Have you see the filing?
I have not...
I was smiling to see the Diliution, but sad to see the FULL VALUE being used to buy
an asset ( plant) at more than full value.
Second, If we suppose that they Paid $50M plus DEBT,,, ( if we suppose since I have not seen the filing).... but let's suppose.
60M gallons production for $50M+ Debt(?) say Total is $80M total ( a guess)
60M capacity gallons out of 260M total gallons ( 200M +60M gallons) is 28% of total capacity.
Make it 30% for a round fiigure...
A- Now if 30% is worth $80M,
then 100% is worth ------? Total Value of PEIX.
B- Say that the New Planti(60M gallon) worth $100M ( not $80M).
Then 100% of PEIX (260M )at is worth $300M...
C- If the New Plant is worth $200M
Then 100% of PEIX is worth $600M...
Choose A, B, or C or add a case D... then Read-on
So now go check the Best opf Class with 1BILLION gallon running Production,
LOC at lowinterest rate, Long term debt Low andLow interest rate...
Check what 1 gallon of production is worth....
Then choose you valuation of PEIX above ( A, B, C... or your own value).
( My sell rating is based on value, not based on being a bad, or BK, or loosing company.
It just is not what your case 'D" ist )
It is a 3-way deal... with a ghost in the middle. being the warants holder, PEIX is 'given the plant...blah, blah', hands over the Shares and the warrants are cancelled. The middle man pass the plants assets over to PEIX.
Now on the Ametis side, they had DEBT and a Plant already. They receive the PEIX shares . They pay their 'debt to the 3rd party or 4th party with shares ' and pass the plant to PEIX.
3rd and 4th 'ghost' settle amopng themselves.
The shares are used to balance out against the million of SHARES sold to the WILLING public last week. Most of the shares are already sold to bagholdersd!!!.
Life goes on: PEIX would be the proud owner of a new piece of steel, and more debt!
Common shareholder was sold down river last year when the warrants were issued, with debt.
Common share holders are ALMOST whole ( 2M+ warrants still out there)
Imraymom is happy( even with dilution; for a while positive margin will contribute to earnings. BUT IF 4Q MARGINS AND 1Q MARGINS WERE great FOR PEIX, WHY NOT FOR AMTX? The debt holders got the CASH from both companies BEFORE letting the noose(s) loose around their neck. 2M warrants still outthere. Noose is still on, but loose. .
PEIX managment is happy as they have survived a BK round trip and managing
a Bigger company
The filing of 03-07, as shown, is a reminder to market: go read an old documentXYZ.
As I read the referrenced XYZ it says :
... the holder of these warrants will sell the shares and no proceeds will flow to PEIX.
Now I did not find any reference to 9% ownerhsip... and so on.
May be someone can point to SEC filing.
But assume imraymom post is correct then my deduction would be :
a) Hedge funds / financing group held both PEIX and AMTX assets AND DEBT
b) they just swap - in a non-taxable set of transations - the increased value of PEIX equity
for steel in the ground.( plant)
c) the plant value was enhanced - pumped up - by the PEIX communications showing
"debt payment" during mid-quarter, without showing 'income and liability' for the same period.
d) PEIX went along with deal probably by assuming some amount of NEW debt with the plant and Lower Interest rate on old debt. So I SUSPECT the debt level will go from $55 at 13% interest to somethin like $100M at 8%.
Magic, dilution of PEIX common shares by an addtional 5+ MILLION sahres or 33% dilution and PEIX is the proud owner of 'steel in the ground' FULLY VALUED ( equity and debt) at the peak of a market cycle. PEIX may have been left with some operating assets to 'OWN and OPERATE' the Aemetis plant.
By the way, approx $1.5m SERVICE INCOME PER QUARTER, PEIX used to get from Aemetis, will no longer be. It will be all internal cost. PEIX has to pay itself to buy the corn and sell the ethanol!!! What a deal.
Funny the otherside of Aemetis has a plant in India who might well be a conduit for
D5 RINs ( biofuel ) that will be competing in the US market ; although they say that their fuel from the plant in India is heading to Europe.
STILL 2+M Warrants LEFT?
Assumptions for WHOLE company at $1/gal capacity
long-term EBITDA of 25c/gal.
Capacity 260m gal
Equity $160M / 21M Common Share ($8/share)
Plant Debt $110M
yeap, Ethanol is GLOBAL.
So is the buy and sell Global Transactions.
As a matter of fact, Europe was beaten over the head by US and Brazil for their blocking policies.
Yeah, it is GLOBAL.
Watch for the upcoming swap operations.
The CME orders are in for volume moving out.
Watch foo incoming.
(sorry, no moon sighting from here. I cannot see Russia from my house)
ejb, I do not think'Crimea' potential as a demand driver on US stockage is priced in! Should the stock ( year end corn inventory be revised) or is depleted(worst case scenario),
then it would have to be replenished.
Do not under or over estimate the shock of international conflict(s).
Yeap, Eastern plants are switching over to Summer fuel.
And they are learning to run with leaner inventory ( just in time buying).
We may never get back to the idea of a 21-day buffer. Industry was vey,
For a guideline where this industry is heading: check the finished-gasoline inventory level. Ethanol need to have more, but 21-days of supply is just cash in the tank.
These Spot prices are just independent stations being pruned by the big guys ( big distributors who know how to buy ahead).
I always smile when I see these spot prices being treated as 100% of the daily volume consumed. NO, NO... at best 20% is bought at spot, 30% based on the index price, 50% pre-bought and delivired at a fixed negotiated price.
STOP doing these daily multiplication Spot times Volume - Minus Corn = Profits. STOP... this is misleading as we well know by now, many companies went BK when they had pre-sold their ethanol, then corn went up and they had to deliver the goods at a lost (remember this scenario: Aventine, BIOF and many others!!!). [ be on-guard for a similar scenario with the 'surprise' use of CASH and Debt repayment delivered to us last week by PEIX: pre-sell assuming corn will be down...]. Be on-guard!!!!
Russia just took another Military camp... Breaking news.as I read your note NOW.
They occupy the PORT where corn is shipped out...
THIS IS NOT A HYPE,
wellhellrex, I do not make the news...
With all eyes on Ukraine, China seems to have to switch its corn orders to US.
Margins will get thiiner with corn cost going up.
But now add Brazil weather; From a Bloomberg report, I copy:
"As much as 15 percent of the soybean crop yet to be harvested in central Brazil may be damaged by as much #$%$ inches (13 centimeters) of rain through early next week, Commodity Weather Group LLC said yesterday in a report.
Excess moisture may delay more corn planting, boosting the risk of lower yields in Brazil, the second-biggest exporter, the forecaster said. ".
( note for a few folks who were thinking 'DROUGHT'....
read above: rain, moisture....)
But I read that the timing of the rain is too late for 'sugarcane' to yield a lot of sugar, but instead a bigger percentage of the cane will be used for ethanol.
The corn equation is a simple one to project the direction it is heading:
Ukraine has the plan to grow this business. China has the orders in for the corn.
But this corn needs fertilizer( from Russia), and needs to go out to market using the balck-sea port to exit out.
So cost will go up to plan and cost will go out to ship. Crimea might double - tripple its fees( who knows how much they will need to make a living - spearated or not they will be beligerent).
Second, Russia will adjust the price of Natgas (frying the corn...).
Cost will be higher and so is price.
US corn may have some headroom to go $6 now. ( 20% from here) just because Ukrainian corn may not shipout in time; and when it does eventualy, it will be at a higher price than now($5).
War or seperatism has a cost.
From the ethanol side, once frozenomics thaw out, ethanol prices will thaw out also and margins will get thinner. than today's outlook.
Wacth for a few [old] folks like Aventine to jump back in, use US corn to add Capacity to the industry too. This will push corn another notch and add to supply!
If one was to look at the swap market, which elements would push out or pull up the swap transactions.
From yesterday market, the RINs values fo D4 were trading as high as 72c and settle at 70C.
(Note 1 D4 is equivalne to 1.5 D6). So 1 D4 at 70c is worth $1.05 of D6.
Should RFS be reset , mdified to increase D6 targets (corn based ethanol), More D4 ( sugarcane biofuel) will come into LCFS market.
Biofuel seems to win over E85 to satisfy increased RFS targets.
Do not jump up on new RFS figures.( should they come to pass)
Is volume sales going thru Idaho region done at a Profit , Even,or a Loss?
When one presell on an Index Value + Markup, there could be a way to cover by Buying the Index(risk management when the index goes up). But what happen when cost of hardgoods ) is higher than the Index Value?
Answer: the dollar figure at index is covered, but the trade is done at a loss ( buy at spot prices higher than the Index value to hand over the goods).
I suspect a lot of PEIX pre-selling occurred after GPRE made their 4Q CC and told everyone they were 90% 1Q locked in and 60% of 2Q locked in.
If PEIX executed a pre-sell to gain cash, and used Parent cash to lower their debt ( Feb 21st call), market action since last week is reversing these gains. Spot price going up not just in the West ( where they make a profit), but inc Chicago ( Argo rule 11), Gulf and East.
As a profile, PEIX makes one-third (1/3) ( about 40mil ) of the volume it sells, another came from partners that they service and the last third bought from the mid-west. The middle third volume is done at a Service hanlding fee. Unless they go out and over-buy from their partners, risk is low. Market risk is really in the mid-west volume and the TIME it takes to move these goods from mid-west to market. So by the time they buy-it in the mid-west, they PRE-SELL the goods to the buyer at a contracted cost. So the TIME element - whenever yuou double from 5 days delivery to 12-15 days- can hurt.
If one buy the goods in the mid-west without pre-selling it, then if the market goes down, then there is a Price risk there as well. By keeping TIME of Delivery Short, then he re-marketing unit makes or loose money.
To be prudent with $$, one has to buy and sell at the same time ( lock-in the margins).
Dynamic markets are not good for remarketeers when delivery is DELAYED ( FROZENOMICS). And if delivery is not on time, then COST OF SPOT CAN HURT. .
Just so that youi know, I will re-assess going in when the Sahre count is at 20 Million Common Shares( 33% dilution from here).
Then I will look at the parameters ( margins, volume, inventory, competitive posture) to know what price to buy back in, IF THERE IS 'headroom'.
Headroom is discounted value to the Best of Class ( GPRE, ADM, ANDE).
But if at Premium Value to best of Class, then WAIT to go back in..
Goood for you!
raybos, to put things in perspective, I picked up this from a discussion of a caterpillar eating away at the crops....
1)put things into perspective.
2)drought had a different impact on sugarcane than on soybeans. On sugarcane, there is less 'sugar yield' but more of the harvest will be used for ethanol.
Brazil is such a large, large territory that when there is flood or drought in one part, the other parts may be unaffected.
But here a sense of the 'drought' on soybean. Oh by the way, after seeing your note,
I went to read on Cosan.,, since they the 2nd largest integrated ethanol producer/seller.
they project 61-63mil tonnes of sugarcane in this coming harvest versus 61 last year.
Knowing them, they probably were planning on a higher number (66-70mil - I am not sure), but they are coming in flat with last year tonnage. This is does not mean that they will get the same sugar or ethanol... just the mass will be similar.
Here is the snippet on the drought. It is dry but not that dry!
"...Bombarda found his first helicoverpa armigera in a bean plant. He knew by the way the fattened, worm-like creature had chewed its way inside the pod, beyond the reach of chemicals, that it was not one of Brazil's usual leaf-eating pests.
"If you wait and send it to a lab it will be too late," he said.
Bahia, one of Brazil's newest farming frontiers, lost 3 million tons of soy and cotton, nearly half of its usual grains production, between the caterpillar and the drought last year, according to the National Confederation of Agriculture. Still, Brazil produced an 81.5 million ton soybean crop.
To be sure, the caterpillar has not reduced forecasts for an even larger soybean harvest that could dethrone the United States as the world's leading grower this year...."
By the way,
May Corn jumped two handles from this morning :$4.91
With the week-end coming, could be taken up before Monday AM.
Who kows what these crazy turn of events in the Ukraine will transpire.?
endup UP on 3/6 end-of day , UP from mid-day.
Corn, ETF, VLO, ADM
Fertilizer up for the day, but backtrack from mid-day.
Warrants Holder hold all the cards.
when to cash,
what they want CASH back to the company.... How many to cash in
Bet is one Coffee! get paid with Paypal. I bet that NK will not hold out for a Cash offer using "Discunted Common Share Value" and YOU AND I will not know about it until MUCH LATER.
One Coffee at Starbucks : Say $7.50 with Cream