Green Brick Partners, Inc. - Annual Report: 2008 (Form 10-K)

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form 10-K

Commission file number: 001-33530

BIOFUEL ENERGY CORP.
(Exact name of registrant as specified in its charter)

(303) 640-6500
(Registrant's telephone number, including area code)

         Securities registered pursuant to Section 12(b) of the Act:

         Securities registered pursuant to Section 12(g) of the Act:

None

         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 ý

         Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes o    Noý

         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 ý    No o

         Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) 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. ý

         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 definitions of "large accelerated filer," "accelerated filer," and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):

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

         The aggregate market value of voting and non-voting stock held by non-affiliates of the Registrant as of June 30, 2008 was $19,446,000.

         Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of the latest practicable date.

DOCUMENTS INCORPORATED BY REFERENCE

         The Registrant's definitive Proxy Statement for its 2009 Annual Meeting of Shareholders is incorporated by reference into Part III of this Form 10-K.

FORWARD LOOKING STATEMENTS

        Certain information included in this report, other materials filed or to be filed by BioFuel Energy Corp. (the "Company", "we", "our", or "us") 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 contain or incorporate by reference certain statements (other than statements of historical or present fact) that constitute "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.

        All statements other than statements of historical fact are "forward-looking statements", including any projections of earnings, revenue or other financial items, any statements concerning future commodity prices and their effect on the Company, any statements of the plans, strategies and objectives of management for future operations, any statements concerning proposed new projects or other developments, any statements regarding future economic conditions or performance, any statements of management's beliefs, goals, strategies, intentions and objectives, and any statements of assumptions underlying any of the foregoing. Words such as "may", "will", "should", "could", "would", "predicts", "potential", "continue", "expects", "anticipates", "future", "intends", "plans", "believes", "estimates" and similar expressions, as well as statements in the future tense, identify forward-looking statements.

        These statements are necessarily subjective and involve known and unknown risks, uncertainties and other important factors that could cause our actual results, performance or achievements, or industry results, to differ materially from any future results, performance or achievements described in or implied by such statements. Actual results may differ materially from expected results described in our forward-looking statements, including with respect to correct measurement and identification of factors affecting our business or the extent of their likely impact, the accuracy and completeness of the publicly available information with respect to the factors upon which our business strategy is based or the success of our business. Furthermore, industry forecasts are likely to be inaccurate, especially over long periods of time and in relatively new and rapidly developing industries such as ethanol.

        Forward-looking statements should not be read as a guarantee of future performance or results, and will not necessarily be accurate indications of whether, or the times by which, our performance or results may be achieved. Forward-looking statements are based on information available at the time those statements are made and management's belief as of that time with respect to future events, and are subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in or suggested by the forward-looking statements. Important factors that could cause such differences include, but are not limited to, those factors discussed under the headings "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in this Form 10-K.

        Should one or more of the risks or uncertainties described above or elsewhere in this Form 10-K occur, or should underlying assumptions prove incorrect, our actual results and plans could differ materially from those expressed in any forward-looking statements. We specifically disclaim all responsibility to publicly update any information contained in a forward-looking statement or any forward-looking statement in its entirety and therefore disclaim any resulting liability for potentially related damages.

        All forward-looking statements attributable to us are expressly qualified in their entirety by this cautionary statement.

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PART I

ITEM 1.    BUSINESS

Overview

        BioFuel Energy Corp. produces and sells ethanol and its co-products (primarily distillers grain), through its two ethanol production facilities located in Wood River, Nebraska and Fairmont, Minnesota. Our ultimate goal is to become a leading ethanol producer in the United States. In late June 2008, we commenced commercial operations and began to produce ethanol at both of our plants, each having a nameplate capacity, based on the maximum amount of permitted denaturant, of 115 million gallons per year ("Mmgy"). In December 2008, we achieved project completion of both of the plants. We are now focused on optimizing production and streamlining operations with the goal of producing at nameplate capacity at the lowest possible cost per gallon.

        From inception, we have worked closely with Cargill, Inc., one of the world's leading agribusiness companies, with whom we have an extensive contractual relationship. The two plant locations were selected primarily based on access to corn supplies, the availability of rail transportation and natural gas and Cargill's competitive position in the area. At each location, Cargill has a strong local presence and owns adjacent grain storage facilities. Cargill provides corn procurement services, markets the ethanol and distillers grain we produce and provides transportation logistics for our two plants under long-term contracts. In addition, we lease grain storage and handling facilities adjacent to our plants from affiliates of Cargill. We believe that our relationship with Cargill will provide us with a number of competitive advantages.

        The Company previously evaluated three similar sites and incurred site development costs for the possible construction of additional plants. During the year ended December 31, 2008, the Company decided to no longer pursue construction of these sites and therefore has written off the associated development costs.

        Our operations and cash flows are subject to fluctuations due to changes in commodity prices. We intend to use derivative financial instruments such as futures contracts, swaps and option contracts to manage commodity prices. See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and capital resources; and—Hedging Losses" elsewhere in this report.

        We are a holding company with no operations of our own, and are the sole managing member of BioFuel Energy, LLC, (the "LLC"), which is itself a holding company and indirectly owns all of our operating assets. The Company's ethanol plants are owned and operated by the Operating Subsidiaries of the LLC.

Restructuring Strategy

        As disclosed elsewhere in this Annual Report, we incurred a loss before minority interest of $84.1 million in 2008, primarily due to hedging losses on corn contracts and significant costs associated with the start up and operation of our plants. We continue to suffer operating losses in 2009 resulting from poor operating margins due to the relative prices of corn and ethanol. Our liquidity position continues to decline as a result of these losses. In addition, under the terms on the Company's senior debt facility with a group of lenders financing construction of our plants, minimum quarterly principal payments of $3,150,000 are scheduled to begin on June 30, 2009. Based on current operating margins and the Company's liquidity position, the Company may not be able to generate sufficient cash flow to make principal and interest payments when they become due during 2009. Failure to make these payment obligations when they become due would result in events of default under the senior debt facility, which we would have up to 3 days to cure.

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        We have initiated a company-wide business restructuring plan to reduce costs and are currently exploring various alternatives to address our liquidity issues. These include: (i) reducing operating expenses through headcount reductions or operating efficiency initiatives; (ii) reducing the cost of various inputs and services by renegotiating the terms of supply and service agreements, including our agreements with Cargill; (iii) seeking forbearance or some other accommodation from our lenders; (iv) seeking new capital, either from new or existing investors or (v) some combination of the foregoing or other measures. However there can be no assurance that we will be successful in achieving any of these objectives or, if successfully implemented, that these initiatives will be sufficient to address our lack of liquidity. Our ability to execute our operating strategies will be dependent upon our ability to overcome our lack of liquidity. If we are unable to reach an agreement with our lenders to restructure our debt or are unable to raise additional capital, or are otherwise unable to generate sufficient liquidity from our operations to satisfy our debt obligations, it may have a material adverse effect on our liquidity and may result in our inability to continue as a going concern. This in turn could potentially force us to seek relief from creditors through a filing under the U.S. Bankruptcy Code. See, "Management's Discussion and Analysis of Financial Condition and Results of Operations—Going Concern" elsewhere in this Annual Report.

Our relationship with Cargill

        We have entered into a number of long-term contracts with Cargill, which will provide us access to corn supply, an extensive logistics and transportation network and an experienced marketer of ethanol and distillers grain. We also have the opportunity to utilize Cargill's risk management services. Cargill participates in almost every aspect of the corn industry in the United States, including operation of grain elevators, management of export facilities, transportation, ethanol production and livestock nutrition. Pursuant to 10-year ethanol marketing agreements and 10-year distillers grain marketing agreements, Cargill has agreed to market 100% of the ethanol and distillers grain produced at our Wood River and Fairmont facilities and, under 20-year corn supply agreements, has agreed to supply 100% of our corn for these facilities. In addition, Cargill, through an equity investment, owns approximately 5% of our company. We believe that our relationship with Cargill will provide us with a number of competitive advantages.

        During the second quarter of 2008, the LLC entered into various derivative instruments with Cargill in order to manage exposure to commodity prices for corn and ethanol, generally through the use of futures, swaps, and option contracts. During August 2008, the market price of corn declined sharply, exposing the LLC to large unrealized losses and significant unmet margin calls under these contracts. Cargill began liquidating the hedge contracts in August 2008 and by September 30, 2008 the LLC was no longer a party to any hedge contracts for any of its commodities. The Company recorded $39.9 million in losses during the year ended December 31, 2008 resulting from the liquidation of its hedge contracts. In January 2009, the LLC and Cargill entered into an agreement which finalized the payment terms for the remaining $17.4 million owed to Cargill by the LLC related to these hedging losses. See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and capital resources—Cargill debt agreement" elsewhere in this Annual Report.

Corn supply

        Our ethanol facilities each require approximately 41 million bushels of corn per year in order to produce the 115 Mmgy of expected ethanol output. Under our corn supply agreements, Cargill will be the exclusive supplier of corn to our facilities for a period of 20 years, and has agreed to provide 100% of the plants' corn requirements. Under the agreements, Cargill will deliver U.S. No. 2 yellow dent corn with maximum moisture of 15.0% and meeting other certain specifications. On a daily basis, Cargill is providing bid sheets reflecting the expected price levels required to purchase corn for the

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upcoming delivery period at each of the plants. We pay the applicable corn futures price then in effect, less the local basis differential paid by Cargill to purchase corn on our behalf, plus an origination fee of $0.045 per bushel.

        We have also entered into concurrent 20-year leases of Cargill's existing grain elevators at each of our Wood River and Fairmont sites. These elevators will provide sufficient corn storage capacity to service the plants at normal operating levels plus excess capacity to allow us to purchase corn opportunistically, for example, based on seasonality.

Sales logistics

        Both of our ethanol plants are located adjacent to a rail mainline operated by the Union Pacific Railroad. A railcar unit train loading facility capable of handling up to 110 cars has been constructed at each of the plants. A 110 car unit train will hold approximately 3.3 million gallons of ethanol, roughly equivalent to nine days of ethanol production at each of these plants. We also have storage capacity to accommodate 10 days of ethanol production and 10 days of dried distillers grain production at each of these plants. Each of our plants also has road access for loading and transportation of ethanol and distillers grain by truck, as needed.

        Under our ethanol marketing agreements and distillers grain marketing agreements with Cargill, Cargill performs a number of logistics functions relating to the ethanol and distillers grain produced at our facilities, utilizing its extensive network of rail and trucking relationships. These functions include arranging for rail and truck freight, bills of lading and scheduling pick-up appointments. Under the ethanol marketing agreements, we are responsible for providing tank railcars to service these facilities, and under the distillers grain marketing agreements, we are responsible for providing covered hopper railcars to service these facilities. In that regard, we have entered into 10-year leases for approximately 529 tank railcars and 346 hopper railcars from Trinity Industries Leasing Company.

Marketing arrangements

Ethanol marketing

        We expect all of our ethanol to be sold to Cargill as our third party marketer and distributor. Cargill has established relationships with many of the leading end-users of ethanol products such as major oil companies and refiners, as well as independent jobbers, storage companies and transportation companies. Our ethanol is "pooled" into a cooperative system whereby we receive the average price of the ethanol sold for all producers in the marketing group, which includes all ethanol produced by Cargill in the United States.

        Under our existing ethanol marketing agreements with Cargill, we have agreed to sell to Cargill, and Cargill has agreed to purchase from us, 100% of the fuel grade ethanol produced at our two facilities, including as a result of any expansion of these facilities, for a period of 10 years. Except in the case of certain force majeure events, Cargill will be the exclusive marketer of the ethanol produced at these facilities. We have agreed to pay Cargill a commission for its ethanol marketing. Cargill markets and distributes our ethanol pursuant to a common marketing pool program, under which Cargill currently markets its own ethanol and ethanol for third parties. Each participant in the pool receives the same price for its share of ethanol sold, net of freight and other agreed costs incurred by Cargill with respect to the pooled ethanol. Freight and other charges are divided among pool participants based upon each participant's ethanol volume in the pool rather than the location of the plant or the delivery point of the customer.

        Under our arrangements with Cargill, we have the ability to opt out of the marketing pool described above. In order to opt out of the marketing pool, we would need to provide six-months notice prior to the date on which ethanol will first be delivered under the contract or any anniversary

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of that date, except that we may be obligated to participate in the pool for up to 18 months to the extent necessary to allow Cargill to fulfill contractual commitments to deliver ethanol from the pool. We will also have the ability to sell ethanol directly to end-customers on a long-term basis, using Cargill as an agent, and in the future we may do so if an attractive opportunity arises. In these circumstances, Cargill would continue to provide transportation and logistics services, would act as a contracting agent and would continue to be paid commissions by us. We will evaluate the desirability of selling ethanol directly to end-customers on an ongoing basis.

Distillers grain marketing

        We expect all of our distillers grain to be sold to Cargill as our third party marketer and distributor. Our dried distillers grain is primarily marketed nationally to agricultural customers for use as an animal feed ingredient. Due to its limited shelf life and high freight costs, our wet distillers grain is sold to local agricultural customers for use as an animal feed ingredient. Under our existing distillers grain marketing agreements with Cargill, we have agreed to sell to Cargill, and Cargill has agreed to purchase from us, all of the distillers grain produced at our two facilities for a period of 10 years. Except in the case of certain force majeure events, Cargill will be the exclusive marketer of the distillers grain produced at these facilities. We have agreed to pay Cargill a commission for its distillers grain marketing.

Other agreements with Cargill

        In addition to the agreements described above, our relationships with Cargill with respect to our ethanol facilities are each governed by a master agreement. Each of these master agreements provides certain terms and conditions that apply to all of our agreements with Cargill with respect to the relevant plant. The master agreements contain a right of first negotiation in favor of Cargill in the event we subsequently acquire or construct additional ethanol facilities. Under this right, Cargill and we have agreed to negotiate in good faith for Cargill to provide all of the commercial arrangements covered by the agreements described below with respect to any additional facilities. The master agreements allow for payments due and owing to each party under all of our agreements with Cargill to be netted and offset by the parties. There are currently no plans to net or offset such amounts. We have also entered into grain facility leases and corn advisory agreements with respect to each of our facilities, and an additional agreement with Cargill regarding certain ownership matters.

Grain facility leases

        We have leased Cargill's grain facilities located adjacent to each plant, for the purpose of receiving, storing and transferring corn to each ethanol facility. Under each of these leases, which have an initial term of twenty years, the annual rental amount is $800,000 for the Fairmont plant and $1,000,000 for the Wood River plant so long as the associated corn supply agreements with Cargill remain in effect. Should the Company not maintain its corn supply agreements with Cargill, the minimum annual payments under each lease increase to $1,200,000 and $1,500,000, respectively, and increase annually based on the percentage change in the Consumer Price Index. Under the lease agreements, we are responsible for the maintenance and repair of the premises. We will be in default under the leases, and Cargill will have the right to terminate the relevant lease, if we fail to pay any rent or other amounts due to Cargill within 30 days following written notice that such amounts are due and payable, default in any non-monetary obligation under the lease and fail to cure such default within a specified time, become subject to certain events of bankruptcy or insolvency or permit the relevant lease to be sold under any attachment or execution.

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Corn risk management services

        We have entered into a futures advisory agreement with Cargill for each of our Wood River and Fairmont facilities. Pursuant to these agreements, which have initial terms of ten years, Cargill will provide us with its hedging and other risk management services for corn purchasing. Pursuant to the futures advisory agreements, we will pay Cargill a flat fee per bushel per calendar month based on the projected number of bushels of corn that are hedged.

Additional agreement with Cargill

        Cargill has made an equity investment in our company. Under the terms of an agreement with Cargill, Cargill has the right to terminate any or all of its arrangements with us for any or all of our facilities if any of five identified parties or their affiliates acquires 30% or more of our common stock or the power to elect a majority of our Board. Cargill has designated five parties, each of which is currently engaged primarily in the agricultural commodities business, and it has the right to annually update this list of designated parties, so long as the list does not exceed five entities and the affiliates of such entities. The five parties currently identified by Cargill are Archer Daniels Midland Company, CHS Inc., Tate & Lyle PLC, The Scoular Company and Bunge Limited.

Delta-T technology licenses

        Each of our two facilities was constructed by TIC Wyoming, an industrial general contracting firm, under engineering, construction and procurement (EPC) contracts, utilizing an operations and process technology licensed from its joint venture Delta-T Corporation, an engineering and design firm. In connection with each of the EPC contracts, Delta-T granted to us limited licenses to use Delta-T's proprietary technology and information in connection with the operation, maintenance, optimization, enhancement and expansion of each of our facilities up to the designed limits. Consideration for the licenses was included as part of the payments under the EPC contracts.

Industry

        Ethanol is a clean burning, high-octane fuel that is produced from the fermentation of carbohydrates such as grains, starches and sugars. In the United States, ethanol is produced primarily from corn. It is used primarily as a gasoline additive to increase octane rating and to comply with air emissions regulations by reducing emissions of carbon monoxide and nitrogen oxide. The Renewable Fuel Standard, or RFS, mandates that renewable biofuels comprise a minimum of 10.5 billion gallons of the U.S. fuel supply in 2009 rising to 15 billion gallons in 2015. Fuel blended with up to 10% ethanol, also referred to as E10 fuel, is approved for use by major motor vehicle manufacturers and is often recommended as a result of ethanol's clean burning characteristics. Ethanol comprises up to 85% of E85 fuel. E85 fuel currently represents a relatively small portion of the U.S. gasoline supply. Approximately six million vehicles out of more than 200 million vehicles in the United States today are Flexible Fuel Vehicles, or FFVs, capable of using E85 fuel.

        We believe the ethanol market will continue to grow as a result of a shortage of domestic petroleum refining capacity, federally mandated renewable fuel usage, favorable tax treatment, ethanol's clean burning characteristics and geopolitical and environmental concerns with petroleum based fuels. Reasons for continued growth prospects in the ethanol market include:

Blending benefits

        Ethanol has an octane rating of 113, and is added to gasoline to raise the octane level of gasoline. Unblended gasoline typically has a base octane level of approximately 84. Typical gasoline and ethanol blends (up to E10) have octane ratings ranging from 87 to 93. Higher octane gasoline has the benefit

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of reducing engine knocking. Gasoline with higher octane typically has been sold at a higher price per gallon than lower octane gasoline.

Expansion of gasoline supply

        By blending ethanol with gasoline, refiners can expand the volume of fuel available for sale. As a result, refiners can produce more fuel from a barrel of oil and expand their ability to meet consumer demand, especially when refinery capacity and octane sources are limited. According to the Energy Information Administration, between 1980 and 2005, petroleum refining capacity in the United States decreased approximately 5% while domestic demand increased approximately 21%. We believe that increased pressure on domestic fuel refining capacity will result in greater demand for ethanol.

Legislative and government policy support

        The Energy Policy Act of 2005, or the 2005 Act, established the initial RFS, which is a minimum standard for use of renewable fuels by refiners, importers and certain blender's of gasoline sold in the United States. The original RFS mandated minimum annual use of 7.5 billion gallons per year of renewable fuels in the United States by 2012, including a mandate of 5.4 billion gallons in 2008.

        The Energy Independence and Security Act of 2007, or the 2007 Act, increased the original RFS mandate to require 15.2 billion gallons per year by 2012, increasing to 36 billion gallons of renewable fuels per year by 2022. The new target is expected to be reached by phasing in additional volumes of both conventional biofuels (including corn-based ethanol) and "advanced biofuels," such as cellulosic ethanol and biomass based diesel.

        The 2007 Act increased the mandated minimum level of use of renewable fuels for the year 2008 to 9 billion gallons (up from 5.4 billion gallons under the original RFS enacted in 2005), all of which may come from conventional biofuels. The RFS for conventional biofuels then increases each year from 2008 through 2015, leveling off at 15 billion gallons per year for 2015 and each subsequent year through 2022.

        The RFS for alternative fuels begins in 2009 with 600 million gallons per year, increasing incrementally to 21 billion gallons of the overall mandate of 36 billion gallons of renewable fuel by 2022.

        As it provides for mandatory minimums, the RFS sets a floor on the amount of ethanol to be consumed. According to the Renewable Fuels Association ("RFA"), industry capacity in the United States was approximately 12.4 billion gallons per year as of January 2009, with an additional 2.1 Bgpy of capacity under construction. The ethanol industry in the United States consisted of approximately 193 production facilities as of January 2009 with 25 facilities under construction or expansion, and is

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primarily corn-based. The RFS requires motor fuels sold in the United States to contain in the aggregate the following minimum volumes of renewable fuels:

        RFS volumes for both conventional and advanced renewable fuels in the years to follow 2022 will be determined by a governmental administrator, in coordination with the U.S. Department of Energy and U.S. Department of Agriculture.

        The 2007 Act and the 2005 Act also proposed credit trading programs to facilitate meeting the industry-wide renewable fuels requirements. The Environmental Protection Agency has proposed a rule for issuing and trading the credits.

Environmental benefits

        Ethanol, as an oxygenate, reduces tailpipe emissions when added to gasoline. The additional oxygen in the ethanol results in a more complete combustion of the fuel in the engine cylinder, resulting in reduced carbon monoxide and nitrogen oxide emissions. Prior federal programs that mandated the use of oxygenated gasoline in areas with high levels of air pollution spurred widespread use of ethanol in the United States.

Favorable tax treatment

        Refiners and blenders that blend ethanol with gasoline can also take advantage of Volumetric Ethanol Excise Tax Credits, or VEETC (commonly referred to as the "blender's credit"), that entitles them to a credit of $0.45 a gallon of ethanol—or $0.045 a gallon of gasoline for a 10% ethanol blend against the excise tax they pay on gasoline. We believe the VEETC will enable ethanol to continue to comprise a significant portion of the U.S. fuel supply. The blender's credit is scheduled to expire on December 31, 2011, unless it is extended by Congress. The benefit of the blenders' tax credit can be captured by refiners or passed on to consumers.

Replacement of MTBE

        Because of their blend characteristics, availability and cost, ethanol and MTBE were the two primary additives used to meet the Clean Air Act's oxygenate requirements. Because MTBE could be produced and blended with gasoline at the refinery and transported through a pipeline, it was initially the preferred oxygenate ingredient used by the petroleum industry in most reformulated gasoline.

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Before 2003, ethanol was used primarily as a fuel extender and octane enhancer, predominantly in the Midwest.

        In recent years, health and environmental concerns have arisen from the discovery of the presence of MTBE, a suspected carcinogen, in ground water supplies. As a result, 25 states, including California, New York and Connecticut, have banned or significantly limited the use of MTBE. These states accounted for more than half of the MTBE consumed in the US. Product liability concerns regarding MTBE increased following passage of the Energy Policy Act, which did not contain limitations on product liability claims relating to MTBE use. As a result, refiners have been phasing out MTBE, creating additional demand for ethanol outside of the Midwest and California. Ethanol has served as a replacement for much of the MTBE volumes that have been eliminated because of its favorable production economics, high octane rating, and clean burning characteristics.

Geopolitical concerns

        The United States is dependent on foreign oil. Political unrest and attacks on oil infrastructure in the major oil-producing nations, particularly in the Middle East, have periodically disrupted the flow of oil. Fears of terrorist attacks have added a "risk premium" to world oil prices. At the same time, developing nations such as China and India have increased their demand for oil. As a result, NYMEX oil prices have ranged dramatically in recent years, particularly in the summer and fall of 2008. As a domestic, renewable source of energy, ethanol can help to reduce the United States' dependence on foreign oil by increasing the amount of fuel that can be consumed for each barrel of imported crude oil.

Ethanol as a gasoline substitute

        Automakers in the United States have been accelerating work on their Flexible Fuel Vehicles, or FFVs, programs, producing vehicles that are capable of running on blends up to 85% ethanol, according to the American Coalition for Ethanol. Management believes that motorists may increasingly choose FFVs due to their lower greenhouse gas emissions, flexibility and performance characteristics. Future widespread adoption of FFVs could significantly boost ethanol demand and reduce the consumption of gasoline. According to the RFA, there are currently more than six million FFVs and 1,400 gasoline stations in the United States that distribute E85. In addition to E85, select gasoline stations in South Dakota and Minnesota have blender pumps that allow consumers to choose between several ethanol blends such as E10, E20, E30, E40 and E85. A recent study conducted by the University of North Dakota and the Minnesota Center for Automotive Research concluded that of several models of FFV's tested, the optimum blends were between E20 and E40, and resulted in these vehicles obtaining improved gas mileage over straight unleaded gasoline.

Supply of ethanol

        The primary feedstock for ethanol production in the United States is corn. Proximity to corn supplies is a crucial factor in the economics of ethanol plants, as transporting corn is much more expensive than transporting the finished ethanol product. As such, the ethanol industry is geographically concentrated in the Midwest based on the proximity to the highest concentration of corn supply. In addition to corn, the ethanol production process requires natural gas or, in some cases, coal in order to power the facility and dry distillers grain.

        Despite the geographic concentration, production in the ethanol industry remains fragmented. According to the RFA, while domestic ethanol production increased from 1.3 billion gallons in 1997 to 9.2 billion gallons in 2008, the top ten producers (including the Company) accounted for approximately 48% of the industry's total estimated production capacity as of December 2008. Smaller producers and farmer-owned cooperatives, all of which have production capacities less than ours, generate the

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remaining production. Since a typical ethanol facility can be constructed in approximately 18 months from groundbreaking to operation, the industry is able to forecast capacity additions for up to 18 months in the future. As of January 2009, the RFA estimates that approximately 2.1 Bgpy of additional production capacity was under construction at 25 new or existing ethanol facilities. Archer Daniels Midland Company, the second largest domestic ethanol producer, has announced plans to increase its production capacity by 550 Mmgy, approximately 51%, by the end of 2009. As a result of this projected increase in production, the ethanol industry faces the risk of excess capacity. See "Risk Factors".

        Ethanol is typically either produced by a dry-milling or wet-milling process. Although the two processes feature numerous technical differences, the primary operating trade-off of the wet-milling process is a higher co-product yield in exchange for a lower ethanol yield. Dry-milling ethanol production facilities constitute the substantial majority of new ethanol production facilities constructed in the past five years because of the increased efficiencies and lower capital costs of dry-milling technology. Older dry-mill ethanol facilities typically produce between five and 50 Mmgy, with newer dry-mill facilities producing over 100 Mmgy and enjoying economies of scale in both construction and operating costs per gallon. According to the RFA, over 90% of the ethanol production capacity in 2008 was comprised of dry-mill facilities, with the remainder coming from wet-mill facilities.

        With the largest proportion of ethanol production, the Midwest is also one of the largest consumers of ethanol fuel in the United States. After California, which is the largest consumer of ethanol, Midwestern states such as Minnesota, Illinois and Ohio are the largest consumers of ethanol. Additionally, the state MTBE bans in Connecticut and New York have increased the ethanol consumption in these states. Various states have mandated ethanol use, including Minnesota, Ohio and Hawaii. These state policies require the use of ethanol above what is required by federal regulations, including the RFS.

Legislation

        In addition to the legislation described above, there have been various other legislative incentives that have spurred growth in the ethanol industry. These incentives include:

State and local incentives

        Twenty-one states have implemented incentives to encourage ethanol production and use. These incentives include tax credits, producer payments, loans, grants, tax exemptions and other programs. Midwestern states have initiated most of the programs and policies to promote ethanol production and development. States on the East and West Coasts also are beginning to initiate ethanol production programs in connection with drives to construct ethanol plants in these states.

State legislation banning or significantly limiting the use of MTBE

        In recent years, due to environmental concerns, a number of states, including California, Connecticut and New York, have banned, or significantly limited, the use of MTBE. Ethanol has served as a replacement for much of the discontinued MTBE volumes and is expected to continue to serve as a primary replacement product in the future for MTBE volumes that are removed from the fuel supply.

Federal tariff on imported ethanol

        In 1980, Congress imposed a tariff on foreign produced ethanol, which typically is produced at a significantly lower cost from sugar cane, to encourage the development of a domestic, corn-derived ethanol supply. This tariff was designed to prevent the federal tax incentive from benefiting non-U.S. producers of ethanol. The tariff is $0.54 per gallon and is scheduled to expire on December 31, 2010. In addition, there is a flat 2.5% ad valorem tariff on all imported ethanol.

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        Ethanol imports from 24 countries in Central America and the Caribbean Islands are exempt from the tariff under the Caribbean Basin Initiative. The Caribbean Basin Initiative provides that specified nations may export an aggregate of 7.0% of U.S. ethanol production per year into the United States, with additional exemptions from ethanol produced from feedstock in the Caribbean region over the 7.0% limit. In addition, the North American Free Trade Agreement, which went into effect on January 1, 1994, allows Canada and Mexico to import ethanol duty-free. Imports from the exempted countries may increase as a result of new plants under development.

Ethanol production process

        The dry-mill process of using corn to produce ethanol and co-products that we use at our plants is described below.

Step one: grain receiving, storing and milling

        Corn is delivered by rail and by truck, at which point it is inspected, weighed and unloaded in a receiving building and then transferred to storage bins. On the grain receiving system, a dust collection system limits particulate emissions. Truck scales and a rail car scale weigh delivered corn. The corn is then unloaded to the storage systems consisting of concrete and steel storage bins. From its storage location, corn is conveyed to cleaning machines called scalpers to remove debris from the corn before it is transferred to hammermills or grinders where it is ground into a flour, or "meal."

Step two: conversion and liquefaction, fermentation and evaporation systems

        The meal is conveyed into slurry tanks for processing. The meal is mixed with water and enzymes and heated to break the ground grain into a fine slurry. The slurry is routed through pressure vessels and steam flashed in a flash vessel. This liquefied meal, now called "mash", reaches a temperature of approximately 200^[nc_cad,191]F, which reduces bacterial build-up. The sterilized mash is then pumped to a liquefaction tank where additional enzymes are added. This cooked mash continues through liquefaction tanks and is pumped into one of the fermenters, where propagated yeast is added, to begin a batch fermentation process.

        The fermentation process converts the cooked mash into carbon dioxide and beer, which contains ethanol as well as all the solids from the original corn feedstock. The mash is kept in a fermentation tank for approximately two days. Circulation through heat exchangers keeps the mash at the proper temperature.

Step three: distillation and molecular sieve

        After batch fermentation is complete, the fermented mash, now called "beer", is pumped to an intermediate tank called the beer well and then to the columnar distillation tank to vaporize and separate the alcohol from the mash. The distillation results in a 96%, or 190-proof, alcohol. This alcohol is then transported through a system of tanks and sieves where it is dehydrated to produce 200-proof anhydrous ethanol. The 200-proof ethanol is then denatured (rendered unfit for human consumption) by mixing with approximately 5% unleaded gasoline to prepare it for sale.

Step four: liquid—solid separation system

        The residue corn mash from the distillation stripper, called "stillage", is pumped into one of several decanter type centrifuges for dewatering. The water, or thin stillage, is then pumped from the centrifuges back to mashing or to an evaporator where it is dried into a thick syrup. The solids that exit the centrifuges, known as "wet cake", are conveyed to the wet cake storage pad or the gas-fired dryer for removal of residual water. Syrup is added to the wet cake. The result is wet distillers grain with

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solubles. The wet distillers grain can then be placed into a dryer, where moisture is removed. The end result of the process is dried distillers grain.

Step five: product storage

        Storage tanks hold the denatured ethanol product prior to being transferred to loading facilities for truck and rail car transportation. Our plants each have approximately 3.1 million gallons of ethanol tank storage capacity, which will accommodate nine days of ethanol production per plant.

Co-products of ethanol production

        Dried distillers grain with solubles.    A co-product of dry-mill ethanol production, dried distillers grain is a high-protein and high-energy animal feed that is sold primarily as an ingredient in beef and dairy cattle rations. Dried distillers grain consists of the concentrated nutrients (protein, fat, fiber, vitamins and minerals) remaining after the starch in corn is converted to ethanol. Over 85% of the dried distillers grain is fed to cattle. It is also used in poultry, swine and other livestock feed.

        Wet distillers grain with solubles.    Wet distillers grain is similar to dried distillers grain except that the final drying stage of dried distillers grain is bypassed and the product is sold as a wet feed containing 25% to 35% dry matter, as compared to dried distillers grain, which contains about 90% dry matter. Wet distillers grain is an excellent livestock feed with better nutritional characteristics than dried distillers grain because it has not been exposed to the heat of drying. The sale of wet distillers grain is usually more profitable because the plant saves the cost of natural gas for drying. The product is sold locally because of its limited shelf life and the higher cost of transporting the product to distant markets.

        Carbon dioxide.    Carbon dioxide, or CO₂, is also a by-product of our dry-mill ethanol production process. We do not currently market our CO₂. Currently, we scrub the CO₂ during the production process and release it to the atmosphere, as allowed under the air permits obtained for each of our facilities. However, our ability to release the CO₂ into the atmosphere may be limited by laws or regulations in the future and any controls on CO₂ emissions could result in additional costs. In the future, we also may explore the possibility of collecting and disposing of or marketing the CO₂.

Competition

        The markets where our ethanol is sold are highly competitive. According to the RFA, industry capacity in the United States was approximately 12.4 billion gallons per year as of January 2009, with an additional 2.1 Bgpy of capacity under construction. The ethanol industry in the United States consisted of approximately 193 production facilities as of January 2009 with 20 new facilities under construction, and is primarily corn-based.

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        We compete with three very large ethanol producers (Archer Daniels Midland Company, Poet, and VeraSun Energy Corporation) that together controlled 33% of the ethanol produced in the United States as of the end of 2008.

Source: Renewable Fuels Association, February 2009 report

(1)

In November, 2008, VeraSun filed for relief from creditors under Chapter 11 of the U.S. Bankruptcy Code. According to the RFA, as of February 2009 VeraSun had idled all but 450 Mmgy of its capacity.

        In November, 2008, VeraSun Energy Corporation filed for protection from creditors under Chapter 11 of the U.S. Bankruptcy Code. VeraSun subsequently announced that seven of its ethanol plants were in the process of being sold to Valero Energy, a producer and retailer of gasoline, as a result of an auction process conducted under the auspices of the bankruptcy court. Its remaining plants were sold in the auction to various secured lenders and, as of the date of this filing, it was unclear which, if any, of these VeraSun plants could be expected to continue operation. During 2008 and early 2009, a variety of smaller ethanol producers likewise filed for protection under Chapter 11 or comparable state law. While it is too soon to estimate what effect, if any, these events may have on our business or competitive prospects, if a sufficient number of competitors cease operations it could reduce industry capacity overall and provide us with a competitive advantage. However, it is also possible that one or more of our competitors may emerge from bankruptcy with improved capital structures, or without significant debt service obligations, which could have the effect of placing us at a competitive disadvantage. We also compete with other large ethanol producers such as Aventine Renewable Energy, Inc., Abengoa Bioenergy Corporation and Hawkeye Holdings Inc. A number of our competitors have substantially greater financial and other resources than we do. The remainder of the industry is highly fragmented, with many small, independent firms and farmer-owned cooperatives constituting the rest of the market. Through our ethanol marketing agreements with Cargill, we compete with our competitors on a national basis.

        Ethanol is a commodity and as such is priced on a very competitive basis. We believe that our ability to compete successfully in the ethanol production industry depends on many factors, including price, reliability of our production processes and delivery schedule and volume of ethanol produced and sold. We try to differentiate ourselves from our competition through continuous focus on cost control and production efficiency and by utilization of Cargill's expertise in ethanol marketing and corn supply. We constructed our ethanol facilities with a focus on minimizing cost inputs such as corn, natural gas and transportation. We have chosen the sites for our Wood River and Fairmont plants in part because of their access to significant local corn production, their proximity to competitive natural gas supplies and their access to transportation infrastructure, the costs of each we expect to keep lower than industry averages. We also expect to promote a company-wide culture of continuous improvement, cost control and efficiency regardless of the economic cycle. We strive to be one of the lowest cost ethanol producers in the industry through the application of the latest technology, strict attention to cost efficiencies and, where appropriate, long-term contracts for the supply of inputs such as corn and natural gas.

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        With respect to distillers grain, we compete with other ethanol producers as well as a number of large and smaller suppliers of competing animal feed. We believe the principal competitive factors are price, proximity to purchasers and, especially, product quality. We try to differentiate ourselves from our competition through high product quality, strategic plant locations and access to Cargill's expertise in feed merchandising.

Environmental matters

        We are subject to various federal, state and local environmental laws and regulations, including those relating to the discharge of materials into the air, water and ground, the generation, storage, handling, use, transportation and disposal of hazardous materials, access to and use of water supply, and the health and safety of our employees. These laws and regulations can require expensive pollution control equipment or operational changes to limit actual or potential impacts to the environment. A violation of these laws and regulations or permit conditions can result in substantial fines, natural resource damage claims, criminal sanctions, permit revocations and facility shutdowns. We do not anticipate a material adverse impact on our business or financial condition as a result of our efforts to comply with these requirements. We also do not expect to incur material capital expenditures for environmental controls in this or the succeeding fiscal year.

        There is a risk of liability for the investigation and cleanup of environmental contamination at each of the properties that we own or operate and at off-site locations where we arrange for the disposal of hazardous substances. If these substances have been or are disposed of or released at sites that undergo investigation or remediation by regulatory agencies, we may be responsible under the Comprehensive Environmental, Response, Compensation and Liability Act of 1980, or CERCLA, or other environmental laws for all or part of the costs of investigation or remediation and for damage to natural resources. We also may be subject to related claims by private parties alleging property damage and personal injury due to exposure to hazardous or other materials at or from these properties. Some of these matters may require us to expend significant amounts for investigation and/or cleanup or other costs. We do not currently have material environmental liabilities relating to contamination at or from our facilities or at off-site locations where we have transported or arranged for the disposal of hazardous substances.

        In addition, new laws, new interpretations of existing laws, increased governmental enforcement of environmental laws or other developments could require us to make additional significant expenditures. Continued government and public emphasis on environmental issues can be expected to result in increased future investments for environmental controls at our ongoing operations. Present and future environmental laws and regulations and related interpretations applicable to our operations, more vigorous enforcement policies and discovery of currently unknown conditions may require substantial capital and other expenditures. Our air emissions are subject to the federal Clean Air Act, the federal Clean Air Act Amendments of 1990 and similar state and local laws and associated regulations. The U.S. EPA has promulgated National Emissions Standards for Hazardous Air Pollutants, or NESHAP, under the federal Clean Air Act that could apply to facilities that we own or operate if the emissions of hazardous air pollutants exceed certain thresholds. If a facility we operate is authorized to emit hazardous air pollutants above the threshold level, then we would be required to comply with the NESHAP related to our manufacturing process and would be required to come into compliance with another NESHAP applicable to boilers and process heaters. Although emissions from our plants are not expected to exceed the relevant threshold levels, new or expanded facilities would be required to comply with both standards upon startup if they exceed the hazardous air pollutant threshold. In addition to costs for achieving and maintaining compliance with these laws, more stringent standards also may limit our operating flexibility. Because other domestic ethanol manufacturers will have similar restrictions, however, we believe that compliance with more stringent air emission control or other environmental laws and regulations is not likely to materially affect our competitive position.

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        The hazards and risks associated with producing and transporting our products, such as fires, natural disasters, explosions, abnormal pressures, blowouts and pipeline ruptures also may result in personal injury claims or damage to property and third parties. As protection against operating hazards, we maintain insurance coverage against some, but not all, potential losses. Our coverage includes physical damage to assets, employer's liability, comprehensive general liability, automobile liability and workers' compensation. We believe that our insurance is adequate and customary for our industry, but losses could occur for uninsurable or uninsured risks or in amounts in excess of existing insurance coverage. We do not currently have pending material claims for damages or liability to third parties relating to the hazards or risks of our business.

Employees

        As of March 12, 2009, we had 147 full-time employees and 4 part-time employees, who are responsible for our management and development and the operation of the Wood River and Fairmont plants. None of these employees is subject to a collective bargaining agreement.

Organizational structure

Company history

        Bio Fuel Solutions Colorado was formed in January 2005, and throughout 2005 and early 2006, worked to develop plans for the Wood River and Fairmont plants. BioFuel Solutions Delaware was formed in 2005 and held a minority interest in Bio Fuel Solutions Colorado until October 2005 when the remaining interest of Bio Fuel Solutions Colorado was acquired by BioFuel Solutions Delaware. In January 2006, BioFuel Energy, LLC was founded to take over development and construction of the plants from Biofuel Solutions Delaware. BioFuel Energy Corp. was formed as a Delaware corporation in April 2006 as a holding company. In September 2006, BioFuel Solutions Delaware was contributed to the LLC and BioFuel Solutions Delaware was dissolved.

        In August 2006, we began construction of our Wood River plant and, in October 2006, we began construction of our Fairmont plant. In June 2008, both plants began commercial operation and in August 2008 achieved the provisional acceptance construction milestone. Both plants achieved project completion in December 2008.

        In June 2007, we completed an initial public offering of 5,250,000 shares of our common stock and the private placement of 4,250,000 shares of our common stock to our three largest pre-existing shareholders at a gross per share price of $10.50 (the "offering"), resulting in $93.2 million in net proceeds. In July 2007, the underwriters of the offering exercised their over-allotment option, purchasing 787,500 additional shares of common stock. The shares were purchased at the $10.50 per share offering price, resulting in $7.7 million of additional proceeds to us. In total, we received approximately $100.9 million in net proceeds from this offering and private placement, after expenses. All net proceeds from the offering were transferred to the LLC as contributed capital subsequent to the offering. With these proceeds, we retired $30.0 million of our subordinated debt, leaving $20.0 million outstanding.

        At December 31, 2008, we owned 69.1% of the LLC units with the remaining 30.9% owned by the historical equity investors of the LLC. There were 23,318,636 shares of our common stock and 10,082,248 shares of our Class B common stock issued and outstanding as of December 31, 2008. The Class B common shares are held by the historical equity investors of the LLC, who also hold 10,082,248 membership interests in the LLC that, when combined with the Class B shares, can be exchanged for newly issued shares of our common stock on a one-for-one basis. The membership interests held by historical equity investors of the LLC are recorded as minority interest on the consolidated balance sheets. Holders of shares of Class B common stock have no economic rights but are entitled to one

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vote for each share held. The Class B common stock will be retired upon exchange of the related membership interests.

Incorporation of BioFuel Energy Corp.

        BioFuel Energy Corp. was incorporated as a Delaware corporation in April 2006. BioFuel Energy Corp. has not engaged in any business or other activities except in connection with its formation and its holding of interests in the LLC. The certificate of incorporation of BioFuel Energy Corp.:

•

authorizes two classes of common stock, common stock and Class B common stock. The Class B common stock, shares of which will be held only by historical equity investors of the Operating Company (other than BioFuel Energy Corp.), provides its holders with no economic rights but entitles each holder to a number of votes equal to the number of Class B common shares held; and



•

entitles the historical equity investors of the LLC (other than BioFuel Energy Corp.) to exchange their Class B common stock along with their membership interests for shares of common stock on a one-for-one basis, subject to customary rate adjustments for stock splits, stock dividends and reclassifications. If a holder of Class B common stock exchanges any membership interests in the LLC for shares of common stock, the shares of Class B common stock held by such holder and attributable to the exchanged LLC membership interests will automatically be transferred to BioFuel Energy Corp. and be retired.

Holding company structure

        BioFuel Energy Corp. is a holding company and its sole asset is a 69.1% equity interest in the LLC. As the sole managing member of the LLC, BioFuel Energy Corp. operates and controls all of the business and affairs of the LLC and its subsidiaries. BioFuel Energy Corp. consolidates the financial results of the LLC and its subsidiaries. The ownership interest of the historical LLC equity investors in the LLC is reflected as a minority interest in BioFuel Energy Corp.'s consolidated financial statements.

        Pursuant to the amended limited liability company agreement of the LLC, BioFuel Energy Corp. has the right to determine when distributions will be made to the members of the LLC and the amounts of any such distributions. If BioFuel Energy Corp. authorizes a distribution, such distribution will be made to the members of the LLC (1) in the case of a tax distribution (as described below), to the holders of membership interests in proportion to the amount of taxable income of the LLC allocated to such holder and (2) in the case of other distributions, pro rata in accordance with the percentages of their respective membership interests.

        The holders of membership interests in the LLC, including BioFuel Energy Corp., will incur U.S. federal, state and local income taxes on their proportionate shares of any net taxable income of the LLC. Net profits and net losses of the LLC will generally be allocated to its members, including BioFuel Energy Corp., the managing member, pro rata in accordance with the percentages of their respective membership interests. Because BioFuel Energy Corp. owns approximately 69.1% of the total membership interests in the LLC, BioFuel Energy Corp. will generally be allocated approximately 69.1% of the net profits and net losses of the LLC. The remaining net profits and net losses will generally be allocated to the other historical equity investors of the LLC. These percentages are subject to change, including upon an exchange of membership interests for shares of our common stock and upon issuance of additional shares to the public. The amended limited liability company agreement provides for cash distributions to the holders of membership interests of the LLC if BioFuel Energy Corp. determines that the taxable income of the LLC will give rise to taxable income for its members. In accordance with the amended limited liability company agreement, we will generally intend to cause the LLC to make cash distributions to the holders of its membership interests for purposes of funding their tax obligations in respect of the income of the LLC that is allocated to them. Generally, these tax

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distributions will be computed based on our estimate of the net taxable income of the LLC allocable to such holders of membership interests multiplied by an assumed tax rate equal to the highest effective marginal combined U.S. federal, state and local income tax rate prescribed for an individual or corporate resident in New York, New York (taking into account the nondeductibility of certain expenses and the character of our income).

        BioFuel Energy Corp. does not intend to pay any dividends on its common stock. If, however, BioFuel Energy Corp. declares dividends on its common stock, the LLC will make distributions to BioFuel Energy Corp. in order to fund any dividends. If BioFuel Energy Corp. declares dividends, the historical LLC equity investors will be entitled to receive equivalent distributions pro rata based on their membership interests in the LLC.

ITEM 1A.    RISK FACTORS

        You should carefully consider the following risks, as well as other information contained in this Form 10-K, including "Management's discussion and analysis of financial condition and results of operations". The risks described below are those that we believe are the material risks we face. Any of these risks could significantly and adversely affect our business, prospects, financial condition and results of operations.

Risks relating to our business and industry

We have a very limited operating history and our business may not succeed.

        We are a relatively new company with very limited operating results to date, and therefore you do not have a sufficient operating history upon which you can evaluate our business and prospects. In addition, our prospects must be considered in light of the risks and uncertainties encountered by an early-stage company and in rapidly evolving markets, such as the ethanol market, where supply and demand and other factors may change significantly over a short period.

        Some of these risks relate to our potential inability to:

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operate our plants as planned or as they were designed;



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continue significant operations, particularly in light of contracting margins due to commodities prices;



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successfully manage our considerable leverage and service the significant amount of debt we have incurred;



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retain key personnel, including plant managers;



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effectively manage our business and operations;



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successfully execute our planned operational efficiency initiatives in order to establish and maintain our intended low-cost structure;



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predict the extent to which our operations may adversely impact the local price of our primary production inputs and our primary products;



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manage rapid changes in commodities markets, either through hedging or marketing activities; and



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successfully address the other risks described throughout this Form 10-K.

        If we cannot successfully manage these risks, our business and results of operations and financial condition will suffer.

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Our auditors have expressed substantial doubt about our ability to continue as a going concern.

        In connection with its year-end audit of our annual financial statements, our independent auditor assesses whether a statement should be included in its audit report regarding the existence of substantial doubt related to our ability to continue as a going concern. Our auditors have issued an opinion on our consolidated financial statements for the fiscal year ended December 31, 2008, which is included with this Annual Report, that states that the consolidated financial statements were prepared assuming we will continue as a going concern and further states that the factors discussed in Note 1 to the consolidated financial statements raise substantial doubt about our ability to continue as a going concern. This is due mainly to the losses we have incurred to date and the contracting margins we have experienced as the price of a gallon of ethanol has declined relative to the cost of the corresponding amount of corn required to produce it (known as the "crush spread"). This has adversely affected our results of operations and caused our operating cash flow to decrease below the amount needed to service our debt on a sustained basis.

        We have initiated a company-wide business restructuring plan to reduce costs and are currently exploring various alternatives to address our liquidity issues. These include: (i) reducing operating expenses through headcount reductions or operating efficiency initiatives; (ii) reducing the cost of various inputs and services by renegotiating the terms of supply and service agreements, including our agreements with Cargill; (iii) seeking forbearance or some other accommodation from our lenders; (iv) seeking new capital, either from new or existing investors or (v) some combination of the foregoing or other measures. However there can be no assurance that we will be successful in achieving any of these objectives or, if successfully implemented, that these initiatives will be sufficient to address our lack of liquidity.

        In the event that our margins do not improve, or we are unable to raise additional capital, or we are otherwise unable to generate sufficient cash flow from operations, we may not be able to pay principal or interest on our debt. This would result in an event of default under our bank agreements and, in the absence of forbearance, debt service abeyance or other accommodations from our lenders, require us to curtail operations or cease operating altogether, and may result in our inability to continue as a going concern and could potentially force us to seek relief through a filing under the U.S. Bankruptcy Code. Our liquidity and ability to continue as a going concern could also be impacted by any number of other unforeseen material adverse developments in the commodities markets or our operations.

We may encounter unanticipated difficulties in operating our plants, which could reduce sales and cause us to incur substantial losses.

        Our revenues are derived from the sale of ethanol and distillers grain that we produce at our facilities. TIC Wyoming, a subsidiary of TIC, constructed our Wood River and Fairmont plants and had not previously constructed an entire ethanol plant of the size and type such as ours. In addition, the Delta-T technology utilized at our plants is currently in use only in a small number of ethanol plants, mostly with smaller capacities than ours. We are aware of certain plant design issues that may impede the reliable operation of the plants and continuous operations. We are in the process of addressing these and a variety of other reliability issues at our plants, but we have no assurance that our initiatives will be successful or can be implemented in a timely fashion or without an extended period of interruption to operations. Further, we are also responsible for the maintenance of certain infrastructure outside of the Wood River and Fairmont plants, such as a rail loop and rail connections, natural gas interconnect pipelines and grain elevator improvements. As a result, we may encounter unanticipated difficulties and the operation of our plants may be more costly or inefficient than we anticipate. We may be entitled to seek damages from TIC for warranty claims under our engineering, procurement and construction, or EPC, contracts if we encounter unanticipated difficulties in operating our plants due to deficiencies in design, construction or materials, but our ability to seek damages may

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be limited. In any event, we would not be able to recover lost sales or lost profits that might result from any defect in the design or construction of our plants.

        We may also encounter other factors that could prevent us from conducting operations as expected, resulting in decreased capacity or interruptions in production, including shortages of workers or materials, design issues relating to improvements, construction and equipment cost escalation, transportation constraints, adverse weather, unforeseen difficulties or labor issues, or changes in political administrations at the federal, state or local levels that result in policy change towards ethanol in general or our plants in particular. Furthermore, local water, electricity and gas utilities may not be able to reliably supply the resources that our facilities will need or may not be able to supply them on acceptable terms. Our operations may be subject to significant interruption if any of our facilities experiences a major accident or is damaged by severe weather or other natural disasters. In addition, our operations may be subject to labor disruptions, unscheduled downtime or other operational hazards inherent in our industry. Some of these operational hazards may cause personal injury or loss of life, severe damage to or destruction of property and equipment or environmental damage, and may result in suspension of operations and the imposition of civil or criminal penalties. Our insurance may not be adequate to cover the potential operational hazards described above and we may not be able to renew our insurance on commercially reasonable terms or at all. Any cessation of operations due to any of the above factors would cause our sales to decrease significantly, which would have a material adverse effect on our results of operation and financial condition.

Crush spreads have narrowed, and may decline further, making profitable operation of our plants difficult or impossible.

        Our gross profit depends principally on our "crush spread", which is the difference between the price of a gallon of ethanol and the cost of the amount of corn required to produce a gallon of ethanol. Using our dry-mill technology, we expect each bushel of corn to produce approximately 2.7 gallons of fuel grade ethanol. From 2007 through 2008, this spread has fluctuated widely, as average U.S. ethanol rack prices, reported by Bloomberg, have ranged from $1.69 to $3.08 per gallon, and Chicago No. 2 yellow corn spot prices, reported by Bloomberg, have ranged from $2.68 to $7.15 per bushel. As of March 16, 2009, based on these same sources, the ethanol rack price was $1.88 per gallon, the spot price of corn was $3.76 per bushel. Based on the two year average price of a bushel of corn of $4.10, the cost of corn per gallon of ethanol would be approximately $1.52 (.37 bushels per gallon × $4.10). As such, the "crush spread" would have been $.75 per gallon based on the 2007 to 2008 average ethanol price of $2.27 per gallon.

        Recent price volatility in the commodities markets, primarily in the prices of ethanol and corn, have greatly diminished or, in some instances eliminated, our daily gross operating margins at the plant level. During the first two months of 2009, the crush spread, based on Bloomberg prices, has ranged from approximately $0.44 per gallon to $0.71 per gallon. These fluctuations affect our results of operations and can cause our operating cash flow to decrease below the amount needed to service our debt on a sustained basis. In the event our margins do not improve, we may not be able to pay principal or interest on our debt, which may lead to an event of default under our bank agreements and, in the absence of forbearance, debt service abeyance or other accommodations from our lenders, require us to curtail operations or cease operating altogether. We expect fluctuations in the crush spread to continue. Any further reduction in the crush spread may cause our operating margins to deteriorate further, resulting in an impairment charge and also causing the consequences described above to occur sooner.

Our significant hedging losses in 2008 have resulted in decreased liquidity.

        During the year ended December 31, 2008, the LLC recorded a $39.9 million loss from hedging. All of the hedge contracts that caused this loss were entered into with Cargill, which conducts all corn

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purchases and sales of ethanol and distillers grain for the LLC and its subsidiaries. See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and capital resources—Hedging Losses" elsewhere in this report. On January 16, 2009, the Company announced that it had finalized an agreement with Cargill resolving matters related to these unpaid losses. Following a $3.0 million payment in early December, the remaining balance due Cargill totaled $11.4 million and interest began accruing at a 5% annual rate, with future payments to Cargill being contingent on available cash flow, as defined in the agreement. Although this agreement resolved the immediate issues between the parties, it will have the likely effect of limiting the ways in which the Company can use certain future cash flows that might otherwise have become available for other purposes, including pursuit of business opportunities, plant expansion or acquisitions.

Results may be adversely affected by future hedging transactions and other strategies.

        We may enter into contracts to sell a portion of our ethanol and distillers grain production or to purchase a portion of our corn or natural gas requirements on a forward basis to offset some of the effects of volatility of ethanol prices and costs of commodities. From time to time, we may also engage in other hedging transactions involving exchange-traded futures contracts for corn and natural gas. The financial statement impact of these activities will depend upon, among other things, the prices involved, changes in the underlying market price and our ability to sell sufficient products to use all of the corn and natural gas for which we have futures contracts or our ability to sell excess corn or natural gas purchased in hedging transactions. Hedging arrangements also expose us to the risk of financial loss in situations where the other party to the hedging contract defaults on its contract or, in the case of exchange-traded contracts, where there is a change in the expected differential between the underlying price in the hedging agreement and the actual prices paid or received by us.

        Although we attempt to link our hedging activities to sales and production plans and pricing activities, such hedging activities can themselves result in losses. Hedging activities can result in losses when a position is purchased in a declining market or a position is sold in a rising market. This risk can be increased in highly volatile conditions such as those recently experienced in corn and other commodities futures markets. A hedge position is often settled when the physical commodity is either purchased (corn and natural gas) or sold (ethanol or distillers grain). In the interim, we are and may continue to be subject to the risk of margin calls and other demands on our financial resources arising from hedging activities. We may experience hedging losses in the future. We may also vary the amount of hedging or other price mitigation strategies we undertake, and we may choose not to engage in hedging transactions at all. As a result, our results of operations and financial condition may be adversely affected by increases in the price of corn or natural gas or decreases in the price of ethanol.

        During the year ended December 31, 2008, the LLC recorded a $39.9 million loss from hedging. All of the hedge contracts that caused this loss were entered into with Cargill, which conducts all corn purchases and sales of ethanol and distillers grain for the LLC and its subsidiaries. See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and capital resources—Hedging Losses" elsewhere in this report.

        The Company has adopted a risk management policy which is intended to provide additional, formal oversight over the hedging activities of the LLC and the Operating Subsidiaries of the LLC. There can be no assurances, however, that this policy will prevent or mitigate future hedging losses.

We have incurred a significant amount of indebtedness to construct our facilities and to operate our business, virtually all of which is secured by our assets.

        We expect to borrow a total of approximately $230 million of bank debt in order to finance the construction, operations and financing costs of our two facilities, of which $198.2 million, including $17 million for working capital, was borrowed as of December 31, 2008. In addition, we have incurred

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$20 million in subordinated debt, $14.4 million in Cargill debt, $6.0 million of tax increment financing, and $4.8 million in other notes payable and capital leases. We may also borrow additional amounts in order to provide additional working capital or to finance capital improvements or other operational requirements.

Our substantial indebtedness could have important consequences by adversely affecting our financial position.

        Our substantial indebtedness could:

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require us to dedicate all of our cash flow from operations (after the payment of operating expenses) to payments with respect to our indebtedness, thereby reducing the availability of our cash flow for working capital, capital expenditures and other general corporate expenditures;



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restrict our ability to take advantage of strategic opportunities;



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limit our flexibility in planning for, or reacting to, competition or changes in our business or industry;



•

limit our ability to borrow additional funds;



•

increase our vulnerability to adverse general economic or industry conditions;



•

restrict us from expanding our current facilities, building new facilities or exploring business opportunities; and



•

place us at a competitive disadvantage relative to competitors that have less debt or greater financial resources.

        Our ability to make payments on and refinance our indebtedness will depend on our ability to generate cash from our operations. Our ability to generate cash from operations is subject, in large part, to our crush spread as well as general economic, competitive, legislative and regulatory factors and other factors that are beyond our control. During our limited period of operations we have been unable to generate positive cash flow. If this continues, we may not be able to generate enough cash flow from operations or obtain enough capital to service our debt, finance our business operations or fund our planned capital expenditures. If we do not have sufficient cash flow to service our debt, we would need to refinance all or part of our existing debt, sell assets, borrow more money or sell securities, any or all of which we may not be able to do on commercially reasonable terms or at all.

We are subject to risks associated with our existing debt arrangements.

        Our bank facility.    The Operating Subsidiaries of the LLC that own and operate our Wood River and Fairmont plants have entered into a bank facility with a group of financial institutions that is secured by substantially all of those subsidiaries' assets. Although we have completed significant borrowing under our bank facility, additional borrowings remain subject to the satisfaction of a number of additional conditions precedent, including compliance with debt covenants and payment of principal and interest when due. To the extent that we are not able to satisfy these requirements, we will not be able to make additional borrowings under the bank facility without obtaining a waiver or consent from the lenders, which could prevent or delay our borrowing. In addition, our bank agreement contains standard clauses regarding occurrence of a "material adverse effect," which is defined very broadly and in such fashion as to be subjective. In the event our banks should determine that a "material adverse effect" has occurred, they could declare us in default and accelerate payment of all principal and interest due, or prevent us from borrowing additional funds under the bank facility.

        The terms of the bank facility include customary events of default and covenants that limit the applicable subsidiaries from taking certain actions without obtaining the consent of the lenders. In particular, our bank facility places significant restrictions on the ability of those subsidiaries to

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distribute cash to the LLC, which limits our ability to use cash generated by those subsidiaries for other purposes. In addition, the bank facility restricts those subsidiaries' ability to incur additional indebtedness. Under our bank facility, if Cargill, or as long as any warranty obligations remain outstanding under our Wood River or Fairmont EPC contracts, TIC or Delta-T admits in writing its inability to, or is generally unable to, pay its debts as such debts become due, we will be deemed to be in default. In addition, should the Company, or any of its subsidiaries that are borrowers under the bank facility, admit in writing its inability to, or is generally unable to, pay its debts as such debts become due, we will be deemed to be in default.

        A default under our bank facility would also constitute a default under our subordinated debt and would entitle the lenders to accelerate the repayment of amounts outstanding. In the event of a default, the lenders could also proceed to foreclose against the assets securing such obligations. Because the debt under our existing arrangements subjects substantially all of our assets to liens, there may be no assets left for stockholders in the event of a liquidation. In the event of a foreclosure on all or substantially all of our assets, we may not be able to continue to operate as a going concern.

        Our subordinated debt agreement.    The LLC has entered into a subordinated debt agreement with entities affiliated with Greenlight Capital,  Inc. and entities and individuals affiliated with Third Point LLC. Subordinated borrowings are secured by the subsidiary equity interests owned by the LLC. A default under our bank facility would also constitute a default under our subordinated debt and would entitle the lenders to accelerate the repayment of amounts outstanding. In the event of a default, the lenders could also proceed to foreclose against the assets securing such obligations. Because the debt under our existing arrangements subjects substantially all of our assets to liens, there may be no assets left for stockholders in the event of a liquidation. In the event of a foreclosure on all or substantially all of our assets, we may not be able to continue to operate as a going concern.

        During the third and fourth quarters of 2008, the LLC did not make the quarterly interest payments that were due on the last day of each quarter, which upon written notice to the LLC would constitute an event of default under the subordinated debt agreement. On January 16, 2009, the Company announced that it had entered into an agreement with the subordinated debt lenders, whereby future payments to the lenders will be contingent on available cash flow, as defined. As part of the agreement, the subordinated debt holders received an immediate $2.0 million cash payment, which paid $767,000 of accrued interest due September 30, 2008 and reduced the principal balance by $1,233,000. Effective December 1, 2008, interest on the subordinated debt began to accrue at a 5% annual rate, compared to the previous rate of 15%, which rate will continue to apply until certain payment obligations have been met under an agreement simultaneously entered into with Cargill. Although this agreement prevented the occurrence of an event of default under the subordinated debt agreement and resolved the immediate issues among the parties, it will have the likely effect of limiting the ways in which the Company can use certain future cash flows that might otherwise have become available for other purposes, including pursuit of business opportunities, plant expansion or acquisitions.

        Our future debt facilities will likely be secured by substantially all our assets.    We expect that the debt we will incur to finance any future needs will be incurred either pursuant to an expanded version of our current bank facility, a new, separate credit facility (which would require the consent of our existing banks) or a new corporate credit facility that would replace our current bank facility. In any event, it is most likely that this indebtedness would be secured by substantially all of our assets. Because the debt under these facilities may subject substantially all of our assets to liens, there may be no assets left for stockholders in the event of a liquidation. Moreover, because the bank facility only contains limits on the amount of indebtedness that certain of our subsidiaries may incur, we have the ability to incur substantial additional indebtedness, and any additional indebtedness we incur could exacerbate the risks described above.

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Increased acceptance of ethanol as a fuel and construction of additional ethanol production plants could lead to shortages of availability and increases in the price of corn.

        We anticipate that the expansion of the ethanol industry will lead to significantly greater demand for corn. Cargill, which supplies corn for our plants, may have difficulty from time to time in sourcing corn on economical terms, due to supply shortages or elevated market prices. Any supply shortage could require us to suspend operations until corn becomes available on economical terms. Suspension of operations would materially harm our business, results of operations and financial condition. Additionally, the price we pay for corn could increase if another ethanol production facility were built in the same general vicinity, if we expand one of our production facilities or based on market conditions. One of our competitors has constructed a large scale ethanol production plant approximately six miles from our Fairmont site, near Welcome, Minnesota. Two plants in such close proximity could lead to increases in the price of corn or shortages of availability of corn in the area. In addition, the price of corn increased significantly over historical levels in late 2006, through 2007 and into the third quarter of 2008. This increase in corn prices was attributed in part to the anticipated demand from new ethanol production plants under construction or development. Although corn prices declined rapidly in the later part of 2008, and have since fluctuated in a range closer to historical levels, we cannot assure you that the price of corn will not rise significantly in the future, which could adversely affect our results of operations.

Excess production capacity in our industry resulting from new plants under construction or decreases in the demand for ethanol or distillers grain could adversely affect our business.

        According to the Renewable Fuels Associate (RFA), a trade group, domestic ethanol production capacity has increased from approximately 1.8 billion gallons per year (Bgpy) in 2001, to an estimated 12.4 Bgpy at the end of 2008. The RFA estimates that, as of December 31, 2008, approximately 2.1 Bgpy of additional production capacity, an increase of approximately 17% over current production levels, is under construction at 25 new and existing facilities. Archer Daniels Midland Company, the second largest domestic ethanol producer, has announced plans to increase its production capacity by 550 Mmgy, or approximately 51% by the end of 2009. As a result of this increase in production, the ethanol industry faces the risk of excess capacity. In a manufacturing industry with excess capacity, producers have an incentive to continue manufacturing products as long as the price of the product exceeds the marginal cost of production (i.e., the cost of producing only the next unit, without regard to interest, overhead or other fixed costs). If there is excess capacity in our industry, this could result in a reduction of the market price of ethanol to a level that is inadequate to generate sufficient cash flow to cover costs, which could result in an impairment charge and could have an adverse effect on our results of operations, cash flows and financial condition. If such circumstances were to arise, it would be extremely unlikely that the potential sale of one or more plants would be worth pursuing at that time.

        Excess ethanol production capacity also may result from decreases in the demand for ethanol, which could result from a number of factors, including regulatory developments and reduced gasoline consumption in the United States. Reduced gasoline consumption could occur as a result of a decrease in general economic conditions, as a result of increased prices for gasoline or crude oil, which could cause businesses and consumers to reduce driving or acquire vehicles with more favorable gasoline mileage, or as a result of technological advances, such as the commercialization of hydrogen fuel-cells, which could supplant gasoline-powered engines. There are a number of governmental initiatives designed to reduce gasoline consumption, including tax credits for hybrid vehicles and consumer education programs. There is emerging evidence that reduced gasoline consumption has occurred recently in the United States, as the economy has experienced a recession.

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        In addition, because ethanol production produces distillers grain as a co-product, increased ethanol production will also lead to increased supplies of distillers grain. An increase in the supply of distillers grain, without corresponding increases in demand, could lead to lower prices.

Competition for qualified personnel in the ethanol industry is intense, and we may not be able to retain qualified personnel to operate our ethanol plants.

        Our success depends in part on our ability to attract and retain competent personnel. For each of our plants, we must hire and retain qualified managers, engineers and operations and other personnel, which can be challenging in a rural community. Competition for both managers and plant employees in the ethanol industry can be intense. Although we have hired substantially all of the personnel necessary to operate our plants, we may not be able to maintain or retain qualified personnel. If we are unable to hire and maintain or retain productive and competent personnel, our strategy may be adversely affected and we may not be able to efficiently operate our ethanol plants as planned.

We are dependent upon our officers for management and direction, and the loss of any of these persons could adversely affect our operations and results.

        We are dependent upon the diligence and skill of our senior management team for implementation of our proposed strategy and execution of our business plan, and our future success depends to a significant extent on the continued service and coordination of our senior management team. We do not have employment agreements with any of our officers or key employees, other than Mr. Pearce and Mr. Simon. We do not maintain "key person" life insurance for any of our officers or other employees. The loss of any of our officers could delay or prevent the achievement of our business objectives.

We are dependent on our commercial relationship with Cargill and subject to various risks associated with this relationship.

        Our operating results may suffer if Cargill does not perform its obligations under our contracts.    We have entered into an extensive commercial relationship with Cargill and will be dependent on Cargill for the success of our business. This relationship includes long-term marketing agreements with Cargill, under which Cargill has agreed to market and distribute 100% of the ethanol and distillers grain produced at our Wood River and Fairmont production plants. We have also entered into corn supply agreements with Cargill, under which Cargill will supply 100% of the corn for our Wood River and Fairmont plants. The success of our business will depend on Cargill's ability to provide our production plants with the required corn supply in a cost-effective manner and to market and distribute our products successfully. If Cargill defaults on payments owed to us, fails to perform any of its responsibilities or does not perform its responsibilities as effectively as we expect them to under our agreements, our results of operations will be adversely affected.

        Cargill may terminate its arrangements with us in the event that certain parties acquire 30% or more of our common stock or the power to elect a majority of the Board.    Cargill has the right to terminate its arrangements with us for any or all of our facilities if any of five identified parties or their affiliates acquires 30% or more of our common stock or the power to elect a majority of our Board of Directors. Cargill has designated five parties, each of which is currently engaged primarily in the agricultural commodities business, and it has the right to annually update this list of identified parties, so long as the list does not exceed five entities and the affiliates of such entities. The five parties currently identified by Cargill are Archer Daniels Midland Company, CHS Inc., Tate & Lyle PLC, The Scoular Company and Bunge Limited. Cargill's termination right may have the effect of deferring, delaying or discouraging transactions with these parties and their affiliates that might otherwise be beneficial to us. If Cargill were to terminate any of our goods and services agreements, it would have a significant negative impact on our business and we would be unable to continue our operations at each

25

affected facility until alternative arrangements were made. If we were required to make alternative arrangements, we may not be able to make such arrangements or, if we are able to make such arrangements, they may not be on terms as favorable as our agreements with Cargill. We currently have no agreements or structure in place that would prohibit any of the parties identified by Cargill from acquiring 30% or more of our common stock and we do not expect to have any such agreements or structures in the future. However, we have no expectation that any of these parties would have an interest in acquiring shares of our common stock. We monitor Schedule 13D filings so that we will be informed of any parties accumulating ownership of our stock. If any identified party accumulates a significant amount of stock, our Board of Directors will address the matter at that time consistent with its fiduciary duties under applicable law.

        If we do not meet certain quality and quantity standards under our marketing agreements with Cargill, our results of operations may be adversely affected.    If our ethanol or distillers grain does not meet certain quality standards, Cargill may reject our products or accept our products and decrease the purchase price to reflect the inferior quality. In addition, if our distillers grain is subject to a recall reasonably determined by Cargill to be necessary, we will be responsible for all reasonable costs associated with the recall. If we fail to produce a sufficient amount of ethanol or distillers grain and, as a result, Cargill is required to purchase replacement products from third parties at a higher purchase price to meet sale commitments, we must pay Cargill the price difference plus a commission on the deficiency volume. Our failure to meet the quality and quantity standards in our marketing agreements with Cargill could adversely affect our results of operations.

        We will be subject to certain risks associated with Cargill's ethanol marketing pool.    Under the terms of our ethanol marketing agreements, Cargill may place our ethanol in a common marketing pool with ethanol produced by Cargill and certain other third party producers. Each participant in the pool will receive the same price for its share of ethanol sold, net of freight and other agreed costs incurred by Cargill with respect to the pooled ethanol. Freight and other charges will be divided among pool participants based solely upon each participant's ethanol volume in the pool. As a result, we may be responsible for higher freight and other costs than we would be if we did not participate in the marketing pool, depending on the freight and other costs attributable to the other marketing pool members. In addition, we may become committed to sell ethanol at a fixed price in the future under the marketing pool, exposing us to the risk of increased corn prices if we are unable to hedge such sales. We have the right to opt out of the ethanol marketing pool for any contract year by giving Cargill a six-month advance notice. However, we may be required to participate in the pool for an additional 18 months if Cargill has contractually committed to sell ethanol based on our continued participation in the pool.

        We are subject to certain risks associated with our corn supply agreements with Cargill.    We have agreed to purchase our required corn supply for our Wood River and Fairmont plants exclusively from Cargill and will pay Cargill a per bushel fee for all corn Cargill sells to us. We cannot assure you that the prices we will pay for corn under our corn supply agreements with Cargill, together with the fee we have agreed to pay to Cargill, will be lower than the prices we could pay or that our competitors will be paying for corn from other sources.

        Our interests may conflict with the interests of Cargill.    According to the RFA, as of February 2009, Cargill has two of its own plants which were producing approximately 120 Mmgy. In addition, we understand that Cargill may market ethanol for other third parties under the marketing pool arrangements described above. We cannot assure you that Cargill will not favor its own interests or those of other parties over our interests. Under our marketing agreements with Cargill, other than our right to terminate to the extent such conflict results in material quantifiable pecuniary loss, we have waived any claim of conflict of interest against Cargill for failure to use commercially reasonable efforts to maximize our returns to the extent such claims relate to an alleged conflict of interest or alleged

26

preference to third parties for which Cargill provides marketing services. If we elected to terminate the marketing agreements in these circumstances, we would need to enter into replacement marketing arrangements with another party, which may not be possible at all or on terms as favorable as our current agreements with Cargill. To the extent a conflict of interest does not result in material quantifiable pecuniary loss, we would be without recourse against Cargill.

New, more energy-efficient technologies for producing ethanol could displace corn-based ethanol and materially harm our results of operations and financial condition.

        The development and implementation of new technologies may impact our business significantly. The current trend in ethanol production research is to develop an efficient method of producing ethanol from cellulosic biomass such as agricultural waste, forest residue, and municipal solid waste. This trend is driven by the fact that cellulosic biomass is generally cheaper than corn and producing ethanol from cellulosic biomass would create opportunities to produce ethanol in areas that are unable to grow corn. Another trend in ethanol production research is to produce ethanol through a chemical process rather than a fermentation process, thereby significantly increasing the ethanol yield per pound of feedstock. Although current technology does not allow these production methods to be cost competitive, new technologies may develop that would allow these or other methods to become viable means of ethanol production in the future thereby displacing corn-based ethanol in whole or in part or intensifying competition in the ethanol industry. Our plants are designed to produce corn-based ethanol through a fermentation process. If we are unable to adopt or incorporate these advances into our operations, our cost of producing ethanol could be significantly higher than those of our competitors, and retrofitting our plants may be very time-consuming and could require significant capital expenditures. In addition, advances in the development of alternatives to ethanol, such as alternative fuel additives, or technological advances in engine and exhaust system design performance, such as the commercialization of hydrogen fuel-cells or hybrid engines, or other factors could significantly reduce demand for or eliminate the need for ethanol. We cannot predict when new technologies may become available, the rate of acceptance of new technologies, the costs associated with new technologies or whether these other factors may harm demand for ethanol.

Our profit margins may be adversely affected by fluctuations in the selling price and production cost of gasoline.

        Ethanol is marketed as a fuel additive to reduce vehicle emissions from gasoline, as an octane enhancer to improve the octane rating of the gasoline with which it is blended and, to a lesser extent, as a gasoline substitute. As a result, ethanol prices are influenced by the supply of and demand for gasoline. Our results of operations may be materially harmed if the demand for, or the price of, gasoline decreases. Conversely, a prolonged increase in the price of, or demand for, gasoline could lead the U.S. government to relax import restrictions on foreign ethanol that currently benefit us.

Our business will be highly dependent on commodity prices, which are subject to significant volatility and uncertainty, and on the availability of raw materials supplies, so our results of operations, financial condition and business outlook may fluctuate substantially.

        Our results of operations will depend substantially on the prices of various commodities, particularly the prices for ethanol, corn, natural gas and unleaded gasoline. The prices of these commodities are volatile and beyond our control. As a result of the volatility of the prices for these and other items, our results may fluctuate substantially. We may experience periods during which the prices of our products decline and the costs of our raw materials increase, which in turn may result in operating losses or impairment charges and hurt our financial condition. If a substantial imbalance occurred, we may take actions to mitigate the effect of the imbalance, such as storing our uncontracted

27

ethanol for a period of time. These actions could involve additional costs and could have a negative impact on our operating results.

Our business is highly sensitive to corn prices, and we generally cannot pass along increases in corn prices to our customers.

        Corn is the principal raw material we use to produce ethanol and distillers grain. We expect corn costs to represent approximately 72% of our total operating expenses, assuming a corn price of $3.50 per bushel. Changes in the price of corn therefore will significantly affect our business. In general, rising corn prices result in lower profit margins and may result in negative margins if not accompanied by increases in ethanol prices. Under current market conditions, because ethanol competes with fuels that are not corn-based, we generally will be unable to pass along increased corn costs to our customers. At certain levels, corn prices would make ethanol uneconomical to use in fuel markets. Over the period from January 2007 through December 2008, corn prices, based on the Chicago Board of Trade, or CBOT, daily futures data, have ranged from a low of $2.68 per bushel in December 2008 to a high of $7.15 per bushel in July 2008, with prices averaging $4.10 per bushel during this two year period. As of March 16, 2009, the CBOT spot price of corn was $3.76 per bushel. The price of corn is influenced by a number of factors, including weather conditions and other factors affecting crop yields, farmer planting decisions and general economic, market and regulatory factors, government policies and subsidies with respect to agriculture and international trade, and global and local supply and demand. In addition, any event that tends to increase the demand for corn could cause the price of corn to increase. We believe that the increasing ethanol production capacity has contributed to, and will continue to contribute to, a period of elevated corn prices compared to historical levels.

The market for natural gas is subject to market conditions that create uncertainty in the price and availability of the natural gas that we will use in our manufacturing process.

        We rely upon third parties for our supply of natural gas, which we use in the ethanol production process. The prices for and availability of natural gas are subject to volatile market conditions. The fluctuations in natural gas prices over the period from January 2007 through December 2008, based on the New York Mercantile Exchange, or NYMEX, daily futures data, have ranged from a low of $5.29 per Mmbtu in September 2007 to a high of $13.31 per Mmbtu in July 2008, averaging $7.73 per Mmbtu during this two year period. As of March 16, 2009 the NYMEX spot price of natural gas was $3.77 per Mmbtu. These market conditions are often affected by factors beyond our control such as the price of oil as a competitive fuel, higher prices resulting from colder than average weather conditions or the impact of hurricanes and overall economic conditions. Depending upon business conditions, we anticipate using approximately 7,200,000 Mmbtu's of natural gas annually at our Wood River and Fairmont plants. Local variation in the cost or supply of natural gas at either plant may also negatively impact our operations. Significant disruptions in the supply of natural gas could impair our ability to manufacture ethanol for our customers. Furthermore, increases in natural gas prices could adversely affect our results of operations.

We may not be able to compete effectively.

        We compete with a number of significant ethanol producers in the United States, including Archer Daniels Midland Company, VeraSun Energy Corporation, Aventine Renewable Energy, Inc., Abengoa Bioenergy Corporation, Poet, Pacific Ethanol, Inc. and Hawkeye Holdings Inc. Some of our competitors are divisions of larger enterprises and have substantially greater financial resources than we do. According to the RFA, the three largest producers (Archer Daniels Midland Company, Poet and VeraSun Energy Corporation) together control 33% of the ethanol market as of the end of 2008.

        In November, 2008, VeraSun Energy Corporation filed for protection from creditors under Chapter 11 of the U.S. Bankruptcy Code. VeraSun subsequently announced that seven of its ethanol

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plants were in the process of being sold to Valero Energy, a producer and retailer of gasoline as a result of an auction process conducted under the auspices of the bankruptcy court. In addition, VeraSun announced that its remaining plants were sold in the auction to various secured lenders and, as of the date of this filing it was unclear which, if any, of these VeraSun plants would continue in operation. During 2008 and early 2009, a variety of smaller ethanol producers likewise filed for protection under Chapter 11 or comparable state law. While it is too soon to estimate what effect, if any, these events may have on our business or competitive prospects, it is possible that one or more of our competitors may emerge from bankruptcy with improved capital structures, or without significant debt service obligations, which could have the potential effect of placing us at a competitive disadvantage.

        In addition to the larger sized competitors described above, there are many smaller competitors that have been able to compete successfully in the ethanol industry made up mostly of farmer-owned cooperatives and independent firms consisting of groups of individual farmers and investors. As many of these smaller competitors are farmer-owned, they receive greater government subsidies than we will and often require their farmer-owners to commit to selling them a certain amount of corn as a requirement of ownership. We expect competition to increase as the ethanol industry becomes more widely known and demand for ethanol increases.

        In addition, Cargill operates its own ethanol facilities and markets ethanol for other parties. If Cargill decides to forgo future opportunities to do business with us, or chooses to give these opportunities to our competitors or to retain them for itself, whether due to our performance or for reasons beyond our control, our business may not perform as expected.

        We also face increasing competition from international suppliers. International suppliers produce ethanol primarily from sugar cane and have cost structures that may be substantially lower than ours. Although there is a $0.54 per gallon tariff on foreign-produced ethanol that is approximately equal to the federal blenders' credit, ethanol imports equivalent to up to 7% of total domestic production in any given year from various countries were exempted from this tariff under the Caribbean Basin Initiative in order to spur economic development in Central America and the Caribbean. In addition, this tariff is currently scheduled to expire on December 31, 2010, and there can be no assurance that it will be renewed beyond that time. Any increase in domestic or foreign competition could force us to reduce our prices and take other steps to compete effectively, which may adversely affect our results of operations and financial position.

Growth in the sale and distribution of ethanol depends on changes to and expansion of related infrastructure which may not occur on a timely basis, if at all.

        It currently is impracticable to transport by pipeline fuel blends that contain ethanol. Substantial development of infrastructure will be required by persons and entities outside our control for our business, and the ethanol industry generally, to grow. Areas requiring expansion include, but are not limited to:

•

additional rail car capacity;



•

additional storage facilities for ethanol;



•

increases in truck fleets capable of transporting ethanol within localized markets;



•

investment in refining and blending infrastructure to handle ethanol;



•

growth in service stations equipped to handle ethanol fuels; and



•

growth in the fleet of flexible fuel vehicles capable of using E85 fuels.

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        The substantial investments or government support required for these infrastructure changes and expansions may not be made on a timely basis or at all. Any delay or failure in making the changes to or expansion of infrastructure could weaken the demand or prices for our products, impede our delivery of products, impose additional costs on us or otherwise materially harm our results of operations or financial position.

Transportation delays, including as a result of disruptions to infrastructure, could adversely affect our operations.

        Our business depends on the availability of rail and road distribution infrastructure. Any disruptions in this infrastructure network, whether caused by earthquakes, storms, other natural disasters or human error or malfeasance, could materially impact our business. It currently is impracticable to transport by pipeline fuel blends that contain ethanol, and we have limited ethanol storage capacity at our facilities. Therefore, any unexpected delay in transportation of our ethanol could result in significant disruption to our operations, possibly requiring shutting down our plant operations. We will rely upon others to maintain our rail lines from our production plants to national rail networks, and any failure on their part to maintain the lines could impede our delivery of products, impose additional costs on us or otherwise cause our results of operations or financial condition to suffer.

Disruptions in the supply of oil or natural gas could materially harm our business.

        Significant amounts of oil and natural gas are required for the growing, fertilizing and harvesting of corn, as well as for the fermentation, distillation and transportation of ethanol and the drying of distillers grain. A serious disruption in the supply of oil or natural gas and any related period of elevated prices could significantly increase our production costs and possibly require shutting down our plant operations which would materially harm our business.

Our business may be influenced by seasonal fluctuations.

        Our operating results may be influenced by seasonal fluctuations in the price of our primary operating inputs, corn and natural gas, and the price of our primary product, ethanol. Generally speaking, the spot price of corn tends to rise during the spring planting season in May and June and tends to decrease during the fall harvest in October and November. The price for natural gas, however, tends to move inversely to that of corn and tends to be lower in the spring and summer and higher in the fall and winter. In addition, ethanol prices have historically been substantially correlated with the price of unleaded gasoline. The price of unleaded gasoline tends to rise during the summer and winter. Due to the blender's credit, ethanol historically has traded at a per gallon premium to gasoline, although there have been times that ethanol has traded at a discount to gasoline. This discount, or price inversion, is believed to be the result of the rapid growth in the supply of ethanol compounded by the limited infrastructure and blending capacity required for distribution. Given our limited operating history, we do not know yet how these seasonal fluctuations will affect our operating results over time.

The price of distillers grain is affected by the price of other commodity products, such as soybeans, and decreases in the price of these commodities could decrease the price of distillers grain.

        Distillers grain is one of many animal feed products and competes with other protein-based animal feed products. The price of distillers grain may decrease when the price of competing feed products decreases. The prices of competing animal feed products are based in part on the prices of the commodities from which they are derived. Downward pressure on commodity prices, such as soybeans, will generally cause the price of competing animal feed products to decline, resulting in downward pressure on the price of distillers grain. Because the price of distillers grain is not tied to production costs, decreases in the price of distillers grain will result in us generating less revenue and lower profit

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margins. In addition, the production of distillers grain is expected to rise significantly in connection with the projected expansion of ethanol production capacity in the United States over the next several years. As a result of this likely significant increase in supply, the market price of distillers grain may fall sharply from its current levels. If the market price of distillers grain falls, our business and financial results may be harmed.

Our financial results may be adversely affected by potential future acquisitions or sales of our plants, which could divert the attention of key personnel, disrupt our business and dilute stockholder value.

        As part of our business strategy, and as market and financing conditions permit, we intend to (1) pursue acquisitions of other ethanol producers, building sites, production facilities, storage or distribution facilities and selected infrastructure and (2) seek opportunities to sell one or more plants or plant sites on a basis more favorable than we would expect to realize by holding them. Due to increased competition, however, we may not be able to secure suitable acquisition opportunities. Further, we may not be able to find a buyer or buyers for one or more of our plants or plant sites at prices that we consider attractive. In addition, the completion of any acquisition may result in unforeseen operating difficulties and may require significant financial and managerial resources that would otherwise be available for the ongoing development or expansion of our operations. Acquisitions also frequently result in the recording of goodwill and other intangible assets which are subject to potential impairments in the future that could harm our financial results. In addition, if we finance acquisitions by issuing equity securities or debt that is convertible into equity securities, our existing stockholders may be diluted, which could affect the market price of our common stock. The failure to successfully evaluate and execute acquisitions or investments or otherwise adequately address these risks could materially harm our business and financial results.

The domestic ethanol industry is highly dependent upon a myriad of federal and state legislation and regulation and any changes in legislation or regulation could adversely affect our results of operations and financial position.

        The elimination of, or any significant reduction in, the blenders' credit could have a material impact on our results of operations and financial position.    The cost of production of ethanol is made significantly more competitive with that of gasoline as a result of federal tax incentives. Before January 1, 2005, the federal excise tax incentive program allowed gasoline distributors that blended ethanol with gasoline to receive a federal excise tax rate reduction for each blended gallon they sold. If the fuel was blended with 10% ethanol, the refiner/marketer paid $0.052 per gallon of ethanol sold less tax, which amounted to an incentive of $0.52 per gallon of ethanol. The $0.52 per gallon incentive for ethanol was reduced to $0.45 per gallon in 2009 and is scheduled to expire on December 31, 2011. It is possible that the blenders' credit will not be renewed beyond 2011 or will be renewed on different terms. In addition, the blenders' credit, as well as other federal and state programs benefiting ethanol (such as tariffs), generally are subject to U.S. government obligations under international trade agreements, including those under the World Trade Organization Agreement on Subsidies and Countervailing Measures, and may be the subject of challenges, in whole or in part.

        The elimination of or significant changes to the Freedom to Farm Act could reduce corn supplies.    In 1996, Congress passed the Freedom to Farm Act, which allows farmers continued access to government subsidies while reducing restrictions on farmers' decisions about land use. This act not only increased acreage dedicated to corn crops but also allowed farmers more flexibility to respond to increases in corn prices by planting greater amounts of corn. The elimination of this act could reduce the amount of corn available in future years and could reduce the farming industry's responsiveness to the increasing corn needs of ethanol producers.

        Ethanol can be imported into the United States duty-free from some countries, which may undermine the domestic ethanol industry.    Imported ethanol is generally subject to a $0.54 per gallon tariff that was

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designed to offset the "blender's credit" ethanol incentive available under the federal excise tax incentive program for refineries that blend ethanol in their gasoline. A special exemption from the tariff exists for ethanol imported from 24 countries in Central America and the Caribbean Islands, which is limited to a total of 7.0% of U.S. production per year. In addition, the North American Free Trade Agreement, which went into effect on January 1, 1994, allows Canada and Mexico to import ethanol duty-free. Imports from the exempted countries may increase as a result of new plants under development. The tariff is scheduled to expire on December 31, 2010. If it is not extended by Congress, imports of ethanol from non-exempt countries may increase. Production costs for ethanol in these countries can be significantly less than in the United States and the duty-free import of lower price ethanol through the countries exempted from the tariff may reduce the demand for domestic ethanol and the price at which we sell our ethanol. The RFA estimates that the U.S. imported 600Mmgy of ethanol in 2008.

        The effect of the Renewable Fuel Standard, or RFS, program in the Energy Independence and Security Act signed into law in December 2007 and the Energy Policy Act signed into law in August 2005 is uncertain.    The use of fuel oxygenates, including ethanol, was mandated through regulation, and much of the forecasted growth in demand for ethanol was expected to result from additional mandated use of oxygenates. Most of this growth was projected to occur in the next few years as the remaining markets switch from MTBE to ethanol. The Energy Independence and Security Act of 2007 and the Energy Policy Act of 2005, however, eliminated the mandated use of oxygenates and instead established minimum nationwide levels of renewable fuels—ethanol, biodiesel or any other liquid fuel produced from biomass or biogas—to be blended with gasoline. The legislation also included provisions for trading of credits for use of renewable fuels and authorized potential reductions in the RFS minimum by action of a governmental administrator. The rules for implementation of the RFS and the energy bill became effective in September 2007, and the ultimate effects of these rules on the ethanol industry are uncertain. In addition, the favorable ethanol provisions in the 2007 Act and 2005 Act may be adversely affected by the enactment of additional legislation.

        The legislation did not include MTBE liability protection sought by refiners. Management predicts that this lack of protection may result in accelerated removal of MTBE and increased demand for ethanol. Refineries, however, may use replacement additives other than ethanol, such as iso-octane, iso-octene and alkylate. Accordingly, the actual demand for ethanol may increase at a lower rate than previously estimated, resulting in excess production capacity in our industry, which would negatively affect our business.

        Waivers of the RFS minimum levels of renewable fuels included in gasoline could have a material adverse affect on our results of operations.    Under the Energy Policy Act, the U.S. Department of Energy, in consultation with the Secretary of Agriculture and the Secretary of Energy, may waive the renewable fuels mandate with respect to one or more states if the Administrator of the Environmental Protection Agency determines that implementing the requirements would severely harm the economy or the environment of a state, a region or the nation, or that there is inadequate supply to meet the requirement. Any waiver of the RFS with respect to one or more states would reduce demand for ethanol and could cause our results of operations to decline and our financial condition to suffer.

We may be adversely affected by environmental, health and safety laws, regulations and liabilities.

        We are subject to various federal, state and local environmental laws and regulations, including those relating to the discharge of materials into the air, water and ground, the generation, storage, handling, use, transportation and disposal of hazardous materials, access to and impacts on water supply, and the health and safety of our employees. Some of these laws and regulations require our facilities to operate under permits that are subject to renewal or modification. These laws, regulations and permits can require expensive emissions testing and pollution control equipment or operational changes to limit actual or potential impacts to the environment. A violation of these laws and

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regulations or permit conditions can result in substantial fines, natural resource damages, criminal sanctions, permit revocations and facility shutdowns. We may not be at all times in compliance with these laws, regulations or permits or we may not have all permits required to operate our business. We may be subject to legal actions brought by environmental advocacy groups and other parties for actual or alleged violations of environmental laws or permits. In addition, we may be required to make significant capital expenditures on an ongoing basis to comply with increasingly stringent environmental laws, regulations and permits.

        We may be liable for the investigation and cleanup of environmental contamination at any of the properties that we own or operate and at off-site locations where we arrange for the disposal of hazardous substances. If these substances have been or are disposed of or released at sites that undergo investigation or remediation by regulatory agencies, we may be responsible under CERCLA, or other environmental laws for all or part of the costs of investigation and remediation, and for damage to natural resources. We also may be subject to related claims by private parties alleging property damage and personal injury due to exposure to hazardous or other materials at or from those properties. Some of these matters may require us to expend significant amounts for investigation, cleanup or other costs.

        New laws, new interpretations of existing laws, increased governmental enforcement of environmental laws or other developments could require us to make additional significant expenditures. Continued government and public emphasis on environmental issues can be expected to result in increased future investments for environmental controls at our production facilities. Environmental laws and regulations applicable to our operations now or in the future, more vigorous enforcement policies and discovery of currently unknown conditions may require substantial expenditures that could have a negative impact on our results of operations and financial condition. For example, carbon dioxide is a co-product of the ethanol manufacturing process and may be released into the atmosphere. Emissions of carbon dioxide resulting from the manufacturing process are not currently subject to applicable permit requirements. If new laws or regulations are passed relating to the production, disposal or emissions of carbon dioxide, we may be required to incur significant costs to comply with such new laws or regulations.

        The hazards and risks, such as fires, natural disasters, explosions and abnormal pressures and blowouts, associated with producing and transporting ethanol also may result in personal injury claims or damage to property and third parties. We could sustain losses for uninsurable or uninsured risks, or in amounts in excess of our insurance coverage. Events that result in significant personal injury or damage to our property or third parties or other losses that are not fully covered by insurance could materially harm our results of operations and financial condition.

Risks relating to the ownership of our common stock

The existing market for our common stock is illiquid, and we do not know whether a liquid trading market will develop.

        Prior to our initial public offering, our common stock had not been traded on a public market. Although our common stock is now listed on Nasdaq, the trading market is relatively illiquid as there are less than 6.0 million shares in publicly traded hands, exclusive of any officers, directors and affiliates. As a result, there are few institutional stockholders and we do not receive a significant amount of analyst coverage. An illiquid market will limit your ability to resell shares of our common stock.

Our common stock could be delisted from The Nasdaq Global Market, which could negatively impact the price of our common stock and our ability to access the capital markets.

        Our common stock is currently listed on The Nasdaq Global Market under the symbol "BIOF." The listing standards of The Nasdaq Global Market provide, among other things, that a company may

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be delisted if the bid price of its stock drops below $1.00 for a period of 30 consecutive business days. The bid price of our stock has been below $1.00 for a period of greater than 30 consecutive business days. As such, we may receive a Nasdaq Staff Determination Letter informing us that we must regain compliance with listing requirements or face delisting. However, given the current extraordinary market conditions, on October 16, 2008, Nasdaq filed an immediately effective rule change with the Securities and Exchange Commission to implement the suspension of enforcement of the bid price and market value of publicly held shares requirements through Friday, January 16, 2009. On December 19, 2008, Nasdaq issued a revised rule extending suspension of the rule until April 20, 2009. As a result of this suspension, even if our common stock continues to trade at a bid price below $1.00, the Company does not expect to receive a Nasdaq Staff Determination Letter prior to expiration of the thirty trading-day period commencing after April 20, 2009, which would be on or about June 2, 2009. To the extent that we receive a Nasdaq Staff Determination Letter, we will have 180 days in which to satisfy the minimum bid price requirements; however, given the suspension of enforcement of the minimum bid price rule, such 180 day period will not commence until after June 2, 2009, at the earliest.

        If we fail to comply with the listing standards, our common stock listing may be moved, in our discretion and subject to the satisfaction of certain listing requirements, including, without limitation, the payment of a listing fee, to the Nasdaq Capital Market, which is a lower tier market, or our common stock may be delisted and traded on the over-the-counter bulletin board network. Moving our listing to the Nasdaq Capital Market could adversely affect the liquidity of our common stock and the delisting of our common stock would significantly affect the ability of investors to trade our securities and could significantly negatively affect the value and liquidity of our common stock. In addition, the delisting of our common stock could materially adversely affect our ability to raise capital on terms acceptable to us or at all. Delisting from Nasdaq could also have other negative results, including the potential loss of confidence by suppliers and employees, the loss of institutional investor interest and fewer business development opportunities.

The price of our common stock may be volatile.

        The trading price of our common stock is likely to be highly volatile and could be subject to fluctuations in response to a number of factors beyond our control. Some of these factors are:

•

our results of operations and the performance of our competitors;



•

the public's reaction to our press releases, our other public announcements and our filings with the Securities and Exchange Commission, or SEC;



•

changes in earnings estimates or recommendations by research analysts who follow us or other companies in our industry;



•

changes in general economic conditions;



•

changes in market prices for our products (ethanol and distillers grains) or for our raw materials (primarily corn and natural gas);



•

actions of the historical equity investors, including sales of common stock by our Directors and executive officers;



•

actions by institutional investors trading in our stock;



•

disruption of our operations;



•

any major change in our management team;



•

other developments affecting us, our industry or our competitors; and



•

U.S. and international economic, legal and regulatory factors unrelated to our performance.

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        In recent years the stock market has experienced significant price and volume fluctuations. These fluctuations may be unrelated to the operating performance of particular companies. These broad market fluctuations may cause declines in the market price of our common stock. The price of our common stock could fluctuate based upon factors that have little or nothing to do with our company or its performance, and those fluctuations could materially reduce our common stock price.

Certain stockholders' shares are restricted from immediate resale but may be sold into the market in the near future, which could cause the market price of our common stock to decrease significantly.

        We currently have outstanding approximately 23.4 million shares of common stock and 10 million shares of Class B common stock. Of these shares, the approximately 6.0 million shares we sold in our initial public offering in June 2007 are freely tradable without restriction under the Securities Act of 1933, as amended, or the Securities Act, except for any shares purchased by one of our "affiliates" as defined in Rule 144 under the Securities Act. All of the shares outstanding other than the shares sold in the initial public offering are "restricted securities" within the meaning of Rule 144 under the Securities Act and will become eligible for sale in the public market over time under Rule 144 of the Securities Act, subject to volume limitations and other restrictions contained in Rule 144. In addition, holders of these shares will have the right to require us to register the resale of their shares. If holders sell substantial amounts of these shares, the price of our common stock could decline. In addition, the sale of these shares could impair our ability to raise capital through the sale of additional equity securities.

The historical equity investors, including some of our officers and directors own a significant percent of our shares and will exert significant influence over us. Their interests may not coincide with yours and they may make decisions with which you may disagree.

        Our certificate of incorporation provides that the holders of shares of our Class B common stock will be entitled to one vote for each share held of record on all matters submitted to a vote of stockholders. Accordingly, Greenlight Capital, Inc. and its affiliates, Third Point LLC and its affiliates and Cargill each control approximately 36.4%, 17.1% and 5.1% of the voting power in BioFuel Energy Corp., respectively, and our officers and Directors together control approximately 76.6% of the voting power in BioFuel Energy Corp. The shares of common stock and Class B common stock held by affiliates of Greenlight Capital, Inc. and Third Point LLC, which are controlled or represented on our board by two of our Directors, were included in the calculation of voting power attributable to our officers and Directors. The historical equity investors (including the private purchasers), acting together, could determine substantially all matters requiring stockholder approval, including the election of Directors and approval of significant corporate transactions. In addition, this concentration of ownership may delay or prevent a change in control of our company and make some transactions more difficult or impossible without the support of these stockholders. The interests of these stockholders may not always coincide with our interests as a company or the interests of other stockholders. Accordingly, these stockholders could cause us to enter into transactions or agreements that you would not approve or make decisions with which you may disagree.

We do not intend to pay dividends on our common stock.

        We have not paid any dividends since inception and do not anticipate paying any cash dividends on our common stock in the foreseeable future. We currently anticipate that we will retain all of our available cash, if any, for use as working capital and for other general corporate purposes, including to service our debt and to fund the development and operation of our business. Any payment of future dividends will be at the discretion of our Board of Directors and will depend upon, among other things, our earnings, financial condition, capital requirements, level of indebtedness, statutory and contractual restrictions applying to the payment of dividends and other considerations that the Board of Directors

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deems relevant. In addition, our bank facility imposes restrictions on the ability of the subsidiaries that own and operate our Wood River and Fairmont plants to pay dividends or make other distributions to us, which will restrict our ability to pay dividends. Investors must rely on sales of their common stock after price appreciation, which may never occur, as the only way to realize a return on their investment. Investors seeking cash dividends should not purchase our common stock.

The requirements of being a public company, including compliance with the reporting requirements of the Exchange Act and the requirements of the Sarbanes-Oxley Act, may strain our resources, increase our costs and distract management, and we may be unable to comply with these requirements in a timely or cost-effective manner.

        We are required to comply with laws, regulations and requirements, including certain corporate governance provisions of the Sarbanes-Oxley Act of 2002 and related regulations of the SEC and requirements of NASDAQ. Complying with these statutes, regulations and requirements will occupy a significant amount of the time of our Board of Directors and management. We are required to:

•

institute a comprehensive compliance function;



•

maintain internal policies, such as those relating to disclosure controls and procedures and insider trading;



•

design, establish, evaluate and maintain a system of internal controls over financial reporting in compliance with the requirements of Section 404 of the Sarbanes-Oxley Act and the related rules and regulations of the SEC;



•

prepare and distribute periodic reports in compliance with our obligations under the federal securities laws;



•

involve and retain outside counsel and accountants in the above activities; and



•

establish an investor relations function.

        If we are unable to accomplish these objectives in a timely and effective fashion, our ability to comply with our financial reporting requirements and other rules that apply to reporting companies could be impaired, and we may be subject to sanctions or investigation by regulatory authorities such as the SEC or NASDAQ. In addition, failure to comply with Section 404 or a report of a material weakness may cause investors to lose confidence in us and may have a material adverse effect on our stock price.

Risks relating to our organizational structure

Our only material asset is our interest in BioFuel Energy, LLC, and we are accordingly dependent upon distributions from BioFuel Energy, LLC to pay dividends, taxes and other expenses.

        BioFuel Energy Corp. is a holding company and has no material assets other than its ownership of membership interests in the LLC. BioFuel Energy Corp. has no independent means of generating revenue. We intend to cause the LLC to make distributions to its members in an amount sufficient to cover all applicable taxes payable, if any, by such members. Our bank facility contains negative covenants, which limit the ability of our operating subsidiaries to declare or pay dividends or distributions. To the extent that BioFuel Energy Corp. needs funds, and the LLC is restricted from making such distributions under applicable law or regulations, or is otherwise unable to provide such funds due, for example, to the restrictions in our bank facility that limit the ability of our operating subsidiaries to distribute funds, our liquidity and financial condition could be materially harmed.

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We will be required to pay the historical LLC equity investors for a portion of the benefits relating to any additional tax depreciation or amortization deductions we may claim as a result of tax basis step-ups we receive in connection with future exchanges of BioFuel Energy, LLC membership interests for shares of our common stock.

        The membership interests in the LLC held by the historical LLC equity investors may in the future be exchanged for shares of our common stock. The exchanges may result in increases in the tax basis of the assets of the LLC that otherwise would not have been available. These increases in tax basis may reduce the amount of tax that we would otherwise be required to pay in the future, although the IRS may challenge all or part of the tax basis increases, and a court could sustain such a challenge. At the current trading price, which was $0.35 as of March 6, 2009, we do not anticipate any material change in the tax basis of the LLC's assets.

        We have entered into a tax benefit sharing agreement with the historical LLC equity investors that will provide for the payment by us to the historical LLC equity investors of 85% of the amount of cash savings, if any, in U.S. federal, state and local income tax or franchise tax that we actually realize as a result of these increases in tax basis. The increase in tax basis, as well as the amount and timing of any payments under this agreement, will vary depending upon a number of factors, including the timing of exchanges, the price of shares of our common stock at the time of the exchange, the extent to which such exchanges are taxable, and the amount and timing of our income. As a result of the size of the increases in the tax basis of the tangible and intangible assets of the LLC attributable to our interest in the LLC, during the expected term of the tax benefit sharing agreement, we expect that the payments that we may make to the historical LLC equity investors could be substantial.

        Although we are not aware of any issue that would cause the IRS to challenge a tax basis increase, the historical LLC equity investors will not reimburse us for any payments that may previously have been made under the tax benefit sharing agreement. As a result, in certain circumstances we could make payments to the historical LLC equity investors under the tax benefit sharing agreement in excess of our cash tax savings. Our ability to achieve benefits from any tax basis increase, and the payments to be made under the tax benefit sharing agreement, will depend upon a number of factors, as discussed above, including the timing and amount of our future income.

Provisions in our charter documents and our organizational structure may delay or prevent our acquisition by a third party or may reduce the value of your investment.

        Some provisions in our certificate of incorporation and bylaws may be deemed to have an anti-takeover effect and may delay, defer or prevent a tender offer or takeover attempt that a stockholder may deem to be in his or her best interest. For example, our Board may determine the rights, preferences, privileges and restrictions of unissued series of preferred stock without any vote or action by our stockholders. In addition, stockholders must provide advance notice to nominate Directors or to propose business to be considered at a meeting of stockholders and may not take action by written consent. Our corporate structure, which provides our historical LLC equity investors, through the shares of Class B common stock they will hold, a number of votes equal to the number of shares of common stock issuable upon exchange of their membership interests in the LLC, may also have the effect of delaying, deferring or preventing a future takeover or change in control of our company. The existence of these provisions and this structure could also limit the price that investors may be willing to pay in the future for shares of our common stock.

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If BioFuel Energy Corp. were deemed an "investment company" under the Investment Company Act of 1940 as a result of its ownership of BioFuel Energy, LLC, applicable restrictions could make it impractical for us to continue our business as contemplated and could have a material adverse effect on our business.

        If BioFuel Energy Corp. were to cease participation in the management of the LLC, its interest in the LLC could be deemed an "investment security" for purposes of the Investment Company Act of 1940, or the 1940 Act. Generally, a person is deemed to be an "investment company" if it owns investment securities having a value exceeding 40% of the value of its total assets (exclusive of U.S. government securities and cash items), absent an applicable exemption. BioFuel Energy Corp. has no material assets other than its equity interest in the LLC. A determination that this interest was an investment security could result in BioFuel Energy Corp. being an investment company under the 1940 Act and becoming subject to the registration and other requirements of the 1940 Act.

        The 1940 Act and the rules thereunder contain detailed parameters for the organization and operations of investment companies. Among other things, the 1940 Act and the rules thereunder limit or prohibit transactions with affiliates, impose limitations on the issuance of debt and equity securities, prohibit the issuance of stock options, and impose certain governance requirements. We intend to conduct our operations so that BioFuel Energy Corp. will not be deemed to be an investment company under the 1940 Act. However, if anything were to happen that would cause BioFuel Energy Corp. to be deemed to be an investment company under the 1940 Act, requirements imposed by the 1940 Act, including limitations on our capital structure, ability to transact business with affiliates and ability to compensate key employees, could make it impractical for us to continue our business as currently conducted, impair the agreements and arrangements between and among BioFuel Energy Corp., the LLC or the historical equity investors, or any combination thereof and materially adversely affect our business, financial condition and results of operations.

ITEM 1B.    UNRESOLVED STAFF COMMENTS

        None.

ITEM 2.    PROPERTIES

Facilities

Headquarters

        Our corporate headquarters are located at 1600 Broadway, Denver, Colorado, where we currently lease approximately 9,000 square feet of office space.

Production Facilities

        The table below provides an overview of our Wood River, Nebraska and Fairmont, Minnesota ethanol plants, which began operations in 2008.

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Wood River plant

        Our Wood River production plant began operations late in the second quarter of 2008 with an initial production capacity of 115 Mmgy, and reached substantial completion in December 2008. The plant is located on an approximately 125 acre site owned by us approximately 100 miles west of Lincoln, Nebraska. The site is immediately adjacent to an existing Cargill grain elevator. The grain elevator provides all required corn storage and handling capacity for the plant and, together with the site on which it sits, has been leased, effective in September 2008, from Cargill pursuant to a 20-year lease. Natural gas distribution to the site's lateral pipeline is provided by the Kinder Morgan Interstate Pipeline. Electricity to the site is being provided by the City of Wood River. We have drilled our own wells for water needed at the facility.

Fairmont plant

        Our Fairmont production plant began operations late in the second quarter of 2008 with an initial production capacity of 115 Mmgy, and reached substantial completion in December 2008. The plant is located on an approximately 200 acre site owned by us approximately 150 miles southwest of Minneapolis, Minnesota. The site is immediately adjacent to an existing Cargill grain elevator. The grain elevator provides all required corn storage and handling capacity for the plant and, together with the site on which it sits, has been leased, effective in September 2008, from Cargill pursuant to a 20-year lease. Natural gas distribution to the plant's lateral pipeline is provided by the Northern Border Interstate Pipeline. Electricity to the site is being provided by Federated Rural Electric Association. Wells on the site will provide water needed at the facility.

ITEM 3.    LEGAL PROCEEDINGS

        None.

ITEM 4.    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

        None.

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

Market Information

        We completed an initial public offering, or "IPO", of shares of our common stock in June 2007. Our common stock trades on the NASDAQ Global Market under the symbol "BIOF." The following table sets forth the high and low closing prices for the common stock as reported on the NASDAQ Global Market for the quarterly periods since our IPO. These prices do not include retail markups, markdowns or commissions.

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        On March 26, 2009, the closing price of our common stock was $0.39. As of March 26, 2009, there were approximately 37 shareholders of record of our common stock and 17 shareholders of record of our Class B common stock. We believe the number of beneficial owners is substantially greater than the number of record holders because a large portion of our outstanding common stock is held of record in broker "street names" for the benefit of individual investors. As of March 26, 2009, there were 22,576,681 common shares outstanding, net of 809,606 shares held in treasury, and 10,012,097 Class B common shares outstanding.

Repurchases of Equity Securities

        On October 15, 2007, the Company announced the adoption of a stock repurchase plan. The repurchase of up to $7.5 million of the Company's common stock was authorized. Purchases will be funded out of cash on hand and made from time to time in the open market. From the inception of the buyback program through March 26, 2009, the Company had repurchased 809,606 shares at an average price of $5.30 per share, leaving $3,184,000 available under the basket for future repurchases.

        The share repurchases made from inception of the buyback program through December 31, 2008 were as follows:

(1)

Pursuant to Repurchase Plan announced on October 15, 2007.

Dividend Policy

        We have not paid any dividends since our inception and do not anticipate declaring or paying any cash dividends on our common stock in the foreseeable future. We currently anticipate that we will retain all of our available cash, if any, for use as working capital and for other general corporate purposes, including to service our debt and to fund the development and operation of our business. Payment of future dividends, if any, will be at the discretion of our Board of Directors and will depend on many factors, including general economic and business conditions, our strategic plans, our financial results and condition, legal requirements and other factors as our Board of Directors deems relevant. In addition, our bank facility imposes restrictions on the ability of the subsidiaries that own our Wood River and Fairmont plants to pay dividends or make other distributions to us, which will restrict our ability to pay dividends.

        BioFuel Energy Corp. is a holding company and has no material assets other than its ownership of membership interests in the LLC. We intend to cause the LLC to make distributions to BioFuel Energy Corp. in an amount sufficient to cover dividends, if any, declared by us. If the LLC makes such

40

distributions, the historical LLC equity investors will be entitled to receive equivalent distributions from the LLC on their membership interests. To ensure that our public stockholders are treated fairly with the historical LLC equity investors, our charter requires that all distributions received from the LLC, other than distributions to cover tax obligations and other corporate expenses, will be dividended to holders of our common stock.

Equity Compensation Plans

        The information required by this item concerning equity compensation plans is incorporated by reference to "Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters" of the Annual Report on Form 10-K.

ITEM 6.    SELECTED FINANCIAL DATA

        The selected financial data of BioFuel Energy Corp. as of December 31, 2008 and 2007 and for the years then ended has been derived from the audited consolidated financial statements of BioFuel Energy Corp. included elsewhere in this Form 10-K.

        You should read the selected historical financial data in conjunction with the information included under the heading "Management's discussion and analysis of financial condition and results of operations" and the consolidated financial statements and accompanying notes included in this Form 10-K.

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

        You should read the following discussion in conjunction with the audited consolidated financial statements and the accompanying notes included in this Form 10-K. This discussion contains forward-looking statements that involve risks and uncertainties. Specifically, forward-looking statements may be preceded by, followed by or may include such words as "estimate", "plan", "project", "forecast", "intend", "expect", "is to be", "anticipate", "goal", "believe", "seek", "target" or other similar expressions. You are cautioned not to place undue reliance on any forward-looking statements, which speak only as of the date of this Form 10-K, or in the case of a document incorporated by reference, as of the date of that document. Except as required by law, we undertake no obligation to publicly update or release any revisions to these forward-looking statements to reflect any events or circumstances after the date of this Form 10-K or to reflect the occurrence of unanticipated events. Our actual results may differ materially from those discussed in or implied by any of the forward-looking statements as a result of various factors, including but not limited to those listed elsewhere in this Form 10-K and those listed in other documents we have filed with the Securities and Exchange Commission.

Overview

        BioFuel Energy Corp. produces and sells ethanol and distillers grain through its two ethanol production facilities located in Wood River, Nebraska and Fairmont, Minnesota. In late June 2008, we commenced start-up of commercial operations and began to produce ethanol at both of our plants, each having a nameplate capacity, based on the maximum amount of permitted denaturant, of 115 million gallons per year ("Mmgy"). During the remainder of 2008, we focused on optimizing production and streamlining operations with the goal of producing at nameplate capacity, which was achieved in December 2008. From inception, we have worked closely with Cargill, Inc., one of the world's leading agribusiness companies, with whom we have an extensive contractual relationship. The two plant locations were selected primarily based on access to corn supplies, the availability of rail transportation and natural gas and Cargill's competitive position in the area. At each location, Cargill, has a strong local presence and owns adjacent grain storage facilities. Cargill provides corn procurement services, markets the ethanol and distillers grain we produce and provides transportation logistics for our two plants under long-term contracts. In addition, we lease grain storage and handling facilities adjacent to our plants from affiliates of Cargill.

        The Company previously evaluated three similar sites and incurred site development costs for the possible construction of additional plants. During the year ended December 31, 2008, the Company decided to no longer pursue construction of these sites and therefore has written off the associated development costs which totaled $1,100,000.

        Our operations and cash flows are subject to fluctuations due to changes in commodity prices. We may use derivative financial instruments such as futures contracts, swaps and option contracts to manage commodity prices. See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and capital resources; and—Hedging Losses" elsewhere in this report.

        We are a holding company with no operations of our own, and are the sole managing member of BioFuel Energy, LLC, or the LLC, which is itself a holding company and indirectly owns all of our operating assets. The Company's ethanol plants are owned and operated by the Operating Subsidiaries of the LLC.

        The Operating Subsidiaries of the LLC entered into engineering, procurement and construction ("EPC") contracts with The Industrial Company—Wyoming ("TIC") for the construction of the Wood River and Fairmont plants. Pursuant to these EPC contracts, TIC was to be paid a total of $272.0 million, subject to certain adjustments, for the turnkey construction of the two plants. The Operating Subsidiaries of the LLC entered into agreements with TIC, effective December 11, 2008,

43

that settled various issues that had arisen between the parties under the terms of the EPC contracts during the course of constructing the plants. Among the items agreed to were that TIC had met both substantial completion and project completion, that TIC would continue to be responsible for its warranty obligations, and that TIC would pay the subsidiaries of the LLC $2.0 million for each plant, which amounts would be deducted from the retainage amounts owed to TIC. The construction retainage liability at December 31, 2008 of $9.4 million was recorded net of the $2.0 million for each plant owed by TIC as part of the settlement agreement and was paid to TIC in February 2009. At December 31, 2008, property, plant and equipment related to the EPC contracts was $248.9 million, net of liquidated damages of $19.1 million arising out of completion delays at both plants and net of $4.0 million arising out of the settlement agreements with TIC. Spending on construction of the Wood River and Fairmont plants, exclusive of corporate overhead and financing charges, is expected to total approximately $319 million, or $300 million net of liquidated damages. As of December 31, 2008 the Company estimated that an additional $5 million will be spent by the Operating Subsidiaries of the LLC on plant infrastructure and other construction requirements to permit the plants to be operated safely and reliably at their nameplate capacities.

Going Concern

        In connection with their year-end audit of our annual financial statements, our independent auditor assesses whether a statement should be included in their audit report regarding the existence of substantial doubt related to our ability to continue as a going concern. Our auditors have issued an opinion on our consolidated financial statements for the fiscal year ended December 31, 2008, which is included with this report, that states that the consolidated financial statements were prepared assuming we will continue as a going concern and further states that the factors discussed in Note 1 to the consolidated financial statements raise substantial doubt about our ability to continue as a going concern. As shown in the accompanying consolidated financial statements, the Company incurred a loss before minority interest of $84.1 million in 2008, primarily due to hedging losses on corn contracts and significant costs associated with the start up and operation of our plants. We continue to suffer operating losses in 2009 resulting from poor operating margins due to the relative prices of corn and ethanol. The Company's liquidity position continues to decline as a result of these losses. In addition, under the terms on the Company's senior debt facility with a group of lenders financing construction of our plants, minimum quarterly principal payments of $3,150,000 are scheduled to begin on June 30, 2009. Based on current operating margins and the Company's liquidity position, the Company may not be able to generate sufficient cash flow to make principal and interest payments when they become due during 2009. Failure to make these payment obligations when they become due would result in events of default under the senior debt facility, which we would have up to 3 days to cure. We have initiated a company-wide business restructuring plan to reduce costs and are currently exploring various alternatives to address our liquidity issues. These include: (i) reducing operating expenses through headcount reductions or operating efficiency initiatives; (ii) reducing the cost of various inputs and services by renegotiating the terms of supply and service agreements, including our agreements with Cargill; (iii) seeking forbearance or some other accommodation from our lenders; (iv) seeking new capital, either from new or existing investors or (v) some combination of the foregoing or other measures. However there can be no assurance that we will be successful in achieving any of these objectives or, if successfully implemented, that these initiatives will be sufficient to address our lack of liquidity. If the Company is unable to reach an agreement with the senior lenders, raise additional capital, or is unable to generate sufficient liquidity from its operations to satisfy its obligations, it may have a material adverse effect on our liquidity and may result in our inability to continue as a going concern, and could potentially force us to seek relief from creditors through a filing under the U.S. Bankruptcy Code.

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Revenues

        Our primary source of revenue is the sale of ethanol. The selling prices we realize for our ethanol are largely determined by the market supply and demand for ethanol, which, in turn, is influenced by industry factors over which we have little control. Ethanol prices are extremely volatile.

        We also receive revenue from the sale of distillers grain, which is a residual co-product of the processed corn and is sold as animal feed. The selling prices we realize for our distillers grain are largely determined by the market supply and demand, primarily from livestock operators and marketing companies in the U.S. and internationally. Distillers grain is sold by the ton and, based upon the amount of moisture retained in the product, can either be sold "wet" or "dry".

Cost of goods sold and gross profit (loss)

        Our gross profit (loss) is derived from our revenues less our cost of goods sold. Our cost of goods sold is affected primarily by the cost of corn and natural gas. The prices of both corn and natural gas are volatile and can vary as a result of a wide variety of factors, including weather, market demand, regulation and general economic conditions, all of which are outside of our control.

        Corn is our most significant raw material cost. Historically, rising corn prices result in lower profit margins because ethanol producers are unable to pass along increased corn costs to customers. The price and availability of corn is influenced by weather conditions and other factors affecting crop yields, farmer planting decisions and general economic, market and regulatory factors. These factors include government policies and subsidies with respect to agriculture and international trade, and global and local demand and supply. Historically, the spot price of corn tends to rise during the spring planting season in May and June and tends to decrease during the fall harvest in October and November.

        We also purchase natural gas to power steam generation in our ethanol production process and as fuel for our dryers to dry our distillers grain. Natural gas represents our second largest operating cost after corn, and natural gas prices are extremely volatile. Historically, the spot price of natural gas tends to be highest during the heating and cooling seasons and tends to decrease during the spring and fall.

        Corn procurement fees paid to Cargill are included in our cost of goods sold. Other cost of goods sold primarily consists of our cost of chemicals and enzymes, electricity, depreciation, manufacturing overhead and rail car lease expenses.

General and administrative expenses

        General and administrative expenses consist of salaries and benefits paid to our management and administrative employees, expenses relating to third party services, insurance, travel, office rent, marketing and other expenses, including certain expenses associated with being a public company, such as costs associated with our annual audit and quarterly reviews, compliance with Section 404 of the Sarbanes-Oxley Act, and listing and transfer agent fees.

Results of operations

        The following discussion summarizes the significant factors affecting the consolidated operating results of the Company for the years ended December 31, 2008 and 2007. This discussion should be read in conjunction with the consolidated financial statements and notes to the consolidated financial statements contained in this Form 10-K.

        At December 31, 2008, the Company owned 69.1% of the LLC and the remainder was owned by our founders and original equity investors. As a result, the Company consolidates the results of the LLC. The amount of income or loss allocable to the 30.9% holders is reported as minority interest in our Consolidated Statements of Operations.

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        The Company's plants located in Wood River, Nebraska and Fairmont, Minnesota, commenced start-up and began commercial operations in late June 2008. Because of this, there are no net sales, cost of goods sold, or gross profit (loss) for the year ended December 31, 2007 for comparison purposes.

        The following table sets forth net sales, expenses and net loss, as well as the percentage relationship to net sales of certain items in our consolidated statements of operations (no percentages are provided for the year ended December 31, 2007 due to the Company not having any net sales during such periods):

        The following table sets forth key operational data for 2008 that we believe are important indicators of our results of operations (no data exists for 2007 as the plants were not operational until June 2008):

Year Ended December 31, 2008 Compared to the Year Ended December 31, 2007

        Both of the Company's plants commenced start-up and began commercial operations in late June 2008. Because of this, there are no net sales, cost of goods sold, or gross profit (loss) for the year ended December 31, 2007 for comparison purposes.

        Cost of goods sold and gross loss:    Cost of goods sold was $199,163,000 for the year ended December 31, 2008 which resulted in a gross loss of $19,296,000 for the year ended December 31, 2008. Cost of goods sold included $140,454,000 for corn, $19,767,000 for natural gas, $3,071,000 for

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denaturant, $5,137,000 for electricity, $10,416,000 for chemicals and enzymes, $11,729,000 for general operating expenses, and $8,589,000 for depreciation. Our cost of goods sold was higher in relation to revenues for several reasons. The cost of corn per gallon of ethanol increased at a rate greater than the price of ethanol as the crush spread narrowed. For the remaining cost of goods sold expense categories, except depreciation, our costs were higher than expected due to the delays in our plants' completion and the resulting inability to operate at capacity, which resulted in inefficiencies in all cost categories. Our plants ran at 64% and 84% of capacity for the quarters ended September 30, 2008 and December 31, 2008, respectively. We achieved 100% production capacity on a combined basis in December 2008.

        General and administrative expenses:    General and administrative expenses increased $7,829,000, or 85.0%, to $17,044,000 for the year ended December 31, 2008, compared to $9,215,000 for the year ended December 31, 2007. The increase was primarily due to an increase in compensation expense of $2,684,000 and other expense of $5,145,000. Of the $2,684,000 increase in compensation expense, $2,531,000 was attributable to plant employees who began working and training at the plants in early 2008. As the plants did not begin commercial operation until June, the plant employees compensation costs were included in general and administrative expenses until that time. Subsequent to June, the plant employees costs are now included in cost of goods sold. Of the $5,145,000 increase in other expense, $4,371,000 was attributable to expenses at the plants. As the plants did not begin commercial operation until June, all start-up costs were included in general and administrative expenses until that time. Subsequent to June, plant costs are now included in cost of goods sold. The most significant start-up costs related to rail car leases for $2,048,000 and elevator leases for $450,000.

        Other operating expense:    Other operating expense was $1,350,000 for the year ended December 31, 2008 compared to zero for the year ended December 31, 2007. The expense consisted of a $250,000 insurance claim deductible expense and a $1,100,000 write off of development costs associated with the evaluation of three additional plant sites.

        Other income (expense):    Interest income decreased $725,000, or 40.0%, to $1,087,000 for the year ended December 31, 2008, compared to $1,812,000 for the year ended December 31, 2007. The decrease was primarily attributable to a decrease in the amount of funds available to be invested in money market mutual funds as a result of the Company having to fund operating losses with its existing cash balances.

        Interest expense was $5,831,000 for the year ended December 31, 2008, compared to zero for the year ended December 31, 2007, as a result of the Company no longer capitalizing interest associated with the loans financing the construction of the plants effective September 1, 2008. The amount represents four months of interest expense on such loans.

        Other non-operating expense was $1,781,000 for the year ended December 31, 2008, compared to zero for the year ended December 31, 2007. The expense consisted of a $1,879,000 loss on the sale of corn prior to operations commencing, which was offset by $98,000 of other miscellaneous income.

        Loss on derivative financial instruments was $39,912,000 for the year ended December 31, 2008, compared to zero for the year ended December 31, 2007. The increase was a result of the Company incurring losses associated with commodities hedging contracts during the third quarter of 2008. The Company was not a party to any such hedging contracts during the year ended December 31, 2007.

        Minority Interest.    Minority interest increased $38,280,000 to $43,262,000 for the year ended December 31, 2008, compared to $4,982,000 for the year ended December 31, 2007. The increase was attributable to the Company's loss before minority interest increasing from $7,403,000 for the year ended December 31, 2007 to $84,127,000 for the year ended December 31, 2008.

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Liquidity and capital resources

        Our cash flows from operating, investing and financing activities during the years ended December 31, 2008 and December 31, 2007 are summarized below (in thousands):

        Cash used in operating activities.    Net cash used in operating activities was $91,063,000 for the year ended December 31, 2008, compared to $5,607,000 for the year ended December 31, 2007. For the year ended December 31, 2008, the amount was primarily comprised of a net loss, before minority interest, of $84,127,000, an increase in accounts receivable of $16,669,000 and an increase in inventories of $14,929,000 which were offset by an increase in hedging loss liability of $14,402,000 and noncash depreciation and amortization expense of $9,791,000. The $84,127,000 net loss, before minority interest, resulted from a $37,690,000 operating loss due to poor operating margins resulting from plant start-up coupled with the relative prices of corn and ethanol and $46,437,000 in nonoperating expenses. The nonoperating expenses were primarily comprised of $39,912,000 in losses on corn hedging contracts and $5,831,000 in interest expense. The increase in accounts receivable and inventories resulted from the Company beginning commercial operations in June 2008 thereby resulting in accounts receivable and inventory at December 31, 2008 versus having none at December 31, 2007. For the year ended December 31, 2007 the amount was primarily comprised of a net loss, before minority interest, of $7,403,000, offset by share based compensation expense of $1,370,000.

        Cash used in investing activities.    Net cash used in investing activities was $41,763,000 for the year ended December 31, 2008, compared to $190,686,000 for the year ended December 31, 2007. During both periods, the cash used was primarily for construction of the Wood River and Fairmont ethanol plants. The decrease from 2007 to 2008 was a result of the construction being at its peak in 2007 versus winding down in the middle of 2008 as the projects neared completion and began operating.

        Cash provided by financing activities.    Net cash provided by financing activities was $89,138,000 for the year ended December 31, 2008, compared to $225,041,000 for the year ended December 31, 2007. For the year ended December 31, 2008, the amount was primarily comprised of $17,000,000 of borrowings under the Company's working capital facility and $77,150,000 of proceeds under its construction loan facilities, which were partially offset by $2,276,000 in payments for treasury stock purchases. For the year ended December 31, 2007, the amount was primarily comprised of $103,581,000 of proceeds related to our initial public offering and concurrent private placement, $104,000,000 in borrowings under the Company's construction facilities, and $50,000,000 in borrowings of Subordinated Debt, which were offset by $30,000,000 of principal payments of the Subordinated Debt.

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        Our principal sources of liquidity at December 31, 2008 consisted of cash and equivalents and available borrowings under our bank facilities as summarized in the following table (in thousands).

        Our principal liquidity needs are expected to be funding our operations, funding remaining construction costs, debt service requirements of our indebtedness, and general corporate purposes. Our construction loan availability will be utilized to pay construction retainage of $9.4 million (which was paid in February 2009), fund a debt service reserve of $10.8 million, and fund remaining construction costs of $5.0 million. The remaining $3.6 million can be used for general operating purposes.

Going Concern Considerations

        As shown in the accompanying consolidated financial statements, the Company incurred a loss before minority interest of $84.1 million in 2008, primarily due to hedging losses on corn contracts and significant costs associated with the start up and operation of our plants. We continue to suffer operating losses in 2009 resulting from poor operating margins due to the relative prices of corn and ethanol. The Company's liquidity position continues to decline as a result of these losses. In addition, under the terms on the Company's senior debt facility, minimum quarterly principal payments of $3,150,000 are scheduled to begin on June 30, 2009. Based on current operating margins and the Company's liquidity position, the Company may not be able to generate sufficient cash flow to make principal and interest payments when they become due during 2009. Failure to make these payment obligations when they become due would result in events of default under the senior debt facility, which we would have up to 3 days to cure. We have initiated a company-wide business restructuring plan to reduce costs and are currently exploring various alternatives to address our liquidity issues. These include: (i) reducing operating expenses through headcount reductions or operating efficiency initiatives; (ii) reducing the cost of various inputs and services by renegotiating the terms of supply and service agreements, including our agreements with Cargill; (iii) seeking forbearance or some other accommodation from our lenders; (iv) seeking new capital, either from new or existing investors or (v) some combination of the foregoing or other measures. However there can be no assurance that we will be successful in achieving any of these objectives or, if successfully implemented, that these initiatives will be sufficient to address our lack of liquidity. If the Company is unable to reach an agreement with the senior lenders, raise additional capital, or is unable to generate sufficient liquidity from its operations to satisfy its obligations, it may have a material adverse effect on our liquidity and may result in our inability to continue as a going concern, and could potentially force us to seek relief through a filing under the U.S. Bankruptcy Code.

Hedging Losses

        During the second quarter of 2008, the LLC entered into various derivative instruments with Cargill in order to manage exposure to commodity prices for corn and ethanol, generally through the use of futures, swaps, and option contracts. During August 2008, the market price of corn declined sharply, exposing the LLC to large unrealized losses and significant unmet margin calls under these contracts. Cargill began liquidating the hedge contracts in August 2008 and by September 30, 2008 the LLC was no longer a party to any hedge contracts for any of its commodities. The Company recorded $39.9 million in losses during the year ended December 31, 2008 resulting from the liquidation of its hedge contracts. All of the related contracts were entered into with Cargill, which conducts all corn purchases and sales of ethanol and distillers grain for the LLC and its subsidiaries. As

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of December 31, 2008, the LLC had converted its payable with Cargill relating to its hedging contract losses into a note payable. See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and capital resources—Cargill debt agreement" elsewhere in this report.

Stock repurchase plan

        On October 15, 2007, the Company announced the adoption of a stock repurchase plan pursuant to which the repurchase of up to $7.5 million of the Company's common stock was authorized. Purchases will be funded out of cash on hand and made from time to time in the open market. From the inception of the buyback program through March 26, 2009 the Company had repurchased 809,606 shares at an average price of $5.30 per share, leaving $3,184,000 available under the repurchase plan. The shares repurchased are held as treasury stock. As of December 31, 2008, there are no plans to repurchase any more shares.

Construction

        In late June 2008, we commenced start-up of commercial operations and began to produce ethanol at both of our plants. During the remainder of 2008, we focused on optimizing production and streamlining operations with the goal of producing at nameplate capacity, which was achieved in December 2008. We entered into agreements with TIC, effective December 11, 2008, that settled certain issues that had arisen between the parties under the terms of the EPC contracts during the course of construction. Among the items agreed to were that TIC had met both substantial completion and project completion, that TIC would continue to be responsible for its warranty obligations, and that TIC would pay the subsidiaries of the LLC $2.0 million for each plant, which amounts would be deducted from the retainage amounts owed to TIC. The construction retainage liability at December 31, 2008 of $9.4 million was recorded net of the $2.0 million for each plant owed by TIC as part of the settlement agreement, and was paid to TIC in February 2009 with borrowings under our existing bank facility. As of December 31, 2008, the Company estimated that an additional $5 million will be spent on plant infrastructure and other construction requirements to permit the plants to be operated safely and reliably at their nameplate capacities, and will be funded with borrowings under the existing bank facility. We estimate that the total project costs, exclusive of corporate overhead and financing charges, to complete these plants will be approximately $319 million.

        In connection with the formation of the Company, we secured a $50.0 million subordinated debt facility from a group of our initial shareholders. Subsequently, we entered into a $230.0 million bank facility in connection with the construction of our Wood River and Fairmont facilities. The full $50.0 million of available subordinated debt had been drawn by May 2007 when we made our initial bank borrowing. In July 2007, we repaid $30.0 million of the subordinated debt with a portion of the proceeds of our initial public offering.

        To date, we have used the net proceeds of equity investments by the historical equity investors, the proceeds of the initial public offering and the private placement, and borrowings under our bank facility and subordinated debt agreement to finance the construction of both facilities. As of December 31, 2008, we had borrowings of $181.2 million under our construction loan facility, $17.0 million under the working capital facility, and $20.5 million under our Subordinated Debt facility.

Tax and our tax benefit sharing agreement

        As a result of future exchanges of membership interests in the LLC for shares of our common stock, the tax basis of the LLC's assets attributable to our interest in the LLC may be increased. These increases in tax basis, if any, will result in a potential tax benefit to the Company that would not have been available but for the exchanges of the LLC membership interests for shares of our common stock.

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These increases in tax basis would reduce the amount of tax that we would otherwise be required to pay in the future, although the IRS may challenge all or part of the tax basis increases, and a court could sustain such a challenge. There have been no assets recognized with respect to any exchanges made through December 31, 2008. The amount of any potential increases in tax basis and the resulting recording of tax assets are dependent upon the share price of our common stock at the time of the exchange of the membership interests in the LLC for shares of our common stock. At the current trading price, which was $.35 as of March 6, 2009, we do not anticipate any material change in the tax basis of the LLC's assets.

        We have entered into a tax benefit sharing agreement with our historical LLC equity investors that will provide for a sharing of these tax benefits, if any, between the Company and the historical LLC equity investors. Under this agreement, the Company will make a payment to an exchanging LLC member of 85% of the amount of cash savings, if any, in U.S. federal, state and local income tax that we actually realize as a result of this increase in tax basis. The Company and its common stockholders will benefit from the remaining 15% of cash savings, if any, in income tax that is realized by the Company. For purposes of the tax benefit sharing agreement, cash savings in income tax will be computed by comparing our actual income tax liability to the amount of such taxes that we would have been required to pay had there been no increase in the tax basis of the tangible and intangible assets of the LLC as a result of the exchanges and had we not entered into the tax benefit sharing agreement. The term of the tax benefit sharing agreement will continue until all such tax benefits have been utilized or expired, unless a change of control occurs and we exercise our resulting right to terminate the tax benefit sharing agreement for an amount based on agreed payments remaining to be made under the agreement.

        Although we are not aware of any issue that would cause the IRS to challenge a tax basis increase, our historical LLC equity investors are not required to reimburse us for any payments previously made under the tax benefit sharing agreement. As a result, in certain circumstances we could make payments to our historical LLC equity investors under the tax benefit sharing agreement in excess of our cash tax savings. Our historical LLC equity investors will receive 85% of our cash tax savings, leaving us with 15% of the benefits of the tax savings. The actual amount and timing of any payments under the tax benefit sharing agreement will vary depending upon a number of factors, including the timing of exchanges, the extent to which such exchanges are taxable, the price of our common stock at the time of the exchange and the amount and timing of our income. As a result of the size of the potential increases of the tangible and intangible assets of the LLC attributable to our interest in the LLC, during the expected term of the tax benefit sharing agreement, the payments that we may make to our historical LLC equity investors could be substantial should our stock price appreciate prior to their exchanging their membership interests in the LLC.

Bank facility

        In September 2006, the Operating Subsidiaries of the LLC entered into a $230.0 million senior secured bank facility with BNP Paribas and a syndicate of lenders to finance the construction of our Wood River and Fairmont plants. Neither the Company nor the LLC is a borrower under the bank facility, although the equity interests and assets of our subsidiaries are pledged as collateral to secure the debt under the facility.

        The bank facility consists of $210.0 million of non-amortizing construction loans, which will convert into term loans amortizing in an amount equal to $3,150,000 per quarter and maturing in September 2014, if certain conditions precedent are satisfied prior to June 2009, which we expect to occur. The construction loans otherwise mature in June 2009. Once repaid, the construction loans may not be re-borrowed in whole or in part.

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        The bank facility also includes working capital loans of up to $20.0 million, a portion of which is available to us in the form of letters of credit. The working capital loans are available to pay certain operating expenses of the plants. Effective August 29, 2008, the Operating Subsidiaries of the LLC entered into an amendment to the bank facility which permitted them access to the $20 million working capital facility and the ability to disburse funds from their revenue account on a daily basis, in each case solely for the purchase of corn, natural gas, chemicals, enzymes, denaturant and electricity. Prior to this amendment, the Operating Subsidiaries of the LLC had access to only $5 million of their working capital line and the ability to disburse their revenues only at the end of each month. The working capital loans mature in September 2010 or, with consent from two-thirds of the lenders, in September 2011. As of December 31, 2008, we had borrowings of $17.0 million under the working capital loans.

        Although we have borrowed substantial amounts under the bank facility, additional borrowings remain subject to the satisfaction of a number of additional conditions precedent, including continued compliance with debt covenants and payment of principal and interest when due. To the extent that we are not able to satisfy these requirements, we will not be able to make additional borrowings under the bank facility without obtaining a waiver or consent from the lenders.

        The obligations under the bank facility are secured by first priority liens on all assets of the borrowers and a pledge of all of our equity interests in our subsidiaries. In addition, substantially all cash of the borrowers is required to be deposited into blocked collateral accounts subject to security interests to secure any outstanding obligations under the bank facility. Funds will be released from such accounts only in accordance with the terms of the bank facility.

        Interest rates on each of the loans under the bank facility will be, at our option, (a) a base rate equal to the higher of (i) the federal funds effective rate plus 0.5% or (ii) BNP Paribas's prime rate, in each case, plus 2.0% or (b) a Eurodollar rate equal to LIBOR adjusted for reserve requirements plus 3.0%. Interest periods for loans based on a Eurodollar rate will be, at our option, one, three or six months, or, if available, nine or twelve months. Accrued interest is due quarterly in arrears for base rate loans, on the last date of each interest period for Eurodollar loans with interest periods of one or three months, and at three month intervals for Eurodollar loans with interest periods in excess of three months. Overdue amounts bear additional interest at a default rate of 2.0%. The average interest rate in effect on the bank borrowings at December 31, 2008 was 3.5%.

        The bank facility includes certain limitations on, among other things, the ability of our subsidiaries to incur additional indebtedness, grant liens or encumbrances, declare or pay dividends or distributions, conduct asset sales or other dispositions, mergers or consolidations, conduct transactions with affiliates and amend, modify or change the scope of the construction projects, the project agreements or the budgets relating to the projects. The Company has established collateral deposit accounts maintained by an agent of the banks, into which our revenues are to be deposited. These funds will then be allocated into various sweep accounts held by the collateral agent, with the remaining cash, if any, distributed to the Company each month. The sweep accounts have various provisions, including an interest coverage ratio and debt service reserve requirements, which will restrict the amount of cash that is made available to the Company each month.

        The terms of the bank facility also contain customary events of default including failure to meet payment obligations, failure to complete construction of the Wood River and Fairmont plants by June 30, 2009, failure to pay financial obligations, failure of the LLC or its principal contractors to remain solvent and failure to obtain or maintain required governmental approvals. In addition, our bank agreement contains standard clauses regarding occurrence of a "material adverse effect," which is defined very broadly and in such fashion as to be subjective. In the event our banks should determine that a "material adverse effect" has occurred, we could be placed in default. Minimum quarterly principal payments of $3,150,000 are scheduled to begin on June 30, 2009. Based on current operating

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margins and the Company's liquidity position, the Company may not be able to make principal and interest payments when they become due during 2009. Failure to make these payment obligations when they become due would result in events of default under the bank facility, which we would have up to 3 days to cure. The Company is currently exploring various alternatives to address its liquidity issues however there can be no assurance that the Company will be successful in achieving its objectives. If the Company is unable to reach an agreement with the senior lenders, raise additional capital, or is unable to generate sufficient liquidity from its operations to satisfy its obligations, it may have a material adverse effect on our liquidity and may result in our inability to continue as a going concern, and could potentially force us to seek relief from creditors through a filing under the U.S. Bankruptcy Code.

        We are required to pay certain fees in connection with our bank facility, including a commitment fee equal to 0.50% per annum on the daily average unused portion of the construction loans and working capital loans and letter of credit fees.

        Debt issuance fees and expenses of approximately $8.5 million ($6.1 million, net of accumulated amortization) have been incurred in connection with the bank facility at December 31, 2008. These costs have been deferred and are being amortized over the term of the bank facility, although the amortization of debt issuance costs during the period of construction through August 2008, were capitalized as part of the cost of the constructed assets.

        As of December 31, 2008, we had borrowed $198,150,000 under our bank facilities, and had remaining availability of $31,850,000 million which was comprised of $3,000,000 million in working capital loans and $28,850,000 in construction loans. The remaining availability on both loans is subject to certain restrictions and milestones.

Subordinated Debt agreement

        The LLC is the borrower of subordinated debt under a loan agreement dated September 25, 2006, entered into with certain affiliates of Greenlight Capital, Inc. and Third Point LLC, each of which are related parties. The loan agreement provides for up to $50.0 million of non-amortizing loans, all of which must be used for general corporate purposes, working capital or the development, financing and construction of our ethanol plants. Interest on the Subordinated Debt is payable quarterly in arrears at a 15.0% annual rate. The entire principal balance, if any, plus all accrued and unpaid interest will be due in March 2015. Once repaid, the subordinated debt may not be re-borrowed. The subordinated debt is secured by the subsidiary equity interests owned by the LLC and are fully and unconditionally guaranteed by all of the LLC's subsidiaries, which guarantees are subordinated to the obligations of these subsidiaries under our bank facility. The subordinated debt may be prepaid at any time in whole or in part without penalty. A default under our bank facility would also constitute a default under our subordinated debt and would entitle the lenders to accelerate the repayment of amounts outstanding.

        All $50.0 million available under the subordinated debt agreement was borrowed in the first six months of 2007. During the third quarter of 2007, the Company retired $30.0 million of its subordinated debt with a portion of the initial public offering proceeds, leaving $20.0 million of subordinated debt outstanding at December 31, 2008. This resulted in accelerated amortization of deferred fees of approximately $3.1 million, which represents the fees relating to the pro rata share of the retired debt.

        The LLC did not make the scheduled quarterly interest payments which were due on September 30, 2008 and December 31, 2008. Under the terms of the subordinated debt, the failure to pay interest when due is an event of default. In January 2009, the LLC and the lenders of the subordinated debt entered into a waiver and amendment agreement to the loan agreement. Under the waiver and amendment, an initial payment of $2.0 million, which was made on January 16, 2009, was made to pay the $767,000 of accrued interest due September 30, 2008 and to reduce outstanding

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principal by $1,233,000. Effective upon the $2.0 million initial payment, the subordinated debt lenders waived the defaults and any associated penalty interest relating to the September 30, 2008 and the December 31, 2008 quarterly interest payments. Effective December 1, 2008, interest on the subordinated debt began accruing at a 5.0% annual rate compounded quarterly, a rate that will apply until the debt owed to Cargill, under an agreement entered into simultaneously, has been paid in full, at which time the rate will revert to a 15.0% annual rate and quarterly payments in arrears are required. As long as the debt to Cargill remains outstanding, future payments to the subordinated debt lenders will be contingent upon available cash (as defined in both agreements) being received by the LLC.

        Debt issuance fees and expenses of approximately $5.5 million ($1.7 million, net of accumulated amortization) have been incurred in connection with the subordinated debt at December 31, 2008. Debt issuance costs associated with the subordinated debt are being deferred and amortized over the term of the agreement, although the amortization of debt issuance costs during the period of construction through August 2008 were capitalized as part of the cost of the constructed assets.

Cargill debt agreement

        In January 2009, the LLC and Cargill entered into an agreement which finalized the payment terms for $17.4 million owed to Cargill by the LLC related to hedging losses with respect to corn hedging contracts that had been liquidated in the third quarter of 2008. The agreement with Cargill required an initial payment of $3.0 million on the outstanding balance, which was paid on December 5, 2008. Upon the initial payment of $3.0 million, Cargill also forgave $3.0 million. Effective December 1, 2008, interest on the Cargill debt began accruing at a 5.0% annual rate compounded quarterly. Future payments to Cargill of both principal and interest are contingent upon the receipt by the LLC of available cash, as defined in the agreement. Cargill will forgive, on a dollar for dollar basis a further $2.8 million as it receives the next $2.8 million of principal payments. The Cargill debt is being accounted for in accordance with SFAS No. 15, Accounting by Debtors and Creditors for Troubled Debt Restructurings. As the future cash payments specified by the terms exceed the carrying amount of the debt before the $3.0 million is forgiven, the carrying amount of the debt is not reduced and no gain is recorded. As future payments are made, the LLC will determine, based on the timing of payments, whether or not any gain contingency should be recorded.

Capital lease

        The LLC, through its subsidiary that constructed the Fairmont plant, entered into an agreement with the local utility pursuant to which the utility has built and owns and operates a substation and distribution facility in order to supply electricity to the plant. The LLC is paying a fixed facilities charge based on the cost of the substation and distribution facility of $34,000 per month, over the 30-year term of the agreement. This fixed facilities charge is being accounted for as a capital lease in the accompanying financial statements. The agreement also includes a $25,000 monthly minimum energy charge which also began in the first quarter of 2008.

Notes payable

        Notes payable relate to certain financing agreements in place at each of our sites. The subsidiaries of the LLC that constructed the plants entered into finance agreements in the first quarter of 2008 for the purchase of certain rolling stock equipment to be used at the facilities for $748,000. The notes have a fixed interest rate of approximately 5.4% and require 48 monthly payments of principal and interest, maturing in the first and second quarter of 2012. In addition, the subsidiary of the LLC that constructed the Wood River facility has entered into a note payable for $2,220,000 with a fixed interest rate of 11.8% for the purchase of our natural gas pipeline. The note requires 36 monthly payments of principal and interest and matures in the first quarter of 2011.

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Tax increment financing

        In February 2007, the subsidiary of the LLC that constructed the Wood River plant received $6.0 million from the proceeds of a tax increment revenue note issued by the City of Wood River, Nebraska. The proceeds funded improvements to property owned by the subsidiary. The City of Wood River will pay the principal and interest of the note from the incremental increase in the property taxes related to the improvements made to the property. The proceeds have been recorded as a liability and will be reduced as the LLC remits property taxes to the City of Wood River beginning in 2008 and continuing for approximately 13 years. The LLC has guaranteed the principal and interest of the tax increment revenue note if, for any reason, the City of Wood River fails to make the required payments to the holder of the note.

        On June 15, 2008, and again on December 15, 2008 the first two principal payments on the note were made. Due to delays in the plant construction, property taxes on the plant in 2008 were lower than anticipated and therefore, the LLC was required to pay $760,000 as a portion of the note payments.

Letters of credit

        The Company had obtained four letters of credit, for a total of approximately $4.0 million outstanding, as of December 31, 2008. These letters of credit have been provided as collateral to the owner of the natural gas pipeline lateral constructed to connect to the Wood River plant, the natural gas provider at the Fairmont plant, and the electrical service providers at both the Fairmont and Wood River plants, and are all secured by certificates of deposit in the respective amounts, which will automatically renew each year.

Off-balance sheet arrangements

        We do not have any off-balance sheet arrangements that have or are reasonably likely to have a material current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

Summary of critical accounting policies and significant estimates

        The consolidated financial statements of BioFuel Energy Corp. included in this Form 10-K have been prepared in conformity with accounting principles generally accepted in the United States. Note 2 to the consolidated financial statements contains a summary of our significant accounting policies, certain of which require the use of estimates and assumptions. Accounting estimates are an integral part of the preparation of financial statements and are based on judgments by management using its knowledge and experience about the past and current events and assumptions regarding future events, all of which we consider to be reasonable. These judgments and estimates reflect the effects of matters that are inherently uncertain and that affect the carrying value of our assets and liabilities, the disclosure of contingent liabilities and reported amounts of expenses during the reporting period.

        The accounting estimates and assumptions discussed in this section are those that we believe involve significant judgments and the most uncertainty. Changes in these estimates or assumptions could materially affect our financial position and results of operations and are therefore important to an understanding of our consolidated financial statements.

Recoverability of property, plant and equipment

        We have made a significant investment in property, plant and equipment. Construction of our two ethanol facilities located in Wood River and Fairmont has been completed. We evaluate the

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recoverability of fixed assets whenever events or changes in circumstances indicate that the carrying value of our property, plant and equipment may not be recoverable.

        Management must continuously assess whether or not circumstances require a formal evaluation of the recoverability of our property, plant and equipment. In analyzing impairment, management must estimate future ethanol and distillers grain sales volume, ethanol and distillers grain prices, corn and natural gas prices, inflation and capital spending, among other factors. These estimates involve significant inherent uncertainties, and the measurement of the recoverability of the cost of our property, plant and equipment is dependent on the accuracy of the assumptions used in making the estimates and how these estimates compare to our future operating performance. Certain of the operating assumptions will be particularly sensitive and subject to change as the ethanol industry develops.

        Recoverability is measured by comparing the carrying value of an asset with estimated undiscounted future cash flows expected to result from the use of the asset and its eventual disposition. An impairment loss is reflected as the amount by which the carrying amount of the asset exceeds the fair value of the asset. Fair value is determined based on the present value of estimated expected future cash flows using a discount rate commensurate with the risk involved, quoted market prices or appraised values, depending on the nature of the assets. As of December 31, 2008, the Company performed an impairment evaluation of the recoverability of its long-lived assets due to the circumstances identified in Note 1 to the consolidated financial statements. We evaluated the recoverability of property, plant and equipment in accordance with SFAS No. 144. For purposes of testing impairment of its long-lived assets at December 31, 2008, the Company determined whether the carrying amount of its long-lived assets was recoverable by comparing the carrying amount to the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the assets. The estimated undiscounted cash flows were dependent on a number of critical management assumptions, including estimates of future capacity, crush spread, corn, and natural gas prices and other inputs, operating costs and other relevant assumptions.

        As a result of this impairment evaluation, it was determined that the future cash flows from the assets exceeded the current carrying values, and therefore, no further analysis was necessary and no impairment was recorded. However, in the event that high corn prices relative to low ethanol prices (e.g., a reduced "crush spread") persist for an extended period, the Company may be required to record an impairment in the future.

Share-based compensation

        We account for the issuance and exchanges of equity instruments for employee services in accordance with Statement of Financial Accounting Standard No. 123 (revised 2004), Share-Based Payments, or SFAS 123R. Under the fair value recognition provisions of this statement, share-based compensation cost is measured at the grant date based on the award's fair value as calculated by the Black-Scholes option-pricing model and is recognized as expense over the requisite service period. The key assumptions generally used in the Black-Scholes calculations include the expected term, the estimated volatility of our common stock, the vesting schedule and the risk-free rate of return during the expected term. Additionally, we are required to estimate the expected forfeiture rate, as we recognize expense only for those shares or stock options expected to vest. Due to the uncertainties inherent in these estimates, the amount of compensation expense to be recorded will be dependent on the assumptions used in making the estimates.

Recent accounting pronouncements

        In December 2007, the FASB issued SFAS No. 141R, Business Combinations, or ("SFAS 141R.") SFAS 141R changes how a reporting enterprise accounts for the acquisition of a business. When

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effective, SFAS 141R will replace existing SFAS 141. However, SFAS 141R carries forward the existing requirements to account for all business combinations using the acquisition method (formerly called the purchase method) to both identify the acquirer for every business combination and recognize intangible assets acquired separately from goodwill, based on the contractual-legal and separability criteria. SFAS 141R will be effective for the Company on January 1, 2009. The effect of adopting SFAS 141R will depend on the terms and timing of future acquisitions, if any.

        In December 2007, the FASB issued SFAS No. 160, Consolidations/Investments in Subsidiaries—Noncontrolling Interests in Consolidated Financial Statements, or SFAS 160. SFAS 160 replaces the minority-interest provisions of Accounting Research Bulletin 51, Consolidated Financial Statements, by defining a new term—noncontrolling interests—to replace what were previously called minority interests. SFAS 160 will be effective for the Company on January 1, 2009. The Company has not assessed the impact of SFAS 160 on its consolidated results of operations, cash flows or financial position; however, at December 31, 2008 the Company had $14.1 million of minority interest liability that, under the provisions of SFAS 160, would be presented as a component of stockholders' equity. Under SFAS 160, the amount of net income attributable to the Company and to the noncontrolling interest will be identified on the Statements of Operations. Future exchanges of LLC units for Company common stock will be accounted for in accordance with SFAS 160 as equity transactions, with any difference between the fair value of the Company's common stock and the amount by which the noncontrolling interest is adjusted being recognized in equity.

        In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities, an amendment of FASB statement No. 133 ("SFAS 161"), which requires enhanced disclosures for derivative and hedging activities. SFAS 161 will become effective beginning with our first quarter of 2009. Early adoption is permitted. We are currently evaluating the impact of this standard on our consolidated financial statements.

        Other new pronouncements issued but not effective until after December 31, 2008, are not expected to have a significant effect on the Company's consolidated financial position or results of operations.

ITEM 7A.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

        We are subject to significant risks relating to the prices of four primary commodities: corn and natural gas, our principal production inputs, and ethanol and distillers grain, our principal products. These commodities are also subject to geographic basis differentials, which can vary considerably. In recent years, ethanol prices have been primarily influenced by gasoline prices, the availability of other gasoline additives and federal, state and local laws, regulations, subsidies and tariffs. Distillers grain prices tend to be influenced by the prices of alternative animal feeds. However, in the short to intermediate term, logistical issues may have a significant impact on ethanol prices. In addition, the acceptance by livestock operators of the anticipated sharp increase in quantities of distillers grain production as new ethanol plants become operational could significantly depress its price.

        We expect that lower ethanol prices will tend to result in lower profit margins even when corn prices decrease due to the significance of fixed costs. The price of ethanol is subject to wide fluctuations due to domestic and international supply and demand, infrastructure, government policies, including subsidies and tariffs, and numerous other factors. Ethanol prices are extremely volatile. From January 1, 2007 to December 31, 2008, the ethanol Bloomberg rack prices have fluctuated from a low of $1.69 per gallon in October 2007 to a high of $3.08 per gallon in July 2008 and averaged $2.27 per gallon during this period.

        We expect that lower distillers grain prices will tend to result in lower profit margins. The selling prices we realize for our distillers grain are largely determined by market supply and demand, primarily

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from livestock operators and marketing companies in the U.S. and internationally. Distillers grain are sold by the ton and can either be sold "wet" or "dry".

        We anticipate that higher corn prices will tend to result in lower profit margins, as it is unlikely that such an increase in costs can be passed on to ethanol customers. The availability as well as the price of corn is subject to wide fluctuations due to weather, carry-over supplies from the previous year or years, current crop yields, government agriculture policies, international supply and demand and numerous other factors. Using an average corn price of $3.50 per bushel, we estimate that corn will represent approximately 72% of our operating costs. Historically, the spot price of corn tends to rise during the spring planting season in May and June and tends to decrease during the fall harvest in October and November. From January 1, 2007 to December 31, 2008 the Bloomberg rack price of corn has fluctuated from a low of $2.68 per bushel in December 2008 to a high of $7.15 per bushel in July 2008 and averaged $4.10 per bushel during this period.

        Higher natural gas prices will tend to reduce our profit margin, as it is unlikely that such an increase in costs can be passed on to ethanol customers. Natural gas prices and availability are affected by weather, overall economic conditions, oil prices and numerous other factors. Using an average corn price of $3.50 per bushel and an average price of $5.75 per Mmbtu for natural gas, we estimate that natural gas will represent approximately 10% of our operating costs. Historically, the spot price of natural gas tends to be highest during the heating and cooling seasons and tends to decrease during the spring and fall. From January 1, 2007 to December 31, 2008, the Bloomberg rack price of natural gas has fluctuated from a low of $5.29 per Mmbtu in September 2007 to a high of $13.31 per Mmbtu in July 2008 and averaged $7.73 per Mmbtu during this period.

        To reduce the risks implicit in price fluctuations of these four principal commodities and variations in interest rates, we plan to continuously monitor these markets and to hedge a portion of our exposure, provided we have the financial resources to do so. Specifically, when we can reduce volatility through hedging on an attractive basis, we expect to do so. Our objective would be to hedge between 60% and 75% of our commodity price exposure on a rolling 12 to 24 month basis when a positive margin can be assured. This range would include the effect of intermediate to longer-term purchase and sales contracts we may enter into, which act as de facto hedges. In hedging, we may buy or sell exchange-traded commodities futures or options, or enter into swaps or other hedging arrangements. In doing so, we may access Cargill's risk management and futures advisory services and utilize its trading capabilities. While there is an active futures market for corn and natural gas, the futures market for ethanol is still in its infancy and very illiquid, and we do not believe a futures market for distillers grain currently exists. Although we will attempt to link our hedging activities such that sales of ethanol and distillers grain match pricing of corn and natural gas on an attractive basis, there is a limited ability to do this against the current forward or futures market for ethanol and corn. Consequently, our hedging of ethanol and distillers grain may be limited or have limited effectiveness due to the nature of these markets. Due to the Company's limited operating history and lack of liquidity, obtaining credit from potential third-party brokerage companies with respect to hedging transactions will be difficult. Due to the Company's limited liquidity resources and the potential for required postings of significant cash collateral or margin deposits resulting from changes in commodity prices associated with hedging activities, the Company may be limited in its ability to hedge with third-party brokers. We also may vary the amount of hedging activities we undertake, and may choose to not engage in hedging transactions at all. As a result, our operations and financial position may be adversely affected by increases in the price of corn or natural gas or decreases in the price of ethanol or unleaded gasoline.

        We have prepared a sensitivity analysis as set forth below to estimate our exposure to market risk with respect to our projected corn and natural gas requirements and our ethanol sales for 2009. Market risk related to these factors is estimated as the potential change in pre-tax income, resulting from a hypothetical 10% adverse change in the fair value of our corn and natural gas requirements and our ethanol sales based on current prices as of December 31, 2008, excluding corn and natural gas forward

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and futures contracts used to hedge our market risk. Actual results may vary from these amounts due to various factors including significant increases or decreases in the LLC's production capacity during 2009.

        At December 31, 2008 the Company had committed through its Fairmont plant subsidiary to purchase 1,000 Mmbtu of natural gas per day starting January 1, 2009 through June 30, 2009. The price of the gas will be based on the local gas index in effect at the first of the month of scheduled delivery plus an additional $0.0425 per Mmbtu.

        We believe that managing our commodity price exposure has the potential to reduce the volatility implicit in a commodity-based business. However, it may also tend to reduce our ability to benefit from favorable commodity price changes. Hedging arrangements also expose us to risk of financial loss if the counterparty defaults or in the event of extraordinary volatility in the commodities markets. Furthermore, if geographic basis differentials are not hedged, they could cause our hedging programs to be ineffective or less effective than anticipated. In the third quarter of 2008, corn prices pulled back sharply resulting in the Company realizing significant losses on its hedge contracts. See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and capital resources—Hedging Losses" elsewhere in this report.

        We are subject to interest rate risk in connection with our bank facility. Under the facility, our bank borrowings bear interest at a floating rate based, at our option, on LIBOR or an alternate base rate. Pursuant to our bank facility, we are required to hedge no less than 50% of our interest rate risk until all obligations and commitments under the facility are paid and terminated. In September 2007, the Operating Company, through its subsidiaries, entered into an interest rate swap for a two-year period. The contract is for $60.0 million principal with a fixed interest rate of 4.65% payable by the Operating Company, and the variable interest rate, the one-month LIBOR, payable by the third party. The difference between the Operating Company's fixed rate of 4.65% and the one-month LIBOR rate, which is reset every 30 days, is received or paid every 30 days in arrears. In March 2008, the Operating Company, through its subsidiaries, entered into a second interest rate swap for a two-year period. The contract is for $50.0 million principal with a fixed interest rate of 2.766%, payable by the Operating Company, and the variable interest rate, the one-month LIBOR, payable by the third party. The difference between the Operating Company's fixed rate of 2.766% and the one-month LIBOR rate, which is reset every 30 days, is received or paid every 30 days in arrears. As of December 31, 2008, we had borrowed $198.2 million under our bank facility. After considering the $110.0 million of interest rate swaps in place with respect to our bank borrowings, a hypothetical 100 basis points increase in interest rates under our bank facility would result in an increase of $882,000 in our annual interest expense.

        At December 31, 2008, we had $12.3 million of cash and equivalents invested in money market mutual funds held at two financial institutions, which is in excess of FDIC insurance limits. We also had certificates of deposit for $4.0 million held at two financial institutions, which is in excess of FDIC insurance limits. The money market mutual funds are not invested in any auction rate securities.

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ITEM 8.    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Index to Consolidated Financial Statements

Financial Statements of BioFuel Energy Corp.

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Stockholders of
BioFuel Energy Corp.

We have audited the accompanying consolidated balance sheets of BioFuel Energy Corp. (a Delaware corporation) and subsidiaries (collectively, the "Company") as of December 31, 2008 and 2007, and the related consolidated statements of operations, stockholders' equity and comprehensive loss, and cash flows for the years then ended. Our audits of the basic financial statements included the financial statement schedule listed in the index appearing under Item 8. These financial statements and financial statement schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and financial statement schedule based on our 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 audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes 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, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of BioFuel Energy Corp. and subsidiaries as of December 31, 2008 and 2007, and the results of their operations and their cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1, the Company incurred a loss before minority interest of $84.1 million during the year ended December 31, 2008, and experienced declining liquidity. These factors, among others, as discussed in Note 1 to the consolidated financial statements, raise substantial doubt about the Company's ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/ GRANT THORNTON LLP

Denver, Colorado
March 27, 2009

F-1

BioFuel Energy Corp.

Consolidated Balance Sheets

(in thousands, except share and per share data)

The accompanying notes are an integral part of these financial statements.

F-2

BioFuel Energy Corp.

Consolidated Statements of Operations

(in thousands, except per share data)

The accompanying notes are an integral part of these financial statements.

F-3

BioFuel Energy Corp.

Consolidated Statement of Stockholders' Equity and Comprehensive Loss

Years Ended December 31, 2007 and December 31, 2008

(in thousands, except share data)