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Western Plains Energy, LLC
GENERAL ANNOUNCEMENT TO ALL MEMBERS
The Board of Directors for Western Plains Energy L.L.C. would like to inform
all of our investors that our Annual Meeting will be March 1st, 2005. This is
an informal notification to give you time to plan on attending this meeting. It
will be held at the Oakley High School Auditorium in Oakley Kansas beginning at
7:00 PM.
As of the required filing date for the proxy no candidates, other than the
present board members, had notified Western Plains Energy, LLC or the Board of
Directors of their intent to run for the board. The Board of Directors has made
provisions for any interested party to be a write in candidate.
Thank you and we look forward to seeing you March 1st.
[SPACE INTENTIONALLY LEFT BLANK]
Western Plains Energy, LLC. 3022 County Road 18 . Oakley, Kansas 67748-6064
January 2005
[LOGO] Western Plains Energy, LLC
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INSIDE THIS ISSUE:
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Dividend Payments 1
Grain Vs. Production 1
Commodities Dept. 2
Quality Control 3
Board President News 4
Expansion Update 4
Pictures 5
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DIVIDEND PAYMENTS PAID
As you all know, dividend checks were mailed and should be received by now. We
paid $500 per unit to our investors, a 10% cash return. Remember, you have an
HPIP and Small Producer Tax Credit coming as well. This will be reflected in
your K-1's. We do need your help, if anyone knows of an investor that has not
received there check, please notify us to remedy the problem. The staff triple
checked the investor list to assure accuracy of the mailing, however, sometimes
our investors move and don't let us know. Please Contact: Debbie Nelson our
Administrative Assistant at 785-672-8810. One of her many job responsibilities
is to take care of the investors and investor files. Her e-mail address is
dnelson@wpellc.com, if she is not available contact myself at
mjerhart@wpellc.com. We will make every effort to remedy the problem. Thank you
for taking the risk to make this all possible, the future looks great for our
company.
GRAIN VS. PRODUCTION
Everyone knows we make ethanol from grain. Grain quality is one of the biggest
factors of yield in an ethanol plant, but the least thought about. The quality,
moisture, test weight, and starch content are all variable factors. We run the
grain through a hammer mill and then conveyer it into the slurry tank to start
the cooking process and forget about it. However through the mills we get a wide
range of particle size and inconsistency that often times is ignored. Too large
of grind makes it hard to convert and makes the process inefficient. Too fine of
grind and the slurry balls up and makes pumping very difficult. How can we truly
measure yield without knowing the quality of grain we are bringing into the
plant. High moisture grain is hard to grind and particle size is inconsistent.
We dock for high moisture, but how do we know that what we are docking makes up
for the loss of production. We recognize that we cannot be too picky at times
about what we take based on supply and mother nature. In the lab we are
currently looking at ethanol production compared to grain quality and particle
size. If we know how the grind reacts in our process, we can engineer a way to
gain the most benefit from the grain we buy. There is much more to ethanol
production than many people realize and our objective is to look at all the
possibilities to produce as much ethanol as possible.
Joe Kreutzer
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NEWS FROM THE COMMODITIES DEPARTMENT
Happy Anniversary and Holidays! Believe it or not, by the time your read this,
we will be nearing our one year production anniversary at Western Plains Energy.
What a year it has been! For the employee group, it has been amazing to see the
transformation from a group of employees hoping they could get the job done, to
a group now that knows how to get it done. It has been fun to witness. As we
enter into the holiday season and complete our first year as an ethanol
producer, it is important to reflect on just a few of the things that we are
thankful for:
We are thankful that this past year we witnessed record highs in the energy
markets that helped offset the affects of 8 year highs in the grain market. I
won't say that it all hasn't happened without some "drymouth" moments, but it
has been a rewarding time and we have all gained some important experience.
Fortunately for the plant "mother-nature" treated most of the country to
favorable growing conditions for fall crops and the markets have broken back
$1.50 a bushel from their summer highs. This break in price has more than offset
the reduced values we are seeing in ethanol and the future looks bright for your
company.
We are thankful for quality marketing partners for both our ethanol and
distillers grains. Your company is connected with some of the premier people in
their respective fields. They have done a wonderful job of opening new markets
and advancing your companies interest in securing long term trading partners. We
can do a great job in producing products for sale, but if we can't find quality
buyers who value the products we produce, we are doomed for a short existence.
We are thankful for a dedicated, hard working group of employees. As I stated
before, we started out with very little knowledge about producing ethanol, but
with a determination to learn. They have surpassed everybody's expectations.
Everyone takes pride in running a clean, well maintained, professional operation
that can be viewed as one of the premier plants in the country.
We are thankful for a board of directors who have given their insight, time and
wisdom. They have been dedicated in ensuring that this company is equipped and
positioned to be a leader in the industry. We are thankful for all of the
investors who could visualize the dream that was this company prior to ever
producing a gallon of ethanol. And lastly, we are thankful that we live in a
Free, God fearing country that encourages independent thinking. We are thankful
for the troops who are representing our ideals and freedoms around the globe.
May all of you have a blessed new year!
Eric Sperber
Commodities Manager
Western Plains Energy, LLC Page 3
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QUALITY CONTROL
So many new and exciting happenings! With the plant undergoing an expansion,
and a new year fast approaching it's been difficult to look back when all eyes
are looking forward.
WPE has been up and running for 11 months now and every member of the plant has
done an outstanding job keeping the process in line and operating smoothly. So
well in fact, that the lab has had some time to squeeze in a little R&D on the
side. Currently, we've run four fermentation tests, each with different
variables at various stages in the process, and even though our trials have been
far from conclusive we have commonly found ourselves intrigued by the results.
And as it would happen our intrigue has spurred our enthusiasm...and such is the
circle of life. Once the mind is entertained there is no going back. We look
forward to the countless hours of R&D ahead of us, and are optimistic about
finding our diamond in the rough.
The lab has been equipped with a few new tools to assist us in quality control.
We have acquired new software that allows us to monitor the water flow through
the boiler and cooling tower. We now have a sonic sifter that we use for grain
analysis. This machine gives as a more accurate reading of how the hammer mill
screens are doing, and because it sifts the grain without human intervention it
is also more reliable. And we have just received a monitor that we will connect
to a camera attached to our microscope. We will primarily be using this to get
the plant operators and the lab personnel on the same page for the yeast counts,
but it will also be used occasionally during tours so our visitors can see what
yeast cells actually look like.
Happy Holiday's!
Tammy Nelson
Lab Manager
[PHOTO]
Inside new beer well as it is being built
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NEWS FROM THE BOARD PRESIDENT
I'm sure by now everyone has had a chance to enjoy the first of hopefully many
dividend checks from your investment in Western Plains Energy. Albeit a little
ostentatious on my part, I hope some of you have had the opportunity to mention
how things are going to some of the local naysayers. You should be very proud of
what you helped to create and pleased to see some of the beginning rewards of
what we all have been anticipating. Western Plains Energy is truly a bright spot
in Northwest Kansas if not the brightest spot.
The board of directors met on November 16, 2004 and reviewed the audited Balance
Sheet with our accounting firm. As you know we have changed our fiscal year end
to September 30th in order to get the audit done and get the K-1's out in a more
timely fashion. In looking at our financials from one year ago, September 30,
2003 shareholder equity has increased from $19,107,990 to $25,058,988. This is
an increase of $5,950,998 or a 31.1% increase in book value. Another way to look
at this is to consider that each share initially cost $5,000; there are 4080
shares outstanding, which means the initial equity from the shareholders was
$20,400,000. Today those same shares have a book value of $6,141.91 each. This
is a 22.8% increase of the initial purchase price.
At the same meeting we also reviewed our audited Income Statement. As of
September 30, 2004 we had net income of $6,248,375. This is after only a little
over 8 months of production! In addition to the net income we have been
accelerating our depreciation on all but a few of the initial capital costs.
This was to take advantage of the tax laws while the CCC payments were at their
highest. When you add in depreciation and amortization to our net income you get
a cash profit of $11,188,611. This is unheard of in any start up business except
for today's ethanol business. To qualify this further this is a ROI (return on
investment) of 54.8% and a ROA (return on assets) of 27.11%. As you can tell
this type of financial performance is more exciting to me than discovering a new
way to propagate yeast. If you look at all the returns per share in this first
eight months of operation the numbers get even more interesting. When you add
the 10% cash dividend, the 5% federal tax credit and the 20% state tax credit
(both of which we have applied for), the 31.1% increase in book value, well, I
think you can do the math from here. This type of performance does not happen by
accident. I am convinced that ICM Technology and support are the best in the
industry. I've said it before and I'll say it again, we have a management and
production team that is second to none. Thank you for your faith in the project
and congratulations on your investment.
Jeff Torluemke
Board President
EXPANSION UPDATE
As reported in our last newsletter the Board of Directors made the decision to
expand the plant to produce 40 million gallon plus of ethanol per year. That
project is underway and ahead of schedule. We anticipated beginning that rate of
production January 20th of 2005, now it looks like we are about two weeks ahead
of schedule. Good news for investors, this will give us several days more of
increased production to take advantage of the great ethanol prices we are
experiencing now. The expansion involved adding another centrifuge to separate
the mash into liquid and distiller's grain. We also added a new 750,000 gallon
beer well; the old beer well will be converted into a fermenter. The cooling
tower was expanded to include a third cooling cell, this will be a huge help
this summer during those hot days. Numerous heat exchangers and pumps are being
changed or upgraded. Electrical upgrades were done to accommodate the additional
equipment installed. Lots of work, but once again ICM has exceeded our
expectations and completed the expansion ahead of schedule. This further proves
the fact that your Board members chose the right engineering company to build
this plant.
Western Plains Energy, LLC Page 5
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[PHOTO]
New beer well foundation
[PHOTO]
Mixer going into new beer well
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[WPE LOGO] 3022 County Road 18 Presorted
Oakley, KS 67748 Standard
Phone: 785-672-8810 U.S. Postage Paid
GRINNELL, KS
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"Fueling the Future"