{"id":637,"date":"2017-02-21T11:39:26","date_gmt":"2017-02-21T16:39:26","guid":{"rendered":"http:\/\/wawa-news.com\/?p=637"},"modified":"2017-10-11T09:52:04","modified_gmt":"2017-10-11T13:52:04","slug":"rentech-idles-wawa-facility-exploring-strategic-alternatives","status":"publish","type":"post","link":"https:\/\/wawa-news.com\/index.php\/2017\/02\/21\/rentech-idles-wawa-facility-exploring-strategic-alternatives\/","title":{"rendered":"Rentech Idles Wawa Facility; Company is now exploring Strategic Alternatives"},"content":{"rendered":"

Feb 21, 2017 @ 11:39<\/strong><\/p>\n

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\"\"<\/a>Rentech, Inc. announced today that its board has decided to idle the Wawa facility due to equipment and operational issues that would require additional unbudgeted capital investment. Today\u2019s decision also results from continued uncertainty around profitability on pellets produced at the facility, making additional investment in the facility uneconomic for Rentech at this time. Idling the plant will allow Rentech to conserve liquidity as it formally explores strategic alternatives for the plant including ongoing discussions with third parties. In conjunction with the strategic review of the Wawa facility, Rentech is also exploring strategic alternatives for the Company as a whole. In addition to these announcements, Rentech is providing updates on its other operating businesses.<\/p>\n

Wawa Facility<\/strong><\/p>\n

As noted in prior communications, the Wawa facility experienced equipment and operating challenges subsequent to the replacement of problematic conveyors last fall. These issues have persisted.<\/p>\n

On February 16, 2017, our board made the decision to suspend operations at the facility. This decision is based in part on our review of the work by a third-party engineering firm to identify necessary capital improvements. While we believe that the issues we have been experiencing at the facility can be resolved with additional capital investments, we have concluded that it is not economical to pursue those investments or to continue to operate the facility at this time. Rentech\u2019s other businesses, including its Atikokan facility, continue to operate without interruption.<\/p>\n

As a result of this decision, the Wawa operations team will immediately begin a safe and orderly idling of the facility, which the Company expects to complete in approximately two weeks. When the facility is successfully idled, a small workforce will remain in place to maintain the plant so that it can resume operations with minimal cost and time if there is interest from a third party to invest in or purchase the facility. The remainder of the workforce will be placed on a temporary layoff while options for the facility are explored.<\/p>\n

Rentech expects to incur a significant asset impairment charge relating to the Wawa and Atikokan facilities in its fourth quarter 2016 results.<\/p>\n

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Updates on Other Businesses<\/b><\/p>\n

Atikokan Facility<\/b><\/i><\/p>\n

We are reducing production at the\u00a0Atikokan\u00a0facility to levels necessary to fulfill the delivery requirements under the\u00a0Ontario Power Generation\u00a0off-take contract. We expect the\u00a0Atikokan\u00a0facility to generate cash flow in the range of break-even to slightly positive in 2017 under this revised operating plan.\u00a0Atikokan\u00a0will no longer ship pellets to the\u00a0Port of Quebec. We will continue to explore alternatives for selling additional pellets produced from the\u00a0Atikokan\u00a0facility to increase its utilization.<\/p>\n

New England Wood Pellet<\/b><\/i><\/p>\n

In the first three quarters of 2016, pellet sales at New England Wood Pellet (NEWP) were negatively impacted by relatively warmer weather than in previous years, continued low-cost heating oil and propane, and changes in consumer buying patterns. The first two issues continued to impact wood pellet sales for the fourth quarter of 2016 and as a result, the market failed to materialize as we had expected.\u00a0Rentech\u00a0now expects NEWP to generate Adjusted EBITDA of\u00a0$4-$4.5 million\u00a0in 2016. While some of these trends may continue into 2017, we believe that they are temporary in nature and we expect the business will return to historical levels of profitability. Further explanation of Adjusted EBITDA, a non-GAAP financial measure, appears below.<\/p>\n

Fulghum Fibres<\/b><\/i><\/p>\n

A customer of Fulghum Fibres (Fulghum) has indicated its intent to exercise its option to purchase two wood chipping mills that Fulghum is operating for the customer under a processing agreement. The Company expects the loss of the contract to negatively impact Fulghum\u2019s cash flow in the second half of 2017 and going forward. If the purchase option is indeed exercised, the Company expects to receive a one-time cash payment of approximately\u00a0$5.5 million.<\/p>\n

Fulghum continues to focus on efficiently operating its remaining 25 mills in the U.S. and 5 mills in\u00a0South America\u00a0and explore opportunities to generate additional cash flow.<\/p>\n

Strategic Alternatives Review Process<\/b><\/p>\n

Rentech\u00a0intends to explore strategic alternatives for the\u00a0Wawa\u00a0facility and for the Company as a whole. In conjunction with this process and to address potential future liquidity needs,\u00a0Rentech\u00a0is considering strategic alternatives that may include, but are not limited to, a sale of the Company, a merger or other business combination, a sale of all or a material portion of the Company\u2019s assets or a recapitalization.<\/p>\n

Rentech\u00a0has retained\u00a0Wells Fargo Securities, LLC\u00a0to assist in the strategic alternatives review process. The Company does not intend to disclose developments with respect to this review until either the Company\u2019s board has approved a definitive transaction, it is required to do so by law, or if such disclosure is deemed appropriate. The Company cautions that there is no guarantee that the strategic review will result in a transaction or if a transaction is undertaken, as to its terms or timing.<\/p>\n

If an appropriate strategic alternative is not achieved on a timely basis, and if the Company were otherwise unable to secure additional sources of funds to address potential future liquidity needs, there could be a material adverse effect on the Company\u2019s business, results of operations, and financial condition. The Company had cash of approximately\u00a0$20 million\u00a0as of\u00a0February 17, 2017\u00a0(excluding cash held by its operating subsidiaries in\u00a0Canadaand\u00a0South America). In addition, the Company expects NEWP and Fulghum to generate positive cash flow and be self-sufficient from a liquidity perspective in 2017.<\/p>\n

Disclosure Regarding Non-GAAP Financial Measures<\/b><\/span><\/p>\n

Adjusted EBITDA, which is a non-GAAP financial measure, is defined as net income from continuing operations plus net interest expense, depreciation and amortization, and other income. Adjusted EBITDA is used as a supplemental financial measure by management and by external users of our consolidated financial statements, such as investors and commercial banks, to assess:<\/p>\n