# Green Plains Inc. (GPRE) FY 2022 MD&A

Verbatim Item 7 Management's Discussion and Analysis from Green Plains Inc.'s 10-K for fiscal year 2022.

SEC filing source: https://www.sec.gov/Archives/edgar/data/1309402/000130940223000012/gpre-20221231.htm
Accession: 0001309402-23-000012
Filing date: 2023-02-10
Report date: 2022-12-31
Extracted structurally from real Item 7 body heading to real Item 7A/8 boundary. Published MD&A gate trimmed front/tail over-capture.
Confidence: high

Company profile: /company/GPRE/
All MD&A years: /company/GPRE/mda/
Previous year: /company/GPRE/mda/fy2021/ (FY 2021)
Next year: /company/GPRE/mda/fy2023/ (FY 2023)

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

General

The following discussion and analysis includes information management believes is relevant to understand and assess our consolidated financial condition and results of operations. This section should be read in conjunction with our consolidated financial statements, accompanying notes and the risk factors contained in this report.

Overview

Green Plains is an Iowa corporation, founded in June 2004 as a producer of low carbon fuels and has grown to be a leading biorefining company maximizing the potential of existing resources through fermentation and agribusiness technologies. We continue the transition from a commodity-processing business to a value-added agricultural technology company creating sustainable, high-value ingredients from existing resources. To that end, we are currently executing on a number of initiatives to allow for product diversification, new market opportunities and production of additional value-added low-carbon ingredients, such as Ultra-High Protein, dextrose, renewable corn oil and more.

Our first FQT MSC™ Ultra-High Protein installation was completed at our Shenandoah plant during the first quarter of 2020. Our Wood River plant began MSCTM operations in October 2021. Commissioning on our MSCTM installation at our Central City plant began during the third quarter of 2022 while two additional locations began commissioning in the fourth quarter of 2022. Installation at additional biorefineries is expected over the course of the next few years. Through our value-added ingredients initiative, we expect to produce Ultra-High Protein, a feed ingredient with protein concentrations of 50% or greater and yeast concentrations of 25%, increase production of renewable corn oil and produce other higher value products, such as post-MSC distillers grains.

We began pilot scale batch operations at the CSTTM production facility at our Innovation Center at York in the second quarter of 2021, which allows for the production of both food and industrial grade low-carbon glucose and dextrose to target applications in food production, renewable chemicals and synthetic biology. In September 2022, we broke ground at our biorefinery in Shenandoah, Iowa, as the first location to deploy FQT CSTTM at commercial scale. We also anticipate modifying additional biorefineries to include FQT CSTTM production capabilities to meet anticipated future customer demands.

In December 2020, we completed the purchase of a majority interest in FQT. The acquisition capitalizes on the core strengths of each company to develop and implement proven, agriculture, food and industrial biotechnology systems, rapidly expand installation and production across Green Plains facilities, and offer these technologies to the biofuels industry.

Additionally, we have taken advantage of opportunities to divest certain assets in recent years to reallocate capital toward our current growth initiatives. We are focused on generating stable and growing operating margins through our business segments and risk management strategy.

Our profitability is highly dependent on commodity prices, particularly for ethanol, distillers grains, renewable corn oil, soybean meal, corn, and natural gas. Since market price fluctuations of these commodities are not always correlated, our operations may be unprofitable at times. We use a variety of risk management tools and hedging strategies to monitor price risk exposure at our ethanol plants and lock in favorable margins or reduce production when margins are compressed. Our profitability could be significantly impacted by price movements of the aforementioned commodities.

More information about our business, properties and strategy can be found under Item 1 – Business and a description of our risk factors can be found under Item 1A – Risk Factors.

Industry Factors Affecting our Results of Operations

U.S. Ethanol Supply and Demand

According to the EIA, domestic ethanol production averaged 1.0 million barrels per day in 2022, which was 1% higher than the 0.99 million barrels per day in 2021. Refiner and blender input volume increased 1% to 884 thousand barrels per day for 2022, compared with 875 thousand barrels per day in 2021. Gasoline demand decreased 0.2 million barrels per day, or 3%, in 2022 compared to the prior year. U.S. domestic ethanol ending stocks increased by approximately 3.2 million barrels compared to the prior year, or 15%, to 24.6 million barrels as of December 31, 2022. As of this filing, according to Prime the

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Pump, there were approximately 2,923 retail stations selling E15 in 31 states, up from 2,555 at the beginning of the year, and approximately 386 suppliers at 113 pipeline terminal locations now offering E15 to wholesale customers.

Global Ethanol Supply and Demand

According to the USDA Foreign Agriculture Service, domestic ethanol exports through November 30, 2022, were approximately 1,277 mmg, up 13% from 1,126 mmg for the same period of 2021. Canada was the largest export destination for U.S. ethanol accounting for 36% of domestic ethanol export volume, driven in part by their national clean fuel standard. South Korea, Netherlands, India and United Kingdom accounted for 12%, 8%, 7% and 5%, respectively, of U.S. ethanol exports. We currently estimate that net ethanol exports will range from 1.1 to 1.3 billion gallons in 2023, based on historical demand from a variety of countries and certain countries that seek to improve their air quality, reduce greenhouse gas emissions through low carbon fuel programs and eliminate MTBE from their own fuel supplies. The recent strengthening of the U.S. Dollar relative to other currencies has the potential to adversely impact the U.S. ethanol competitiveness in the global market, which could also impact domestic ethanol prices.

Legislation and Regulation

We are sensitive to government programs and policies that affect the supply and demand for ethanol and other fuels, which in turn may impact the volume of ethanol and other products we handle. Over the years, various bills and amendments have been proposed in the House and Senate, which would eliminate the RFS entirely, eliminate the corn based ethanol portion of the mandate, and make it more difficult to sell fuel blends with higher levels of ethanol. Bills have also been introduced to require higher levels of octane blending, and require car manufacturers to produce vehicles that can operate on higher ethanol blends. We believe it is unlikely that any of these bills will become law in the current Congress. In addition, the manner in which the EPA administers the RFS and related regulations can have a significant impact on the actual amount of ethanol and other biofuels blended into the domestic fuel supply.

Federal mandates and state-level clean fuel programs supporting the use of renewable fuels are a significant driver of ethanol demand in the U.S. Ethanol policies are influenced by concerns for the environment, diversifying the fuel supply, and reducing the country’s dependence on foreign oil. Consumer acceptance of FFVs and higher ethanol blends in non-FFVs may be necessary before ethanol can achieve further growth in U.S. surface transportation fleet market share. In addition, expansion of clean fuel programs in other states and countries, or a national LCFS could increase the demand for ethanol, depending on how it is structured.

The Inflation Reduction Act of 2022, which was signed into law on August 16, 2022, is a sweeping policy that could have many potential impacts on our business which we are continuing to evaluate. The legislation (1) created a new Clean Fuel Production Credit, section 45Z of the Internal Revenue Code, which runs from 2025 to 2027 of $1.00 per gallon, which could impact our fuel ethanol, depending on the level of GHG reduction for each gallon; (2) created a new tax credit for SAF of $1.25 to $1.75 per gallon, depending on the GHG reduction for each gallon, that could possibly involve some of our low carbon ethanol through an ATJ pathway, depending on the life cycle analysis model being used (this credit expires after 2024 and shifts to the 45Z Clean Fuel Production Credit, where it qualifies for $1.75 per gallon); (3) expanded the carbon capture and sequestration credit, section 45Q of the Internal Revenue Code, to $85 for each ton of carbon sequestered, which could impact our carbon capture partnership and other potential carbon capture investments, though it cannot be claimed in conjunction with the 45Z Clean Fuel Production Credit, which could prove to be more valuable; (4) extended the biodiesel tax credit, which could impact our renewable corn oil values, as this co-product serves as a low-carbon feedstock for renewable diesel and biomass based diesel production (this credit expires after 2024 and shifts to the 45Z Clean Fuel Production credit, where all non-SAF fuels qualify for up to $1.00 per gallon); (5) funded biofuel refueling infrastructure by $500 million, which could impact the availability of higher level ethanol blended fuel; (6) increased funding for working lands conservation programs for farmers by $20 billion; and (7) provided credits for the production and purchase of electric vehicles, which could impact the amount of internal combustion engines built and sold longer term, and by extension impact the demand for liquid fuels including ethanol. There are numerous additional clean energy credits included in this law, including investment tax credits for construction of clean energy infrastructure, that could impact us and our overall competitiveness.

The RFS sets a floor for biofuels use in the United States. When the RFS was established in 2010, the required volume of conventional, or corn-based, ethanol to be blended with gasoline was to increase each year until it reached 15 billion gallons in 2015, which left the EPA to address existing limitations in both supply and demand.

As of December 31, 2022, the EPA has proposed RVOs for 2023, 2024 and 2025, setting the implied conventional

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ethanol levels at 15.25 billion gallons for each year, inclusive of 250 million gallons of supplemental volume in 2023 to reflect a court-ordered remand of a previously lowered RVO. The EPA also proposed a modest increase in biomass based diesel volumes over the three years, with a large increase in advanced biofuels for 2024 and 2025, which they expect to be fulfilled by e-RINs for electric vehicles. The EPA has agreed to a consent decree from the U.S. District Court for D.C. to finalize an RVO for 2023 (and possibly 2024 and 2025) by June 14, 2023.

Under the RFS, RINs and SREs are important tools impacting supply and demand. The EPA assigns individual refiners, blenders, and importers the volume of renewable fuels they are obligated to use in each annual RVO based on their percentage of total production of domestic transportation fuel sales. Obligated parties use RINs to show compliance with the RFS mandated volumes. Ethanol producers assign RINs to each gallon of renewable fuel they produce and the RINs are detached when the renewable fuel is blended with transportation fuel domestically. Market participants can trade the detached RINs in the open market. The market price of detached RINs can affect the price of ethanol in certain markets and can influence purchasing decisions by obligated parties. Of note, the RIN mechanism for proposed e-RINs could vary from the traditional process.

As it relates to SREs, a small refinery is defined as one that processes fewer than 75,000 barrels of petroleum per day. Small refineries can petition the EPA for a SRE which, if approved, waives their portion of the annual RVO requirements. The EPA, through consultation with the DOE and the USDA can grant them a full or partial waiver, or deny it outright within 90 days of submittal. The EPA granted significantly more of these waivers for the 2016, 2017 and 2018 reporting years than they had in prior years, totaling 790 mmg of waived requirements for the 2016 compliance year, 1.82 billion gallons for 2017 and 1.43 billion gallons for 2018. In doing so, the EPA effectively reduced the RFS mandated volumes for those compliance years by those amounts respectively, and as a result, RIN values declined significantly. In the waning days of the previous administration, the EPA approved three additional SREs, reversing one denial from 2018 and granting two from 2019. A total of 88 SREs were granted under the previous administration, erasing a total 4.3 billion gallons of potential blending demand. The EPA, under the current administration, reversed the three SREs issued in the final weeks of the previous administration, and in conjunction with the RVO rulemaking for 2020, 2021, and 2022, denied all pending SREs, a stance they have reiterated in the proposed 2023, 2024 and 2025 RVO rulemaking. There are multiple on-going legal challenges to how the EPA has handled SREs and RFS rulemakings.

The One-Pound Waiver, which was extended in May 2019 to allow E15 to be sold year-round to all vehicles model year 2001 and newer, was challenged in an action filed in Federal District Court for the D.C. Circuit. On July 2, 2021, the Circuit Court vacated the EPA’s rule so the future of summertime, defined as June 1 to September 15, sales of E15 is uncertain. The Supreme Court declined to hear a challenge to this ruling. On April 12, 2022, the President announced that he has directed the EPA to issue an emergency waiver to allow for the continued sale of E15 during the summer months, and that the temporary waiver should be extended as long as the gasoline supply emergency lasts. As of this filing, E15 is sold year-round at approximately 2,923 stations in 31 states.

In October 2019, the White House directed the USDA and EPA to move forward with rulemaking to expand access to higher blends of biofuels. This includes funding for infrastructure, labeling changes and allowing E15 to be sold through E10 infrastructure. The USDA rolled out the Higher Blend Infrastructure Incentive Program in the summer of 2020, providing competitive grants to fuel terminals and retailers for installing equipment for dispensing higher blends of ethanol and biodiesel. In December 2021, the USDA announced it would administer another infrastructure grant program. The Inflation Reduction Act, signed into law in 2022, provided for an additional $500 million in USDA grants for biofuel infrastructure from 2022 to 2031, though all the funds could be awarded in the first few years of the program.

To respond to COVID-19 health crisis and attempt to offset the subsequent economic damage, Congress passed multiple relief measures, most notably the CARES Act in March 2020, which created and funded multiple programs that have impacted our industry. The CARES Act also allowed for certain net operating loss carrybacks, which has allowed us to receive certain tax refunds. In December 2020, Congress passed and then the President signed into law an annual spending package coupled with another COVID relief bill which included additional funds for the Secretary of Agriculture to distribute to those impacted by the pandemic. The language of the bill specifically included biofuels producers as eligible for some of this aid, and in May 2022, the USDA distributed funds to us in the amount of $27.7 million pursuant to this bill.

Environmental and Other Regulation

Our operations are subject to environmental regulations, including those that govern the handling and release of ethanol, crude oil and other liquid hydrocarbon materials. Compliance with existing and anticipated environmental laws and regulations may increase our overall cost of doing business, including capital costs to construct, maintain, operate, and

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upgrade equipment and facilities. Our business may also be impacted by government policies, such as tariffs, duties, subsidies, import and export restrictions and outright embargos. We employ maintenance and operations personnel at each of its facilities, which are regulated by the Occupational Safety and Health Administration.

The U.S. ethanol industry relies heavily on tank cars to deliver its product to market. In 2015, the DOT finalized the Enhanced Tank Car Standard and Operational Controls for High-Hazard and Flammable Trains, or DOT specification 117, which established a schedule to retrofit or replace older tank cars that carry crude oil and ethanol, braking standards intended to reduce the severity of accidents and new operational protocols. The deadline for compliance with DOT specification 117 is May 1, 2023. The rule may increase our lease costs for railcars over the long term, which will, in turn, result in an increase in fees the partnership charges for railcar capacity. Additionally, existing railcars may be out of service for a period of time while upgrades are made, tightening supply in an industry that is highly dependent on railcars to transport product. We are strategically managing our leased railcar fleet to comply with the new regulations and have commenced transition of our fleet to DOT 117 compliant railcars. As of December 31, 2022, approximately 87% of our railcar fleet was DOT 117 compliant. We anticipate that our entire railcar fleet will be DOT 117 compliant by the 2023 deadline.

Variability of Commodity Prices

Our business is highly sensitive to commodity price fluctuations, particularly for corn, ethanol, renewable corn oil, distillers grains, Ultra-High Protein, and natural gas, which are impacted by factors that are outside of our control, including weather conditions, corn yield, changes in domestic and global ethanol supply and demand, government programs and policies and the price of crude oil, gasoline and substitute fuels. We use various financial instruments to manage and reduce our exposure to price variability. For more information about our commodity price risk, refer to Item 7A. - Qualitative and Quantitative Disclosures About Market Risk, Commodity Price Risk in this report.

We maintained an average utilization rate of approximately 91% of capacity during 2022, compared with 77% of capacity for the prior year. Our operating strategy is to transform our company to a value-add agricultural technology company. Depending on the margin environment, we may exercise operational discretion that results in reductions in production volumes. It is possible that throughput volumes could be below our MVC made to the partnership in the future, depending on various factors that drive each biorefinery’s variable contribution margin, including future driving and gasoline demand for the industry, demand for valuable coproducts we produce, and the supply and pricing of renewable feedstocks needed to operate our biorefineries. We are currently producing Ultra-High Protein at three locations, and began commissioning FQT’s MSCTM technology at two additional locations in the fourth quarter of 2022. We also anticipate deploying FQT MSC™ technology at various locations across our platform to help meet growing global demand for protein feed ingredients and renewable corn oil.

Effects of Inflation

While inflation has increased relative to recent years, we do not expect it to have a material impact on our future results of operations. However, inflation has and may continue to impact the interest rate environment in which we operate, resulting in a higher cost of capital. Refer to Item 7A. - Qualitative and Quantitative Disclosures About Market Risk, Commodity Price Risk in this report for additional information related to interest rate risk.

Critical Accounting Policies and Estimates

The preparation of our consolidated financial statements requires that we use estimates that affect the reported assets, liabilities, revenue and expense and related disclosures for contingent assets and liabilities. We base our estimates on experience and assumptions we believe are proper and reasonable. While we regularly evaluate the appropriateness of these estimates, actual results could differ materially from our estimates. The following accounting policies, in particular, may be impacted by judgments, assumptions and estimates used in the preparation of our consolidated financial statements.

Derivative Financial Instruments

We use various derivative financial instruments, including exchange-traded futures and exchange-traded and over-the-counter options contracts, to attempt to minimize risk and the effect of commodity price changes, including but not limited to, corn, ethanol, natural gas, soybean meal, soybean oil and other agricultural and energy products. We monitor and manage this exposure as part of our overall risk management policy to reduce the adverse effect market volatility may have on our operating results. We may hedge these commodities as one way to mitigate risk; however, there may be situations when these hedging activities themselves result in losses.

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By using derivatives to hedge exposures to changes in commodity prices, we are exposed to credit and market risk. Our exposure to credit risk includes the counterparty’s failure to fulfill its performance obligations under the terms of the derivative contract. We minimize our credit risk by entering into transactions with high quality counterparties, limiting the amount of financial exposure it has with each counterparty and monitoring their financial condition. Market risk is the risk that the value of the financial instrument might be adversely affected by a change in commodity prices or interest rates. We manage market risk by incorporating parameters to monitor exposure within our risk management strategy, which limits the types of derivative instruments and strategies we can use and the degree of market risk we can take using derivative instruments.

Forward contracts are recorded at fair value unless the contracts qualify for, and we elect, normal purchase or sale exceptions. Changes in fair value are recorded in operating income unless the contracts qualify for, and we elect, cash flow hedge accounting treatment.

Certain qualifying derivatives related to ethanol production and agribusiness and energy services segments are designated as cash flow hedges. We evaluate the derivative instrument to ascertain its effectiveness prior to entering into cash flow hedges. Unrealized gains and losses are reflected in accumulated other comprehensive income or loss until the gain or loss from the underlying hedged transaction is realized and the physical transaction is completed. When it becomes probable a forecasted transaction will not occur, the cash flow hedge treatment is discontinued, which affects earnings. These derivative financial instruments are recognized in current assets or current liabilities at fair value.

At times, we hedge our exposure to changes in inventory values and designate qualifying derivatives as fair value hedges. The carrying amount of the hedged inventory is adjusted in the current period for changes in fair value. Estimated fair values carried at market are based on exchange-quoted prices, adjusted as appropriate for regional location basis values which represent differences in local markets including transportation as well as quality or grade differences. Basis values are generally determined using inputs from broker quotations or other market transactions. However, a portion of the value may be derived using unobservable inputs. Ineffectiveness of the hedges is recognized in the current period to the extent the change in fair value of the inventory is not offset by the change in fair value of the derivative.

Please refer to Note 11 - Derivative Financial Instruments to the consolidated financial statements for further details.

Accounting for Income Taxes

Income taxes are accounted for under the asset and liability method in accordance with GAAP. Deferred tax assets and liabilities are recognized for future tax consequences between existing assets and liabilities and their respective tax basis, and for net operating loss and tax credit carry-forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to be applied to taxable income in years temporary differences are expected to be recovered or settled. The effect of a tax rate change is recognized in the period that includes the enactment date. The realization of deferred tax assets depends on the generation of future taxable income during the periods in which temporary differences become deductible. Management considers scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies to make this assessment. A valuation allowance is recorded by the company when it is more likely than not that some portion or all of a deferred tax asset will not be realized. In making such a determination, management considers the positive and negative evidence to support the need for, or reversal of, a valuation allowance. The weight given to the potential effects of positive and negative evidence is based on the extent it can be objectively verified.

To account for uncertainty in income taxes, we gauge the likelihood of a tax position based on the technical merits of the position, perform a subsequent measurement related to the maximum benefit and degree of likelihood, and determine the benefit to be recognized in the financial statements, if any.

Please refer to Note 16 - Income Taxes to the consolidated financial statements for further details.

Impairment of Goodwill

Our goodwill is related to certain acquisitions within our ethanol production and partnership segments. We review goodwill for impairment at least annually, as of October 1, or more frequently whenever events or changes in circumstances indicate that an impairment may have occurred.

Circumstances that may indicate impairment include a decline in future projected cash flows, a decision to suspend plant operations for an extended period of time, a sustained decline in our market capitalization, a sustained decline in market

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prices for similar assets or businesses or a significant adverse change in legal or regulatory matters, or business climate. Significant management judgment is required to determine the fair value of our goodwill and measure impairment, including projected cash flows. Fair value is determined through various valuation techniques, including discounted cash flow models utilizing assumed margins, cost of capital, inflation and other inputs, sales of comparable properties and third-party independent appraisals. Changes in estimated fair value as a result of declining ethanol margins, loss of significant customers or other factors could result in an impairment of goodwill.

Please refer to Note 10 – Goodwill and Intangible Assets to the consolidated financial statements for further details.

Recently Issued Accounting Pronouncements

For information related to recent accounting pronouncements, see Note 2 – Summary of Significant Accounting Policies included as part of the notes to consolidated financial statements in this report.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements.

Components of Revenues and Expenses

Revenues. For our ethanol production segment, our revenues are derived primarily from the sale of ethanol, distillers grains, Ultra-High Protein and renewable corn oil. For our agribusiness and energy services segment, our primary sources of revenue include sales of ethanol, distillers grains and renewable corn oil that we market for our ethanol plants, in which we earn a marketing fee, sales of ethanol we market for a third-party and sales of grain and other commodities purchased in the open market. The vast majority of our revenues are from forward contracts accounted for as derivatives under ASC 815 as disclosed in the tables within Note 4 - Revenue and Note 11 - Derivative Financial Instruments. Revenues include net gains or losses from derivatives related to products sold. For our partnership segment, our revenues consist primarily of fees for receiving, storing, transferring and transporting ethanol and other fuels.

Cost of Goods Sold. For our ethanol production segment, cost of goods sold includes direct labor, materials and plant overhead costs. Direct labor includes compensation and related benefits of non-management personnel involved in ethanol plant operations. Plant overhead consists primarily of plant utilities and outbound freight charges. Corn is the most significant raw material cost followed by natural gas, which is used to power steam generation in the ethanol production process and dry distillers grains. Cost of goods sold also includes net gains or losses from derivatives related to commodities purchased.

For our agribusiness and energy services segment, purchases of ethanol, distillers grains, renewable corn oil and grain are the primary component of cost of goods sold. Grain inventories held for sale and forward purchase and sale contracts are valued at market prices when available or other market quotes adjusted for differences, such as transportation, between the exchange-traded market and local markets where the terms of the contracts are based. Changes in the market value of grain inventories, forward purchase and sale contracts, and exchange-traded futures and options contracts are recognized as a component of cost of goods sold.

Operations and Maintenance Expense. For our partnership segment, transportation expense is the primary component of operations and maintenance expense. Transportation expense includes rail car leases, shipping and freight and costs incurred for storing ethanol at destination terminals.

Loss (Gain) on Sale of Assets, Net. We completed the sale of the ethanol plant located in Ord, Nebraska in March 2021 and the sale of the ethanol plant located in Hereford, Texas during the fourth quarter of 2020. The sale of Ord resulted in a pretax gain of $35.9 million recorded at the corporate level. The sale of Hereford resulted in a loss of $18.5 million recorded at the corporate level, a loss of $3.9 million recorded at the ethanol production level and the gain on the assignment of operating leases of $2.7 million recorded at the partnership level.

Selling, General and Administrative Expense. Selling, general and administrative expenses are recognized at the operating segment and corporate level. These expenses consist of employee salaries, incentives and benefits; office expenses; director fees; and professional fees for accounting, legal, consulting and investor relations services. Personnel costs, which include employee salaries, incentives and benefits, as well as severance and separation costs, are the largest expenditure. Selling, general and administrative expenses that cannot be allocated to an operating segment are referred to as corporate activities.

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Other Income (Expense). Other income (expense) includes interest earned, interest expense and other non-operating items, as well as a $27.7 million grant received from the USDA related to the Biofuel Producer Program authorized as part of the CARES Act to offset market losses as a result of the COVID-19 pandemic for the year-ended December 31, 2022.

Income from Equity Method Investees, Net of Income Taxes. Income from equity method investees, net of income taxes, represents our proportional share of earnings from our equity method investees.

Results of Operations

Comparability

The following summarizes various events that affect the comparability of our operating results for the past three years:

[[GREPCENT_TABLE]]
[["\u2022October 2020","Our remaining 50% membership interest in GPCC was sold."],["\u2022December 2020","Hereford, Texas ethanol plant was sold and certain storage assets of this plant were acquired from the partnership prior to being sold."],["\u2022December 2020","Acquired a majority interest in FQT."],["\u2022March 2021","Ord, Nebraska ethanol plant was sold and certain storage assets of this plant were acquired from the partnership prior to being sold."],["\u2022May 2022","Received a $27.7 million grant from the USDA as part of the CARES Act."]]
[[/GREPCENT_TABLE]]

The year ended December 31, 2020, includes approximately nine months of operations of the GPCC joint venture being accounted for using the equity method of accounting.

A discussion regarding our financial condition and results of operations for the year ended December 31, 2021, compared to the year ended December 31, 2020, can be found under Item 7 in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021, filed with the SEC on February 18, 2022.

Segment Results

We report the financial and operating performance for the following three operating segments: (1) ethanol production, which includes the production of ethanol, distillers grains, Ultra-High Protein and renewable corn oil, (2) agribusiness and energy services, which includes grain handling and storage, commodity marketing and merchant trading for company-produced and third-party ethanol, distillers grains, renewable corn oil, natural gas and other commodities, and (3) partnership, which includes fuel storage and transportation services.

During the normal course of business, our operating segments do business with each other. For example, our agribusiness and energy services segment procures grain and natural gas and sells products, including ethanol, distillers grains and renewable corn oil of our ethanol production segment. Our partnership segment provides fuel storage and transportation services for our agribusiness and energy services segment. These intersegment activities are treated like third-party transactions with origination, marketing and storage fees charged at estimated market values. Consequently, these transactions affect segment performance; however, they do not impact our consolidated results since the revenues and corresponding costs are eliminated.

Corporate activities include selling, general and administrative expenses, consisting primarily of compensation, professional fees and overhead costs not directly related to a specific operating segment.

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The selected operating segment financial information are as follows (in thousands):

[[GREPCENT_TABLE]]
[["","Year Ended December 31,"],["","2022","","2021","","2020"],["Revenues:"],["Ethanol production:"],["Revenues from external customers","$","3,070,192","","$","2,153,368","","$","1,502,481"],["Intersegment revenues","\u2014","","\u2014","","100"],["Total segment revenues","3,070,192","","2,153,368","","1,502,581"],["Agribusiness and energy services:"],["Revenues from external customers","588,654","","669,526","","416,403"],["Intersegment revenues","26,961","","21,958","","27,468"],["Total segment revenues","615,615","","691,484","","443,871"],["Partnership:"],["Revenues from external customers","4,003","","4,274","","4,835"],["Intersegment revenues","75,764","","74,178","","78,510"],["Total segment revenues","79,767","","78,452","","83,345"],["Revenues including intersegment activity","3,765,574","","2,923,304","","2,029,797"],["Intersegment eliminations","(102,725)","","","(96,136)","","","(106,078)"],["","$","3,662,849","","$","2,827,168","","$","1,923,719"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","Year Ended December 31,"],["","2022","","2021","","2020"],["Cost of goods sold:"],["Ethanol production","$","3,068,366","","$","2,063,283","","$","1,507,335"],["Agribusiness and energy services","562,950","","657,375","","409,407"],["Intersegment eliminations","(106,305)","","","(95,549)","","","(104,579)"],["","$","3,525,011","","$","2,625,109","","$","1,812,163"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","Year Ended December 31,"],["","2022","","2021","","2020"],["Gross margin:"],["Ethanol production","$","1,826","","","$","90,085","","","$","(4,754)"],["Agribusiness and energy services","52,665","","","34,109","","","34,464"],["Partnership","79,767","","","78,452","","","83,345"],["Intersegment eliminations","3,580","","","(587)","","","(1,499)"],["","$","137,838","","","$","202,059","","","$","111,556"]]
[[/GREPCENT_TABLE]]

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[[GREPCENT_TABLE]]
[["","Year Ended December 31,"],["","2022","","2021","","2020"],["Operating income (loss):"],["Ethanol production (1)","$","(117,764)","","","$","(27,996)","","","$","(129,618)"],["Agribusiness and energy services","36,415","","17,458","","15,773"],["Partnership","47,699","","48,672","","50,437"],["Intersegment eliminations","3,580","","","(587)","","","(1,400)"],["Corporate activities (2)","(68,878)","","","(12,039)","","","(57,888)"],["","$","(98,948)","","$","25,508","","","$","(122,696)"]]
[[/GREPCENT_TABLE]]

(1)Operating loss for ethanol production includes an inventory lower of cost or net realizable value adjustment of $12.3 million for the year-ended December 31, 2022, and a goodwill impairment charge of $24.1 million and $3.9 million loss on sale of assets from the sale of the Hereford, Texas ethanol plant for the year-ended December 31, 2020.

(2)Corporate activities for the year-ended December 31, 2021 include a $29.6 million net gain on sale of assets primarily from the sale of the Ord, Nebraska ethanol plant. Corporate activities for the year-ended December 31, 2020 include an $18.5 million loss on sale of assets from the sale of the Hereford, Texas ethanol plant and a $1.5 million net gain from the sale of GPCC.

[[GREPCENT_TABLE]]
[["","Year Ended December 31,"],["","2022","","2021","","2020"],["Depreciation and amortization:"],["Ethanol production","$","81,545","","$","82,969","","$","67,956"],["Agribusiness and energy services","3,466","","2,535","","2,512"],["Partnership","4,093","","3,737","","3,806"],["Corporate activities","3,594","","2,711","","3,970"],["","$","92,698","","$","91,952","","$","78,244"]]
[[/GREPCENT_TABLE]]

We use EBITDA, adjusted EBITDA, and segment EBITDA as measures of profitability to compare the financial performance of our reportable segments and manage those segments. EBITDA is defined as earnings before interest expense, income tax expense, including related tax expense of equity method investments, depreciation and amortization excluding the amortization of right-of-use assets and debt issuance costs. Adjusted EBITDA includes adjustments related to other income associated with the USDA COVID-19 relief grant, gains or losses on sale of assets, our proportional share of EBITDA adjustments of our equity method investees and noncash goodwill impairment. We believe EBITDA, adjusted EBITDA and segment EBITDA are useful measures to compare our performance against other companies. These measures should not be considered an alternative to, or more meaningful than, net income, which is prepared in accordance with GAAP. EBITDA, adjusted EBITDA, and segment EBITDA calculations may vary from company to company. Accordingly, our computation of EBITDA, adjusted EBITDA, and segment EBITDA may not be comparable with a similarly titled measure of other companies.

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The following table reconciles net loss including noncontrolling interest to adjusted EBITDA (in thousands):

[[GREPCENT_TABLE]]
[["","Year Ended December 31,"],["","2022","","2021","","2020"],["Net loss","$","(103,377)","","","$","(44,146)","","","$","(89,654)"],["Interest expense (1)","32,642","","","67,144","","","39,993"],["Income tax expense (benefit)","4,747","","","1,845","","","(43,879)"],["Depreciation and amortization (2)","92,698","","","91,952","","","78,244"],["EBITDA","26,710","","","116,795","","","(15,296)"],["Other income (3)","(27,712)","","","\u2014","","","\u2014"],["Loss (gain) on sale of assets, net","\u2014","","","(29,601)","","","20,860"],["Proportional share of EBITDA adjustments to equity method investees","180","","","184","","","7,093"],["Noncash goodwill impairment","\u2014","","","\u2014","","","24,091"],["Adjusted EBITDA","$","(822)","","","$","87,378","","","$","36,748"]]
[[/GREPCENT_TABLE]]

(1)Interest expense for the year ended December 31, 2021 includes a loss on extinguishment of convertible notes of $22.1 million and a loss on settlement of convertible notes of $9.5 million.

(2)Excludes the amortization of operating lease right-of-use assets and amortization of debt issuance costs.

(3)Other income for the year-ended December 31, 2022 includes a grant received from the USDA related to the Biofuel Producer Program of $27.7 million.

The following table reconciles segment EBITDA to consolidated adjusted EBITDA (in thousands):

[[GREPCENT_TABLE]]
[["","Year Ended December 31,"],["","2022","","2021","","2020"],["Adjusted EBITDA:"],["Ethanol production (1)","$","(8,619)","","","$","55,056","","","$","(60,868)"],["Agribusiness and energy services","39,798","","","19,716","","","18,430"],["Partnership","52,429","","","53,109","","","54,907"],["Intersegment eliminations","3,580","","","(587)","","","(1,400)"],["Corporate activities (2)","(60,478)","","","(10,499)","","","(26,365)"],["EBITDA","26,710","","","116,795","","","(15,296)"],["Other income (3)","(27,712)","","","\u2014","","","\u2014"],["Loss (gain) on sale of assets, net","\u2014","","","(29,601)","","","20,860"],["Proportional share of EBITDA adjustments to equity method investees","180","","","184","","","7,093"],["Noncash goodwill impairment","\u2014","","","\u2014","","","24,091"],["Adjusted EBITDA","$","(822)","","","$","87,378","","","$","36,748"]]
[[/GREPCENT_TABLE]]

(1)Operating loss for ethanol production includes an inventory lower of cost or net realizable value adjustment of $12.3 million for the year-ended December 31, 2022, and a goodwill impairment charge of $24.1 million and $3.9 million loss on sale of assets from the sale of the Hereford, Texas ethanol plant for the year-ended December 31, 2020.

(2)Corporate activities for the year-ended December 31, 2021 include a $29.6 million net gain on sale of assets primarily from the sale of the Ord, Nebraska ethanol plant. Corporate activities for the year-ended December 31, 2020 include an $18.5 million loss on sale of assets from the sale of the Hereford, Texas ethanol plant and a $1.5 million gain from sale of GPCC.

(3)Other income for the year-ended December 31, 2022 includes a grant received from the USDA related to the Biofuel Producer Program of $27.7 million.

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Total assets by segment are as follows (in thousands):

[[GREPCENT_TABLE]]
[["","Year Ended December 31,"],["","2022","","2021"],["Total assets (1):"],["Ethanol production","$","1,157,791","","$","1,101,151"],["Agribusiness and energy services","489,083","","487,164"],["Partnership","108,680","","100,349"],["Corporate assets","386,437","","524,206"],["Intersegment eliminations","(18,860)","","","(53,115)"],["","$","2,123,131","","$","2,159,755"]]
[[/GREPCENT_TABLE]]

(1)Asset balances by segment exclude intercompany balances.

Year Ended December 31, 2022 compared with the Year Ended December 31, 2021

Consolidated Results

Consolidated revenues increased $835.7 million in 2022 compared with 2021 primarily due to higher average selling prices and higher volumes sold on ethanol, distillers grains and renewable corn oil within our ethanol production segment as described below, slightly offset by lower revenues within our agribusiness and energy services segment as a result of decreased trading volumes.

Net loss increased $59.2 million and adjusted EBITDA decreased $88.2 million in 2022 compared with 2021 primarily due to decreased margins within our ethanol production segment. Interest expense decreased $34.5 million in 2022 compared with 2021 primarily due to the loss upon settlement of convertible notes of $31.6 million recorded during 2021, as well as higher capitalized interest and decreased amortization of debt issuance costs, partially offset by increased interest as a result of higher rates and a higher average debt balance. Income tax expense was $4.7 million in 2022 compared to an income tax expense of $1.8 million in 2021 primarily due to an increase in the valuation allowance recorded against certain deferred tax assets.

The following discussion provides greater detail about our segment performance.

Ethanol Production Segment

Key operating data for our ethanol production segment is as follows:

[[GREPCENT_TABLE]]
[["","Year Ended December 31,"],["","2022","","2021"],["Ethanol sold"],["(thousands of gallons)","872,133","","","750,648"],["Distillers grains sold"],["(thousands of equivalent dried tons)","2,280","","","1,977"],["Renewable corn oil sold"],["(thousands of pounds)","281,730","","","219,807"],["Corn consumed"],["(thousands of bushels)","301,868","","","259,786"]]
[[/GREPCENT_TABLE]]

Revenues in our ethanol production segment increased $916.8 million in 2022 compared with 2021 primarily due to higher ethanol, distillers grains and renewable corn oil volumes sold resulting in increased revenues of $295.7 million, $57.3 million and $31.9 million, respectively, as well as higher weighted average selling prices on ethanol, distillers grains and renewable corn oil resulting in increased revenues of $168.2 million, $90.2 million and $50.0 million, respectively. Revenues

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also increased as a result of ethanol hedging activities by $233.3 million.

Cost of goods sold in our ethanol production segment increased $1,005.1 million for 2022 compared with 2021 due to higher weighted average corn prices, higher corn volumes processed and hedging activities, resulting in increased costs of $400.2 million, $248.3 million and $151.3 million, respectively, as well as an increase of $178.8 million driven by higher utilities, freight and chemical costs.

Operating loss in our ethanol production segment increased $89.8 million in 2022 compared with 2021 primarily due to decreased margins as outlined above. Depreciation and amortization expense for the ethanol production segment was $81.5 million for 2022 compared with $83.0 million during 2021.

Agribusiness and Energy Services Segment

Revenues in our agribusiness and energy services segment decreased $75.9 million while operating income increased $19.0 million in 2022 compared with 2021. The decrease in revenues was primarily due to a decrease in ethanol, distillers grains and renewable corn oil trading volume. Operating income increased primarily as a result of higher trading margins.

Partnership Segment

Revenues generated by our partnership segment increased $1.3 million in 2022 compared with 2021. Railcar transportation services revenue increased $2.4 million primarily due to an increase in railcar volumetric capacity and associated fees. Storage and throughput services revenue decreased $0.7 million primarily due to a reduction in contracted minimum volume commitments as a result of the sale of our parent’s Ord ethanol plant in the first quarter of 2021. Trucking and other revenue decreased $0.3 million primarily as a result of lower non-affiliate freight volume. Terminal services revenue remained consistent with the prior year. Operating income decreased $1.0 million in 2022 compared with 2021 primarily due to higher railcar lease expenses.

Intersegment Eliminations

Intersegment eliminations of revenues increased by $6.6 million for 2022 compared with 2021 due to increased intersegment marketing and commodity service fees within the agribusiness and energy services segment as a result of higher production volumes as well as increased storage and throughput fees paid to the partnership segment.

Corporate Activities

Operating loss was impacted by an increase in corporate activities of $56.8 million for 2022 compared with 2021, primarily due to the net gain on sale of assets recorded during 2021 of $29.6 million, as well as increased personnel costs, professional fees and travel costs during 2022.

Income Taxes

We recorded income tax expense of $4.7 million for 2022 compared to an income tax expense of $1.8 million in 2021. The increase in the amount of tax expense recorded for 2022 was primarily due to an increase in the valuation allowance recorded against certain deferred tax assets.

Liquidity and Capital Resources

Our principal sources of liquidity include cash generated from operating activities and bank credit facilities. We fund our operating expenses and service debt primarily with operating cash flows. Capital resources for maintenance and growth expenditures are funded by a variety of sources, including cash generated from operating activities, borrowings under bank credit facilities, or issuance of senior notes or equity. Our ability to access capital markets for debt under reasonable terms depends on our financial condition, credit ratings and market conditions. We believe that our ability to obtain financing at reasonable rates and our history of positive cash flow from operating activities, which have been positive for eight of the previous ten years, provide a solid foundation to meet our future liquidity and capital resource requirements.

On December 31, 2022, we had $444.7 million in cash and cash equivalents and $55.6 million in restricted cash. We also had $235.0 million available under our committed revolving credit agreement, subject to restrictions or other lending conditions. Funds at certain subsidiaries are generally required for their ongoing operational needs and restricted from

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distribution. At December 31, 2022, our subsidiaries had approximately $117.1 million of net assets that were not available to use in the form of dividends, loans or advances due to restrictions contained in their credit facilities.

Net cash provided by operating activities was $69.7 million in 2022 compared to $4.2 million in 2021. Operating activities compared to the prior year were primarily affected by fluctuations in working capital, including cash provided by higher accounts payable and lower accounts receivable, offset by higher net loss when compared to the prior year. Net cash used in investing activities was $105.3 million in 2022 compared to $236.3 million in 2021 primarily due to the purchases of marketable securities in the prior year. Net cash used in financing activities was $25.1 million in 2022 compared to net cash provided by financing activities of $518.2 million in 2021 primarily due to proceeds from the issuance of common stock and debt offerings during 2021.

Additionally, Green Plains Finance Company, Green Plains Trade, Green Plains Grain and Green Plains Commodity Management use revolving credit facilities to finance working capital requirements. We frequently draw from and repay these facilities which results in significant cash movements reflected on a gross basis within financing activities as proceeds from and payments on short-term borrowings.

We incurred capital expenditures of $212.4 million in 2022 primarily for Ultra-High Protein expansion projects at Central City, Mount Vernon and Obion and for various other capital projects, which were funded from our restricted cash accounts. The current projected estimate for capital spending for 2023 is approximately $150 million to $250 million, which is subject to review prior to the initiation of any project. The estimate includes additional expenditures to deploy FQT’s MSC™ and CST™ technology, as well as expenditures for various other maintenance projects, which are expected to be financed with cash on hand and by cash provided by operating activities.

Our business is highly sensitive to the price of commodities, particularly for corn, ethanol, distillers grains, renewable corn oil and natural gas. We use derivative financial instruments to reduce the market risk associated with fluctuations in commodity prices. Sudden changes in commodity prices may require cash deposits with brokers for margin calls or significant liquidity with little advanced notice to meet margin calls, depending on our open derivative positions. We continuously monitor our exposure to margin calls and believe we will continue to maintain adequate liquidity to cover margin calls from our operating results and borrowings.

Available cash generally means all cash and cash equivalents on hand at the end of that quarter less cash reserves established by the general partner, including those for future capital expenditures, future acquisitions and anticipated future debt service requirements, plus all or any portion of the cash on hand resulting from working capital borrowings made subsequent to the end of that quarter.

Our board of directors authorized a share repurchase program of up to $200.0 million of our common stock. Under the program, we may repurchase shares in open market transactions, privately negotiated transactions, accelerated share buyback programs, tender offers or by other means. The timing and amount of repurchase transactions are determined by our management based on market conditions, share price, legal requirements and other factors. The program may be suspended, modified or discontinued at any time without prior notice. We did not repurchase any common stock in 2022 and 2021. Since inception, we have repurchased 7.4 million shares of common stock for approximately $92.8 million under the program.

We believe we have sufficient working capital for our existing operations. A continued sustained period of unprofitable operations, however, may strain our liquidity. We may sell additional assets or equity or borrow capital to improve or preserve our liquidity, expand our business or acquire businesses.

Debt

We were in compliance with our debt covenants at December 31, 2022. Based on our forecasts, we believe we will maintain compliance at each of our subsidiaries for the next twelve months or have sufficient liquidity available on a consolidated basis to resolve noncompliance. We cannot provide assurance that actual results will approximate our forecasts or that we will inject the necessary capital into a subsidiary to maintain compliance with its respective covenants. In the event a subsidiary is unable to comply with its debt covenants, the subsidiary’s lenders may determine that an event of default has occurred, and following notice, the lenders may terminate the commitment and declare the unpaid balance due and payable.

As outlined in Note 12 - Debt, we use LIBOR as a reference rate for certain credit facilities. The administrator of LIBOR ceased the publication of the one week and two month LIBOR settings immediately following the LIBOR publication on December 31, 2021, and will cease the remaining USD LIBOR settings immediately following the LIBOR publication on

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June 30, 2023. The U.S. Federal Reserve, in conjunction with the Alternative Reference Rates Committee, a steering committee comprised of large U.S. financial institutions, is considering replacing U.S. dollar LIBOR with a new reference rate, the SOFR, calculated using short-term repurchase agreements backed by Treasury securities. The potential effect of any such event on interest expense is not expected to be material.

Corporate Activities

In March 2021, we issued $230.0 million of 2.25% convertible senior notes due in 2027, or the 2.25% notes. The 2.25% notes bear interest at a rate of 2.25% per year, payable on March 15 and September 15 of each year. The initial conversion rate is 31.6206 shares of the company’s common stock per $1,000 principal amount of 2.25% notes (equivalent to an initial conversion price of approximately $31.62 per share of our common stock), representing an approximately 37.5% premium over the offering price of our common stock. The conversion rate is subject to adjustment upon the occurrence of certain events, including but not limited to; the event of a stock dividend or stock split; the issuance of additional rights, options and warrants; spinoffs; or a tender or exchange offering. In addition, we may be obligated to increase the conversion rate for any conversion that occurs in connection with certain corporate events, including our calling the 2.25% notes for redemption. We may settle the 2.25% notes in cash, common stock or a combination of cash and common stock. At December 31, 2022, the outstanding principal balance on the 2.25% notes was $230.0 million.

In June 2019, we issued $115.0 million of 4.00% convertible senior notes due in 2024, or the 4.00% notes. The 4.00% notes were senior, unsecured obligations, with interest payable on January 1 and July 1 of each year, beginning January 1, 2020, at a rate of 4.00% per annum. The initial conversion rate was 64.1540 shares of our common stock per $1,000 principal amount of the 4.00% notes, which is equivalent to an initial conversion price of approximately $15.59 per share of our common stock. We increased the final conversion rate to 66.4178 in connection with calling the 4.00% notes for redemption on May 25, 2022.

In May 2021, we entered into a privately negotiated agreement with certain noteholders of the company’s 4.00% notes. Under this agreement, 3.6 million shares of our common stock were exchanged for $51.0 million in aggregate principal amount of the 4.00% notes. Common stock held as treasury shares were exchanged for the 4.00% notes.

On May 25, 2022, we gave notice calling for the redemption of our outstanding 4.00% notes, totaling an aggregate principal amount of $64.0 million. The conversion rate was 66.4178 shares of common stock per 1,000 of principal. From July 1, 2022 through July 8, 2022, the remaining $64.0 million of the 4.00% notes were converted into approximately 4.3 million shares of common stock. Common stock held as treasury shares were exchanged for the 4.00% notes. Pursuant to the guidance within ASC 470, Debt, we recorded the exchanges as a conversion. The 4.00% notes were retired effective July 8, 2022.

In August 2016, we issued $170.0 million of 4.125% convertible senior notes due in 2022, or 4.125% notes, which were senior, unsecured obligations with interest payable on March 1 and September 1 of each year. Prior to March 1, 2022, the 4.125% notes were not convertible unless certain conditions are satisfied. The initial conversion rate was 35.7143 shares of common stock per $1,000 of principal, which was equal to a conversion price of approximately $28.00 per share.

In March 2021, concurrent with the issuance of the 2.25% notes, we used approximately $156.5 million of the net proceeds of the 2.25% notes to repurchase approximately $135.7 million aggregate principal amount of its 4.125% notes due 2022, in privately negotiated transactions. Pursuant to the guidance within ASC 470, Debt, we recorded a loss upon extinguishment of $22.1 million in interest expense. This charge included $1.2 million of unamortized debt issuance costs related to the principal balance extinguished.

During August 2022, we entered into four privately negotiated exchange agreements with certain noteholders of the 4.125% notes to exchange approximately $32.6 million aggregate principal amount for approximately 1.2 million shares of our common stock. Additionally, on September 1, 2022, approximately $1.7 million aggregate principal amount of the 4.125% notes were settled through a combination of $1.7 million in cash and approximately 15 thousand shares of our common stock, and the remaining $23 thousand aggregate principal amount and accrued interest were settled in cash. The 4.125% notes were fully retired effective September 1, 2022.

Ethanol Production Segment

On February 9, 2021, Green Plains SPE LLC, a wholly-owned special purpose subsidiary and parent of Green Plains Obion and Green Plains Mount Vernon issued $125.0 million of junior secured mezzanine notes due 2026 with BlackRock

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for the purchase of all notes issued. At December 31, 2022, the outstanding principal balance was $125.0 million on the loan and the interest rate was 11.75%.

Green Plains Wood River and Green Plains Shenandoah, wholly-owned subsidiaries of us, have a $75.0 million delayed draw loan agreement, which matures on September 1, 2035. At December 31, 2022, the outstanding principal balance was $74.6 million on the loan and the interest rate was 5.02%.

We also have small equipment financing loans, finance leases on equipment or facilities, and other forms of debt financing.

Agribusiness and Energy Services Segment

Green Plains Finance Company, Green Plains Grain and Green Plains Trade have total revolving commitments of $350.0 million and an accordion feature whereby amounts available under the Facility may be increased by up to $100.0 million of new lender commitments subject to certain conditions, due 2027. Each SOFR rate loan shall bear interest for each day at a rate per annum equal to the Term SOFR rate for the outstanding period plus a Term SOFR adjustment and an applicable margin of 2.25% to 2.50%, which is dependent on undrawn availability under the Facility. Each base rate loan shall bear interest at a rate per annum equal to the base rate plus the applicable margin of 1.25% to 1.50%, which is dependent on undrawn availability under the Facility. The unused portion of the Facility is also subject to a commitment fee of 0.275% to 0.375%, dependent on undrawn availability. At December 31, 2022, the outstanding principal balance was $115.0 million on the facility and the interest rate was 8.02%.

Green Plains Commodity Management has an uncommitted $40.0 million revolving credit facility to finance margins related to its hedging programs. We expect to refinance or extend this facility prior to maturity. Advances are subject to variable interest rates equal to SOFR plus 1.75%. At December 31, 2022, the outstanding principal balance was $22.7 million on the facility and the interest rate was 6.05%.

Green Plains Grain has a short-term inventory financing agreement with a financial institution. The company has accounted for the agreements as short-term notes, rather than revenues, and has elected the fair value option to offset fluctuations in market prices of the inventory. This agreement is subject to negotiated variable interest rates. The company had no outstanding short-term notes payable related to the inventory financing agreement as of December 31, 2022.

Partnership Segment

Green Plains Partners, through a wholly owned subsidiary, has a term loan to fund working capital, capital expenditures and other general partnership purposes. On July 20, 2021, the partnership’s prior credit facility was amended in the Amended and Restated Credit Agreement (“Amended Credit Facility”) with BlackRock and TMI Trust Company as administrative agent. The Amended Credit Facility decreased the total amount available to $60.0 million, extended the maturity from December 31, 2021 to July 20, 2026, and converted the balance to a term loan. The term loan does not require any principal payments; however, the partnership has the option to prepay $1.5 million per quarter.

Under the terms of the Amended Credit Facility, BlackRock purchased the outstanding balance of the existing notes from the previous lenders. Interest on the term loan is based on 3-month LIBOR plus 8.00%, with a 0% LIBOR floor and is payable on the 15th day of each March, June, September and December, during the term, with the first interest payment being September 15, 2021. The Amended Credit Facility is secured by substantially all of the assets of the partnership.

During the year ended December 31, 2021, prior to the amendment, principal payments of $50.0 million were made on the previous credit facility, including $19.5 million of scheduled repayments, $27.5 million related to the sale of the storage assets located adjacent to the Ord, Nebraska ethanol plant and a $3.0 million prepayment made with excess cash.

On February 11, 2022, the Amended Credit Facility was modified to allow Green Plains Partners and its affiliates to repurchase outstanding notes. On the same day, the partnership purchased $1.0 million of the outstanding notes from accounts and funds managed by BlackRock and subsequently retired the notes. As of December 31, 2022, the term loan had a balance of $59.0 million and an interest rate of 12.77%.

Refer to Note 12 – Debt included as part of the notes to consolidated financial statements for more information about our debt.

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Contractual Obligations and Commitments

In addition to debt, our material future obligations include certain lease agreements and contractual and purchase commitments related to commodities, storage and transportation. Aggregate minimum lease payments under the operating lease agreements for future fiscal years as of December 31, 2022 totaled $85.6 million. As of December 31, 2022, we had contracted future purchases of ethanol, grain, natural gas, and distillers grains valued at approximately $389.1 million and future commitments for storage and transportation valued at approximately $23.6 million. Refer to Note 17 – Commitments and Contingencies included in the notes to consolidated financial statements for more information.