Pacific Ethanol sets goal to reopen facility

By Kris Bevill | September 23, 2010
Posted Sept. 29, 2010

Pacific Ethanol Inc. is maneuvering to restart its 60 MMgy corn ethanol plant in Stockton, Calif., sometime this quarter. The company announced on Sept. 28 that it will purchase a 20 percent ownership in New PE Holdco LLC, the current owner of Pacific Ethanol's four facilities, for $23.3 million and expects the transaction to close no later than Oct. 22. The purchase will give Pacific Ethanol controlling ownership of New PE Holdco and allow it to regain controlling interest in its ethanol plants.

When the transaction is complete, Pacific Ethanol will once again control a 60 MMgy facility in Burley, Idaho, a 40 MMgy plant in Boardman, Ore., the 60 MMgy Stockton facility and a 40 MMgy plant in Madera, Calif. The plants in Idaho and Oregon are currently operating, according to Pacific Ethanol, but the California facilities have been idle for some time. Neil Koehler, Pacific Ethanol's president and CEO said the company is focused on an immediate plan to restart the Stockton plant in order to meet growing demand for ethanol and, specifically, California-produced ethanol. Paul Koehler, the company's vice president of corporate development, said the Madera plant will be reopened "in an ordered manner and as market conditions continue to permit."

As part of its strategy to fund the reacquisition of its plants, Pacific Ethanol has agreed to sell its 42 percent share in the 48 MMgy Front Range Energy LLC plant to the facility's majority owner for $18.5 million. The transaction is scheduled to close by Oct. 11.

"These transactions represent a significant step forward for Pacific Ethanol Inc. as we complete our restructuring and improve our balance sheet," said Neil Koehler. "We are reinvesting in the ownership of core assets at a time when plant valuations offer considerable upside potential, as evidenced by the price we received from the sale of our interest in Front Range. With our improved financial position, additional working capital, the integration of marketing asset management, and plant ownership, together with efficient operations, we are well positioned for profitable growth."

Separately, Pacific Ethanol recently signed a memorandum of understanding with Canadian cellulosic ethanol producer and technology developer Lignol Energy Corp. to explore integrating Lignol's technology at Pacific Ethanol's plants. Paul Koehler said the company looks forward to working with Lignol and developing the potential for second-generation ethanol integration at the facilities, however, testing has not yet commenced.