Pacific Ethanol to change focus, sell or repurpose idle plants

By Erin Voegele | October 26, 2020

Pacific Ethanol Inc. on Oct. 26 announced a strategic realignment to focus on specialty alcohols and essential ingredients. As part of that effort the company said it will sell or repurpose its three idle ethanol plants and change its name.

“Our company was founded to supply low carbon renewable fuel for the transportation market. While we will continue to participate in that market, transportation fuels are no longer our primary focus,” said Mike Kandris, CEO of Pacific Ethanol. “Beginning with our acquisition of Illinois Corn Processing, LLC in 2017 and continuing with our ongoing expansion of specialty alcohol production begun earlier this year, we have been making investments to transition our business from focusing on fuels to focusing on specialty alcohols and essential ingredients used in consumer products, including alcoholic beverages, personal care products, sanitizers, cleaners and pharmaceuticals. We recently obtained ISO 9001 certification for our largest specialty alcohols production facility, and we are pursuing additional qualifications that will enable us to supply specialty alcohols used in a wider range of consumer products. We believe focusing on products for these markets aligns us with strong secular growth trends that will enable us to deliver greater and more consistent profitability for our shareholders.”

According to Pacific Ethanol, the company’s 2019 production mix was approximately 85 percent fuel grade ethanol and 15 percent specialty alcohols. Over the past nine months, that has shifted to approximately 50 percent each. Excluding sales of third-party ethanol marketed by the company’s Kinergy subsidiary, specialty alcohols used in consumer products contributed approximately 45 percent of Pacific Ethanol’s revenues during the first nine months of this year, up from 15 percent for all of 2019.

Going forward, Pacific Ethanol said it will focus on specialty alcohols and essential ingredients for four key markets: health, home and beauty; food and beverage; essential ingredients; and renewable fuels. Products for the health, home and beauty markets include specialty alcohols used in mouthwash, cosmetics, pharmaceuticals, hand sanitizer, disinfectants and cleaners. Products for the food and beverage markets include grain neutral spirits used in alcoholic beverages and vinegar as well as corn germ used in for corn oils. Products for essential ingredients markets include yeast, corn gluten, and distillers grains used in commercial animal feed and pet foods. Renewable fuels includes fuel-grade ethanol and distillers corn oil used as a feedstock for renewable diesel.

Pacific Ethanol idled ethanol plants in Magic Valley, Idaho; Stockton, California; and Madera, California, earlier this year. During a second quarter earnings call held on Aug. 12, Kandris said the company did not expect to resume operations at those idle facilities until it could secure better positive forward operating margins, and noted reopening of those plants would be achieved through either repurposing or restarting with high-value complimentary or differentiated products.

In its latest announcement, Pacific Ethanol said it now plans to sell or repurpose those three idle plants as part of its strategic alignment and new business focus. The company said any proceeds from the sale of the assets will be used to reduce debt, invest in core operations, or for general corporate purposes. Additional information is expected to be discussed in the company’s upcoming third quarter earnings conference call. The date of that call has not yet been announced.

Pacific Ethanol also said it will change its corporate name and introduce a new brand identify that reflects the company’s focus on providing specialty alcohols and essential ingredients used in consumer products. The new name, however, has not yet been released.

As part of its announcement, Pacific Ethanol also released preliminary third quarter financial results. The company generated net sales of approximately $204 million for the quarter and expects to report net income of approximately $15 million and adjusted EBITDA of approximately $34 million. This reflects a decrease in net sales of approximately $161 million, and anticipated increase in net income of approximately $43 million, and an anticipated increase in adjusted EBITDA for about $46 million from the same period of last year.

Additional information is available on the Pacific Ethanol website