Green Plains Partners LP(GPP) - 2022 Q4 - Annual Report

Operations and Capacity - Green Plains Partners operates 27 ethanol storage tanks with a combined capacity of 25.1 million gallons, supporting an annual production capacity of 958 million gallons of ethanol [22][23]. - For the year ended December 31, 2022, the average utilization rate of the parent company's ethanol production facilities was approximately 91% [23]. - The company owns and operates two fuel terminals with a total storage capacity of approximately 6.7 million gallons and an aggregate throughput of approximately 198.8 million gallons for the year ended December 31, 2022 [24]. - The leased railcar fleet consists of approximately 2,500 railcars with an aggregate capacity of 75.0 million gallons, with a remaining term of 6.5 years for the rail transportation services agreement [24][37]. - The average daily railcar capacity billed was 73.1 million gallons in 2022, an increase from 69.8 million gallons in 2021 [210]. Financial Performance - Total revenues for the year ended December 31, 2022, were $79.767 million, an increase of $1.3 million compared to $78.452 million in 2021 [211]. - Adjusted EBITDA for 2022 was $51.168 million, down from $52.147 million in 2021 [199]. - Distributable cash flow decreased by $0.8 million in 2022, associated with an increase in net income offset by changes in interest expense compared to the prior period [214]. - The coverage ratio for distributions declared was 1.04x in 2022, down from 1.72x in 2021 [199]. - Operations and maintenance expenses increased by $2.1 million in 2022, primarily due to an increase in railcar lease expense [212]. Customer and Revenue Dependency - Revenues from Green Plains Trade accounted for approximately $75.8 million, or 95.0% of total revenues in 2022, highlighting the company's dependency on this major customer [57]. - The company benefits from stable and predictable cash flows due to long-term, fee-based commercial agreements with Green Plains Trade, which include minimum volume commitments [41]. Regulatory and Compliance Risks - The company is subject to risks related to the operational and financial performance of Green Plains Trade, which could adversely affect cash distributions to unitholders [70]. - Compliance with environmental regulations may require substantial capital expenditures, and any violations could lead to penalties that negatively impact financial performance [85]. - The company faces potential material adverse effects on its financial condition due to federally-mandated tank car requalification, which requires inspections and upgrades every ten years, potentially leading to increased out-of-service railcars [80]. Market and Economic Factors - Future demand for ethanol is uncertain, influenced by federal mandates, public perception, and global events, which could adversely affect the company's revenue generation [86][87]. - Changes in international trade agreements and tariffs could materially affect the company's business and financial results, particularly in ethanol exports to countries like Canada, South Korea, and Mexico [82]. - The recent strengthening of the U.S. Dollar could adversely impact U.S. ethanol competitiveness in the global market [173]. Strategic Initiatives and Growth - Green Plains Partners intends to pursue organic growth and strategic acquisitions to enhance its asset base and operational capabilities [46][47]. - The company is positioned to compete effectively in a growing market due to its expertise in managing third-party terminal services and logistics [55]. Partnership and Governance - The partnership agreement requires distribution of all available cash, limiting the ability to fund growth and acquisitions externally [117]. - The general partner can reset target distribution levels without unitholder approval, potentially leading to lower distributions for common unit holders [123]. - Unitholders may face liability to repay distributions that were wrongfully distributed under Delaware law [135]. Tax and Financial Structure - Tax treatment as a partnership is crucial; if treated as a corporation, distributable cash flow would be significantly reduced [138]. - The company has not requested a ruling from the IRS regarding its partnership treatment, which poses a risk of adverse market impacts if the IRS contests its tax positions [142]. - Unitholders are liable for taxes on their share of taxable income, even without cash distributions, which may not align with actual cash received [143]. Industry Trends - In 2022, U.S. domestic ethanol production averaged 1.0 million barrels per day, a 1% increase from 2021 [172]. - Domestic ethanol exports through November 30, 2022, were approximately 1,277 million gallons, up 13% from 1,126 million gallons in the same period of 2021 [173]. - The EPA has proposed Renewable Volume Obligations (RVOs) for 2023, 2024, and 2025, setting the implied conventional ethanol levels at 15.25 billion gallons for each year [178].