Rentech Cuts its Losses and Commerce City Production Unit

Reminders of the tough economic climate for getting projects financed are everywhere. Another hammer came down early this month as one of the giant players in the industry announced plans to shutter all research and development towards developing a synthetic fuel from biomass.

Eleven months ago we wrote about Rentech’s moves to scale back spending for development of its patented Rentech Fischer-Tropsch Process, designed to produce synthetic jet and diesel fuel. The parent company of fertilizer giant Rentech Nitrogen had been buying up technologies and land for a variety of projects and was now being squeezed by shareholders for a return on those investments. Last year the company abandoned projects in Port St. Joe, Fla. and Natchez, Miss. and begin looking for a new outlet for the rights to the 1.3 million tons of timber it purchased from the Province of Ontario.

Further austerity measures were recently taken when Rentech announced it would cease operations on its production demonstration unit in Commerce City, Colo., cutting 65 jobs and effectively halting any efforts to continue developing synthetic renewable jet and diesel fuel.

“While our elimination of these positions is a difficult decision, today’s actions will further position Rentech to drive value for shareholders by cutting R&D spending and focusing on businesses that generate strong returns, with ready markets and certainty of revenue,” CEO Hunt Ramsbottom said in a statement on Feb. 28^th.

Rentech's Product Demonstration Unit in Commerce City.
Courtesy: Rentech, Inc.

Rentech looked like it was poised for success in 2010 when United Airlines successfully flew an A319 Airbus, which was powered in part by RenJet, the synthetic fuel produced at the Commerce City facility, out of Denver International Airport. Forecasts for how this development could change the industry were good but economics kept the drop-in fuel from becoming a staple in the industry.

Reports say that Rentech would need more than $1 billion to bring the technology to a large enough scale to make the process economic and potential customers haven’t been willing to agree to long-term contacts to make financing easier. Rentech will attempt to sell the five-year old facility it built in Commerce City for $85 million as well as the 450 acres of land it still owns in Natchez, Miss.

The company expects to cut its R&D budget from $21 million in 2012 to $10 million in 2013. It has no plans to spend any money beyond maintaining intellectual property in 2014.

Better BTU Take: We were skeptical of Rentech’s chances for success from the beginning, noting in our first blog that the company seemed to be throwing large amounts of money around hoping to hit the target and strike it rich. Although the company may have been able to prove its technology, it wasn’t able to bring it to large-scale production due to cost and that is one of the reasons we support building the industry on smaller scale projects.

Rentech to Close Product Demonstration Unit – Rentech Press Release, Feb. 28, 2013

Rentech to Shutter Research Plant in Commerce City, Cutting 65 Jobs – By Aldo Svaldi, The Denver Post, Feb. 28, 2013

Rentech in Reverse – Better BTU Technology Blog, Apr. 24, 2012

Jet Fuel's Future on the Front Burner – By Ann Schrader, The Denver Post, Aug. 1, 2010.