Biox exercises option to terminate land lease at New York Harbor
Biox Corp., a renewable energy company that designs, builds, owns and operates biodiesel production facilities, announced Dec. 24 it has exercised an option which allows the company to terminate the land lease agreement with International-Matex Tank Terminals to construct a 100 million liter per year (approximately 30 MMgy) biodiesel production facility in New York Harbor.
“We remain confident in the growth opportunities available to us in the market,” said Kevin Norton, CEO of Biox. “However, given the significant change in the biodiesel market dynamics since we announced the IMTT agreement in June 2012, terminating the land lease agreement is the responsible decision. We also remain confident in the value of our Hamilton production facility, especially as we anticipate the market conditions in the U.S. biodiesel market will return to a rational balance between supply and demand. We believe the challenges the biodiesel market has endured in 2012 are short-term issues that reflect the maturing of a relatively nascent sector. As the market evolves, we will be in a better position to move quickly at that time to pursue our growth strategies.”
Based on Biox’s decision to exercise the option to terminate the land lease agreement, IMTT has agreed to return, in full, the $4.1 million letter of credit related to the proposed tank modifications. Biox will also be reimbursed $1.4 million of the $2.1 million upfront payment it made to IMTT. The net difference of $0.7 million will be expensed as a termination charge recorded in the first quarter of fiscal 2013.
Exercising the option reduces the term of the tank services agreement from 20 years to five years, with 53 months remaining. Biox is able to utilize the tanks or sublease the tank services during the remaining term of the agreement.
The cumulative impact of exercising the option to terminate will increase Biox’s unrestricted cash position by approximately $5.5 million. Depending upon the timing of its receipt, this amount will be reflected in the company’s cash position in either the first or second quarter of fiscal 2013.