution facility during the conversion. A lot of things have changed in the two years.

Pearce Hammond – Simmons and Co. International

Sure, then, Merrick, back to what we were talking about before on cash burn, and you stated that you intend to wait 12-15 months to raise equity. Based on your cash right now if you’re at a burn of $2 million a month which is $24 million, you’ve got R&D spend, and then you add in the cost of buying the Natchez land, that gets you up fairly quickly to $50 million in short order. I guess that gets us to that 12 months period. It seems like you’d want to raise equity that you wouldn’t want to get it down that low. I know you have a revolver. What are your thoughts there?

Merrick Kerr

I think that the cash flow that we have on hand, the cash that’s going to flow from the plant, as I mentioned was very healthy. There’s clearly [inaudible] on the plant as well. We definitely want to be as careful as possible when we come back to the capital markets and do that when necessary. I believe that timeline I’ve given you is the timeline for when that’s going to happen.

Pearce Hammond – Simmons and Co. International

Great, thank you.

Operator

Moving on, we’ll take our next question from Jan Coulter of Prime Investor.

Jan Coulter - Prime Investor

I had a question about the Natchez plant just to see if things will be on schedule there. I know there were a lot of hiccups on the REMC plant. I just wanted to see if you see any kind of issues with this particular plant, do you think things will go as planned? I know that’s a pretty open question, I’m just curious.

Hunt Ramsbottom

I think when you think about it, we anticipate things to go as planned. When you think about it as a management team, we’ve come together in the last two years, and we’ve hit the ground running pretty hard between the PDU, REMC conversion and all the projects we had in the pipeline. You get smarter in that period of time. We believe we have gotten smarter during that period of time, both in engineering, looking at the application technologies and what you need to do. What you need to look for when you site and build. I think the management team’s gotten a lot smarter about how to approach these plants.

It never goes smoothly, but we certainly feel a lot more confident going into this than we historically have.

Jan Coulter - Prime Investor

Okay, thank you.

Operator

We’ll take our final question from William Cobey, private investor.

William Cobey

Good morning, can you proceed with the design and construction of the Salina project in Northern California before the PDU runs successfully with the biomass gasifier?

Hunt Ramsbottom

Yes, because we will be using Salina’s gasifier.

William Cobey

You won’t have married biomass gasification with the FTS at the PDU, that’s not a problem?

Hunt Ramsbottom

A couple of things: our R&D guys came back to us and said they don’t anticipate. We’ve been working through energy balance equations and working with the Salina guys. You never say never, but we’re feeling very confident that the two technologies will work well together.

William Cobey

Thank you.

Operator

At this time that will conclude our Q&A session, I’d like to turn the conference back over to Mr. Ramsbottom for any closing or additional remarks.

Hunt Ramsbottom

Great, thank you. I’d like to make a few closing comments. The board of directors, management team and employees of Rentech remain committed to the business plan of commercializing our technology which we believe is a primary driver to enhance shareholder value. We’ve made significant progress in branding our company as the leading technology provider for environmentally sound synthetic fuels.

I say this because over time we’ve had continued increases in potential opportunities for use if our technology both domestically and abroad. We continue to build on the Rentech brand as the technology leader for alternative fuel production. The accomplishment and business decisions we make on the path to commercialization will lay the foundation for increased shareholder value.

We expect to be producing fuels that are fully integrated PDU in the spring of 2008. We also believe the flexibility of our management team has been demonstrated by our ability to adjust to the macro-environment on numerous occasions, including most recently our decision to change our plans to build our first commercial facility near Natchez rather than East Dubuque. This move was the right move. It will demonstrate that we can produce fuels that are among the most greenhouse gas friendly in the nation and we expect to spend significantly less to construct phase one at Natchez than the REMC conversion.

That means less capital that we’ll need to raise to have the same commercial plant capacity. As a result, we don’t anticipate raising significant equity capital for 15 to 20 months. Meanwhile we’ve preserved the value of REMC which we expect will generate over $35 million of EBITDA next year.

Although the legislative uncertainty regarding our industry impacting us, we believe that recent events in Washington, such as the farm bill and bio-diesel mandate can work in our favor. In addition, we look forward to supplying the United States Air Force with fuels from our PDU in 2008 for the testing program.

We at Rentech remain committed to executing our business plan and progressing on the objectives as outlined today as we believe that these factors will increase and sustain enhanced shareholder value in the long-term.

We appreciate the support that our shareholders have given us. And we’d like to thank you for joining is in this call today. We look forward to speaking with you when we report our first quarter results in fiscal 2008.

Thank you very much.

Operator

Thank you that will conclude today’s conference. At this time your phone lines may now be disconnected.

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Source: Rentech Q4 2007 Earnings Call Transcript
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