Red Trail optimistic about future
May 20, 2009
OMAHA (DTN) – Despite reports of financial difficulties at the Richardton, N.D.-based Red Trail Energy 50-million-gallon ethanol plant, the company said in a statement Tuesday that it feels confident it will survive recent struggles.
In a statement Red Trail Energy CEO Mick Miller said a DTN story published Friday was “unfairly negative” regarding the direction of the company.
“Red Trail is facing significant challenges, many of which are affecting the ethanol industry as a whole,” the statement said.
“These challenges are disclosed in the risk factors sections of our respective quarterly report on form 10Q for the period ended March 31, 2009, and annual report on form 10K for the year ended Dec. 31, 2008.
“It is important to realize, however, that Red Trail has always paid its corn suppliers and other vendors and employees on time and intends to continue doing so, as Red Trail knows its vendors and employees are the key to its survival.
“Red Trail also remains very optimistic regarding the long-term success for the ethanol industry and anticipates the current supply and demand imbalance that has caused the current poor margin conditions will improve as demand for ethanol grows.”
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According to the May 15 SEC filing Red Trail (http://redtrailenergyllc.com/… where a link to the filings is located) is asking its lender First National Bank of Omaha, to waive principal payments on its loan, after the company announced in March that it had defaulted.
“If we are unable to reach agreement with the bank on the terms of an agreement to waive principal, the company will be forced to evaluate other options, including bankruptcy or ceasing operations,” the SEC filing said.
Red Trail estimates that it would have to buy its corn supplies at 20 cents to 30 cents below market prices this year to maintain cash flow, the SEC filing indicates.
In an attempt to overcome deteriorating market conditions, according to the SEC filing, Red Trail has already taken several steps.
The company temporarily suspended employee bonuses and eliminated management bonuses last year. Miller took voluntary pay cuts totaling $45,000 annually, according to the SEC filing. The members of the company’s board of governors opted out of compensation they receive for attending board and committee meetings.
In addition, the company has adjusted its hedging strategy, including procuring more corn from North Dakota farmers and less via rail to save on transportation costs, the SEC filing said. Red Trail also has taken steps to improve efficiency at the plant.