Pacific Ethanol optimistic about 2008 plant production

By Sarah Smith | March 10, 2008
Web exclusive posted April 7, 2008 at 10:42 a.m. CST

Pacific Ethanol Inc., reeling from huge losses posted in late 2007, is rebounding quickly. March 31 the California- based company announced its new 50 MMgy ethanol plant in Burley, Idaho, would begin grinding corn "in a few days." It hopes to have a fourth plant in Stockton, Calif., operating by late 2008.

During a conference call with analysts, the company announced that fourth quarter losses of $14.7 million and construction cost overruns of $27 million on two ethanol plants were offset by record fourth quarter ethanol sales. When compared with the same quarter in 2006, Pacific Ethanol saw an 82 percent increase during the fourth quarter of 2007. The company's finances were shored up by a stock sale worth $40 million, a lifeline extended by its construction contractor that will help Pacific Ethanol address violations with credit agreements and appease lenders, company officials said.

The Sacramento-based company unveiled its annual report, which was delayed by accounting mishaps and other issues. Pacific Ethanol officials said financial controls have been instituted.

The company attributed its fourth quarter losses to skyrocketing corn prices and a temporary market glut, which should be remedied in the next few years by new ethanol mandates along the Pacific Coast. A recently released U.S. Department of Agriculture Crop Report which said there will be less corn acreage in 2008 than in 2007 has caused several ethanol companies' stocks to fall, including Pacific Ethanol's which is down 6 percent.

Construction on Pacific Ethanol's Imperial Valley plant, suspended last fall, will not resume in the immediate future, CEO Neil Koehler said. Pacific Ethanol has two operational plants, in Oregon and California, together producing around 75 MMgy. Koehler said the plants have been running at 108 percent nameplate capacity, with a goal to push that to 110 percent.

Net sales of ethanol for the company during 2007 were $462,000, more than double 2006 sales. But those higher sales volumes were offset by lower prices, company officials said.

Pacific Ethanol was founded in 2003 by Koehler and Bill Jones, a former California secretary of state. The original company, Accessity Corp., was an automobile repair broker. Koehler sold an ethanol business in 1997 to form Pacific Ethanol.

In early 2008, Pacific Ethanol received a grant from the U.S. Department of Energy to build a cellulosic test plant next to its corn-based refinery in Boardman, Ore. The cellulosic plant, which will not be constructed until 2009, will convert wheat straw, wood chips and corn stover to ethanol.