High corn costs cut into Pacific Ethanol earnings

By Bryan Sims | November 03, 2008
Web exclusive posted Nov. 17, 2008 at 11:33 a.m. CST

Due to higher corn prices and suspended construction, Pacific Ethanol Inc. posted a net lost of $54.9 million in its third-quarter earnings report, compared with a $4.8 million loss it accrued the same quarter a year ago.

The Sacramento, Calif.-based ethanol producer said higher corn prices and an impairment charge of $40.9 million for suspending construction on its Imperial Valley project near Calipatria, Calif. widened its loss.

When the company reported its third quarter loss on Nov. 10, it initially reported a charge of $26.6 million because of construction liabilities for the unfinished plant. The new, noncash impairment charge of $40.9 million reflects the $43.8 million value of the unfinished plant's land and equipment, minus future cash flows. The change could result in future noncash gains if Pacific Ethanol is released from the construction liabilities.

Average corn prices for the company increased 54 percent year over year, according to the company's earnings statement.

With the opening of its 50 MMgy Stockton, Calif., ethanol plant, Pacific Ethanol now has five operating facilities in the western United States with a total production capacity of 220 MMgy.