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Harvesting Energy:
Green Plains is an enterprise focused on
harvesting the energy out of the commodities we process.
By unleashing the energy in the corn kernel, we produce
feed, food and fuel to extract value for our shareholders.
We would like to take a few pages of this annual report to
show you what we mean by harvesting energy.
A Look at 2011 Performance:
We experienced solid growth
last year. Our ethanol production increased 33% over 2010
as we produced a record 722 million gallons of fuel ethanol.
This increase was aided by our acquisition of the Otter Tail
ethanol plant located in Fergus Falls, Minnesota in the first
quarter of last year. We also sold a record two million tons
of livestock feed, or distillers grains, in 2011. The marketing
and distribution segment contributed 8% of our segment
operating income for last year. In the third quarter of 2011,
we acquired the remaining interest of BlendStar, as we
believe that full ownership of BlendStar will allow us to
accelerate growth of this ethanol blending terminal business.
Our agribusiness segment operating income grew
significantly last year, increasing by more than 100% over
2010. This result was driven by adding five million bushels
of grain storage and increasing our grain handling volumes
23% over 2010. In a short time, we will have built a substantial
grain handling business with 40 million bushels of storage
capacity after completing the expansion of our most recently-
acquired elevator in St. Edward, Nebraska. We believe
our grain handling capability positions us in the top
tier of U.S. grain handling companies.
The most important addition to our business
in 2011 was completing the implementation of
corn oil extraction processes at all nine of our
ethanol plants. Our new corn oil production
segment generated $27 million, or 22%,
of segment operating income for all of
last year. Our $21 million investment was
paid back in less than a year and should
contribute significant cash flows for
years to come.
In all, 2011 was a strong growth year and
a year during which our diversification
strategy provided solid results.
We generated 40% of our segment operating income from
non-ethanol segments. This contribution helped us generate a
record amount of operating income last year. More importantly,
growing our non-ethanol operating income effectively lowers
our breakeven for our ethanol production, which is a key factor
in executing our risk management strategy.
We ended the year with a strong liquidity position and a
solid capital structure. During 2011, we secured additional
financing in our agribusiness segment with a syndicated
$195 million revolving credit facility. We believe this facility
will provide significant flexibility as well as position this
segment for further growth in the future.
The Fundamentals Driving Our Business:
We are in a
new era for the ethanol industry, a time when the buyers
of ethanol no longer receive a tax break from the federal
government. We are optimistic that the long-term
fundamentals for ethanol are very strong. Our confidence
comes from what we believe are the demand drivers for
our industry and those are:
The renewable fuel standard mandate is 13.2 billion gallons
for 2012, an increase of 600 million gallons over 2011. The
mandate continues to increase 600 million gallons a year
until it reaches 15 billion gallons in 2015.
Export markets should remain active as we believe
the U.S. ethanol industry should export over 500
million gallons in 2012. This is down from the record
1.2 billion gallons of ethanol exported in 2011, but
still a key factor driving future ethanol demand.
The makeup of the domestic gasoline
market has changed over the last two
years. Refiners are producing more
CBOB, a sub-grade 84 octane gasoline,
which requires ethanol, or other octane
sources, to meet the minimum octane
rating requirements for the U.S. gasoline
market. In addition, the reformulated
gasoline market must still have an
oxygenate blended in to comply with
the Clean Air Act. The fact remains
Dear Green Plains Investor:
President and Chief Executive Officer