Can Rentek Catch A Break? (RTK)

The Emergency Economic Stabilization Act (aka, the Wall Street bailout bill) did more than provide $700 billion of taxpayer funds to jump start the economy. The legislation also included the Energy Improvement and Extension Act aimed at encouraging continued development of alternative energy sources. Rentek Inc. (AMEX:RTK) was recently touting what it gained from the new legislation.  But shares have been gutted in recent selling and closed yesterday well under the $1.00 critical mass level at $0.6899 as speculative stocks and alternative energy stocks have been killed.

The company noted extended and expanded excise tax credits for fuelscreated from the Fischer-Tropsch process (coal-to-liquids). Ofparticular importance to Rentek was the extension of the credit toinclude jet fuel, which the company plans to produce at its proposedplant in Natchez, Mississippi. Rentek also plans to take advantage ofthe new legislation’s incentives to capture and sequester carbonemissions or to use the captured carbon in tertiary recovery of crudeoil.

Rentek can certainly use the help. It’s cash flow from operations hasbeen negative, and growing, for the past three years, and analysts arenot expecting positive results for the rest of 2008 or 2009. And withfinancing nearly impossible to come by, the new incentives foralternative fuels could be too little, too late for Rentek.

Paul Ausick
October 8, 2008