Advanced BioEnergy, LLC (Form: 10-Q, Received: 08/14/2012 15:05:06)

Large accelerated filer

Accelerated filer

Non-accelerated filer

þ (Do not check if a smaller reporting company)

Smaller reporting company

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

Form 10-Q

(Mark One)

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

For the quarterly period ended June 30, 2012

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

For the transition period from to

Commission file number: 000-52421

ADVANCED BIOENERGY, LLC

(Exact name of Registrant as Specified in its Charter)

Delaware

20-2281511

(State or Other Jurisdiction of

Incorporation or Organization)

(I.R.S. Employer

Identification No.)

8000 Norman Center Drive, Suite 610

Bloomington, Minnesota 55437

(763) 226-2701

(Address, including zip code, and telephone number,

including area code, of Registrant’s Principal Executive Offices)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files.) Yes þ No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

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

As of August 9, 2012, the number of outstanding units was 24,714,180.

ADVANCED BIOENERGY, LLC

FORM 10-Q

Index


	Page
Part I. Financial Information
Item 1. Financial Statements		3
Consolidated Balance Sheets		3
Consolidated Statements of Operations		4
Consolidated Statement of Changes in Members’ Equity		5
Consolidated Statements of Cash Flows		6
Notes to Consolidated Financial Statements		7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		20
Item 3. Quantitative and Qualitative Disclosures About Market Risk		33
Item 4. Controls and Procedures		34
Part II. Other Information
Item 1. Legal Proceedings		35
Item 1A. Risk Factors		35
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		36
Item 3. Defaults Upon Senior Securities		36
Item 4. Mine Safety Disclosures		36
Item 5. Other Information		36
Item 6. Exhibits		36
Signatures		37
Exhibit Index		38

PART I. FINANCIAL INFORMATION

Item 1.

Financial Statements

ADVANCED BIOENERGY, LLC & SUBSIDIARIES

Consolidated Balance Sheets

(Dollars in thousands)


	June 30, 2012			September 30, 2011
	(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	19,473		$	18,725
Accounts receivable:
Trade accounts receivable, net of allowance for doubtful accounts of $178 at June 30, 2012 and September 30, 2011		12,251			14,653
Other receivables		1,389			838
Due from broker		728			1,014
Inventories		17,149			22,106
Prepaid expenses		1,868			2,175
Current portion of restricted cash		6,762			3,959

Total current assets		59,620			63,470

Property and equipment, net		154,074			164,821
Other assets:
Restricted cash		1,146			1,508
Notes receivable-related party		506			494
Other assets		1,727			1,883

Total assets	$	217,073		$	232,176

LIABILITIES AND MEMBERS’ EQUITY
Current liabilities:
Accounts payable	$	8,968		$	6,688
Accrued expenses		6,724			6,528
Derivative financial instruments		295			832
Current portion of long-term debt (stated principal amount of $15,280 and $20,541 at June 30, 2012 and September 30, 2011, respectively)		17,238			21,703

Total current liabilities		33,225			35,751

Other liabilities		332			318
Deferred income		3,703			4,208
Long-term debt (stated principal amount of $107,277 and $117,962 at June 30, 2012 and September 30, 2011, respectively)		114,086			126,253

Total liabilities		151,346			166,530

Members’ equity:
Members’ capital, no par value, 24,714,180 units issued and outstanding		171,249			171,246
Accumulated deficit		(105,522	)		(105,600	)

Total members’ equity		65,727			65,646

Total liabilities and members’ equity	$	217,073		$	232,176

See notes to consolidated financial statements.

ADVANCED BIOENERGY, LLC & SUBSIDIARIES

Consolidated Statements of Operations

(Dollars in thousands, except per unit data)

(Unaudited)


	Three months ended						Nine months ended
	June 30, 2012			June 30, 2011			June 30, 2012			June 30, 2011
Net sales
Ethanol and related products	$	137,655		$	154,848		$	440,474		$	423,818
Other		—			—			366			358

Total net sales		137,655			154,848			440,840			424,176
Cost of goods sold		144,080			153,370			433,029			411,783

Gross profit (loss)		(6,425	)		1,478			7,811			12,393
Selling, general and administrative		2,409			1,586			6,041			4,611
Arbitration settlement expense		—			1,083			—			3,789

Operating income (loss)		(8,834	)		(1,191	)		1,770			3,993
Other income		226			164			783			774
Interest income		26			27			61			64
Interest expense		(630	)		(764	)		(2,536	)		(2,692	)

Net income (loss)	$	(9,212	)	$	(1,764	)	$	78		$	2,139

Weighed average units outstanding—basic		24,714,180			24,705,180			24,714,180			24,705,180
Weighed average units outstanding—diluted		24,755,155			24,705,180			24,714,180			24,705,180
Income (loss) per unit—basic	$	(0.37	)	$	(0.07	)	$	0.00		$	0.09
Income (loss) per unit—diluted	$	(0.38	)	$	(0.08	)	$	0.00		$	0.08

See notes to consolidated financial statements.

ADVANCED BIOENERGY, LLC & SUBSIDIARIES

Consolidated Statements of Changes in Members’ Equity

For the Nine Months Ended June 30, 2012

(Dollars in thousands)

(Unaudited)


	Member Units		Members’ Capital		Accumulated Deficit			Total
MEMBERS’ EQUITY—September 30, 2011		24,714,180	$	171,246	$	(105,600	)	$	65,646
Unit compensation expense		—		3		—			3
Net income		—		—		78			78

MEMBERS’ EQUITY—June 30, 2012		24,714,180	$	171,249	$	(105,522	)	$	65,727

See notes to consolidated financial statements

ADVANCED BIOENERGY, LLC & SUBSIDIARIES

Consolidated Statements of Cash Flows

(Dollars in thousands)

(Unaudited)


	Nine Months Ended
	June 30, 2012			June 30, 2011
Cash flows from operating activities:
Net income	$	78		$	2,139
Adjustments to reconcile net income to operating activities cash flows:
Depreciation		17,398			16,862
Amortization of deferred financing costs		99			99
Amortization of deferred revenue and rent		(527	)		(517	)
Idle lease liability reduction		—			(154	)
Amortization of additional carrying value		(686	)		(645	)
Unit compensation expense		3			34
Gain on disposal of assets		(9	)		(8	)
Unrealized loss (gain) on warrant derivative liability		36			(241	)
Change in risk management activities		(537	)		314
Change in working capital components:
Receivables		2,125			(2,639	)
Inventories		4,957			(5,844	)
Prepaid expenses		307			668
Accounts payable		2,280			3,741
Accrued expenses		196			774

Net cash provided by operating activities		25,720			14,583

Cash flows from investing activities:
Purchase of property and equipment		(6,642	)		(3,951	)
Issuance of notes receivable		—			(490	)
Change in other assets		57			154
Change in restricted cash		(2,441	)		1,544

Net cash used in investing activities		(9,026	)		(2,743	)

Cash flows from financing activities:
Payments on debt		(15,946	)		(14,549	)
Distribution to members		—			(27	)

Net cash used in financing activities		(15,946	)		(14,576	)

Net increase (decrease) in cash and cash equivalents		748			(2,736	)
Beginning cash and cash equivalents		18,725			22,772

Ending cash and cash equivalents	$	19,473		$	20,036

Supplemental disclosure of cash flow information:
Cash paid for interest	$	3,498		$	3,401

See notes to consolidated financial statements.

ADVANCED BIOENERGY, LLC & SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2012 and 2011

(Unaudited)

1. Organization and Significant Accounting Policies

The consolidated financial statements include the accounts of Advanced BioEnergy, LLC (“ABE” or the “Company”) and its wholly owned subsidiaries, ABE Fairmont, LLC (“ABE Fairmont”) and ABE South Dakota, LLC (“ABE South Dakota”). All intercompany balances and transactions have been eliminated in consolidation.

The accompanying unaudited consolidated financial statements have been prepared in conformity with U.S. generally accepted accounting principles, or GAAP, for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. The interim financial statements should be read in conjunction with the audited financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K for the year ended September 30, 2011. The financial information as of June 30, 2012 and the results of operations for the three and nine months ended June 30, 2012 are not necessarily indicative of the results for the fiscal year ending September 30, 2012.

The Company currently operates three ethanol production facilities in the U.S. with a combined production capacity of 195 million gallons per year. The Company commenced operations at the 110 million gallon facility in Fairmont, Nebraska in November 2007. The Company acquired existing facilities in Aberdeen, South Dakota (9 million gallons) and Huron, South Dakota (32 million gallons) in November 2006 and commenced operations at the 44 million gallon Aberdeen expansion facility in January 2008.

Cash, Cash Equivalents and Restricted Cash

The Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents. The Company’s cash balances are maintained in bank depositories and periodically exceed federally insured limits. The Company has not experienced losses in these accounts. The Company’s restricted cash includes cash held for debt service under the terms of its debt agreements, and cash deposited to support letters of credit.

Fair Value of Financial Instruments

Financial instruments include cash, cash equivalents and restricted cash, derivative financial instruments, accounts receivable, accounts payable, accrued expenses, warrants, and long-term debt. The fair value of derivative financial instruments is based on quoted market prices, which are considered to be Level 1 inputs. The fair value of warrants is determined using the Black-Scholes valuation model. The fair value of the long-term debt is estimated based on Level 3 inputs which are anticipated interest rates which management believes would currently be available to the Company for similar issues of debt, taking into account the current credit risk of the Company and other market factors. The Company believes the carrying value of the debt instruments at ABE Fairmont approximate fair value. Based on the restructuring event in 2010, the fair value of the debt instruments at ABE South Dakota is not determinable (refer to Note 5 for terms). The fair value of all other financial instruments are estimated to approximate carrying value due to the short-term nature of these instruments, and are considered to be Level 2 inputs.

Fair Value Measurements

In determining fair value of its derivative financial instruments and warrant liabilities, the Company uses various methods including market, income and cost approaches. Based on these approaches, the Company often uses certain assumptions that market participants would use in pricing the asset or liability, including assumptions about risk and the risks inherent in the inputs to the valuation technique. These inputs can be readily observable, market-corroborated, or generally unobservable inputs. Financial assets and liabilities carried at fair value will be classified and disclosed in one of the following three fair value hierarchy categories.

Level 1: Valuations for assets and liabilities traded in active markets from readily available pricing sources for market transactions involving identical assets or liabilities.

Level 2: Valuations for assets and liabilities traded in less active dealer or broker markets. Valuations are obtained from third-party pricing services for identical or similar assets or liabilities.

Level 3: Valuations incorporating certain assumptions and projections in determining the fair value assigned to such assets or liabilities.

Commodity futures and exchange-traded commodity options contracts are reported at fair value using Level 1 inputs. For these contracts, the Company obtains fair value measurements from an independent pricing service. The fair value measurements consider observable data that may include dealer quotes and live trading levels from the Chicago Board of Trade (“CBOT’) and New York Mercantile Exchange (“NYMEX”) markets.

The following table summarizes financial assets and financial liabilities measured at the approximate fair value used to measure fair value (amounts in thousands):


	Total		Level 1		Level 2		Level 3
At June 30, 2012
Liabilities—Derivative Financial Instruments	$	295	$	295	$	—	$	—
Other Liabilities—Warrant Derivative		218		—		—		218

At September 30, 2011
Liabilities—Derivative Financial Instruments	$	832	$	832	$	—	$	—
Other Liabilities—Warrant Derivative		182		—		—		182

The unit warrants issued contain a strike price adjustment feature. The Company calculated the fair value of the warrants using the Black-Scholes valuation model. During the nine months ended June 30, 2012 and 2011, the Company recognized an unrealized loss (gain) of $36,000 and ($243,000), respectively, related to the change in the fair value of the warrant derivative liability. The liability can fluctuate significantly if the market value of the unit changes.

The assumptions used in the Black-Scholes valuation model were as follows:


	June 30,			September 30,
	2012			2011
Market value(1)	$	1.50		$	1.50
Exercise price	$	1.50		$	1.50
Expected volatility (2)		45.93	%		46.92	%
Expected life (years)		2.25			1.50
Risk-free interest rate		0.33	%		0.25	%
Forfeiture rate		—			—
Dividend rate		—			—

(1)	Market value based on trading values of comparable competitors.

(2)	Volatility based on trading volatility of a comparable competitor.

The following table reflects the activity for the warrant derivative, the only liability measured at fair value using Level 3 inputs, for the nine months ended June 30, 2012 and 2011 (amounts in thousands):


	2012		2011
Beginning balance	$	182	$	474
Unrealized loss (gain) related to the change in fair value		36		(243	)

Ending balance	$	218	$	231

Receivables

Credit sales are made to a few customers with no collateral required. Trade receivables are carried at original invoice amount less an estimate made for doubtful receivables based on a review of all outstanding amounts on a monthly basis. Management determines the allowance for doubtful accounts by regularly evaluating individual receivables and considering a customer’s financial condition, credit history and current economic conditions. Receivables are written off if deemed uncollectible. Recoveries of receivables previously written off are recorded when received.

Derivative Instruments/Due From Broker

On occasion, the Company has entered into derivative contracts to hedge the Company’s exposure to price risk related to forecasted corn purchases and forecasted ethanol sales. Accounting for derivative contracts requires that an entity recognize all derivatives as either assets or liabilities on the balance sheet and measure those instruments at fair value. If certain conditions are met, a derivative may be specifically designated as (a) a hedge of the exposure to changes in the fair value of a recognized asset or liability or an unrecognized firm commitment, (b) a hedge of the exposure to variable cash flows of a forecasted transaction, or (c) a hedge of the foreign currency exposure of a net investment in a foreign operation, an unrecognized firm commitment, an available-for-sale security, or a foreign-currency-denominated forecasted transaction.

Although the Company believes its derivative positions are economic hedges, it has not designated any derivative position as a hedge for accounting purposes and it records derivative positions on the balance sheet at their fair market value, with changes in fair value recognized in current period earnings.

In addition, certain derivative financial instruments that meet the criteria for derivative accounting treatment also qualify for a scope exception to derivative accounting, as they are considered normal purchases and sales. The availability of this exception is based on the assumption that the Company has the ability to deliver or take delivery of the underlying item, and it is probable that the Company will do so. Derivatives that are considered to be normal purchases and sales are exempt from derivative accounting treatment, and are accounted for under accrual accounting

Inventories

Corn, chemicals, supplies, work in process, ethanol and distillers grains inventories are stated at the lower of weighted average cost or market.

Property and Equipment

Property and equipment is carried at cost less accumulated depreciation computed using the straight-line method over the estimated useful lives:


Office equipment		3-7 Years
Process equipment		10 Years
Buildings		40 Years

Maintenance and repairs are charged to expense as incurred; major improvements and betterments are capitalized. Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount on the asset may not be recoverable. An impairment loss is recognized when estimated undiscounted future cash flows from operations are less than the carrying value of the asset group. An impairment loss is measured by the amount by which the carrying value of the asset exceeds the estimated fair value on that date.

Revenue Recognition

Ethanol revenue is recognized when product title and all risk of ownership is transferred to the customer as specified in the contractual agreements with the marketers. At all of the Company’s plants, revenue is recognized upon the release of the product for shipment. Revenue from the sale of co-products is recorded when title and all risk of ownership transfer to

customers, which generally occurs at the time of shipment. Co-products and related products are generally shipped free on board (“FOB”) shipping point. Interest income is recognized as earned. In accordance with the Company’s agreements for the marketing and sale of ethanol and related products, commissions due to the marketers are deducted from the gross sale price at the time of payment.

Income (loss) Per Unit

Basic and diluted income (loss) per unit is computed using the weighted-average number of vested units outstanding during the period. Unit appreciation rights and the unit warrants are considered unit equivalents and are considered in the diluted income per unit computation, but have not been included in the computations of diluted income (loss) per unit for the nine months ended June 30, 2012, because their effect would be anti-dilutive. Basic earnings and diluted per unit data were computed as follows (in thousands except per unit data):


	Three Months Ended						Nine Months Ended
	June 30,						June 30,
	2012			2011			2012		2011
Numerator:
Net income (loss) for basic earnings per unit	$	(9,212	)	$	(1,764	)	$	78	$	2,139
Gain on fair value of warrant derivative liability		(123	)		(179	)		—		(243	)

Net income (loss) for diluted earnings per unit	$	(9,335	)	$	(1,943	)		78		1,896

Denominator:
Basic common units outstanding		24,714			24,705			24,714		24,705
Diluted common units outstanding		24,755			24,705			24,714		24,705
Income (loss) per unit basic	$	(0.37	)	$	(0.07	)	$	0.00	$	0.09

Income (loss) per unit diluted	$	(0.38	)	$	(0.08	)	$	0.00	$	0.08

Accounting Estimates

Management uses estimates and assumptions in preparing these financial statements in accordance with generally accepted accounting principles. Those estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported revenues and expenses. Actual results could differ from those estimates.

Risks and Uncertainties

The ethanol industry previously received an indirect benefit of the Volumetric Ethanol Excise Tax Credit (“VEETC”) provided to gasoline blenders, which expired on December 31, 2011. This credit provided for a 45-cent a gallon tax credit for gasoline blenders and a 54-cent a gallon tariff on ethanol imports. Although the Renewable Fuels Standard still exists to maintain the demand for ethanol in the United States, the Company is uncertain how the elimination of the VEETC credit and import tariffs will ultimately affect the Company and the overall ethanol industry. Any reduction in the Renewable Fuels Standard could have an adverse effect on the Company and the overall ethanol industry.

2. Inventories

A summary of inventories is as follows (in thousands):


	June 30,		September 30,
	2012		2011
Corn	$	4,526	$	4,889
Chemicals		1,109		1,280
Work in process		3,440		3,610
Ethanol		4,885		9,280
Distillers grain		497		713
Supplies and parts		2,692		2,334

Total	$	17,149	$	22,106

3. Property and Equipment

A summary of property and equipment is as follows (in thousands):


	June 30,			September 30,
	2012			2011
Land	$	3,999		$	3,999
Buildings		21,351			21,341
Process equipment		225,727			221,020
Office equipment		2,119			1,813
Construction in process		1,862			260

		255,058			248,433
Accumulated depreciation		(100,984	)		(83,612	)

Property and equipment, net	$	154,074		$	164,821

4. Notes Receivable-Related Party

On June 30, 2011, the Company received a $490,000 promissory note from Ethanol Capital Partners, LP-Series R, Ethanol Capital Partners LP-Series T, Ethanol Capital Partners LP-Series V, Ethanol Investment Partners, LLC and Tennessee Ethanol Partners, LP in connection with payments the Company made in connection with the settlement of arbitration brought by a former officer of the Company against the Company and related litigation brought against a director of the Company. The note is due on July 1, 2016 and accrues interest at the Prime Rate, adjusted annually. The note is secured by a pledge of 4.4 million units of membership in the Company owned by the entities listed above. Any proceeds from the disposition of these units as well as distributions from the Company to the owners of the units will first go to pay down the promissory note and accrued interest.

5. Debt

A summary of debt is as follows (in thousands, except percentages):


	June 30,
	2012			June 30,			September 30,
	Interest Rate			2012			2011
ABE Fairmont:
Senior credit facility—variable		3.65	%	$	40,740		$	32,266
Senior credit facility—fixed		7.53	%		—			20,000
Seasonal line		3.30	%		—			—
Subordinate exempt facilities bonds—fixed		6.75	%		5,370			6,185

					46,110			58,451

ABE South Dakota:
Senior debt principal—variable		3.46	%		73,447			77,052
Restructuring fee		N/A			3,000			3,000
Additional carrying value of restructured debt		N/A			8,767			9,453

					85,214			89,505

Total outstanding				$	131,324		$	147,956

Additional carrying value of restructured debt		N/A			(8,767	)		(9,453	)

Stated principal				$	122,557		$	138,503

The estimated maturities of debt at June 30 are as follows (in thousands):


			Amortization of
			Additional Carrying
	Stated		Value of
	Principal		Restructured Debt		Total
2013	$	15,280	$	1,958	$	17,238
2014		9,155		2,561		11,716
2015		13,815		2,464		16,279
2016		77,197		1,784		78,981
2017		5,815		—		5,815
Thereafter		1,295		—		1,295

Total debt	$	122,557	$	8,767	$	131,324

Senior Credit Facility for the Fairmont Plant

ABE Fairmont has a senior credit facility with Farm Credit consisting of a term loan (“term loan A”), and a revolving term loan (“term loan B”). At June 30, 2012, the Company also had a $4.0 million revolving credit facility through Farm Credit for financing eligible grain inventory and equity in Chicago Board of Trade (“CBOT”) futures positions, which expires on May 1, 2013. ABE Fairmont also has a revolving credit facility with Farm Credit for financing third-party letters of credit. ABE Fairmont has issued a letter of credit in connection with a rail car lease, thereby fully utilizing the financing available under the $911,000 revolving credit facility as of June 30, 2012. This revolving credit facility expires in February 2014.

At June 30, 2012, ABE Fairmont had $15.7 million outstanding on term loan A. Under the term loan A agreement, ABE Fairmont is required to make quarterly principal installments of $2.6 million starting in August 2012, and continuing through November 2013, followed by a final installment in an amount equal to the remaining unpaid term loan A principal balance in February 2014. In April 2012, the term loan A agreement was amended to skip the May 2012 principal payment in order to fund a capital project. In addition, under the term loan A agreement, for each fiscal year ending through September 30, 2013, ABE Fairmont is required to pay an additional amount equal to the lesser of $8.0 million or 75% of its free cash flow as defined in the agreement, not to exceed $16 million in the aggregate. The Company made cash sweep payments of $6.3 million and $5.0 million to Farm Credit in December 2011 and 2010, respectively, pursuant to this provision of the agreement.

At June 30, 2012, ABE Fairmont had $25.0 million outstanding on the revolving term loan B. On the earlier of December 1, 2014 or six months following complete repayment of term loan A, ABE Fairmont is required to begin repayment of revolving term loan B in $5.0 million semi-annual principal payments.

ABE Fairmont pays interest monthly at a variable rate comprised of the 30-day LIBOR plus a fixed rate of 3.40% on the remaining outstanding term loan A and B senior credit facilities.

ABE Fairmont’s senior credit facility is secured by a first mortgage on all of ABE Fairmont’s real property and a lien on all of ABE Fairmont’s personal property. The agreement contains financial and restrictive covenants, including limitations on additional indebtedness, restricted payments, and the incurrence of liens and transactions with affiliates and sales of assets. In addition, the senior secured credit facility requires ABE Fairmont to comply with certain financial covenants, including maintaining monthly minimum working capital, monthly minimum net worth, annual debt service coverage ratios and capital expenditure limitations.

The Company believes ABE Fairmont has violated its minimum working capital covenant of $10.0 million subsequent to June 30, 2012. The Company has been in ongoing discussions with the senior lender regarding this matter, and believes it is probable that ABE Fairmont will receive appropriate waivers from the senior lenders in the fiscal fourth quarter, and continues to classify this liability in accordance with its scheduled repayment terms.

Fillmore County Subordinate Exempt Facilities Revenue Bonds for the Fairmont plant

ABE Fairmont has $5.4 million of subordinate exempt facilities revenue bonds outstanding under a subordinated loan and trust agreement with the County of Fillmore, Nebraska and Wells Fargo, N.A. The loan agreement is collateralized by the Fairmont plant assets. ABE Fairmont’s repayment of the loan and the security for the loan are subordinate to its senior credit facility. The loan requires semi-annual interest payments, with annual principal payments of $815,000 through December 2016, with the remainder due in December 2017.

Senior Credit Agreement for the South Dakota Plants

ABE South Dakota entered into an Amended and Restated Senior Credit Agreement (the “Senior Credit Agreement”) effective as of June 18, 2010, and further amended on December 28, 2011, which was accounted for under troubled debt restructuring rules. The Senior Credit Agreement was executed among ABE South Dakota, the lenders from time to time party thereto, and Portigon AG, New York Branch, (formerly known as WestLB AG), as Administrative Agent and Collateral Agent. The Senior Credit Agreement converted the outstanding principal amount of the loans and certain other amounts under interest rate protection agreements to a senior term loan in an aggregate principal amount equal to $84.4 million. The interest accrued on outstanding term and working capital loans under the existing credit agreement was reduced to zero. ABE South Dakota has agreed to pay a $3.0 million restructuring fee to the lenders due at the earlier of March 31, 2016 or the date on which the loans are repaid in full. ABE South Dakota recorded the restructuring fee as a long-term, non-interest bearing debt on its consolidated balance sheets.

Since the future maximum undiscounted cash payments on the Senior Credit Agreement (including principal, interest and the restructuring fee) exceeded the adjusted carrying value, no gain for the forgiven interest was recorded, the carrying value was not adjusted and the modification of terms are being accounted for on a prospective basis, via a new effective interest calculation, amortized over the life of the note, offsetting interest expense. Based on the treatment of the troubled debt restructuring which will result in the additional carrying value being amortized as a reduction in interest expense over the term of the loan, the Company’s effective interest rate over the term of the restructuring note agreement is currently approximately 0.13% over the Three-Month LIBOR (0.60% at June 30, 2012).

The principal amount of the term loan facility is payable by three quarterly payments of $1,105,000 from September 30, 2012, and quarterly payments of $750,000 beginning June 30, 2013, with the remaining principal amount fully due and payable on March 31, 2016. The credit agreement was amended in December 2011 to allow the Company to install corn oil extraction technology in its Aberdeen facility.

ABE South Dakota has the option to select the interest rate on the senior term loan between base rate and euro-dollar rates for maturities of one to six months. Base rate loans bear interest at the administrative agent’s base rate plus an applicable margin of 2.0%, and increasing to 3.0% on June 16, 2013. Euro-dollar loans bear interest at LIBOR plus the applicable margin of 3.0%, and increasing to 4.0% on June 16, 2013. As of June 30, 2012, ABE South Dakota had selected the LIBOR plus 3.0% rate for a period of three months.

ABE South Dakota’s obligations under the Senior Credit Agreement are secured by a first-priority security interest in all of the equity of and assets of ABE South Dakota.

ABE South Dakota is allowed to make equity distributions (other than certain tax distributions) to ABE only upon ABE South Dakota meeting certain financial conditions and if there is no more than $25 million of principal outstanding on the senior term loan. Loans outstanding under the Senior Credit Agreement are subject to mandatory prepayment in certain circumstances, including, but not limited to, mandatory prepayments based upon receipt of certain proceeds of asset sales, casualty proceeds, termination payments, and cash flows.

The Senior Credit Agreement and the related loan documentation include, among other terms and conditions, limitations (subject to specified exclusions) on ABE South Dakota’s ability to make asset dispositions; merge or consolidate with or into another person or entity; create, incur, assume or be liable for indebtedness; create, incur or allow liens on any property or assets; make investments; declare or make specified restricted payments or dividends; enter into new material agreements; modify or terminate material agreements; enter into transactions with affiliates; change its line of business; and establish bank accounts. Substantially all cash of ABE South Dakota is required to be deposited into special, segregated project accounts subject to security interests to secure obligations in connection with the Senior Credit Agreement. The Senior Credit Agreement contains customary events of default and also includes an event of default for defaults on other indebtedness by ABE South Dakota and certain changes of control.

ABE South Dakota was in violation of certain covenants as of June 30, 2012 as a result of its entry into several new material agreements in May 2012. On July 31, 2012, ABE South Dakota, Portigon AG, New York Branch (f/k/a WestLB AG, New York Branch), as Lender to the Amended and Restated Senior Credit Agreement, along with six other Lenders, entered into a Letter Agreement, whereby the senior lenders consented to, along with certain other items, ABE South Dakota’s entry into the new agreements and waived the specified events of default.

ABE Letter of Credit

6. Major Customers and Subsequent Event

The two operating subsidiaries of the Company, ABE South Dakota and ABE Fairmont, entered into several agreements with Gavilon, LLC, a commodity marketing firm, and affiliated companies (collectively “Gavilon”), on May 4, 2012, and were amended on July 31, 2012. ABE South Dakota and ABE Fairmont entered into separate ethanol marketing agreements with Gavilon (“Ethanol Marketing Agreements”) dated May 4, 2012, and amended on July 31, 2012. The Ethanol Marketing Agreements provide that the subsidiaries will sell to Gavilon all of the denatured fuel-grade ethanol produced at the South Dakota and Fairmont plants. The term of the Ethanol Marketing Agreements began on August 1, 2012, and expire on December 31, 2015.

ABE South Dakota also entered into a Rail Car Sublease Agreement with Gavilon dated May 4, 2012, and amended on July 31, 2012, which became effective on August 1, 2012. Under the terms of the Rail Car Sublease, Gavilon agreed to sublease to ABE South Dakota all its interests in a master lease agreement covering certain rail cars. Under the terms of the Rail Car Sublease, ABE South Dakota is subleasing certain rail cars for varying terms expiring from June 30, 2014 to June 30, 2019.

ABE Fairmont and ABE South Dakota were parties to separate Ethanol Marketing Agreements with Hawkeye Gold, LLC to sell substantially all of the ethanol produced by the facilities through April 30, 2013. Effective July 31, 2012, the Company and Hawkeye Gold mutually agreed to terminate their ethanol marketing relationship for the sale of ethanol from the Company’s ethanol production facilities, in exchange for certain payments based on ethanol sold through April 30, 2013. In connection with the termination of these agreements, the Company will record a charge of approximately $1.7 million in the fiscal fourth quarter of 2012.

ABE Fairmont is currently self-marketing the distillers grains it produces. ABE South Dakota is party to a co-product marketing agreement with Dakotaland Feeds, LLC (“Dakotaland Feeds”), under which Dakotaland Feeds markets the local sale of distillers grains produced at the ABE South Dakota Huron plant to third parties for an agreed upon commission. The agreement is cancellable with a six month notice period. The Company currently has an agreement with Hawkeye Gold to market the distillers grains produced at the ABE South Dakota Aberdeen plants. The term of this agreement expires July 31, 2013. ABE South Dakota has signed an agreement with Gavilon to market the dry distillers grains from the Aberdeen plant effective, August 1, 2013 until July 31, 2016.

Sales and receivables from the Company’s major customers were as follows (in thousands):


	June 30,		June 30,
	2012		2011
Hawkeye Gold—Ethanol and Distiller Grains
Nine months revenues	$	367,983	$	369,145
Receivable balance at period end		9,224		13,665
Dakotaland—ABE South Dakota Distillers Grains
Nine months revenues	$	12,629	$	10,320
Receivable balance at period end		594		503

7. Risk Management

The Company is exposed to a variety of market risks, including the effects of changes in commodity prices and interest rates. These financial exposures are monitored and managed by the Company as an integral part of its overall risk management program. The Company’s risk management program seeks to reduce the potentially adverse effects that the volatility of these markets may have on its current and future operating results. To reduce these effects, the Company generally attempts to fix corn purchase prices and related sale prices of ethanol and distillers grains with forward purchase and sales contracts to reduce volatility in future operating margins. In addition to entering into contracts to purchase 1.3 million bushels of corn and sell 41.8 million gallons of ethanol in which the futures price was not locked, the Company had entered into the following fixed price forward contracts at June 30, 2012 (in thousands):

Quantity (000s)

Amount

Period Covered

Corn

Purchase Contracts

1,234 bushels

7,767

Jul 2012-Mar 2013

Ethanol

Sale Contracts

290 gallons

655

Jul 2012

Distillers grains

Sale Contracts

35 tons

7,353

Jul 2012

Corn Oil

Sale Contracts

3,670 pounds

1,600

Jul-Aug 2012

Unrealized gains and losses on forward contracts, in which delivery has not occurred, are deemed “normal purchases and normal sales,” and, therefore are not marked to market in the financial statements.

When forward contracts are not available at competitive rates, the Company may engage in hedging activities using exchange-traded futures contracts, OTC futures options or OTC swap agreements. Changes in market price of ethanol-related hedging activities are reflected in revenues while changes in market price of corn-related items are reflected in cost of goods sold. The following table represents the approximate amount of realized and unrealized gains (losses) and changes in fair value recognized in earnings on commodity contracts for the three and nine months ended June 30, 2012 and 2011, and the fair value of futures contracts as of June 30, 2012 and September 30, 2011 (in thousands):


	Income Statement	Realized			Unrealized			Total
	Classification	Gain (Loss)			Gain (Loss)			Gain (Loss)
Three months ending June 30, 2012	Cost of Goods Sold	$	(46	)	$	(375	)		(421	)
Three months ending June 30, 2011	Cost of Goods Sold		(2	)		(2	)		(4	)
Nine months ending June 30, 2012	Cost of Goods Sold	$	(854	)	$	537			(317	)
Nine months ending June 30, 2011	Cost of Goods Sold		400			(314	)		86


	Balance Sheet	June 30,		September 30,
	Classification	2012		2011
Derivative financial instrument—futures contract	Current Liabilities		295		832

8. Commitments

Purchase Commitments

In May 2012, the Company signed a contract for the construction of corn storage bins with a capacity of approximately 1.5 million bushels in Fairmont. The project has a remaining commitment of approximately $4.0 million, with an expected completion date in the fall of 2012. The Company is financing the construction out of current cash flows.

Lease Commitments

Since the end of fiscal year 2011, the Company’s operating subsidiaries have entered into new lease commitments for rail cars. These lease commitments will increase annual lease expense in fiscal 2013 to approximately $5.9 million, compared to $5.2 million in fiscal 2011. The term of these lease commitments ranges from two to seven years.

9. Parent Financial Statements

The following financial information represents the unconsolidated financial statements of Advanced BioEnergy, LLC (“ABE”) as of June 30, 2012 and September 30, 2011, and the three and nine months ended June 30, 2012 and 2011. ABE’s ability to receive distributions from its consolidated subsidiaries is based on the terms and conditions in their respective credit agreements. ABE Fairmont is able to pay a distribution to ABE annually based on its financial results for that fiscal year, subject to maintaining compliance with all loan covenants and the terms and conditions of its senior secured credit agreement. ABE Fairmont paid a distribution to ABE in March 2012 of $3.8 million in accordance with these terms. ABE South Dakota is allowed to make equity distributions (other than certain tax distributions) to ABE only upon ABE South Dakota meeting certain financial conditions and if there is no more than $25 million of principal outstanding on the senior term loan.

Advanced BioEnergy, LLC (Unconsolidated)

Balance Sheets


	(unaudited)
	June 30,			September 30,
	2012			2011
	(Dollars in thousands)
ASSETS
Current assets:
Cash and cash equivalents	$	6,136		$	3,457
Restricted cash		2,500			—
Other receivables		351			524
Prepaid expenses		32			42

Total current assets		9,019			4,023

Property and equipment, net		629			666
Other assets:
Investments in consolidated subsidiaries		57,234			62,341
Notes receivable-related party		506			494
Other assets		32			32

Total assets	$	67,420		$	67,556


LIABILITIES AND MEMBERS’ EQUITY
Current liabilities:
Accounts payable	$	855		$	1,083
Accrued expenses		506			509

Total current liabilities		1,361			1,592

Other liabilities		332			318

Total liabilities		1,693			1,910

Members’ equity:
Members’ capital, no par value, 24,714,180 units issued and outstanding		171,249			171,246
Accumulated deficit		(105,522	)		(105,600	)

Total members’ equity		65,727			65,646

Total liabilities and members’ equity	$	67,420		$	67,556

Advanced BioEnergy, LLC (Unconsolidated)

Statements of Operations

(Unaudited)


	Three months ended						Nine months ended
	June 30, 2012			June 30, 2011			June 30, 2012			June 30, 2011
	(Dollars in thousands)						(Dollars in thousands)
Equity in earnings (losses) of consolidated subsidiaries	$	(9,807	)	$	(1,249	)	$	(1,279	)	$	4,743
Management fee income from subsidiaries		1,157			1,024			3,506			3,004
Selling, general and administrative expenses		(894	)		(804	)		(2,712	)		(2,457	)
Arbitration settlement expense		—			(1,083	)		—			(3,789	)

Operating income (loss)		(9,544	)		(2,112	)		(485	)		1,501
Other income		209			169			600			394
Interest income (expense)		123			179			(37	)		244

Net income (loss)	$	(9,212	)	$	(1,764	)	$	78		$	2,139

Advanced BioEnergy, LLC (Unconsolidated)

Statements of Cash Flows

(Unaudited)


	Nine Months Ended
	June 30, 2012			June 30, 2011
	(Dollars in thousands)
Cash flows from operating activities:
Net income	$	78		$	2,139
Adjustments to reconcile net income to operating activities cash flows:
Depreciation		123			79
Equity in losses (earnings) of consolidated subsidiaries		1,279			(4,743	)
Distributions from subsidiaries		3,828			4,672
Gain on disposal of fixed assets		(17	)		(3	)
Amortization of deferred revenue and rent		(22	)		(13	)
Unit compensation expense		3			34
Unrealized (gain) loss on warrant derivative liability		36			(241	)
Change in working capital components:					—
Accounts receivable		161			540
Prepaid expenses		10			(20	)
Accounts payable and accrued expenses		(231	)		(83	)

Net cash provided by operating activities		5,248			2,361

Cash flows from investing activities:
Purchase of property and equipment		(129	)		(215	)
Proceeds from disposal of fixed assets		60			16
Issuance of notes receivable		—			(490	)
Increase in restricted cash		(2,500	)		—
Change in other assets and liabilities		—			129

Net cash used in investing activities		(2,569	)		(560	)

Cash flows from financing activities:
Distribution to members		—			(27	)

Net cash used in financing activities		—			(27	)

Net increase in cash and cash equivalents		2,679			1,774
Beginning cash and cash equivalents		3,457			1,065

Ending cash and cash equivalents	$	6,136		$	2,839

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Information Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements regarding our business, financial condition, results of operations, performance and prospects. All statements that are not historical or current facts are forward-looking statements and are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve known and unknown risks, uncertainties and other factors, many of which may be beyond our control, which may cause our actual results, performance or achievements to be materially different from any future results, performances or achievements expressed or implied by the forward-looking statements. Certain of these risks and uncertainties are described in the “Risk Factors” section of our Annual Report on Form 10-K for the year ended September 30, 2011 and in this Form 10-Q. These risks and uncertainties include, but are not limited to, the following:

•

our operational results are subject to fluctuations in the prices of grain, utilities and ethanol, which are affected by various factors including weather, production levels, supply, demand, changes in technology and government support and regulations;

•

margins can be volatile and can evaporate, which may affect our ability to meet current obligations and debt service requirements at our operating entities;

•

our hedging transactions and mitigation strategies could materially harm our results;

•

cash distributions depend upon our future financial and operational performance and will be affected by debt covenants, reserves and operating expenditures;

•

current governmental- mandated tariffs, credits and standards may be reduced or eliminated, and legislative acts taken by state governments such as California related to low-carbon fuels that include the effects caused by indirect land use, may have an adverse effect on our business;

•

alternative fuel additives may be developed that are superior to or cheaper than ethanol;

•

transportation, storage and blending infrastructure may become impaired, preventing ethanol from reaching markets;

•

our operating facilities may experience technical difficulties and not produce the gallons of ethanol we expect and insurance proceeds may not be adequate to cover these production disruptions;

•

our units are subject to a number of transfer restrictions, no public market exists for our units, and we do not expect a public market to develop;

•

the ability of ABE Fairmont and ABE South Dakota subsidiaries to make distributions to ABE in light of restrictions in these subsidiaries’ credit facilities; and

•

the supply of ethanol rail cars in the market is extremely tight, which could affect our ability to obtain new tanker cars or negotiate new leases at a reasonable fee when our current leases expire.

You can identify forward-looking statements by terms such as “anticipates,” “believes,” “could,” “estimates,” “expects,” “intends,” “may,” “plans,” “potential,” “predicts,” “projects,” “should,” “will,” “would,” and similar expressions intended to identify forward-looking statements. Forward-looking statements reflect our current views with respect to future events, are based on assumptions, and are subject to risks and uncertainties. Given these uncertainties, you should not place undue reliance on these forward-looking statements. Also, forward-looking statements represent our estimates and assumptions only as of the date of this report. Except as required by law, we assume no obligation to update any forward-looking statements publicly, or to update the reasons actual results could differ materially from those anticipated in any forward-looking statements, even if new information becomes available in the future. Readers are urged to carefully review and consider the various disclosures made by us in this report and in our other reports filed from time to time with the Securities and Exchange Commission that advise interested parties of the risks and factors that may affect our business.

General

The following discussion and analysis provides information that management believes is relevant to an assessment and understanding of our consolidated financial condition and results of operations. This discussion should be read in conjunction with the consolidated financial statements included herewith and notes to the consolidated financial statements thereto.

Overview

Advanced BioEnergy, LLC (“Company,” “we,” “our,” “Advanced BioEnergy” or “ABE”) was formed in 2005 as a Delaware limited liability company. Our business consists of producing ethanol and co-products, including wet, modified and dried distillers grains, as well as corn oil. Ethanol is a renewable, environmentally clean fuel source that is produced at numerous facilities in the United States, mostly in the Midwest. In the U.S., ethanol is produced primarily from corn and then blended with unleaded gasoline in varying percentages. Ethanol is most commonly sold as E10. Increasingly, ethanol is also available as E85, which is a higher percentage ethanol blend for use in flexible-fuel vehicles, and is available as E15 in some states.

To execute our business plan, we entered into financial arrangements to build and operate an ethanol production facility in Fairmont, Nebraska. Separately, in November 2006, we acquired ABE South Dakota, which owned existing ethanol production facilities in Aberdeen and Huron, South Dakota. Construction of our Fairmont, Nebraska plant began in June 2006, and operations commenced at the plant in November 2007. Construction of our new facility in Aberdeen, South Dakota began in April 2007, and operations commenced in January 2008. Our production operations are carried out primarily through our operating subsidiaries, ABE Fairmont, which owns and operates the Fairmont, Nebraska plant and ABE South Dakota, which owns and operates plants in Aberdeen and Huron, South Dakota.

Operating segments are defined as components of an enterprise for which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources in assessing performance. Based on the related business nature and expected financial results, the Company’s plants are aggregated into one operating segment.

DRY MILL PROCESS

Dry mill ethanol plants produce ethanol predominantly by processing corn. Other possible feeds are grain sorghum, or other cellulosic materials. The corn is received by truck, then weighed and unloaded in a receiving building. It is then conveyed to storage silos. Thereafter, it is transferred to a scalper to remove rocks, cobs, and other debris before it is fed to a hammer mill where it is ground into flour and conveyed into a slurry tank. Water, heat and enzymes are added to the flour in the slurry tank to start the process of converting starch from the corn into sugar. The slurry is pumped to a liquefaction tank where additional enzymes are added. These enzymes continue the starch-to-sugar conversion. The grain slurry is pumped into fermenters, where yeast is added, to begin the batch-fermentation process. Fermentation is the process of the yeast converting the sugar into alcohol and carbon dioxide. After the fermentation is complete, a vacuum distillation system removes the alcohol from the grain mash. The 95% (190-proof) alcohol from the distillation process is then transported to a molecular sieve system, where it is dehydrated to 100% alcohol (200 proof). The 200-proof alcohol is then pumped to storage tanks and blended with a denaturant, usually gasoline. The 200-proof alcohol and 2.0-2.5% denaturant constitute denatured fuel ethanol.

Corn mash left over from distillation is pumped into a centrifuge for dewatering. The liquid from the centrifuge, known as thin stillage, is then pumped from the centrifuges to an evaporator, where it is concentrated to a syrup. The solids that exit the centrifuge, known as the wet cake, are conveyed to the dryer system. Syrup is added to the wet cake as it enters the dryer, where

moisture is removed. The process produces distillers grains with solubles, which is used as a high-protein/fat animal- feed supplement. Dry-mill ethanol processing creates three forms of distillers grains: wet distillers grains with solubles, known as wet distillers grains; modified wet distillers grains with solubles, known as modified distillers grains; and dry distillers grains with solubles, known as dry distillers grains. Wet and modified distillers grains have been dried to approximately 67% and 50% moisture levels, respectively, and are predominately sold to nearby markets. Dried distillers grains have been dried to 11% moisture, have an almost indefinite shelf life and may be sold and shipped to any market regardless of its proximity to an ethanol plant.

Corn oil is produced by processing evaporated thin stillage through a disk stack style centrifuge. Corn oil has a lower density than water or solids that make up the syrup. The centrifuges separate the relatively light oil from the heavier components of the syrup, eliminating the need for significant retention time. De-oiled syrup is returned to the process for blending into wet, modified, or dry distillers grains. The corn oil is then pumped into storage tanks before being loaded onto trucks for sale .

FACILITIES

The table below provides a summary of our ethanol plants in operation as of June 30, 2012:


Location	Estimated Annual Ethanol Production		Estimated Annual Distillers Grains Production(1)		Estimated Annual Corn Processed		Primary Energy Source		Builder
	(Million gallons)		(000’s Tons)		(Million bushels)
Fairmont, NE		110		334		39.3		Natural Gas		Fagen
Aberdeen, SD(2)		9		27		3.2		Natural Gas		Broin
Aberdeen, SD(2)		44		134		15.7		Natural Gas		ICM
Huron, SD		32		97		11.4		Natural Gas		ICM

Consolidated		195		592		69.6

(1)	Our plants produce and sell wet, modified and dried distillers grains. The stated quantities are on a fully dried basis operating at full production capacity.

(2)	Our plant at Aberdeen consists of two production facilities that operate on a separate basis.

We believe that each of the operating facilities is in adequate condition to meet our current and future production goals. We also believe that these plants are adequately insured for replacement cost plus related disruption expenditures.

The senior credit facility of the ABE Fairmont plant is secured by a first mortgage on the plant’s real property and a security interest lien on the plant’s personal property. We also granted a subordinate lien and security interest to the trustee of the subordinated exempt facilities revenue bonds used to finance the ABE Fairmont plant. We pledged a first-priority security interest in and first lien on substantially all of the assets of the ABE South Dakota plants to the collateral agent for the senior creditor of these plants.

Sales of distillers grains represented 19.4% and 16.9% of our revenues for the quarters ended June 30, 2012 and 2011, respectively. When the plants are operating at capacity they produce approximately 592,000 tons of dried distillers grains equivalents per year, approximately 17 pounds per bushel of corn. Distillers grains are a high-protein, high-energy animal feed supplement marketed primarily to the dairy and beef industry, and to a lesser extent, the poultry and swine markets. Corn oil sales represented approximately 1.4% of our revenues for the quarter ended June 30, 2012. Our corn oil is currently sold primarily to biodiesel manufacturers.

Plan of Operations Through June 30, 2013

Over the next twelve months, we will continue our focus on operational improvements at each of our operating facilities. These operational improvements include exploring methods to improve ethanol yield per bushel and maximizing production output at each of our plants. We will also have a continued emphasis on safety and environmental regulation, reducing our operating costs, and optimizing our margin opportunities through prudent risk-management policies. We are adding 1.5 million additional bushels of corn storage at Fairmont in next twelve months, in order to increase the amount of corn we are able to purchase from individual growers. We feel that purchasing from individual farmers will enable us to obtain a more advantageous price for corn.

RESULTS OF OPERATIONS

Quarter Ended June 30, 2012 Compared to Quarter Ended June 30, 2011

The following table reflects quantities of our products sold at average net prices as well as bushels of corn ground and therms of gas burned at average costs for the three months ended June 30, 2012 and 2011:


	Three Months Ended				Three Months Ended
	June 30, 2012				June 30, 2011
	Sold/Consumed		Average		Sold/Consumed		Average
	(In thousands)		Net Price/Cost		(In thousands)		Net Price/Cost
Ethanol (gallons)		51,430	$	2.12		49,577	$	2.59
Dried distillers grains (tons)		99		199.41		114		184.66
Wet/modified distillers grains (tons)		85		81.94		69		74.03
Corn Oil (pounds)		5,276		0.36		—		—
Corn (bushels)		18,250		6.22		17,541		7.02
Gas (mmbtus)		1,260		3.16		1,369		4.37

Net Sales

Net sales for the quarter ended June 30, 2012 were $137.7 million compared to $154.8 million for the quarter ended June 30, 2011, a decrease of $17.1 million or 11.0%. The decrease in revenues was primarily due to a drop in ethanol prices of 18.1% during the quarter compared to the same period last year. The decrease in ethanol prices resulted from overcapacity in the industry in the quarter, as gasoline demand decreased approximately 4% from the same period in 2011. The average price of distillers grains increased 8.0% in 2012 based on market uncertainty about the corn crop, and a reduction of supplies after spring maintenance shutdowns and producers beginning to reduce output due to poor margins. During the fiscal quarters ending June 30, 2012 and 2011, 79.2% and 83.1%, respectively, of our net sales were derived from the sale of ethanol and our remaining net sales were derived from the sale of distillers grains and corn oil. We began selling corn oil in August 2011, added the technology to our Aberdeen plant in April 2012, and sold $1.9 million of oil in the third quarter of fiscal 2012.

Cost of Goods Sold

Costs of goods sold for the quarter ending June 30, 2012 was $144.1 million, compared to $153.4 million for the quarter ending June 30, 2011, a decrease of $9.3 million or 6.1%. Corn costs represented 78.8% and 80.2% of cost of goods sold for the fiscal quarters ending June 30, 2012 and 2011. Corn costs decreased 11.4% to $6.22 per bushel in the quarter ending June 30, 2012 from $7.02 per bushel for the quarter ending June 30, 2011. Cost of goods sold included a hedging loss of $0.4 million for the quarter ended June 30, 2012 compared to a negligible loss for the quarter ended June 30, 2011. The Company believes that corn prices will not decrease significantly for the remainder of our fiscal year 2012 and into fiscal year 2013 due to drought conditions. Natural gas costs represented 2.8% and 3.9% of cost of sales for the fiscal quarters ending June 30, 2012 and 2011. Our average gas prices decreased to $3.16 per mmbtu in the quarter ending June 30, 2012 from $4.37 per mmbtu in the quarter ending June 30, 2011.

Gross Profit(Loss)

Our gross loss for the quarter ending June 30, 2012 was $6.4 million, compared to gross profit of $1.5 million for the quarter ending June 30, 2011. The decrease in gross profit was a result of weak margins due to a drop in average ethanol prices. Margins in the fourth quarter will likely remain weak as gasoline demand is below last year and the continuing drought in the United States has pushed corn prices higher in the fiscal fourth quarter.

Selling, General, and Administrative Expenses

For the quarter ending June 30, 2012, selling, general and administrative expenses were $2.4 million compared to $1.6 million for the quarter ending June 30, 2011. As a percentage of sales, selling, general and administrative expenses increased to 1.7% for the quarter ended June 30, 2012 compared to 1.0% for the quarter ended June 30, 2011, as a result of an increase in employee headcount as we filled open positions at headquarters, as well as higher legal and professional fees, and new industry advocacy dues. Excluding non-recurring legal fees related to litigation matters, expenses were 1.2% of sales for the quarter ended June 30, 2012, compared to 1.0% for the quarter ended June 30, 2011. Selling, general, and administrative expenses are comprised of recurring administrative personnel compensation, legal, technology, consulting, insurance and accounting fees.

Arbitration Settlement Expense

The Company incurred legal and accrued settlement costs of $1.1 million in the three months ended June 30, 2011 related to the arbitration matter that was settled in the third quarter of fiscal 2011.

Other Income

Other income for the quarter ended June 30, 2012 was $0.2 million, compared to $0.2 million for the quarter ended June 30, 2011. The change was due to Nebraska Advantage Act refunds, as described below under “Government Programs, Tax Credits and Tax Increment Financing.” The refunds will fluctuate based on eligible purchases during the quarter.

Interest Expense

Interest expense for the quarter ending June 30, 2012 was $0.6 million, compared to $0.8 million for the quarter ended June 30, 2011, a decrease of $0.2 million. The decrease was due to principal reductions on the Fairmont debt facility of $15 million since the third quarter of 2011.

Nine Months Ended June 30, 2012 Compared to Nine Months Ended June 30, 2011

The following table reflects quantities of our products sold at average net prices as well as bushels of corn ground and therms of gas burned at average costs for the nine months ended June 30, 2012 and 2011:


	Nine Months Ended				Nine Months Ended
	June 30, 2012				June 30, 2011
	Sold/Consumed		Average		Sold/Consumed		Average
	(In thousands)		Net Price/Cost		(In thousands)		Net Price/Cost
Ethanol (gallons)		151,057	$	2.33		153,322	$	2.31
Dried distillers grains (tons)		310		194.13		351		154.91
Wet/modified distillers grains (tons)		286		82.50		234		62.42
Corn Oil (pounds)		14,493		0.35		—		—
Corn (bushels)		53,485		6.30		54,588		5.87
Gas (mmbtus)		4,037		3.68		4,166		4.27

Net Sales

Net sales for nine months ended June 30, 2012 were $440.5 million compared to $423.8 million for the nine months ended June 30, 2011, an increase of $16.7 million or 3.9%. The increase in revenues was due to an increase in average prices of distillers grains of 25.3%. Ethanol prices rose approximately 1.0% due to increased demand in the first quarter, and commodity inflation, particularly higher corn prices. We believe demand increased in the last three months of calendar 2011, due to the expiration of the VEETC blending credit on December 31, 2011, as refiners added to their inventory prior to expiration of the blending credit. The Company sold 2.3 million fewer gallons in 2012 compared to 2011, mostly as a result of reduced production in the third fiscal quarter due to the challenging margin environment. The price of distillers grains generally follows the price of corn, which along with tight supplies, resulted in higher prices in 2012. During the fiscal nine months ending June 30, 2012 and 2011, 79.7% and 83.7%, respectively, of our net sales were derived from the sale of ethanol and our remaining net sales were derived from the sale of distillers grains and corn oil. We added corn oil technology to our Aberdeen plant in April 2012, and sold $5.1 million of oil in the first nine months of fiscal 2012 from the two facilities which produce corn oil.

Cost of Goods Sold

Cost of goods sold for the nine months ending June 30, 2012 was $433.0 million, compared to $411.8 million for the nine months ending June 30, 2011, an increase of $21.2 million or 5.1%. Corn costs represented 77.8% of cost of goods sold for the fiscal nine months ending June 30, 2012 and 2011. Corn costs increased 7.3% to $6.30 per bushel in the nine months ending June 30, 2012 from $5.87 per bushel for the nine months ending June 30, 2011. Cost of goods sold included a hedging loss of $0.3 million for the nine months ended June 30, 2012 compared to a gain of $0.1 million for the same period in 2011. The Company believes that corn prices will not decrease significantly for the remainder of fiscal 2012 and into fiscal 2013 as the

continuing drought in the US has pushed prices higher. Natural gas costs represented 3.4% and 4.3% of cost of sales for the fiscal nine months ending June 30, 2012 and 2011. Our average gas prices decreased to $3.68 per mmbtu in the nine months ending June 30, 2012 from $4.27 per mmbtu in the nine months ending June 30, 2011.

Gross Profit

Our gross profit for the nine months ending June 30, 2012 was $7.8 million, compared to gross profit of $12.4 million for the nine months ending June 30, 2011. The decrease in gross profit was a result of overcapacity in the industry in the second and third fiscal quarters, and a decrease in gasoline demand of approximately 5% during this period, which decreased ethanol prices in the same period. As a result, we experienced negative margins in the third fiscal quarter. Margins in the fourth fiscal quarter are likely to remain weak as gasoline demand is below last year and the continuing drought in the US has pushed corn prices higher.

Selling, General, and Administrative Expenses

For the nine months ending June 30, 2012, selling, general and administrative expenses were $6.0 million compared to $4.6 million for the nine months ending June 30, 2011. As a percentage of sales, selling, general and administrative expenses increased to 1.4% for the nine months ended June 30, 2012 compared to 1.1% for the nine months ended June 30, 2011, as a result of higher legal and professional fees, new industry advocacy dues, and headcount increases for new or open positions at headquarters. Excluding non-recurring legal fees related to litigation matters, expenses were 1.1% of sales for the nine months ended June 30, 2012, compared to 1.1% for the nine months ended June 30, 2011 Selling, general, and administrative expenses are comprised of recurring administrative personnel compensation, legal, technology, consulting, insurance and accounting fees.

Arbitration Settlement Expense

The Company incurred legal and settlement costs of $3.8 million in the nine months ended June 30, 2011 related to the arbitration matter which was settled in the third quarter of fiscal 2011.

Other Income

Other income for the nine months ended June 30, 2012 was $0.8 million, compared to $0.8 million for the nine months ended June 30, 2011. Other income is comprised of Nebraska Advantage Act refunds, as described below under “Government Programs, Tax Credits and Tax Increment Financing,” as well as patronage refunds.

Interest Expense

Interest expense for the nine months ending June 30, 2012 was $2.5 million, compared to $2.7 million for the nine months ended June 30, 2011. The FY 2012 expense includes a mark-to-market loss of $0.03 million on the warrant derivative, compared to a $0.3 million gain in FY 2011. Excluding the mark-to-market loss, interest expense decreased by $0.4 million, due to reductions in outstanding principal in fiscal 2012.

TRENDS AND UNCERTAINTIES AFFECTING THE ETHANOL INDUSTRY AND OUR FUTURE OPERATIONS

Overview

Ethanol is currently blended with gasoline to meet regulatory standards as a clean air additive, an octane enhancer, a fuel extender and a gasoline alternative. According to the Renewable Fuels Association, as of July 2012, the estimated ethanol production capacity in the United States was 14.7 billion gallons per year, with approximately 13.6 billion gallons currently in operation. The demand for ethanol is affected by what is commonly referred to as the “blending wall,” which is a regulatory cap on the amount of ethanol that can be blended into gasoline. The blend wall affects the demand for ethanol, and as industry production capacity reaches the blend wall, the supply of ethanol in the market may surpass the demand. Assuming current gasoline usage in the U.S. at 138 billion gallons per year and a blend rate of 10% ethanol and 90% gasoline, the current blend wall can be assumed at approximately 13.8 billion gallons of ethanol per year. Gasoline demand in the US declined 5% in the first nine months of 2012 compared to the same period in 2011 according to the Renewable Fuels Association. Ethanol margins could remain weak if gasoline demand does not increase in the remainder of 2012.

In an attempt to increase the blend wall, Growth Energy, an ethanol industry trade organization, requested a waiver from the U.S. Environmental Protection Agency (“EPA”) to allow blending of ethanol at a 15 percent blend rate. In October of 2010, the EPA made a decision to allow the use of E15 blends in 2007 and newer vehicles. On January 21, 2011, the EPA announced E15 blends to be safe for use in all cars and pickups built in 2001 and later. In April 2012, the ethanol industry

agreed to fund a nationwide fuel survey to satisfy the final federal hurdle to E15 commercial availability. We do not yet know what the impact of this decision will be on ethanol demand, as there are still some regulatory issues at the state level that must be addressed prior to widespread market use of the E15 blend. E15 has recently become available in some states in limited locations.

Our operations are highly dependent on commodity prices, especially prices for corn, ethanol, distillers grains and natural gas. As a result of price volatility for these commodities, our operating results may fluctuate substantially. The price and availability of corn are subject to significant fluctuations depending upon a number of factors that affect commodity prices in general, including crop conditions, weather, federal policy and foreign trade. Because the market price of ethanol is not always directly related to corn prices, at times ethanol prices may lag movements in corn prices and compress the overall margin structure at the plants. As a result, operating margins may become negative and we may be forced to shut down the plants.

We focus on locking in margins based on a cash flows model that continually monitors market prices of corn, natural gas and other input costs against prices for ethanol and distillers grains at each of our production facilities. We create offsetting positions by using a combination of derivative instruments, fixed-price purchases and sales, or a combination of strategies in order to manage risk associated with commodity price fluctuations. Our primary focus is not to manage general price movements, for example, minimize the cost of corn consumed, but rather to lock in favorable margins whenever possible.

Federal policy has a significant impact on ethanol market demand. Ethanol blenders previously benefited from incentives that encouraged usage and a tariff on imported ethanol that supported the domestic industry, which have now expired. Additionally, the renewable fuels standard (“RFS”) mandates increased level of usage of both corn-based and cellulosic ethanol. Any adverse ruling on, or legislation affecting, RFS mandates in the future could have an adverse impact on short-term ethanol prices and our financial performance in the future.

The ethanol industry and our business depend upon continuation of the federal and state ethanol supports such as the RFS. We believe the ethanol industry expanded due to these federal mandates, policies, and incentives. These government mandates have supported a market for ethanol that might disappear without these programs. Alternatively, the government mandates may be continued at lower levels than those at which they currently exist. In addition, state regulatory activity may also negatively affect the consumption of corn-based ethanol in certain domestic markets such as California, due to low-carbon fuel standards that take into consideration the effects caused by indirect land use.

The Renewable Fuels Standard

The RFS is a national program that imposes minimum requirements with respect to the amount of renewable fuel produced and used. The RFS was revised by the EPA in July 2010 (“RFS2”) and applies to refineries, blenders, distributors and importers. The RFS2 requires that refiners and importers blend renewable fuels totaling at least 9.23% of total fuel volume in 2012, or approximately 15.2 billion gallons, of which 13.2 billion gallons can be derived from corn-based ethanol. The RFS2 requirement will increase incrementally over the next several years to a renewable fuel requirement of 36.0 billion gallons, or approximately 7% of the anticipated gasoline and diesel consumption, by 2022.The following chart illustrates the potential United States ethanol demand based on the schedule of minimum usage established by the program through the year 2022 (in billions of gallons).


Year	Total Renewable Fuel Requirement		Cellulosic Ethanol Minimum Requirement		Biodiesel Minimum Requirement		Advanced Biofuel		RFS Requirement That Can Be Met With Corn-Based Ethanol
2012		15.20		0.50		1.00		2.00		13.20
2013		16.55		1.00		—		2.75		13.80
2014		18.15		1.75		—		3.75		14.40
2015		20.50		3.00		—		5.50		15.00
2016		22.25		4.25		—		7.25		15.00
2017		24.00		5.50		—		9.00		15.00
2018		26.00		7.00		—		11.00		15.00
2019		28.00		8.50		—		13.00		15.00
2020		30.00		10.50		—		15.00		15.00
2021		33.00		13.50		—		18.00		15.00
2022		36.00		16.00		—		21.00		15.00

The RFS2 went into effect on July 1, 2010 and requires certain gas emission reductions for the entire lifecycle, including production of fuels. The greenhouse gas reduction requirement generally does not apply to facilities that commenced construction prior to December 2007. If this changes, and our plants must meet the standard for emissions reduction, it may affect the way we procure feed stock and modify the way we market and transport our products.

There has been recent legislation introduced in the US House of Representatives to reduce the RFS requirements during times of low corn supply. It is too early to predict the outcome of these actions.

Blending Incentives

The VEETC, often commonly referred to as the “blender’s credit,” was created by the American Jobs Creation Act of 2004. This credit allowed gasoline distributors who blend ethanol with gasoline to receive a federal excise tax credit of $0.45 per gallon of pure ethanol used, or $0.045 per gallon for E10 and $0.3825 per gallon for E85. Federal policy also insulated the domestic ethanol industry from foreign competition by levying a $0.54 per gallon tariff on all imported ethanol. Both the VEETC and the tariff expired on December 31, 2011, and are not expected to be renewed in the future. We are uncertain how the expiration of these programs will affect the ethanol industry and our profitability over the long term.

California Low-Carbon Fuel Standard

In April 2009, the California air regulators approved the Low-Carbon Fuel Standard (LCFS) aimed at achieving a 10% reduction in motor vehicle emissions of greenhouse gases by 2020. Other states may adopt similar legislation, which may lead to a national standard. The regulation requires that providers, refiners, importers and blenders ensure that the fuels they provide in the California market meet a declining standard of carbon intensity. This rule calls for a reduction of greenhouse gas emissions associated with the production, transportation and consumption of a fuel. The emissions score also includes indirect land-use change created from converting a forest to cultivated land for row crops. The final regulation contains a provision to review the measurement of the indirect land-use effects and further analysis of the land use values and modeling inputs.

On December 29, 2011, a judge in Federal District Court in Fresno, California ruled that the LCFS is unconstitutional and violates the Commerce Clause of the U.S. Constitution, and issued an injunction. California’s air regulators then filed an appeal in the U.S. Court of Appeals for the 9 ^th Circuit on January 5, 2012. In April 2012, the Court of Appeals stayed the injunction, expedited briefing of the appeal, and expects the briefing to be completed in the summer of 2012.

This standard and others to follow may affect the way ethanol producers procure feedstocks, produce dry distillers grains and market and transport ethanol and distillers grains. Ethanol produced through low-carbon methods, including imported ethanol made from sugarcane, may be redirected to certain markets and U.S. producers may be required to market their ethanol in other regions.

Imported Ethanol Tariffs

There was a $0.54 per gallon tariff on imported ethanol, which expired on December 31, 2011. Ethanol imported from other countries may be a less expensive alternative to domestically produced ethanol. The expiration of this tariff could lead to the importation of ethanol from other countries, which may be a less expensive alternative to ethanol produced domestically. This could affect our ability to sell our ethanol at the price we need to operate profitably.

Chinese Anti-Dumping Investigation

On December 28, 2010, the Chinese government announced a one-year investigation into the potential violation of anti-dumping laws regarding imported dried distillers grains (“DDGS”) originating in the United States. The allegation is that the 2010 surge in imports of U.S. dried distillers grains was undercutting sales of domestically produced dried distillers grains and that U.S. dried distillers grains were being sold at a price lower than the fair market value. In May 2012, the Chinese government terminated the investigation and no tariffs will be imposed.

European Union Anti-Dumping Investigation

On November 24, 2011, the European Union (“EU”) initiated anti-dumping and countervailing duty investigations regarding U.S. exports of ethanol to Europe and current U.S. policies surrounding ethanol production and use. Specifically at issue is federal and state incentives to producers and blenders of ethanol, which the EU alleges are allowing U.S. exports to be sold below fair market value in the EU. Preliminary findings are due by August 24, 2012. The EU could potentially impose

anti-dumping and anti-subsidy tariffs for periods of six months to five years, should it find evidence of dumping. The Company does not export any ethanol to Europe at this time. Any imposition of tariffs could reduce U.S. exports to Europe, and possibly other export markets. A reduction of exports to Europe could have an adverse effect on domestic ethanol prices, as the available supply of ethanol for the domestic market would increase.

COMPETITION

Ethanol

The ethanol we produce is similar to ethanol produced by other plants. The RFA reports that as of July 2012, current U.S. ethanol production capacity is approximately 14.7 billion gallons per year, with approximately 1.1 billion gallons idle at the current time. On a national level there are numerous other production facilities with which we are in direct competition, many of whom have greater resources than we do. As of July 2012, Nebraska had 26 ethanol plants producing an aggregate of 2.0 billion gallons of ethanol per year, and South Dakota had 15 ethanol plants producing an aggregate of 1.0 billion gallons of ethanol per year, in each case including our plants.

The largest ethanol producers include: Abengoa Bioenergy Corp., Archer Daniels Midland Company, Cargill, Inc., Green Plains Renewable Energy, Inc., POET, LLC and Valero Renewable Fuels. Producers of this size may have an advantage over us from economies of scale and stronger negotiating positions with purchasers. We market our ethanol on a regional and national basis. We believe that we are able to reach the best available markets through the use of experienced ethanol marketers and by the rail delivery methods we use. Our plants compete with other ethanol producers on the basis of price, and, to a lesser extent, delivery service. We believe that we can compete favorably with other ethanol producers due to our proximity to ample grain, natural gas, electricity and water supplies at favorable prices.

Distillers Grains

In the sales of our distillers grains, 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 product quality. Currently 72% of our distillers grain revenues are derived from the sale of dried distillers grains, which have an indefinite shelf life and can be transported by truck or rail, and 28% as modified and wet distillers grains, which have a shorter shelf life and are typically sold in local markets.

Corn Oil

In the sales of corn oil, we compete with other ethanol producers. A significant number of plants in the United States currently have oil extraction capabilities, with more being added.

LIQUIDITY AND CAPITAL RESOURCES

Financing and Existing Debt Obligations

We conduct our business activities and plant operations through Advanced BioEnergy, ABE Fairmont and ABE South Dakota. The liquidity and capital resources for each entity are based on the entity’s existing financing arrangements and capital structure. ABE Fairmont has traditional project financing in place, including senior secured financing, a working capital credit facility and subordinate exempt-facilities revenue bonds. There are provisions contained in the various financing agreements at each operating entity preventing cross-default or collateralization between operating entities. Advanced BioEnergy is highly restricted in its ability to use the cash and other financial resources of each subsidiary for the benefit of Advanced BioEnergy, with the exception of allowable distributions as defined in the separate financing agreements.

Advanced BioEnergy, LLC

ABE had cash and cash equivalents of $6.1 million at June 30, 2012. ABE has no outstanding debt as of June 30, 2012. ABE does not expect to make any distributions to its unit holders in the next 12 months. ABE’s primary source of operating cash comes from charging a monthly management fee to ABE Fairmont and ABE South Dakota for services provided in connection with operating the ethanol plants. The primary management services provided include risk management, accounting and finance, human resources and other general management-related responsibilities. From time to time ABE may also receive certain allowable distributions from ABE Fairmont and ABE South Dakota based on the terms and conditions in their respective senior credit agreements. In March 2012, ABE received a distribution from ABE Fairmont of $3.8 million based on the fiscal 2011 financial results of ABE Fairmont. Future distributions are subject to ABE Fairmont remaining in compliance with all loan covenants and terms and conditions of its senior secured credit agreement. ABE does not expect any distribution from ABE South Dakota in 2012.

In connection with the execution of a rail car sublease, the Company, as parent of ABE South Dakota agreed to post an irrevocable and non-transferable standby letter of credit on May 4, 2012 for the benefit of Gavilon in the amount of $2,500,000 as security for the payment obligations of ABE South Dakota under certain agreements with Gavilon. The Company has deposited $2,500,000 in a restricted account as collateral for this letter of credit and has classified it as restricted cash.

We believe ABE has sufficient financial resources available to fund current operations and capital expenditure requirements for at least the next 12 months. As noted below, it is probable that ABE will pay a $0.6 million capital infusion into ABE Fairmont in the fiscal fourth quarter of 2012.

ABE Fairmont

ABE Fairmont had cash and cash equivalents of $6.9 million and restricted cash of $0.6 million at June 30, 2012. The restricted cash is held in escrow for future debt service payments. As of June 30, 2012, ABE Fairmont had total debt outstanding of $46.1 million consisting of $40.7 million in senior secured credit and $5.4 million of subordinate exempt-facilities revenue bonds. ABE Fairmont is required to make monthly interest payments on its senior secured credit and semi-annual interest payments on its outstanding subordinate exempt revenue bonds. ABE Fairmont is required to make quarterly principal payments of $2.6 million on its senior secured credit starting in August 2012, and annual payments of $815,000 on its subordinated debt.

ABE Fairmont is allowed to make cash distributions to ABE if ABE Fairmont meets all conditions required in its senior secured credit agreement at the end of a fiscal year. This annual distribution is limited to 40% of net income calculated in accordance with generally accepted accounting principles and other terms contained in its senior secured credit agreement. Additionally, if ABE Fairmont has made the required free cash flow payment (described below) it may make a distribution up to 75% of net income. The distribution is subject to the completion of ABE Fairmont’s annual financial statement audit and ABE Fairmont remaining in compliance with all loan covenants and terms and conditions of the senior secured credit agreement. In March 2012, ABE Fairmont paid an annual distribution of $3.8 million based on its fiscal 2011 financial results.

ABE Fairmont’s free cash flow calculation, as defined in its senior secured credit agreement, requires that, for each fiscal year through 2013, ABE Fairmont must make a payment equal to the lesser of $8.0 million or 75% of its free cash flow after distributions, not to exceed $16.0 million in the aggregate for all of the free cash flow payments. Based on fiscal year financial results, ABE Fairmont made cash sweep payments of $6.3 million and $5.0 million in December 2011 and 2010, respectively. Cash sweep payments are subject to compliance with all loan covenants and terms and conditions of the senior secured credit agreement. We are not forecasting a sweep payment for fiscal 2012.

In addition to the cash on hand, ABE Fairmont has a $4.0 million revolving credit facility for financing eligible grain inventory and equity in Chicago Board of Trade futures positions, which expires May 1, 2013. ABE Fairmont also has a revolving credit facility for financing third-party letters of credit, which expires in February 2014. ABE Fairmont issued a letter of credit in connection with a rail car lease, thereby fully utilizing the $911,000 financing available as of June 30, 2012. We expect ABE Fairmont to renew both of these credit facilities upon expiration for an additional one-year term.

ABE Fairmont’s senior secured credit facility agreement contains financial and restrictive covenants, including limitations on additional indebtedness, restricted payments, and the incurrence of liens and transactions with affiliates and sales of assets. In addition, the senior secured credit facility requires ABE Fairmont to comply with certain financial covenants, including maintaining monthly minimum working capital, monthly minimum net worth, annual debt service coverage ratios and capital expenditure limitations. ABE Fairmont was in compliance with all covenants at June 30, 2012.

ABE Fairmont is able to meet its current working capital obligations, but has proactively entered into discussions with its senior lender to remedy the covenant violation of its minimum working capital requirement of $10.0 million in the fiscal fourth quarter of 2012. ABE Fairmont experienced a decrease in working capital resulting from required cash sweep payments of $6.5 million to its senior lender in December of 2011, allowable cash distributions to its parent of $3.8 million in February of 2012, and a deterioration of the margin environment in the third quarter of 2012. Potential remedies under discussion include the following: waivers from the senior lender, a temporary reduction of the minimum working capital requirement, deferral of one to two principal payments, and a capital infusion of $0.6 million from the parent. The Company believes with the credit actions noted above, it is probable it will remedy the covenant violation prior to the end of its fiscal year. ABE Fairmont also intends to increase its available seasonal working capital facility to approximately $6.0 million. This will increase its ability to fund additional corn inventory which will be purchased once additional storage capacity is completed early in the first quarter of fiscal 2013.

ABE South Dakota

ABE South Dakota had cash and cash equivalents of $6.5 million and $3.6 million of restricted cash at June 30, 2012. The restricted cash consists of $3.5 million for a debt service payment reserve, and $0.1 million for maintenance capital expenditures, As of June 30, 2012, ABE South Dakota had interest-bearing term debt outstanding of $73.4 million.

ABE South Dakota entered into an Amended and Restated Senior Credit Agreement dated as of June 16, 2010 and amended on December 28, 2011 (the “Senior Credit Agreement”) among ABE South Dakota, the lenders from time to time

party thereto, and Portigon AG, New York Branch, (f/k/a WestLB); as administrative agent and collateral agent. The principal amount of the term loan facility is payable with three quarterly payments of $1,105,000, followed by quarterly payments of $750,000 starting June 30, 2013, with the remaining principal amount fully due and payable on March 31, 2016. The credit agreement was amended in December 2011 to allow the Company to install corn oil extraction technology in its Aberdeen facility.

ABE South Dakota has agreed to pay a $3.0 million restructuring fee to the lender due at the earlier of March 31, 2016 and the date on which the loans are repaid in full. The Company recorded the restructuring fee as long-term, non-interest bearing debt.

ABE South Dakota’s obligations under the Senior Credit Agreement are secured by a first-priority security interest in all of the equity in and assets of ABE South Dakota.

ABE South Dakota is allowed to make equity distributions (other than certain tax distributions) to ABE only if (i) ABE South Dakota meets certain financial conditions and, (ii) there is no more than $25 million of principal outstanding on the senior term loan.

ABE South Dakota was in violation of certain covenants as of June 30, 2012 as a result of its entry into new material agreements in May 2012. On July 31, 2012, ABE South Dakota, Portigon AG, New York Branch (f/k/a WestLB AG, New York Branch), as Lender to the Amended and Restated Senior Credit Agreement, along with six other Lenders, entered into a Letter Agreement, whereby the senior lenders consented to, along with certain other items, ABE South Dakota’s entry into the new agreements and waived the specified events of default.

We believe ABE South Dakota has sufficient financial resources available to fund current operations, make debt service payments and fund capital expenditure requirements over the next 12 months.

CASH FLOWS

The following table shows our cash flows for the nine months ended June 30, 2012 and 2011:


	Nine Months Ended June 30
	2012			2011
	(In thousands)			(In thousands)
Net cash provided by operating activities	$	25,720		$	14,583
Net cash used in investing activities		(9,026	)		(2,743	)
Net cash used in financing activities		(15,946	)		(14,576	)

Cash Flow from Operating Activities

Our cash flows from operations for the nine months ended June 30, 2012 were higher compared to the same period in 2011, primarily due to lower receivable and ethanol inventory balances at June 30, 2012, compared to June 30, 2011.

Cash Flow from Investing Activities

We used more cash in investing activities in the nine months ended June 30, 2012, compared to the same period in fiscal 2011 primarily due to capital expenditures for installation of additional fermentation equipment and corn storage facilities at our Fairmont plant, as well as installation of corn oil extraction equipment at our Aberdeen plant.

Cash Flow from Financing Activities

We used more cash for financing activities in the first nine months of fiscal 2012 due to higher principal payments compared to the same period in fiscal 2011. This was primarily as result of a higher cash sweep payment on our Fairmont debt package.

CREDIT ARRANGEMENTS

Long-term debt consists of the following (in thousands, except percentages):


	June 30, 2012 Interest Rate			June 30, 2012			September 30, 2011
ABE Fairmont:
Senior credit facility—variable		3.65	%	$	40,740		$	32,266
Senior credit facility—fixed		7.53	%		—			20,000
Seasonal line		3.30	%		—			—
Subordinate exempt facilities bonds—fixed		6.75	%		5,370			6,185

					46,110			58,451
ABE South Dakota:
Senior debt principal—variable		3.46	%		73,447			77,052
Restructuring fee		N/A			3,000			3,000
Additional carrying value of restructured debt		N/A			8,767			9,453

					85,214			89,505

Total outstanding				$	131,324		$	147,956

Additional carrying value of restructured debt		N/A			(8,767	)		(9,453	)

Stated principal				$	122,557		$	138,503

The estimated maturities of debt at June 30, 2012, are as follows (in thousands):


	Stated Principal		Amortization of Additional Carrying Value of Restructured Debt		Total
2013	$	15,280	$	1,958	$	17,238
2014		9,155		2,561		11,716
2015		13,815		2,464		16,279
2016		77,197		1,784		78,981
2017		5,815		—		5,815
Thereafter		1,295		—		1,295

Total debt	$	122,557	$	8,767	$	131,324

SUMMARY OF CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Note 1 to our consolidated financial statements contains a summary of our significant accounting policies, many of which require the use of estimates and assumptions. Accounting estimates are an integral part of the preparation of financial statements and are based upon management’s current judgment. We used our knowledge and experience about past events and certain future assumptions to make estimates and judgments involving matters that are inherently uncertain and that affect the carrying value of our assets and liabilities. We believe that of our significant accounting policies, the following are noteworthy because changes in these estimates or assumptions could materially affect our financial position and results of operations:

Revenue Recognition

Ethanol revenue is recognized when product title and all risk of ownership is transferred to the customer as specified in the contractual agreements with the marketers. At all our plants, revenue is recognized upon the release of the product for shipment. Revenue from the sale of co-products is recorded when title and all risk of ownership transfers to customers, which generally occurs at the time of shipment. Co-products and related products are generally shipped free on board (FOB) shipping point. Interest income is recognized as earned. In accordance with the Company’s agreements for the marketing and sale of ethanol and related products, commissions due to the marketers are deducted from the gross sale price at the time of payment.

Fair Value Measurements

In determining fair value of its derivative financial instruments and warrant liabilities, the Company uses various methods including market, income and cost approaches. Based on these approaches, the Company often utilizes certain assumptions that market participants would use in pricing the asset or liability, including assumptions about risk and the risks inherent in the inputs to the valuation technique. These inputs can be readily observable, market-corroborated, or generally unobservable inputs. Financial assets and liabilities carried at fair value will be classified and disclosed in one of the following three fair-value hierarchy categories:

Level 1: Valuations for assets and liabilities traded in active markets from readily available pricing sources for market transactions involving identical assets or liabilities.

Level 2: Valuations for assets and liabilities traded in less-active dealer or broker markets. Valuations are obtained from third-party pricing services for identical or similar assets or liabilities.

Level 3: Valuations incorporate certain assumptions and projections in determining the fair value assigned to such assets or liabilities.

Commodity futures and exchange-traded commodity options contracts are reported at fair value using Level 1 inputs. For these contracts, the Company obtains fair-value measurements from an independent pricing service. The fair-value measurements consider observable data that may include dealer quotes and live-trading levels from the Chicago Board of Trade (“CBOT”) and New York Mercantile Exchange (“NYMEX”) markets.

Derivative Instruments/Due From Broker

On occasion, the Company has entered into derivative contracts to hedge its exposure to price risk related to forecasted corn purchases and forecasted ethanol sales. Accounting for derivative contracts requires that an entity recognize all derivatives as either assets or liabilities in the statement of financial position and measure those instruments at fair value. If certain conditions are met, a derivative may be specifically designated as (a) a hedge of the exposure to changes in the fair value of a recognized asset or liability or an unrecognized firm commitment, (b) a hedge of the exposure to variable cash flows of a forecasted transaction, or (c) a hedge of the foreign currency exposure of a net investment in a foreign operation, an unrecognized firm commitment, an available-for-sale security, or a foreign-currency-denominated forecasted transaction.

Although the Company believes its derivative positions are economic hedges, none have been designated as a hedge for accounting purposes and derivative positions are recorded on the balance sheet at their fair market value, with changes in fair value recognized in current period earnings.

In addition, certain derivative financial instruments that meet the criteria for derivative accounting treatment also qualify for a scope exception to derivative accounting, as they are considered normal purchases and sales. The availability of this exception is based on the assumption that the Company has the ability and it is probable to deliver or take delivery of the underlying item. Derivatives that are considered to be normal purchases and sales are exempt from derivative accounting treatment, and are accounted for under accrual accounting.

Inventories

Corn, chemicals, supplies, work in process, ethanol and distillers grains inventories are stated at the lower of weighted average cost or market.

Property and Equipment

Property and equipment is carried at cost less accumulated depreciation computed using the straight-line method over the estimated useful lives:


Office equipment			3-7 Years
Process equipment			10 Years
Buildings			40 Years

OFF-BALANCE SHEET ARRANGEMENTS

We have no off-balance sheet arrangements.

GOVERNMENT PROGRAMS, TAX CREDITS AND TAX INCREMENT FINANCING

We have applied for income and sales tax incentives available under a Nebraska Advantage Act Project Agreement. As of June 30, 2012, we have received approximately $4.9 million in refunds under the Nebraska Advantage Act. We anticipate earning investment credits for certain sales taxes paid on construction costs, up to 10% of the cost of the Fairmont plant construction, and up to 10% of new asset additions. These investment credits can be used to offset Nebraska sales, use, and income tax. Under the Nebraska Advantage Act, we also anticipate earning employment credits for 5% of the annual costs of the newly created employment positions, which can be used to offset future payroll taxes. We will continue to earn additional investment and employment credits under the Nebraska Advantage Act through the tax year ended December 31, 2013. These credits can be carried over until used, but will expire on December 31, 2019. Although we may apply under several programs simultaneously and may be awarded grants or other benefits from more than one program, some combinations of programs are mutually exclusive. Under some state and federal programs, awards are not made to applicants in cases where construction on the project has started prior to the award date. There is no guarantee that applications will result in awards of grants or credits or deductions.

In December 2006, we received net proceeds of $6.7 million from tax incremental financing from the Village of Fairmont, Nebraska. ABE Fairmont has guaranteed payment of the tax increment bonds. We anticipate paying off the outstanding obligation with future property tax payments assessed on the Fairmont plant.

The State of South Dakota pays an incentive to operators of ethanol plants to encourage the growth of the ethanol industry. The Huron plant is eligible to receive an aggregate of $9.7 million, payable up to $1 million per year. The amounts are dependent on annual allocations by the State of South Dakota and the number of eligible plants. ABE South Dakota has received $0.37 million in the nine months ended June 30, 2012, and received $0.36 million during the nine months ended June 30, 2011.

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

COMMODITY PRICE RISK

We consider our principal market risk to be the potential changes in commodity prices and their effect on our results of operations. We are subject to significant market risk with respect to the price of ethanol and corn. For the quarter ended June 30, 2012, sales of ethanol represented 79.2% of our total revenues and corn costs represented 78.8% of total cost of goods sold. In general, ethanol prices are affected by the supply and demand for ethanol, the cost of ethanol production, the availability of other fuel oxygenates, the regulatory climate and the cost of alternative fuels such as gasoline. The price of corn is affected by weather conditions and other factors affecting crop yields, farmer planting decisions and general economic, market and regulatory factors. At June 30, 2012, the price per gallon of ethanol and the cost per bushel of corn on the Chicago Board of Trade, or CBOT, were $2.233 and $6.72, respectively.

We are also subject to market risk on the selling prices of our distillers grains, which represent 19.4% of our total revenues. These prices fluctuate seasonally when the price of corn or other cattle feed alternatives fluctuate in price. The dried distiller grains spot price for Nebraska and South Dakota local customers were $230 and $220 per ton, respectively, at June 30, 2012.

We are also subject to market risk with respect to our supply of natural gas that is consumed in the ethanol production process. Natural gas costs represented 2.8% of total cost of goods sold for the quarter ended June 30, 2012. The price of natural gas is affected by weather conditions and general economic, market and regulatory factors. At June 30, 2012, the price of natural gas on the NYMEX was $2.824 per mmbtu.

To reduce price risk caused by market fluctuations in the cost and selling prices of related commodities, we have entered into forward purchase/sale contracts and derivative transactions. At June 30, 2012, we guaranteed prices representing 0.6% of our estimated ethanol production through September 2012 by entering into flat-priced contracts. At June 30, 2012, we had entered into forward sale contracts representing 25.2% of our expected distillers grains production through September 2012, and we had entered into forward purchase contracts representing 7.3% of our current corn requirements through September 2012. At June 30, 2012, none of our expected gas usage through September 2012 was fixed with our natural gas providers.

The following represents a sensitivity analysis that estimates our annual exposure to market risk with respect to our current corn and natural gas requirements and ethanol sales. Market risk is estimated as the potential impact on operating income resulting from a hypothetical 10% change in the current ethanol, distiller grains, corn, and natural gas prices. The results of this analysis, which may differ from actual results, are as follows:


	Estimated at Risk Volume (1)		Units		Hypothetical Change in Price			Spot Price(2)		Change in Annual Operating Income
	(In millions)									(In millions)
Ethanol		193.8		gallons		10.0	%	$	2.23	$	43.2
Distillers grains		0.45		tons		10.0	%		225.64		10.2
Corn		64.7		bushels		10.0	%		6.72		43.5
Natural gas		5.4		btus		10.0	%		2.82		1.5

(1)

The volume of ethanol at risk is based on the assumption that we will enter into forward contracts for 0.6% of our expected annual gallons capacity of 195 million gallons. The volume of distillers grains at risk is based on the assumption that we will enter into forward contracts for 24.0% of our expected annual distillers grains production of 592,000 tons. The volume of corn is based on the assumption that we will enter into forward contracts for 7.1% of our estimated current 69.6 million bushel annual requirement. The volume of natural gas at risk is based on the assumption that we will continue to lock in none of our gas usage.

(2)	Current spot prices include the CBOT price per gallon of ethanol and the price per bushel of corn, the NYMEX price per mmbtu of natural gas and our listed local advertised dried distillers grains price per ton as of June 30, 2012.

INTEREST RATE/FOREIGN EXCHANGE RISK

Our future earnings may be affected by changes in interest rates due to the impact those changes have on our interest expense on borrowings under our credit facilities. As of June 30, 2012, we had $114.2 million of outstanding borrowings with variable interest rates. With each 1% change in interest rates our annual interest expense would change by $1.1 million.

We have no direct international sales. Historically all of our purchases have been denominated in U.S. dollars. Therefore we do not consider future earnings subject to foreign exchange risk.

Item 4.

Controls and Procedures

Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by this report, we conducted an evaluation, under the supervision and with the participation of our chief executive officer, who is also our chief financial officer, of our disclosure controls and procedures (as

defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934). Based on this evaluation, our chief executive officer, who is also our chief financial officer, concluded that our disclosure controls and procedures are effective to ensure that information required to be disclosed by us in reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms and to ensure that information required to be disclosed by the Company in the reports the Company files or submits under the Exchange Act is accumulated and communicated to the Company’s management, including its principal executive and principal financial officer, to allow timely decisions regarding required disclosures.

Changes in Internal Controls

There were no changes in our internal controls over financial reporting during our most recently completed fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1.

Legal Proceedings

ABE Fairmont, LLC. v. Renewable Products Marketing Group, LLC

As previously disclosed, on December 21, 2011, the Company’s subsidiary ABE Fairmount, LLC (“ABE Fairmont”) commenced a lawsuit against Renewable Products Marketing Group, LLC (“RPMG”) in Hennepin County District Court in Minneapolis seeking injunctive relief and damages. The ABE Fairmont complaint alleged that defendant RPMG breached its obligations under an Ethanol Fuel Marketing Agreement and a later oral agreement by refusing to assign to ABE Fairmont a lease for 200 rail cars. ABE Fairmont sought (i) injunctive relief to require RPMG to abide by its contractual obligations, (ii) damages caused by RPMG’s breach of the agreement, (iii) a declaratory judgment, and (iv) other necessary relief. Defendant RPMG answered the complaint denying the allegations and sought a declaration that RPMG was entitled to possession of the cars after September 30, 2012.

In an order dated June 28, 2012, the Court denied partial and full cross summary judgment motions respectively brought by ABE Fairmont and RPMG, finding that there were genuine factual disputes and that therefore summary judgment was inappropriate.

The Court subsequently issued an order dated July 31, 2012 granting ABE Fairmont’s request for a continuance in the trial, originally set for August 1, 2012, and directing ABE Fairmont to return the 200 rail cars to RPMG on or prior to September 30, 2012.

The parties held a scheduling conference with the Court on August 3, 2012. The Company expects the Court to issue an order dismissing the ABE Fairmont claims for injunctive relief and a declaratory judgment, and to set a new trial date concerning the Company’s claims for damages based on breach of contract and other causes of action.

Item 1A.

Risk Factors

There are no material changes from risk factors as previously discussed in our September 30, 2011 Annual Report on Form 10-K, except the following:

The current supply of ethanol rail cars is very limited, which could affect our ability to obtain new tanker cars and adversely affect our operations.

We transport our ethanol to our customers primarily via tanker rail cars. As of June 30, 2012, we were leasing ethanol tank cars whose leases expire at varying times over the next seven years. We require tanker cars to ship our ethanol to customers, and would have to lower or cease production should we not have sufficient cars available.

There has been increased demand by the oil industry for the type of tankers used to transport ethanol, as a result of increased production in the Bakken shale oil fields in North Dakota and Montana, as well as the Eagle Ford shale oil fields in Texas. The light viscosity of the oil being produced out of these fields, and the lack of pipelines to transport oil from these fields to major collection points has caused the oil industry to utilize the same type of tanker cars used by the ethanol industry. This increased demand has severely constrained the available supply of tanker rail cars during the past twelve months, and caused tanker car lease rates to increase significantly above historical rates. We expect lease rates to remain high through at least fiscal 2013, as we expect demand for tanker cars to remain high due to the continued growth of shale oil production, the flexibility that rail car transport affords the oil producers, and the continued lack of pipelines to transport oil to collection points.

Our subsidiaries entered into several agreements dated May 4, 2012, and amended July 31, 2012, with Gavilon, LLC, and affiliated companies ( “Gavilon”). In order to ensure a continued source of rail cars for our South Dakota operations, these agreements include the renewed sublease of rail cars for periods expiring June 30, 2014 through June 30, 2019. These agreements became effective August 1, 2012.

Our ABE Fairmont facility currently leases 200 rail cars under a sublease with Renewable Products Marketing Group, LLC. As described in Item 1, Legal Proceedings, our ABE Fairmont subsidiary sued RPMG in Hennepin County District Court in Minneapolis seeking injunctive relief and damages. The Court denied each party’s summary judgment motions in the lawsuit, granted ABE Fairmont’s request for a continuance in the trial originally set for August 1, 2012, and directed ABE Fairmont to return the 200 rail cars to RPMG on or prior to September 30, 2012. We expect the Court to issue an order dismissing the ABE Fairmont claims for injunctive relief and a declaratory judgment, and to set a new trial date. As a result, ABE Fairmont will not be entitled to use these rail cars after September 30, 2012.

We have replaced a portion of the 200 tank cars that ABE Fairmont will be returning to RPMG by September 30, 2012, and are attempting to obtain replacements for the remaining cars needed at ABE Fairmont. If we are unable to replace all or some of the rail cars we need to ship ethanol from Fairmont, Nebraska beginning October 1, 2012, we may have to lower production at that plant, or market and sell our ethanol in a different manner, either of which could materially adversely affect our profitability. We cannot offer any assurance that we will be able to obtain the replacement cars required at a reasonable price or at all. Even if we are able to obtain replacement rail cars, if we are required to lease the cars at prices significantly in excess of our current lease rates, our future profitability could be adversely affected.

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3.

Defaults Upon Senior Securities

None.

Item 4.

Mine Safety Disclosures

None.

Item 5.

Other Information

None.

Item 6.

Exhibits

The exhibits filed herewith are set forth on the Exhibit Index filed as a part of this report beginning immediately following the signatures.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	ADVANCED BIOENERGY, LLC

Date: August 14, 2012	By:	/s/ Richard R. Peterson
		Richard R. Peterson
		Chief Executive Officer and President,
		Chief Financial Officer
		(Duly authorized signatory and Principal Financial Officer)

EXHIBIT INDEX


Exhibit	Description	Method of Filing

10.1	**Ethanol Marketing Agreement dated May 4, 2012 between ABE South Dakota, LLC and Gavilon LLC.	Filed herewith.

10.1.1	**Amendment No. 1 dated July 31, 2012 to Ethanol Marketing Agreement between ABE South Dakota, LLC and Gavilon, LLC	Filed herewith.

10.2	**Distiller’s Grains Marketing Agreement dated May 4, 2012 between ABE South Dakota, LLC and Gavilon Ingredients, LLC.	Filed herewith.

10.2.1	Amendment No. 1 dated July 31, 2012 to Distiller’s Grains Marketing Agreement between ABE South Dakota, LLC and Gavilon Ingredients, LLC.	Filed herewith.

10.3	**Ethanol Marketing Agreement dated May 4, 2012 between ABE Fairmont, LLC and Gavilon, LLC.	Filed herewith.

10.3.1	Amendment No. 1 dated July 31, 2012 to Ethanol Marketing Agreement between ABE Fairmont, LLC and Gavilon, LLC.	Filed herewith.

10.4	**Rail Car Sublease Agreement dated May 4, 2012 by and among Gavilon, LLC, ABE South Dakota, LLC and ABE Fairmont.	Filed herewith.

10.4.1	Amendment No. 1 dated July 31, 2012 to Rail Car Sublease by and among Gavilon, LLC, ABE South Dakota, LLC , ABE Fairmont, LLC, and Gavilon, LLC.	Filed herewith.

10.5	Consent and Agreement dated as of July 31, 2012, among Gavilon, LLC, Gavilon Ingredients, LLC, ABE South Dakota, LLC, and Portigon AG, New York Branch (f/k/a WestLB AG, New York Branch).	Filed herewith.

31	Rule 13a-14(a)/15d-14(a) Certification by Principal Executive Officer, Financial and Accounting Officer	Filed herewith.

32	Section 1350 Certifications.	Filed electronically.

101	The following materials from Advanced BioEnergy’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2012, formatted in XBRL: (i) Consolidated Balance Sheets at June 30, 2012 and September 30, 2011 ; (ii) Consolidated Statements of Operations for the three and nine months ended June 30, 2012 and June 30, 2011; (iii) Consolidated Statements of Changes in Member’s Equity for the nine months ended June 30, 2012; (iv) Consolidated Statements of Cash Flows for the nine months ended June 30, 2012 and 2011; and (v) Notes to the Consolidated Financial Statements.	Filed electronically.

Pursuant to Rule 24b-2 adopted under the Securities Exchange Act of 1934, the Company has deleted certain information from these Agreements, as filed, on the basis that disclosure of this information would be detrimental to the Company and is not necessary for the protection of investors. The Company has filed a request for Confidential Treatment of this information.

Exhibit 10.1

ETHANOL MARKETING AGREEMENT

ABE South Dakota, LLC

THIS ETHANOL MARKETING AGREEMENT (the “ Agreement ”) is dated and made effective as of May 4, 2012 (the “ Effective Date ”), by and among ABE South Dakota, LLC, a Delaware limited liability company (“ Producer ”), and Gavilon, LLC , a Delaware limited liability company (“ Gavilon ”).

RECITALS

(a)

Producer will produce ethanol at its two (2) facilities located in Aberdeen, South Dakota having a nameplate capacity of 50 million gallons (“ Aberdeen Plant ”) and Huron, South Dakota having a nameplate capacity of 30 million gallons (“ Huron Plant ”) (the Aberdeen Plant and the Huron Plant shall each, individually, be a “ Plant ” and, collectively, the “ Plants ”);

(b)

Gavilon is in the business of purchasing ethanol and marketing and reselling same to third parties; and

(c)

Producer desires to deliver and sell to Gavilon, and Gavilon desires to purchase and take from Producer, the ethanol output of the plants specified herein and Gavilon desires to provide certain related services to Producer on the terms and subject to the conditions contained in this Agreement and in the other Transaction Agreements.

AGREEMENT

NOW THEREFORE, in consideration of the above Recitals, which are incorporated herein and made a part hereof, and the mutual promises and covenants set forth herein, and intending to be legally bound, Gavilon and Producer mutually agree as follows:

Article 1

DEFINITIONS

1.1 “ Aberdeen Plant ” has the meaning provided for in the Recitals.

1.2 “ Actually Placed ” or “ Actual Placement ” means that such railcars have been delivered to and received by Producer at the Plant.

1.3 “ Agreement ” means this Ethanol Marketing Agreement and any exhibits or schedules attached hereto as the same may be amended, supplemented or amended and restated from time to time.

1.4 “Bankruptcy ” has the meaning provided for in Section 13.1.6.

*	*indicates material has been omitted pursuant to a request for confidential treatment, and such material has been filed separately with the Securities and Exchange Commission* .

1.5 “ Business Day ” or “ Business Days ” means the hours from 8:00 a.m. to 5:00 p.m. Central Time excluding Saturdays, Sundays, and scheduled holidays observed by the Chicago Board of Trade, Chicago, Illinois, USA.

1.6 “ Central Time ” means the local time in Omaha, Nebraska at any relevant time, taking into account daylight saving time, if applicable.

1.7 “ Change in Control ” means a change in the ownership of a Party, whereby such change results in any person or group (as such terms are used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934), directly or indirectly, having the ability to control the governing body of such Party.

1.8 “ Commencement Date ” has he meaning provided in Section 2.1.

1.9 “ Confidential Information ” has the meaning provided for in Section 10.1.

1.10 “ Confirmation ” has the meaning provided for in Section 6.2.1.

1.11 “ Constructively Placed ” or “ Constructive Placement ” means either: (i) with respect to a loaded shipment of Product by railcars, that such railcars are located at the Delivery Point in such condition ready for shipment to or if the Producer’s Constructively Placed designation is unavailable, then at such nearby location as determined by the railroad, or (ii) with respect to receipt of railcars for Product loading, that such railcars are located at the Delivery Point or if the Producer’s Constructively Placed designation is unavailable, then at such nearby location as determined by the railroad and within the operating hours specified, in such condition ready for Producer’s use in fulfilling its obligations hereunder.

1.12 “ Cross Default ” has the meaning provided for in Section 13.4.

1.13 “ Damages ” has the meaning provided for in Section 12.1.

1.14 “ Delivery ” means the Product has crossed the point between the Terminal output apparatus and the intake apparatus of the respective Transport Carrier.

1.15 “ Delivery Point ” means for Transport Carriers the location(s) at the Terminal or Plant where Transport Carriers are received for loading of Product on the respective Transport Carriers, as follows:

1.15.1 The Delivery Point for railcar shipments is the railway’s “ Constructively Placed ” or “ Actually Placed ” designation; and

1.15.2 The Delivery Point for trucks is the point that the Product is loaded into the truck from the Plant’s loading facility.

1.16 “ Delivery Schedule ” has the meaning provided for in Section 5.3.

1.17 “ Demurrage ” means all costs, damages, penalties and charges resulting from any delay in excess of two (2) business hours in loading of Product shipments, including, without limitation, any delay related to any Transport Carrier, as applicable: (i) being incapable of timely loading any shipment of Product due to mechanical failure or for other reasons, or (ii) delivering any shipment of Product to an incorrect Delivery Point.

1.18 “ Designated Logistics Individual ” has the meaning provided for in Section 5.2.

1.19 “ Designated Pricing Individual ” has the meaning provided for in Section 6.1.

1.20 “ DOT ” means the United States Department of Transportation.

1.21 “ Effective Date ” has the meaning provided for in the Preamble.

1.22 “ Event of Default ” has the meaning provided for in Section 13.1.

1.23 “ Favorable Terms ” has the meaning provided in Section 6.2.3.

1.24 “ Fees ” has the meaning provided for in Section 6.3.

1.25 “ Force Majeure ” has the meaning provided for in Section 11.2.

1.26 “ Forward Market Services ” has the meaning provided for in Section 9.1.

1.27 “ Gavilon ” has the meaning provided for in the Preamble.

1.28 “ Gavilon Claims ” has the meaning provided for in Section 12.1.

1.29 “ Gavilon Indemnitees ” has the meaning provided for in Section 12.1.

1.30 “ Gavilon’s Parties ” has the meaning provided for in Section 10.3.

1.31 “ Governing Body ” means the American Arbitration Association.

1.32 “ Governing Body Arbitration Rules ” means the commercial arbitration rules of the American Arbitration Association.

1.33 “ Huron Plant ” has the meaning provided for in the Recitals.

1.34 “ Initial Term ” has the meaning provided for in Section 2.1.

1.35 “ Invoice” has the meaning provided for in Section 6.5.1.

1.36 “ Invoice Date” has the meaning provided for in Section 6.5.1.

1.37 “ Logistics ” means activities related to or connected with either (i) transporting, storing and otherwise handling Product after Delivery to Gavilon hereunder, or (ii) delivery of Transport Carriers to the Delivery Point for Product loading.

1.38 “ Nonconforming Product ” has the meaning provided for in Section 4.3.

1.39 “ Party ” shall mean either Producer or Gavilon, as the context requires, and “ Parties ” shall mean both Producer and Gavilon.

1.40 “ Plants ” has the meaning provided for in the Recitals.

1.41 “ Producer ” has the meaning provided for in the Preamble.

1.42 “ Producer Claims ” has the meaning provided for in Section 12.2.

1.43 “ Producer Indemnitees ” has the meaning provided for in Section 12.2.

1.44 “ Producer’s Parties ” has the meaning provided in Section 10.2.

1.45 “ Product ” means the ethanol product meeting the Specifications set forth in Exhibit A attached hereto and incorporated herein by this reference.

1.46 “ Production Forecast ” has the meaning provided in Section 4.1.

1.47 “ Purchase Price ” has the meaning provided for in Section 6.2.1.

1.48 “ Railcar Lease ” means that certain Rail Car Sublease Agreement between Producer, ABE Fairmont, LLC, a Delaware limited liability company, and Gavilon, dated of even date herewith.

1.49 “ Remaining Fee Payout ” means (i) the monthly Fees payable to Gavilon if the Plants were operated at 100% of the nameplate capacity ( i.e. , 6,666,666 gallons per month), and then (ii) multiplied by the number of calendar months (prorated for any partial months) remaining on the Initial Term.

1.50 “ Remaining Months Payout ” means the Six Months Payout divided by six (6), and then multiplied by the number of calendar months (prorated for any partial months) remaining on the Initial Term.

1.51 “ Renewal Term ” has the meaning specified in Section 2.2.

1.52 “ Six Months Payout ” has the meaning provided in Section 2.1.1

1.53 “ Rolling Forecast ” has the meaning provided in Section 4.1.1.

1.54 “ Specifications ” has the meaning provided in Section 4.2.

1.55 “ Storage Costs ” means direct or indirect costs incurred by Gavilon or charged by a third-party for storing Product, together with insurance and all other charges incurred by third-parties in connection with such storage, without markup by Gavilon.

1.56 “ Taxes ” has the meaning provided for in Section 6.4.

1.57 “ Term ” has the meaning provided for in Section 2.2.

1.58 “ Terminal ” means the site and facilities of the terminal operator serving the operations of the Plant.

1.59 “ Transaction Agreements ” means this Agreement, the Distillers Grains Marketing Agreement dated of even date herewith between Producer and Gavilon Ingredients, LLC, the Railcar Lease, and the irrevocable and non-transferable standby letter of credit posted by Producer’s parent company (Advanced BioEnergy, LLC, a Delaware limited liability company) for the benefit of Gavilon in the amount of $2,500,000.

1.60 “ Transport Carrier ” means railcars or trucks.

1.61 “ Written ” or “ in writing ” conditions will be satisfied by any one of the following: email, mail, or facsimile and addressed to the proper Parties as set forth in Section 15.14, except any written notice required under Sections 13 and 15 shall be done strictly in accordance with Section 15.14.

Article 2

TERM

2.1 Initial Term. Unless terminated earlier according to its terms, this Agreement shall be effective on the earlier of (the “Commencement Date”): October 1, 2012; or that date occurring after May 1, 2012 as specified in writing by Producer to Gavilon at least thirty (30) days prior to such date: and shall continue until December 31, 2015 (the “Initial Term”), unless extended as set forth in Section 2.2. Notwithstanding the foregoing, Producer shall also have the right to terminate this Agreement prior to expiration of the Initial Term under the following conditions:

2.1.1

Upon three (3) months’ prior written notice of a Change in Control in Producer or Producer’s parent company (Advanced BioEnergy, LLC, a Delaware limited liability company) during the Initial Term; provided, however, upon any such termination, Producer shall (i) pay Gavilon an amount equal to the greater of (a) the prior six (6) months of cumulative Fees earned by Gavilon or (b) * (the “Six Months Payout”); (ii) pay Gavilon all other Fees and expenses accruing under this Agreement as of the date of such termination; and (iii) continue with the Railcar Lease; and

2.1.2

Upon thirty (30) days’ prior written notice at any time after April 1, 2014 but prior to November 30, 2015; provided, however, upon any such termination, Producer shall (i) pay Gavilon the Remaining Fee Payout; (ii) pay Gavilon all other Fees and expenses accruing under this Agreement as of the date of such termination; and (iii) continue with the Railcar Lease.

2.1.3

Upon providing written notice at any time prior to 5:00 p.m. CDT on October 2, 2012, indicating that Producer’s senior lenders, as coordinated by the senior lenders’ administrative agent WestLB Ag, did not approve of Producer entering into: this Agreement; the Distillers Grains Marketing Agreement dated of even date herewith between Producer and Gavilon Ingredients, LLC; and the Railcar Lease. Upon any such termination, neither Party shall be bound by the terms of this Agreement except that (i) the confidentiality provisions of Article 10, (ii) the indemnity and limitation of liability provisions of Article 12, and (iii) the provisions of Section 15.1, shall in each case continue to be binding upon the Parties in accordance with their terms.

2.2 Renewal Term . The Initial Term will automatically be extended for additional one (1) year periods (each, a “ Renewal Term ”), unless either Party provides the other Party with three (3) months prior written notice that the Agreement shall terminate at the end of the then-current Term (collectively, the Initial Term and any Renewal Term are referred to herein as the “ Term ”).

Article 3

PRODUCT PURCHASE

3.1 Sale/Purchase. Subject to the Confirmations referenced in Section 6.2 and the other terms and conditions herein, during the Term, Producer shall sell and make available for Delivery to Gavilon, and Gavilon shall purchase and take Delivery of, one hundred percent (100%) of the Product produced at the Plants. All Product produced at the Plants shall be subject to the terms of this Agreement. Producer hereby represents and warrants that, as of the Commencement Date, it shall have no obligation or commitment to any third party with respect to the delivery or sale of Product, and that any and all such obligations and commitments that existed prior to the Commencement Date shall have been terminated or otherwise fulfilled without liability to any Party as of the Commencement Date.

Article 4

PRODUCT QUANTITY AND QUALITY

4.1 Quantity. Except as otherwise stated in this Agreement, Producer shall sell its entire output of Product produced at the Plants to Gavilon. For Product sales and purchase planning purposes, Producer shall provide to Gavilon, in form and substance reasonably acceptable to Gavilon, its monthly production targets reflected in the then current Rolling Forecast and the other production forecasts as set forth below (the “ Production Forecast ”) in accordance with the following:

4.1.1

Promptly after the Commencement Date and monthly thereafter, Producer’s monthly Product production output forecast for the Plants for the following twelve (12) calendar months (the “ Rolling Forecast ”);

4.1.2

On or prior to 10:30 am Central Time of each day of operation, the estimated daily Product inventory balances of the Plants, Product production status and Product shipment information in writing or electronically;

4.1.3

Promptly after the Commencement Date, and at least forty five (45) days prior to the beginning of each calendar year during the Term, written notice of any then-scheduled Plant shutdowns;

4.1.4

Prompt written notice, within twenty four (24) hours, of any event that has resulted or could reasonably be expected to result in an unscheduled Plant shutdown, suspension or significant decrease in Plant’s production of Product that was not reported or anticipated in the Production Forecasts provided for herein; and

4.1.5

Immediately upon request, such other information as reasonably requested by Gavilon.

metering equipment shall be certified on an annual basis, whereupon Producer shall provide the certification certificate(s) to Gavilon. In the event that the scale or metering equipment at any Plant is deemed faulty or inoperable, then the quantity of Product shall be established by a replacement scale or replacement metering system(s) which is/are certified as of the time of such weighing or metering and which comply with the terms and conditions of this Agreement and all applicable laws, rules and regulations. In the event that either Gavilon or Producer reasonably believes that Producer’s scales or metering equipment are not working properly, either Party may request that such scales or metering equipment be tested and re-certified.

4.2 Quality. Unless otherwise agreed by Gavilon in writing, Producer represents and warrants that the Product produced at the Plants and delivered to Gavilon (i) shall be free and clear of all liens and encumbrances, (ii) shall comply in all material respects with any applicable federal, state, and local laws, regulations and requirements governing quality, naming, and labeling of Product, the specifications of which shall be determined by Producer in its sole discretion, and shall conform to the specifications set forth in Exhibit A attached hereto (the “ Specifications ”). The Specifications shall be deemed modified upon mutual agreement of the Parties or, without any further action by either of the Parties hereto, from time to time to conform with legally mandated standards currently in existence or as modified or amended.

4.2.1

Producer shall provide to Gavilon, on or prior to Delivery of any Product to Gavilon, a certificate representing an analysis of the Product to be sold to Gavilon, certifying and evidencing to the reasonable satisfaction of Gavilon that such Product (i) is free and clear of all liens and encumbrances, (ii) complies in all material respects with any applicable federal, state, and local laws, regulations and requirements governing quality, naming, and labeling of Product, and (iii) conforms to the Specifications. Producer, at its sole cost and expense, shall provide or cause to be provided all testing and related test equipment, which shall be calibrated at least once every six (6) months during the Term of this Agreement, at or in the vicinity of the Plants to determine, to Gavilon’s satisfaction, that the Product is in compliance with the Specifications. Gavilon or Gavilon’s representative shall have the right to perform, at any time within a reasonable period of time following delivery or receipt by Gavilon’s customers and at Gavilon’s sole expense, tests to determine whether or not the Product is in compliance with the Specifications. If the Product so tested does not conform to the Specifications, Producer shall reimburse Gavilon its actual costs in conducting such tests.

4.2.2

If Producer knows or reasonably suspects that any of the Product produced at any Plant is adulterated or misbranded, or does not conform to any warranty or Specification, Producer shall promptly notify Gavilon of the same so that such Product can be tested before entering interstate commerce. If Gavilon knows or reasonably suspects that any of the Product produced by Producer at any Plant is adulterated, misbranded or does not conform to the Specifications, then Gavilon may obtain independent laboratory tests of the Product in question. If such Product is tested and found to comply with all warranties and the Specifications made by Producer herein, then Gavilon shall be responsible for all applicable testing costs; and if the Product is found not to conform with such warranties and the Specifications, Producer shall be responsible for all applicable testing costs.

4.2.3

Gavilon’s payment for the Product, whether or not in conformance with this Agreement or any applicable Confirmation, does not constitute a waiver by Gavilon of Gavilon’s rights in the event the Product does not comply with the terms of this Agreement.

4.2.4

Producer shall, using standard sampling methodology, take an origin sample of the Product from each source denatured ethanol tank, flat storage or modified pad, as applicable, before loading onto Transport Carrier for Delivery. Producer shall label such samples and cross reference them to all Transport Carriers loaded from said tank, flat storage or pad. Unless the Parties agree otherwise, Producer shall store such samples at the Plant for testing by Gavilon, at Gavilon’s sole discretion for a period of two (2) months, after which time Producer may include the sample Product in future shipments to Gavilon.

4.2.5

If requested by Gavilon, Producer shall provide all information to Gavilon pursuant to this Section 4.2 in electronic form.

4.3 Nonconforming Product. In the event the Product delivered to Gavilon is determined to be nonconforming to the Specifications or otherwise nonconforming in any material respect to any other representation or warranty made by Producer herein (the “ Nonconforming Product ”), Gavilon shall notify Producer of Gavilon’s rejection (or Gavilon’s customer’s rejection) of such Nonconforming Product in writing within two (2) Business Days of determining that such Product is a Nonconforming Product. Producer will then direct Gavilon to either (i) sell the Nonconforming Product at a discounted price, or (ii) return the Nonconforming Product to Producer, each at Producer’s sole cost and expense. Producer shall replace the Nonconforming Product with an acceptable type and/or quality of Product as soon as reasonably possible, but within four (4) Business Days. In the event Producer is unable to ship the replacement for the Nonconforming Product within four (4) Business Days, Gavilon shall have the option in Gavilon’s sole and absolute discretion to return the Nonconforming Product, withhold payment thereof and purchase replacement Product. Producer will be responsible for the difference in cost between the higher cost replacement Product and the cost of Producer’s Product which is the Nonconforming Product, and the costs of returning or disposing of any such Nonconforming Product. Such costs may include, without limitation, reasonably incurred Storage Costs or costs reasonably incurred by Gavilon to return such Nonconforming Product to Producer. If such Nonconforming Product is sold by Gavilon at a discount, the Purchase Price payable by Gavilon may be reasonably adjusted by Gavilon by the amount of such discount. In the event that the replacement Product costs less than the cost of Producer’s Product which is the Nonconforming Product (after taking into consideration all costs to obtain such replacement Product), Producer will receive a credit for any such gain associated with the replacement Product.

Product and Gavilon shall have the right to set off all such amounts in accordance with the terms of this Agreement. In the event that Gavilon is directed to dispose of the Nonconforming Products at the direction of any federal or state department or agency, Gavilon shall coordinate with Producer with regard to the same; provided, however, Gavilon shall ultimately be responsible for determining how to comply with such orders and Producer shall ultimately be responsible for all costs arising therefrom.

Article 5

DELIVERY, SCHEDULING AND LOGISTICS

5.1 Delivery. Delivery of Product hereunder shall take place at the applicable Delivery Point for Product and in accordance with the applicable Confirmation.

5.2 Designated Logistics Individual. At all times from the Commencement Date until the expiration of the Term, Producer shall designate (and may re-designate from time to time) in writing to Gavilon, a qualified, full-time, individual for daily operational and Logistics issues who shall interact directly with Gavilon relating to such matters and shall have full, binding authority on behalf of Producer for all operational and Logistics matters with respect to the transactions contemplated herein (the “ Designated Logistics Individual ”).

5.3 Delivery Schedule . The Parties shall jointly develop a delivery schedule (the “ Delivery Schedule ”), the format of which will be mutually agreed upon by the Parties, which will serve as the formal planning tool for Logistics purposes.

5.4 Gavilon’s Covenants . Gavilon shall be responsible for the coordination and management of Logistics which arise after Delivery and for delivery of Transport Carriers to the Delivery Point for Product loading. Except as otherwise stated herein, Gavilon covenants and agrees to:

5.4.1

Secure and maintain all necessary agreements, licenses, documents and contracts related to the transport of the Product from the Delivery Point;

5.4.2

Establish, monitor and communicate Logistics related data to Producer as reasonable to ensure the shipment of Product in accordance with the applicable Delivery Schedule;

5.4.3

Secure and supply to Producer in connection with Delivery of Products herein all trucks (the owner or lessee of which shall be Gavilon and not Producer), and bear all costs relating to same, and advise Producer on tracking Transport Carriers and applicable respective estimated times of arrival therefore in an effort to reduce Demurrage and other costs;

5.4.4

Schedule the loading and shipping of all outbound Product purchased hereunder and shipped by Transport Carrier; and

5.4.5

Comply in all material respects with all applicable federal, state, and local laws, regulations and requirements regarding the shipment of Product from the Plant including, but not limited to, all DOT requirements relating to the shipment of hazardous materials or otherwise applicable to the shipment of the Product (e.g., proper paperwork, railcars meeting DOT requirements, etc.).

5.5 Producer’s Covenants . Producer shall be responsible for the coordination and management of transporting, storing and otherwise handling Product up through completion of Delivery of the Product to Gavilon and, except as otherwise stated herein, Producer covenants and agrees to:

5.5.1

Provide a qualified, full-time, Designated Logistics Individual for daily shipping, storage, and such matters up through Delivery;

5.5.2

Comply in all material respects with all applicable federal, state, and local laws, regulations and requirements regarding the labeling and shipment of Product applicable to Producer in connection with Delivery of Product at the Plants including, but not limited to, all DOT requirements relating to the labeling and shipment of hazardous materials or otherwise applicable to the labeling and shipment of the Products (e.g., proper paperwork, railcars meeting DOT requirements, etc.);

5.5.3

Provide to Gavilon and Gavilon’s representatives access to the Plants in a manner and at all times reasonably necessary and convenient for Gavilon to take Delivery of the Product;

5.5.4

Provide all labor, facilities and equipment necessary to load the Transport Carriers and consummate Delivery of the Product at no charge to Gavilon;

5.5.5

Handle the Product in a good and workmanlike manner in accordance with all governmental regulations and in accordance with normal industry practice;

5.5.6

Maintain all loading facilities at the Terminal in a safe operating condition in accordance with normal industry standards;

5.5.7

Prior to Delivery, inspect all applicable Transport Carriers in accordance with industry standards to ensure that the same are free of debris and foreign material that are prohibited under applicable laws or industry standards, free of odor unrelated to the Product and free of visually ascertainable contamination, and free of leaks from the Transport Carrier valves, and immediately notify Gavilon upon the discovery of or suspicion of the presence of such items to allow the Parties to coordinate the removal of such contaminants or arrange for substitute transportation equipment; such inspections shall include, but not be limited to, ensuring that the Transport Carriers are free and clear of mammalian protein; and all such inspections shall be documented and reported in accordance with inspection reports and records as mutually agreed upon by the Parties;

5.5.8

Use commercially reasonable efforts to load all Transport Carriers to full capacity at the Delivery Point. In the event that a Transport Carrier is not loaded to full capacity due to Producer’s failure to use such commercially reasonable efforts, Producer shall pay that portion of freight charges allocable to the unused capacity of the applicable Transport Carrier and shall notify Gavilon within one (1) Business Day of the occurrence of such partial load;

5.5.9

Provide Gavilon with (i) monthly consolidated and consolidating balance sheets of Producer and its affiliates as at the end of such month, and the related consolidated and consolidating statements of income or operations for such month, and the related consolidated and consolidating statements of cash flows for such month, all in reasonable detail and certified by the chief executive officer, chief financial officer, treasurer or controller of Producer as fairly presenting in all material respects the financial condition, the results of operations and cash flows of Producer and its affiliated entities in accordance with GAAP in all material respects, and (ii) such other accounting, financial and other information as may be reasonably requested in order for Gavilon to monitor and assess Producer’s credit status during the Term;

5.5.10

Provide, at Producer’s cost and expense, all railcars required or required to meet its obligations hereunder;

5.5.11

Provide to Gavilon on a daily basis complete and accurate reports and downloads of all data related to Product produced and/or stored at the Plants and Product shipped from storage at the Plants.

5.6 Producer’s Demurrage Obligations. Producer shall be responsible for Demurrage and other applicable freight and storage penalties which may accrue during the period commencing after the Transport Carriers are received by Producer (or prevented from being received in accordance with the most recent Production Forecast) for loading of Product onto the respective Transport Carriers and ending when Transport Carriers are loaded and ready for shipment at the Delivery Point, but only to the extent that such penalties arise as a result of Producer’s conduct in its performance under this Agreement, including any Production Forecast errors which result in Gavilon sending Transport Carriers when not needed for Product.

5.7 Notification of Problems with Delivery. Each Party shall inform the other Party of any problem regarding any Delivery or shipment of Product within one (1) Business Day by facsimile, email or telephone, after a Party becomes aware of any such problem. An example of such problem(s) includes, but is not limited to, a difference in the quantity of the Delivery of Product from that quantity set out in the applicable Confirmation.

Article 6

PRICING AND PAYMENTS

6.1 Designated Pricing Individual. At all times from the Commencement Date until the expiration of the Term, Producer shall designate (and may re-designate from time to time) in writing to Gavilon a qualified, full-time individual to interact directly with Gavilon for all pricing and payment matters who shall have full, binding authority on behalf of Producer for all pricing, billing, and payment matters with respect to the transactions contemplated herein (the “ Designated Pricing Individual” ). The Designated Logistics Individual and the Designated Pricing Individual may be the same individual.

6.2

Confirmation Process.

6.2.1

in Section 6.3. The Purchase Price for Product sold hereunder will be established through an “offer” and “confirmation” process between the Parties. Gavilon will offer market-based Product prices to Producer (FOB Plant) and Producer shall timely confirm the offered price, volume and delivery period to establish each “Confirmation” all as set forth on Exhibit B attached hereto. Gavilon agrees to use commercially reasonable best efforts to achieve the highest Purchase Price available under prevailing market conditions.

6.2.2

Producer shall have the right to establish “flat price” pricing for Product for up to sixty (60) days forward on volumes not to exceed the ratable capacity of the Plants. Any forward sales allowed under this Section 6.2.2 shall be subject to (i) setoff rights as set forth in this Agreement, and (ii) the net mark-to-market balance of the then-existing forward contracts being within the analyzed credit status of the Producer and any tolerance set by Gavilon’s credit department. In the event that this Agreement is terminated, all open contracts which comply with the terms of this Section 6.2.2 shall be honored by the Parties (subject to the rights and obligations of the Parties as set forth in Article 13 below).

6.2.3

To the extent that Producer obtains a more favorable bid or price quote for the Product (the “ Favorable Terms ”) from a third-party (but on terms that are otherwise customary and comparable to those set forth herein), Producer shall give written notice to Gavilon of the Favorable Terms, including the Product quantities and specifications. Gavilon has the right (but not any requirement) to match the Favorable Terms and purchase the Product from Producer. If Gavilon does not provide oral confirmation (followed by written notice) to Producer of Gavilon’s agreement to purchase Product at the Favorable Terms within two (2) business hours after Producer’s written notice to Gavilon, the sole remedy of Producer shall be for Producer to directly sell the applicable Product on the Favorable Terms to the third-party. If Gavilon elects not to match the Favorable Terms pursuant to this Section 6.2.3, Gavilon shall not receive any Fees on such third-party transaction but shall have the option to provide services for Logistics in regard to the third party transaction at Gavilon’s then-current rates. Any sale by Producer to a third-party purchaser shall occur within one (1) day following Gavilon’s failure to match the third-party purchaser’s price.

6.3

Fees.

6.3.1

In consideration for Gavilon’s agreement to purchase Product hereunder, and other obligations contained herein, Producer shall deduct from the Purchase Price for all Product sold to Gavilon under this Agreement the following marketing fee (collectively, the “ Fees ”): (i) from October 1, 2012 through April 30, 2013, $ * per gallon of Product sold to Gavilon, and (ii) from May 1, 2013 through the end of the Term, $ * per gallon of Product sold to Gavilon.

6.3.2

Excepting railcars subject to the Railcar Lease, in the event a Gavilon railcar is used to transport Product from the Plant, then Producer shall reimburse Gavilon for the then applicable lease cost for said railcar computed on the number of days the railcar is used by Producer (or a third party transporting Product for Producer). Any lease fees for such Gavilon railcars shall be invoiced by Gavilon and paid by Producer in accordance with Gavilon’s then-current invoice policy.

6.4

Taxes. Producer shall pay or cause to be paid all valid levies, assessments, duties, rates and taxes (together “ Taxes ”) on Product sold to Gavilon hereunder that arise prior to, or at the time and as a result of, the sale of such Product to Gavilon. Gavilon shall pay or cause to be paid all Taxes, including fuel or excise Taxes, on Product that arise after the sale of Product by Producer to Gavilon hereunder. Any and all state or federal tax, production, investor, or U.S. excise credits, any and all emissions credits, other government incentives or credits or benefits relating to the production of Product or the sale thereof to Gavilon, shall inure solely to the benefit of Producer.

6.5

Billing and Payment.

6.5.1

Invoice. Within one (1) Business Day of Delivery of Product to Gavilon (the “ Invoice Date ”), Producer will provide an invoice to Gavilon, in writing or electronically, setting forth the net amounts due from Gavilon with respect to such Delivery of Product after deducting the applicable Fees (the “ Invoice ”).

6.5.2

Payment Due. Upon receipt of the Invoice, Gavilon shall issue payment for the net amount due to Producer within ten (10) Business Days after Delivery of Product.

Article 7

REPRESENTATIONS AND WARRANTIES

7.1 Representations, Warranties and Covenants . Producer and Gavilon each represent, warrant and covenant to the other that:

7.1.1

Such Party is duly organized, validly existing, and in good standing under the laws of the state of its formation, has registered as a foreign entity in those jurisdictions where such registration is required, and has the power and authority to own and operate its properties and to carry on its business as now being conducted;

7.1.2

Such Party is duly authorized to execute and deliver this Agreement and any Confirmations, perform the covenants contained herein and therein, to consummate the transactions contemplated hereby, and to execute, deliver and perform all documents and instruments to be executed and delivered by such Party pursuant hereto, and all required action in respect to the foregoing has been taken by such Party;

7.1.3

When executed and delivered, this Agreement, any Confirmations, and all of the documents and instruments described herein and therein, will constitute valid and binding obligations of the Parties thereto, enforceable against the Parties, in accordance with their respective terms;

7.1.4

instrument or obligation of any kind or character to which such Party is a party or by which such Party or the Product may be bound, and will not constitute a default thereunder or result in the declaration or imposition of any lien, charge or encumbrance of any nature whatsoever upon any Product;

7.1.5

It is not relying upon any representations of the other Party, other than those expressly set forth in this Agreement, any Confirmation or any other Transaction Agreement; and

7.1.6

It has entered into this Agreement with a full understanding of the material terms and risks of same, and it is capable of assuming those risks.

Article 8

POSSESSION AND TITLE

8.1 Title; Risk of Loss. The Product to be sold by Producer shall be delivered FOB the Delivery Point. Title to and possession of the Product meeting the Specifications and delivered according to this Agreement shall transfer from Producer to Gavilon at Delivery of the Product, and risk of loss or damage to the Product meeting the Specifications and delivered according to this Agreement shall transfer from Producer to Gavilon at Delivery of the Product. Until such times as specifically set forth in the prior sentence, Producer shall be deemed to be in control of, and in possession of, and shall have title to and risk of loss of and in the Product. Notwithstanding anything herein to the contrary, in the case of Nonconforming Product returned to Producer pursuant to Section 4.3 by Gavilon, the title and risk of loss to such Nonconforming Product shall pass to Producer promptly upon the written notice of rejection thereof by Gavilon (or Gavilon’s customer) provided to, and received by, Producer.

8.2 Responsibility for Product. Gavilon shall have no responsibility or liability with respect to any Product delivered under this Agreement until Delivery. Without prejudice to Gavilon’s right to reject Nonconforming Product as set forth in Section 4.3 and without affecting Producer’s liability for the Delivery of Nonconforming Product, Producer shall have no responsibility or liability with respect to the Product after Delivery or on account of anything which may be done or happen to arise with respect to such Product after such Delivery except as may otherwise be expressly provided for herein.

Article 9

FORWARD MARKET SERVICES

9.1 Services. During the Term and for no additional cost to the Producer, Gavilon will (i) review Product positions and current market conditions relating to purchases of Product, (ii) provide basis quotes, index quotes and price quotes for nearby and forward markets on an as needed and requested by Producer basis if available in the market, and (iii) provide Producer with daily mark-to-market position reporting for all fixed price and open positions for the activities at the Plants, each for the purpose of supporting Producer’s risk management policies (the “ Forward Market Services ”).

such strategies by it, are and will be made solely by Producer and are the sole responsibility of Producer. Except for fraud or willful misconduct by Gavilon, Gavilon is not responsible for any losses, liabilities, costs, or expenses incurred by Producer or entitled to any gains of Producer, resulting from any Forward Market Services supplied by Gavilon. EXCEPT FOR FRAUD OR WILLFUL MISCONDUCT BY A PARTY, IN NO EVENT SHALL GAVILON OR PRODUCER BE LIABLE TO THE OTHER PARTY FOR ANY DAMAGES OF ANY NATURE, INCLUDING BUT NOT LIMITED TO, INDIRECT, CONSEQUENTIAL, PUNITIVE, OR SPECIAL DAMAGES, LOSS OF BUSINESS EXPECTATIONS OR PROFITS OR BUSINESS INTERRUPTIONS, ARISING IN ANY WAY OUT OF THE PROVISION OF THE FORWARD MARKET SERVICES.

Article 10

CONFIDENTIALITY

10.1 Confidential Information. For purposes of this Agreement, the term “ Confidential Information ” shall mean any information which is disclosed by one Party to the other pursuant to this Agreement and which is oral, written, graphic, machine readable or other tangible form, whether or not marked or identified as confidential or proprietary. Confidential Information shall not include any information which is (a) already known to the recipient, (b) already in the public domain, (c) lawfully disclosed to it by a third party, or (d) legally required to be disclosed by the recipient.

10.2 Producer Nondisclosure. Producer acknowledges that, by reason of this Agreement, it may become privy to Confidential Information belonging to Gavilon. With the exception of its investors, legal advisors, financial advisors, accountants and/or lenders, their agents, representatives, or employees (hereinafter “Producer’s Parties”), Producer shall not, without the prior written consent of Gavilon, or except as otherwise required by law, disclose to any third parties or use for Producer’s own benefit any Gavilon Confidential Information, except for the intended use pursuant to this Agreement. Producer shall inform any of Producer’s Parties and any consented-to third parties to whom Producer intends to disclose Confidential Information of the confidential nature of such Confidential Information and shall ensure that such persons are bound by confidentiality obligations similar to those set forth herein. The confidentiality obligations hereunder shall survive until the later of any expiration or termination of this Agreement and the other Transaction Agreements for a period of two (2) years thereafter. Notwithstanding the foregoing, Producer may disclose the provisions of this Agreement to Producer’s Parties provided such parties have agreed in writing to be bound by the confidentiality obligations of this Article 10.

10.3 Gavilon Nondisclosure. Gavilon acknowledges that, by reason of this Agreement, it may become privy to Confidential Information belonging to Producer. With the exception of its investors, legal advisors, financial advisors, accountants and/or lenders, their agents, representatives, or employees (hereinafter “Gavilon Parties”), Gavilon shall not, without the prior written consent of Producer, or except as otherwise required by law, disclose to any third parties or use for Gavilon’s own benefit any Producer Confidential Information, except for the intended use pursuant to this Agreement. Gavilon shall inform any of Gavilon’s Parties and any consented-to third parties to whom Gavilon intends to disclose Confidential Information of the confidential nature of such Confidential Information and shall ensure that such persons are bound by confidentiality obligations similar to those set forth herein. The confidentiality obligations hereunder shall survive until the later of any expiration or termination of this Agreement and the other Transaction Agreements for a period of two (2) years thereafter. Notwithstanding the foregoing, Gavilon may disclose the provisions of this Agreement to Gavilon’s Parties provided such parties have agreed in writing to be bound by the confidentiality obligations of this Article 10.

Article 11

FORCE MAJEURE

11.1 Force Majeure. In the event either Party hereto is rendered unable by reason of Force Majeure to carry out its obligations under this Agreement, upon such Party giving written notice of such Force Majeure to the other Party as soon as possible after the occurrence of the cause relied on, the obligations of the Party giving such notice, so far as they are affected by Force Majeure, shall (except as otherwise provided in Article 13) be suspended during the continuance of any inability so caused, but for no longer period, and such cause shall, so far as reasonably possible, be remedied with all reasonable dispatch.

11.2 Definition of Force Majeure. The term “ Force Majeure , ” as used in this Agreement, shall mean any cause not reasonably within the control of the Party claiming suspension and which, by the exercise of commercially reasonable efforts, such Party is unable to prevent or overcome. Such term shall include, but not be limited to: acts of God, acts of public enemy (including terrorism), wars, blockades, insurrections, riots, epidemics, landslides, lightning, earthquakes, fires, floods, tornadoes, storms, washouts or other inclement weather resulting in a delay of the movement, loading or off-loading of Transport Carriers, or the inability of Producer or Gavilon to sell or resell the Product due to governmental action or embargo, all of which shall be beyond the reasonable control of the Party claiming Force Majeure.

11.3 Sale of Product Upon Gavilon Claim of Force Majeure. If Gavilon is the Party claiming Force Majeure, Producer may, upon written notice to Gavilon, sell the Product to third-parties during the duration of the Force Majeure event, but only to the extent of Gavilon’s inability to perform or Gavilon’s delay in performance of this Agreement. Gavilon shall not be entitled to any Fees for Product sold by Producer during such Force Majeure time period. The sole remedy of Producer during any Force Majeure event claimed by Gavilon shall be for Producer to directly sell the applicable Product to third parties during the duration of the Force Majeure event.

Article 12

INDEMNITY AND LIMITATIONS ON LIABILITY

12.1 Indemnification by Producer. Except as may otherwise be provided in this Agreement, Producer shall indemnify, defend and hold harmless Gavilon, its affiliates and their respective officers, directors, employees, agents, members, managers, shareholders and representatives (collectively “Gavilon Indemnitees”) from and against any and all claims, liabilities, actions, losses, damages, fines, penalties, costs and expenses including reasonable attorneys’ fees (collectively “Damages”) actually suffered by the Gavilon Indemnitees resulting from: (x) the gross negligence or willful misconduct of Producer, its operating subsidiaries, or any of their officers, directors, employees, agents, representatives and contractors; or (y) any breach of the Transaction Agreements by Producer.

12.2 Indemnification by Gavilon. Except as may otherwise be provided in this Agreement, Gavilon shall indemnify, defend and hold harmless Producer, its affiliates and their respective officers, directors, employees, agents, members, managers, shareholders and representatives (collectively “Producer Indemnitees”) from and against any and all Damages actually suffered by the Producer Indemnitees resulting from: (x) the gross negligence or willful misconduct of Gavilon, its operating subsidiaries, or any of their officers, directors, employees, agents, representatives and contractors hereunder; or (y) any breach of the Transaction Agreements by Gavilon.

12.3 Limitation of Liability. IN NO EVENT SHALL PRODUCER OR GAVILON BE LIABLE TO THE OTHER PARTY FOR ANY INDIRECT, CONSEQUENTIAL, PUNITIVE, EXEMPLARY, OR SPECIAL DAMAGES, LOSS OF BUSINESS EXPECTATIONS OR LOST PROFITS OR BUSINESS OR PLANT INTERRUPTIONS OR SHUT-DOWN COSTS ARISING IN ANY WAY OUT OF THIS AGREEMENT OR ANY BREACH OF THIS AGREEMENT. Under no circumstances (other than for willful misconduct or fraud) will either Party be liable to the other for damages for breach that arise under this Agreement and exceed the total amount of $1,000,000; provided, however, that such limitations shall not apply with respect to (a) the payment by Gavilon for Product received hereunder, (b) the obligation of Producer to reimburse Gavilon for payments in respect of Nonconforming Product, (c) third-party claims involving personal injury, property damage or breach, or (d) damages covered by any insurance. In the event that damages exceed such limitation, the sole remedy of the damaged Party with respect to such excess damages shall be to terminate this Agreement.

Article 13

DEFAULT AND TERMINATION

13.1 Event of Default. An “ Event of Default ” shall mean with respect to a Party, the occurrence of any of the following events:

13.1.1

The failure to make, when due, any payment required pursuant to this Agreement;

13.1.2

Any representation or warranty made by such Party herein is false or misleading in any material respect when made or when deemed made;

13.1.3

The failure to perform any material covenant, condition, or obligation set forth in this Agreement;

13.1.4

Either Party directly or indirectly, including by operation of law, transfers, assigns, sells, or disposes of all or substantially all of its assets or any rights or obligations under this Agreement, without the prior written consent of the other Party, which shall not be unreasonably withheld, except to the extent such transfer, assignment, sale or disposition is otherwise specifically permitted by clause (ii) of Section 15.2 of this Agreement;

13.1.5

Any Party herein shall (i) become subject to any foreclosure proceeding by such Party’s primary lender or other material creditor(s), or (ii) become insolvent, or shall suffer or consent to or apply for the appointment of a receiver, trustee, custodian or liquidator of itself or any of its property, or shall generally fail to pay its debts as they become due, or shall make a general assignment for the benefit of creditors; any Party hereunder shall file a voluntary petition in bankruptcy, or seek reorganization, in order to effect a plan or other arrangement with creditors or any other relief under the Bankruptcy Code, Title 11 of the United States Code, as amended or recodified from time to time, or under any state or federal law granting relief to debtors (collectively “ Bankruptcy ”); or

13.1.6

Any Party herein shall default on any payment obligation with such Party’s primary lender or other material creditor(s), or such other Party has received notice of acceleration or demand for payment from such Party’s primary lender or any other material creditor(s), and such payment obligation default is not cured or the primary lender or material creditor does not forbear such payment obligation default, acceleration or demand for payment within ten (10) days following such default or notice.

13.2 Right to Cure. If an Event of Default is not cured within fifteen (15) days (or two (2) Business Days with respect to clause 13.1.1) after receipt of a notice thereof from the non-defaulting Party, the non-defaulting Party may, at any time after the applicable cure period, terminate this Agreement by written notice. Notwithstanding the foregoing provision, no cure period shall apply to Bankruptcy and Producer or Gavilon may, upon the occurrence of Bankruptcy of the other Party, immediately suspend further performance under this Agreement, with or without giving notice of such default or notice of termination.

13.3 Non-Waiver of Future Default. No waiver by either Party of any Event of Default by the other Party in the performance of any of the provisions of this Agreement or any other Transaction Agreement will operate or be construed as a waiver of any other or future default or defaults, whether of a like or of a different character.

13.4 Cross Default. The occurrence and continuance of an Event of Default under any other Transaction Agreement shall constitute, at the election of the non-defaulting Party, in its sole and absolute discretion, an Event of Default under this Agreement or any of the other Transaction Agreements (together the “ Cross Default ”). A waiver of a Cross Default by the non-defaulting Party pursuant to this Section 13.4 shall not operate or be construed as a waiver of any other Event of Default or Cross Default.

13.5 Termination for Force Majeure. In the event that Force Majeure shall continue for a period of ninety (90) days from the date the Party claiming relief due to Force Majeure gives the other Party notice thereof, the Party not claiming such relief shall have the right to terminate this Agreement by furnishing written notice to the Party claiming Force Majeure relief, with termination effective upon the expiration date of such ninety (90) day period. Upon such termination, each Party shall be relieved from its respective obligations, except for obligations for payment of monetary sums which arose prior to the event of Force Majeure and obligations pursuant to Article 10 and Section 13.6 herein.

13.6 Rights and Obligations on Termination or Default. Upon termination of, or default under, this Agreement:

13.6.1

Any rights of Gavilon or Producer to payments accrued through termination of this Agreement shall remain in effect and, unless otherwise specified herein, all payments and monetary obligations of the respective Parties required pursuant to this Agreement shall be made pursuant to this Agreement.

13.6.2

In addition to other remedies available, if Producer defaults in Producer’s obligation to deliver Product under Confirmation, then Gavilon may, but shall not be obligated to, “cover” by purchasing Product from third parties. Producer shall pay to Gavilon the amount, if any, by which the cost of such third-party product including all reasonable costs and expenses associated with the purchase of product from third parties plus the Fee for such amounts of product purchased, exceeds the Purchase Price of Product requiring “cover.” Payments due and owing under this Section 13.6.2 shall be made pursuant to this Agreement.

13.6.3

In addition to other remedies available, if Gavilon defaults in Gavilon’s obligation to purchase Product under any Confirmation, then Producer may, but shall not be obligated to, “cover” by selling its Product to third parties. Gavilon shall pay to Producer the amount, if any, by which the Purchase Price of such Product plus other reasonable costs and expenses associated with Producer’s sale of Product to third parties exceeds the net price to such third party. Payments due and owing under this Section 13.6.3 shall be made pursuant to this Agreement. In the event that Gavilon fails to purchase all of the Product included in the Production Forecast or otherwise actually produced by Producer, then Producer may sell such Product not purchased by Gavilon to third-parties but only to the extent of Gavilon’s failure to purchase such Product and without any liability to Gavilon hereunder.

13.7 Cumulative Rights and Remedies. The rights and remedies under this Article 13 are cumulative and not exclusive. Upon default (whether or not an Event of Default) or termination, the non-defaulting Party shall additionally have such other and further rights as may be provided at law or in equity, including all rights of set off as contained in this Agreement.

Article 14

INSURANCE

14.1 Insurance Requirements . During the Term of this Agreement and for one (1) year thereafter, Producer and Gavilon shall be required to purchase, maintain and provide proof (via Certificate of Insurance) of the insurance set forth on Exhibit C .

Article 15

MISCELLANEOUS

15.1 No Press Releases or Public Announcements. Except as otherwise mandated by applicable law, no Party may issue, or otherwise permit to be issued, any press release or other public announcement relating to the subject matter or existence of this Agreement without the prior written approval of the other Party, which approval may be withheld in such Party’s sole discretion. Notwithstanding anything herein contained to the contrary, Producer may file and release any and all information it is required to file, as reasonably determined by Producer, to comply with its securities filing and reporting requirements.

15.2 Assignment. Gavilon may not assign this Agreement without the consent of Producer except that Gavilon may, without the consent of Producer: (i) transfer, sell, pledge, encumber or assign this Agreement, including the revenues or proceeds hereof, in connection with any financing arrangement of Gavilon; (ii) transfer or assign this Agreement to an affiliate of Gavilon; and (iii) transfer or assign this Agreement in connection with a Gavilon Change of Control. Any assignee or transferee of Gavilon shall agree to be bound by the terms and conditions of the Transaction Agreements. Producer may not assign this Agreement without the consent of Gavilon except that Producer may, without the consent of Gavilon: transfer, sell, pledge, encumber or assign this Agreement, including the revenues or proceeds hereof, in connection with any financing arrangement of Producer. In the event of a Producer Change of Control, and subject to Producer’s termination rights under Section 2.1, Producer shall transfer

or assign this Agreement to the purchaser of the Plant and require the purchaser to assume all of the Producer’s obligations hereunder, provided that such purchaser is reasonably acceptable to Gavilon and that all other Transaction Agreements are similarly transferred or assigned in accordance with their terms. Each Party will work in good faith as reasonably necessary to support, assist and cooperate with any allowed transfer or assignment by the other Party.

15.3 Records. Producer and Gavilon will each establish and maintain at all times, true and accurate books, records and accounts relating to their own transactions under this Agreement in accordance with generally accepted accounting principles applied consistently from year to year in accordance with good industry practices. These books, records and accounts will be preserved by the applicable Party for a period of at least one (1) year after the expiration of the term of this Agreement.

15.4 Audit of Records. Upon five (5) Business Days notice and during normal business hours, each Party or its designated auditor has the right to inspect or audit the books, records and accounts of the other Party relating solely to the transactions in this Agreement, provided the right to inspect or audit shall be limited to two (2) calendar years following the completion of any delivery of Product. Each Party’s audit rights as set forth in this Section 15.4 shall survive the termination of this Agreement for a period of two (2) years following such termination. Any error or discrepancy detected which has led to an overpayment or an underpayment between the Parties shall be corrected by an appropriate balancing payment to the underpaid Party or by a refund by the overpaid Party.

15.5

Dispute Resolution.

15.5.1

Dispute Notice. The Parties shall make a diligent, good faith attempt to resolve all disputes before either Party commences arbitration with respect to the subject matter of any dispute. If the representatives of the Parties are unable to resolve a dispute within forty five (45) days after either Party gives written notice to the other of a dispute, either Party may, by sending a dispute notice to the other Party, submit the dispute to binding arbitration in accordance with the Governing Body Arbitration Rules, except as such Governing Body Arbitration Rules may be modified by this Agreement.

15.5.2

Appointment of Arbitrators. An arbitration committee shall be appointed pursuant to the Governing Body Arbitration Rules unless the Parties otherwise agree to some other method of selecting one or more arbitrators.

15.5.3

Location. The site of the arbitration shall be determined by the Governing Body, unless otherwise agreed by the Parties.

15.5.4

Diligence; Remedies. The Parties shall diligently and expeditiously proceed with arbitration. The arbitrator(s) shall decide the dispute by majority of the arbitrators (if applicable). The arbitrator(s) shall be instructed to render a written decision within forty five (45) days after the conclusion of the hearing or the filing of such briefs as may be authorized by the arbitrator(s), subject to any reasonable delay due to unforeseen circumstances. Except to the extent the Parties’ remedies may be limited by the terms of this Agreement, the arbitrator(s) shall be empowered to award any remedy available under the laws of the State of Nebraska including, but not limited to, monetary damages and specific performance. The arbitrator(s) shall not have the power to

amend or add to this Agreement. The award of the arbitrator(s) shall be in writing and shall include reasons for such award and shall be signed by the arbitrator(s). Any award rendered shall be final and binding. Judgment rendered by the arbitrator(s) may be entered in any court having jurisdiction thereof.

15.5.5

Costs of Arbitration. The costs of such arbitration shall be determined by and allocated between the Parties by the arbitrator(s) in their award.

15.5.6

Independent Agreement. This Section 15.5 constitutes an independent contract between the Parties to, pursuant to the Governing Body Arbitration Rules (except as said Governing Body Arbitration Rules are modified by the express terms of this Agreement), arbitrate all disputes between the Parties related to this Agreement, including, without limitation, disputes regarding the formation of contract(s) and whether either Party is entitled to quasi-contractual or quantum merit recovery from the other Party.

15.5.7

Continuation of Performance. Unless otherwise agreed in writing or as otherwise set forth in this Agreement, the Parties shall each continue to perform their respective obligations hereunder during any proceeding by the Parties in accordance with this Section 15.5.

15.6 Inurement. This Agreement will inure to the benefit of and be binding upon the respective successors and permitted assigns of the Parties, and Producer shall cause the same to be assumed by and to be binding upon any successor owner or operator of the Plants, provided that such successor or assign is reasonably acceptable to Gavilon.

15.7 Entire Agreement. This Agreement, together with the other Transaction Agreements constitutes the entire Agreement between the Parties with respect to the subject matter contained herein and any and all previous agreements, written or oral, express or implied, between the Parties or on their behalf relating to the matters contained herein shall be given no effect. As a condition to entering into this Agreement, the Parties acknowledge that they must also enter into the other Transaction Agreements as partial consideration for this Agreement.

15.8 Amendments. There will be no modification of the terms and provisions hereof except by the mutual agreement in writing signed by the Parties. Any attempt to so modify this Agreement in the absence of such writing signed by the Parties shall be considered void and of no effect.

15.9 Governing Law. This Agreement will be interpreted, construed and enforced in accordance with the procedural, substantive and other laws of the State of Nebraska without giving effect to principles and provisions thereof relating to conflict or choice of law even though one or more of the Parties is now or may do business in or become a resident of a different state. Subject to Section 15.5, all disputes arising out of this Agreement shall be resolved exclusively by state or federal courts located in Omaha, Nebraska, and each of the Parties waives any objection that it may have to bring an action in any such court.

15.10

Setoff.

15.10.1

In addition to, and without limitation of, any rights hereunder, if Producer becomes insolvent, however evidenced, or upon any Event of Default on the part of Producer, and Producer fails to cure the Event of Default as permitted by Section 13.2, within the applicable period specified therein, then any and all amounts due and owing by Producer under this Agreement, and any other Transaction Agreement may be applied by Gavilon toward the payment of amounts due and owing to Producer under this Agreement, and any other Transaction Agreement. This right of setoff shall be without prejudice and in addition to any right of setoff, net income, recoupment, a combination of accounts, lien, charge or the right to which Gavilon is at any time otherwise entitled (whether by operation of law, by contract or otherwise).

15.10.2

In addition to, and without limitation of, any rights hereunder, if Gavilon becomes insolvent, however evidenced, or upon any Event of Default on the part of Gavilon, and Gavilon fails to cure the Event of Default as permitted by Section 13.2, within the applicable period specified therein, then any and all amounts due and owing by Gavilon under this Agreement, and any other Transaction Agreement may be applied by Producer toward the payment of amounts due and owing to Gavilon under this Agreement, and any other Transaction Agreement. This right of setoff shall be without prejudice and in addition to any right of setoff, net income, recoupment, a combination of accounts, lien, charge or the right to which Producer is at any time otherwise entitled (whether by operation of law, by contract or otherwise).

15.11 Forward Contract/Forward Contract Merchants . The Parties agree that each of them is a forward contract merchant as set forth in 11 U.S.C. §101(26). The Parties also agree that this Agreement is a forward contract as defined in 11 U.S.C. §101(25). The payments and transfers described herein shall constitute “Settlement Payments” or “Margin Payments” as set forth in 11 U.S.C. §§101(51A) and (38).

15.12 Compliance with Laws. This Agreement and the respective obligations of the Parties hereunder are subject to present and future valid laws and valid orders, rules and regulations of duly constituted authorities having jurisdiction.

15.13 No Partnership; Relationship . This Agreement shall not create or be construed to create in any respect a partnership or any agency or joint venture relationship between the Parties. The relationship of Gavilon and Producer established by this Agreement is that of independent contractors, and nothing contained in this Agreement shall be construed: to give either Party the power to unilaterally direct and control the day-to-day activities of the other or to be considered an agent of the other; to constitute the Parties as partners, joint ventures, co-owners or otherwise; or to allow either Party to create or assume any obligation on behalf of the other Party for any purpose whatsoever. Except as otherwise provided herein, nothing contained in this Agreement shall be construed as conferring any right or benefit on a person not a Party to this Agreement.

15.14 Notice Addresses. Except as specifically otherwise provided herein, any notice or other written matter required or permitted to be given hereunder by one Party to the other Party pursuant to the terms and conditions of this Agreement, shall be deemed to be sufficiently given if delivered by hand or sent by certified mail, nationally recognized delivery service or by fax, and addressed as follows:


		If to Gavilon:		Gavilon, LLC Eleven ConAgra Drive Omaha, NE 68102-5011 Attn: Senior Director – Renewable Fuels Fax: (402) 221-0228 Phone: (402) 889-4300

		With a copy to:		Gavilon, LLC Eleven ConAgra Drive, STE 11-160 Omaha, NE 68102 Fax: (402) 221-0228 Phone: (402) 889-4027 Attn: Legal Department

		If to Producer:		Advanced BioEnergy, LLC 8000 Norman Center Drive, Suite 610 Bloomington, MN 55437 Fax: 763-226-2725 Phone: 763-226-2709 Attn: Richard Peterson

		With a copy to:		Lindquist & Vennum, P.L.L.P. 4200 IDS Center 80 South Eighth Street Minneapolis, MN 55402 Fax: 612-371-3207 Phone: 612-371-3285 Attn: Stanley J. Duran

Where this Agreement indicates that notice or information may be provided electronically or by email, such notice or information shall be deemed provided if sent to the email address of such Party indicated above and shall be effective as of the date sent if sent prior to 5:00 p.m. Central Time on a Business Day, otherwise effective as of the next Business Day. Either Party may give notice to the other Party (in the manner herein provided) of a change in its address for notice. Any notice or other written matter shall be deemed to have been given and received: if delivered by hand, certified mail or delivery service on the date of delivery or the date delivery is refused; and, if sent by fax before or during normal business hours, on the Business Day of the sending of the notice and the machine-generated evidence of receipt or if after normal business hours, on the Business Day following the sending of the notice and the machine generated evidence of receipt.

15.15 Costs to be Borne by Each Party. Producer and Gavilon shall each pay their own costs and expenses incurred in the negotiation, preparation and execution of this Agreement and of all documents referred to herein.

electronic transfer, and the signature as so transmitted shall be as binding upon the executing Party as its original signature, without the necessity of the recipient Party to establish original execution or the existence of such original signature or the document to which affixed, all of which shall be deemed waived.

15.17 Severability. Any provision of this Agreement which is or becomes prohibited or unenforceable in any jurisdiction shall not invalidate or impair the remaining provisions of this Agreement, and the remaining terms of this Agreement shall continue in full force and effect or, if allowed by the law of the applicable jurisdiction, it shall be amended so as to most closely conform to the original intent of this Agreement without the offending provision, and as so amended shall continue in full force and effect.

15.18 Headings; Interpretations . The article and section headings used herein are for convenience of reference only and shall not affect the construction or interpretation of this Agreement. Unless the context of this Agreement otherwise requires, (i) words of any gender shall be deemed to include each other gender; (ii) words using the singular or plural number shall also include the plural or singular number, respectively; and (iii) the terms “hereof,” “herein,” “hereby,” “hereto,” and derivative or similar words shall refer to this entire Agreement.

15.19 Waiver. No delay or omission in the exercise of any right, power or remedy hereunder shall impair such right, power or remedy or be construed to be a waiver of any default or acquiescence therein.

15.20 Observer Status . Upon reasonable prior invitation made by Producer to Gavilon, Gavilon may provide an observer to the Producer’s Risk Management Committee meetings.

15.21 Interpretation . This Agreement shall not be interpreted against the Party drafting or causing the drafting of this Agreement. All Parties hereto have participated in the preparation of this Agreement. In the event of an inconsistency between or among the following documents entered into by the Parties, the following order of precedent shall govern:

15.21.1

This Agreement; and

15.21.2

A Confirmation.

15.22 Incorporation of Exhibits/Schedules . The exhibits and schedules attached hereto form an integral part of this Agreement and are hereby incorporated herein by reference.

[The remainder of this page intentionally left blank; signature page follows.]

IN WITNESS WHEREOF the Parties have executed this Agreement by their respective proper signing officers as of the Effective Date.


GAVILON, LLC

By:		/s/ illegible
Its: VP Trade Operations
Date: May 4, 2012


ABE SOUTH DAKOTA, LLC

By:		/s/ Richard Peterson
Its: CEO
Date: May 4, 2012

Ethanol Marketing Agreement

Signature Page

EXHIBIT A

ETHANOL SPECIFICATIONS


Specification Points	Test Method	Shipments	Deliveries ¹
Apparent Proof, 60 ^o F Or Density, 60 ^o F	Hydrometer ASTM D-4052	Report Report

Water, Volume %, Maximum	ASTM E-203 or E-1064	1.00

Ethanol, Volume %, Minimum	ASTM D-5501	93.5	93.5

Methanol, Volume%, Maximum	ASTM D-5501	0.5

Sulphur, ppm (wt/wt), Maximum	ASTM D5453	10

Solvent Washed Gum, mg/100mL Maximum	ASTM D-381 Air Jet Method	5

Potential Sulfate, mass ppm Maximum	ASTM D7319	4

Chloride, mg/L Maximum	ASTM D7319	32

Copper, mg/L Maximum	ASTM D-1688 Method A,	0.08
	Modified per D-4806

Acidity (as acetic acid), Mass % Maximum	ASTM D-1613	0.007

pHe	ASTM D-6423
Minimum		6.5
Maximum		9.0

Appearance @ 60 ^o F	Visual Examination	Visibly free of suspended or precipitated contaminants. Must be clear and bright.

Denaturant Content and Type ² Volume%		2

Corrosion Inhibitor Additive,	Minimum treat rate	Vendor	Additive
One of the following is required:	20 lbs./1000 bbls.	Octel	DCI-11
	20 lbs./1000 bbls.	G. E. Betz	Endcor GCC9711
	20 lbs./1000 bbls.	Petrolite	Tolad 3222
	20 lbs./1000 bbls.	Nalco	5403
	20 lbs./1000 bbls.	Betz	ACN 13
	20 lbs./1000 bbls.	Midcontinental	MCC5011E
	13 lbs./1000 bbls.	Midcontinental	MCC5011PHE
	13 lbs./1000 bbls.	Petrolite	Tolad 3224
	13 lbs./1000 bbls.	US Water Services	Corrpro 654
	15 lbs./1000 bbls.	Nalco	5624A
	13 lbs./1000 bbls.	US Water Services	Corrpro 656

¹	Delivered products meets all applicable requirements at time and place of delivery.

²	Only approved denaturants listed in D4806. The denaturant range must be within the guidelines provided for in IRS Notice 2009.06, which is 1.96% to no more than 2.5%.

Exhibit A

EXHIBIT B

CONFIRMATION

CONFIRMATION OF PURCHASE AND SALE TRANSACTION

This agreement shall confirm the agreement reached on , 20 between, Gavilon, LLC (“ Gavilon ”) and ABE South Dakota, LLC (“ Counterparty ”) regarding the sale and purchase of under the terms and conditions as follows:


PRODUCER:

BUYER:

COMMODITY:

TYPE / QUALITY:

CONTRACT QUANTITY:

CONTRACT PRICE:

DELIVERY POINT(S):

PERIOD OF DELIVERY:					To

OTHER TERMS:

This Confirmation is being provided pursuant to and in accordance with the Ethanol Marketing Agreement dated as of , 2012 (the “ Master Agreement ”) between Gavilon and Counterparty, and constitutes part of and is subject to all of the terms and provisions of such Master Agreement. Terms used but not herein defined shall have the meanings ascribed to them in the Master Agreement.

Please confirm that the terms stated herein accurately reflect the agreement between Counterparty and Gavilon by returning an executed copy of this Confirmation by facsimile to Gavilon. If Counterparty does not execute and return this Confirmation by 5:00 p.m. Central Standard (or Daylight) Time on the second (2 ^nd ) Business Day following Counterparty receipt hereof, Counterparty will be deemed to have accepted and agreed to all of the terms included herein, including the terms and provisions of the Master Agreement.


“Gavilon” GAVILON, LLC						“Counterparty” ABE South Dakota, LLC

By:						By:
Name:						Name:
Title:						Title:
Date:						Date:

Exhibit B

EXHIBIT C

INSURANCE COVERAGES

Commercial General Liability Insurance—$1,000,000 per occurrence/$2,000,000 aggregate

Policy shall include coverage for liability resulting from Premises/Operations, Products and Completed Operations, Blanket and Contractual Liability. Policy shall also include coverage for Broad Form Property Damage, including explosion, collapse and underground hazards. Such insurance shall be on an occurrence basis.

Environmental Pollution Liability Insurance—$1,000,000 per occurrence/$2,000,000 aggregate

Policy shall include coverage for bodily injury or property damage arising from the handling, storage, processing, discharge or dispersion of pollutants on or about the Producer’s premises. Such insurance may be on an occurrence basis or claims-made basis.

Prior to the initial sale of Product and at all times during the Term of the Agreement, Producer and Gavilon shall carry insurance in accordance with the requirements described above. These requirements may be satisfied by issuance of separate policies or a combination of policies with umbrella/excess liability policies.

Producer and Gavilon shall also carry excess or umbrella liability insurance with limits of at least $4,000,000 per occurrence for bodily injury or property damage in excess of the limits afforded for general liability provided above.

Producer shall also carry the following insurance coverages:

Workers’ Compensation with statutory limits as required by the State of Minnesota. Employers liability with limits of $1 million per accident, $1 million disease—each employee and $1 million policy limits

All Risk Property insurance coverage for the Product and any grain which is located at the Plant and not part of the Product. All grain shall be insured for the full market value and property insurance coverage will include, but not be limited to, perils of wind, fire, lightning, flood, theft and infestation.

Producer and Gavilon shall provide notification to the respective party at least thirty (30) days prior to the effective date of any cancellation or change that would affect the insurance requirements described above or put them out of compliance of such policies. In the event that a Party receives notice that the other Party’s insurance shall be canceled, and in the event that the Party receiving notice does not receive a subsequent Certificate of Insurance showing that the other Party is in compliance with the insurance requirements set forth above, the Party receiving notice shall have the right to either (i) purchase insurance for the defaulting Party and set off all costs for such insurance in accordance with the terms of this Agreement, or (ii) terminate this Agreement.

Exhibit C

Exhibit 10.1.1

AMENDMENT NO. 1 TO

ETHANOL MARKETING AGREEMENT

ABE South Dakota, LLC

THIS AMENDMENT NO. 1 TO ETHANOL MARKETING AGREEMENT (the “ Amendment ”) is dated and made effective as of July 31, 2012 (the “ Effective Date ”), by and between ABE South Dakota, LLC, a Delaware limited liability company (“ Producer ”), and Gavilon, LLC , a Delaware limited liability company (“ Gavilon ”).

RECITALS

(a)

The Parties entered into that certain Ethanol Marketing Agreement dated May 4, 2012 (the “Agreement”); and

(b)

The Parties desire to amend the Agreement as set forth herein.

AGREEMENT

1. Definitions . Capitalized terms used in this Amendment, to the extent not otherwise defined, shall have the meanings set forth in the Agreement as amended hereby.

2. Amendments . The Agreement is amended as follows:

a) The definition of “Change in Control” shall be revised to include the following at the end thereof:

*	*indicates material has been omitted pursuant to a request for confidential treatment, and such material has been filed separately with the Securities and Exchange Commission* .

“or any other change in the ownership of the Plant to a party other than an affiliate of Producer, but excluding any change in ownership of Producer or the Plant (or any part thereof) resulting from any exercise of remedies by Portigon AG, New York Branch (f/k/a WestLB AG, New York Branch), as collateral agent (together with its successors in such capacity, the “Collateral Agent”) in connection with (or by any of the other senior secured parties referred to in) the Amended and Restated Senior Credit Agreement dated as of June 16, 2010, as amended, provided that any change in ownership of the Producer that results in any person or group (as such terms are used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934), directly or indirectly, having the ability to control the governing body of such Party, or any change in ownership of the Plants, in each case resulting from any exercise of remedies by the Collateral Agent shall be done in compliance with that certain Consent and Agreement, dated as of July 31, 2012, by and among Gavilon, Gavilon Ingredients, LLC, a Delaware limited liability company, Producer and the Collateral Agent (the “Consent and Agreement”).”

b) A new definition for “Letter of Credit” shall be added in Article 1 as follows:

“ Letter of Credit ” shall mean that certain irrevocable and non-transferable standby letter of credit posted by Producer’s parent company (Advanced BioEnergy, LLC, a Delaware limited liability company) for the benefit of Gavilon in the amount of $2,500,000.”

c) The first sentence of Section 2.1 is deleted in its entirety and replaced with the following:

“Unless terminated earlier according to its term, this Agreement shall be effective on August 1, 2012 (the “Commencement Date”), and shall continue until December 31, 2015 (the “Initial Term”), unless extended as set forth in Section 2.2.”

d) Section 2.1.3 is deleted in its entirety.

e) Section 4.2 is amended by deleting the phrase “the specifications of which shall be determined by Producer in its sole discretion”, and by inserting “(iii)” in front of the words “shall conform to the specifications set forth in Exhibit A”

f) Section 4.3 is amended by deleting the phrase “of determining” in the first sentence, and replacing it with the following phrase: “after an independent third party acceptable to the Parties determines, on the basis of the applicable samples of Product maintained by Producer pursuant to Section 4.2.4,”.

g) Section 5.5.11 shall be amended by deleting the “.” at the end of the first sentence and inserting the following phrase:

“, and providing Gavilon on a daily basis with notice of (i) any foreclosure proceedings against assets of Producer or (ii) defaults by Producer on any payment obligations to its primary lender or any other creditor(s), in either case in the aggregate amount of $100,000 or more.”

h) The following sentence shall be added after the first sentence of Section 6.2.1:

“For avoidance of doubt, the term “Purchase Price” (as defined in the previous sentence) refers to the amount prior to deducting the costs and Fees described in Section 6.2.1(a) and 6.2.1(b) of the previous sentence.”

i) The second to last sentence of Section 6.2.3 is deleted in its entirety and replaced with the following:

“If Gavilon elects not to match the Favorable Terms pursuant to this Section 6.2.3, Gavilon shall not receive any Fees on such third-party transaction but shall have the option to provide services for Logistics in regard to the third-party transaction at Gavilon’s then current rates, provided, however, that such third-party and Producer request Gavilon to provide such services for Logistics.”

j) Section 6.3.1(i) is deleted in its entirety and replaced with the following:

“(i) from August 1, 2012 through April 30, 2013, $. * per gallon of Product sold to Gavilon, and”

k) Section 6.5.1 is amended by inserting the phrase “and costs described in Section 6.2.1(a) and (b)” after the phrase “after deducting the applicable Fees”.

l) Section 10.2 is amended by inserting the word “and” on the fourth to last line of that Section between the words “Agreements” and “for.”

m) Section 10.3 is amended by inserting the word “and” on the fourth to the last line of that Section between the words “Agreements” and “for.”

n) The phrase appearing in Section 13.1.5 which reads “(i) become subject to any foreclosure proceeding by such Party’s primary lender or other material creditor(s), or (ii)” shall be deleted in its entirety and replaced with the following:

Gavilon’s property; or (y) in the case of Producer, become subject to a final, non-appealable foreclosure judgment, entered by a court of competent jurisdiction in favor of the Collateral Agent or any other material creditor of Producer that has a security interest in all or substantially all of the Producer’s property, with respect to (x) all or a material portion of the property of the Producer or (y) the equity interests in the Producer unless, upon the entry of such final, non-appealable judgment, (1) such creditor (which must be reasonably acceptable to Gavilon) or the Collateral Agent, as applicable (the “Agent”), (2) a designee of such Agent that is reasonably acceptable to Gavilon, or (3) a third party reasonably acceptable to Gavilon to which such Agent has assigned the Agreement (each person referred to in (1), (2) or (3), a “Substitute Owner”), agree(s) to substitute itself for the Producer under the Agreement, all in the same manner as required in Section 1(b) of the Consent and Agreement, or (ii).”

o) Section 13.1.6 shall be deleted in its entirety.

p) The following shall be added as new Section 13.8:

“ Open Contracts . If Producer shall become subject to any foreclosure proceeding or defaults on any payment obligation with, or receives notice of acceleration or demand for payment from, its primary lender or any other creditor(s) in the aggregate amount of $100,000 or more, and such foreclosure proceeding continues or such payment obligation default is not cured or the primary lender or other creditor(s) does not forbear such payment obligation default, acceleration or demand for payment within fourteen (14) days following the filing of such foreclosure proceeding or such default or notice, then Gavilon may: (i) close out any open contracts which are, in Gavilon’s sole discretion, no longer within a tolerance acceptable to Gavilon’s credit department; (ii) exercise its setoff rights under this Agreement to mitigate against any losses arising from closing out any such forward contracts; and (iii) notwithstanding any contrary terms set forth in Section 6.2.2, limit any future forward contracts to either spot contracts and/or thirty (30) days or less.”

q) Section 15.1 is amended by adding the following phrase at the end thereof:

“, provided that Producer shall first allow Gavilon to review any such information if it includes references to Gavilon or the Agreement.”

r) Section 15.2 is amended (i) by deleting the reference to “Gavilon Change of Control” and replacing it with a reference to “Change in Control of Gavilon” and (ii) by deleting the reference to “Producer Change of Control” and replacing it with a reference to “Change in Control of Producer”.

s) Section 15.2 (ii) is deleted in its entirety and replaced with the following:

“(ii) transfer or assign this Agreement to an affiliate of Gavilon provided such assignee is at least as creditworthy as Gavilon on the date hereof and provided further that such assignee agrees to execute a consent to assignment for the benefit of Producer’s lenders in substantially the form furnished by counsel for Producer’s lenders on May 30, 2008; and”

t) Section 15.4 is amended by inserting the word “and” on the fourth to last line of that Section between the words “Agreements” and “for.”

u) Section 15.10.1 is amended by adding the following phrase at the end of the first sentence:

“provided, however, Gavilon shall not have the right to offset any amounts owed under this Agreement from the Letter of Credit.”

v) The following shall be added as a new Section 15.10.3:

“15.10.3 In addition to, and without limitation of, any rights hereunder, if any foreclosure proceeding continues or any payment obligation default is not cured within the fourteen (14) day period as set forth in Section 13.8 above, then any and all amounts due and owing under this Agreement and under any other Transaction Agreement may be applied by Gavilon toward the payment of amounts due and owing to Producer under this Agreement and any other Transaction Agreement. This right of setoff shall be without prejudice and in addition to any right of setoff, net income, recoupment, a combination of accounts, lien, charge or the right to which Gavilon is at any time otherwise entitled (whether by operation of law, by contract or otherwise).”

w) Exhibit C is deleted in its entirety and replaced with the Exhibit C attached hereto.

3. Integration . The Agreement shall remain in full force and effect as herein amended.

[The Remainder of This Page Intentionally Left Blank; Signature Page Follows.]

IN WITNESS WHEREOF the Parties have executed this Amendment by their respective proper signing officers as of the Effective Date.


GAVILON, LLC

By:		/s/ illegible
Its:		VP Risk Control Officer
Date:		8/1/2012

ABE SOUTH DAKOTA, LLC

By:		/s/ Richard Peterson
Its:		CEO
Date:		7/31/12

EXHIBIT C

INSURANCE COVERAGES

Commercial General Liability Insurance - $1,000,000 per occurrence/$2,000,000 aggregate

Policy shall include coverage for liability resulting from Premises/Operations, Products and Completed Operations, and Contractual Liability. Policy shall also include coverage for Broad Form Property Damage, including explosion, collapse and underground hazards. Such insurance shall be on an occurrence basis.

Environmental Pollution Liability Insurance - $1,000,000 per occurrence/$2,000,000 aggregate

Producer and Gavilon shall also carry Workers’ Compensation with statutory limits as required by the applicable states in which each have employees. Employers liability with limits of $1 million per accident, $1 million disease – each employee and $1 million policy limits.

Producer shall also carry all Risk Property insurance coverage for the Product and any grain which is located at the Plant and not part of the Product. All grain shall be insured for the full market value and property insurance coverage will include, but not be limited to, perils of wind, fire, lightning, flood and theft.

Exhibit 10.2

DISTILLER’S GRAINS MARKETING AGREEMENT

ABE South Dakota, LLC

THIS DISTILLER’S GRAINS MARKETING AGREEMENT (the “ Agreement ”) is dated and made effective as of May 4, 2012 (the “ Effective Date ”), by and among ABE South Dakota, LLC, a Delaware limited liability company (“ Producer ”), and Gavilon Ingredients, LLC , a Delaware limited liability company (“ Gavilon ”).

RECITALS

(a)

Producer will produce dried distiller grains at its facility located in Aberdeen, South Dakota having a nameplate capacity of 50 million gallons (the “ Plant ”);

(b)

Gavilon is in the business of purchasing dried distiller grains and marketing and reselling same to third parties; and

(c)

Producer desires to deliver and sell to Gavilon, and Gavilon desires to purchase and take from Producer, the dried distiller grains output of the plant specified herein and Gavilon desires to provide certain related services to Producer on the terms and subject to the conditions contained in this Agreement and in the other Transaction Agreements.

AGREEMENT

Article 1

DEFINITIONS

1.1 “ Aberdeen Plant ” has the meaning provided for in the Recitals.

1.2 “ Actually Placed ” or “ Actual Placement ” means that such railcars have been delivered to and received by Producer at the Plant.

1.3 “ Agreement ” means this Distiller’s Grains Marketing Agreement and any exhibits or schedules attached hereto as the same may be amended, supplemented or amended and restated from time to time.

1.4 “Bankruptcy ” has the meaning provided for in Section 13.1.6.

*	*indicates material has been omitted pursuant to a request for confidential treatment, and such material has been filed separately with the Securities and Exchange Commission*

1.6 “ Central Time ” means the local time in Omaha, Nebraska at any relevant time, taking into account daylight saving time, if applicable.

1.8 “ Commencement Date ” has the meaning provided in Section 2.1.