UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

Form 10-K

 

(Mark One)

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

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

Commission File No. 001-15795

RENTECH, INC.

(Exact name of registrant as specified in its charter)

Colorado		84-0957421
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)

10877 Wilshire Boulevard, Suite 600
Los Angeles, California 90024
(Address of principal executive offices)

(310) 571-9800
(Registrant’s telephone number, including area code)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o. No þ.

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o. No þ.

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 þ No o

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 o No o

Indicate by check if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. þ

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):

Large accelerated filer o		Accelerated filer þ		Non-accelerated filer o		Smaller reporting company o
				(Do not check if a smaller reporting company)

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

The aggregate market value of the voting and non-voting common equity held by non-affiliates as of March 31, 2010, the last business day of the registrant’s most recently completed second quarter, was approximately $187.1 million (based upon the closing price of the common stock on March 31, 2010, as reported by the NYSE Amex).

The number of shares of the Registrant’s common stock outstanding as of November 30, 2010 was 222,209,542.

Portions of the registrant’s definitive Proxy Statement for its 2011 annual meeting of shareholders, which the registrant intends to file with the Securities and Exchange Commission within 120 days after the end of the fiscal year covered by this report, are incorporated by reference in Part III of this Form 10-K to the extent stated in this report.

 

 

TABLE OF CONTENTS

	Page
PART I
ITEM 1. Business		4
ITEM 1A. Risk Factors		17
ITEM 1B. Unresolved Staff Comments		27
ITEM 2. Properties		28
ITEM 3. Legal Proceedings		28
ITEM 4. (Removed and Reserved)		29
PART II
ITEM 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities		30
ITEM 6. Selected Financial Data		32
ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations		33
ITEM 7A. Quantitative and Qualitative Disclosures About Market Risk		47
ITEM 8. Financial Statements and Supplementary Data		48
ITEM 9. Changes in and Disagreements with Accountants On Accounting and Financial Disclosure		94
ITEM 9A. Controls and Procedures		94
ITEM 9B. Other Information		95
PART III
ITEM 10. Directors, Executive Officers and Corporate Governance		96
ITEM 11. Executive Compensation		96
ITEM 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters		96
ITEM 13. Certain Relationships and Related Transactions, and Director Independence		96
ITEM 14. Principal Accounting Fees and Services		96
PART IV
ITEM 15. Exhibits and Financial Statement Schedules		96
Exhibit 10.4
Exhibit 10.6
Exhibit 12.1
Exhibit 21
Exhibit 23.1
Exhibit 23.2
Exhibit 31.1
Exhibit 31.2
Exhibit 32.1
Exhibit 32.2

FORWARD-LOOKING STATEMENTS

Certain information included in this report contains, and other reports or materials filed or to be filed by the Company with the Securities and Exchange Commission (“SEC”) (as well as information included in oral statements or other written statements made or to be made by the Company or its management) contain or will contain, “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, Section 27A of the Securities Act of 1933, as amended, and pursuant to the Private Securities Litigation Reform Act of 1995. The forward-looking statements may relate to financial results and plans for future business activities, and are thus prospective. The forward-looking statements are subject to risks, uncertainties and other factors that could cause actual results to differ materially from future results expressed or implied by the forward-looking statements. They can be identified by the use of terminology such as “may,” “will,” “expect,” “believe,” “intend,” “plan,” “estimate,” “anticipate,” “should” and other comparable terms or the negative of them. You are cautioned that, while forward-looking statements reflect management’s good faith belief and best judgment based upon current information, they are not guarantees of future performance and are subject to known and unknown risks and uncertainties.

Factors that could affect the Company’s results include the risk factors detailed in “Part I, Item 1A. Risk Factors” and from time to time in the Company’s periodic reports and registration statements filed with the SEC. Any forward-looking statements are made pursuant to the Private Securities Litigation Reform Act of 1995, and are current only as of the date made.

As used in this Annual Report on Form 10-K, the terms “we,” “our,” “us,” “the Company” and “Rentech” mean Rentech, Inc., a Colorado corporation and its consolidated subsidiaries, unless the context indicates otherwise.

PART I

ITEM 1.		BUSINESS

Company Overview

Incorporated in 1981, Rentech’s vision is to be a provider of clean energy solutions. We also own and operate a nitrogen fertilizer plant in East Dubuque, Illinois, that manufacturers and sells natural gas-based nitrogen fertilizer products within the corn-belt region in the United States and, subject to the restrictive covenants in our credit agreement, provides us with financial support for our alternative energy business.

We are developing energy projects that we expect to produce certified synthetic fuels and electric power from carbon-containing materials such as biomass, waste and fossil resources. We own technologies that enable the production of such fuels and power when integrated with certain other technologies that we license or purchase. Our technologies can produce synthesis gas (“syngas”) from biomass and waste materials, and convert syngas from our own or other gasification technologies into complex hydrocarbons (the “Rentech Process”) that are then upgraded into fuels using refining technology that we license. In addition to developing projects using these technologies, we are pursuing the licensing of our technologies to developers of projects that are expected to produce fuels and/or power.

The Rentech Process is a patented and proprietary technology based on Fischer-Tropsch (“FT”) chemistry, which converts syngas that can be produced from a wide variety of biomass, waste and fossil resources into hydrocarbons. These hydrocarbons can be processed and upgraded into ultra-clean synthetic fuels such as military and commercial jet fuels and ultra low sulfur diesel fuel, as well as specialty waxes and chemicals. Unlike some other alternative transportation fuels, such as ethanol, fuels produced from the Rentech Process can be transported and used in existing infrastructure including pipelines and engines without blending restrictions. Our technology portfolio also includes the Rentech-SilvaGas biomass gasification technology (the “Rentech-SilvaGas Technology”), which specifically enables us to offer integrated technologies that can convert biomass and wastes to syngas and subsequently into clean fuels and electric power. The bulk of our development activity is for proposed projects that would use biomass as a feedstock.

We believe that fuels and power produced from biomass using our technologies may have very low lifecycle carbon footprints, approaching zero in some cases, depending on the type and source of the feedstock. Using biomass for fuels and power production can also divert the feedstock from disposal in landfills or other uses that generally have greater lifecycle carbon footprints.

The Rentech Process can produce synthetic diesel fuels (“RenDiesel^® fuels”) which are clean burning having lower emissions of regulated pollutants, such as nitrogen oxides, sulfur oxides and particulate matter, than traditional petroleum-based diesel fuels. These fuels either meet or exceed all fuels and environmental standards presently applicable in North America including the ASTM D-975 standard for diesel fuel, which is the specification used for regular diesel fuel. RenDiesel fuel will also meet the European specification described in CEN CWA 15940 which is for paraffinic diesel fuels from synthesis or hydrotreatment.

The Rentech Process also can produce synthetic jet fuel (“RenJet^® fuel”), which when blended with conventional jet fuel will meet jet fuel specifications for military jet fuel and commercial Jet A and Jet A-1 fuels. Synthetic jet fuel from the FT process is the only type of alternative jet fuel that meets ASTM specifications for use in commercial aviation and has been certified by the U.S. Air Force for use in its aircraft. The ASTM International Committee on Petroleum Products and Lubricants and the U.S. Federal Aviation Administration have approved FT fuels for use in commercial aircraft, when blended with petroleum-based fuels at a blend of up to 50% synthetic fuel. If the upcoming European specification for jet fuel known as DefStan 91-91 is officially issued (as currently drafted), RenJet fuel will meet the specification.

We believe that the life-cycle emissions of greenhouse gases for fuels and power produced from biomass using our technology without carbon capture and sequestration can be significantly lower than is the case with fossil feedstocks, and, depending on the feedstock, can be as low as zero. A third-party study of our Rialto project has supported this conclusion. A U.S. Department of Energy (“DOE”) study of the life-cycle greenhouse gas emissions from the production of fuels from fossil feedstocks using FT chemistry concluded that, when carbon capture and sequestration are used, the resulting emissions are lower than those generated in the traditional production and use of petroleum-derived fuels. Because a high percentage of the carbon dioxide (“CO₂”) produced by our processes is isolated as part of our standard plant configurations, we believe that carbon capture and sequestration could be readily implemented by our projects if an economical option for sequestration can be identified.

We have constructed and operate our Product Demonstration Unit (“PDU”), a demonstration-scale plant at the Rentech Energy Technology Center (the “RETC”) located in Commerce City, Colorado, which we believe is the only operating integrated FT synthetic transportation fuels facility in the United States. The PDU is capable of producing approximately ten barrels per day of synthetic fuels, and we have produced thousands of gallons of ultra-clean synthetic fuels including RenJet and RenDiesel fuels. Jet and diesel fuel produced at our PDU have been used by the U.S. Air Force, United Airlines and Audi, among others. The PDU currently produces syngas from natural gas. As discussed below, we and a co-developer are in the process of constructing a biomass gasifier at the PDU, which is expected to provide syngas from biomass feedstocks.

During fiscal year 2009, we acquired SilvaGas Holding Corporation (“SilvaGas”) and its biomass gasification technology, which can convert a wide range of biomass and waste feedstocks, including wood, wood residues, straw, switch grass, refuse-derived fuel, energy crops and agricultural residues, into syngas. From 1998 to 2001, the SilvaGas technology was applied at commercial scale of 400 tons per day at a gasifier in Burlington, Vermont in a series of operating campaigns. In fiscal 2009, we also acquired a 25% ownership interest in ClearFuels Technology, Inc. (“ClearFuels”), a bio-energy gasification and project development company which owns technology that can convert virgin cellulosic biomass feedstock, such as wood waste and sugar cane bagasse, into syngas. Together with ClearFuels, we are currently constructing a demonstration-scale ClearFuels gasifier at our PDU (the “ClearFuels Gasifier”), with support from a grant from the DOE.

We are pursuing the deployment of the Rentech Process and the Rentech-SilvaGas Technology by seeking to license our technologies and to develop facilities that produce synthetic fuels, chemicals, natural gas substitutes, and electric power from biomass and fossil feedstocks. We are working on a number of commercial scale opportunities involving biomass-fed, fossil-fed and a combination of biomass and fossil-fed projects to produce synthetic fuels, chemicals, and power, including a proposed project in Rialto, California (the “Rialto Renewable Energy Center” or “Rialto Project”) that we expect would produce approximately 640 barrels per day of renewable synthetic fuels and approximately 35 megawatts of renewable electric power. We have also been developing a proposed project near Natchez, Mississippi (the “Natchez Project”) designed to produce approximately 30,000 barrels per day of synthetic fuels and chemicals and approximately 120 megawatts of power. We are also evaluating alternative configurations for the Natchez site which would initially be smaller in scale. The alternate configurations may use various feedstocks (possibly including biomass, natural gas, petroleum coke and coal) alone or in various combinations, and may include higher proportions of waxes and specialty chemicals as products. We believe that a project of up to 30,000 barrels per day is still a possibility, as we could develop the project in multiple stages or in a single stage if conditions related to development and financing of very large projects improve.

We also own, through our wholly-owned subsidiary, Rentech Energy Midwest Corporation (“REMC”), a nitrogen fertilizer manufacturing plant that uses natural gas as its feedstock to produce syngas and then nitrogen fertilizer products. REMC’s plant, located in East Dubuque, Illinois (the “East Dubuque Plant”), manufactures and sells within the corn-belt region nitrogen fertilizer products which are currently in high demand by the American farmer and industrial users. Although our primary development strategy is focused on synthetic fuels, our operating revenues in fiscal year 2010 were almost exclusively from sales of products by REMC.

Business Strategy

Our deployment strategy includes both development of facilities and licensing of the Rentech Process and Rentech-SilvaGas Technology. The development model involves Rentech developing, co-owning and operating biomass-fed, fossil-fed and a combination of biomass and fossil-fed synthetic fuels, chemicals and/or power facilities. We believe we will be able to advance future projects by using the experience we gain through engineering, designing and constructing early facilities and by reducing the required capital and technical resources for each subsequent project. We intend to develop standard designs for our projects that are both replicable and scalable. The licensing model consists of licensing the Rentech Process and Rentech-SilvaGas Technology to parties for the development of facilities that produce synthetic fuels, specialty waxes and chemicals and/or power, thereby expanding the deployment opportunities for our technologies.

Develop, Co-Own and Operate Model

Biomass Facilities. We believe biomass facilities provide an attractive business model due to the relatively low lifecycle carbon footprints of the fuels and electricity produced by these facilities, the demand that has been demonstrated for the renewable fuels and electricity produced by these facilities and the potential to procure certain forms of urban waste streams at costs significantly lower than most fossil feedstocks. Biomass can be categorized into urban streams (including waste materials such as municipal solid waste, construction and demolition waste, green wastes and sewage sludge) and rural streams (including agricultural materials such as stovers and straws, sugar cane bagasse, forestry residues, energy crops and algae). A typical biomass facility may produce renewable synthetic fuels as well as renewable power from the biomass feedstock. We also may develop biomass facilities that would produce natural gas substitutes or electric power without the production of synthetic fuels, depending on relative product prices in various markets around the world. Biomass facilities typically should require less capital than fossil facilities which are likely to be much larger in scale.

Fossil Facilities. We believe that fossil facilities provide an appealing business model due to the ability to achieve capital efficiencies and attractive economic returns resulting from large-scale production of diverse high-value product streams. Fossil feedstock, particularly coal and petroleum coke, are abundant domestic resources with relatively stable historical prices. As a result, fossil resources are an attractive feedstock for large-scale synthetic fuels and chemicals facilities utilizing the Rentech Process where economies of scale and product diversification can be achieved. Carbon capture and sequestration as well as the addition of biomass as a co-feed are expected to reduce the life-cycle carbon footprint of fuels produced by fossil facilities below that of fuels produced from petroleum by conventional refineries. These types of facilities require significant capital for construction. Consequently, we are seeking strategic and financial partners as well as long-term off-take agreements for products produced at potential fossil facilities we may develop in the future. We believe these steps would help secure the financing required to fund these types of projects. We intend to develop plants that will be economical at a scale smaller than that typical of our competitors. Although our technology would enable us to pursue larger projects, we believe that projects at a smaller scale optimize access to capital and development time.

Licensing Model

We are actively pursuing a number of licensing opportunities domestically and internationally. We are working to license the Rentech Process for both biomass and fossil feedstock applications for synthetic fuels production. We are also working to license our Rentech-SilvaGas Technology for renewable power production and, in combination with the Rentech Process, synthetic fuels production. Licensing will provide us with the opportunity to expand the global deployment and acceptance of our technologies without funding the capital investment for plant construction. We believe that successful commercialization of Rentech technologies would enhance our licensing opportunities, resulting in additional revenue streams for the Company.

Under a typical licensing arrangement, in addition to license fees, we would expect to receive fees for providing our catalyst and technical services to licensees. After we grant a license, our licensees will be responsible for financing, constructing and operating their own facilities that will use our licensed technologies. We generally would expect our licensees to acquire certain proprietary equipment that meets Rentech’s specifications. Licensees must also acquire their own feedstock and sell the products that their facilities produce.

Commercial Opportunities

We are working on the development of potential biomass projects. Our Rialto Project is furthest along in the development process compared to our other potential projects. The Rialto Project is designed to produce approximately 640 barrels per day of renewable synthetic fuels and approximately 35 megawatts of renewable power. We are approaching the completion of FEED (front-end engineering and design) for the Rialto Project which is designed to utilize both the Rentech-SilvaGas Technology and the Rentech Process. In addition, we are conducting preliminary engineering work for the design of other biomass facilities, evaluating potential sites at which to locate these facilities and actively pursuing feedstock sources and off-take agreements for these potential projects.

We have been developing the Natchez Project designed to produce approximately 30,000 barrels per day of synthetic fuels and chemicals and approximately 120 megawatts of power. We own the site on which we intend to build this facility and we have a long-term agreement with Denbury Resources, Inc. under which that company will purchase all of the carbon dioxide captured during the production process. We are also evaluating alternative configurations which would initially be smaller in scale. The alternate configurations may use various feedstocks (possibly including biomass, natural gas, petroleum coke and coal) alone or in various combinations, and may include higher proportions of waxes and specialty chemicals as products. We believe that a project of up to 30,000 barrels per day is still a possibility, as we could develop the project in multiple stages or in a single stage if conditions related to development and financing of very large projects improve.

Research and Development Program

We continue to advance our technologies. Our research and development activities are centered at the RETC, where we have skilled technical, engineering and operating teams that work at our development and testing laboratories. The laboratory contains equipment and support facilities that provide us with resources for the continued development and testing of our technologies, as well as complementary technologies for additional applications and performance enhancements. In addition, the facilities allow us to conduct online analysis of feedstock and products.

Our principal research and development efforts at our laboratory are focused on optimizing the efficiency and operating costs of the Rentech Process, and on the development of next generation technologies to further improve the economics of producing synthetic fuel and electricity from various forms of renewable and fossil feedstock. We also plan to install a ClearFuels biomass gasifier to supply syngas to the PDU in order to develop at demonstration scale a gasification technology that would complement the Rentech-SilvaGas Technology, and to continue to develop technologies and processes that clean and condition syngas produced from biomass to make it suitable as an input for the Rentech Process. The PDU is important to our research and development activities, and provides samples of our products to potential customers.

Financial Information About Our Business Segments

Financial information about our business segments is provided in Note 18 of our Consolidated Financial Statements.

Our Proprietary Rentech Process

We have been developing our proprietary Rentech Process for nearly thirty years. The Rentech Process is a significant enhancement of the FT technology originally developed in the 1920s. Prior to application of the Rentech Process, hydrocarbon feedstock including fossil resources such as coal, petroleum coke, and natural gas and biomass resources such as forestry waste, agricultural waste, municipal solid waste and energy crops are reformed or gasified into syngas by various commercially available processes, including our Rentech-SilvaGas Technology. The syngas is then converted through the Rentech Process into differentiated hydrocarbon products in a reactor vessel containing Rentech’s patented and proprietary catalyst, and then upgraded with commercially available refining processes.

Development of the Rentech Process

Use of the Rentech Process in a commercial scale facility was successfully demonstrated in 1992 and 1993 at the Synhytech facility located in Pueblo, Colorado. The Synhytech facility was designed to produce up to 235 barrels of liquid hydrocarbons per day. Fuel Resources Development Company (“Fuelco”), our licensee at that time, had full control of the supply of syngas and the construction and operation of the facility. We designed, fabricated and operated the FT reactors and provided our catalyst for use in the Rentech reactors. Fuelco constructed the facility at the Pueblo municipal landfill, with the intent of using, at minimal cost, the methane and carbon dioxide in the landfill gas that was generated each day from the decomposition of the landfill material. Although the Rentech Process performed as expected to produce liquid hydrocarbons, Fuelco determined that the volume and the energy content of the landfill gas it captured were inadequate to operate the facility on an economic basis, and thus ceased operation of the facility.

We obtained ownership and control of the Synhytech facility in 1993. In order to further evaluate performance of the Rentech Process, we decided to operate the facility for a short period of time using natural gas supplied by pipeline as the feedstock. In July and August 1993, we operated the facility continuously for three weeks. The results confirmed that the Rentech Process operated successfully and that we had the ability to produce the desired products. We closed the Synhytech facility at the end of 1993 because no cost-efficient source of natural gas feedstock was available or convenient.

Our technology was also successfully used by Texaco Energy Systems at a facility in Laporte, Texas in 2000. Texaco leased the use of this facility from the DOE on a short-term basis to conduct a joint demonstration integrating the Rentech Process with Texaco’s gasification process. The Laporte facility had the capacity to produce approximately ten barrels of product per day using the Rentech Process.

We have successfully produced synthetic fuels at our PDU in Commerce City, Colorado, in a series of campaigns since August 2008. We believe that the PDU is the only operating integrated FT synthetic fuels facility in the United States producing transportation fuels. The facility is designed to produce approximately ten barrels per day of synthetic jet and diesel fuels and demonstrates the design, construction and operation of a synthetic fuels facility utilizing the Rentech Process. Achieving production at the PDU was the result of the operation and integration of all processes at the facility, including the steam methane reformer for the production of synthesis gas; the conversion of the synthesis gas in the Rentech reactor into clean hydrocarbons; the separation of the Rentech catalyst from the wax produced from the reactor; and the processing and upgrading of the hydrocarbons into ultra-clean synthetic fuels, using hydrocracking and hydrotreating technologies provided by UOP, a Honeywell Company. Rentech and UOP maintain an alliance which provides customers with a single source of technologies for synthesis gas clean-up, conversion and product upgrading. Continued operations at the PDU enable us to:

	•		confirm and optimize the design parameters of the Rentech Process during longer-term production runs;
	•		monitor the effect of various operation parameters on product yields for the Rentech Process;

	•		demonstrate an integrated syngas to fuels process for strategic partners and financing sources; and
	•		produce fuels for validation, certification and customer development.

Rentech-SilvaGas Technology

The patented Rentech-SilvaGas Technology generates medium-BTU syngas through the gasification of varying types of biomass feedstocks such as forestry products, pulp and paper residue, agricultural byproducts and energy crops. Biomass feedstock is loaded into the gasifier and mixed with hot sand, turning it into syngas and residual char. The residual char and sand are separated from the syngas by a cyclone separator and discharged to a combustor. The sand is then reheated in the combustor by adding air and burning the residual char and carbon. The reheated sand is removed from the combustion gas by a cyclone separator and returned to the gasifier. The resulting syngas can then be fed into a gas turbine or boiler for renewable power production. The syngas may also be used in combination with the Rentech Process for the production of renewable synthetic fuels.

Development of the Rentech-SilvaGas Technology

The Rentech-SilvaGas Technology was developed with approximately $100 million in funding from private investors and the DOE. A gasifier incorporating the technology operated over a series of campaigns for over 22,000 hours at a 10 dry ton per day pilot scale plant at the Battelle Memorial Institute in Columbus, Ohio. Then, from 1998 to 2001, the gasifier was operated successfully on a commercial scale during a series of operating campaigns at a facility in Burlington, Vermont, built in partnership with the DOE, National Renewable Energy Laboratory and Battelle Columbus Laboratory. The gasifier at the Burlington facility converted 400 dry tons per day of wood-based biomass into syngas used for power production. Rentech acquired the Rentech-SilvaGas Technology through its acquisition of SilvaGas in June 2009.

Competition in the Alternative Energy Segment

Competition in our alternative energy business varies depending on the technology and the relevant market. We face competition to provide energy conversion technologies, as well as competition in markets for the products to be produced and for the feedstocks required for the projects we are developing.

Competition in Energy Conversion Technologies

Competition in Fischer-Tropsch Technologies: The development of Fischer-Tropsch technology for the production of hydrocarbon products is highly competitive. Several major integrated oil companies, such as ExxonMobil, the Royal Dutch/Shell group, Statoil and BP, as well as several other companies such as Sasol, have developed or are developing competing technologies. A number of these competitors have substantially more resources to fund research and development and to stand behind guarantees of the performance of the technology.

The fundamental differences between the various FT technologies developed by us and our competitors are the FT catalyst, the reactors where the syngas reacts with the catalyst and the process for separating catalyst from the wax product. The Rentech Process uses its proprietary iron-based catalyst which permits the efficient use of a wide range of feedstocks. We believe that most other FT technologies use cobalt-based catalysts. The Rentech Process also includes a patented process for separation of the Rentech catalyst from the wax product. Developing commercial FT technology requires significant capital and time, which we believe provides a material barrier to new competitors. We believe that our focus on developing small to medium sized facilities will require less capital and time for construction than larger capacity facilities.

Competition from other Alternative Fuels Technologies: We believe that a number of large and small companies are developing a wide range of technologies that could produce alternative fuels from various feedstocks. We compete with these technology providers to provide conversion technology to project developers, on the basis of the overall cost of producing fuel and on the characteristics of the fuel to be produced. We also compete with these companies for feedstock and project development sites.

Competition in Biomass Gasification Technology

We believe that there are two primary categories of competition to the Rentech-SilvaGas Technology: conventional, proven technologies and developmental, small-scale technologies. We believe that the conventional technologies are typically used to produce low-BTU syngas that is then combusted in a boiler to generate steam for use in power production. These technologies have been deployed at large commercial scale facilities and are currently the established technologies for biomass-to-energy projects.

We believe that the developmental technologies are typically designed to produce a medium-BTU syngas which could be used for a wider range of applications, including power production on a more efficient scale and for higher value fuels such as Fischer-Tropsch fuels, ethanol, butanol, or for precursors for many industrial chemicals. These technologies are generally considered to have higher technological or scale-up risk than their conventional competitors because they have operated only at small scale or pilot scale. We believe the facility in Burlington, Vermont that utilized the Rentech-SilvaGas technology from 1998 to 2001 remains the largest facility that has operated with this type of biomass gasification technology, but other competitors have reported operating small scale facilities for several years which have gained some commercial acceptance. While some of our competitors’ technologies require the use of oxygen to make medium BTU syngas, the Rentech-SilvaGas Technology does not, which can help to simplify the design, lower the capital costs and reduce the required scale at which a biomass gasification facility can efficiently operate. Significant competitors in this area include Repotec Co., Choren Industries, Thermoselect, Range Fuels and Taylor Biomass Energy.

Competition in Product and Feedstock Markets

Competition in Fuels: Fuels and chemicals produced at our projects would compete broadly with fuels and chemicals produced from petroleum as well as alternative fuels and chemicals produced from various feedstocks. We believe that our synthetic fuels have some advantages over other types of alternative fuels due to their high quality and low emissions properties. Our fuels, when produced from biomass, may have very low life-cycle carbon footprints, which can be an advantage, depending on the development of regulations to limit carbon emissions. Our competition in providing fuels comes from very large, well capitalized companies in the petroleum industry and from smaller developmental companies in the alternative fuels and chemicals businesses.

Competition in Power: Power produced by our projects would compete broadly with power produced by utilities and independent power producers. In particular, we compete with other forms of renewable power, such as wind, solar, and geothermal, in selling our renewable power to utilities who are trying to fulfill their obligations under various programs to procure and sell renewable power. We compete with very large, well-capitalized companies in the business of producing power, and with both large and small companies in the production of renewable power.

Competition for Feedstock: For our projects that would use coal, petroleum coke or natural gas as feedstocks, we compete for supply of those feedstocks with the broad range of large and small purchasers of those feedstocks, and the markets for those feedstocks include a large number of participants. For our projects that would use biomass or waste as feedstocks, we compete in more fragmented, less developed markets to acquire supplies of feedstock. The markets for biomass and waste feedstocks are highly localized, as transportation costs are high relative to the value of the feedstock, and the infrastructure for collecting and transporting these feedstocks is less well developed. We compete for these feedstocks with existing and proposed traditional biomass-to-power plants, which produce power through incineration of the feedstock, and with a number of proposed projects that would use new technologies to convert biomass and/or waste into power and/or fuels.

Products and Markets

Facilities using Rentech’s technologies can be designed and configured to produce synthetic fuels, chemicals and/or power from fossil and biomass resources.

The products we can produce include:

	•		renewable synthetic diesel and jet fuels, naphtha (primarily used as a feedstock in the production of plastic) and power from biomass resources;
	•		synthetic diesel and jet fuels, naphtha and power from fossil or fossil and biomass resources; and
	•		paraffinic waxes, solvents and specialty chemicals.

Synthetic fuel products that can be produced with our technology are substantially free of contaminants usually found in crude oil, such as sulfur, aromatics, nitrogen and heavy metals. Vehicle engine tests of RenDiesel conducted by independent labs have demonstrated that our synthetic diesel fuel is clean burning with excellent combustion qualities, and substantially reduces harmful air emissions from vehicles. Our fuels can be used directly or as a blending component with conventionally refined petroleum based fuels without any modifications to existing engines or delivery infrastructure.

Clean Air and Renewable Energy Laws

The Clean Air Act Amendments of 1990 (the “CAAA”) established several programs in order to improve air quality by, among other things, imposing restrictions on the emissions of hazardous pollutants into the atmosphere. As a means to address common sources of air pollution such as automobiles, trucks and electric power plants, the CAAA encourages the development and sale of alternative fuels as the nation attempts to meet national air quality standards. In addition, beginning on October 15, 2006, the United States Environmental Protection Agency (the “EPA”) required diesel vehicles traveling on interstate highways to operate using ultra-low sulfur diesel. Furthermore, California has promulgated state-specific standards to reduce the sulfur content of diesel fuel. Synthetic diesel fuel produced using the Rentech Process currently exceeds the requirements of Federal and state low-sulfur standards, is clean burning fuel, and should therefore be attractive to fuel buyers and users.

In 2002, the California Legislature passed Senate Bill 1078 establishing California’s Renewable Portfolio Standard (“RPS”). As modified by subsequent legislation and executive orders, the RPS requires retail sellers of electricity regulated by the California Public Utilities Commission to procure or produce power representing 20% of their retail sales from renewable sources by 2010. On July 31, 2010, the California Air Resources Board adopted the Renewable Electricity Standard (“RES”) which requires all utilities, including municipal utility districts, and other load-serving entities to procure or produce power representing 33% of their retail sales from renewable resources by 2020, as prescribed by the Global Warming Solutions Act of 2006. Electricity produced at the Rialto Project has been pre-qualified by the California Energy Commission as renewable electricity and we expect it will meet both the RPS and RES requirements. We also expect that future biomass-to-electricity plants employing the Rentech-SilvaGas Technology will meet these requirements.

The Renewable Fuel Standard (“RFS”) created under the Energy Policy Act of 2005 (“EPACT 2005”) and subsequently expanded by the Energy Independence and Security Act of 2007 (“EISA 2007”), established four distinct renewable fuel categories and associated volumetric blending requirements that in aggregate reach 36 billion ethanol gallon equivalents by 2022. The mandate, which was created under the authority of the Clean Air Act, requires the blending of renewable diesel fuels with conventional diesel fuels. Fuels produced from renewable feedstock using the Rentech Process will qualify as renewable diesel fuels.

Government Incentives

EPACT 2005 provides for tax credits, grants, loan guarantees and other incentives to stimulate coal gasification into Fischer-Tropsch fuels and chemicals. EPACT 2005 provides a 20% tax credit for qualifying gasification projects, including for entities which produce chemicals, fertilizers, glass, steel and forest products. In order to qualify for the tax credit, coal must comprise at least 90% of fuels required for “production of chemical feedstocks, liquid transportation fuels or co-production of electricity.” EPACT 2005 also authorizes grants for gasification and gasification co-production, which includes the production of Fischer-Tropsch fuels, fertilizer and electricity, as well as comprehensive loan guarantees for up to 80% of the project cost for deployment and commercialization of innovative technologies including gasification projects and gasifying coal to produce “ultra-clean premium fuels through Fischer-Tropsch process.” EPACT 2005 incentives may be used together with tax credits provided by the statute.

As discussed above, RFS established volumetric blending requirements that must reach a certain threshold by 2022. We believe that government mandates for production of ethanol could increase the demand for corn and, as a result, for our nitrogen fertilizer products which are used in corn production. In addition, we expect that RenDiesel fuel produced at the Rialto Project will qualify as a cellulosic diesel fuel (a sub-category of one of the distinct renewable fuel categories under the RFS), which would allow obligated parties to use the fuel to meet either cellulosic biofuel or biomass-based diesel fuel volumetric blending requirements under the RFS.

An obligated party under the RFS, which includes any refiner or importer of petroleum-based gasoline or diesel fuel, demonstrates compliance with the RFS through the acquisition of unique Renewable Identification Numbers (“RINs”) assigned to produced or imported renewable fuel based upon the energy content of the fuel relative to ethanol. Each year, obligated parties under RFS must acquire sufficient RINs to demonstrate compliance with their Renewable Volume Obligation (“RVO”). RINs may be traded freely between renewable fuel producers, marketers, obligated parties and other investors in RINs, and their price is generally determined between purchasers and sellers of RINs. EISA 2007 created one RIN category for each of the four volumetric blending requirements under RFS. RenDiesel fuel, as a cellulosic diesel fuel, is expected to receive a cellulosic biofuel RIN in any project that uses cellulosic materials as feedstock. RenDiesel fuel, when derived from biomass, would receive 1.7 RINs per gallon.

The Emergency Economic Stabilization Act of 2008 (“EESA 2008”) created a credit for capture and sequestration of anthropogenic CO₂ that is sequestered in geological formations. The tax credit is $10 per ton for CO₂ used for enhanced oil recovery and $20 per ton for CO₂ injected in other geological formations.

The American Recovery and Reinvestment Act of 2009 (“ARRA”) provided funding to several renewable energy programs and created a new loan guarantee program for, among other things, the commercial development and deployment of advanced renewable power and fuels production technologies. Currently, according to an October 2010 White House briefing memorandum, approximately $2.5 billion in funding remains available to subsidize loans to eligible projects. We are currently pursuing a loan guarantee under this program for the Rialto Project, which we believe meets the requirements as an eligible project.

The ARRA also provided additional funding for the DOE’s existing renewable energy programs, including funding for advanced biofuel production technologies. Rentech, along with ClearFuels, received an award under this program for approximately $23 million for the ClearFuels Gasifier being constructed at the PDU.

In 2006, the California Legislature passed Assembly Bill 32 (“AB-32”) or the Global Warming Solutions Act of 2006. AB-32 is intended to reduce greenhouse gas emissions in California to 1990 levels by 2020. The Low Carbon Fuel Standard (“LCFS”) under AB-32 requires regulated parties, which are California-based refiners or importers of gasoline or diesel fuel, to reduce the carbon content per BTU (the “carbon intensity”) in the transportation fuels they sell in California by at least 10% by 2020. LCFS credits will be assigned to each gallon of renewable fuel that has a carbon intensity value below that of equivalent petroleum fuel. We expect that RenDiesel fuel produced at the Rialto Project will be entitled to receive LCFS credits. Regulated parties must comply with the LCFS beginning in 2011, and we expect that a market for LCFS credits will be established at that time.

The Canadian Renewable Fuels Regulations announced on September 1, 2010 mandates an average of 5% renewable fuels content in Canadian gasoline, effective December 15, 2010. The Canadian government has also set a goal of 2% renewable fuels content in Canadian diesel fuel and heating distillate oil by 2012. Additionally, the Canadian federal ecoENERGY for Biofuels program provides a per liter incentive payment for renewable biofuels.

The Province of Ontario has established preferred power rates for renewable power through the Feed-in Tariff program created by the Green Energy and Green Economy Act of 2009. Other provinces in Canada, including British Columbia, Alberta, Manitoba, and Saskatchewan have similar provincial legislation to promote renewable power and renewable fuels production.

Many countries in addition to the United States and Canada have enacted or proposed renewable power and renewable fuels regulations and various incentives to promote the development of alternative and clean energy. We are exploring development and licensing opportunities in a number of these countries.

Business of Rentech Energy Midwest Corporation

Production Facility

The East Dubuque Plant is designed to produce anhydrous ammonia, nitric acid, ammonium nitrate solution, liquid and granular urea, urea ammonium nitrate solution (“UAN”) and carbon dioxide using natural gas as a feedstock. East Dubuque is located in the northwest corner of Illinois, and the facility is located on the Mississippi River.

The facility operates continuously, except for planned shutdowns for maintenance and efficiency improvements and occasional unplanned shutdowns due to equipment failures, power failures or other events. The facility can optimize the product mix according to swings in demand and pricing for its various products. During the fiscal year ended September 30, 2010, the facility produced approximately 1.05 million tons of these products, compared to approximately 1.02 million tons in the fiscal year ended September 30, 2009. Some products are final products sold to customers, and others, including ammonia, are both final products and feedstocks for other final products. Final products shipped from the facility during the fiscal year ended September 30, 2010 totaled approximately 490,000 tons of ammonia and upgraded nitrogen products, compared to approximately 438,000 tons in the fiscal year ended September 30, 2009. Carbon dioxide shipments totaled approximately 107,000 tons and 95,000 tons in the fiscal years ended September 30, 2010 and 2009, respectively.

The following table sets forth the East Dubuque Plant’s current rated production capacity for the listed nitrogen fertilizer products in tons per day.

		Capacity
Plant		(Tons per Day)
UAN blending			1,100
Anhydrous ammonia			830
Carbon Dioxide			650
Ammonium nitrate			600
Urea synthesis			400
Nitric acid			380
Urea granulation			140

Products

REMC’s product sales are heavily weighted toward sales of anhydrous ammonia and UAN, which make up over 80% of total revenues. A majority of REMC’s products are sold through a Distribution Agreement with Agrium U.S.A., Inc. (“Agrium”) with the exception of carbon dioxide which is sold to industrial customers, generally on a contract basis. Although anhydrous ammonia and UAN are substitutes, each has its own characteristics, and customer product preferences vary according to the crop planted, soil and weather conditions, regional farming practices, relative prices and the cost and availability of appropriate storage, handling and application equipment, which are different for each of these two products.

Anhydrous Ammonia. REMC produces anhydrous ammonia (often referred to simply as “ammonia”), the simplest form of nitrogen fertilizer and the feedstock for the production of other nitrogen fertilizers. Ammonia is produced by reacting natural gas with steam and air at high temperatures and pressures in the presence of catalysts. The ammonia processing unit has a current rated capacity of 830 tons per day. Ammonia product storage consists of two 20,000 ton tanks in East Dubuque, Illinois and 15,000 tons of leased storage in Niota, Illinois. Ammonia is used in the production of all other products produced by the East Dubuque Plant, except carbon dioxide.

Ammonia contains 82% nitrogen by weight and is generally the least expensive form of fertilizer per pound of nitrogen. However, because it must be kept under pressure or refrigerated in order to keep it in a liquid state, ammonia is more costly to store, ship and apply than other nitrogen fertilizer products and must be applied in the fall during cool weather after harvest, in the spring just before planting or as side dress after the plant emerges. When used as a fertilizer, ammonia must be injected into the soil by specialized equipment, and soil conditions can limit its application.

UAN. UAN is produced by combining urea solution and ammonium nitrate solution. An aqueous solution of ammonium nitrate, referred to as AN, an intermediate in UAN manufacture, is produced in a separate AN unit by neutralizing nitric acid with ammonia. No solid ammonium nitrate is produced in the facility. UAN is a liquid fertilizer which has a slight ammonia odor and, unlike ammonia, it does not need to be refrigerated or pressurized when transported or stored. The East Dubuque Plant maintains two UAN storage tanks having a combined storage capacity of 80,000 tons.

As a liquid, UAN has many advantages over solid fertilizers and ammonia. UAN (typically sold in nitrogen concentrations of 28% and 32%) may be applied more uniformly than non-liquid products and may be mixed with various crop protection products or other nutrients, permitting the application of several materials simultaneously, thus reducing energy and labor costs. In addition, UAN, unlike ammonia, may be applied from ordinary tanks and trucks and can be applied to the soil either through spraying, injecting or through irrigation systems throughout the growing season. Moreover, due to its stable nature and due to the fact that it can be applied in the field along with other chemicals, UAN can be a preferred fertilizer choice for crops requiring soil surface applications (such as no-till row crops).

Urea. Urea product is produced through the reaction of ammonia with carbon dioxide at high pressure and temperatures creating a molten product called Urea solution at a concentration of approximately 70%. Urea solution can be further processed through the urea granulation plant to create dry granular urea (46% nitrogen concentration), used for the production of UAN or sold directly to trade customers in its state as a urea solution. The facility has a 12,000 ton capacity bulk warehouse which may be used for dry bulk granular urea storage.

Nitric Acid. REMC produces nitric acid through two separate nitric acid plants. Nitric acid is produced through the catalytic combustion of ammonia vapor in air over a platinum-rhodium (precious metals) catalyst gauze and absorption of the nitric oxide in weak acid. Nitric acid is either sold to third parties or used within the facility for the production of ammonium nitrate solution, as an intermediate from which UAN is produced. Limited storage capacity is currently available at the facility, but sufficient storage is available for efficient product loading. Storage capacity has not been a limiting factor in the sale of nitric acid.

Carbon Dioxide. Carbon dioxide is a co-manufactured gaseous product in the manufacture of ammonia (approximately 1.1 tons of CO₂ per ton of ammonia). Most plants vent the gas from their ammonia production to the atmosphere. The East Dubuque Plant utilizes CO₂ in its urea production and has developed a market for the CO₂ produced through conversion to a purified food grade liquid carbon dioxide. The CO₂ is purified, compressed and chilled to condensing conditions. It is stored as a saturated liquid for later sale to various industrial customers. The facility is a certified producer of food grade liquid CO₂ for the soft drink industry. The facility has storage capacity for approximately 1,900 tons of CO₂. Negotiated contract agreements for CO₂ allow for regular shipment of CO₂ throughout the year, so the current storage capacity is adequate.

Marketing and Distribution

REMC has a Distribution Agreement with Agrium, pursuant to which Agrium is obligated to use commercially reasonable efforts to promote the sale of, and to solicit and secure orders from its customers for, nitrogen fertilizer products comprising ammonia, granular urea, UAN solutions and nitric acid and related nitrogen-based products manufactured at the East Dubuque Plant. REMC has typically sold more than 80% of the nitrogen fertilizer products manufactured at the facility through the Distribution Agreement with Agrium, and the remaining amounts directly to customers. REMC pays Agrium a commission for these services. REMC’s sales executives are typically directly involved with the customers who buy REMC’s products, and REMC’s management approves price, quantity, and other terms for each sale through Agrium. REMC’s rights under the Distribution Agreement include the right to store specified amounts of its ammonia at Agrium’s ammonia terminal in Niota, Illinois, for a monthly fee. CO₂ is not sold to Agrium, but marketed by REMC, generally on a contract by contract basis.

Seasonality and Volatility

The fertilizer business is seasonal, based upon the planting, growing and harvesting cycles. Inventories must be accumulated to allow for customer shipments during the spring and fall fertilizer application seasons, and require significant storage capacity. The accumulation of inventory to be available for seasonal sales requires that working capital be available at REMC. This seasonality generally results in higher fertilizer prices during peak periods, with prices normally reaching their highest point in the spring, decreasing in the summer, and increasing again in the fall. Another seasonal factor affecting REMC is the ability to transport product via barges on the Mississippi River. During the winter, the Mississippi River cannot be used for transport due to lock closures. The river closure affects how REMC and its competitors can transport products and can impact profitability due to differences in transportation costs. Fertilizer products are sold both on the spot market for immediate delivery and under forward sale contracts for future delivery at fixed prices. The terms of the forward sale contracts, including the percentage of the purchase price paid as a down payment, can vary from season to season. Variations in the proportion of product sold through forward sales, and variations in the terms of the forward sale contracts can increase the seasonal volatility of cash flows and cause changes in the patterns of seasonal volatility from year-to-year.

Nitrogen fertilizer price levels are influenced by world supply and demand for ammonia and nitrogen-based products. Long-term demand is affected by population growth and rising living standards that determine food consumption. Shorter-term demand is affected by world economic conditions and international trade decisions. Supply is affected by increasing worldwide capacity and the availability of nitrogen product imports from major producing regions and countries such as the former Soviet Union, the Middle East, South America, Trinidad and China. There continue to be industry cycles of expansion and reduction of production facilities in response to the changes in market prices of natural gas and the demand for nitrogen fertilizer products.

The following table shows tonnage of REMC’s products shipped by quarter for the last four fiscal years.

		For the Fiscal Years Ended September 30,
		2010				2009				2008				2007
		(in thousands of tons)
First Quarter			124				115				171				160
Second Quarter			86				65				103				77
Third Quarter			206				203				170				209
Fourth Quarter			181				150				199				125
Total Tons Shipped for Fiscal Year			597				533				643				571

The highest volume of tons shipped is typically during the spring planting season during the third fiscal quarter and the next highest volume of tons shipped is typically after the fall harvest during the first fiscal quarter, although, as reflected in the table above, the seasonal patterns may change substantially year-to-year due to various circumstances including timing of or changes in the weather. These seasonal increases and decreases in demand can also cause sales prices to fluctuate accordingly.

Raw Materials

The principal raw material used to produce manufactured nitrogen products is natural gas. REMC has historically purchased natural gas in the spot market, through the use of forward purchase contracts, or a combination of both. Forward purchase contracts have historically been used to lock in pricing for a portion of the facility’s natural gas requirements. These forward purchase contracts are generally either fixed-price or index-priced, short term in nature and for a fixed supply quantity. REMC’s policy is to purchase under fixed-price forward contracts approximately enough gas to manufacture the products that have been sold under pre-sale contracts for later delivery, effectively fixing most of the gross margin on pre-sold product. REMC is able to purchase natural gas at competitive prices due to its connection to the Northern Illinois Gas Company (“NICOR”) distribution system and its proximity to the Northern Natural Gas pipeline. Natural gas purchased and used in production was approximately 9.5 billion cubic feet and 9.6 billion cubic feet in the 12 month periods ended September 30, 2010 and September 30, 2009, respectively.

Natural gas prices have experienced significant fluctuations over the last few years. Prices increased in 2008 and declined in 2009 and 2010. The price changes have been driven by several factors, including changes in the demand for natural gas from industrial users, which is affected, in part, by the general conditions of the United States economy, and other factors. Seasonal fluctuations exist within each year resulting from various supply and demand factors, such as the severity of winter and its effect on the consumer demand for heating, and the severity of summer and its effect on industrial demand by utilities for electrical generation, among other factors. Several recent discoveries of large domestic natural gas deposits, combined with advances in technology for quickly and efficiently producing natural gas have caused large increases in the estimates of available reserves and production in the U.S., contributing to significant reductions in prices of natural gas. Changes in levels of natural gas prices and market prices of nitrogen-based products can materially affect REMC’s financial position and results of operations.

Transportation

Natural gas is transported to the East Dubuque Plant through a connection to the natural gas pipeline from NICOR. Products are shipped by barge, truck and rail. Over 70% of REMC’s products are typically transported by truck within a 150-mile radius of the plant. The facility can ship ammonia and UAN through a barge dock on the Mississippi River owned by REMC. The East Dubuque Plant owns a rail spur that connects to the Burlington Northern Santa Fe Railway (“BNSF”). The Canadian National Railway Company services the East Dubuque Plant and has rights to travel on the BNSF main line.

Competition

REMC competes with a number of domestic and foreign producers of nitrogen fertilizer products, many of which are larger than REMC. Customers for nitrogen fertilizer products make purchasing decisions principally on the delivered price and availability of the product at the critical application times. Our physical location in the center of the Midwest corn belt provides us with a strategic placement and transportation cost advantage, compared to other producers who have to ship their products greater distances to the corn belt. We plan to continue to operate the East Dubuque Plant with natural gas as the feedstock. Competitors who may have access to cheaper natural gas could have a cost advantage that would act to offset our location advantage.

Intellectual Property and Patents of the Company

We own 33 issued and 27 pending United States utility patents and patent applications pertaining to the Rentech Process, the Rentech-SilvaGas Technology, and related processes, including the applications of these processes, the products made by the Rentech Processes and the materials used in connection with the Rentech Processes. We protect certain technologies abroad in varying countries, presently holding 27 issued non-domestic patents and 83 pending non-domestic patent applications (all of which are counterparts to our United States utility patents).

The Rentech Process uses our iron-based catalyst, which we have patented. We currently have several pending United States and foreign patent applications which claim improvements to certain aspects of the Rentech Process. Five of our patents are related to the Rentech-SilvaGas Technology and several of our patent applications deal with conditioning the syngas from the Rentech-SilvaGas Technology for use in the Rentech Process for production of synthetic fuels.

The term of a utility patent is generally 20 years from the earliest priority date for the application in the United States Patent and Trademark Office (“USPTO”). Patents that are in force on or that will issue on an application that was filed before June 8, 1995 have a term that is the greater of the 20 year term noted above or 17 years from the patent grant. Our issued patents will expire over a range of years from 2012 through 2026. Our most recent applications were filed in 2010.

We have registered RENTECH^® as a trademark and it is listed on the Primary Register of the USPTO. The use of RENTECH^® as just the name, or with the stylized bubbles that comprise our corporate logo, will identify and distinguish our services from those of other companies. We have also registered or are in the process of registering the RENTECH^® mark in certain foreign jurisdictions. We have registered or are in the process of registering RENJET^®, RENCHEM^® and RENDIESEL^® as trademarks on the Primary Register of the USPTO and in Canada. The use of these trademarks identifies fuels and chemicals produced using the Rentech Process. We have also filed intent to use trademark applications domestically and in Canada for the mark RENPOWER™. These marks are representative of the names under the Rentech product umbrella that we intend to use for certain fuel, chemical and power products.

We also maintain trade secrets and confidential proprietary information that we use in connection with our trademarked Rentech Process. The life of a trademark is indefinite as long as there is continual use of the mark. The term of our trade secrets and proprietary information is perpetual as long as we prevent public disclosure by keeping them secret and confidential and as long as they are not discovered by others. We typically protect our trade secrets and confidential proprietary information through non-disclosure agreements with parties with whom we do business.

The success of our business, as well as that of our subsidiaries, depends upon the intellectual property that we own and use in the conduct of our business. We believe that our intellectual property gives us rights to exploit our technologies and to exclude others from making, using, selling, offering for sale, or importing certain inventions throughout the United States and those jurisdictions in which we have secured rights, without our consent. If we lost the rights to exploit or exclusively exploit an intellectual property asset, the financial results of our business and our overall financial results and prospects would be materially harmed.

Regulation

The ownership and operation of nitrogen fertilizer and alternative energy facilities are subject to extensive United States federal, state and local environmental, health and safety laws and regulations, including those governing and imposing liability for the discharge of pollutants into the air and water, the management and on-site and off-site disposal of chemicals, byproducts, including waste water and spent catalyst, and hazardous wastes, worker health and safety, the investigation and cleanup of contamination at currently and formerly owned or operated sites, as well as third party sites that may have been impacted by our operations, and for natural resource damages related to any releases of hazardous substances. The Company’s facilities and operations must comply with these environmental laws and regulations. For example, under the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (“CERCLA”), we could be held strictly or jointly and severally liable for the removal and remediation of any hazardous substance contamination at our currently or formerly owned or operated facilities, at off-site properties (where migration of contamination from our facilities occurred) and at third party waste disposal sites at which our wastes were disposed. Because of our operations, the history of industrial or commercial uses at our currently and formerly owned and operated facilities, and the use, production, disposal and possible release of hazardous substances and wastes at or from those facilities, we may be subject to liability under environmental laws. We could also be subject to liability for personal injury based on human exposure to or natural resource damages from hazardous substances or wastes released or disposed of at or from our currently or formerly owned or operated facilities.

In addition, some of our operations require environmental permits and controls to prevent or limit pollution to the environment. Compliance with laws, regulations and requisite permits could require us to curtail our operations or increase costs of designing, installing and operating our nitrogen fertilizer and alternative energy facilities. For example, emissions from those facilities may require the installation of costly pollution control equipment in order to meet applicable environment legal and permit requirements.

Although we do not believe that costs for compliance with environmental and health and safety laws and regulations and applicable environmental permit requirements in connection with our current operations will have a material adverse effect on us, we cannot predict with certainty the future costs of complying with environmental laws, regulations and permit requirements or the costs that may be associated with investigation, remediating contamination or monitoring. The East Dubuque Plant has experienced some level of regulatory scrutiny in the past and we may be subject to further regulatory inspections, future requests for investigation relating to, or assertions of liability for, among other things, regulated materials management practices. In the future, we could incur material liabilities or costs related to environmental matters, and these environmental liabilities or costs (including fines or other sanctions) could have a material adverse effect on our business, operating results, financial condition and cash flows.

In addition, the engineering design and technical services we provide to our licensees may necessitate compliance with certain professional standards and other requirements. We believe we have all required licenses to conduct our operations and are in substantial compliance with applicable regulatory requirements. However, the loss or revocation of any license or the limitation on any services thereunder could prevent us from conducting such services and could subject us to substantial fines. In addition, changes in these requirements (including those related to future climate change regulation) could adversely affect us.

Implementation of Carbon Dioxide Emissions Reduction Strategy

There has been a broad range of proposed or promulgated state, national and international laws and regulations focusing on greenhouse gas (GHG) emissions and reduction. These proposed or promulgated regulations of GHG emissions apply or could apply to projects utilizing our technologies in countries where we currently have, or may in the future have, projects or customers. Laws in this field continue to evolve, and while it is not possible to accurately estimate either a timetable for implementation or our future compliance costs relating to implementation, such laws, if enacted, could have a material impact on our results of operations and financial condition. Examples of legislation or precursors for possible regulation that do or could affect our operations include:

	•		The Kyoto Protocol which was initially adopted in 1997 and came into effect in 2005 with the goal of reducing certain greenhouse gas emissions, including carbon dioxide. A number of countries that are parties to the Kyoto Protocol have instituted or are considering climate change legislation and regulations, including the European Union’s Emissions Trading System (ETS), among others.
	•		California’s Global Warming Solutions Act, or AB-32, which requires the California Air Resources Board (CARB) to develop regulations and market mechanisms that will ultimately reduce California’s GHG emissions to 1990 levels by 2020.
	•		The Greenhouse Gas Reduction Targets Act (GGRTA) enacted by the government of British Columbia, Canada in 2008 that seeks to reduce GHG emissions by at least 33 per cent below 2007 levels by 2020. It also includes the long-term target of an 80 percent reduction below 2007 levels by 2050.
	•		The U.S. Supreme Court decision in Massachusetts v. EPA, 549 U.S. 497, 127 S.Ct. 1438 (2007) confirming that the U.S. Environmental Protection Agency (EPA) has the authority to regulate carbon dioxide as an “air pollutant” under the Federal Clean Air Act.

	•		In December 2009, EPA issued a final endangerment finding for greenhouse gases, which specifically found that emissions of six greenhouse gases threaten the public health and welfare and that greenhouse gases from new motor vehicles and engines also contribute to such pollution. While these findings do not themselves impose any requirements on any industry or company at this time, these findings may lead to greater regulation of GHG emissions by the EPA, may trigger more climate-based claims for damages, and may result in longer agency review time for development projects to determine the extent of climate change.
	•		EPA’s announcement on March 29, 2010 (published as “Interpretation of Regulations that Determine Pollutants Covered by Clean Air Act Permitting Programs,” 75 Fed. Reg. 17004 (April 2, 2010)), and the EPA’s and U.S. Department of Transportation’s joint promulgation of a Final Rule on April 1, 2010, which triggers regulation of GHGs under the Clean Air Act, may trigger more climate-based claims for damages, and may result in longer agency review time for development projects to determine the extent of climate change.

The GHG policy of the United States currently favors voluntary actions to reduce emissions and continued research and technology development over near-term mandatory GHG emission reduction requirements. However, in the United States, there is growing consensus that some form of regulation will be forthcoming at the federal level with respect to GHG emissions. Such regulation could take any of several forms that result in the creation of additional costs in the form of taxes, the restriction of output, investments of capital to maintain compliance with laws and regulations, or required acquisition or trading of emission allowances. Rentech is actively participating in the evolution of federal policy on this issue and we are focused on initiatives to reduce greenhouse gas emissions, particularly carbon dioxide.

In the event that these legislative or regulatory initiatives increase the economic cost of emitting greenhouse gases, our businesses could be materially affected. The East Dubuque Plant is a significant emitter of greenhouse gases. The net effect on the East Dubuque Plant from such initiatives would depend on the baseline level of allowed emissions in any new carbon regulation regime, and their impact could result in significant costs for REMC. We are evaluating alternatives to reduce GHG emissions at our East Dubuque Plant.

Our potential biomass energy projects are designed to produce low-carbon fuels and power, depending on the feedstock and its potential alternative uses, and they may benefit from carbon regulation. We do not expect to develop projects using fossil feedstocks without carbon capture and sequestration or some form of control regarding GHG emission, and we expect that such projects could have life-cycle carbon footprints equal to or better than those of petroleum-based fuels. Therefore, we expect that the impact of carbon regulation on our fossil projects may be neutral to positive, although we would expect to benefit substantially less from carbon regulation with respect to our fossil projects than our biomass projects.

Employees and Labor Relations

As of September 30, 2010, we had 167 non-unionized and salaried employees, and 85 unionized employees. We believe that we have good relations with our employees. REMC has one labor contract in place covering the unionized employees. This contract is effective until October 17, 2012. Neither the Company nor any of its subsidiaries, including REMC, have experienced work stoppages in the recent past.

Available Information

Our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports are available free of charge as soon as reasonably practical after they are filed or furnished to the SEC, through our website, www.rentechinc.com. Materials we file with the SEC may be read and copied at the SEC’s Public Reference Room at 100 F Street, NE, Washington, D.C. 20549. Information on the operation of the Public Reference Room may be obtained by calling the SEC at 1-800-SEC-0330. The SEC also maintains an Internet website at www.sec.gov that contains reports, proxy and information statements, and other information regarding the Company that we file electronically with the SEC.

ITEM 1A		— RISK FACTORS

Set forth below are certain risk factors related to the Company’s business. The risk factors described below may not include all of the risk factors that could affect future results. Actual results could differ materially from those anticipated as a result of these and various other factors, including those set forth in the Company’s other periodic and current reports filed with the SEC from time to time.

Risks Related to Our Liquidity, Financial Condition, and Results of Operations

Our liquidity and capital resources are limited. We must raise substantial additional capital to execute our business plan and, in the event that currently expected sources of funding are not available, to fund working capital and to continue our operations. Competitors with superior access to capital may have a substantial advantage over us.

Our liquidity and capital resources are limited. At September 30, 2010, we had working capital (current assets in excess of current liabilities) of $22.7 million, compared to working capital of $12.0 million at September 30, 2009. We generally consider our short-term liquidity requirements to consist of those items that are expected to be incurred within the next 12 months. In November 2010 REMC distributed the net proceeds of a $52 million incremental term loan to the Company for general corporate purposes. We expect REMC’s short-term liquidity needs to be met from cash on hand and cash generated from REMC’s operations, but a decline in REMC’s results, which have shown historical volatility, could reduce REMC’s cash flows. Our budgeted liquidity needs (other than those relating to REMC) that we expect to incur in the next 12 months include costs to complete FEED for the Rialto Project, to continue development of the Natchez Project and other projects, to operate the PDU, to continue research and development of Rentech’s technologies, to construct the ClearFuels Gasifier at the PDU, and for general working capital and administrative needs. We do not expect to require additional capital for these budgeted activities during the next twelve months. We do expect to require additional capital if we elect to pursue additional activities beyond our current budget, such as continuing the development of the Rialto Project beyond the FEED phase, funding the development of certain new technologies, or pursuing other projects beyond their current early development stages. Pre-FEED development activities for our projects require relatively low levels of spending.

However, project development and licensing activities in our alternative energy business each require substantial amounts of capital resources. Project development requires capital for, among other things, scoping and feasibility studies, development activities, engineering, construction, and deposits paid to suppliers and parties who intend to purchase the power or fuel to be manufactured at our facilities. Licensing may require performance or other guarantees to be backed by financial guarantees or cash deposits. Our competitors who have superior access to capital may have a competitive advantage over us in these activities.

In the event that capital needed to move beyond the budgeted activities were not available, we would not be able to advance our development projects beyond FEED (in the case of the Rialto Project) or into the feasibility or FEED stages (in the case of other projects). Our failure to raise additional capital when needed would have a material adverse effect on our results of operations, liquidity and cash flows and our ability to execute our business plan.

We have never operated at a profit. If we do not achieve significant amounts of additional revenues and become profitable on an ongoing basis, we may be unable to continue our operations.

We have a history of operating losses and have never operated at a profit. From our inception on December 18, 1981 through September 30, 2010, we have an accumulated deficit of $297.0 million. If we do not achieve significant amounts of revenues and operate at a profit on an ongoing basis in the future, we may be unable to continue our operations at their current level. Ultimately, our ability to remain in business will depend upon earning a profit from commercialization of the Rentech Process and deployment of the Rentech-SilvaGas Technology. We have not been able to achieve sustained commercial use of the technology as of this time. Failure to do so would have a material adverse effect on our financial position, results of operations, cash flows and prospects.

REMC’s operations may become unprofitable and may require substantial working capital financing.

During fiscal years 2007 through 2010, REMC generated positive income from operations and positive cash flow from operations. However, during fiscal year 2006, although REMC provided positive cash flow from operations, it operated at a net loss. In prior fiscal years, the East Dubuque Plant operated by REMC sustained losses and negative cash flows from operations. The net loss in fiscal year 2006, was the result, among other things, of very difficult market conditions in its industry and rapidly rising costs of the natural gas feedstock and energy required to produce nitrogen fertilizers. REMC’s profits and cash flows are subject to changes in the prices for its products and its main input, natural gas, all of which are commodities. REMC’s profits depend on maintaining high rates of production of its products, and interruptions in plant operations could adversely affect profitability. In addition, REMC’s business is extremely seasonal, and the working capital requirements in its offseason are substantial. If REMC is not able to operate its nitrogen fertilizer facility at a profit or if REMC is not able to access a sufficient amount of additional financing for working capital, our business, financial condition and results of operations would be materially adversely affected.

Our level of indebtedness could adversely affect our ability to raise additional capital to fund our operations, limit our ability to react to changes in the economy or our industry and prevent us from meeting our obligations.

As of September 30, 2010, our total indebtedness was $120.8 million. Of this amount, approximately $63.3 million of principal borrowings were outstanding under the Credit Agreement we executed on January 29, 2010 (as amended, the “2010 Credit Agreement”) and the remainder was our convertible notes due in 2013. Our indebtedness increased by approximately $32 million after September 30, 2010 as a result of entering into a Second Amendment and Second Incremental Loan Agreement. The obligations under the 2010 Credit Agreement are secured by substantially all of our assets and the assets of most of our subsidiaries, including a pledge of the East Dubuque Plant and a pledge of the equity interests in most of our subsidiaries. Our substantial debt could have important consequences, including:

	•		increasing our vulnerability to general economic and industry conditions;
	•		requiring all or a substantial portion of our cash flow from operations to be dedicated to the payment of principal and interest on our indebtedness, therefore restricting or reducing our ability to use our cash flow to fund our operations, capital expenditures and future business opportunities;
	•		limiting our ability to obtain additional financing for working capital, capital expenditures, debt service requirements, acquisitions and general corporate or other purposes;
	•		incurring higher interest expense in the event of increases in the 2010 Credit Agreement’s variable interest rates;
	•		limiting our ability to adjust to changing market conditions and placing us at a competitive disadvantage compared to our competitors who have greater capital resources;
	•		limiting our ability to make investments, dispose of assets, pay cash dividends or repurchase stock; and
	•		subjecting us to financial and other restrictive covenants in our indebtedness, which may restrict our activities, and the failure to comply with which could result in an event of default.

If our cash flows and capital resources are insufficient to fund our debt service obligations, we may be forced to reduce or delay capital expenditures, sell assets, seek additional capital or restructure or refinance our indebtedness. These alternative measures may not be successful and may not permit us to meet our scheduled debt service obligations. Failure to pay our indebtedness on time would constitute an event of default under the agreements governing our indebtedness, which would give rise to our lenders’ ability to accelerate the obligations and seek other remedies against us.

Continued recessionary conditions and the relative unavailability of credit have made it more difficult for companies to secure financing. If we are unable to access financing on terms and at a time acceptable to us for any reason, it could have a material adverse effect on our operations, financial condition and liquidity.

Our ability to obtain any financing when needed, whether through the issuance of new equity or debt securities or otherwise, and the terms of any such financing are dependent on, among other things, our financial condition, financial market conditions, general economic conditions and conditions within our industry, and numerous other factors. In the U.S., recent market and economic conditions continue to be challenging with tight credit conditions and no or slow growth. Throughout fiscal year 2010, continued concerns about the systemic impact of high unemployment rates, sovereign debt, the availability and cost of credit, the U.S. mortgage market, and the U.S. real estate market contributed to continued lowered expectations for the U.S. economy. As a result of these market conditions, the cost and availability of credit has been and may continue to be adversely affected by illiquid credit markets and wider credit spreads. Many lenders and institutional investors continue to be reluctant to provide funding to borrowers. If these market conditions continue, they could limit our ability to timely replace maturing liabilities, or access the capital markets or other sources of financing to meet our liquidity needs, resulting in a material adverse effect on our operations, financial condition and liquidity.

The issuance of shares of our common stock could result in the loss of our ability to use our net operating losses.

As of September 30, 2010, we had approximately $165 million of tax net operating loss carryforwards. Realization of any benefit from our tax net operating losses is dependent on: (1) our ability to generate future taxable income and (2) the absence of certain future “ownership changes” of our common stock. An “ownership change,” as defined in the applicable federal income tax rules, would place significant limitations, on an annual basis, on the use of such net operating losses to offset any future taxable income we may generate. Such limitations, in conjunction with the net operating loss expiration provisions, could effectively eliminate our ability to use a substantial portion of our net operating losses to offset any future taxable income.

It is likely that we have incurred one or more “ownership changes” in the past, in which case our ability to use our net operating losses may be limited. In addition, the issuance of shares of our common stock could cause an “ownership change” which would also limit our ability to use our net operating losses. Other issuances of shares of our common stock which could cause an “ownership change” include the issuance of shares of common stock upon future conversion or exercise of outstanding options and warrants. In this regard, we contemplate that we would need to issue a substantial amount of additional shares of our common stock (or securities convertible into or exercisable or exchangeable for common stock) in connection with our proposed plans to finance the commercialization of our technologies and the implementation of our business plan.

We may not be able to successfully manage our growing business.

If we are successful in our plans to commercialize the Rentech Process and the Rentech-SilvaGas Technology by acquiring or developing alternative energy facilities, we would experience a period of rapid growth that could place significant additional demands on, and require us to expand, our management resources and information systems. The management of our growth will require, among other things, continued development of our internal controls and information systems and the ability to attract and retain qualified personnel. Our alternative energy projects under development are complex and very large in relation to projects that we have managed in the past. We have experienced cost over-runs and control weaknesses in the past. Our failure to effectively manage such projects and any such rapid growth could have a material adverse effect on us, our cash flows, our ability to raise capital in the future, and our operating results.

Although ClearFuels has been consolidated with us for financial reporting purposes, we have not evaluated ClearFuels’ internal controls and the conclusion of our management regarding the effectiveness of our internal control over financial reporting included in this report does not extend to ClearFuels’ internal controls.

On September 3, 2010, we entered into a Project Support Agreement (the “Support Agreement”) with ClearFuels. Based on the execution of the Support Agreement, we reconsidered whether we were the primary beneficiary of ClearFuels. In September 2010, we determined that we are the primary beneficiary of ClearFuels, a variable interest entity, and began to consolidate ClearFuels with us for financial reporting purposes. However, our management has not evaluated ClearFuels’ internal controls and the conclusion of our management regarding the effectiveness of our internal control over financial reporting described under “Item 9A. Controls and Procedures — Management’s Report on Internal Control Over Financial Reporting” does not extend to the internal controls of ClearFuels. We have recorded total assets, net assets, revenue and net loss of $9.4 million, $9.3 million, $0, and $0.3 million, respectively, in our audited consolidated financial statements as of and for the fiscal year ended September 30, 2010 from the consolidation of ClearFuels. Management excluded ClearFuels from its report on internal control over financial reporting. We cannot assure you as to whether there are any material weaknesses in ClearFuels’ internal controls over financial reporting. As a result, we may not be able to accurately report ClearFuels’ financial condition, results of operations or cash flows, which in turn could significantly impact our ability to accurately report financial information relating to ClearFuels in this or other reports we file with the SEC. If we are unable to report information accurately in the reports we file with the SEC, or if there is a perception among investors that we are unable to do so, we could lose investor confidence and this could impair the value of our common stock, increase our cost of raising capital and other material adverse consequences.

Risks Related to the Rentech Process and the Rentech-SilvaGas Technology

We and our potential licensees may be unable to successfully or economically implement the Rentech Process or the Rentech-SilvaGas Technology at commercial-scale synthetic fuels or power plants.

A variety of results necessary for successful operation of the Rentech Process and the Rentech-SilvaGas Technology could fail to occur at a commercial plant. Results that could cause commercial scale synthetic fuels or power plants to be unsuccessful, and require design revisions, include:

•

higher than anticipated capital and operating costs to design, construct or reconfigure and operate a plant using our technologies;

	•		reaction activity different than that demonstrated in laboratory, pilot, and demonstration plant operations, which could increase the amount of feedstock to convert into synthesis gas or catalyst or number of reactors required to convert synthesis gas into hydrocarbons;
	•		shorter than anticipated catalyst life, which would require more frequent catalyst replacement or addition, catalyst purchases, or both;
	•		insufficient catalyst separation from the crude wax product stream, which could either impair the operation of the product upgrading unit or increase the capital costs for the plant;
	•		product upgrading catalyst sensitivities to impurities in the crude synthetic fuel products, which would impair the efficiency and economics of the product upgrade unit and require design revisions;
	•		higher than anticipated costs for the catalyst and other materials used to operate a plant using the Rentech technologies; and
	•		higher than anticipated levels of tar in the syngas using the Rentech-SilvaGas Technology.

If any of the foregoing were to occur, our capital and operating costs would increase. In addition, our projects or those of our licensees could experience mechanical difficulties, either related or unrelated to elements of the Rentech Process or the Rentech-SilvaGas Technology. Our failure to construct and operate a commercial scale synthetic fuels or gasification plant based on the Rentech technologies could materially and adversely affect our business, results of operation, financial condition, cash flows and prospects.

We could have indemnification liabilities to potential licensees of our technology.

We anticipate that our license agreements will require us to indemnify the licensee against specified losses relating to, among other things:

	•		use of patent rights and technical information relating to the Rentech Process or the Rentech-SilvaGas Technology;
	•		the possibility of infringing on the intellectual property of other parties;
	•		failure of our technology to perform according to guaranteed specifications; and
	•		acts or omissions by us in connection with our preparation of preliminary and final design packages for the licensee’s plant and approval of the licensee’s construction plans.

Our indemnification obligations could result in substantial expenses and liabilities to us if intellectual property rights claims were to be made against us or our licensees, or if the plants fail to operate according to the preliminary plans.

Our success substantially depends on the performance of our management team, project development team and technology group. The loss of key individuals within these groups would disrupt our business operations.

Our successful implementation of our business plan is substantially dependent upon the contributions of our management team, project development team and technology group. Our ability to design, finance, construct, startup and operate plants or enter into licensing arrangements using our technologies is highly reliant on the knowledge and skills of these key personnel. Moreover, we rely on these personnel to conduct research and development of our processes, products, markets and costs, and the loss of such personnel would harm our ability to successfully compete. As a result, unexpected loss of the services of key employees could have a material adverse effect on our business, operating results, financial condition, cash flows and prospects.

Our success depends in part on our ability to protect our intellectual property rights, which involves complexities and uncertainties.

We rely on a combination of patents, trademarks, trade secrets and contractual restrictions to protect our proprietary rights. Our business and prospects depend largely upon our ability to maintain control of rights to exploit our intellectual property. Our published and issued patents both foreign and domestic provide us certain exclusive rights (subject to licenses we have granted to others) to exploit our technologies. Our existing patents might be infringed upon, invalidated or circumvented by others. The availability of patents in foreign markets, and the nature of any protection against competition that may be afforded by those patents, is often difficult to predict and varies significantly from country to country. We, or our licensees, may choose not to seek, or may be unable to obtain, patent protection in a country that could potentially be an important market for our technology. The confidentiality agreements that are designed to protect our trade secrets could be breached, and we might not have adequate remedies for the breach. Additionally, our trade secrets and proprietary know-how might otherwise become known or be independently discovered by others.

We may not become aware of patents or rights of others that may have applicability in our technologies until after we have made a substantial investment in the development and commercialization of our technologies. Third parties may claim that we have infringed upon past, present or future technologies. Legal actions could be brought against us, our co-venturers or our licensees claiming damages and seeking an injunction that would prevent us, our co-venturers or our licensees from testing, marketing or commercializing the affected technologies. If an infringement action were successful, in addition to potential liability for damages by our joint venturers or our licensees, we could be subject to an injunction or required to obtain a license from a third party in order to continue to test, market or commercialize our affected technologies. Any required license might not be made available or, if available, might not be available on acceptable terms, and we could be prevented entirely from testing, marketing or commercializing the affected technology. We may have to expend substantial resources in litigation, enforcing our patents or defending against the infringement claims of others, or both. If we are unable to successfully maintain our technology against claims by others, our competitive position would be harmed and our revenues could be substantially reduced, and our business, operating results, financial condition and cash flows could be materially and adversely affected.

Our technologies may not compete successfully against technologies developed by our competitors, many of whom have significantly more resources.

The development of Fischer-Tropsch and biomass gasification technologies like ours is highly competitive. Several major integrated oil companies, as well as several smaller companies, have developed or are developing competing Fischer-Tropsch and gasification technologies that they may offer to license to our potential customers or use as the basis for a competing development project. Many of these companies, especially the major oil companies, have significantly more financial and other resources than we do to spend on developing, promoting, marketing and using their Fischer-Tropsch technology. In addition, several companies are developing biomass gasification technologies that compete with our Rentech-SilvaGas Technology. Advances by others in their technologies might lower the cost of processes that compete with our technologies. As our competitors continue to develop technologies, some part or all of our current technologies could become obsolete. Our ability to create and maintain technological advantages is critical to our future success. As new technologies develop, we may be placed at a competitive disadvantage, and competitive pressures may force us to implement new technologies at a substantial cost. We may not be able to successfully develop or expend the financial resources necessary to acquire new technology.

A reduction in government incentives for FT fuels or energy from biomass, or the relaxation of clean air and renewable energy requirements, could materially reduce the demand for FT fuels or energy from biomass and the economic feasibility of projects using our technologies.

Federal and state law provides incentives for FT fuels, and technologies that produce FT fuels, such as the Rentech Process, and for energy produced from renewable feedstocks. For example, EPACT 2005 provides for tax credits, grants, loan guarantees and other incentives to stimulate coal gasification into FT fuels and chemicals. The RFS established volumetric blending requirements for renewable fuel applicable to refiners or importers of petroleum-based gasoline or diesel fuel, which we expect to be applicable to fuels produced at the Rialto Project. The ARRA provides a number of incentives and authority for loan guarantees for the development of projects such as our Rialto Project and other projects that we are pursuing. In addition, California law requires specific reductions in the carbon content of transportation fuels, as well as specific levels of the production of power from renewable resources. Certain federal regulations that restrict air pollution also provide an incentive for the use of FT fuels because they comply with the regulations in cases where conventional fuels might not. For further information on these government incentives and air pollution and renewable energy production requirements, see “Part I, Item 1. Business — Government Incentives”. A significant reduction in loan guarantees, tax credits or other government incentives for our Rialto Project would likely adversely impact the economic feasibility and our ability to obtain adequate financing for that project and could have a similar adverse impact on other projects utilizing our technology. Changes in law or policy also could result in a relaxation of the requirements relating to air pollution and renewable energy production, which could materially reduce the demand for FT fuels or energy from biomass. As a result, the reduction or elimination of government incentives or the relaxation of air pollution and renewable energy requirements could have a material adverse effect on our financial condition, results of operations and prospects.

Industry rejection of the Rentech Process or the Rentech-SilvaGas Technology would adversely affect our ability to receive future license fees.

As is typical in the case of unfamiliar and/or rapidly evolving technologies, demand and industry acceptance of the Rentech Process or the Rentech-SilvaGas Technology is highly uncertain. Historically, most applications of FT processes have not produced fuels that were economical compared to the price of conventional fuel sources. Failure by the industry to accept our technology or to accept it as timely as we expect, whether due to unsuccessful use, results that are not economical, the novelty of our technology, the lower price of alternatively sourced fuels or for other reasons, would materially and adversely affect our business, operating results, financial condition and prospects.

If a high profile industry participant were to adopt the Rentech Process or the Rentech-SilvaGas Technology and fail to achieve success, or if any commercial FT plant based on our technology were to fail to achieve success, other industry participants’ perception of our technology could be adversely affected. That could adversely affect our ability to obtain future license fees and generate other revenue. In addition, some oil companies may be motivated to seek to prevent industry acceptance of FT technology in general, or our technology in particular, based on their belief that widespread adoption of FT technology might negatively impact their competitive position.

Changes in existing laws and regulations, or their interpretation, or the imposition of new restrictions relating to emissions of greenhouse gases or carbon dioxide may give rise to additional compliance costs or liabilities and could materially reduce the demand for FT fuels or the Rentech Process which could, in turn, have a material adverse effect on our business, financial condition, results of operations, cash flows or prospects.

The application of the Rentech Process in synthetic fuel projects often relies on gasification technology to create the syngas that is used to produce power, FT fuels and other hydrocarbon products. Coal gasification breaks down coal into its components by subjecting it to high temperature and pressure, using steam and measured amounts of oxygen, which leads to the production of gaseous compounds, including CO₂. Although the United States does not currently maintain comprehensive regulation of CO₂ emissions, various legislative and regulatory measures to address greenhouse gas emissions (such as CO₂) are currently in various phases of discussion or implementation. These include without limit, the Kyoto Protocol, ETS, AB-32, GGRTA, EPA regulations, and other proposed laws or regulations each of which have imposed or would impose reductions in or other limitations on greenhouse gas emissions.

Future restrictions on greenhouse gas emissions and continued political attention to issues concerning climate change, the role of human activity in it and potential mitigation through regulation could result in increased costs or liabilities associated with complying with such restrictions or regulations, or materially reduce the demand for FT fuels and the Rentech Process which, in turn, could have a material adverse effect on our business, financial condition, results of operations, cash flows or prospects.

Risks Related to Possible Inability to Complete Project Developments and the Financing Required for Construction and Subsequent Operation

We are pursuing alternative energy projects, including the Rialto and Natchez Projects, that will involve substantial expense and risk.

We are pursuing opportunities to develop alternative energy projects, however we do not have the financing to complete any of these projects. Moreover, the pursuit of such opportunities requires that we incur material expenses, including for financial, legal and other advisors, whether or not our efforts are successful. From time to time, we may enter into letters of intent or memorandums of understanding relating to our projects, which may not proceed to completion for various reasons. Our pursuit of any of these alternative energy projects involves significant risks, and our failure to successfully develop these projects, or failure to operate them successfully after we have developed them, could have a material adverse effect on our financial condition, results of operations and prospects. The costs of constructing our projects depends substantially on general construction costs, including the costs for commodities such as steel, copper and concrete. Escalation of costs for these commodities or other construction costs may increase the cost of our projects substantially, potentially to the extent that the projects would no longer be economically feasible.

The construction of commercial scale projects that utilize our technology will require several years and substantial financing, and may not be successful.

The engineering, design, procurement of materials, and construction necessary to build a commercial scale alternative energy production project that utilizes our technology could cost hundreds of millions of dollars for a smaller scale plant and up to billions of dollars for a larger facility. It could take at least 2 to 3 years to construct a commercial scale facility, or more time depending upon many factors, particularly the size and scope of the project. We cannot assure you that we will be able to obtain financing for the projects in the time required or at all, and our failure to do so would prevent us from implementing our business plan as expected. Moreover, we have never undertaken any such projects, and the duration, cost, and eventual success of our efforts are all uncertain.

We may not be able to successfully negotiate and execute engineering, procurement and construction contracts with construction and other vendors necessary for our development projects.

Construction of our proposed Rialto Project and Natchez Project and the development of other projects will require that we identify and arrive at acceptable contracts with construction and other vendors. Among these contracts required for development of a project may be an engineering, procurement and construction (“EPC”) contract that we seek to enter into with a prime contractor and with terms satisfactory to lenders in the project finance market. We cannot assure you that we will be able to enter into such contracts on acceptable terms or at all, and our failure to do so would generally limit our access to project finance lenders who require that an acceptable EPC contract be in place before funding a project. If we are unable to enter into acceptable contracts with construction and other vendors related to our projects in the future, we would not be able to implement our business plan as expected and we would be materially adversely affected.

The volatility in the price for certain commodities that we may purchase in the open market to use as feedstock; the price for oil and natural gas used to create fuels that compete with our fuels; and prices for electricity could adversely affect our ability to develop, build and operate commercial scale synthetic fuels and power plants or our ability to license our technology.

The prices of commodities, such as petroleum coke, coal, or biomass that we might use as feedstock in commercial scale projects are subject to fluctuations due to a variety of factors that are beyond our control. Additionally, there is no commodities market for biomass, so its cost will vary depending upon numerous factors which we are unable to predict, but we anticipate will include, availability of the feedstock, costs of production of the feedstock and transportation costs. An increase in the price of commodities or a high cost for biomass which we may need to operate our projects could adversely affect our ability to develop, build and operate commercial scale synthetic fuels plants or our ability to license our technology.

Additionally, the extreme volatility in the cost of crude oil results in significant variances in the market price of petroleum based fuels. For instance, during fiscal year 2008, the price of crude oil per barrel fluctuated from approximately $80, up to a high of $145, and dipped to as low as approximately $37 in fiscal year 2009. During fiscal year 2010, the price of crude oil per barrel fluctuated from approximately $70 to $86. As crude oil prices rose and fell, so did the price of gasoline and other petroleum-derived products. The price at which we can sell our synthetic fuels will be dependent upon the market price for petroleum based fuels despite the fact that our costs of feedstock may or may not correspond to the cost of crude oil. This discrepancy in cost may negatively impact our ability to develop, build and operate commercial scale synthetic fuels plants or our ability to license our technology.

Risks Related to the East Dubuque Plant

The market for natural gas has been volatile. If prices for natural gas increase significantly, we may not be able to economically operate the East Dubuque Plant.

Our operation of the East Dubuque Plant with natural gas as the feedstock exposes us to market risk due to increases in natural gas prices. During 2008, natural gas prices spiked to near-record high prices. This was due to various supply and demand factors, including the increasing overall demand for natural gas from industrial users, which is affected, in part, by the general conditions of the United States economy, and other factors. The profitability of operating the facility is significantly dependent on the cost of natural gas as feedstock and the facility has operated in the past, and may operate in the future, at a net loss. Since we expect to purchase natural gas for use in the plant on the spot market we remain susceptible to fluctuations in the price of natural gas. We expect to also use short-term, fixed supply, fixed price forward purchase contracts to lock in pricing for a portion of our natural gas requirements. These may not protect us from increases in the cost of our feedstock. A hypothetical increase of $0.10 per MMBTU of natural gas would increase the cost to produce one ton of ammonia by approximately $3.50. Higher than anticipated costs for the catalyst and other materials used at the East Dubuque Plant could also adversely affect operating results. These increased costs could materially and adversely affect our business, results of operations, financial condition, cash flows and prospects.

Lower prices for nitrogen fertilizers or downturns in market demands could reduce the revenues and profitability of the East Dubuque Plant’s nitrogen fertilizer business.

Nitrogen fertilizer is a global commodity that often experiences unpredictable fluctuations in demand and an increasing supply on the world-wide market. In the recent past, nitrogen fertilizer prices have been volatile, often experiencing price changes from one growing season to the next. A downturn in nitrogen prices could have a depressing effect on the prices of most of the fertilizer products that we sell, and might materially and adversely affect our ability to economically operate the East Dubuque Plant.

A reduction in demand for corn or other crops could reduce demand for the nitrogen fertilizer produced by REMC.

The demand for nitrogen fertilizer is closely tied to the demand for, and the price of, corn and other crops. Fluctuations in such demand could significantly affect the demand for and the price of nitrogen fertilizer. The demand for corn depends on, among other things, overall economic growth both in the U.S. and overseas, demand for grain-fed animals, and the demand for corn as a feedstock in the production of ethanol. Government mandates for production of ethanol are subject to change, and any reduction in such mandates could have a significant effect on demand for corn and, as a result, our business, financial condition and results of operations.

Weather conditions may materially impact the demand for REMC products.

Weather conditions can have a significant impact on the farming economy and, consequently, on demand for the fertilizer products produced by the East Dubuque Plant. For example, adverse weather such as flood, drought or frost can cause a delay in, or even the cancellation of, planting, reducing the demand for fertilizer. Adverse weather conditions can also impact the financial position of the farmers who will buy our nitrogen fertilizer products. This, in turn, may adversely affect the ability of those farmers to meet their obligations in a timely manner, or at all. Accordingly, the weather can have a material effect on our business, financial condition, results of operations, cash flows and liquidity.

The East Dubuque Plant is an aging facility with aging equipment that could fail. Any operational disruption at the plant could result in a reduction of sales volumes and could cause us to incur substantial expenditures. A prolonged disruption could materially affect the cash flow we expect from the plant, or lead to a default of the 2010 Credit Agreement.

The East Dubuque Plant is an aging facility with aging equipment that could fail. The East Dubuque Plant may be subject to significant interruption if it were to experience a major accident, equipment failure or were damaged by severe weather or other natural disaster. In addition, operations at the East Dubuque Plant are subject to hazards inherent in chemical manufacturing. Some of those hazards may cause personal injury and loss of life, severe damage to or destruction of property and equipment and environmental damage, and may result in suspension of operations and the imposition of civil or criminal penalties. Significant downtime at the East Dubuque Plant could significantly reduce the amount of product available for sale, which could reduce or eliminate profits and cash flows from REMC. Repairs to the plant in such circumstances could be expensive, and could be so extensive that the plant could not economically be placed back into service. We currently maintain property insurance, including business interruption insurance, but we may not have sufficient coverage, or may be unable in the future to obtain sufficient coverage at reasonable costs. A prolonged disruption at the East Dubuque Plant could materially affect the cash flow we expect from the plant, or lead to a default of the 2010 Credit Agreement. As a result, operational disruptions at the East Dubuque Plant could materially adversely impact our business, financial condition, results of operations and cash flows.

The business of the East Dubuque Plant is highly seasonal.

Sales of nitrogen fertilizer products from the East Dubuque Plant are seasonal, based upon the planting, growing and harvesting cycles. Most of the East Dubuque Plant’s annual sales have occurred between March and July of each year due to the condensed nature of the planting season. Since interim period operating results reflect the seasonal nature of our business, they are not indicative of results expected for the full fiscal year. In addition, results for comparable quarters can vary significantly from one year to the next due primarily to weather-related shifts in planting schedules and purchase patterns. We expect to incur substantial expenditures for fixed costs for the East Dubuque Plant throughout the year and substantial expenditures for inventory in advance of the spring planting season. Seasonality also relates to the limited windows of opportunity that nitrogen fertilizer customers have to complete required tasks at each stage of crop cultivation. Should events such as adverse weather or transportation interruptions occur during these seasonal windows, we would face the possibility of reduced revenue without the opportunity to recover until the following season. In addition, because of the seasonality of agriculture, we expect to face the risk of significant inventory carrying costs should our customers’ activities be curtailed during their normal seasons. The seasonality can negatively impact accounts receivable collections and increase bad debts. In addition, variations in the proportion of product sold through forward sales, and variances in the terms of the forward sales contracts can affect working capital requirements, and increase the seasonal and year-to-year volatility of cash flows. Access to storage facilities is critical to the profitable operation of the plant. If our access to storage were interrupted, profits could be affected.

The nitrogen fertilizer industry is very competitive and the actions of our competitors could materially affect the business, results of operations, cash flows and financial position of the Company.

REMC operates in a highly competitive industry, particularly with respect to the price of its nitrogen fertilizer products. Its principal competitors in the distribution of crop production inputs include agricultural co-operatives (which have the largest market share in many of the locations that it serves), national and international fertilizer producers, major grain companies and independent distributors and brokers. Some of these competitors have greater financial, marketing and research and development resources than we do, or better name recognition, and can better withstand adverse economic or market conditions. In addition, as a result of increased pricing pressures caused by competition, REMC may in the future experience reductions in its profit margins on sales, or may be unable to pass future input price increases on to its customers.

We rely on Agrium as distributor of the nitrogen fertilizer products we produce at the East Dubuque Plant.

We rely on Agrium as exclusive distributor of REMC’s products, pursuant to a Distribution Agreement between it and REMC. However, to the extent Agrium and we are not able to reach an agreement with respect to the purchase and sale of products, Agrium is under no obligation to sell such products. If we cannot reach an agreement with Agrium for the sale of products or its services to REMC terminate, we cannot assure you that we would be able to find other buyers for the products. Our inability to sell products manufactured at the East Dubuque Plant could result in significant losses and materially and adversely affect our business.

We could be subject to claims and liabilities under environmental, health and safety laws and regulations arising from the production and distribution of nitrogen fertilizers and alternative energy products at our facilities.

The production and distribution of nitrogen fertilizers at the East Dubuque Plant are subject to compliance with United States federal, state and local environmental, health and safety laws and regulations. These regulations govern operations and use, storage, handling, discharge and disposal of a variety of substances. For instance, under CERCLA, we could be held strictly or jointly and severally responsible for the removal and remediation of any hazardous substance contamination at our facilities, at neighboring properties (where migration from our facilities occurred) and at third party waste disposal sites. We could also be held liable for any consequences arising out of human exposure to these substances or other environmental damage. We may incur substantial costs to comply with these environmental, health and safety law requirements. We may also incur substantial costs for liabilities arising from past releases of, or exposure to, hazardous substances. In addition, we may discover currently unknown environmental problems or conditions. The discovery of currently unknown environmental problems or conditions, changes in environmental, health and safety laws and regulations or other unanticipated events could give rise to claims that may involve material expenditures or liabilities for us.

We may be required to install additional pollution control equipment at the East Dubuque Plant in order to maintain compliance with applicable environmental requirements.

Continued government and public emphasis on environmental issues can be expected to result in increased future investments for environmental controls at ongoing operations. We may be required to install additional air and water quality control equipment, such as low emission burners, scrubbers, ammonia sensors and continuous emission monitors, at our East Dubuque Plant in order to comply with applicable environmental requirements. Such investments would reduce income from future operations. Present and future environmental laws and regulations applicable to operations, more vigorous enforcement policies and discovery of unknown conditions may require substantial expenditures and may have a material adverse effect on results of operations, cash flows, financial position or business.

The imposition of new restrictions relating to emissions of carbon dioxide may give rise to material additional compliance costs, capital expenditures or liabilities at the East Dubuque Plant.

The United States does not currently maintain comprehensive regulation of CO₂ emissions. Various legislative and regulatory measures, including EPA regulations, to address greenhouse gas emissions (such as CO₂) are currently in various phases of discussion or implementation. REMC has CO₂ emissions which are in excess of CO₂ that it captures and sells, that result from utilizing natural gas in both its operating process and fuel combustion. Future restrictions on greenhouse gas emissions could result in increased costs for capital expenditures and liabilities associated with complying with such restrictions, which could have a material adverse effect on our business, financial condition or results of operations and cash flows.

Risks Related to the Market for Rentech Common Stock

We have a substantial overhang of common stock and future sales of our common stock will cause substantial dilution and may negatively affect the market price of our shares.

As of September 30, 2010, there were 221.7 million shares of our common stock outstanding. As of that date, we also had an aggregate of 36.9 million shares of common stock that may be issued upon exercise or conversion of outstanding convertible notes, restricted stock units, options and warrants. During fiscal year 2010, we issued an aggregate of 6.7 million shares of our common stock. During fiscal year 2009, we issued an aggregate of 45.6 million shares of our common stock which includes 14.5 million shares issued in connection with our acquisition of SilvaGas. In connection with that acquisition, we also agreed to issue up to a maximum of 11 million additional shares of our common stock as earn-out consideration. Also, during fiscal year 2009, we issued warrants to purchase 7.0 million shares of common stock in connection with amendments to our prior Credit Agreement and our investment in ClearFuels. In addition, we have one shelf registration statement covering $94.3 million aggregate offering price of securities (up to all of which could be issued as shares of common stock) for issuance in future financing transactions.

We expect the sale of common stock and common stock equivalents in material amounts will be necessary to finance the progress of our business plan and operations. Certain holders of our securities have, and certain future holders are expected to be granted, rights to participate in or to require us to file registration statements with the SEC for resale of common stock.

We may issue shares of stock to acquire companies or assets.

We cannot predict the effect, if any, that future sales of shares of our common stock into the market, or the availability of shares of common stock for future sale, will have on the market price of our common stock. Sales of substantial amounts of common stock (including shares issued upon the exercise, conversion or exchange of other securities), or the perception that such sales could occur, may materially and adversely affect prevailing market prices for our common stock.

The market price of the Company’s common stock may decline. A lower stock price would result in more dilution if we issue shares to raise equity capital, and could prevent us from raising sufficient equity capital to implement our business plan.

The market price of our stock may decline for a number of reasons, including if:

	•		the construction of a commercial scale synthetic fuels plant, including the Rialto and Natchez Projects, or other plants is not completed in a timely, economical and efficient manner;
	•		the construction of a commercial scale synthetic fuels plant, including the Rialto and Natchez Projects or other plants, does not yield the expected benefits to our revenues and profits as rapidly or to the extent that may be anticipated by financial or industry analysts, shareholders or other investors;
	•		the effect of the construction of a commercial scale synthetic fuels plant, including the Rialto and Natchez Projects or other plants, on our consolidated financial statements is not consistent with the expectations of financial or industry analysts, shareholders or other investors;
	•		our significant shareholders decide to dispose of their shares of common stock because of any of the above or other reasons; or
	•		any of the other risks referred to in this section materialize.

In the event that we seek to raise additional equity capital, a lower stock price would result in more dilution to our existing stockholders or could prevent us from raising sufficient equity capital to implement our business plan.

ITEM 1B.		UNRESOLVED STAFF COMMENTS

Not Applicable.

ITEM 2.		PROPERTIES

Rentech Energy Midwest Corporation Properties

REMC operates an ammonia fertilizer plant on an approximately 200 acre site in East Dubuque, Illinois adjacent to the Mississippi River. All of the East Dubuque Plant’s properties and equipment are owned; these include land, roads, buildings, several special purpose structures, equipment, storage tanks, and specialized truck, rail and river barge loading facilities. REMC also has access to 15,000 tons of leased storage tank capacity for ammonia products in Niota, Illinois.

Product Demonstration Unit Properties

We own the site located in Commerce City, Colorado where we have constructed our PDU. The site consists of 17 acres located in an industrial area adjacent to a rail line and an interstate highway. Approximately six acres of the site are occupied by the PDU and the remaining approximately 11 acres of the site are available for other uses. There is an approximately 12,000 square foot building on that site that is primarily used for laboratory and maintenance functions supporting the PDU. We also lease a 2 1/2 acre industrial site located adjacent to the site, which includes a single building of approximately 3,000 square feet and is used for the storage and maintenance of construction equipment.

Natchez Project Property

We own an approximately 500 acre site in Adams County, Mississippi near the city of Natchez, where we intend to develop our Natchez Project.

Office Leases

Our executive offices are located in Los Angeles, California, and consist of approximately 13,000 square feet of leased office space. The lease expires in June 2015.

Our other principal leased offices are located in Denver, Colorado, and consist of approximately 8,000 square feet of office space. The lease expires in October 2014.

ITEM 3.		LEGAL PROCEEDINGS

In the normal course of business, we are party to litigation from time to time. We maintain insurance to cover certain actions and believe that resolution of such litigation will not have a material adverse effect on us.

Between December 29, 2009 and January 6, 2010, three purported class action shareholder lawsuits were filed against the Company and certain of its current and former directors and officers in the United States District Court for the Central District of California (“C.D. Cal.”) alleging that the Company and the named current and former directors and officers made false or misleading statements regarding the Company’s financial performance in connection with its financial statements for fiscal year 2008 and the first three quarters of fiscal year 2009. Plaintiffs in the actions purport to bring claims on behalf of all persons who purchased Rentech securities between May 9, 2008 and December 14, 2009 and seek unspecified damages, interest, and attorneys’ fees and costs. The cases were consolidated as Michael Silbergleid v. Rentech, Inc., et al. (In re Rentech Securities Litigation), Lead Case No. 2:09-cv-09495-GHK-PJW (C.D. Cal.) (the “Securities Action”), and a lead plaintiff was appointed on April 5, 2010. The lead plaintiff filed a consolidated complaint on May 20, 2010, and the Company filed a motion to dismiss the action on October 15, 2010. The matters are currently stayed to allow the parties to discuss settlement. At this time, the Company does not believe that these matters will have a material adverse effect on the Company.

Between January 22, 2010 and February 10, 2010, five shareholder derivative lawsuits were filed against certain of the Company’s current and former officers and directors in the United States District Court for the Central District of California and the Superior Court of the State of California for the County of Los Angeles (“LASC”). The initial complaints allege that the named current and former directors and officers caused the Company to make false or misleading statements regarding the Company’s financial performance in connection with its financial statements for fiscal year 2008 and the first three quarters of fiscal year 2009. The plaintiffs, who purport to assert claims on behalf of the Company, seek various equitable and/or injunctive relief, unspecified restitution to the Company, interest, and attorneys’ fees and costs. The cases before the United States District Court are consolidated as John Cobb v. D. Hunt Ramsbottom, et al. (In re Rentech Derivative Litigation), Lead Case No. 2:10-cv-0485-GHK-PJW (C.D. Cal.), and the cases before the Superior Court are consolidated as Andrew L. Tarr v. Dennis L. Yakobson, et al., LASC Master File No. BC430553. The matters have been stayed pending resolution of motions to dismiss the Securities Action. At this time, the Company does not believe that these matters will have a material adverse effect on the Company.

In October 2009, the EPA Region 5 issued a Notice and Finding of Violation pursuant to the Clean Air Act (“CAA”) related to the #1 nitric acid plant at the East Dubuque Plant. The notice alleges violations of the CAA’s New Source Performance Standard for nitric acid plants, Prevention of Significant Deterioration requirements and Title V Permit Program requirements. The notice appears to be part of the EPA’s Clean Air Act National Enforcement Priority for New Source Review/Prevention of Significant Deterioration related to nitric acid plants, which seeks to reduce emissions from nitric acid plants through proceedings that result in the installation of new pollution control technology. The Company continues to engage in dialogue with the EPA regarding the Company’s defenses to the alleged violations and has had meetings and conversations with the EPA to discuss technical issues associated with the installation, and the associated monitoring and emissions limits, of any new pollution control technology to resolve the EPA’s alleged violations. The EPA has informed the Company that it has referred this matter to the United States Department of Justice. The Company cannot at this time estimate the cost to resolve this matter, but it does not believe that the matter will have a material adverse effect on the Company.

ITEM 4.		(REMOVED AND RESERVED)

PART II

ITEM 5.		MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Our common stock is traded on the NYSE Amex under the symbol RTK. The following table sets forth the range of high and low closing prices for the common stock as reported by NYSE Amex.

Fiscal Year Ended September 30, 2010		High				Low
First Quarter, ended December 31, 2009		$	1.72			$	1.21
Second Quarter, ended March 31, 2010		$	1.32			$	1.01
Third Quarter, ended June 30, 2010		$	1.35			$	0.95
Fourth Quarter, ended September 30, 2010		$	1.02			$	0.70

Fiscal Year Ended September 30, 2009		High				Low
First Quarter, ended December 31, 2008		$	1.31			$	0.46
Second Quarter, ended March 31, 2009		$	0.88			$	0.53
Third Quarter, ended June 30, 2009		$	0.73			$	0.51
Fourth Quarter, ended September 30, 2009		$	2.40			$	0.46

The approximate number of shareholders of record of our common stock as of November 30, 2010 was 533. Based upon the securities position listings maintained for our common stock by registered clearing agencies, we estimate the number of beneficial owners is not less than 34,600.

We have never paid cash dividends on our common stock. We currently expect that we will retain future earnings for use in the operation and expansion of our business and do not anticipate paying any cash dividends on our common stock in the foreseeable future.

Company Purchases of Equity Securities

Not applicable.

Recent Sales of Unregistered Securities

Not applicable.

STOCK PERFORMANCE GRAPH

The following graph and table compares the cumulative total shareholder return on our common stock to that of the NYSE Amex Composite Index (the “NYSE Amex Composite”), the Russell 2000 Index (the “Russell 2000”), a new alternative energy peer group which is the Ardour Global Alternative Energy Index — North America (the “New Alternative Energy Peer Group”), and two customized peer groups for the last five fiscal years ending September 30. The first customized peer group of six companies includes: Evergreen Energy, Inc., Fuel Tech, Inc., Headwaters, Inc., Pacific Ethanol, Inc., Syntroleum Corporation and Verasun Energy Corporation (the “Old Peer Group”). The second customized peer group of four companies includes: Agrium Inc., CF Industries Holdings, Inc., Terra Nitrogen Company, L.P., and Yara International (the “New Fertilizer Peer Group”). The following graph and table assumes that a $100 investment was made at the close of trading on September 30, 2005 in our common stock and in the indexes and the peer groups, and that dividends, if any, were reinvested. The stock price performance shown on the graph below should not be considered indicative of future price performance.

Rentech has used the Old Peer Group for comparison purposes because Rentech believed that the selected companies were more comparable to Rentech than the published indexes available at the time. The Old Peer Group is made up of companies that engage in the development of lower emission fuel technologies and related businesses as a significant element of their overall business. However, the companies included in the Old Peer Group do not participate in the nitrogen products manufacturing business, which is one of our principal lines of business. In addition, the market capitalizations of many of the companies included in the Old Peer Group are different from Rentech’s market capitalization and at least one of the companies is not currently trading on a public exchange. For fiscal year 2011, Rentech has ceased using the Old Peer Group and the NYSE Amex Composite and has begun using the New Alternative Energy Peer Group, the New Fertilizer Peer Group and the Russell 2000 for the comparison purposes described above. Rentech believes that the Russell 2000 will be more comparable than the NYSE Amex Composite to Rentech because it measures the performance of the small-cap segment of the U.S. equity market. Rentech believes that the New Alternative Energy Peer Group (comprised of alternative energy companies) and the New Fertilizer Peer Group (comprised of companies in the nitrogen fertilizer business) will be more comparable to Rentech’s alternative energy and nitrogen products manufacturing business segments than the more narrow Old Peer Group.

		9/05				9/06				9/07				9/08				9/09				9/10
Rentech, Inc.			100.00				183.00				85.38				52.57				64.03				38.97
NYSE Amex Composite			100.00				110.96				140.03				108.33				113.47				134.74
Russell 2000			100.00				109.92				123.49				105.60				95.52				108.27
New Alternative Energy Peer Group			100.00				84.85				101.48				84.53				62.74				59.87
Old Peer Group			100.00				66.20				44.50				25.46				14.20				9.78
New Fertilizer Peer Group			100.00				101.77				251.45				272.53				253.23				347.09

ITEM 6.		SELECTED FINANCIAL DATA

The following tables include selected summary financial data for each of our last five fiscal years. The data below should be read in conjunction with “Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Part II, Item 8. Financial Statements and Supplementary Data.”

		Fiscal Years Ended September 30,
		2010				2009				2008				2007				2006
		(in thousands, except per share data)
CONSOLIDATED STATEMENTS OF OPERATIONS DATA
Revenues		$	130,624			$	186,687			$	217,293			$	134,923			$	45,387
Cost of Sales		$	105,411			$	125,891			$	160,742			$	119,170			$	44,947
Gross Profit		$	25,213			$	60,796			$	56,551			$	15,753			$	440
Research and Development Expense		$	19,641			$	21,381			$	64,477			$	43,127			$	12,054
Loss from Continuing Operations		$	(42,271	)		$	(93	)		$	(59,425	)		$	(97,038	)		$	(40,838	)
Income from Discontinued Operations		$	9			$	72			$	91			$	3,150			$	1,265
Net Loss		$	(42,262	)		$	(21	)		$	(59,334	)		$	(93,888	)		$	(39,573	)
Net Loss Attributable to Noncontrolling Interests		$	94			$	—			$	—			$	—			$	—
Dividends		$	—			$	—			$	—			$	—			$	(75	)
Net Loss Attributable to Rentech		$	(42,168	)		$	(21	)		$	(59,334	)		$	(93,888	)		$	(39,648	)
Net Income (Loss) per Common Share Attributable to Rentech:
Basic:
Continuing Operations (1)		$	(0.20	)		$	0.00			$	(0.36	)		$	(0.64	)		$	(0.32	)
Discontinued Operations			0.00				0.00				0.00				0.02				0.01
Net Loss		$	(0.20	)		$	0.00			$	(0.36	)		$	(0.62	)		$	(0.31	)
Diluted:
Continuing Operations (1)		$	(0.20	)		$	0.00			$	(0.36	)		$	(0.64	)		$	(0.32	)
Discontinued Operations			0.00				0.00				0.00				0.02				0.01
Net Loss		$	(0.20	)		$	0.00			$	(0.36	)		$	(0.62	)		$	(0.31	)
Weighted-average shares used to compute net income (loss) per common share:
Basic and diluted			216,069				174,445				165,480				151,356				127,174
CONSOLIDATED BALANCE SHEET DATA
Working Capital		$	22,656			$	12,032			$	21,484			$	37,960			$	65,316
Construction in Progress		$	41,098			$	28,037			$	19,960			$	4,293			$	3,917
Total Assets		$	200,515			$	200,600			$	203,863			$	157,064			$	148,408
Total Long-Term Liabilities		$	98,520			$	46,759			$	95,819			$	39,713			$	29,565
Total Rentech Stockholders’ Equity		$	37,920			$	68,236			$	15,002			$	67,250			$	103,294

ITEM 7.		MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

In addition to the information provided here in Management’s Discussion and Analysis of Financial Condition and Results of Operations, we believe that in order to more fully understand our discussion in this section, you should read our consolidated financial statements and the notes thereto and the other disclosures herein, including the discussion of our business and the risk factors.

OVERVIEW OF OUR FINANCIAL CONDITION, LIQUIDITY, AND RESULTS OF OPERATIONS

At September 30, 2010, we had working capital of $22,656,000. Historically, we have relied upon sales of our equity securities, borrowings and cash flows from our nitrogen fertilizer manufacturing business for working capital. We have a history of significant net losses.

Our primary needs for working capital in fiscal year 2011 include REMC-related costs to operate, pay debt service, and make capital investments in the East Dubuque Plant, as well as non-REMC costs to complete FEED for the Rialto Project, continue development of the Natchez Project and other projects, operate the PDU, continue research and development of Rentech’s technologies, construct the ClearFuels Gasifier at the PDU, and fund administrative needs. Based on current market conditions, we expect that REMC’s activities can be funded from cash on hand and REMC’s forecasted operating cash flows at least through fiscal year 2011. We also expect to fund Rentech’s budgeted non-REMC activities during the next twelve months from cash on hand. We expect to need additional capital in the event we decide to pursue unbudgeted activities, such as continuing the development of the Rialto Project beyond the FEED phase, funding the development of certain new technologies, or pursuing other projects beyond the early development stages that they are in. Such additional capital could be raised from external financing sources, including from offerings of equity or debt securities, or from restructuring REMC’s existing financing. In the event that such capital is not available, we would not be able to continue some or all of our non-REMC activities. Capital markets experienced extreme uncertainty in recent years, and access to those markets has been difficult. Our failure to raise additional capital when needed would have a material adverse effect on our business, financial condition, results of operations and liquidity.

For further information concerning our potential financing needs and related risks, see “Part I, Item 1. Business,” and “Part I, Item 1A. Risk Factors”. See Note 22 in the Notes to the Consolidated Financial Statements for information concerning a Second Amendment to Credit Agreement, Waiver and Collateral Agent Consent.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenues and expenses during the reporting periods. The most significant estimates and assumptions relate to: revenue recognition, inventories, the valuation of financial assets, long-lived assets and intangible assets, stock based compensation and the realization of deferred income taxes. Actual amounts could differ significantly from these estimates.

Revenue Recognition. We recognize revenue when the following elements are substantially satisfied: there are no uncertainties regarding customer acceptance; there is persuasive evidence that an agreement exists documenting the specific terms of the transaction; the sales price is fixed or determinable; and collectibility is reasonably assured. Management assesses the business environment, the customer’s financial condition, historical collection experience, accounts receivable aging and customer disputes to determine whether collectibility is reasonably assured. If collectibility is not considered reasonably assured at the time of sale, we do not recognize revenue until collection occurs.

Product sales revenues from our nitrogen products manufacturing segment are recognized when the customer takes ownership upon shipment from the East Dubuque Plant or its leased facility and assumes risk of loss, collection of the related receivable is probable, persuasive evidence of a sale arrangement exists and the sales price is fixed or determinable.

Certain product sales occur under product prepayment contracts which require payment in advance of delivery. The Company records a liability for deferred revenue in the amount of, and upon receipt of, cash in advance of shipment. The Company recognizes revenue related to the product prepayment contracts and relieves the liability for deferred revenue when products are shipped. A significant portion of the revenue recognized during any period may be related to prepayment contracts, for which cash may have been collected during an earlier period, with the result that a significant portion of revenue recognized during a period may not generate cash receipts during that period.

Natural gas, though not purchased for the purpose of resale, occasionally is sold under certain circumstances. Natural gas is sold when contracted quantities received are in excess of production requirements and storage capacities, in which case the sales price is recorded in product sales and the related cost is recorded in cost of sales. Natural gas is also sold with a simultaneous gas purchase in order to receive a benefit that reduces raw material cost, in which case the net of the sale price and the related cost of sales are recorded within cost of sales.

Technical service revenues from our alternative energy segment are recognized as the services are provided during each month. Revenues from feasibility studies are recognized based on the terms of the services contract.

Rental income from our alternative energy segment is recognized monthly as per the lease agreement, and is included in the alternative energy segment as a part of service revenues.

Inventories. Our inventory is stated at the lower of cost or estimated net realizable value. The cost of inventories is determined using the first-in first-out method. We perform an analysis on at least a quarterly basis of our inventory balances to determine if the carrying amount of inventories exceeds their net realizable value. The analysis of estimated net realizable value is based on customer orders, market trends and historical pricing. If the carrying amount exceeds the estimated net realizable value, the carrying amount is reduced to the estimated net realizable value. We allocate fixed production overhead costs to inventory based on the normal capacity of our production facilities.

Valuation of Financial Assets, Long-Lived Assets and Intangible Assets. We assess the realizable value of financial assets, long-lived assets and intangible assets for potential impairment whenever events or changes in circumstances indicate that the carrying value may not be recoverable. In assessing the recoverability of our assets, we make assumptions regarding estimated future cash flows and other factors to determine the fair value of the respective assets. As applicable, we make assumptions regarding the useful lives of the assets. If these estimates or their related assumptions change in the future, we may be required to record impairment charges for these assets.

Stock Based Compensation. All stock based compensation awards granted subsequent to September 30, 2005 are included in compensation expense based on grant-date fair value. We use the Black-Scholes valuation model to value the equity instruments issued. The Black-Scholes valuation model uses assumptions of expected volatility, risk-free interest rates, the expected term of options granted, expected rates of dividends and forfeitures. Management determines these assumptions by reviewing current market rates and reviewing conditions relevant to our Company, such as our historical experience relating to the exercise and forfeitures of grants.

Deferred Income Taxes. We have provided a full valuation allowance related to our substantial deferred tax assets. In the future, if sufficient evidence of our ability to generate sufficient future taxable income in certain tax jurisdictions becomes apparent, we may be required to reduce this valuation allowance, resulting in income tax benefits in our consolidated statement of operations. We evaluate our ability to utilize the deferred tax assets quarterly and assess the need for the valuation allowance.

Business Segments

The Company operates in two business segments as follows: (i) nitrogen products manufacturing and (ii) alternative energy. In nitrogen products manufacturing, the Company manufactures a variety of nitrogen fertilizer and industrial products. In alternative energy, the Company develops projects and markets licenses that would use processes for conversion of low-value, carbon-bearing solids or gases into valuable hydrocarbons and electric power. The alternative energy business segment also includes the consolidation of ClearFuels, a variable interest entity.

FISCAL YEAR 2010 COMPARED TO FISCAL YEAR 2009

Continuing Operations:

Revenues

		For the Years Ended
		September 30,
		2010				2009
		(in thousands)
Revenues:
Product shipments		$	128,091			$	184,071
Natural gas sales of excess inventory			2,004				2,378
Total nitrogen products manufacturing		$	130,095			$	186,449
Alternative energy			529				238
Total revenues		$	130,624			$	186,687

		For the Year Ended								For the Year Ended
		September 30, 2010								September 30, 2009
		Tons				Revenue				Tons				Revenue
		(in thousands)								(in thousands)
Product Shipments:
Ammonia			153			$	57,318				126			$	91,413
Urea Ammonium Nitrate			294				52,341				267				71,185
Urea (liquid and granular)			32				12,562				36				15,876
Carbon Dioxide			107				2,780				95				2,571
Nitric Acid			11				3,090				9				3,026
Total			597			$	128,091				533			$	184,071

Nitrogen products manufacturing. Our nitrogen products manufacturing segment provides revenue from sales of various nitrogen fertilizer products manufactured at our East Dubuque Plant, primarily utilized in corn production. The East Dubuque Plant is designed to produce anhydrous ammonia, nitric acid, urea liquor, ammonium nitrate solutions, granular urea and carbon dioxide using natural gas as a feedstock. Revenues are seasonal based on the planting, growing, and harvesting cycles of customers utilizing nitrogen fertilizer.

The decrease in revenues for the year ended September 30, 2010 compared to the year ended September 30, 2009 primarily was due to decreased sales prices for all products which was partially offset by an increase in urea ammonium nitrate sales volume.

The average sales price per ton in the current fiscal year as compared with the prior fiscal year decreased by 49% and 33% for anhydrous ammonia and urea ammonium nitrate solutions, respectively. These two products comprised approximately 86% and 88% of the product sales for each of the years ended September 30, 2010 and 2009, respectively. Average sales prices per ton decreased because the prices for a majority of the earlier period’s shipments had been determined in pre-sale contracts that were signed when fertilizer prices were at peak levels in 2008. Management believes that the significant decline in prices for nitrogen fertilizer that occurred between calendar 2008 and the end of calendar 2009 were due to, among other things, a substantial drop in corn prices and the price of natural gas, a key input, and weak economic conditions.

Alternative Energy. This segment generates revenues for technical services and licensing activities related to Rentech’s technologies, and previously generated revenues from rental income for leasing part of a building we owned. This rental income was included in our alternative energy segment because the rental income was generated from a building, which was sold in April 2010, used in the past by some of our research and development employees. The revenue earned in this segment during fiscal 2010 was technical service revenue. The revenue earned during fiscal 2009 included both technical service revenue of $145,000 and rental revenue of $93,000.

Cost of Sales

		For the Years Ended
		September 30,
		2010				2009
		(in thousands)
Cost of sales:
Product shipments		$	98,448			$	99,117
Turnaround expenses			3,955				—
Natural gas sales of excess inventory			2,259				3,996
Natural gas sales with simultaneous purchase			57				22,775
Total nitrogen products manufacturing			104,719				125,888
Alternative energy			692				3
Total cost of sales		$	105,411			$	125,891

Nitrogen Products Manufacturing. Natural gas and labor and benefit costs comprised approximately 55% and 12%, respectively, of cost of sales on product shipments for the year ended September 30, 2010. Natural gas and labor and benefit costs comprised approximately 61% and 13%, respectively, of cost of sales on product shipments for the year ended September 30, 2009.

Turnaround expenses represent the cost of shutting down the plant for scheduled maintenance, which is done approximately every two years. A plant turnaround occurred in October 2009. As a result, during the year ended September 30, 2010, the Company incurred turnaround expenses of $3,955,000. There was no plant turnaround during the year ended September 30, 2009.

Natural gas, though not purchased for the purpose of resale, is occasionally sold under certain circumstances. Natural gas is sold when contracted quantities received are in excess of production requirements and storage capacities, in which case the sales proceeds are recorded as revenue and the related cost is recorded as a cost of sales. Natural gas may also be sold to a third party with a simultaneous purchase of gas by the Company of the same quantity at a lower price to benefit from location differentials and realize a reduction of raw material cost. In this case, no revenue is recorded for the sale of gas, and the difference between the cost of the gas that was sold and the cost of gas that was simultaneously purchased is recorded directly to cost of sales.

Depreciation expense included in cost of sales from our nitrogen products manufacturing segment was $10,104,000 and $8,280,000 for the years ended September 30, 2010 and 2009, respectively.

Alternative Energy. The cost of sales for our alternative energy segment during the year ended September 30, 2010 and 2009 was for costs incurred for work performed under technical services contracts.

Gross Profit

		For the Years Ended September 30,
		2010				2009
		(in thousands)
Gross profit (loss):
Product shipments		$	29,643			$	84,954
Turnaround expenses			(3,955	)			—
Natural gas sales of excess inventory			(255	)			(1,618	)
Natural gas sales with simultaneous purchase			(57	)			(22,775	)
Total nitrogen products manufacturing			25,376				60,561
Alternative energy			(163	)			235
Total gross profit		$	25,213			$	60,796

Nitrogen Products Manufacturing. The segment had a gross profit margin on product shipments of 23% for the year ended September 30, 2010 as compared to a gross profit margin on product shipments of 46% for the year ended September 30, 2009 primarily due to lower sales prices which was partially offset by lower gas prices.

Operating Expenses

		For the Years Ended
		September 30,
		2010				2009
		(in thousands)
Operating expenses:
Selling, general and administrative		$	28,410			$	24,061
Depreciation and amortization			1,947				1,478
Research and development			19,641				21,381
Other project costs			1,095				—
Loss on impairment			95				—
Loss on disposal of property, plant and equipment			191				17
Total operating expenses		$	51,379			$	46,937

Selling, General and Administrative Expenses. During the year ended September 30, 2010 as compared to the year ended September 30, 2009, selling, general and administrative expenses increased by $4,349,000 or 18%. Stock-based compensation increased by $1,945,000 as a result of additional grants during fiscal 2010. Consulting expenses increased by $747,000 primarily due to an equity grant to a consultant and increases in consulting expenses related to renewable energy projects. Salaries and benefits increased by $456,000 as a result of an accrual for severance payments owed to a former officer of the Company, the acquisition of SilvaGas and the retention of its key employees, annual salary increases and an increase in headcount.

Depreciation and Amortization. A portion of depreciation and amortization expense is associated with assets supporting general and administrative functions and is recorded in operating expense. The majority of depreciation and amortization expense originates at our nitrogen products manufacturing segment and, as a manufacturing cost, is distributed between cost of sales and finished goods inventory, based on product volumes. The amount of depreciation expense within operating expenses increased by $469,000 for the year ended September 30, 2010 which was primarily attributable to amortization of intellectual property acquired in the purchase of SilvaGas’ biomass gasification technology.

Research and Development. We incur research and development expenses in our testing laboratory in Commerce City, Colorado, where we actively conduct work to further improve our technology and to perform services for our customers. These expenses are included in our alternative energy segment. Research and development expenses decreased by $1,740,000 during the year ended September 30, 2010 compared to the year ended September 30, 2009 primarily due to a decrease of $2,622,000 in the accrual for taxes related to the construction of the PDU which was partially offset by an additional $394,000 due to the consolidation of ClearFuels.

Other Project Costs. The Company had secured and was evaluating various sites for its Rialto Project. It was determined that one of the sites, which the Company had an option to acquire, was no longer needed for the development of the project. Therefore, at the end of fiscal 2010, the Company gave notice to terminate the option resulting in the write-off of the previously capitalized option payments of $1,095,000.

Loss on Impairment. The Company had recorded in construction in progress the cost of a feasibility study which it determined in fiscal year 2010 would never be used. Therefore, the cost was written off.

Operating Income (Loss)

		For the Years Ended
		September 30,
		2010				2009
		(in thousands)
Operating income (loss):
Product shipments		$	26,070			$	81,354
Turnaround expenses			(3,955	)			—
Natural gas sales of excess inventory			(255	)			(1,618	)
Natural gas sales with simultaneous purchase			(57	)			(22,775	)
Total nitrogen products manufacturing			21,803				56,961
Alternative energy			(47,969	)			(43,102	)
Total operating income (loss)		$	(26,166	)		$	13,859

Nitrogen Products Manufacturing. The reduction in income from operations for product shipments for the year ended September 30, 2010 as compared to the prior year was primarily due to lower sales prices, partially offset by increased sales volume of urea ammonium nitrate and lower natural gas prices.

Alternative Energy. Loss from operations primarily consists of operating expenses, such as selling, general and administrative; depreciation and amortization; and research and development.

Other Income (Expense), Net

		For the Years Ended
		September 30,
		2010				2009
		(in thousands)
Other income (expense), net:
Interest and dividend income		$	212			$	561
Interest expense			(14,235	)			(14,099	)
Loss on debt extinguishment			(2,268	)			—
Realized loss, net on sale of investments			(1,231	)			—
Gain on equity method investment			1,909				—
Other income (expense), net			63				(269	)
Total other income (expense), net		$	(15,550	)		$	(13,807	)

The increase in other expense for the year ended September 30, 2010 as compared to the year ended September 30, 2009 is primarily due to the loss on debt extinguishment related to paying off the Company’s 2008 Credit Agreement and the net realized loss on the sale of available for sale securities which was partially offset by the gain on equity method investment.

FISCAL YEAR 2009 COMPARED TO FISCAL YEAR 2008

Continuing Operations:

Revenues

		For the Years Ended
		September 30,
		2009				2008
		(in thousands)
Revenues:
Product shipments		$	184,071			$	212,937
Natural gas sales of excess inventory			2,378				3,678
Total nitrogen products manufacturing		$	186,449			$	216,615
Alternative energy			238				678
Total revenues		$	186,687			$	217,293

		For the Year Ended								For the Year Ended
		September 30, 2009								September 30, 2008
		Tons				Revenue				Tons				Revenue
		(in thousands)								(in thousands)
Product Shipments:
Ammonia			126			$	91,413				173			$	93,198
Urea Ammonium Nitrate			267				71,185				313				96,370
Urea (liquid and granular)			36				15,876				34				16,310
Carbon Dioxide			95				2,571				109				2,860
Nitric Acid			9				3,026				14				4,199
Total			533			$	184,071				643			$	212,937

Nitrogen products manufacturing. The decrease in sales for the year ended September 30, 2009 compared to the year ended September 30, 2008 was primarily due to decreased sales volume. Sales volume decreased primarily due to reduced shipments in the first and fourth quarters of fiscal year 2009. During the first quarter of 2009, there was a reduction in fall fertilizer application due to rain-delayed planting and harvesting cycles and due to an early onset of winter weather. During the fourth quarter of 2009, fertilizer shipments decreased due to the general downturn in the economy.

The average sales price per ton for fiscal year 2009 as compared with fiscal year 2008 increased by 35% for anhydrous ammonia and decreased by 13% for urea ammonium nitrate solutions. These two products comprised approximately 88% and 89% of the product sales for each of the years ended September 30, 2009 and 2008, respectively. The average ammonia sales price increased due to selling most of our spring 2009 ammonia shipments on product prepayment contracts, most of which were entered into when fertilizer prices were at their peak. However, we entered into about half of our spring 2009 product prepayment contracts for urea ammonium nitrate solutions after fertilizer prices started to decline, causing the average sales prices to decrease.

Alternative Energy. The revenue earned during fiscal 2009 was technical service revenue of $145,000 from progress billings for work performed under contracts and rental revenue of $93,000. The revenue earned during fiscal 2008 was technical service revenue of $547,000 from progress billings for work performed under contracts and rental income of $131,000.

Cost of Sales

		For the Years Ended
		September 30,
		2009				2008
		(in thousands)
Cost of sales:
Product shipments		$	99,117			$	153,862
Natural gas sales of excess inventory			3,996				3,731
Natural gas sales with simultaneous purchase			22,775				3,040
Total nitrogen products manufacturing			125,888				160,633
Alternative energy			3				109
Total cost of sales		$	125,891			$	160,742

Nitrogen Products Manufacturing. The cost of sales for product shipments for the year ended September 30, 2009 declined from the year ended September 30, 2008 primarily due to lower sales volume. Natural gas and labor and benefit costs comprised approximately 61% and 13%, respectively, of cost of sales on product shipments for the year ended September 30, 2009. Natural gas and labor and benefit costs comprised approximately 62% and 8%, respectively, of cost of sales on product shipments for the year ended September 30, 2008.

Natural gas, though not purchased for the purpose of resale, is occasionally sold under certain circumstances. Natural gas is sold when contracted quantities received are in excess of production requirements and storage capacities, in which case the sales proceeds are recorded as revenue and the related cost is recorded as a cost of sales. Natural gas may also be sold to a third party with a simultaneous purchase of gas by the Company of the same quantity at a lower price in order to realize a reduction of raw material cost. In this case, no revenue is recorded for the sale of gas, and the difference between the cost of the gas that was sold and the cost of gas that was simultaneously purchased is recorded directly to cost of sales.

Depreciation expense included in cost of sales from our nitrogen products manufacturing segment was $8,280,000 and $8,361,000 for the years ended September 30, 2009 and 2008, respectively.

Alternative Energy. The cost of sales for our alternative energy segment during the year ended September 30, 2009 and 2008 was for costs incurred for work performed under a contract.

Gross Profit

		For the Years Ended September 30,
		2009				2008
		(in thousands)
Gross profit (loss):
Product shipments		$	84,954			$	59,075
Natural gas sales of excess inventory			(1,618	)			(53	)
Natural gas sales with simultaneous purchase			(22,775	)			(3,040	)
Total nitrogen products manufacturing			60,561				55,982
Alternative energy			235				569
Total gross profit		$	60,796			$	56,551

Nitrogen Products Manufacturing. The segment had a gross profit on product shipments of 46% for the year ended September 30, 2009 as compared to a gross profit margin on product shipments of 28% for the year ended September 30, 2008 driven by higher ammonia sales prices.

Alternative Energy. The decrease in gross profit for alternative energy was primarily due to the decrease in technical service revenue between fiscal year 2009 and fiscal year 2008.

Operating Expenses

		For the Years Ended
		September 30,
		2009				2008
		(in thousands)
Operating expenses:
Selling, general and administrative		$	24,061			$	33,352
Depreciation and amortization			1,478				1,184
Research and development			21,381				64,477
Loss on impairment			—				9,482
Loss on disposal of property, plant and equipment			17				5
Recovery of payment to vendor			—				(1,473	)
Total operating expenses		$	46,937			$	107,027

Selling, General and Administrative Expenses. During the year ended September 30, 2009 as compared to the year ended September 30, 2008, selling, general and administrative expenses decreased by $9,291,000 or 28%. Stock-based compensation decreased by $1,937,000 as a result of prior grants having become fully vested before the most recent period. Consulting expenses decreased by $1,687,000 due to a one-time modification of warrants in 2008 which resulted in additional stock-based compensation of $813,000 in 2008 and the use of consultants was reduced in 2009. The modification of warrants involved amendments to the exercise prices and expiration dates of warrants to purchase 4,192,000 shares of common stock. Salaries and benefits decreased by $2,357,000 as a result of reductions in staff. $760,000 of the decrease is related to the rescission of a marketing agreement in 2009 which led to a reversal of non-cash marketing expense which was previously recorded in 2008. Travel costs decreased by $891,000 as a result of reduced travel. Information technology expense decreased by $732,000 because 2008 includes non-capitalized costs associated with the implementation of our Oracle financial accounting and enterprise resource planning system.

Depreciation and Amortization. A portion of depreciation and amortization expense is associated with assets supporting general and administrative functions and is recorded in operating expense. The majority of depreciation and amortization expense originates at our nitrogen products manufacturing segment and, as a manufacturing cost, is distributed between cost of sales and finished goods inventory, based on product volumes. The amount of depreciation expense within operating expenses increased by $294,000 for the year ended September 30, 2009 which was mostly attributable to an increase in depreciable computer equipment and software assets.

Research and Development. We incur research and development expenses in our testing laboratory where we actively conduct work to further improve our technology and to perform services for our customers. These expenses are included in our alternative energy segment. During fiscal 2008, we incurred significant research and development expense related primarily to the construction of the PDU and also incurred expenses related to the operation of the PDU and other research and development expense. Research and development expenses decreased by $43,096,000 during the year ended September 30, 2009 compared to the year ended September 30, 2008. The decrease was primarily due to the completion of the construction of the PDU, for which the costs were recorded as research and development expense. Of the research and development expense recorded in the year ended September 30, 2008, $40,046,000 represented construction costs for the PDU.

Loss on Impairment. During the year ended September 30, 2008, the Company suspended development on the conversion of the East Dubuque Plant and recorded an impairment loss of $9,482,000 on assets recorded as capitalized costs incurred in winding down the REMC conversion project. No impairment was recorded on any project in fiscal year 2009.

Recovery of Payment to Vendor. During the year ended September 30, 2008, the Company recovered $1,473,000 that was previously paid to a vendor for work related to the conversion of the East Dubuque Plant. This amount was subsequently applied to unpaid invoices from the vendor on projects other than the conversion of the East Dubuque Plant.

Operating Income (Loss)

		For the Years Ended
		September 30,
		2009				2008
		(in thousands)
Operating income (loss):
Product shipments		$	81,354			$	55,829
Natural gas sales of excess inventory			(1,618	)			(53	)
Natural gas sales with simultaneous purchase			(22,775	)			(3,040	)
Total nitrogen products manufacturing			56,961				52,736
Alternative energy			(43,102	)			(103,212	)
Total operating income (loss)		$	13,859			$	(50,476	)

Nitrogen Products Manufacturing. The increased income from operations for the year ended September 30, 2009 as compared to the year ended September 30, 2008 was primarily due to higher ammonia sales prices.

Alternative Energy. The decrease in the loss from operations for alternative energy of $60,110,000 for the year ended September 30, 2009, was primarily due to the completion of the PDU construction during the year ended September 30, 2008 and no loss on impairment or costs incurred for the REMC conversion.

Other Income (Expense), Net

		For the Years Ended
		September 30,
		2009				2008
		(in thousands)
Other income (expense), net:
Interest and dividend income		$	561			$	1,849
Interest expense			(14,099	)			(7,894	)
Loss on investments			—				(3,011	)
Other income (expense), net			(269	)			120
Total other income (expense), net		$	(13,807	)		$	(8,936	)

Interest Income. The decrease in interest income for the year ended September 30, 2009 as compared to the year ended September 30, 2008 was primarily due to marked decreases in interest rates, partially offset by an overall increase in the amount of funds invested in interest-bearing cash accounts by the nitrogen products manufacturing segment. Interest income from our holdings of available for sale securities decreased during the year ended September 30, 2009 compared to the year ended September 30, 2008 due to lower balances along with the impact of lower interest rates on all balances maintained.

Interest Expense. Interest expense increased by $6,205,000 during the year ended September 30, 2009 as compared to the year ended September 30, 2008. This increase was primarily due to interest payments under the Credit Agreement which we entered into during the third quarter of fiscal 2008 and amortization of discount on our 4.00% Convertible Senior Notes. Interest capitalized to construction in progress increased by $1,253,000 during the year ended September 30, 2009 as compared to the year ended September 30, 2008 primarily due to the Company’s purchase of the site for the Natchez Project in June 2008.

Loss on Investments. During fiscal 2008, we recognized an impairment loss of $3,011,000 on available for sale securities, which was included in our alternative energy segment. These securities were substantially impacted by economic and market pressures and experienced sustained declines in estimated fair values. We experienced no such losses during fiscal 2009.

Other Income (Expense). Other expense for the year ended September 30, 2009 was primarily comprised of early payment fees on term debt.

INFLATION

Inflation has and is expected to have an insignificant impact on the Company’s results of operations and sources of liquidity.

ANALYSIS OF CASH FLOWS

The following table summarizes our Consolidated Statements of Cash Flows:

		For the Years Ended
		September 30,
		2010				2009
		(in thousands)
Net Cash Provided by (Used in):
Operating activities		$	(9,576	)		$	4,370
Investing activities			(24,624	)			(20,313	)
Financing activities			19,229				21,338
Net Increase (Decrease) in Cash		$	(14,971	)		$	5,395

Cash Flows From Operating Activities

Net Loss. The Company had a net loss of $42,262,000 during fiscal 2010, as compared to $21,000 during fiscal 2009. The cash flows provided by (used in) operations during these periods resulted from the following operating activities:

Write-off of Deferred Lease Costs. During 2010, the Company gave notice to terminate the option on a site considered for its Rialto Project resulting in the write-off of the previously capitalized option payments in the amount of $1,095,000.

Non-Cash Interest Expense. Total non-cash interest expense recognized during the fiscal year ended September 30, 2010 was $7,605,000, compared to $6,944,000 during the fiscal year ended September 30, 2009. The non-cash interest expense recognized was due to the amortization of bond issue costs of our convertible notes and amortization of debt issuance costs on borrowings under the term loan.

Loss on Debt Extinguishment. During 2010, the Company refinanced its 2008 Credit Agreement (as defined below) resulting in a loss of $2,268,000.

Property Insurance Claim Receivable. During fiscal 2009, we recorded a property insurance recovery receivable for insured property losses related to a weather-related shutdown of REMC in January 2009. During fiscal 2010, the Company collected the outstanding balance of $1,795,000.

Inventories. Inventories decreased during the year ended September 30, 2010 by $4,684,000 as compared to a decrease during the year ended September 30, 2009 of $5,278,000. Inventories decreased during the year ended September 30, 2010 due to a combination of inventory levels having been high leading into the current fiscal year due to seasonal build-up of inventory prior to the fall ammonia application season and reduction of inventories due to higher than normal sales volumes during the summer of this year. This was partially offset by higher costs of natural gas, our primary raw material, associated with product held in inventory.

Deposits on Gas Contracts. Deposits on gas contracts increased by $1,629,000 during the year ended September 30, 2010 compared to a decrease of $17,644,000 during the prior year. The large decrease in the prior year was caused by an unusually large amount of deposits required as of September 30, 2008 due to a significant drop in natural gas prices after executing the commitments, causing the gas suppliers to require deposits to reduce their credit risk.

Deferred Revenue. We record deferred revenue for product pre-sale contracts to the extent we receive cash payments for those contracts. Deferred revenue decreased $3,730,000 during the year ended September 30, 2010, versus a decrease of $44,605,000 during the year ended September 30, 2009. The decrease was larger in the year-ago period due to both higher prepaid sales prices and a higher volume of tons presold.

Cash Flows From Investing Activities

Proceeds from Sale of Available for Sale Securities. During the year ended September 30, 2010, the Company sold, through a tender offer and various sales, its entire holdings of available for sale securities for approximately $4,769,000, which resulted in a net realized loss on sale of investments of approximately $1,231,000. For the year ended September 30, 2009, there were no such sales.

Purchase of Property, Plant, Equipment and Construction in Progress. The increase in net additions of $8,743,000 for the year ended September 30, 2010 compared to the year ended September 30, 2009 was primarily due to the capitalization of development activities at the Rialto Project.

Cash Flows From Financing Activities

Proceeds from and Retirement of Term Loan. During the year ended September 30, 2010, the Company replaced the 2008 Credit Agreement, which had an outstanding balance of $37,112,000 and issuance costs of $928,000, with the 2010 Credit Agreement which had an initial balance of $62.5 million. The 2010 Credit Agreement was amended on July 21, 2010 resulting in the increase of the principal balance to $67,500,000. The 2010 Credit Agreement, as amended in fiscal 2010, had an aggregate original issue discount amount of $3,075,000.

Debt Issuance Costs. During the year ended September 30, 2010, the Company incurred approximately $4,061,000 of costs related to the 2010 Credit Agreement.

Payments on Line of Credit on Available for Sale Securities. During the year ended September 30, 2010, we paid off the line of credit of $4,532,000 with the net proceeds from the various sales of available for sale securities. For the year ended September 30, 2009, the balance of the line of credit was reduced by $226,000 as a result of interest earned on the securities that was applied to the outstanding balance of the loan.

LIQUIDITY AND CAPITAL RESOURCES

Sources of Liquidity

At September 30, 2010, our current assets totaled $79,298,000, including cash and cash equivalents of $54,146,000, of which $34,934,000 was held at REMC and subject to the restrictions imposed by the 2010 Credit Agreement, as amended, and accounts receivable of $9,586,000. Our current liabilities were $56,642,000. We had long-term liabilities of $98,520,000, most of which related to our long-term convertible senior notes and debt under our 2010 Credit Agreement, as amended. REMC’s income from continuing operations for the years ended September 30, 2010 and 2009 was $10,464,000 and $49,264,000, respectively. The Company’s loss from continuing operations for the years ended September 30, 2010 and 2009 was $42,271,000 and $93,000, respectively.

During fiscal year 2010, we funded our operations primarily from cash flow from REMC’s operations, the proceeds from the 2010 Credit Agreement as amended by the First Amendment (as defined below) and the issuance of our common stock. On November 24, 2010 REMC further amended the 2010 Credit Agreement, and entered into a Second Amendment and a Second Incremental Loan Agreement. Pursuant to the terms of the Second Incremental Loan Agreement, REMC borrowed an additional $52 million incremental term loan, the net proceeds of which were distributed to the Company for general corporate purposes. After giving effect to the Second Incremental Loan and a $20 million prepayment of our term loan made in connection therewith, the total principal amount of outstanding term loans to REMC under the 2010 Credit Agreement, as amended, was approximately $95.3 million. The 2010 Credit Agreement, as amended, generally prohibits distributions of cash from REMC to Rentech until the loan balance is reduced to $65 million and certain leverage tests are met, but the Second Amendment permits a $5 million dividend from REMC to the Company in fiscal year 2011 before the loan balance is reduced to $65 million, subject to compliance with covenants and conditions related to REMC’s financial performance and outlook at the time of the requested dividend. The occurrence of this special dividend would also trigger a required $5 million prepayment of the outstanding loan balance.

In February 2010, we entered into an Equity Distribution Agreement (as amended, the “Equity Distribution Agreement”), which permits the Company to sell up to approximately $43.7 million of remaining aggregate gross sales price of common stock until February 2, 2011. Sales of shares may be made by means of ordinary brokers’ transactions on the NYSE Amex at market prices or as otherwise agreed by our sales agent and us. The sales agent will receive a commission of 1.5% based on the gross sales price per share. On a daily basis, we may sell a number of shares of our common stock up to twenty-five percent of the average daily trading volume of our common stock for the thirty trading days preceding the date of the sale. The net proceeds from any sales under the Equity Distribution Agreement are expected to be used for general corporate purposes. For the period from March 1, 2010 through September 30, 2010, we sold a total of approximately 6.2 million shares of common stock which resulted in aggregate net proceeds of approximately $6.2 million after sales commissions of approximately $0.1 million. In addition to liquidity available from the Equity Distribution Agreement, depending on capital market conditions, other sources of liquidity for corporate activities during fiscal year 2011 could include the issuance of equity or equity-linked securities, project debt and project equity, and various forms of financing from REMC.

As of September 30, 2010, approximately $94.3 million aggregate offering price of securities was available to be sold under our shelf registration statement (including up to $43.7 million of common stock that may be sold under the Equity Distribution Agreement). This report shall not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. Any such offering will be made solely by prospectus.

We may also consider sales of non-core assets as a source of non-dilutive capital to fund the Company’s non-REMC activities. We recently considered inquiries regarding the sale of a portion or all of our interest in REMC. We may in the future decide to pursue such a sale, but we currently believe that the operating expertise, cash flow and financing proceeds that are expected to be generated by REMC are more valuable to us than the likely proceeds of a sale transaction.

Capital markets have experienced periods of extreme uncertainty over the past two years, and access to those markets has been difficult. Our failure to raise additional capital would have a material adverse effect on our business, financial condition and results of operations and liquidity.

Liquidity Requirements

Short-Term Liquidity Requirements. We generally consider our short-term liquidity requirements to consist of those items that are expected to be incurred within the next 12 months. The budgeted non-REMC liquidity needs that we expect to incur in the next twelve months include costs to fund completion of FEED for the Rialto Project, to continue development of the Natchez Project and other projects, operation of the PDU, continued research and development of Rentech’s technologies, construction of the ClearFuels Gasifier at the PDU, and general working capital and administrative needs. We do not expect to require additional capital for these budgeted activities during the next twelve months. We do expect to require additional capital if we elect to pursue additional activities beyond our current budget, such as continuing the development of the Rialto Project beyond the FEED phase, funding the development of certain new technologies, or pursuing other projects beyond the early development stages that they are in. Pre-FEED development activities for our projects require relatively low levels of spending. In the event that capital to move beyond the budgeted activities were not available, we would not be able to advance these projects beyond FEED (in the case of Rialto) or into the feasibility or FEED stages (in the case of other projects). In the event that we decide to pursue unbudgeted activities, and we need additional capital, depending on the availability of such capital, we expect to obtain it through various combinations of project debt and equity, corporate equity, asset sales, equity from strategic partners and suppliers, and various forms of government support.

During the next 12 months, we expect REMC’s principal liquidity needs, which include costs to operate the East Dubuque Plant, such as its ordinary course needs for working capital and capital expenditures, to be met from cash on hand at REMC and cash forecasted to be generated by REMC’s operations. REMC’s fertilizer business is seasonal, based upon the planting, growing and harvesting cycles. Inventories must be accumulated to allow for customer shipments during the spring and fall fertilizer application seasons. The accumulation of inventory to be available for seasonal sales requires that working capital be available at REMC. Our practice of selling substantial amounts of our fertilizer products through prepayment contracts also significantly affects working capital needs at REMC. Working capital available at REMC is also affected by changes in commodity prices for natural gas and nitrogen fertilizers, which are the East Dubuque Plant’s principal feedstock and products.

All outstanding loans under the 2010 Credit Agreement, as amended, are subject to annual amortization and require cash payments of interest. This amortization provision requires us to make payments of 1.875% of the principal amount in each quarter of calendar year 2010 that such term loan was outstanding, 7.5% of the principal amount in calendar year 2011, 15.0% of the entire principal amount in calendar years 2012 and 2013, and the remainder payable in the last six months prior to maturity. The 2010 Credit Agreement, as amended, also requires that a certain percentage of excess cash flow from REMC, as defined in the 2010 Credit Agreement, be applied to repay the term loans and any incremental term loans under the 2010 Credit Agreement, as amended. The percentage of REMC’s excess cash flow required to be applied as a prepayment will depend on REMC’s leverage ratio as of the relevant calculation date and the aggregate outstanding principal amount of loans under the 2010 Credit Agreement, as amended, on such date. See Note 22 in the Notes to the Consolidated Financial Statements.

Long-Term Liquidity Requirements. We generally consider our long-term liquidity requirements to consist of those items that are expected to be incurred beyond the next 12 months. Our principal long-term needs for liquidity are to fund development, detailed engineering, procurement, construction and operation of commercial projects as well as our ongoing research and development expenses, including operation of the PDU, and corporate administrative expenses. The two commercial projects that are the furthest along in their development are the Rialto Project and the Natchez Project, and we have begun early stage development of additional projects. We will require substantial amounts of capital that we do not now have to fund our long-term liquidity requirements and develop commercial projects, for which we anticipate that the construction costs will range from hundreds of millions of dollars to multiple billions of dollars depending upon their size and scope. Depending on the availability of such capital, we expect these projects to be funded by various combinations of project debt and equity, asset sales, corporate debt and equity, equity from strategic partners and suppliers, and various forms of government support.

The outstanding loans under the 2010 Credit Agreement, as amended, mature on July 29, 2014. However, the 2010 Credit Agreement, as amended, requires us to meet the following financial covenants (and failure to meet such covenants could result in acceleration of the outstanding loans):

•

REMC and its subsidiaries cannot spend more than a specified maximum amount of capital expenditures in each fiscal year. From October 1, 2010 through September 30, 2012, the aggregate limit on capital expenditures is $33 million, and such limit varies each succeeding fiscal year. For the nine months ended September 30, 2010, REMC incurred $5.6 million of capital expenditures against a limit of $6 million. If REMC and its subsidiaries do not expend the maximum amount of capital expenditures permitted for any period, then the unused amount from that period may be carried forward to the subsequent period;

	•		REMC and its subsidiaries must maintain a minimum interest coverage ratio for any period of four consecutive fiscal quarters. For fiscal year 2011, the minimum interest coverage ratio requirement ranges from 3.10:1.00 to 4.10:1.00 for the applicable measurement periods. At September 30, 2010, our actual interest coverage ratio was 4.26:1.00;
	•		REMC and its subsidiaries cannot exceed a maximum leverage ratio as of the last day of any period of four consecutive fiscal quarters. The maximum leverage ratio is calculated by dividing the outstanding principal amount of the loans under the 2010 Credit Agreement, as amended, by EBITDA, as defined in the 2010 Credit Agreement, as amended. For fiscal year 2011, the maximum leverage ratio requirement ranges from 2.50:1.00 to 1.80:1.00 for the applicable measurement periods. At September 30, 2010, our actual leverage ratio was 1.95:1.00; and
	•		REMC must maintain at least $7.5 million of unrestricted cash and permitted investments. At September 30, 2010, REMC had $34.9 million of unrestricted cash and permitted investments.

CONTRACTUAL OBLIGATIONS

The following table lists our significant contractual obligations and their future payments at September 30, 2010:

						Less than												More than
Contractual Obligations		Total				1 Year				1-3 Years				3-5 Years				5 Years
		(in thousands)
Continuing Operations
Term loan debt (1)		$	63,291			$	14,268			$	46,766			$	2,257			$	—
Long-term convertible debt (2)			57,500				—				57,500				—				—
Interest payments on debt			18,783				9,222				9,487				74				—
Natural gas (3)			15,294				15,294				—				—				—
Purchase obligations (4)			19,759				19,759				—				—				—
Asbestos removal (5)			268				—				—				—				268
Operating leases			4,678				1,108				1,964				1,606				—
Gas and electric fixed charges (6)			497				371				105				21				—
Capital lease			322				322				—				—				—
Total		$	180,392			$	60,344			$	115,822			$	3,958			$	268

In May 2007, we entered into an Equity Option Agreement with Peabody Venture Fund, LLC (“PVF”). Under the Equity Option Agreement, PVF agreed to fund the lesser of $10.0 million or 20% of the development costs for our proposed coal-to-liquids conversion project at the East Dubuque Plant incurred during the period between November 1, 2006 and the closing date of the financing for the project. In consideration for PVF’s payment of development costs, we granted PVF an option to purchase up to 20% of the equity interest in the project for a purchase price equal to 20% of the equity contributions made to the project at the closing of the project financing, less the amount of development costs paid by PVF as of such time. Through September 30, 2007, the net proceeds from PVF under this agreement were $8,799,000 which was recorded as an advance for equity investment on the Consolidated Balance Sheets. In the first fiscal quarter of 2008, a partial reimbursement to PVF of $907,000 occurred bringing the net total received to $7,892,000. Though our Board of Directors decided to suspend development of the conversion of the East Dubuque Plant, neither we nor PVF have terminated the Equity Option Agreement as of September 30, 2010, and as such, the liability for the advance for equity investment remains.

On June 23, 2009, we entered into a Merger Agreement pursuant to which we acquired SilvaGas. SilvaGas stockholders may be entitled to receive shares of our common stock as earn-out consideration. Potential earn-out consideration will be calculated based on the degree to which the biomass gasification unit implementing SilvaGas technology at our Rialto Project, or an alternative project to be designated by us, achieves certain performance criteria no later than March 29, 2022. Depending on the performance of the gasifier, subject to certain limitations, such additional earn-out consideration may vary from zero to the sum of (i) 6,250,000 shares of our common stock and (ii) that number of shares equal in value to $5,500,000 at the time of any such payment (provided that such number may not exceed 11,000,000 shares). In the event the SilvaGas biomass gasification unit fails to achieve the performance criteria, SilvaGas stockholders may be entitled to receive shares of our common stock with a value equal to a portion of the licensing fees and other royalties we receive from licensing the SilvaGas technology. The SilvaGas stockholders will not be entitled to receive such common stock unless the licensing fees and other royalties received by us exceed a certain threshold.

On September 3, 2010, we entered into the Support Agreement with ClearFuels. We acquired a 25% ownership interest in ClearFuels in June 2009 in exchange for a warrant to purchase Rentech common stock (the “Warrant”). The Warrant was partially vested upon closing of the acquisition of ClearFuels equity with additional vesting to occur after the closing, conditional upon ClearFuels’ achievement of certain milestones.

In December 2009, we and ClearFuels announced that we were jointly selected to receive up to $23 million as a grant from the DOE to construct a biomass gasifier utilizing ClearFuels’ technology at the PDU for the production of renewable synthetic fuels from biomass (the “Project”).

Pursuant to the terms of the Support Agreement, we provided the DOE with a certification of our support of the Project, and we assumed operational control and full decision making authority over the Project as of October 1, 2010. We will be responsible for budgeted construction payments for the Project after October 1, 2010 and will receive reimbursement from the DOE for approximately 62% of those payments and of all costs and expenses we have incurred to support the Project. We estimate that third party cash expenses, excluding costs and expenses incurred to operate the PDU in support of the Project, will total approximately $2 million after receipt of all DOE reimbursements. Those costs and expenses not reimbursed by the DOE would be reimbursed by ClearFuels in the event that ClearFuels were to complete a Qualified Financing as described below.

Our obligations with respect to the Project extend until the earlier of (a) the date that ClearFuels closes a financing with proceeds of at least $25,000,000 (a “Qualified Financing”) for construction of the Project and other technology and development efforts or (b) March 31, 2011. If a Qualified Financing occurs prior to March 31, 2011, then we will be repaid for any costs and expenses not already reimbursed by the DOE, receive a fee equal to 15% of all such costs and expenses and receive a warrant to purchase additional ClearFuels equity at an exercise price per share of one-half of the equity price per share in the Qualified Financing. If no Qualified Financing occurs by March 31, 2011, then we will have the opportunity to exercise an option to merge with and acquire substantially all the remaining equity of ClearFuels for no additional consideration. The terms of the Support Agreement also amend the Warrant to extend the vesting milestone for a Qualified Financing until March 31, 2011.

OFF-BALANCE SHEET ARRANGEMENTS

We have no off-balance sheet arrangements.

Recent Accounting Pronouncements From Financial Statement Disclosures

For a discussion of the recent accounting pronouncements relevant to our operations, please refer to “Recent Accounting Pronouncements” provided under Note 2 to the consolidated financial statements included in Part II, Item 8. of this Form 10-K.

ITEM 7A.		QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest Rate Risk. We are exposed to interest rate risk related to our borrowings under the 2010 Credit Agreement. Borrowings under the 2010 Credit Agreement bear interest at a variable rate based upon either LIBOR with a 2.5% minimum or the lender’s alternative base rate with a 3.5% minimum, plus in each case an applicable margin. At September 30, 2010, LIBOR was approximately 1.36%. As of September 30, 2010, we had outstanding borrowings under the 2010 Credit Agreement of $63.3 million. Based upon the outstanding balances of our variable-interest rate debt at September 30, 2010, and assuming interest rates are above the applicable minimum and increase or decrease by 100 basis points, the potential annual increase or decrease in annual interest expense is approximately $633,000. Under its current policies, the Company does not use interest rate derivative instruments to manage exposure to interest rate changes.

Commodity Price Risk. We are exposed to significant market risk due to potential changes in prices for fertilizer products and natural gas. Natural gas is the primary raw material used in the production of various nitrogen-based products manufactured at the East Dubuque Plant. Market prices of nitrogen-based products are affected by changes in natural gas prices as well as by supply and demand and other factors. In the normal course of business, REMC currently produces nitrogen-based fertilizer products throughout the year to supply the needs of its customers during the high-delivery-volume spring and fall seasons. Fertilizer product inventory is subject to market risk due to fluctuations in the relevant commodity prices. Currently, REMC purchases natural gas for use in its East Dubuque Plant on the spot market, and through short-term, fixed supply, fixed price and index price purchase contracts. Natural gas prices have fluctuated during the last several years, increasing in 2008 and declining to lower levels in 2009 and 2010. A hypothetical increase of $0.10 per MMBTU of natural gas would increase the cost to produce one ton of ammonia by approximately $3.50. REMC has experienced no difficulties in securing supplies of natural gas, however, natural gas is purchased at market prices and such purchases are subject to price volatility.

Alternative Energy. The future success of our alternative energy business depends to a great extent on the levels and volatility of certain commodities such as petroleum-based fuels, natural gas and electricity. It may also depend on the level and volatility of prices or taxes placed on emissions of carbon or other pollutants. The cost of feedstocks for our projects could also materially affect prospective profitability of those projects. We expect that our projects will be designed to produce fuels and power that may compete with conventional fuels and power as well as with fuels and power produced from non-traditional sources. The prices of our products may be influenced by the prices of those traditional or alternative fuels and power. Fluctuations in the price of construction commodities such as concrete, steel and other materials could have a material effect on the construction cost, and therefore of the projected returns to investors, on such projects. Significant fluctuations in such prices may materially affect the business prospects of our alternative energy business.

ITEM 8.		FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

RENTECH, INC.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

		Page
Consolidated Financial Statements:
Reports of Independent Registered Public Accounting Firms			49
Consolidated Balance Sheets			51
Consolidated Statements of Operations			52
Consolidated Statements of Stockholders’ Equity			53
Consolidated Statements of Cash Flows			54
Notes to Consolidated Financial Statements			56
Financial Statement Schedules:
Schedule I — Condensed Financial Information (Parent Entity Only)			90
Schedule II — Valuation and Qualifying Accounts for the years ended September 30, 2010, 2009 and 2008			94

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders of Rentech Inc.

In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of operations, of stockholders’ equity and of cash flows present fairly, in all material respects, the financial position of Rentech, Inc. and its subsidiaries at September 30, 2010 and 2009, and the results of their operations and their cash flows for each of the two years in the period ended September 30, 2010 in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedules of Condensed Financial Information (Parent Entity Only) and Valuation and Qualifying Accounts for the years ended September 30, 2010 and 2009 present fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of September 30, 2010, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company’s management is responsible for these financial statements and financial statement schedules, for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express opinions on these financial statements, on the financial statement schedules, and on the Company’s internal control over financial reporting based on our integrated audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

As discussed in Note 2 to the financial statements, the Company changed the manner in which it accounts for convertible debt instruments, noncontrolling interests, and business combinations in 2010.

As discussed in Note 4 to the financial statements, the Company changed the manner in which it accounts for recurring fair value measurements of financial instruments in 2009.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

As described in Management’s Report on Internal Control over Financial Reporting, management excluded ClearFuels Technology Inc. from its assessment of internal control over financial reporting as of September 30, 2010 because it was consolidated as a variable interest entity due to events that occurred during September 2010. We have also excluded ClearFuels Technology Inc. from our audit of internal control over financial reporting. ClearFuels Technology Inc. is a consolidated variable interest entity whose total assets and total revenues represent less than one percent and 0%, respectively, of the related consolidated financial statement amounts as of and for the year ended September 30, 2010.

/s/ PricewaterhouseCoopers LLP
Los Angeles, California
December 14, 2010

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Stockholders and Board of Directors

Rentech, Inc. and Subsidiaries

Los Angeles, California

We have audited the accompanying consolidated statements of operations, stockholders’ (deficit) equity and comprehensive loss and cash flows of Rentech Inc. and Subsidiaries (the “Company”) for the year ended September 30, 2008. The Company’s management is responsible for these consolidated financial statements. Our responsibility is to express an opinion on these consolidated financial statements based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the results of operations and cash flows of the Company for the year ended September 30, 2008 in conformity with accounting principles generally accepted in the United States of America.

In addition, in our opinion, the financial statement schedules of Condensed Financial Information (Parent Entity Only) and the Valuation and Qualifying Accounts for the year ended September 30, 2008 present fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements.

In its Form 10-K filed on December 14, 2009, the Company has restated its financial statements for the year ended September 30, 2008 to classify and record its deposit payments made under forward gas contracts as deposits on gas contracts instead of inventory and to adjust its inventory write-down for the effects of the change in balance sheet classification.

The Company retrospectively adjusted its historical consolidated financial statements to reflect the adoption of Accounting Standards Codification Subtopic 470-20, Accounting for Convertible Debt Instruments That May Be Settled in Cash Upon Conversion (Including Partial Settlement) effective as of October 1, 2009.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company’s internal control over financial reporting as of September 30, 2008, based on the criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated December 14, 2008, except for the effect of the restatement discussed above as to which the date is December 14, 2009, expressed an adverse opinion on the Company’s internal control over financial reporting because of two material weaknesses.

/s/ EHRHARDT KEEFE STEINER & HOTTMAN PC

Denver, Colorado

December 14, 2008, except for the effects of the restatement discussed above, as to which the date is December 14, 2009, and except for the effects of the October 1, 2009 adoption of the new accounting standard requiring retrospective application discussed above, as to which the date is March 10, 2010.

RENTECH, INC.

		As of September 30,
		2010				2009
ASSETS
Current assets
Cash and cash equivalents		$	54,146			$	69,117
Restricted cash, short-term			100				150
Accounts receivable, net of allowance for doubtful accounts of $100 and $0 at September 30, 2010 and 2009, respectively			9,586				9,757
Inventories			6,966				12,222
Deposits on gas contracts			2,353				724
Prepaid expenses and other current assets			5,699				3,858
Other receivables, net			448				1,809
Total current assets			79,298				97,637
Property, plant and equipment, net			55,299				54,249
Construction in progress			41,098				28,037
Other assets
Other assets and deposits			17,599				14,677
Goodwill			6,660				—
Deferred income taxes			561				—
Available for sale securities, non-current			—				6,000
Total other assets			24,820				20,677
Total assets		$	200,515			$	200,600
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable		$	6,425			$	5,495
Accrued payroll and benefits			5,786				6,204
Accrued liabilities			13,515				11,801
Capital lease obligation			322				—
Line of credit on available for sale securities			—				4,532
Deferred revenue			14,473				18,203
Accrued interest			2,725				2,930
Deferred income taxes			561				—
Current portion of long-term debt and term loan			12,835				36,440
Total current liabilities			56,642				85,605
Long-term liabilities
Long-term debt, net of current portion			—				907
Term loan, net of current portion			48,040				—
Long-term convertible debt to stockholders			42,163				37,717
Advance for equity investment			7,892				7,892
Other long-term liabilities			425				243
Total long-term liabilities			98,520				46,759
Total liabilities			155,162				132,364
Commitments and contingencies (Note 13)
Stockholders’ equity
Preferred stock — $10 par value; 1,000 shares authorized; 90 series A convertible preferred shares authorized and issued; no shares outstanding and $0 liquidation preference			—				—
Series C participating cumulative preferred stock — $10 par value; 500 shares authorized; no shares issued and outstanding			—				—
Common stock — $.01 par value; 450,000 and 350,000 shares authorized at September 30, 2010 and 2009, respectively; 221,731 and 212,696 shares issued and outstanding at September 30, 2010 and 2009, respectively			2,217				2,127
Additional paid-in capital			332,696				320,934
Accumulated deficit			(296,993	)			(254,825	)
Total Rentech stockholders’ equity			37,920				68,236
Noncontrolling interests			7,433				—
Total equity			45,353				68,236
Total liabilities and stockholders’ equity		$	200,515			$	200,600

See Accompanying Notes to Consolidated Financial Statements.

RENTECH, INC.

		For the Years Ended September 30,
		2010				2009				2008
Revenues
Product sales		$	130,095			$	186,449			$	216,615
Service revenues			529				238				678
Total revenues			130,624				186,687				217,293
Cost of sales
Product sales			104,719				125,888				160,633
Service revenues			692				3				109
Total cost of sales			105,411				125,891				160,742
Gross profit			25,213				60,796				56,551
Operating expenses
Selling, general and administrative expense			28,410				24,061				33,352
Depreciation and amortization			1,947				1,478				1,184
Research and development			19,641				21,381				64,477
Other project costs			1,095				—				—
Loss on impairment			95				—				9,482
Loss on disposal of property, plant and equipment			191				17				5
Recovery of payment to vendor			—				—				(1,473	)
Total operating expenses			51,379				46,937				107,027
Operating income (loss)			(26,166	)			13,859				(50,476	)
Other income (expenses), net
Interest and dividend income			212				561				1,849
Interest expense			(14,235	)			(14,099	)			(7,894	)
Loss on debt extinguishment			(2,268	)			—				—
Loss on investments			(1,231	)			—				(3,011	)
Gain on equity method investment			1,909				—				—
Other income (expense), net			63				(269	)			120
Total other income (expenses), net			(15,550	)			(13,807	)			(8,936	)
Loss from continuing operations before income taxes and equity in net loss of investee company			(41,716	)			52				(59,412	)
Income tax expense			11				61				13
Loss from continuing operations before equity in net loss of investee company			(41,727	)			(9	)			(59,425	)
Equity in net loss of investee company			544				84				—
Loss from continuing operations			(42,271	)			(93	)			(59,425	)
Income from discontinued operations			9				72				91
Net loss			(42,262	)			(21	)			(59,334	)
Net loss attributable to noncontrolling interests			94				—				—
Net loss attributable to Rentech		$	(42,168	)		$	(21	)		$	(59,334	)
Net income (loss) per common share attributable to Rentech:
Basic:
Continuing operations		$	(0.20	)		$	0.00			$	(0.36	)
Discontinued operations			0.00				0.00				0.00
Net loss		$	(0.20	)		$	0.00			$	(0.36	)
Diluted:
Continuing operations		$	(0.20	)		$	0.00			$	(0.36	)
Discontinued operations			0.00				0.00				0.00
Net loss		$	(0.20	)		$	0.00			$	(0.36	)
Weighted-average shares used to compute net income (loss) per common share:
Basic and diluted			216,069				174,445				165,480