Quarterly report pursuant to Section 13 or 15(d)

PROPERTY, PLANT AND EQUIPMENT

v3.21.2
PROPERTY, PLANT AND EQUIPMENT
 9 Months Ended
Sep. 30, 2021
Property, Plant and Equipment [Abstract]  
PROPERTY, PLANT AND EQUIPMENT
NOTE C – PROPERTY, PLANT AND EQUIPMENT


On May 7, 2020, through its wholly-owned subsidiary BKRF OCB, LLC, the Company purchased all of the outstanding equity
interests
of
Alon
Bakersfield
Property,
Inc.
a
 
company that owned a crude oil refinery in Bakersfield, California, from Alon
Paramount
Holdings,
Inc.
(“Alon
Paramount”)
for
a
total
fair
value
of
$89.4
million
(excluding
acquisition
costs).
Immediately
prior
to
the
purchase,
Alon
Bakersfield
Propert
y I
nc.
was
converted
into a limited liability company and renamed as “Bakersfield
Renewable Fuels, LLC.” The Company is now retooling the acquired crude oil refinery into a biorefinery. In accordance with ASC
Topic 805,
Business Combinations
, the Company determined that the purchase is an asset purchase and not a business combination
based
the
following
a)
substantially
all
of
the
fair
value
of
the
gross
assets
acquired
is
concentrated
in
a
single
identifiable
asset
group, b)
the existing crude oil based (very high carbon) refinery is not able to produce renewable diesel (very low carbon) fuel, c) no
refinery in the U.S. has been designed specifically around the plant oil feedstock extracted from Camelina seeds, thus the technical
aspect is new and unique to the Bakersfield Biorefinery and d) the Company did not acquire an assembled workforce. Thus, the
acquired asset group does not have the full inputs or substantive process to produce outputs and does not have any acquired revenue
generating
contractual
arrangements.
 
The total fair value of consideration for the purchase of the Bakersfield Biorefinery was $89.4 million, which consisted of $40.0 million of cash, an option right to acquire a 33% equity interest in GCE Acquisitions granted to the seller that was valued at $5.5 million, and an assumption of $43.9 million of liabilities. The liabilities assumed consist of $21.9 million of asset retirement obligations (ARO) and $22.0 million of other environmental remediation liabilities. These liabilities are the estimated costs of clean-up, remediation and associated costs of the acquired assets in accordance with current regulations. The option right was valued using various inputs, including a volatility of 116%, a risk free rate of 0.14% and a marketability discount of 25%. The total consideration of the purchase was allocated to the asset categories acquired based upon their relative fair values, except that the fair value of the asset retirement obligations was allocated to the specific assets to which they relate.


The following summarizes this allocation of the fair value of the consideration and also the reclassification of the pre-acquisition costs: 
 
Asset Category
 
Capitalized Costs
Based on
Acquisition
Valuation
 
 
Allocated
Pre-Acquisition
Costs
 
 
Total
Capitalized
Costs on
Acquisition
 
Property and Equipment
 
 
 
 
 
 
 
 
 
Land
 
$
7,584,961
 
 
$
-
 
 
$
7,584,961
 
Buildings
 
 
2,053,570
 
 
 
-
 
 
 
2,053,570
 
Refinery
 
 
77,845,201
 
 
 
3,222,449
 
 
 
81,067,650
 
Intangible Assets
 
 
1,921,082
 
 
 
-
 
 
 
1,921,082
 
Total
 
$
89,404,814
 
 
$
3,222,449
 
 
$
92,627,263
 
Property, plant, and equipment as of September 30, 2021 and December 31, 2020 are as follows:
 
 
 
September 30,
2021
 
 
December 31,
2020
 
Land
 
$
7,584,961
 
 
$
7,584,961
 
Office Equipment
 
 
62,506
 
 
 
61,078
 
Buildings
 
 
2,053,570
 
 
 
2,053,570
 
Refinery and Industrial Equipment
 
 
86,066,002
 
 
 
86,019,130
 
Transportation Equipment
 
 
136,237
 
 
 
-
 
Construction in Process
 
 
149,811,267
 
 
 
33,212,695
 
Construction Period Interest
 
 
30,347,027
 
 
 
10,220,766
 
Total Cost
 
$
276,061,570
 
 
$
139,152,200
 
Less Accumulated Depreciation
 
 
(268,066
)
 
 
(179,525
)
Property, plant and equipment, net
 
$
275,793,504
 
 
$
138,972,675
 
 
Depreciation expense for property and equipment was approximately $35,000 and $46,000 for the three months ended September 30, 2021 and September 30, 2020, respectively and $
89,000
and $
73,000
for the nine months ending September 30, 2021 and September 30, 2020, respectively
.