Advanced BioEnergy, LLC - FORM 10-Q

Advanced BioEnergy, LLC - FORM 10-Q - May 15, 2012

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EXCEL - IDEA: XBRL DOCUMENT - Advanced BioEnergy, LLC	Financial_Report.xls
EX-32 - SECTION 1350 CERTIFICATIONS - Advanced BioEnergy, LLC	d339337dex32.htm
EX-31 - RULE 13A-14(A)/15D-14(A) CERTIFICATION - Advanced BioEnergy, LLC	d339337dex31.htm
EX-10.1 - MULTIPLE ADVANCE TERM LOAN SUPPLEMENT - Advanced BioEnergy, LLC	d339337dex101.htm
EX-10.3 - MONITORED REVOLVING CREDIT SUPPLEMENT - Advanced BioEnergy, LLC	d339337dex103.htm
EX-10.2 - AMENDMENT TO THE MASTER LOAN AGREEMENT - Advanced BioEnergy, LLC	d339337dex102.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

Form 10-Q

(Mark One)

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2012

¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number: 000-52421

ADVANCED BIOENERGY, LLC

(Exact name of Registrant as Specified in its Charter)

Delaware

20-2281511

(State or Other Jurisdiction of

Incorporation or Organization)

(I.R.S. Employer

Identification No.)

8000 Norman Center Drive, Suite 610

Bloomington, Minnesota 55437

(763) 226-2701

(Address, including zip code, and telephone number,

including area code, of Registrant’s Principal Executive Offices)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files.) Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

As of May 4, 2012, the number of outstanding units was 24,714,180.

ADVANCED BIOENERGY, LLC

FORM 10-Q

Index


	Page
Part I. Financial Information
Item 1. Financial Statements		3
Consolidated Balance Sheets		3
Consolidated Statements of Operations		4
Consolidated Statement of Changes in Members’ Equity		5
Consolidated Statements of Cash Flows		6
Notes to Consolidated Financial Statements		7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		21
Item 3. Quantitative and Qualitative Disclosures About Market Risk		34
Item 4. Controls and Procedures		35
Part II. Other Information
Item 1. Legal Proceedings		36
Item 1A. Risk Factors		36
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		36
Item 3. Defaults Upon Senior Securities		37
Item 4. Mine Safety Disclosures		37
Item 5. Other Information		37
Item 6. Exhibits		37
Signatures		38
Exhibit Index		38

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

ADVANCED BIOENERGY, LLC & SUBSIDIARIES

Consolidated Balance Sheets

(Dollars in thousands)


	March 31,			September 30,
	2012			2011
	(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	25,159		$	18,725
Accounts receivable:
Trade accounts receivable, net of allowance for doubtful accounts of $178 at March 31, 2012 and September 30, 2011		6,385			14,653
Other receivables		896			838
Due from broker		608			1,014
Inventories		28,045			22,106
Derivative financial instruments		35			—
Prepaid expenses		1,838			2,175
Current portion of restricted cash		3,924			3,959

Total current assets		66,890			63,470

Property and equipment, net		157,160			164,821
Other assets:
Restricted cash		1,595			1,508
Notes receivable-related party		502			494
Other assets		1,760			1,883

Total assets	$	227,907		$	232,176

LIABILITIES AND MEMBERS’ EQUITY
Current liabilities:
Accounts payable	$	9,961		$	6,688
Accrued expenses		5,991			6,528
Derivative financial instruments		—			832
Current portion of long-term debt (stated principal amount of $13,035 and $20,541 at March 31, 2012 and September 30, 2011, respectively)		14,747			21,703

Total current liabilities		30,699			35,751

Other liabilities		462			318
Deferred income		3,871			4,208
Long-term debt (stated principal amount of $110,627 and $117,962 at March 31, 2012 and September 30, 2011, respectively)		117,937			126,253

Total liabilities		152,969			166,530

Members’ equity:
Members’ capital, no par value, 24,714,180 units issued and outstanding		171,248			171,246
Accumulated deficit		(96,310	)		(105,600	)

Total members’ equity		74,938			65,646

Total liabilities and members’ equity	$	227,907		$	232,176

See notes to consolidated financial statements.

ADVANCED BIOENERGY, LLC & SUBSIDIARIES

Consolidated Statements of Operations

(Dollars in thousands, except per unit data)

(Unaudited)


	Three months ended						Six months ended
	March 31,			March 31,			March 31,			March 31,
	2012			2011			2012			2011
Net sales
Ethanol and related products	$	138,278		$	152,704		$	302,819		$	268,970
Other		200			108			366			358

Total net sales		138,478			152,812			303,185			269,328
Cost of goods sold		136,828			148,000			288,949			258,414

Gross profit		1,650			4,812			14,236			10,914
Selling, general and administrative		2,014			1,452			3,634			3,024
Arbitration settlement expense		—			2,215			—			2,706

Operating income (loss)		(364	)		1,145			10,602			5,184
Other income		344			510			559			610
Interest income		12			13			35			37
Interest expense		(794	)		(932	)		(1,906	)		(1,928	)

Net income (loss)	$	(802	)	$	736		$	9,290		$	3,903

Weighed average units outstanding—basic		24,714,180			24,705,180			24,714,180			24,705,180
Weighed average units outstanding—diluted		24,752,228			24,705,180			24,714,180			24,705,180
Income (loss) per unit—basic	$	(0.03	)	$	0.03		$	0.38		$	0.16
Income (loss) per unit—diluted	$	(0.03	)	$	0.03		$	0.38		$	0.16

See notes to consolidated financial statements.

ADVANCED BIOENERGY, LLC & SUBSIDIARIES

Consolidated Statements of Changes in Members’ Equity

For the Six Months Ended March 31, 2012

(Dollars in thousands)

(Unaudited)


	Member		Members’		Accumulated
	Units		Capital		Deficit			Total
MEMBERS’ EQUITY—September 30, 2011		24,714,180	$	171,246	$	(105,600	)	$	65,646
Unit compensation expense		—		2		—			2
Net income		—		—		9,290			9,290

MEMBERS’ EQUITY—March 31, 2012		24,714,180	$	171,248	$	(96,310	)	$	74,938

See notes to consolidated financial statements

ADVANCED BIOENERGY, LLC & SUBSIDIARIES

Consolidated Statements of Cash Flows

(Dollars in thousands)

(Unaudited)


	Six Months Ended
	March 31,			March 31,
	2012			2011
Cash flows from operating activities:
Net income	$	9,290		$	3,903
Adjustments to reconcile net income to operating activities cash flows:
Depreciation		11,548			11,226
Amortization of deferred financing costs		66			66
Amortization of deferred revenue and rent		(351	)		(337	)
Idle lease liability reduction		—			(154	)
Amortization of additional carrying value		(431	)		(428	)
Unit compensation expense		2			23
Gain on disposal of assets		—			(8	)
Unrealized loss (gain) on warrant derivative liability		158			(64	)
Change in risk management activities		(867	)		314
Change in working capital components:
Receivables		8,608			(2,500	)
Inventories		(5,939	)		1,694
Prepaid expenses		337			339
Accounts payable		2,628			3,495
Accrued expenses		(537	)		2,930

Net cash provided by operating activities		24,512			20,499

Cash flows from investing activities:
Purchase of property and equipment		(3,242	)		(1,949	)
Change in other assets		57			(8	)
Change in restricted cash		(52	)		1,750

Net cash used in investing activities		(3,237	)		(207	)

Cash flows from financing activities:
Payments on debt		(14,841	)		(13,799	)

Net cash used in financing activities		(14,841	)		(13,799	)

Net increase in cash and cash equivalents		6,434			6,493
Beginning cash and cash equivalents		18,725			22,772

Ending cash and cash equivalents	$	25,159		$	29,265

Supplemental disclosure of cash flow information:
Cash paid for interest	$	2,399		$	2,393
Supplemental disclosure of non cash information:
Equipment purchased but not yet paid for		645			—

See notes to consolidated financial statements.

ADVANCED BIOENERGY, LLC & SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2012 and 2011

(Unaudited)

1. Organization and Significant Accounting Policies

The consolidated financial statements include the accounts of Advanced BioEnergy, LLC (“ABE” or the “Company”) and its wholly owned subsidiaries, ABE Fairmont, LLC (“ABE Fairmont”) and ABE South Dakota, LLC (“ABE South Dakota”). All intercompany balances and transactions have been eliminated in consolidation. The interim financial statements should be read in conjunction with the audited financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K for the year ended September 30, 2011. The financial information as of March 31, 2012 and the results of operations for the three and six months ended March 31, 2012 are not necessarily indicative of the results for the fiscal year ending September 30, 2012.

The Company currently operates three ethanol production facilities in the U.S. with a combined production capacity of 195 million gallons per year. The Company commenced operations at the 110 million gallon facility in Fairmont, Nebraska in November 2007. The Company acquired existing facilities in Aberdeen, South Dakota (9 million gallons) and Huron, South Dakota (32 million gallons) in November 2006 and commenced operations at the 44 million gallon Aberdeen expansion facility in January 2008.

Cash, Cash Equivalents and Restricted Cash

The Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents. The Company’s cash balances are maintained in bank depositories and periodically exceed federally insured limits. The Company has not experienced losses in these accounts. The Company’s restricted cash includes cash held for debt service under the terms of its debt agreements.

Fair Value of Financial Instruments

Financial instruments include cash, cash equivalents and restricted cash , derivative financial instruments, accounts receivable, accounts payable, accrued expenses, warrants, and long-term debt. The fair value of derivative financial instruments is based on quoted market prices. The fair value of warrants is determined using the Black-Scholes valuation model. The fair value of the long-term debt is estimated based on Level 3 inputs which are anticipated interest rates which management believes would currently be available to the Company for similar issues of debt, taking into account the current credit risk of the Company and other market factors. The Company believes the carrying value of the debt instruments at ABE Fairmont approximate fair value. Based on the restructuring event, the fair value of the debt instruments at ABE South Dakota is not determinable (refer to Note 5 for terms). The fair value of all other financial instruments are estimated to approximate carrying value due to the short-term nature of these instruments, and are considered to be Level 2 inputs.

Fair Value Measurements

In determining fair value of its derivative financial instruments and warrant liabilities, the Company uses various methods including market, income and cost approaches. Based on these approaches, the Company often uses certain assumptions that market participants would use in pricing the asset or liability, including assumptions about risk and the risks inherent in the inputs to the valuation technique. These inputs can be readily observable, market-corroborated, or generally unobservable inputs. Financial assets and liabilities carried at fair value will be classified and disclosed in one of the following three fair value hierarchy categories.

Level 1: Valuations for assets and liabilities traded in active markets from readily available pricing sources for market transactions involving identical assets or liabilities.

Level 2: Valuations for assets and liabilities traded in less active dealer or broker markets. Valuations are obtained from third-party pricing services for identical or similar assets or liabilities.

Level 3: Valuations incorporating certain assumptions and projections in determining the fair value assigned to such assets or liabilities.

Commodity futures and exchange-traded commodity options contracts are reported at fair value using Level 1 inputs. For these contracts, the Company obtains fair value measurements from an independent pricing service. The fair value measurements consider observable data that may include dealer quotes and live trading levels from the Chicago Board of Trade (“CBOT’) and New York Mercantile Exchange (“NYMEX”) markets.

The following table summarizes financial assets and financial liabilities measured at the approximate fair value used to measure fair value (amounts in thousands):


At March 31, 2012	Total		Level 1		Level 2		Level 3
Assets—Derivative Financial Instruments	$	35	$	35	$	—	$	—
Other Liabilities—Warrant Derivative		340		—		—		340

At September 30, 2011
Liabilities—Derivative Financial Instruments	$	832	$	832	$	—	$	—
Other Liabilities—Warrant Derivative		182		—		—		182

The unit warrants issued contain a strike price adjustment feature. The Company calculated the fair value of the warrants using the Black-Scholes valuation model. During the six months ended March 31, 2012 and 2011, the Company recognized an unrealized loss (gain) of $158,000 and ($64,000), respectively, related to the change in the fair value of the warrant derivative liability. The liability can fluctuate significantly if the market value of the unit changes.

The assumptions used in the Black-Scholes valuation model were as follows:


	March 31,			September 30,
	2012			2011
Market value(1)	$	1.75		$	1.50
Exercise price	$	1.50		$	1.50
Expected volatility (2)		50.00	%		46.92	%
Expected life (years)		2.50			1.50
Risk-free interest rate		0.330	%		0.250	%
Forfeiture rate		—			—
Dividend rate		—			—

(1)	Market value based on trading values of comparable competitors.

(2)	Volatility based on trading volatility of a comparable competitor.

The following table reflects the activity for the warrant derivative, the only liability measured at fair value using Level 3 inputs, for the six months ended March 31, 2012 and 2011 (amounts in thousands):


	2012		2011
Beginning balance	$	182	$	474
Unrealized loss (gain) related to the change in fair value		158		(64	)

Ending balance	$	340	$	410

Receivables

Credit sales are made to a few customers with no collateral required. Trade receivables are carried at original invoice amount less an estimate made for doubtful receivables based on a review of all outstanding amounts on a monthly basis. Management determines the allowance for doubtful accounts by regularly evaluating individual receivables and considering a customer’s financial condition, credit history and current economic conditions. Receivables are written off if deemed uncollectible. Recoveries of receivables previously written off are recorded when received.

Derivative Instruments/Due From Broker

On occasion, the Company has entered into derivative contracts to hedge the Company’s exposure to price risk related to forecasted corn purchases and forecasted ethanol sales. Accounting for derivative contracts requires that an entity recognize all derivatives as either assets or liabilities on the balance sheet and measure those instruments at fair value. If certain conditions are met, a derivative may be specifically designated as (a) a hedge of the exposure to changes in the fair value of a recognized asset or liability or an unrecognized firm commitment, (b) a hedge of the exposure to variable cash flows of a forecasted transaction, or (c) a hedge of the foreign currency exposure of a net investment in a foreign operation, an unrecognized firm commitment, an available-for-sale security, or a foreign-currency-denominated forecasted transaction.

Although the Company believes its derivative positions are economic hedges, it has not designated any derivative position as a hedge for accounting purposes and it records derivative positions on the balance sheet at their fair market value, with changes in fair value recognized in current period earnings.

In addition, certain derivative financial instruments that meet the criteria for derivative accounting treatment also qualify for a scope exception to derivative accounting, as they are considered normal purchase and sales. The availability of this exception is based on the assumption that the Company has the ability to deliver or take delivery of the underlying item, and it is probable that the Company will do so. Derivatives that are considered to be normal purchases and sales are exempt from derivative accounting treatment, and are accounted for under accrual accounting.

Inventories

Corn, chemicals, supplies, work in process, ethanol and distillers grains inventories are stated at the lower of weighted average cost or market.

Property and Equipment

Property and equipment is carried at cost less accumulated depreciation computed using the straight-line method over the estimated useful lives:


Office equipment			3-7 Years
Process equipment			10 Years
Buildings			40 Years

Maintenance and repairs are charged to expense as incurred; major improvements and betterments are capitalized. Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount on the asset may not be recoverable. An impairment loss is recognized when estimated undiscounted future cash flows from operations are less than the carrying value of the asset group. An impairment loss is measured by the amount by which the carrying value of the asset exceeds the estimated fair value on that date.

Revenue Recognition

Ethanol revenue is recognized when product title and all risk of ownership is transferred to the customer as specified in the contractual agreements with the marketers. At all of the Company’s plants, revenue is recognized upon the release of the product for shipment. Revenue from the sale of co-products is recorded when title and all risk of ownership transfer to customers, which generally occurs at the time of shipment. Co-products and related products are generally shipped free on board (“FOB”) shipping point. Interest income is recognized as earned. In accordance with the Company’s agreements for the marketing and sale of ethanol and related products, commissions due to the marketers are deducted from the gross sale price at the time of payment.

Income (loss) Per Unit

Basic and diluted income (loss) per unit is computed using the weighted-average number of vested units outstanding during the period. Unit appreciation rights and the unit warrants are considered unit equivalents and are considered in the diluted income per unit computation, but have not been included in the computations of diluted income (loss) per unit for the current periods because their effect would be anti-dilutive, except for the warrants in the second quarter of 2012. Basic earnings and diluted per unit data were computed as follows (in thousands except per unit data):


	Three Months Ended						Six Months Ended
	March 31,						March 31,
	2012			2011			2012		2011
Numerator:
Net income (loss) for basic earnings per unit	$	(802	)	$	736		$	9,290	$	3,903
Change in fair value of warrant derivative liability		(37	)		(30	)		—		(64	)

Net income (loss) for diluted earnings per unit	$	(839	)	$	706			9,290		3,839

Denominator:
Basic common units outstanding		24,714			24,705			24,714		24,705
Diluted common units outstanding		24,752			24,705			24,714		24,705
Income (loss) per unit basic	$	(0.03	)	$	0.03		$	0.38	$	0.16

Income (loss) per unit diluted	$	(0.03	)	$	0.03		$	0.38	$	0.16

Accounting Estimates

Management uses estimates and assumptions in preparing these financial statements in accordance with generally accepted accounting principles. Those estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported revenues and expenses. Actual results could differ from those estimates.

Risks and Uncertainties

The ethanol industry previously received an indirect benefit of the Volumetric Ethanol Excise Tax Credit (“VEETC”) provided to gasoline blenders, which expired on December 31, 2011. This credit provided for a 45-cent a gallon tax credit for gasoline blenders and a 54-cent a gallon tariff on ethanol imports. Although the Renewable Fuels Standard still exists to maintain the demand for ethanol in the United States, the Company is uncertain how the elimination of the VEETC credit and import tariffs will ultimately affect the Company and the overall ethanol industry.

2. Inventories

A summary of inventories is as follows (in thousands):


	March 31,		September 30,
	2012		2011
Corn	$	5,545	$	4,889
Chemicals		1,289		1,280
Work in process		3,240		3,610
Ethanol		14,885		9,280
Distillers grain		499		713
Supplies and parts		2,587		2,334

Total	$	28,045	$	22,106

The Company recorded a lower of cost or market adjustment of $0.7 million in cost of goods sold for the three and six months ended March 31, 2012.

3. Property and Equipment

A summary of property and equipment is as follows (in thousands):


	March 31,			September 30,
	2012			2011
Land	$	3,999		$	3,999
Buildings		21,351			21,341
Process equipment		221,380			221,020
Office equipment		2,089			1,813
Construction in process		3,484			260

		252,303			248,433
Accumulated depreciation		(95,143	)		(83,612	)

Property and equipment, net	$	157,160		$	164,821

4. Notes Receivable-Related Party

On June 30, 2011, the Company received a $490,000 promissory note from Ethanol Capital Partners, LP-Series R, Ethanol Capital Partners LP-Series T, Ethanol Capital Partners LP-Series V, Ethanol Investment Partners, LLC and Tennessee Ethanol Partners, LP in connection with payments the Company made in connection with the settlement of arbitration brought by a former officer of the Company against the Company and related litigation brought against a director of the Company. The note is due on July 1, 2016 and accrues interest at the Prime Rate, adjusted annually. The note is secured by a pledge of 4.4 million units of membership in the Company owned by the entities listed above. Any proceeds from the disposition of these units as well as distributions from the Company to the owners of the units will first go to pay down the promissory note and accrued interest.

5. Debt

A summary of debt is as follows (in thousands, except percentages):


	March 31,
	2012			March 31,			September 30,
	Interest Rate			2012			2011
ABE Fairmont:
Senior credit facility—variable		3.65	%	$	25,000		$	32,266
Senior credit facility—fixed		7.53	%		15,740			20,000
Seasonal line		3.35	%		—			—
Subordinate exempt facilities bonds—fixed		6.75	%		5,370			6,185

					46,110			58,451
ABE South Dakota:
Senior debt principal—variable		1.97	%		74,552			77,052
Restructuring fee		N/A			3,000			3,000
Additional carrying value of restructured debt		N/A			9,022			9,453

					86,574			89,505

Total outstanding				$	132,684		$	147,956

Additional carrying value of restructured debt		N/A			(9,022	)		(9,453	)

Stated principal				$	123,662		$	138,503

The estimated maturities of debt at March 31 are as follows (in thousands):


			Amortization of
			Additional Carrying
	Stated		Value of
	Principal		Restructured Debt		Total
2013	$	13,035	$	1,712	$	14,747
2014		11,755		2,431		14,186
2015		13,815		2,488		16,303
2016		77,947		2,391		80,338
2017		5,815		—		5,815
Thereafter		1,295		—		1,295

Total debt	$	123,662	$	9,022	$	132,684

Senior Credit Facility for the Fairmont Plant

ABE Fairmont has a senior credit facility with Farm Credit consisting of a term loan (“term loan A”), and a revolving term loan (“term loan B”). At March 31, 2012, the Company also had a $4.0 million revolving credit facility through Farm Credit for financing eligible grain inventory and equity in Chicago Board of Trade (“CBOT”) futures positions, which expires on May 1, 2013. ABE Fairmont also has a revolving credit facility with Farm Credit for financing third-party letters of credit. ABE Fairmont has issued a letter of credit in connection with a rail car lease, thereby fully utilizing the financing available under the $911,000 revolving credit facility as of March 31, 2012. This revolving credit facility expires in February 2014.

At March 31, 2012, ABE Fairmont had $15.7 million outstanding on term loan A. Under the term loan A agreement, ABE Fairmont is required to make quarterly principal installments of $2.6 million starting in August 2012, and continuing through November 2013, followed by a final installment in an amount equal to the remaining unpaid term loan A principal balance in February 2014. In April 2012, the term loan A agreement was amended to skip the May 2012 principal payment in order to fund a capital project. In addition, under the term loan A agreement, for each fiscal year ending through September 30, 2013, ABE Fairmont is required to pay an additional amount equal to the lesser of $8.0 million or 75% of its free cash flow as defined in the agreement, not to exceed $16 million in the aggregate. The Company made cash sweep payments of $6.3 million and $5.0 million to Farm Credit in December 2011 and 2010, respectively, pursuant to this provision of the agreement.

At March 31, 2012, ABE Fairmont had $25.0 million outstanding on the revolving term loan B. On the earlier of December 1, 2014 or six months following complete repayment of term loan A, ABE Fairmont is required to begin repayment of revolving term loan B in $5.0 million semi-annual principal payments.

ABE Fairmont pays interest monthly at an annualized interest rate of 7.53% on $15.7 million on term loan A, and a variable rate comprised of the 30-day LIBOR plus a fixed rate of 3.40% on the remaining outstanding term loan B senior credit facility of $25 million.

ABE Fairmont’s senior credit facility is secured by a first mortgage on all of ABE Fairmont’s real property and a lien on all of ABE Fairmont’s personal property. The agreement contains financial and restrictive covenants, including limitations on additional indebtedness, restricted payments, and the incurrence of liens and transactions with affiliates and sales of assets. In addition, the senior secured credit facility requires ABE Fairmont to comply with certain financial covenants, including maintaining monthly minimum working capital, monthly minimum net worth, annual debt service coverage ratios and capital expenditure limitations.

Fillmore County Subordinate Exempt Facilities Revenue Bonds for the Fairmont plant

ABE Fairmont has $5.4 million of subordinate exempt facilities revenue bonds outstanding under a subordinated loan and trust agreement with the County of Fillmore, Nebraska and Wells Fargo, N.A. The loan agreement is collateralized by the Fairmont plant assets. ABE Fairmont’s repayment of the loan and the security for the loan are subordinate to its senior credit facility. The loan requires semi-annual interest payments, with annual principal payments of $815,000 through December 2016, with the remainder due in December 2017.

Senior Credit Agreement for the South Dakota Plants

ABE South Dakota entered into an Amended and Restated Senior Credit Agreement (the “Senior Credit Agreement”) effective as of June 18, 2010, and further amended on December 28, 2011, which was accounted for under troubled debt restructuring rules. The Senior Credit Agreement was executed among ABE South Dakota, the lenders from time to time party thereto, and WestLB AG, New York Branch, as Administrative Agent and Collateral Agent. The Senior Credit Agreement converted the outstanding principal amount of the loans and certain other amounts under interest rate protection agreements to a senior term loan in an aggregate principal amount equal to $84.4 million. The interest accrued on outstanding term and working capital loans under the existing credit agreement was reduced to zero. ABE South Dakota has agreed to pay a $3.0 million restructuring fee to the lenders due at the earlier of March 31, 2016 or the date on which the loans are repaid in full. ABE South Dakota recorded the restructuring fee as a long-term, non-interest bearing debt on its consolidated balance sheets.

Since the future maximum undiscounted cash payments on the Senior Credit Agreement (including principal, interest and the restructuring fee) exceeded the adjusted carrying value, no gain for the forgiven interest was recorded, the carrying value was not adjusted and the modification of terms are being accounted for on a prospective basis, via a new effective interest calculation, amortized over the life of the note, offsetting interest expense. Based on the treatment of the troubled debt restructuring which will result in the additional carrying value being amortized as a reduction in interest expense over the term of the loan, the Company’s effective interest rate over the term of the restructuring note agreement is currently approximately 0.13% over the Three-Month LIBOR (0.60% at March 31, 2012).

The principal amount of the term loan facility is payable by four quarterly payments of $1,105,000 starting on June 30, 2012, and quarterly payments of $750,000 beginning June 30, 2013, with the remaining principal amount fully due and payable on March 31, 2016. The credit agreement was amended in December 2011 to allow the Company to install corn oil extraction technology in its Aberdeen facility.

ABE South Dakota has the option to select the interest rate on the senior term loan between base rate and euro-dollar rates for maturities of one to six months. Base rate loans bear interest at the administrative agent’s base rate plus an applicable margin of 0.50%, increasing to 2% on June 16, 2012, and increasing to 3.0% on June 16, 2013. Euro-dollar loans bear interest at LIBOR plus the applicable margin of 1.5%, increasing to 3.0% on June 16, 2012, and increasing to 4.0% on June 16, 2013. As of March 31, 2012, ABE South Dakota had selected the LIBOR plus 1.5% rate for a period of three months.

ABE South Dakota’s obligations under the Senior Credit Agreement are secured by a first-priority security interest in all of the equity of and assets of ABE South Dakota.

ABE South Dakota is allowed to make equity distributions (other than certain tax distributions) to ABE only upon ABE South Dakota meeting certain financial conditions and if there is no more than $25 million of principal outstanding on the senior term loan. Loans outstanding under the Senior Credit Agreement are subject to mandatory prepayment in certain circumstances, including, but not limited to, mandatory prepayments based upon receipt of certain proceeds of asset sales, casualty proceeds, termination payments, and cash flows.

The Senior Credit Agreement and the related loan documentation include, among other terms and conditions, limitations (subject to specified exclusions) on ABE South Dakota’s ability to make asset dispositions; merge or consolidate with or into another person or entity; create, incur, assume or be liable for indebtedness; create, incur or allow liens on any property or assets; make investments; declare or make specified restricted payments or dividends; enter into new material agreements; modify or terminate material agreements; enter into transactions with affiliates; change its line of business; and establish bank accounts. Substantially all cash of ABE South Dakota is required to be deposited into special, segregated project accounts subject to security interests to secure obligations in connection with the Senior Credit Agreement. The Senior Credit Agreement contains customary events of default and also includes an event of default for defaults on other indebtedness by ABE South Dakota and certain changes of control.

6. Major Customers

The Company has entered into Exclusive Ethanol Marketing Agreements with Hawkeye Gold, LLC to sell substantially all of its ethanol. Prior to January 2011, Hawkeye Gold was an affiliate of Hawkeye Energy Holdings, LLC, a 34% owner of the Company’s membership units. ABE Fairmont executed an Exclusive Ethanol Marketing Agreement dated as of August 28, 2009 with Hawkeye Gold (the “ABE Fairmont Ethanol Agreement”), which became effective on January 1, 2010, and was amended on September 30, 2011. ABE South Dakota executed Exclusive Ethanol Marketing Agreements dated as of April 7, 2010 with Hawkeye Gold (the “ABE South Dakota Ethanol Agreements”, and together with the ABE Fairmont Ethanol Agreement, the “Ethanol Agreements”), which became effective October 1, 2010, and were amended on September 30, 2011. The Ethanol Agreements require, among other things, that:

(1)

Hawkeye Gold must use commercially reasonable efforts to submit purchase orders for, and ABE Fairmont and ABE South Dakota must sell to Hawkeye Gold, substantially all of the denatured fuel grade ethanol produced by ABE Fairmont and ABE South Dakota,

(2)

a purchase and sale of ethanol under the Ethanol Agreements must be in the form of either a direct fixed price purchase order, a direct index price purchase order, a terminal storage purchase order, a transportation swap, or a similar transaction that is mutually acceptable to the parties,

(3)

ABE Fairmont or ABE South Dakota will pay any replacement or other costs incurred by Hawkeye Gold as a result of any failure to deliver by ABE Fairmont or ABE South Dakota, respectively, and

(4)

with certain exceptions, ABE Fairmont and ABE South Dakota will sell substantially all of the ethanol they produce to Hawkeye Gold. The term of the ABE Fairmont Agreement expires April 30, 2013, and provides for automatic renewal for successive 18-month terms unless either party provides written notice of nonrenewal at least 180 days prior to the end of any term. The terms of the ABE South Dakota Ethanol Agreements expire on April 30, 2013, and provide for automatic renewal for successive one-year terms unless either party provides written notice of nonrenewal at least 180 days prior to the end of any term.

ABE Fairmont is currently self-marketing the distillers grains it produces. ABE South Dakota is party to a co-product marketing agreement with Dakotaland Feeds, LLC (“Dakotaland Feeds”), under which Dakotaland Feeds markets the local sale of distillers grains produced at the ABE South Dakota Huron plant to third parties for an agreed upon commission, cancellable with a six month notice period. The Company currently has an agreement with Hawkeye Gold to market the distillers grains produced at the ABE South Dakota Aberdeen plants. The initial term of this agreement expires in fiscal 2013, and provides for automatic renewal for successive one-year terms unless either party provides written notice of nonrenewal at least 90 days prior to the end of any term.

Sales and receivables from the Company’s major customers were as follows (in thousands):


	March 31,		March 31,
	2012		2011
Hawkeye Gold—Ethanol and Distiller Grains
Six months revenues	$	253,809	$	237,667
Receivable balance at period end		2,538		13,719
Dakotaland—ABE South Dakota Distillers Grains
Six months revenues	$	8,978	$	6,614
Receivable balance at period end		720		588

7. Risk Management

The Company is exposed to a variety of market risks, including the effects of changes in commodity prices and interest rates. These financial exposures are monitored and managed by the Company as an integral part of its overall risk management program. The Company’s risk management program seeks to reduce the potentially adverse effects that the volatility of these markets may have on its current and future operating results. To reduce these effects, the Company generally attempts to fix corn purchase prices and related sale prices of ethanol and distillers grains with forward purchase and sales contracts to reduce volatility in future operating margins. In addition to entering into contracts to purchase 6.3 million bushels of corn and sell 68.2 million gallons of ethanol in which the futures price was not locked, the Company had entered into the following fixed price forward contracts at March 31, 2012 (in thousands):

Quantity (000s)

Amount

Period Covered

Corn

Purchase Contracts

1,379 bushels

8,628

Apr 2012-Mar 2013

Natural Gas

Purchase Contracts

456 MMBTUs

1,825

April-May 2012

Ethanol

Sale Contracts

840 gallons

1,833

April 2012

Distillers grains

Sale Contracts

51 tons

9,969

April-June 2012

Corn Oil

Sale Contracts

4,613 pounds

1,888

April-June 2012

Unrealized gains and losses on forward contracts, in which delivery has not occurred, are deemed “normal purchases and normal sales,” and, therefore are not marked to market in the financial statements.

When forward contracts are not available at competitive rates, the Company may engage in hedging activities using exchange-traded futures contracts, OTC futures options or OTC swap agreements. Changes in market price of ethanol-related hedging activities are reflected in revenues while changes in market price of corn-related items are reflected in cost of goods sold. The following table represents the approximate amount of realized and unrealized gains (losses) and changes in fair value recognized in earnings on commodity contracts for the three and six months ended March 31, 2012 and 2011, and the fair value of futures and put option contracts as of March 31, 2012 and September 30, 2011 (in thousands):


	Income Statement		Realized		Unrealized		Total
	Classification		Gain (Loss)		Gain (Loss)		Gain (Loss)
Three months ending March 31, 2012		Cost of Goods Sold	$	38	$	35		73
Three months ending March 31, 2011		Cost of Goods Sold		—		—		—
Six months ending March 31, 2012		Cost of Goods Sold	$	69	$	35		104
Six months ending March 31, 2011		Cost of Goods Sold		90		—		90


	Balance Sheet	March 31,		September 30,
	Classification	2012		2011
Derivative financial instrument—futures contract	Current Assets	$	35	$	—
Derivative financial instrument—futures contract	Current Liabilities		—		832

8. Subsequent Events

Purchase Commitments

In May 2012, the Company signed a contract for the construction of corn storage bins with a capacity of approximately 1.5 million bushels in Fairmont. The project is expected to cost approximately $5.3 million and construction will begin in May 2012, with an expected completion date in the fall of 2012. In connection with this plan, the lending agreements with Farm Credit were amended to enable ABE Fairmont to skip the May 2012 principal payment. The effect of this change will be to extend the final payment on term loan A from November 2013 to February 2014. The Company is financing the construction out of current cash flows.

At March 31, 2012, the Company had remaining purchase commitments of approximately $1.0 million relating to the addition of a fermenter at Fairmont and the addition of corn oil extraction technology at Aberdeen. The projects were completed in April 2012.

May 4, 2012 Agreements with Gavilon

On May 4, 2012, the two operating subsidiaries of Advanced BioEnergy, LLC (the “Company”), ABE South Dakota, LLC (“ABE South Dakota”) and ABE Fairmont, LLC (“ABE Fairmont”), entered into several agreements with Gavilon, LLC, a commodity marketing firm, and affiliated companies (collectively “Gavilon”). Subsequent to the execution of the May 4, 2012 agreements described herein, the Company and its subsidiaries have engaged in additional discussions with Gavilon and Hawkeye Gold (as defined below), with respect to the negotiation and execution of additional agreements that would amend or supplement one or more of the agreements referred to below.

The Company has also had preliminary discussions with West LB (as defined below) regarding these agreements, and plans to continue these discussions in order to obtain lender approval for these agreements.

ABE South Dakota Agreements

ABE South Dakota entered into an ethanol marketing agreement with Gavilon (“South Dakota Ethanol Marketing Agreement”) and a Dried Distiller’s Grains Marketing Agreement for the Aberdeen plant with Gavilon, each dated May 4, 2012 (collectively the “South Dakota Agreements”).

The South Dakota Ethanol Marketing Agreement provides that ABE South Dakota will sell to Gavilon, and Gavilon will purchase from ABE South Dakota, all of the denatured fuel-grade ethanol produced at the South Dakota plants. The term of the South Dakota Ethanol Marketing Agreement begins on May 1, 2013, or such earlier date that ABE South Dakota designates, and expires on December 31, 2015.

The Dried Distiller’s Grains Marketing Agreement provides that ABE South Dakota will sell to Gavilon, and Gavilon will purchase from ABE South Dakota, all of the dried distiller’s grains produced at the Aberdeen South Dakota plant. The term of the Dried Distiller’s Grains Marketing Agreement begins on May 1, 2013, or such earlier date that ABE South Dakota designates, and expires on December 31, 2015.

The South Dakota Agreements provide, however, that ABE South Dakota may terminate the South Dakota Agreements on or prior to October 2, 2012, if the Senior Lenders (as defined below) fail to approve the South Dakota Agreements and the Rail Car Sublease (as defined below).

ABE South Dakota entered into an Amended and Restated Senior Credit Agreement (the “Senior Credit Agreement”) effective as of June 18, 2010, as amended on December 28, 2011, among ABE South Dakota, the lenders from time to time party thereto (“Senior Lenders”), and WestLB AG, (New York Branch), as Administrative Agent and Collateral Agent (“WestLB”). The date upon which the Senior Lenders approve the South Dakota Agreements and the Rail Car Sublease is referred to as the “Senior Lender Approval Date.”

ABE Fairmont Ethanol Marketing Agreement

ABE Fairmont entered into an ethanol marketing agreement (“Fairmont Ethanol Marketing Agreement”) with Gavilon dated as of May 4, 2012. The Fairmont Ethanol Marketing Agreement provides that ABE Fairmont will sell to Gavilon, and Gavilon will purchase from ABE Fairmont, all of the denatured fuel-grade ethanol produced at the Fairmont plant. The term of the Fairmont Ethanol Marketing Agreement begins on October 1, 2012, and expires on December 31, 2015.

Rail Car Sublease Agreement; Month to Month Rail Car Sublease Agreement

In connection with execution of the South Dakota Agreements and Fairmont Ethanol Marketing Agreement, ABE South Dakota and ABE Fairmont entered into a Rail Car Sublease Agreement with Gavilon dated as of May 4, 2012 (“Rail Car Sublease”). Under the terms of the Rail Car Sublease, Gavilon agreed to sublease to ABE South Dakota all its interests in the Master Lease Agreement dated as of September 1, 2008, as amended, between GATX Corporation and Gavilon covering agreed-upon rail cars.

Under the terms of the Rail Car Sublease, Gavilon agreed to sublease to ABE South Dakota, and ABE South Dakota agreed to sublease from Gavilon, 298 rail cars as follows:

•

99 rail cars that are currently under lease through Gavilon, which current lease would be terminated as of the Senior Lender Approval Date, and the rail cars leased through June 30, 2014;

•

100 rail cars that are currently under lease through Gavilon, which current lease would be terminated as of the Senior Lender Approval Date, and the rail cars leased through June 30, 2017; and

•

99 additional rail cars that would be leased from the Senior Lender Approval Date through June 30, 2019 (the “June 2019 Leased Rail Cars”).

The Rail Car Sublease provides that in the event that the Senior Lenders do not approve the South Dakota Agreements by October 1, 2012, then the rights and obligations under the Rail Car Sublease will automatically be transferred from ABE South Dakota to ABE Fairmont. In the event of this transfer, Gavilon would agree to sublease to ABE Fairmont, and ABE Fairmont would agree to sublease from Gavilon, the June 2019 Leased Rail Cars for a period beginning October 1, 2012 and ending June 30, 2019.

Gavilon and ABE South Dakota also entered into a Month to Month Rail Car Sublease Agreement dated as of May 4, 2012, (“Monthly Sublease”) under which Gavilon agreed to sub-lease to ABE South Dakota, and ABE South Dakota agreed to sublease from Gavilon, beginning as of July 1, 2012, the June 2019 Leased Rail Cars. This Monthly Sublease will become effective only if the Senior Lender Approval Date has not occurred by July 1, 2012, and will expire on (i) the Senior Lender Approval Date, or (ii) October 1, 2012, if the Senior Lenders have not approved the South Dakota Agreements and the Rail Car Sublease, in which case the June 2019 Leased Rail Cars will be leased by ABE Fairmont pursuant to the Rail Car Sublease.

Advanced BioEnergy, LLC Irrevocable Standby Letter of Credit

In connection with the execution of the Rail Car Sublease and the other agreements, the Company, as parent of ABE South Dakota agreed to post an irrevocable and non-transferable standby letter of credit for the benefit of Gavilon in the amount of $2,500,000 (the “ABE LOC”) as security for the payment obligations of ABE South Dakota under the South Dakota Agreements. The ABE LOC was issued on May 4, 2012. The full amount of the ABE LOC may be drawn by Gavilon if the Senior Lenders have not approved the South Dakota Agreements on or before October 1, 2012.

Existing Agreements with Hawkeye Gold

The Company had entered agreements with Hawkeye Gold, LLC (“Hawkeye Gold”) effective as of September 30, 2011, under which the Company’s subsidiaries agreed to sell to Hawkeye Gold, and Hawkeye Gold had agreed to purchase from the Company’s subsidiaries, substantially all the ethanol produced at the Company’s South Dakota and Fairmont plants (“Hawkeye Gold Ethanol Marketing Agreements”). The Hawkeye Gold Ethanol Marketing Agreements by their terms expire on April 30, 2013.

In addition, ABE South Dakota had entered into a three-year Distiller’s Grain Marketing Agreement with Hawkeye Gold dated as of April 7, 2010, under which ABE South Dakota had agreed to sell to Hawkeye Gold, and Hawkeye Gold had agreed to purchase from ABE South Dakota, substantially all the distiller’s grains produced at the Aberdeen plant (“Hawkeye Gold Grains Marketing Agreement”). The Hawkeye Gold Grains Marketing Agreement by its terms expires on April 7, 2013. The Hawkeye Gold Ethanol Marketing Agreements and the Hawkeye Gold Grains Marketing Agreement are collectively referred to as the “Hawkeye Gold Agreements.”

In connection with the execution of the agreements with Gavilon, ABE Fairmont and ABE South Dakota have given Hawkeye Gold notice of the early termination of the Hawkeye Gold Ethanol Marketing Agreements and the Hawkeye Gold Grains Marketing Agreement. ABE Fairmont and ABE South Dakota have not determined the effective date of termination of the Hawkeye Gold Agreements, in part, because of the approval required by the Senior Lenders. ABE Fairmont and ABE South Dakota have commenced negotiations with Hawkeye Gold relating to the early termination of the Hawkeye Gold Agreements.

9. Parent Financial Statements

The following financial information represents the unconsolidated financial statements of Advanced BioEnergy, LLC (“ABE”) as of March 31, 2012 and September 30, 2011, and the three and six months ended March 31, 2012 and 2011. ABE’s ability to receive distributions from its consolidated subsidiaries is based on the terms and conditions in their respective credit agreements. ABE Fairmont is able to pay a distribution to ABE annually based on its financial results for that fiscal year, subject to maintaining compliance with all loan covenants and the terms and conditions of its senior secured credit agreement. ABE Fairmont paid a distribution to ABE in March 2012 of $3.8 million in accordance with these terms. ABE South Dakota is allowed to make equity distributions (other than certain tax distributions) to ABE only upon ABE South Dakota meeting certain financial conditions and if there is no more than $25 million of principal outstanding on the senior term loan.

Advanced BioEnergy, LLC (Unconsolidated)

Balance Sheets


	(unaudited)
	March 31,			September 30,
	2012			2011
	(Dollars in thousands)
ASSETS
Current assets:
Cash and cash equivalents	$	7,734		$	3,457
Other receivables		651			524
Prepaid expenses		36			42

Total current assets.		8,421			4,023

Property and equipment, net		672			666
Other assets:
Investments in consolidated subsidiaries.		67,040			62,341
Notes receivable-related party		502			494
Other assets		32			32

Total assets	$	76,667		$	67,556

LIABILITIES AND MEMBERS’ EQUITY
Current liabilities:
Accounts payable	$	864		$	1,083
Accrued expenses		403			509

Total current liabilities		1,267			1,592

Other liabilities		462			318

Total liabilities		1,729			1,910

Members’ equity:
Members’ capital, no par value, 24,714,180 units issued and outstanding		171,248			171,246
Accumulated deficit		(96,310	)		(105,600	)

Total members’ equity		74,938			65,646

Total liabilities and members’ equity	$	76,667		$	67,556

Advanced BioEnergy, LLC (Unconsolidated)

Statements of Operations

(Unaudited)


	Three months ended						Six months ended
	March 31,			March 31,			March 31,			March 31,
	2012			2011			2012			2011
	(Dollars in thousands)						(Dollars in thousands)
Equity in earnings of consolidated subsidiaries	$	(1,178	)	$	2,561		$	8,527		$	5,992
Management fee income from subsidiaries		1,178			990			2,349			1,980
Selling, general and administrative expenses		(1,013	)		(793	)		(1,819	)		(1,652	)
Arbitration settlement expense		—			(2,215	)		—			(2,706	)

Operating income (loss)		(1,013	)		543			9,057			3,614
Other income		174			163			391			225
Interest income (expense)		37			30			(158	)		64

Net income (loss)	$	(802	)	$	736		$	9,290		$	3,903

Advanced BioEnergy, LLC (Unconsolidated)

Statements of Cash Flows

(Unaudited)


	Six Months Ended
	March 31,			March 31,
	2012			2011
	(Dollars in thousands)
Cash flows from operating activities:
Net income	$	9,290		$	3,903
Adjustments to reconcile net income to operating activities cash flows:
Depreciation		80			43
Equity in earnings of consolidated subsidiaries		(8,527	)		(5,992	)
Distributions from subsidiaries		3,828			4,672
Gain on disposal of fixed assets		(17	)		(3	)
Amortization of deferred revenue and rent		(14	)		—
Unit compensation expense		2			22
Unrealized (gain) loss on warrant derivative liability		158			(64	)
Change in working capital components:
Accounts receivable		(135	)		(58	)
Prepaid expenses		6			(42	)
Accounts payable and accrued expenses		(325	)		1,986

Net cash provided by operating activities		4,346			4,467

Cash flows from investing activities:
Purchase of property and equipment		(129	)		(63	)
Proceeds from disposal of fixed assets		60			16
Change in other assets and liabilities		—			(32	)

Net cash used in investing activities		(69	)		(79	)

Net increase in cash and cash equivalents		4,277			4,388
Beginning cash and cash equivalents		3,457			1,065

Ending cash and cash equivalents	$	7,734		$	5,453

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Information Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements regarding our business, financial condition, results of operations, performance and prospects. All statements that are not historical or current facts are forward-looking statements and are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve known and unknown risks, uncertainties and other factors, many of which may be beyond our control, which may cause our actual results, performance or achievements to be materially different from any future results, performances or achievements expressed or implied by the forward-looking statements. Certain of these risks and uncertainties are described in the “Risk Factors” section of our Annual Report on Form 10-K for the year ended September 30, 2011 and in this Form 10-Q. These risks and uncertainties include, but are not limited to, the following:

•

our operational results are subject to fluctuations in the prices of grain, utilities and ethanol, which are affected by various factors including weather, production levels, supply, demand, changes in technology and government support and regulations;

•

margins can be volatile and can evaporate, which may affect our ability to meet current obligations and debt service requirements at our operating entities;

•

our hedging transactions and mitigation strategies could materially harm our results;

•

cash distributions depend upon our future financial and operational performance and will be affected by debt covenants, reserves and operating expenditures;

•

current governmental- mandated tariffs, credits and standards may be reduced or eliminated, and legislative acts taken by state governments such as California related to low-carbon fuels that include the effects caused by indirect land use, may have an adverse effect on our business;

•

alternative fuel additives may be developed that are superior to or cheaper than ethanol;

•

transportation, storage and blending infrastructure may become impaired, preventing ethanol from reaching markets;

•

our operating facilities may experience technical difficulties and not produce the gallons of ethanol we expect and insurance proceeds may not be adequate to cover these production disruptions;

•

our units are subject to a number of transfer restrictions, no public market exists for our units, and we do not expect a public market to develop; and

•

the ability of ABE Fairmont and ABE South Dakota subsidiaries to make distributions to ABE in light of restrictions in these subsidiaries’ credit facilities; and

•

the supply of ethanol rail cars in the market is extremely tight, which could affect our ability to obtain new tanker cars or negotiate new leases at a reasonable fee when our current leases expire.

You can identify forward-looking statements by terms such as “anticipates,” “believes,” “could,” “estimates,” “expects,” “intends,” “may,” “plans,” “potential,” “predicts,” “projects,” “should,” “will,” “would,” and similar expressions intended to identify forward-looking statements. Forward-looking statements reflect our current views with respect to future events, are based on assumptions, and are subject to risks and uncertainties. Given these uncertainties, you should not place undue reliance on these forward-looking statements. Also, forward-looking statements represent our estimates and assumptions only as of the date of this report. Except as required by law, we assume no obligation to update any forward-looking statements publicly, or to update the reasons actual results could differ materially from those anticipated in any forward-looking statements, even if new information becomes available in the future. Readers are urged to carefully review and consider the various disclosures made by us in this report and in our other reports filed from time to time with the Securities and Exchange Commission that advise interested parties of the risks and factors that may affect our business.

General

The following discussion and analysis provides information that management believes is relevant to an assessment and understanding of our consolidated financial condition and results of operations. This discussion should be read in conjunction with the consolidated financial statements included herewith and notes to the consolidated financial statements thereto.

Overview

Advanced BioEnergy, LLC (“Company,” “we,” “our,” “Advanced BioEnergy” or “ABE”) was formed in 2005 as a Delaware limited liability company. Our business consists of producing ethanol and co-products, including wet, modified and dried distillers grains, as well as corn oil. Ethanol is a renewable, environmentally clean fuel source that is produced at numerous facilities in the United States, mostly in the Midwest. In the U.S., ethanol is produced primarily from corn and then blended with unleaded gasoline in varying percentages. Ethanol is most commonly sold as E10. Increasingly, ethanol is also available as E85, which is a higher percentage ethanol blend for use in flexible-fuel vehicles, and may soon be available as E15.

To execute our business plan, we entered into financial arrangements to build and operate an ethanol production facility in Fairmont, Nebraska. Separately, in November 2006, we acquired ABE South Dakota, which owned existing ethanol production facilities in Aberdeen and Huron, South Dakota. Construction of our Fairmont, Nebraska plant began in June 2006, and operations commenced at the plant in November 2007. Construction of our new facility in Aberdeen, South Dakota began in April 2007, and operations commenced in January 2008. Our production operations are carried out primarily through our operating subsidiaries, ABE Fairmont, which owns and operates the Fairmont, Nebraska plant and ABE South Dakota, which owns and operates plants in Aberdeen and Huron, South Dakota.

Operating segments are defined as components of an enterprise for which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources in assessing performance. Based on the related business nature and expected financial results, the Company’s plants are aggregated into one operating segment.

DRY MILL PROCESS

Dry mill ethanol plants produce ethanol predominantly by processing corn. Other possible feeds are grain sorghum, or other cellulosic materials. The corn is received by truck, then weighed and unloaded in a receiving building. It is then conveyed to storage silos. Thereafter, it is transferred to a scalper to remove rocks, cobs, and other debris before it is fed to a hammer mill where it is ground into flour and conveyed into a slurry tank. Water, heat and enzymes are added to the flour in the slurry tank to start the process of converting starch from the corn into sugar. The slurry is pumped to a liquefaction tank where additional enzymes are added. These enzymes continue the starch-to-sugar conversion. The grain slurry is pumped into fermenters, where yeast is added, to begin the batch-fermentation process. Fermentation is the process of the yeast converting the sugar into alcohol and carbon dioxide. After the fermentation is complete, a vacuum distillation system removes the alcohol from the grain mash. The 95% (190-proof) alcohol from the distillation process is then transported to a molecular sieve system, where it is dehydrated to 100% alcohol (200 proof). The 200-proof alcohol is then pumped to storage tanks and blended with a denaturant, usually gasoline. The 200-proof alcohol and 2.0-2.5% denaturant constitute denatured fuel ethanol.

Corn mash left over from distillation is pumped into a centrifuge for dewatering. The liquid from the centrifuge, known as thin stillage, is then pumped from the centrifuges to an evaporator, where it is concentrated to a syrup. The solids that exit the centrifuge, known as the wet cake, are conveyed to the dryer system. Syrup is added to the wet cake as it enters the dryer, where moisture is removed. The process produces distillers grains with solubles, which is used as a high-protein/fat animal-feed supplement. Dry-mill ethanol processing creates three forms of distillers grains: wet distillers grains with solubles, known as wet distillers grains; modified wet distillers grains with solubles, known as modified distillers grains; and dry distillers grains with solubles, known as dry distillers grains. Wet and modified distillers grains have been dried to approximately 67% and 50% moisture levels, respectively, and are predominately sold to nearby markets. Dried distillers grains have been dried to 11% moisture, have an almost indefinite shelf life and may be sold and shipped to any market regardless of its proximity to an ethanol plant.

Corn oil is produced by processing evaporated thin stillage through a disk stack style centrifuge. Corn oil has a lower density than water or solids that make up the syrup. The centrifuges separate the relatively light oil from the heavier components of the syrup, eliminating the need for significant retention time. De-oiled syrup is returned to the process for blending into wet, modified, or dry distillers grains. The corn oil is then pumped into storage tanks before being loaded onto trucks for sale.

FACILITIES

The table below provides a summary of our ethanol plants in operation as of March 31, 2012:

Estimated

Annual

Estimated

Annual

Distillers

Annual

Ethanol

Grains

Corn

Primary

Location

Production

Production(1)

Processed

Energy Source

Builder

(Million gallons)

(000’s Tons)

(Million bushels)

Fairmont, NE

110

334

39.3

Natural Gas

Fagen

Aberdeen, SD(2)

3.2

Natural Gas

Broin

Aberdeen, SD(2)

134

15.7

Natural Gas

ICM

Huron, SD

11.4

Natural Gas

ICM

Consolidated

195

592

69.6

(1)	Our plants produce and sell wet, modified and dried distillers grains. The stated quantities are on a fully dried basis operating at full production capacity.

(2)	Our plant at Aberdeen consists of two production facilities that operate on a separate basis.

We believe that each of the operating facilities is in adequate condition to meet our current and future production goals. We also believe that these plants are adequately insured for replacement cost plus related disruption expenditures.

The senior credit facility of the ABE Fairmont plant is secured by a first mortgage on the plant’s real property and a security interest lien on the plant’s personal property. We also granted a subordinate lien and security interest to the trustee of the subordinated exempt facilities revenue bonds used to finance the ABE Fairmont plant. We pledged a first-priority security interest in and first lien on substantially all of the assets of the ABE South Dakota plants to the collateral agent for the senior creditor of these plants.

Sales of distillers grains represented 20.4% and 15.8% of our revenues for the quarters ended March 31, 2012 and 2011, respectively. When the plants are operating at capacity they produce approximately 592,000 tons of dried distillers grains equivalents per year, approximately 17 pounds per bushel of corn. Distillers grains are a high-protein, high-energy animal feed supplement marketed primarily to the dairy and beef industry, and to a lesser extent, the poultry and swine markets. Corn oil sales represented approximately 1% of our revenues for the quarter ended March 31, 2012. Our corn oil is currently sold primarily to biodiesel manufacturers.

Plan of Operations Through March 31, 2013

Over the next twelve months, we will continue our focus on operational improvements at each of our operating facilities. These operational improvements include exploring methods to improve ethanol yield per bushel and maximizing production output at each of our plants. We will also have a continued emphasis on safety and environmental regulation, reducing our operating costs, and optimizing our margin opportunities through prudent risk-management policies. We are adding additional fermentation capacity at our Fairmont facility, and corn oil extraction technology at our Aberdeen facility, that became operational in April 2012. We also plan to add 1.5 million additional bushels of corn storage at Fairmont in next twelve months, in order to increase the amount of corn we are able to purchase from individual growers. We feel that purchasing from individual growers will enable us to obtain a more advantageous price for corn.

RESULTS OF OPERATIONS

Quarter Ended March 31, 2012 Compared to Quarter Ended March 31, 2011

The following table reflects quantities of our products sold at average net prices as well as bushels of corn ground and therms of gas burned at average costs for the three months ended March 31, 2012 and 2011:


	Three Months Ended				Three Months Ended
	March 31, 2012				March 31, 2011
	Sold/Consumed		Average		Sold/Consumed		Average
	(In thousands)		Net Price/Cost		(In thousands)		Net Price/Cost
Ethanol (gallons)		47,071	$	2.31		54,612	$	2.35
Dried distillers grains (tons)		100		190.46		116		159.47
Wet/modified distillers grains (tons)		109		84.19		86		65.26
Corn Oil (pounds)		4,376		0.34		—		—
Corn (bushels)		16,586		6.30		19,469		5.96
Gas (mmbtus)		1,361		3.82		1,391		4.33

Net Sales

Net sales for the quarter ended March 31, 2012 were $138.5 million compared to $152.8 million for the quarter ended March 31, 2011, a decrease of $14.3 million or 9.4%. The decrease in revenues was primarily due to 7.5 million fewer ethanol gallons sold, which was a result of the timing of train shipments as we had 5.8 million more gallons in inventory at March 31, 2012 compared to March 31, 2011. Ethanol prices decreased 1.7% in the second quarter of 2012 compared to the second quarter of 2011. The decrease in ethanol prices resulted from overcapacity in the industry in the quarter, as gasoline demand decreased and ethanol inventories increased after blenders stocked up prior to expiration of the VEETC credit on December 31, 2011. The average price of distillers grains increased 20.4% in 2012 based on strong exports and higher corn prices. During the fiscal quarters ending March 31, 2012 and 2011, 78.4% and 84.2%, respectively, of our net sales were derived from the sale of ethanol and our remaining net sales were derived from the sale of distillers grains and corn oil. We began selling corn oil in August 2011, and sold $1.5 million of oil in the second quarter of fiscal 2012.

Cost of Goods Sold

Costs of goods sold for the quarter ending March 31, 2012 was $136.8 million, compared to $148.0 million for the quarter ending March 31, 2011, a decrease of $11.2 million or 7.6%. Corn costs represented 76.4% and 78.4% of cost of goods sold for the fiscal quarters ending March 31, 2012 and 2011. Corn costs increased 5.7% to $6.30 per bushel in the quarter ending March 31, 2012 from $5.96 per bushel for the quarter ending March 31, 2011. The Company believes that corn prices will remain high for the remainder of our fiscal year 2012 before moving lower in the next fiscal year. Natural gas costs represented 3.8% and 4.1% of cost of sales for the fiscal quarters ending March 31, 2012 and 2011. Our average gas prices decreased to $3.82 per mmbtu in the quarter ending March 31, 2012 from $4.33 per mmbtu in the quarter ending March 31, 2011.

Gross Profit

Our gross profit for the quarter ending March 31, 2012 was $1.7 million, compared to gross profit of $4.8 million for the quarter ending March 31, 2011. The decrease in gross profit was a result of weak margins due to a drop in average ethanol prices and an increase in corn prices, as well as sales of 7.5 million fewer gallons of ethanol in 2012. Margins in the third fiscal quarter traditionally increase from the second quarter as the summer driving season tends to increase gasoline demand, and therefore ethanol demand. If gasoline demand remains weak, and ethanol inventories remain high, our margins will remain weak.

Selling, General, and Administrative Expenses

For the quarter ending March 31, 2012, selling, general and administrative expenses were $2.0 million compared to $1.5 million for the quarter ending March 31, 2011. As a percentage of sales, selling, general and administrative expenses increased to 1.5% for the quarter ended March 31, 2012 compared to 1.0% for the quarter ended March 31, 2011, as a result of an increase in employee headcount as we filled open positions at headquarters and added expertise in our grain procurement area, as well as higher legal fees, and new industry advocacy dues. Selling, general, and administrative expenses are comprised of recurring administrative personnel compensation, legal, technology, consulting, insurance and accounting fees.

Arbitration Settlement Expense

The Company incurred legal and accrued settlement costs of $2.0 million in the three months ended March 31, 2011 related to the arbitration matter that was subsequently settled in the third quarter of fiscal 2011.

Other Income

Other income for the quarter ended March 31, 2012 was $0.3 million, compared to $0.5 million for the quarter ended March 31, 2011. The change was due to Nebraska Advantage Act refunds, as described below under “Government Programs, Tax Credits and Tax Increment Financing.” The refunds will fluctuate based on eligible purchases during the quarter.

Interest Expense

Interest expense for the quarter ending March 31, 2012 was $0.8 million, compared to $0.9 million for the quarter ended March 31, 2011, a decrease of $0.1 million. The decrease was due to principal reductions on the Fairmont debt facility of $15 million since the second quarter of 2011.

Six Months Ended March 31, 2012 Compared to Six Months Ended March 31, 2011

The following table reflects quantities of our products sold at average net prices as well as bushels of corn ground and therms of gas burned at average costs for the six months ended March 31, 2012 and 2011:


	Six Months Ended				Six Months Ended
	March 31, 2012				March 31, 2011
	Sold/Consumed		Average		Sold/Consumed		Average
	(In thousands)		Net Price/Cost		(In thousands)		Net Price/Cost
Ethanol (gallons)		99,628	$	2.43		103,745	$	2.18
Dried distillers grains (tons)		211		191.65		236		140.53
Wet/modified distillers grains (tons)		201		82.74		165		57.56
Corn Oil (pounds)		9,216		0.35		—		—
Corn (bushels)		35,235		6.33		37,047		5.32
Gas (mmbtus)		2,777		3.92		2,797		4.23

Net Sales

Net sales for six months ended March 31, 2012 were $303.2 million compared to $269.3 million for the six months ended March 31, 2011, an increase of $33.9 million or 12.6%. The increase in revenues was due to an increase in average prices of ethanol and distillers grains of 11.5% and 36.1%, respectively. Ethanol prices rose due to increased demand in the first quarter, and commodity inflation, particularly higher corn prices. We believe demand increased in the last three months of calendar 2011, due to the expiration of the VEETC blending credit on December 31, 2011, as refiners added to their inventory prior to expiration of the blending credit. The price of distillers grains generally follows the price of corn, and exports remained strong, resulting in higher prices in 2012. During the fiscal six months ending March 31, 2012 and 2011, 80.0% and 84.0%, respectively, of our net sales were derived from the sale of ethanol and our remaining net sales were derived from the sale of distillers grains and corn oil. We began selling corn oil in August 2011, and sold $3.2 million of oil in the first six months of fiscal 2012.

Cost of Goods Sold

Cost of goods sold for the six months ending March 31, 2012 was $288.9 million, compared to $258.4 million for the six months ending March 31, 2011, an increase of $30.5 million or 11.8%. Corn costs represented 77.2% and 76.3% of cost of goods sold for the fiscal six months ending March 31, 2012 and 2011. Corn costs increased 19.0% to $6.33 per bushel in the six months ending March 31, 2012 from $5.32 per bushel for the six months ending March 31, 2011. The Company believes that corn prices will remain high for the remainder of fiscal 2012 before moving lower in the next fiscal year. Natural gas costs represented 3.8% and 4.6% of cost of sales for the fiscal six months ending March 31, 2012 and 2011. Our average gas prices decreased to $3.92 per mmbtu in the six months ending March 31, 2012 from $4.23 per mmbtu in the six months ending March 31, 2011.

Gross Profit

Our gross profit for the six months ending March 31, 2012 was $14.2 million, compared to gross profit of $10.9 million for the six months ending March 31, 2011. The increase in gross profit was primarily due to more favorable distillers grain pricing, strong first quarter margins, and sales of corn oil beginning in August 2011. Margins in the last six months are expected to recover from the second quarter as the summer driving season typically boosts gasoline demand and therefore ethanol demand. If gasoline demand does not increase, our margins could remain weak for the third quarter.

Selling, General, and Administrative Expenses

For the six months ending March 31, 2012, selling, general and administrative expenses were $3.6 million compared to $3.0 million for the six months ending March 31, 2011. As a percentage of sales, selling, general and administrative expenses increased to 1.2% for the six months ended March 31, 2012 compared to 1.1% for the six months ended March 31, 2011, as a result of higher legal fees, new industry advocacy dues, and headcount increases for new or open positions at headquarters and our grain procurement area. Selling, general, and administrative expenses are comprised of recurring administrative personnel compensation, legal, technology, consulting, insurance and accounting fees.

Arbitration Settlement Expense

The Company incurred legal costs of $2.7 million in the three months ended March 31, 2011 related to the arbitration matter which was subsequently settled in the third quarter of fiscal 2011.

Other Income

Other income for the six months ended March 31, 2012 was $0.6 million, compared to $0.6 million for the six months ended March 31, 2011. Other income is comprised of Nebraska Advantage Act refunds, as described below under “Government Programs, Tax Credits and Tax Increment Financing,” as well as patronage refunds.

Interest Expense

Interest expense for the six months ending March 31, 2012 was $1.9 million, compared to $1.9 million for the six months ended March 31, 2011. The FY 2012 expense includes a mark-to-market loss of $0.2 million on the warrant derivative, compared to a $0.06 million gain in FY 2011. Excluding the mark-to-market loss, interest expense decreased by $0.2 million, due to reductions in outstanding principal in fiscal 2012.

TRENDS AND UNCERTAINTIES AFFECTING THE ETHANOL INDUSTRY AND OUR FUTURE OPERATIONS

Overview

Ethanol is currently blended with gasoline to meet regulatory standards as a clean air additive, an octane enhancer, a fuel extender and a gasoline alternative. According to the Renewable Fuels Association, as of April 2012, the estimated ethanol production capacity in the United States was 14.7 billion gallons per year. The demand for ethanol is affected by what is commonly referred to as the “blending wall,” which is a regulatory cap on the amount of ethanol that can be blended into gasoline. The blend wall affects the demand for ethanol, and as industry production capacity reaches the blend wall, the supply of ethanol in the market may surpass the demand. Assuming current gasoline usage in the U.S. at 138 billion gallons per year and a blend rate of 10% ethanol and 90% gasoline, the current blend wall can be assumed at approximately 13.8 billion gallons of ethanol per year. Gasoline demand in the U.S. declined 6.7% in the first three months of 2012 compared to the same period in 2011, according to the Renewable Fuels Association. Ethanol margins could remain weak if gasoline demand does not increase in the remainder of 2012.

In an attempt to increase the blend wall, Growth Energy, an ethanol industry trade organization, requested a waiver from the U.S. Environmental Protection Agency (“EPA”) to allow blending of ethanol at a 15 percent blend rate. In October of 2010, the EPA made a decision to allow the use of E15 blends in 2007 and newer vehicles. On January 21, 2011, the EPA announced E15 blends to be safe for use in all cars and pickups built in 2001 and later. In April 2012, the ethanol industry agreed to fund a nationwide fuel survey to satisfy the final federal hurdle to E15 commercial availability. We do not yet know what the impact of this decision will be on ethanol demand, as there are still some regulatory issues at the state level that must be addressed prior to widespread market use of the E15 blend. It appears likely that E15 will become available in certain states in 2012.

Our operations are highly dependent on commodity prices, especially prices for corn, ethanol, distillers grains and natural gas. As a result of price volatility for these commodities, our operating results may fluctuate substantially. The price and availability of corn are subject to significant fluctuations depending upon a number of factors that affect commodity prices in general, including crop conditions, weather, federal policy and foreign trade. Because the market price of ethanol is not always directly related to corn prices, at times ethanol prices may lag movements in corn prices and compress the overall margin structure at the plants. As a result, operating margins may become negative and we may be forced to shut down the plants.

We focus on locking in margins based on a cash flows model that continually monitors market prices of corn, natural gas and other input costs against prices for ethanol and distillers grains at each of our production facilities. We create offsetting positions by using a combination of derivative instruments, fixed-price purchases and sales, or a combination of strategies in order to manage risk associated with commodity price fluctuations. Our primary focus is not to manage general price movements, for example, minimize the cost of corn consumed, but rather to lock in favorable margins whenever possible.

Federal policy has a significant impact on ethanol market demand. Ethanol blenders previously benefited from incentives that encouraged usage and a tariff on imported ethanol that supported the domestic industry, which have now expired. Additionally, the renewable fuels standard (“RFS”) mandates increased level of usage of both corn-based and cellulosic ethanol. Any adverse ruling on, or legislation affecting, RFS mandates in the future could have an adverse impact on short-term ethanol prices and our financial performance in the future.

The ethanol industry and our business depend upon continuation of the federal and state ethanol supports such as the RFS. We believe the ethanol industry expanded due to these federal mandates, policies, and incentives. These government mandates have supported a market for ethanol that might disappear without these programs. Alternatively, the government mandates may be continued at lower levels than those at which they currently exist. In addition, state regulatory activity may also negatively affect the consumption of corn-based ethanol in certain domestic markets such as California, due to low-carbon fuel standards that take into consideration the effects caused by indirect land use.

The Renewable Fuels Standard

The RFS is a national program that imposes minimum requirements with respect to the amount of renewable fuel produced and used. The RFS was revised by the EPA in July 2010 (“RFS2”) and applies to refineries, blenders, distributors and importers. The RFS2 requires that refiners and importers blend renewable fuels totaling at least 9.23% of total fuel volume in 2012, or approximately 15.2 billion gallons, of which 13.2 billion gallons can be derived from corn-based ethanol. The RFS2 requirement will increase incrementally over the next several years to a renewable fuel requirement of 36.0 billion gallons, or approximately 7% of the anticipated gasoline and diesel consumption, by 2022. The following chart illustrates the potential United States ethanol demand based on the schedule of minimum usage established by the program through the year 2022 (in billions of gallons).


			Cellulosic						RFS Requirement
	Total Renewable		Ethanol		Biodiesel				That Can Be Met
	Fuel		Minimum		Minimum		Advanced		With Corn-Based
Year	Requirement		Requirement		Requirement		Biofuel		Ethanol
2012		15.20		0.50		1.00		2.00		13.20
2013		16.55		1.00		—		2.75		13.80
2014		18.15		1.75		—		3.75		14.40
2015		20.50		3.00		—		5.50		15.00
2016		22.25		4.25		—		7.25		15.00
2017		24.00		5.50		—		9.00		15.00
2018		26.00		7.00		—		11.00		15.00
2019		28.00		8.50		—		13.00		15.00
2020		30.00		10.50		—		15.00		15.00
2021		33.00		13.50		—		18.00		15.00
2022		36.00		16.00		—		21.00		15.00

The RFS2 went into effect on July 1, 2010 and requires certain gas emission reductions for the entire lifecycle, including production of fuels. The greenhouse gas reduction requirement generally does not apply to facilities that commenced construction prior to December 2007. If this changes and our plants must meet the standard for emissions reduction, it may affect the way we procure feed stock and modify the way we market and transport our products.

Blending Incentives

The VEETC, often commonly referred to as the “blender’s credit,” was created by the American Jobs Creation Act of 2004. This credit allowed gasoline distributors who blend ethanol with gasoline to receive a federal excise tax credit of $0.45 per gallon of pure ethanol used, or $0.045 per gallon for E10 and $0.3825 per gallon for E85. Federal policy also insulated the domestic ethanol industry from foreign competition by levying a $0.54 per gallon tariff on all imported ethanol. Both the VEETC and the tariff expired on December 31, 2011, and are not expected to be renewed in the future. We are uncertain how the expiration of these programs will affect the ethanol industry and our profitability. It appears that short term ethanol prices will be suppressed until the inventories that the refiners built up in the last quarter of 2011 are exhausted.

California Low-Carbon Fuel Standard

In April 2009, the California air regulators approved the Low-Carbon Fuel Standard (LCFS) aimed at achieving a 10% reduction in motor vehicle emissions of greenhouse gases by 2020. Other states may adopt similar legislation, which may lead to a national standard. The regulation requires that providers, refiners, importers and blenders ensure that the fuels they provide in the California market meet a declining standard of carbon intensity. This rule calls for a reduction of greenhouse gas emissions associated with the production, transportation and consumption of a fuel. The emissions score also includes indirect land-use change created from converting a forest to cultivated land for row crops. The final regulation contains a provision to review the measurement of the indirect land-use effects and further analysis of the land use values and modeling inputs.

On December 29, 2011, a judge in Federal District Court in Fresno, California ruled that the LCFS is unconstitutional and violates the Commerce Clause of the U.S. Constitution, and issued an injunction. California’s air regulators then filed an appeal in the U.S. Court of Appeals for the 9^th Circuit on January 5, 2012. The Court of Appeals has expedited briefing of the appeal and expects the briefing to be completed in the summer of 2012.

This standard and others to follow may affect the way ethanol producers procure feedstocks, produce dry distillers grains and market and transport ethanol and distillers grains. Ethanol produced through low-carbon methods, including imported ethanol made from sugarcane, may be redirected to certain markets and U.S. producers may be required to market their ethanol in other regions.

Imported Ethanol Tariffs

There was a $0.54 per gallon tariff on imported ethanol, which expired on December 31, 2011. Ethanol imported from other countries may be a less expensive alternative to domestically produced ethanol. The expiration of this tariff could lead to the importation of ethanol from other countries, which may be a less expensive alternative to ethanol produced domestically. This could affect our ability to sell our ethanol at the price we need to operate profitably.

Chinese Anti-Dumping Investigation

On December 28, 2010, the Chinese government announced a one-year investigation into the potential violation of anti-dumping laws regarding imported dried distillers grains (“DDGS”) originating in the United States. The allegation is that the 2010 surge in imports of U.S. dried distillers grains was undercutting sales of domestically produced dried distillers grains and that U.S. dried distillers grains were being sold at a price lower than the fair market value. If the Chinese government finds evidence of dumping upon conclusion of the investigation on July 28, 2012, a final determination will include the imposition of punitive tariffs on U.S. imports of DDGS to China. Punitive tariffs, if applied, will be significantly higher, as much as 50 percent, for non-cooperating parties. Although the Company does not sell distillers grains directly into China, some of our distillers grains may be sold into China through third parties. The Company has chosen to cooperate with the Chinese government’s investigation, but at this time we are uncertain as to the impact this may have on our business. Any imposition of tariffs could reduce the market price of distillers grains in the U.S., as it would most likely decrease the volume of exports to China.

European Union Anti-Dumping Investigation

On November 24, 2011, the European Union (“EU”) initiated anti-dumping and countervailing duty investigations regarding U.S. exports of ethanol to Europe and current U.S. policies surrounding ethanol production and use. Specifically at issue is federal and state incentives to producers and blenders of ethanol, which the EU alleges are allowing U.S. exports to be sold below fair market value in the EU. Preliminary findings are due by August 24, 2012. The EU could potentially impose anti-dumping and anti-subsidy tariffs for periods of six months to five years, should it find evidence of dumping. The Company does not export any ethanol to Europe at this time. Any imposition of tariffs could reduce U.S. exports to Europe, and possibly other export markets. A reduction of exports to Europe could have an adverse effect on domestic ethanol prices, as the available supply of ethanol for the domestic market would increase.

COMPETITION

Ethanol

The ethanol we produce is similar to ethanol produced by other plants. The RFA reports that as of April 2012, current U.S. ethanol production capacity is approximately 14.7 billion gallons per year, with approximately 0.7 billion gallons idle at the current time. On a national level there are numerous other production facilities with which we are in direct competition, many of whom have greater resources than we do. As of April 2012, Nebraska had 26 ethanol plants producing an aggregate of 2.0 billion gallons of ethanol per year, and South Dakota had 15 ethanol plants producing an aggregate of 1.0 billion gallons of ethanol per year, in each case including our plants.

The largest ethanol producers include: Abengoa Bioenergy Corp., Archer Daniels Midland Company, Cargill, Inc., Green Plains Renewable Energy, Inc., POET, LLC and Valero Renewable Fuels. Producers of this size may have an advantage over us from economies of scale and stronger negotiating positions with purchasers. We market our ethanol on a regional and national basis. We believe that we are able to reach the best available markets through the use of experienced ethanol marketers and by the rail delivery methods we use. Our plants compete with other ethanol producers on the basis of price, and, to a lesser extent, delivery service. We believe that we can compete favorably with other ethanol producers due to our proximity to ample grain, natural gas, electricity and water supplies at favorable prices.

Distillers Grains

In the sales of our distillers grains, we compete with other ethanol producers, as well as a number of large and smaller suppliers of competing animal feed. We believe the principal competitive factors are price, proximity to purchasers and product quality. Currently 71% of our distillers grain revenues are derived from the sale of dried distillers grains, which have an indefinite shelf life and can be transported by truck or rail, and 29% as modified and wet distillers grains, which have a shorter shelf life and are typically sold in local markets.

Corn Oil

In the sales of corn oil, we compete with other ethanol producers. A significant number of plants in the United States currently have oil extraction capabilities, with more being added.

LIQUIDITY AND CAPITAL RESOURCES

Financing and Existing Debt Obligations

We conduct our business activities and plant operations through Advanced BioEnergy, ABE Fairmont and ABE South Dakota. The liquidity and capital resources for each entity are based on the entity’s existing financing arrangements and capital structure. ABE Fairmont has traditional project financing in place, including senior secured financing, a working capital credit facility and subordinate exempt-facilities revenue bonds. In June 2010, ABE South Dakota entered into the Senior Credit Agreement (as defined below), which eliminated its subordinated debt. There are provisions contained in the various financing agreements at each operating entity preventing cross-default or collateralization between operating entities. Advanced BioEnergy is highly restricted in its ability to use the cash and other financial resources of each subsidiary for the benefit of Advanced BioEnergy, with the exception of allowable distributions as defined in the separate financing agreements.

Advanced BioEnergy, LLC

ABE had cash and cash equivalents of $7.7 million at March 31, 2012. ABE has no outstanding debt as of March 31, 2012. ABE does not expect to make any distributions to its unit holders in the next 12 months. ABE’s primary source of operating cash comes from charging a monthly management fee to ABE Fairmont and ABE South Dakota for services provided in connection with operating the ethanol plants. The primary management services provided include risk management, accounting and finance, human resources and other general management-related responsibilities. From time to time ABE may also receive certain allowable distributions from ABE Fairmont and ABE South Dakota based on the terms and conditions in their respective senior credit agreements. In March 2012, ABE received a distribution from ABE Fairmont of $3.8 million based on the fiscal 2011 financial results of ABE Fairmont. Future distributions are subject to ABE Fairmont remaining in compliance with all loan covenants and terms and conditions of its senior secured credit agreement. ABE does not expect any distribution from ABE South Dakota in 2012.

We believe ABE has sufficient financial resources available to fund current operations and capital expenditure requirements for at least the next 12 months.

ABE Fairmont

ABE Fairmont had cash and cash equivalents of $9.2 million and restricted cash of $1.6 million at March 31, 2012. The restricted cash is held in escrow for future debt service payments. As of March 31, 2012, ABE Fairmont had total debt outstanding of $46.1 million consisting of $40.7 million in senior secured credit and $5.4 million of subordinate exempt-facilities revenue bonds. ABE Fairmont is required to make monthly interest payments on its senior secured credit and semi-annual interest payments on its outstanding subordinate exempt revenue bonds. ABE Fairmont is required to make quarterly principal payments of $2.6 million on its senior secured credit starting in August 2012, and annual payments of $815,000 on its subordinated debt.

ABE Fairmont is allowed to make cash distributions to ABE if ABE Fairmont meets all conditions required in its senior secured credit agreement at the end of a fiscal year. This annual distribution is limited to 40% of net income calculated in accordance with generally accepted accounting principles and other terms contained in its senior secured credit agreement. Additionally, if ABE Fairmont has made the required free cash flow payment (described below) it may make a distribution up to 75% of net income. The distribution is subject to the completion of ABE Fairmont’s annual financial statement audit and ABE Fairmont remaining in compliance with all loan covenants and terms and conditions of the senior secured credit agreement. In March 2012, ABE Fairmont paid an annual distribution of $3.8 million based on its fiscal 2011 financial results.

ABE Fairmont’s free cash flow calculation, as defined in its senior secured credit agreement, requires that, for each fiscal year through 2013, ABE Fairmont must make a payment equal to the lesser of $8.0 million or 75% of its free cash flow after distributions, not to exceed $16.0 million in the aggregate for all of the free cash flow payments. Based on fiscal year financial results, ABE Fairmont made cash sweep payments of $6.3 million and $5.0 million in December 2011 and 2010, respectively. Cash sweep payments are subject to compliance with all loan covenants and terms and conditions of the senior secured credit agreement.

In addition to the cash on hand, ABE Fairmont has a $4.0 million revolving credit facility for financing eligible grain inventory and equity in Chicago Board of Trade futures positions, which expires May 1, 2013. ABE Fairmont also has a revolving credit facility for financing third-party letters of credit, which expires in February 2014. ABE Fairmont issued a letter of credit in connection with a rail car lease, thereby fully utilizing the $911,000 financing available as of March 31, 2012. We expect ABE Fairmont to renew both of these credit facilities upon expiration for an additional one-year term.

ABE Fairmont’s senior secured credit facility agreement contains financial and restrictive covenants, including limitations on additional indebtedness, restricted payments, and the incurrence of liens and transactions with affiliates and sales of assets. In addition, the senior secured credit facility requires ABE Fairmont to comply with certain financial covenants, including maintaining monthly minimum working capital, monthly minimum net worth, annual debt service coverage ratios and capital expenditure limitations. ABE Fairmont was in compliance with all covenants at March 31, 2012.

We believe ABE Fairmont has sufficient financial resources available to fund its current operations and capital expenditure requirements for at least the next 12 months.

ABE South Dakota

ABE South Dakota had cash and cash equivalents of $8.2 million and $3.9 million of restricted cash at March 31, 2012. The restricted cash consists of $3.4 million for a debt service payment reserve, $0.1 million for maintenance capital expenditures, and $0.4 million for construction of the Aberdeen corn oil extraction system. As of March 31, 2012, ABE South Dakota had interest-bearing term debt outstanding of $74.5 million.

ABE South Dakota entered into an Amended and Restated Senior Credit Agreement dated as of June 16, 2010 and amended on December 28, 2011 (the “Senior Credit Agreement”) among ABE South Dakota, the lenders from time to time party thereto, and WestLB AG, New York Branch, as administrative agent and collateral agent. The principal amount of the term loan facility is payable with four quarterly payments of $1,105,000 starting June 30, 2012, followed by quarterly payments of $750,000 starting June 30, 2013, with the remaining principal amount fully due and payable on March 31, 2016. The credit agreement was amended in December 2011 to allow the Company to install corn oil extraction technology in its Aberdeen facility.

ABE South Dakota has agreed to pay a $3.0 million restructuring fee to the lender due at the earlier of March 31, 2016 and the date on which the loans are repaid in full. The Company recorded the restructuring fee as long-term, non-interest bearing debt.

ABE South Dakota’s obligations under the Senior Credit Agreement are secured by a first-priority security interest in all of the equity in and assets of ABE South Dakota.

ABE South Dakota is allowed to make equity distributions (other than certain tax distributions) to ABE only if (i) ABE South Dakota meets certain financial conditions and, (ii) there is no more than $25 million of principal outstanding on the senior term loan.

We believe ABE South Dakota has sufficient financial resources available to fund current operations, make debt service payments and fund capital expenditure requirements over the next 12 months.

CASH FLOWS

The following table shows our cash flows for the six months ended March 31, 2012 and 2011:


	Six Months Ended March 31
	2012			2011
	(In thousands)			(In thousands)
Net cash provided by operating activities	$	24,512		$	20,499
Net cash used in investing activities		(3,237	)		(207	)
Net cash used in financing activities		(14,841	)		(13,799	)

Cash Flow from Operating Activities

Our cash flows from operations for the six months ended March 31, 2012 were higher compared to the same period in 2011, primarily due to increased margins during fiscal 2012.

Cash Flow from Investing Activities

We used more cash in investing activities in the six months ended March 31, 2012, compared to the same period in fiscal 2011 primarily due to capital expenditures for installation of additional fermentation equipment at our Fairmont facility, as well as installation of corn oil extraction equipment at our Aberdeen facility.

Cash Flow from Financing Activities

We used more cash for financing activities in the first six months of fiscal 2012 due to higher principal payments compared to the same period in fiscal 2011. This was primarily as result of a higher cash sweep payment on our Fairmont debt package.

CREDIT ARRANGEMENTS

Long-term debt consists of the following (in thousands, except percentages):


	March 31, 2012 Interest Rate			March 31, 2012			September 30, 2011
ABE Fairmont:
Senior credit facility—variable		3.65	%	$	25,000		$	32,266
Senior credit facility—fixed		7.53	%		15,740			20,000
Seasonal line		3.35	%		—			—
Subordinate exempt facilities bonds—fixed		6.75	%		5,370			6,185

					46,110			58,451

ABE South Dakota:
Senior debt principal—variable		1.97	%		74,552			77,052
Restructuring fee		N/A			3,000			3,000
Additional carrying value of restructured debt		N/A			9,022			9,453

					86,574			89,505

Total outstanding				$	132,684		$	147,956

Additional carrying value of restructured debt		N/A			(9,022	)		(9,453	)

Stated principal				$	123,662		$	138,503

The estimated maturities of debt at March 31, 2012, are as follows (in thousands):


	Stated Principal		Amortization of Additional Carrying Value of Restructured Debt		Total
2013	$	13,035	$	1,712	$	14,747
2014		11,755		2,431		14,186
2015		13,815		2,488		16,303
2016		77,947		2,391		80,338
2017		5,815		—		5,815
Thereafter		1,295		—		1,295

Total debt	$	123,662	$	9,022	$	132,684

SUMMARY OF CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Note 1 to our consolidated financial statements contains a summary of our significant accounting policies, many of which require the use of estimates and assumptions. Accounting estimates are an integral part of the preparation of financial statements and are based upon management’s current judgment. We used our knowledge and experience about past events and certain future assumptions to make estimates and judgments involving matters that are inherently uncertain and that affect the carrying value of our assets and liabilities. We believe that of our significant accounting policies, the following are noteworthy because changes in these estimates or assumptions could materially affect our financial position and results of operations:

Revenue Recognition

Ethanol revenue is recognized when product title and all risk of ownership is transferred to the customer as specified in the contractual agreements with the marketers. At all our plants, revenue is recognized upon the release of the product for shipment. Revenue from the sale of co-products is recorded when title and all risk of ownership transfers to customers, which generally

occurs at the time of shipment. Co-products and related products are generally shipped free on board (FOB) shipping point. Interest income is recognized as earned. In accordance with the Company’s agreements for the marketing and sale of ethanol and related products, commissions due to the marketers are deducted from the gross sale price at the time of payment.

Fair Value Measurements

In determining fair value of its derivative financial instruments and warrant liabilities, the Company uses various methods including market, income and cost approaches. Based on these approaches, the Company often utilizes certain assumptions that market participants would use in pricing the asset or liability, including assumptions about risk and the risks inherent in the inputs to the valuation technique. These inputs can be readily observable, market-corroborated, or generally unobservable inputs. Financial assets and liabilities carried at fair value will be classified and disclosed in one of the following three fair-value hierarchy categories:

Level 1: Valuations for assets and liabilities traded in active markets from readily available pricing sources for market transactions involving identical assets or liabilities.

Level 2: Valuations for assets and liabilities traded in less-active dealer or broker markets. Valuations are obtained from third-party pricing services for identical or similar assets or liabilities.

Level 3: Valuations incorporate certain assumptions and projections in determining the fair value assigned to such assets or liabilities.

Commodity futures and exchange-traded commodity options contracts are reported at fair value using Level 1 inputs. For these contracts, the Company obtains fair-value measurements from an independent pricing service. The fair-value measurements consider observable data that may include dealer quotes and live-trading levels from the Chicago Board of Trade (“CBOT”) and New York Mercantile Exchange (“NYMEX”) markets.

Derivative Instruments/Due From Broker

On occasion, the Company has entered into derivative contracts to hedge its exposure to price risk related to forecasted corn purchases and forecasted ethanol sales. Accounting for derivative contracts requires that an entity recognize all derivatives as either assets or liabilities in the statement of financial position and measure those instruments at fair value. If certain conditions are met, a derivative may be specifically designated as (a) a hedge of the exposure to changes in the fair value of a recognized asset or liability or an unrecognized firm commitment, (b) a hedge of the exposure to variable cash flows of a forecasted transaction, or (c) a hedge of the foreign currency exposure of a net investment in a foreign operation, an unrecognized firm commitment, an available-for-sale security, or a foreign-currency-denominated forecasted transaction.

Although the Company believes its derivative positions are economic hedges, none have been designated as a hedge for accounting purposes and derivative positions are recorded on the balance sheet at their fair market value, with changes in fair value recognized in current period earnings.

In addition, certain derivative financial instruments that meet the criteria for derivative accounting treatment also qualify for a scope exception to derivative accounting, as they are considered normal purchases and sales. The availability of this exception is based on the assumption that the Company has the ability and it is probable to deliver or take delivery of the underlying item. Derivatives that are considered to be normal purchases and sales are exempt from derivative accounting treatment, and are accounted for under accrual accounting.

Inventories

Corn, chemicals, supplies, work in process, ethanol and distillers grains inventories are stated at the lower of weighted average cost or market.

Property and Equipment

Property and equipment is carried at cost less accumulated depreciation computed using the straight-line method over the estimated useful lives:


Office equipment			3-7 Years
Process equipment			10 Years
Buildings			40 Years

OFF-BALANCE SHEET ARRANGEMENTS

We have no off-balance sheet arrangements.

GOVERNMENT PROGRAMS, TAX CREDITS AND TAX INCREMENT FINANCING

We have applied for income and sales tax incentives available under a Nebraska Advantage Act Project Agreement. As of March 31, 2012, we have received approximately $4.4 million in refunds under the Nebraska Advantage Act. We anticipate earning investment credits for certain sales taxes paid on construction costs, up to 10% of the cost of the Fairmont plant construction, and up to 10% of new asset additions. These investment credits can be used to offset Nebraska sales, use, and income tax. Under the Nebraska Advantage Act, we also anticipate earning employment credits for 5% of the annual costs of the newly created employment positions, which can be used to offset future payroll taxes. We will continue to earn additional investment and employment credits under the Nebraska Advantage Act through the tax year ended December 31, 2013. These credits can be carried over until used, but will expire on December 31, 2019. Although we may apply under several programs simultaneously and may be awarded grants or other benefits from more than one program, some combinations of programs are mutually exclusive. Under some state and federal programs, awards are not made to applicants in cases where construction on the project has started prior to the award date. There is no guarantee that applications will result in awards of grants or credits or deductions.

In December 2006, we received net proceeds of $6.7 million from tax incremental financing from the Village of Fairmont, Nebraska. ABE Fairmont has guaranteed payment of the tax increment bonds. We anticipate paying off the outstanding obligation with future property tax payments assessed on the Fairmont plant.

The State of South Dakota pays an incentive to operators of ethanol plants to encourage the growth of the ethanol industry. The Huron plant is eligible to receive an aggregate of $9.7 million, payable up to $1 million per year. The amounts are dependent on annual allocations by the State of South Dakota and the number of eligible plants. ABE South Dakota has received $0.37 million in the six months ended March 31, 2012, and received $0.36 million during the six months ended March 31, 2011.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

COMMODITY PRICE RISK

We consider our principal market risk to be the potential changes in commodity prices and their effect on our results of operations. We are subject to significant market risk with respect to the price of ethanol and corn. For the quarter ended March 31, 2012, sales of ethanol represented 78% of our total revenues and corn costs represented 77% of total cost of goods sold. In general, ethanol prices are affected by the supply and demand for ethanol, the cost of ethanol production, the availability of other fuel oxygenates, the regulatory climate and the cost of alternative fuels such as gasoline. The price of corn is affected by weather conditions and other factors affecting crop yields, farmer planting decisions and general economic, market and regulatory factors. At March 31, 2012, the price per gallon of ethanol and the cost per bushel of corn on the Chicago Board of Trade, or CBOT, were $2.265 and $6.44, respectively.

We are also subject to market risk on the selling prices of our distillers grains, which represent 21% of our total revenues. These prices fluctuate seasonally when the price of corn or other cattle feed alternatives fluctuate in price. The dried distiller grains spot price for Nebraska and South Dakota local customers were $202 and $196 per ton, respectively, at March 31, 2012.

We are also subject to market risk with respect to our supply of natural gas that is consumed in the ethanol production process. Natural gas costs represented 3.8% of total cost of goods sold for the quarter ended March 31, 2012. The price of natural gas is affected by weather conditions and general economic, market and regulatory factors. At March 31, 2012, the price of natural gas on the NYMEX was $2.126 per mmbtu.

To reduce price risk caused by market fluctuations in the cost and selling prices of related commodities, we have entered into forward purchase/sale contracts and derivative transactions. At March 31, 2012, we guaranteed prices representing 1.6% of our estimated ethanol production through July 2012 by entering into flat-priced contracts. At March 31, 2012, we had entered into forward sale contracts representing 26.6% of our expected distillers grains production and we had entered into forward purchase contracts representing 6.1% of our current corn requirements through July 2012. At March 31, 2012, prices of 25.9% of our expected gas usage through July 2012 were fixed with our natural gas providers.

The following represents a sensitivity analysis that estimates our annual exposure to market risk with respect to our current corn and natural gas requirements and ethanol sales. Market risk is estimated as the potential impact on operating income resulting from a hypothetical 10% change in the current ethanol, distiller grains, corn, and natural gas prices. The results of this analysis, which may differ from actual results, are as follows:


	Estimated at Risk Volume (1)		Units	Hypothetical Change in Price			Spot Price(2)		Change in Annual Operating Income
	(In millions)								(In millions)
Ethanol		191.6	gallons		10.0	%	$	2.27	$	43.4
Distillers grains		0.39	tons		10.0	%		199.39		7.8
Corn		64.1	bushels		10.0	%		6.44		41.3
Natural gas		2.7	btus		10.0	%		2.13		0.6

(1)

The volume of ethanol at risk is based on the assumption that we will enter into forward contracts for 1.7% of our expected annual gallons capacity of 195 million gallons. The volume of distillers grains at risk is based on the assumption that we will enter into forward contracts for 34.3% of our expected annual distillers grains production of 592,000 tons. The volume of corn is based on the assumption that we will enter into forward contracts for 7.9% of our estimated current 69.6 million bushel annual requirement. The volume of natural gas at risk is based on the assumption that we will continue to lock in 50.6% of our gas usage.

(2)	Current spot prices include the CBOT price per gallon of ethanol and the price per bushel of corn, the NYMEX price per mmbtu of natural gas and our listed local advertised dried distillers grains price per ton as of March 31, 2012.

INTEREST RATE/FOREIGN EXCHANGE RISK

Our future earnings may be affected by changes in interest rates due to the impact those changes have on our interest expense on borrowings under our credit facilities. As of March 31, 2012, we had $99.6 million of outstanding borrowings with variable interest rates. With each 1% change in interest rates our annual interest would change by $1.0 million.

We have no direct international sales. Historically all of our purchases have been denominated in U.S. dollars. Therefore we do not consider future earnings subject to foreign exchange risk.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by this report, we conducted an evaluation, under the supervision and with the participation of our chief executive officer, who is also our chief financial officer, of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934). Based on this evaluation, our chief executive officer, who is also our chief financial officer, concluded that our disclosure controls and procedures are effective to ensure that information required to be disclosed by us in reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms and to ensure that information required to be disclosed by the Company in the reports the Company files or submits under the Exchange Act is accumulated and communicated to the Company’s management, including its principal executive and principal financial officer, to allow timely decisions regarding required disclosures.

Changes in Internal Controls

There were no changes in our internal controls over financial reporting during our most recently completed fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

On December 21, 2011, the Company’s subsidiary ABE Fairmount, LLC (“ABE Fairmont”) commenced a lawsuit against Renewable Products Marketing Group, LLC (“RPMG”) in Hennepin County District Court in Minneapolis seeking injunctive relief and damages. The ABE Fairmont complaint alleges that defendant RPMG breached its obligations under an Ethanol Fuel Marketing Agreement and a later agreement with ABE Fairmont by refusing to assign to ABE Fairmont a lease for 200 rail cars that ABE Fairmont requires to distribute the ethanol it produces. ABE Fairmont is seeking injunctive relief to require RPMG to abide by its contractual obligations; damages caused by RPMG’s breach of the agreement; a declaratory judgment; and other necessary relief. Defendant RPMG answered the complaint denying the allegations, and has filed a counterclaim for a declaratory judgment. The parties have agreed to an expedited trial process, including an expedited discovery schedule, to resolve the dispute before the rail car lease expires on September 30, 2012. In the case, summary judgment briefs are due beginning in mid-May, a summary judgment hearing is set for on June 11, and a trial is set for date certain on August 1-3, 2012.

Item 1A. Risk Factors

There are no material changes from risk factors as previously discussed in our September 30, 2011 Annual Report on Form 10-K, except the following:

The current supply of ethanol rail cars is very limited, which could affect our ability to obtain new tanker cars and adversely affect our operations.

We transport our ethanol to our customers primarily via tanker rail cars. As of March 31, 2012, we were leasing approximately 538 ethanol tank cars whose leases expire at varying times over the next three years. We require tanker cars to ship our ethanol to customers, and would have to curtail or cease production should we not have sufficient cars available. As a result of the economic slowdown in the United States over the past several years, rail car manufacturers reduced their production of new rail cars. This reduction, combined with increased demand for tankers for the oil industry as a result of increased production in Western North Dakota and Eastern Montana, has severely constrained the available supply of tanker rail cars.

As discussed in Note 8 of the Notes to financial statements in this Form 10-Q, on May 4, 2012, our subsidiaries entered into several agreements with Gavilon, LLC, and affiliated companies ( “Gavilon”), a commodity management firm. In order to ensure a continuing source of rail cars for our South Dakota operations, these agreements include the renewed sublease of 298 rail cars for periods expiring June 30, 2014 through June 30, 2019. Although these agreements are, in part, subject to the consent of the senior lenders of our South Dakota-based subsidiary, the agreements when effective, would provide a supply of ethanol rail cars necessary to continue operations at our South Dakota subsidiary.

Of the rail cars we currently lease, 200 are subject to the terms of a sublease with Renewable Products Marketing Group, LLC. As described in Item 1, Legal Proceedings, our ABE Fairmont subsidiary has sued RPMG in Hennepin County District Court in Minneapolis seeking injunctive relief and damages. Given the nationwide shortage of rail cars, if we are unable to prevail in the litigation and obtain injunctive relief that requires the defendant to assign its rights to us, and if we are otherwise unable to obtain the rail cars we need to ship ethanol from Fairmont Nebraska beginning October 1, 2012, we would have to curtail or cease production at that plant. There can no assurance that we would be able to obtain replacement cars at a reasonable price or at all. Even if we were able to obtain new rail cars, if we were required to enter into new rail car leases at prices significantly in excess of our current lease rates, our future profitability could be adversely affected.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

None.

Item 5. Other Information

None.

Item 6. Exhibits

The exhibits filed herewith are set forth on the Exhibit Index filed as a part of this report beginning immediately following the signatures.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	ADVANCED BIOENERGY, LLC

Date: May 15, 2012	By:	/s/ Richard R. Peterson
		Richard R. Peterson
		Chief Executive Officer and President, Chief Financial Officer (Duly authorized signatory and Principal Financial Officer)

EXHIBIT INDEX


Exhibit No.	Description	Method of Filing

10.1	Multiple Advance Term Loan Supplement dated April 30, 2012 between Farm Credit Services of America, FLCA and ABE Fairmont, LLC.	Filed herewith.

10.2	Amendment to the Master Loan Agreement dated April 30, 2012 between Farm Credit Services of America, FLCA, Farm Credit Services of America, PCA, and ABE Fairmont, LLC.	Filed herewith.

10.3	Monitored Revolving Credit Supplement dated April 30, 2012 between Farm Credit Services of America, PCA and ABE Fairmont, LLC.	Filed herewith

31	Rule 13a-14(a)/15d-14(a) Certification by Principal Executive Officer, Financial and Accounting Officer.	Filed Electronically

32	Section 1350 Certifications.	Filed Electronically

101	The following materials from Advanced BioEnergy’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2012, formatted in XBRL: (i) Consolidated Balance Sheets at March 31, 2012 and September 30, 2011; (ii) Consolidated Statements of Operations for the three and six months ended March 31, 2012 and March 31, 2011; (iii) Consolidated Statements of Changes in Member’s Equity for the six months ended March 31, 2012; (iv) Consolidated Statements of Cash Flows for the six months ended March 31, 2012 and 2011; and (v) Notes to the Consolidated Financial Statements.	Filed Electronically

Large accelerated filer

Accelerated filer

Non-accelerated filer

x (Do not check if a smaller reporting company)

Smaller reporting company