Sacramento's Pacific Ethanol Inc. has landed in bankruptcy court, its dreams of a West Coast ethanol empire crushed by low fuel prices and high corn costs.
The company placed its four production plants including facilities in Stockton and Madera, in Chapter 11 bankruptcy protection. The company itself didn't file for bankruptcy, nor did its marketing company. But the plants had defaulted on about $250 million in debt, and the company has been frantically seeking new cash for the past several weeks.
Last week Pacific Ethanol reported a 50 percent decline in revenue, a $23.9 million quarterly loss and issued a fresh bankruptcy warning. The filing "really isn't a surprise," said Rick Kment, a commodities analyst at the DTN commodities news service in Omaha.
The ethanol boom has essentially crashed, even as government-mandated ethanol demand continues rising. Ethanol makers have been squeezed between weak fuel prices and the high price of corn, the main ingredient. With prices at about $1.70 a gallon, Kment said ethanol makers are facing a 30 cents-a-gallon loss.
Pacific Ethanol is the third ethanol maker to file for bankruptcy in recent months.
Founded in Fresno in 2003 by former California Secretary of State Bill Jones, the company built one of California's earliest ethanol plants, in Madera, which opened in 2006. But in recent months it has reduced production to one-fourth capacity and laid off workers to conserve cash. A few weeks ago it warned that it was close to running out of money.
Pacific Ethanol's chief executive, Neil Koehler, vowed to keep the company going, noting that it lined up $20 million in new financing. "We have worked well with our creditors to develop a plan that we believe allows us to continue operations and meet our commitments to our customers and vendors," Koehler said in a press release. "We are unwavering in our vision of being a leading producer and marketer of low carbon fuels."
In the same press release, Jones said the company hopes to "maintain our focus on serving our fuel and feed markets." He declined to be interviewed.
As ethanol producers have faltered, big energy companies have swooped in. Texas oil company Valero bought seven Midwestern ethanol plants from a bankrupt company.
Pacific Ethanol's shares plunged 26 cents, to 31 cents, in early afternoon Nasdaq trading.
Call The Bee's Dale Kasler, (916) 321-1066.
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