With the shutdown of two more plants, Sacramento's Pacific Ethanol Inc. is operating at about one-quarter capacity in an industry struggling with depressed profit margins.
The company still boasts it's the "largest West Coast-based marketer and producer of ethanol," but lately it's been in retreat. Last week, it announced it is suspending production at plants in Stockton and Burley, Idaho. A month earlier, it halted operations in Madera.
That leaves just one wholly owned plant in operation, in Boardman, Ore., plus a 42 percent share in a still-operating Colorado plant. The company has effectively slashed its annual production capacity to 60 million from 220 million gallons, said vice president Paul Koehler.
Meanwhile, the company has obtained forbearance agreements with two major lenders. The agreements will prevent any loan defaults through March 31 while the company attempts to negotiate new loan terms.
"We're negotiating with our debt holders and trying to operate the (plants) so when the margins return we're poised to turn them back on," Koehler said.
Producers got squeezed between falling ethanol prices and the rising cost of corn, the raw material used to make the fuel additive. One of the largest ethanol producers, VeraSun Energy of Sioux Falls, S.D., filed for Chapter 11 bankruptcy protection in October.
Ethanol prices have stabilized and corn has dropped, but the margins are still too weak for many producers, said analyst Rick Kment of the DTN commodities news service in Omaha. Ethanol prices tend to rise and fall with the price of gasoline.
"Things are not bouncing back," he said.
Pacific Ethanol's stock closed Monday at 29 cents a share, down 5 cents, on the Nasdaq market.
Call The Bee's Dale Kasler at (916) 321-1066. Read his blog on the economy, Home Front, at www.sacbee.com/blogs.
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