Citigroup Biofuels Conference Ethanol on the Cob October 3, 2006

Transcription

1 Citigroup Biofuels Conference Ethanol on the Cob October 3, 2006

2 Forward-Looking Statements Certain statements in this presentation, and other written or oral statements made by or on behalf of us, are forward-looking statements within the meaning of the federal securities laws. Statements regarding future events and developments and our future performance, as well as management s expectations, anticipations, beliefs, plans, targets, estimates, or projections and similar expressions relating to the future, are forwardlooking statements within the meaning of these laws. These statements are based on assumptions and assessments made by our management in light of their experience and their perception of historical trends, current conditions, expected future developments and other factors they believe to be appropriate. Any forward-looking statements are not guarantees of our future performance and are subject to risks and uncertainties that could cause actual results, developments and business decisions to differ materially from those contemplated by any forward-looking statements. We disclaim any duty to update any forward-looking statements. Some of the factors that may cause actual results, developments and business decisions to differ materially from those contemplated by any forward-looking statements include the volatility and uncertainty of corn, natural gas, ethanol and unleaded gasoline prices; the results of our hedging transactions and other risk mitigation strategies; operational disruptions at our facilities; our ability to implement our expansion strategy as planned or at all; our ability to locate and integrate potential future acquisitions; development of infrastructure related to the sale and distribution of ethanol; our limited operating history; excess production capacity in our industry; our ability to compete effectively in our industry; our ability to implement a marketing and sales network for our ethanol; changes in or elimination of governmental laws, tariffs, trade or other controls or enforcement practices; environmental, health and safety laws, regulations and liabilities; our reliance on key management personnel; future technological advances; limitations and restrictions contained in the instruments and agreements governing our indebtedness; our ability to raise additional capital and secure additional financing; and costs of construction and equipment, as more fully described in the "Risk Factors" section of our quarterly report on Form 10-Q for the three months ended June 30, Page 2

3 Investment Highlights Attractive Industry Dynamics Strong Growth Trajectory Large Scale and Low-Cost Strategy Experienced and Proven Management Team Strong Financial Trends Page 3

4 Attractive Industry Dynamics

5 Ethanol Price Tracks Gasoline Price Ethanol averages more than $0.50 over unleaded (1998 Present) Page 5

6 Ethanol Improves Refinery Economics Ethanol valued as clean, high-octane additive Refiners able to produce suboctane blend stock (about 84 octane) Improves refinery output (2) Adding ethanol Increases octane Expands fuel Reduces emissions Ethanol viewed as a strategic blend component (1) Source: EIA, 2006, total refinery capacity has increased from 16.1 million barrels per day in 1984 to 16.9 million barrels per day in 2004 (2) Results vary by refinery, gasoline specification and market Page 6

7 Nationwide Blend Component 40% of US gasoline contains ethanol Ethanol expansion driven by voluntary usage MTBE has been removed in most markets RFG markets have surpassed the Midwest in ethanol use Infrastructure being built to support RFG markets Large & growing conventional blending opportunity nearby Page 7

8 Significant Growth Opportunity Ethanol currently represents less than 4% of the gasoline market (1) Source: RFA, September 2006 (2) Includes 2.9 billion gallons of ethanol capacity under construction (Source: RFA, September 2006) (3) Calculated as 10% of the projected 2015 gasoline market of billion gallons (Source: EIA, 2006) (4) Calculated assuming 600 gallons of ethanol used each year per FFV and 20% mileage loss compared to conventional gasoline Page 8

9 Adequate Corn Supplies Expected USDA projects crop at 11.2 billion bushels this year Ethanol production accounts for 15% National Corn Growers projects 14.6 billion bushels in 2015 (1) Supports 15.9 BGY of ethanol production (1) Source: National Corn Growers and Pro Exporter, 2006; Page 9

10 Additional corn acres support over 30 BGY by Source: National Corn Growers and Pro Exporter, 2006; Page 10

11 Large Scale and Low-Cost Strategy

12 Strong Growth Trajectory Proven operating track record (1) Scheduled completion in July/August 2007 (2) Expected completion in Q Page 12

13 Plants located in Low Cost Corn areas $ (1) Source for corn prices: FCStone, LLC, 2006; determined using the basis differential to the Chicago Board of Trade over a five-year period ( ): Midwest $(0.15); Pacific Northwest $0.65; California $1.10; Panhandle $0.50; Gulf $0.50; Southeast $0.53. (2) Top ten corn producing states (five-year average): IA, IL, NE, MN, IN, SD, KS, WI, OH, MS; source: NASS (USDA), Page 13

14 Flexibility to Reach High-Value Markets Low cost transportation through unit trains Tacoma, WA + $1.48 Albany, NY Providence, RI Chicago, IL Sewaren, NJ San Francisco, CA Baltimore, MD St. Louis, MO Carson, CA + $0.85 Dallas, TX Houston, TX Gulf Terminal + $0.68 (1) Source for ethanol prices: OPIS, 2006; determined using the highest differential to Chicago ethanol price from January 2006 through September Page 14

15 Aurora, South Dakota 120 MMGY plant in operation Rail Loop Page 15

16 Fort Dodge, Iowa 110 MMGY plant in operation Rail Loop Page 16

17 Charles City Construction on Schedule 110 MMGY plant targeted for July/August 2007 start-up Page 17

18 2006 Ford Motor Company June, 2006 VeraSun, Ford Open Industry-First Ethanol Corridor In America's Heartland July, 2006 VeraSun and General Motors Collaborate to Bring E85 Ethanol-Based Fuel to Pittsburgh 2006 General Motors Corporation

19 Ethanol Marketing Transition on Track Marketing relationship with Aventine ending April 2007 Size and scale allows VeraSun the ability to market directly Currently >30% of Aventine marketing pool Hired Paul Kreter as Vice President of Ethanol Sales More than 20 years industry experience Secured ethanol tank cars for 1Q07 delivery for Aurora, Fort Dodge and Charles City production Completed logistics and marketing study VeraSun facility locations provide flexibility to reach favorable markets Page 19

20 Second Quarter 2006

21 Page 21

22 Strong Volume Growth Due to New Capacity Page 22

23 Revenues Improved Due to Volume Growth and Favorable Ethanol Prices Page 23

24 Ethanol Gross Margin Improved by $0.52 Per Gallon Versus First Quarter (1) Ethanol COGS = COGS less Distillers Revenues Page 24

25 Page 25

26 Fully-Funded Strategic Growth No additional debt or equity needed for growth to 560 MMGY Charles City, Iowa construction on schedule Construction began March 2006 Completion targeted for July/August 2007 Welcome, Minnesota and Hartley, Iowa development on schedule Construction on both facilities to begin in fourth quarter 2006 Completion targeted for end of first quarter 2008 Continuing to develop additional new sites American Milling strategic relationship Five targeted locations for development of new facilities Page 26

27 Strong Financial Metrics Source: VSE, AVR, BG, CPO, VLO, TSO,GI, SUN. Form 10-Q for 6 months ended June 20, 2006, ADM Form 10-K for year ended June 30, 2006 and form 10-Q for 6 months ended December 31, 2005; CAG Form 10-K for year ended May 22, 2006 and Form 10-Q for 6 months ended November 27, Page 27

28 Strong Financial Metrics Source: VSE, AVR, BG, CPO, VLO, TSO,GI, SUN. Form 10-Q for 6 months ended June 20, 2006, ADM Form 10-K for year ended June 30, 2006 and form 10-Q for 6 months ended December 31, 2005; CAG Form 10-K for year ended May 22, 2006 and Form 10-Q for 6 months ended November 27, Page 28

29 Strong Financial Metrics Source: VSE, AVR, BG, CPO, VLO, TSO,GI, SUN. Form 10-Q for 6 months ended June 20, 2006, ADM Form 10-K for year ended June 30, 2006 and form 10-Q for 6 months ended December 31, 2005; CAG Form 10-K for year ended May 22, 2006 and Form 10-Q for 6 months ended November 27, Page 29

30 VeraSun Summary Strong Financial Results Strong Volume Growth Improved Revenues Improved Margins Fully-Funded for 560 MMGY by March 2008 Confidence in Our Long-Term Strategy Page 30

31 Appendix

32 Net Income to EBITDA Reconciliation Page 32

33 Summary of National Corn Growers Study Crop Year Harvested Acres (mm) Total Production (mm bu) Ethanol Conversion (gal/bu) Ethanol Production (mm gal) Yield (bu/acre) Ethanol Use (mm bu) HI CASE ,504 5, ,862 MED CASE ,586 5, ,909 LO CASE ,528 4, ,841 Source: National Corn Growers and Pro Exporter, 2006; Page 33