Q&A Q: For third-quarter financials, REG initially proposed its adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) would be $10 million to $15 million, but due to lower RIN values and risk management positions, the company’s third quarter adjusted EBITDA came in at a $2.3 million loss. Can you talk in detail about what those positions were, how that led to a significant loss in adjusted EBITDA versus initial guidance of an even more significant gain, and what lessons have been learned from the third-quarter of 2012? A: In our conference call, we talked about a tougher biodiesel environment, the RINs market tested down, due in part to the level of production that the market had produced to date. The market was giving signals that we need to slow down production. That made the market environment challenging during the third quarter, but we’re also excited about the announcement of the 28 percent increase in the RVO (renewable volume obligation) for 2013, and we look forward to starting produce for that higher mandate. Q: A couple years ago at the Fuel Ethanol Workshop, where you presented, you said corn oil extracted from the backend of the ethanol process made up slightly less than 10 percent of U.S. biodiesel production feedstock in 2010. What are those numbers today, and what do you project them to be in coming years? A: First of all, inedible corn oil has been a great synergy story between the biodiesel industry and the ethanol industry. REG has been using inedible corn oil since 2007, and it’s a very [important] feedstock for us. And as the ethanol industry has expanded its production of inedible corn oil, we have made plant investments to put in the capability to use it. It’s a growing feedstock for us. Some of the numbers you might be looking for are, at the end of September 2012, the EIA data shows that we’ve used 414 million pounds of inedible corn oil in biodiesel production this year. If you extrapolate that into biodiesel gallons,
it’s roughly maybe 6 to 7 percent of the overall gallons produced. But certainly the inedible corn oil used, having a growth feedstock, helps us and, in the process, is a story to point to as we work to grow the RVO in the forward years. Q: Is there any concern about the current state of the ethanol industry now with plants idling due to the socalled blend wall having been reached? Obviously, the less ethanol that’s produced, the less inedible corn oil is available for biodiesel production.
A: We always are watching the ethanol industry closely, it’s a good partner for us, and their margin structure is challenged right now, which reinforces the need for many of the ethanol producers to have this capability installed in their plant. We do think the ethanol industry will continue to move toward this separation on the back of their plants. And we think the market is going to, in another year or two, be fully penetrated through all ethanol plants. In a lot of cases, it will be the help in margins that they’ll need to continue to produce ethanol in a difficult market. The other thing we think will get a lot of attention in the next year or two is
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JANUARY | FEBRUARY 2013
BIODIESEL MAGAZINE
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