XML 44 R15.htm IDEA: XBRL DOCUMENT v3.19.3.a.u2
Related Party Transactions
12 Months Ended
Sep. 30, 2019
Related Party Transaction, Due from (to) Related Party [Abstract]  
Related Party Transactions Related Party Transactions and Major Customers
Related Party Transactions
Bunge
On December 5, 2014, the Company entered into an Amended and Restated Ethanol Purchase Agreement with Bunge which was further amended and restated on October 23, 2017 to include specific provisions for loading and shipment of ethanol by truck (the “Ethanol Agreement”). Under the Ethanol Agreement, the Company has agreed to sell Bunge all of the ethanol produced by the Company, and Bunge has agreed to purchase the same.  The Company will pay Bunge a percentage marketing fee for ethanol sold by Bunge, subject to a minimum and maximum annual fee.  The initial term of the Ethanol Agreement expires on December 31, 2019, however it it will automatically renew for one five-year term, unless terminated by the parties in accordance with the terms of the agreement. The Company has incurred ethanol marketing expenses of $1.5 million in each year for Fiscal 2019 and Fiscal 2018, under the Ethanol Agreement.
On June 26, 2009, the Company executed a Railcar Agreement with Bunge for the lease of 325 ethanol cars and 300 hopper cars which are used for the delivery and marketing of ethanol and distillers grains. In November 2016, The Company reduced the number of leased ethanol cars to 323 and in both November 2013 and January 2015 The Company reduced the number of hopper cars by one for a total of 298 leased hopper cars.  Under the Railcar Agreement, the Company leases railcars for terms lasting 120 months and continuing on a month to month basis thereafter.  The Railcar Agreement will terminate upon the expiration of all railcar leases.  Expenses under this agreement were $3.5 million and $4.0 million for Fiscal 2019 and 2018, net of subleases and accretion, respectively. In November 2016, the Company entered into a sublease for 96 hoppers with Bunge that expired on March 24, 2019. The Company had subleased another 92 hopper cars to unrelated third parties, which also expired March 25, 2019. In June 2018, one of the third party customers entered into an assignment agreement for their 52 hopper cars with the Company and Bunge which will be phased in over the fourth quarter, and the start of the first quarter in our fiscal year ending September 30, 2019. SIRE received an up front assignment payment, and the net result will be financially neutral, and the number of side-leased railcars by SIRE remains the same.
The Company entered into a agreement effective March 24, 2019 extending the original Railcar Agreement with Bunge for the lease of 323 ethanol cars and 111 hopper cars which will be used for the delivery and marketing of ethanol and distiller grains. Under the terms of the new agreement, the original DOT111 tank cars are leased over a four year term running from March 24, 2019 to April 30, 2023, with the ability to start returning cars after January 1, 2023 to conform to the requirement for DOT117 tank cars with enhanced safety specifications which is scheduled to become effective May 2023. The 111 hopper cars are leased over a three year term running from March 24, 2019 to March 31, 2022. The combined cost for the leases for Fiscal 2019 was $3.5 million and $4.0 million in Fiscal 2018.

The Company continues to work with Bunge to determine the need for ethanol and hopper cars in light of current market conditions, and the expected conditions in 2020 and beyond. The Company believes we will be able to fully utilize our fleet of hopper cars in the future, to allow us to cost-effectively ship distillers grains to distant markets, primarily the export markets.        
On December 5, 2014, the Company and Bunge entered into an Amended and Restated Distiller’s Grain Purchase Agreement (the “ DG Purchase Agreement ”).  Under the DG Purchase Agreement, Bunge will purchase all distiller’s grains produced by the Company, and will receive a marketing fee based on the net sale price of distillers grains, subject to a minimum and maximum annual fee.  The initial term of the DG Purchase Agreement expires on December 31, 2019  and will automatically renew for one five year term unless terminated by the parties in accordance with the terms of the agreement. The Company has incurred distillers grains marketing expenses of $1.3 million and $1.2 million during Fiscal 2019 and 2018, respectively.
The Company and Bunge also entered into an Amended and Restated Grain Feedstock Agency Agreement on December 5, 2014 (the “ Agency Agreement ”).  The Agency Agreement provides that Bunge will procure corn for the Company, the Company will pay Bunge a per bushel fee, subject to a minimum and maximum annual fee.  The initial term of the Agency Agreement expires on December 31, 2019 and will automatically renew for one five year term unless terminated by the parties in accordance with the terms of the agreement. Expenses for corn procurement by Bunge were $0.7 million for each year of the fiscal years ended September 30, 2019 and 2018. The Company has outstanding corn contracts of 7 thousand bushels with a $25 thousand liability as of September 30, 2019, and 116 thousand bushels with a $393 thousand liability as of September 30, 2018 included in derivative financial instruments liability on the balance sheet.
Since the 2015 crop year, the Company has been using corn containing Syngenta Seeds, Inc.’s proprietary Enogen® technology (“ Enogen Corn ”) for a portion of its ethanol production needs.  The Company contracts directly with growers to produce Enogen Corn for sale to the Company.  Concurrent with the Agency Agreement, the Company and Bunge entered into a Services Agreement regarding corn purchases (the “ Services Agreement ”).  Under this agreement, the Company originates all Enogen Corn contracts for its facility and Bunge assists the Company with certain administrative matters related to Enogen Corn, including facilitating delivery to the facility.  The Company pays Bunge a per bushel service fee.  The initial term of the Services Agreement expires on December 31, 2019 and will automatically renew for one additional five year term unless terminated by the parties in accordance with the terms of the agreement. Expenses under the Services Agreement are included as part of the Amended and Restated Grain Feedstock Agency Agreement discussed above.

ICM    
In connection with the payoff of the ICM subordinated debt, the Company entered into the SIRE ICM Unit Agreement dated December 17, 2014 (the “ Unit Agreement ”).  Under the Unit Agreement, the Company granted ICM the right to sell to the Company its 1,000 Series C and 18 Series A Membership Units (the “ ICM Units ”) commencing anytime during the earliest of  several alternative dates and events at the greater of $10,897 per unit or the fair market value (as defined in the agreement) on the date of exercise. The Company increased expense in Fiscal 2019 by $637 thousand, and in Fiscal 2018 reduced expense by $300 thousand in conjunction with this put right under the Unit Agreement. See Note 7 Fair Value Measurement, for the terms of this agreement. In accordance with the terms of the Unit Agreement, the Company repurchased the ICM Units on November 15, 2019. See Note 11 Subsequent Event, for additional information regarding the repurchase of the ICM Units.

Major Customers
The Company is party to the Ethanol Agreement and the Distillers Grain Purchase Agreement with Bunge for the exclusive marketing, selling, and distributing of all of the ethanol and distillers grains produced by the Company.  The Company has expensed $2.8 million and $2.7 million in marketing fees under these agreements for Fiscal 2019 and 2018, respectively. Revenues with this customer were $205.1 million and $204.7 million, respectively, for Fiscal 2019 and 2018.   Trade accounts receivable due from Bunge were $7.9 million and $11.6 million as of September 30, 2019 and 2018, respectively.