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Rentech Closes Alt-Energy Demo Unit

By Rich Smith – Feb 28, 2013 at 9:50PM

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Move could cut annual R&D costs by $10 million to $20 million.

On Thursday, Rentech (NYSEMKT: RTK) -- an alternative energy play that also happens to own majority interest in fertilizer maker Rentech Nitrogen Partners (NYSE: RNF) -- announced its intention to focus more on the business initiatives that make it money, and less on those that lose money.

In that vein, Rentech says it plans to close down and mothball its research and development (R&D) Product Demonstration Unit (PDU) in Commerce City, Col., eliminating "all related R&D activities" in the process. Rather than spend more money on unprofitable "new technologies," Rentech says it will refocus its efforts on "more immediate growth opportunities within the energy industry" -- businesses that offer "strong returns, with ready markets, and certainty of revenue."

Rentech has been spending between $20 million and $30 million a year on R&D in recent years. The company expects today's announced closures to cut that figure to about $10 million in 2013. One-time costs related to the closure, and the layoff of 65 employees and contractors, will cost the company $16 million -- part of which Rentech may recoup as it attempts to sell its PDU and the 450 acres of land in Natchez, MS that it occupies.

Rentech shares gained 3.4% on today's announcement, recently trading at $2.72.

Fool contributor Rich Smith has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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