Tyson Foods execs said Monday (Nov. 18) its Dynamic Fuels plant in Geismar, La., remains idle as it has not reached an agreement to restart production with its joint venture partner, Syntroleum Corp.
Every month the plant sits idle each partner burns though $1 million in cash to support a facility that is fully staffed and on-standby mode. Aside from the monthly cash burn, Syntroleum execs estimate the venture has lost out on roughly $20 million in potential sales since July because the partners can’t reach amicable restart terms.
“While the plant is ready for commercial operations, the Dynamic Fuels management committee has not agreed on the terms of the restart. On two occasions Syntroleum requested its partner to agree to restart the plant,” Syntroleum’s Senior V.P. Ron Stinebaugh noted in the company’s recent earning call with investors.
The City Wire asked Tyson execs for an update on the plant operations during Monday’s earnings call with the media after CEO Donnie Smith said last quarter the plant would not be restarted as long as its partner (Syntroleum) was shopping its interest with potential buyers. On Monday, Smith simply said the partners had not reached a restart agreement and declined to discuss the matter any further.
Stinebaugh said there are multiple interested parties involved in due diligence to acquire Tyson Foods' interest in Dynamic Fuels and there is nothing materially wrong with the plant. He said the partners have had different interpretations of the agreement terms.
Dynamic Fuels completed the installation of the new $7.3 million catalyst on June 28, and the plant was ready to restart immediately. A new solvent recycle pump is onsite ready to be installed, but no date has yet been scheduled, according to Stinebaugh. He said the tax credit extension to 2014 remains up in the air and won’t likely be discussed until early 2014. But he doesn’t believe the full $1 tax credit is needed to run profitably given it has the ability to use multiple types of feedstock that can turn out renewable diesel and jet fuel.
Syntroleum said in May that it will cost about $20 million in working capital to restart the plant, most of which is the investment in feedstock.
At the end of September, Syntroleum had a cash balance of $16.5 million, with a spend rate of approximately $1.5 million per quarter, excluding funding cash calls for Dynamic Fuels. That venture has a current cash balance of $2 million and is awaiting payment from the federal government of $3.5 million, according to Stinebaugh.
If Syntroleum is not successful in selling its interest in Dynamic Fuels, Stinebaugh said the firm would work aggressively as possible with Tyson Foods to restart production.