Pacific Ethanol to acquire ownership in Nebraska grain elevator

By Erin Voegele | December 13, 2016

On Dec. 12, Pacific Ethanol Inc. announced it has entered an agreement with the Aurora Cooperative Elevator Co. Under the agreement, Pacific Ethanol will contribute its Aurora, Nebraska-based plant assets into a newly created company, Pacific Aurora LLC. Simultaneously, ACEC will contribute its Aurora West Grain Elevator, loop track, related land and other assets into PAL. Pacific Ethanol will sell a 14 percent interest in LAP to ACEC for $30 million. As a result of these transactions, Pacific Ethanol will own 74 percent of the combined ethanol production, grain elevator and rail facilities in Aurora, with ACEC owning the remaining 26 percent. To further strengthen its liquidity, Pacific Ethanol said PAL will obtain a five-year amortizing, revolving term loan of $30 million from CoBank secured by PAL’s assets.

The transaction was part of a larger announcement made by Pacific Ethanol that it is refinancing its $155.1 million principal term debt, due in September 2017, and expanding its business through several transactions.

In addition to the Aurora transaction, Pacific Ethanol said it will obtain a new five-year term amortizing loan from CoBank and First Farm Credit for $64 million, along with a revolving line of credit of $32 million secured by its Pekin, Illinois, assets.

Pacific Ethanol also said it will obtain $55 million from a three-year senior note offering secured by Pacific Ethanol’s ownership interest in its Western assets.

The company also announced plans to use the combined proceeds to repay the $155.1 million in outstanding principal and accrued and unpaid interest owned under the terms of its existing term loans. According to Pacific Ethanol, the debt refinancing reduces total debt outstanding by more than $12 million and reduces annual interest costs by more than $8 million. PAL will be a fully consolidated subsidiary of Pacific Ethanol, and is expected to reduce operating costs by more than $5 million annually. The company indicated excess proceeds are expected to strengthen Pacific Ethanol’s cash and working capital positions and will be used for general corporate purposes.

Finally, Pacific Ethanol, in connection with the refinancing, will increase Kinergy’s line of credit facility with Wells Fargo by $10 million, from $75 million to $85 million, to provide additional liquidity to Kinergy, its ethanol marketing subsidiary.

“In this series of agreements, we will accomplish a major milestone for the company by refinancing the Midwest plants’ term debt at favorable terms, strengthening our balance sheet and significantly lowering our cost of capital,” said Neil Koehler, president and CEO of Pacific Ethanol. “The expanded strategic relationship with the Aurora Cooperative will allow us to directly benefit from farmer ownership in our ethanol business, which has proven to be a winning combination over the years in the ethanol industry. These transactions will be immediately accretive to our shareholders and create new growth opportunities for Pacific Ethanol.”

“We are pleased and excited to deepen our relationship with Pacific Ethanol,” said Chris Vincent, president and CEO of ACEC. “We will be combining Aurora Cooperative's grain terminal and handling facility with both of Pacific Ethanol's adjacent bio-refineries. Our plan is to unify both entities’ operations to gain efficiencies and enhance performance. Aurora Cooperative will use its years of grain origination and operations experience combined with Pacific Ethanol's production expertise to greatly benefit Pacific Aurora, LLC. Bringing both companies’ resources together benefits our respective stockholders, and adds value and strength to our communities, the State of Nebraska and both the ethanol and grain industries.”