Pacific Ethanol to install Cellunators, expand sorghum use

By Susanne Retka Schill | January 22, 2013

Pacific Ethanol Inc. has contracted to install Edeniq Inc.’s Cellunator technology at its 60 MMgy Stockton, Calif., ethanol plant. “There’s not a huge amount of retrofitting and we should be able to have that online by the middle of the second quarter,” said Paul Koehler, vice president of business development.

“This initial phase is for using the Cellunator on corn grind, and finding ways to increase efficiencies in yield at our Stockton plant,” he explained. The Cellunator technology for corn grind exposes more surface area on starch granules for enzyme action with the goal of improving ethanol yield. Koehler added that they expect the technology to improve oil separation as well. Further down the road, the Edeniq agreement will allow the integration of proprietary enzymes for cellulosic ethanol production.

Pacific Ethanol is pursuing other avenues to improve its carbon-intensity rating. In the last half of the year, the company used grain sorghum for about 25-30 percent of its feedstock, Koehler said, sourced from both U.S. producers and a cargo imported from Argentina. The company also processed a trial run of sorghum for Chromatin Inc. A consortium of California ethanol producers are working with the seed company to encourage more sorghum acres in the Central Valley, he said.

The Cellunator will be the first of a number of efficiency improvements required before the Stockton facility can claim the coveted advanced biofuel credits, however, under the renewable fuels standard. The U.S. EPA pathway for grain sorghum as an advanced biofuel specifies the use of biogas and combined heat and power, neither of which the plant has installed and both requiring substantial capital investment.

Pacific Ethanol also announced Jan. 15 that it had closed on a transaction to improve its debt position and increase its ownership interest in the four plants it operates. Under the terms of the agreements, the company purchased $21.54 million of secured term debt of the Pacific Ethanol plants and extended the maturity date of the purchased term debt from June 2013 to June 2016. The transactions also extend the maturity of the Pacific Ethanol plants’ $10 million secured revolving credit facility from June 2013 to June 2015. The company also purchased an additional 13 percent ownership interest in New PE Holdco LLC, the entity that owns the Pacific Ethanol plants, for $1.3 million, bringing its equity ownership to 80 percent. To fund these transactions, the company issued $22.2 million of senior unsecured notes, and five-year warrants to purchase an aggregate of 25.6 million shares of the company’s common stock. Lazard Capital Markets LLC served as the sole placement agent in the transaction.

“It’s been quite a tribute to the teamwork among the investors, lenders and owners to make this happen,” Koeler said about the company’s progress since emerging from bankruptcy three years ago. “We’re very pleased that we’ve gone as far as we have. There’s always a bit more to do, but we see a clear pathway to continue to strengthen the operation of the plants and integrate that with the marketing company. We are focused on becoming the West Coast leader in producing low carbon fuels.”

Pacific Ethanol has three operating plants in Stockton, Calif.; Burley, Idaho; and Boardman, Ore., and one idled plant in Madera, Calif., for a total capacity of 200 MMgy.