maintaining plant value

Capturing Today’s Improved Value, Tomorrow

Ethanol Leadership Summit

December 11, 2014

Renewable Energy - Food - Agribusiness

Discussion Outline

Introduction & Experience Why Value Matters Market and Plant Value Trends Value Drivers Like Fingerprints Driving Superior Value In Good Markets and Bad Questions and Discussion

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Ascendant Overview & Scope of Services Ascendant Partners (www.ascendantpartners.com) is a business and financial advisory firm

dedicated to helping mid-size agribusiness, renewable fuel and food companies protect and enhance shareholder value.

Ascendant Partners brings the collective experience and resources of more than 75 years of financial advisory experience, including financial planning, investment banking, private equity management, commercial lending and mezzanine financing.

Service Offering Financial Advisory

Strategic Planning Capital Planning Business Valuation Investment Evaluation Restructuring/Recapitalization/Refinancing

Capital Formation Capital Strategy, Structure & Placement

Merger and Acquisition Advisory Facilitate Successful Restructuring Transactions Sell-Side Focus

Performance Improvement & Benchmarking Administer Financial and Operational Benchmarking Platform Designed to Help Independent Ethanol Plants Improve & Succeed

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Financial Advisory

Capital Formation

Performance Improvement

Mergers & Acquisitions

Trusted Insight

http://www.ascendantpartners.com/


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Biofuel Experience & Resources More than 175 Ethanol Assignments in Last Five Years

Business and Strategic Planning Performance Improvement & Benchmarking Business Valuation/Capital Planning Plant sales Refinancing/Recapitalization/Restructuring Business, Market & Credit Reviews

Maintain Best Practices Performance Benchmarking Platform Multiple Participating Independent Ethanol Plants

Strong Strategic and Financial Resource Network (>140 qualified groups) Investor Groups Lenders and Specialty Financial Services Companies Strategic & Financial Buyers

Dedicated Market Perspective Biofuel a core focus in good times and bad Insight into markets and value drivers over time Fresh perspective


Introduction: Why Value Matters…

Common Misconception: Measuring the value of your business is only important if considering

selling it…

Why Measure Value? Means to best representing shareholder interests

• Can’t manage what you don’t measure… Foundation for supporting commercial loan terms or follow on

investments or joint ventures Baseline for grounding strategic planning discussions

There are multiple methods for estimated business value including discounted cash flow modeling and looking at sales transaction comparables Both methods can provide insight into the value drivers in your business

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Renewable Energy - Food - Agribusiness -$0.40

-$0.20

$0.00

$0.20

$0.40

$0.60

$0.80

$1.00

$1.20

$1.40

Historical Average EBITDA Margins Per Ethanol Gallon

Period 1 Period 2 Period 3 Period 4

2014 Delivered Second Best Margins in History… No doubt 2014 market environment has been strong strong

Strong and sustained margins building confidence, driving strong earnings and improved values, especially for high-performing plants

That said, we know the industry is cyclical and today’s strong margins are not likely to persist forever…

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History tells us the market will cycle…Not a question of if, but when

Does that mean plant values will fall with the markets?

Unlike more stable industries, investors view plant performance over at least one full cycle (3-5 years)

Data source: Historical margin simulation


And Plant Vales Improving As Well, At Least at the Top…

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Transaction values for strong plants are expected to rise going into 2015 reflecting the strong operating environment and margins in 2014

Notes: The per gallon valuations are for plant assets only and do not include cash or net working capital Valuations for higher performing operations have improved over time, despite a slight set back in 2013 Ultimately, the business values for a particular operation are a function of EBITDA performance

$1.05

$1.20

$1.35 $1.28 $1.30

$1.35

$0.91

$1.31 $1.35$1.39

$0.75

$1.30$1.40

$1.50

$0.75

$0.85

$0.95

$1.05

$1.15

$1.25

$1.35

$1.45

$1.55

2009 2010 2011 2012 2013 2014 2015

$/ga

l PPE

Valuations for Above Average Plants Remain Strong

ImpliedValuation Range


But the Market Doesn’t Tell the Whole Story…

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VeraSun Collapses

Tax Credit

Expires

2012 Drought

Building Margins

Data Sources: - Transaction data from Ascendant database - EBITDA history based on data from public filing entities

Strong performing plants drive strong values in good markets and bad

Distressed plants are penalized in both good markets and bad

Highlights importance of making sure protect the core business First…


What Factors Drive Value for Shareholders?

Cash returns on invested capital Cash returns driven by: Product margins (defines profit potential) Operating efficiencies (ability to convert potential to profits)

A good measure of competitiveness is EBITDA As it captures both margins and operating performance

Average transaction values over the past five years have averaged around 5X EBITDA (3 yr avg) which is consistent with similar industry type operations That is NOT to say, all plants have the same value…

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Not All Plants Are Created Equal…

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Source: API proprietary financial performance monitor

For 60MMGY: 0.25/gal = $15MM/yr = $75MM Value


Each Plant is Uniquely Positioned to Drive Value

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InputAssumptions

OutputAssumptions

FinancialResults

OperationalAssumptions

Corn Milo Fiber Supplies

Ethanol Distillers Corn Oil CO2

Labor Energy Yields Capital structure

Margins EBITDA Free cash flow Distributions

Drives Business Value


What Makes Your Operation Unique? Where do you fit on the competitive curve (EBITDA curve)? Remember the Hedgehog Principle?

1) Determine what you can be best in the world at and what you cannot be best in the world at;

2) Determine what drives your economic engine; and 3) Determine what you are deeply passionate about

Don’t be afraid of exposing reality and learning from others Participate in benchmarking studies Collaborate with other plants Avoid complacency

Success breeds complacency. Complacency breeds failure. Only the paranoid survive… Andy Grove

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Scorecard Your Performance to Measure and Set Goals

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Value Driver ComparisonCompared to Top Tier Performer

Value DriversMy Plant Top Tier Notes

Operating PerformanceYields Average Strong How do yields stack upProcess efficiencies/cost base Strong Average Variable and fixed cost comparisonsEnergy Utilization Strong Average Electricity and gasCompliance/Safety/Environ Average Average Track recordManagement capabilities Average Strong Technical, leadership, success plansProcess Technology ICM ICM Industry-standard process technologyEBITDA Performance Strong Strong Position on the 'EBITDA curve'

Market Access & LogisticsCompetitive Feedstock Access Average Strong Compare delivered prices and contribution to EBITDAEthanol Market Access Average StrongCoProducts Contribution Strong Strong- Distillers Strong Average- Corn Oil Average Average- Other? Average Average CO2? Hi pro feed? Fiber separation?

Capital & InfrastructureInfrastructure Strong Average Scalability, unit train capacity, storage, etc.Room to expand Weak Strong Site footprint, room to expand - adjascent acreage available, zoningEfficient site layout Strong Strong Plant footprint and traffic flow and confirguation Capital Improvements Weak Strong Storage, loading/unloading, bolt on operations, co gen turbine, drying capacity

Implied Outcome AveragePremium to

Average How stack up on the Competitive Curve


Capturing Superior Value in Good Markets and Bad…

First, Protect the Core Covet thy working capital Invest in the core business to ensure competitive Maintain capital discipline

Understand and Measure business value and drivers Can’t manage what you don’t measure DCF and Comps

Identify Opportunities to Improve Compare Map Confront the brutal truth Compounding effects of improvements

Develop and execute plans to close gap and build value Align strategic priorities for maximum value impact

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Summary

Understanding and measuring value important to protecting and improving shareholder interests

Market environment does influence business value but doesn’t tell the whole story

Every business is uniquely positioned to drive value You do control the levers that drive value in your

business There are steps you can take to protect and improve

shareholder values

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Recent Advisory Assignments

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