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8-K - FORM 8-K - Western Iowa Energy, L.L.C. | c11686e8vk.htm |
Exhibit 99.1
Western Iowa Energy, LLC 1220 S. Center Street PO Box 399 Wall Lake, IA 51466 phone 712-664-2173 fax 712-664-2183 www.westerniowaenergy.com |
February 1, 2011
Dear Western Iowa Energy Members:
Several exciting things are occurring in the biodiesel industry and at Western Iowa Energy in
particular. In December 2010, the federal biodiesel blenders tax credit was extended through
2011. This credit provides a tax credit of $1.00 for each gallon of biodiesel blended with
petroleum-based diesel. We are optimistic that this tax credit will provide oil companies and
other blenders with a continuing incentive to purchase biodiesel. The biodiesel industry also
received favorable news in December 2010 when a federal court rejected an attempt by the oil
industry to challenge the implementation of the Renewable Fuels Standard (RFS2). The RFS2 requires
parties such as refiners and importers to utilize 800 million gallons of biodiesel in 2011.
Encouraging developments are also occurring at Western Iowa Energy (WIE):
| In August and September 2010, WIE hired a General Manager and Plant Manager. These functions were previously provided by REG. |
| In September 2010, WIE finalized a product marketing agreement and feedstock procurement agreement with Archer-Daniels-Midland Company (ADM). These agreements are not only beneficial from an expense standpoint relative to the companys prior agreements, but also place WIE in a working relationship with one of the largest agribusiness and renewable fuels companies in the country. |
| In December 2010, WIE paid off its term debt in full, lowering interest expense. |
| WIE biodiesel sales are currently at approximately 70% of plant production capacity through March 2011. |
| WIE is once again employing a full workforce. The company has hired back approximately 80% of the employees that were previously laid off and has also hired new workers from local areas. |
The WIE Board of Directors is continually looking to make the company more efficient and eliminate
expenses that detract from the companys bottom line. Recently, the Board has discussed the
burdens associated with the companys U.S. Securities and Exchange Commission (SEC) public
reporting obligations. After much discussion, the Board has approved,
subject to final member and SEC approval, reclassifying the companys membership units into three
classes and deregistering the companys membership units with the SEC.
WIEs current annual cost of SEC reporting and compliance is estimated at $235,000, and continues
to escalate as additional regulations are imposed on reporting companies. This estimate includes
approximately $215,000 in direct costs and approximately $20,000 in staff expense. As an SEC
reporting company, WIE must file reports that are available to the general public containing the
companys financial results, discussions regarding the companys activities, and material events
impacting the company. This information is available to our competitors, some of whom are not SEC
reporting companies and therefore do not have reciprocal disclosure obligations. Additionally, the
Companys reporting obligations require the time and attention of WIEs management and employees,
which could instead be utilized to focus on the companys operations.
Deregistering WIEs membership units involves reclassifying the units into three different classes,
Class A, Class B, and Class C. Different classes are necessary so that the number of members in
each class will be below the thresholds that trigger SEC reporting obligations. For purposes of
our proposed reclassification and deregistration, the applicable maximum number of unit holders in
each class would be 300 unit holders in Class A, 500 unit holders in Class B, and 500 unit holders
in Class C. Currently WIE has 26,447 membership units outstanding held by approximately 748
members. If approved by the companys members, the unit reclassification would be based on the
number of membership units owned by each member on the date of the reclassification. Class A would
be comprised of members that own 40 or more units, Class B would be comprised of members that own
21 to 39 units, and Class C would be comprised of members that own 20 or fewer units. If the
reclassification was implemented as of today, the results would be as follows:
Class A | Class B | Class C | ||||||||||
Number of members |
187 | 195 | 366 | |||||||||
Number of units represented |
14,893 | 5,126 | 6,428 |
All membership units would continue to have identical economic rights following the
reclassification. This means that profit and loss allocations and cash distribution rights
would be the same for members in all three classes. If the reclassification is approved by WIEs
members, we expect that the classes of membership units would be distinguished from one another
based on voting rights. We expect that Class A members would be entitled to vote on all matters
for which member approval is required under WIEs operating agreement or state law; Class B members
would be entitled to vote on the election of WIEs directors, the merger, consolidation, exchange
or disposal of all or substantially all of the companys assets, and the voluntary
dissolution of the company; and Class C members would be entitled to vote on the merger,
consolidation, exchange or disposal of all or substantially all of the companys assets and the
voluntary dissolution of the company.
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WIE is implementing a trading window opening on the date of this letter and closing on May 2,
2011, during which members may transfer units prior to the reclassification so that they may own
the requisite number of units needed to be in their desired class. The trading window closing date
may be extended by the Board in its discretion. In some cases, members may desire to combine
ownership of membership units in order to have their units classified in a certain class. For
example, a husband and wife that each separately own 15 units might consider combining their units
so that they instead own 30 units jointly. In that case, the units would be classified as Class B
units on the date of the reclassification rather than Class C units. Please consult your
professional advisors to determine whether it may be advantageous for you to transfer or combine
membership unit ownership. Following the closing date of the trading window, all unit sales and
transfers will be suspended until further notice or until the completion of the reclassification,
whichever occurs first.
The purpose of deregistering WIEs membership units is not to provide the companys members
with less information regarding the company. If the reclassification is approved by the companys
members, the company would continue to provide members with copies of the companys annual audited
financial statements, as well as quarterly unaudited financial statements as requested.
Additionally, following deregistration the company would be less hampered by SEC regulations as to
what may or may not be disclosed. Several other renewable fuels companies have successfully
deregistered their membership units with the SEC and ceased their public reporting obligations,
including Siouxland Ethanol, Little Sioux Corn Processors, East Kansas Agri-Energy, E Energy Adams,
United Wisconsin Grain Producers, and Badger State Ethanol. We are also aware of one company that
is currently in the process of determining whether to deregister its membership units, First United
Ethanol. Our understanding is that the experience of those companies that have successfully
deregistered has been very positive.
We expect to hold a special member meeting for the purpose of voting on the reclassification and
deregistration transaction this summer, prior to harvest. We also expect to hold an informational
meeting prior to the special member meeting to address certain details regarding the
reclassification and deregistration transaction and to provide you the opportunity to ask any
questions you have regarding the transaction. WIE has engaged the Davis Brown Law Firm in Des
Moines as legal counsel to represent the company in the reclassification transaction. Our legal
counsel will prepare a detailed proxy statement describing the proposed reclassification and
accompanying amendments to WIEs Operating Agreement needed to effect the reclassification.
You will be provided with a copy of this proxy statement in advance of the special member
meeting.
Thank you for your continued support of WIE. We are optimistic about the future of the company and
believe that the market for biodiesel is improving. We also believe that deregistering the
companys membership units is another step towards making the company more effective and efficient.
If you have any questions regarding the deregistration process, please feel free to contact the
members of the Board.
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Sincerely,
The Board of Directors,
Western Iowa Energy, LLC
The Board of Directors,
Western Iowa Energy, LLC
This letter is not a proxy statement or a solicitation of proxies from the holders of membership
units of the company. Any solicitation of proxies will be made only by the definitive proxy
statement of the company, when available. Members of the company are urged to read the proxy
statement and appendices thereto, when available, because they will contain important information
about the company and the proposed reclassification of membership units.
This letter contains historical information, as well as forward-looking statements that involve
known and unknown risks and relate to future events, our future financial performance, or our
extended future operations and actions. These forward-looking statements are only our predictions
based on current information and involve numerous assumptions, risks and uncertainties. Our actual
results or actions may differ materially from these forward-looking statements for many reasons,
including the reasons described in our filings with the Securities and Exchange Commission. We
caution you not to put undue reliance on any forward-looking statements, which speak only as of the
date of this letter. We qualify all of our forward-looking statements by these cautionary
statements.
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