Pacific Ethanol Inc. announced it’s expanding its Midwest operations Monday by acquiring a Nebraska grain elevator, a move that would increase its access to the raw material for its ethanol while strengthening ties with the agricultural community.
The Sacramento ethanol producer, which operates eight biofuel plants on the West Coast and in the Midwest, also said it’s refinanced its debt in a deal that will lower its annual interest costs and increase its liquidity.
In a series of complicated transactions, Pacific Ethanol announced the formation of a new company with farmer-owned Aurora Cooperative Elevator Co. of Aurora, Neb. The firm will consist of the Sacramento company’s two ethanol plants in Aurora and the Midwest company’s grain elevator, land and adjacent rail facilities. The Midwest company is also contributing $30 million cash. The new company, Pacific Aurora LLC, will be 74 percent owned by Pacific Ethanol, while the Midwest company will own the rest.
By combining the grain elevator with the two ethanol plants, the two companies expect to improve operating efficiencies. It “will allow us to directly benefit from farmer ownership in our ethanol business, which has proven to be a winning combination over the years in the ethanol industry,” said Neil Koehler, Pacific Ethanol’s president and chief executive, in a prepared statement.
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Pacific Ethanol, whose West Coast plants include facilities in Stockton and Madera, expanded into the Midwest in 2015 when it bought Aventine Energy Holdings Inc. of Pekin, Ill., for $192 million in stock. The deal doubled Pacific Ethanol’s production capacity and marked a major milestone for a company that had to shut down most of its production and put its plants in bankruptcy in 2009.
Meanwhile, Pacific Ethanol is refinancing $155.1 million in debt. It’s obtaining a new $96 million line of credit and $55 million in additional debt financing. The company said its interest costs will fall by $8 million a year.
Pacific Ethanol shares closed at $10.25, up 65 cents, on the Nasdaq market.