ELEMENT

6 Months Ended

Jun. 30, 2023

Equity Method Investments and Joint Ventures [Abstract]

ELEMENT

ELEMENT

ELEMENT was structured as a limited liability company established for the primary purpose of producing ethanol and additional co-products such as distiller’s dried grain and corn oil. The facility located in Colwich, Kansas was designed to produce 70 million gallons of ethanol per year and began operations in August 2019.

The Company holds 51% of the membership units and ICM Holdings, Inc. (“ICM”) owns the remaining 49% of the membership units. The Company acted as the manager of the facility, responsibilities which were assumed per the Management Services Agreement dated January 1, 2021, and it was concluded to be a variable interest entity (“VIE”) and consolidated ELEMENT within the Company’s Consolidated Financial Statements.

The plant has faced operational and market-based challenges. These challenges have been exacerbated by a shift in the California Low Carbon Fuel Standard credit markets and high western corn basis. In early 2023, ELEMENT was unable to make its scheduled debt payments and was placed into default. The default led to an impairment triggering event, concluding in an $87.2 million impairment charge in the first quarter.

On April 18, 2023, ELEMENT was placed into receivership and was appointed a receiver, which took possession and control of the rights and interests of ELEMENT. The facility is being marketed for sale. With this appointment, while retaining its investment in ELEMENT, the Company ceased to have a controlling financial interest and was no longer deemed to be the primary beneficiary in the subsidiary. Accordingly, the Company deconsolidated ELEMENT at that time and began accounting for the subsidiary as an equity method investment which resulted in a pretax gain of $18.1 million. Additionally, the Company had a $9.6 million balance in raw material and fee receivables as well as $2.0 million in loans and interest due from ELEMENT that were previously eliminated in consolidation. Upon deconsolidation, the fair values of these receivables and loans from ELEMENT to the Company were ascertained to have no value and were fully reserved for resulting in a pretax loss of $11.6 million. The combination of this activity triggered by the ELEMENT deconsolidation resulted in a cumulative net pretax gain of $6.5 million which was recorded in Other income, net in the Condensed Consolidated Statements of Operations.

As of June 30, 2023, ELEMENT has continued to incur losses and there have been no payments on the outstanding receivables or loan mentioned previously. No equity method losses related to ELEMENT have been recorded since deconsolidation as the investment is in a negative position as of June 30, 2023.