Pacific Ethanol provides update of plant improvement activities
Pacific Ethanol provides update of plant improvement activities
Pacific Ethanol Inc. has released third quarter 2018 financial results, reporting reduce net sales and total gallons sold. During an investor call, the company provided an update of its plant improvement projects.
Neil Koehler, president and CEO of Pacific Ethanol, opened the investor call with a brief discussion of the expected U.S. EPA rulemaking to allow year-round sales of E15. “We are encouraged by President Trump’s direction to the Environmental Protection Agency to extend E15 availability year-round, nationwide, as this creates a significant growth opportunity for the ethanol industry,” he said in a statement. “The compelling cost, octane and carbon advantages of ethanol provide strong incentives for both increased demand from higher blends and exports. This will tighten existing supply and demand balances and improve production margins. In the current challenging market environment, we are supported by a solid balance sheet and a continued focus on product diversification, cost reductions and carbon advantages.”
According to Koehler, industry margins continued to be depressed during the third quarter, with industry inventories near record highs. He said these factors point to the need for some combination of lower production levels and new incremental demand from higher ethanol blends and exports.
“As a company, we have reduced our production levels and are running at around 90 percent of operating capacity, across the portfolio,” Koehler said, noting the company remains focused on making investments to improve its yields and carbon scores.
He said the company is at or near completion of several plant-level capital projects with near-term pay-backs. According to Koehler, the solar project at Pacific Ethanol’s Madera, California, plant is currently producing 3.5 MW of electricity. Following upgrades by PG&E at the local substation, he said the solar project is expected to reach its full 5 MW production level by the end of the year.
Koehler also said the company is making good progress on its 3.5 MW cogeneration project at its Stockton, California, facility. “Required modifications to the two generating units were completed in the third quarter, and the units are now installed,” he said. “We are currently going through startup operations and anticipate the system will be at target performance by the end of the year.”
Commercial operations at the Airgas CO2 facility under development adjacent to the Stockton facility, however, have been delayed slightly, and are now expected to begin operations during the first quarter of 2019, Koehler said.
The company is also continuing to make progress with its cellulosic ethanol production. During the third quarter, Koehler said the company received a new fuel pathway from the California Air Resources Board for cellulosic ethanol produced at its Stockton plant. “We continue to generate D3 RINs and are still awaiting final EPA approval for our cellulosic ethanol pathways for our Madera and Magic Valley plants,” Koehler continued.
Regarding export markets, Koehler said Pacific Ethanol currently expects ethanol exports to reach a new record high in 2018 of between 1.6 billion and 1.7 billion gallons. That would represent about a 20 percent increase from 2017 levels, he said. The company expects to see additional growth in ethanol exports next year.
Pacific Ethanol reported net sales of $370.4 million for the third quarter, down from $445.4 million during the same period of last year. Total gallons sold fell to 212.2 million, compared to 250. Million. Total production gallons sold fell slightly to 139.9 million, compared to 141.8 million during the third quarter of 2017. Gross profit was $3.58 million, down from $12.1 million during the same period of last year. Operating loss was $5.2 million, compared to an operating income of $3.3 million. Loss available to common stockholders was $7.8 million, or 18 cents per share, compared to $500,000, or 1 cent per share. Adjusted EBITDA was $6.3 million during the third quarter, down from $13.2 million during the same period of 2017.
