After halting construction of an ethanol plant in Brawley, Calif., in December, Pacific Ethanol (NSDQ: PEIX) told Greentech Media it plans to open a new facility in Stockton, Calif. this month.
The company announced in March it was building the plant, which will have the capacity to produce 50 million gallons of ethanol per year, at the Port of Stockton. Pacific Ethanol has already built three ethanol plants and owns 42 percent of Front Range Energy's ethanol plant in Windsor, Colo.
Speaking after a biofuel panel at the University of California at Berkeley on Saturday, Doug Dickson, vice president for commodities at the company, said the facility would turn corn into ethanol, but could also make the fuel from other materials, including wine, molasses and citrus juice.
"It's all about the market,” he said. “And the lowest cost feedstock will be what we'll use.”
Market conditions have been rough on biofuel companies in the last year, and Pacific Ethanol has not been exempt. In December, the company suspended the construction of an ethanol plant in Southern California, a month after Cascade Investment, an investment firm owned by Microsoft chairman Bill Gates, said it would sell its 21 percent stake in the company (see Biofuel Forecast May Buoy a Bit and Ethanol Stocks Keep Falling).
Feedstock prices have grown as biofuel process remained low, squeezing company margins and causing a number of plants to be delayed or cancelled in the last year (see Mascoma to Play Smaller Role in Pilot Project, Plans for Two Cellulosic-Ethanol Plants Scrapped, Another Ethanol Plant Gets Cancelled, Poet Cancels Ethanol Plant, Ethanol Margins Suffer and Ethanol’s Tough Times Continue).
But news that Pacific Ethanol’s Stockton plant is on track is the latest sign that the bad times may be easing.
VeraSun Energy Corp. (NYSE: VSE) – which in June had said it would delay the start up of three ethanol plants – last week announced it would start operating one of the shelved plants after margins improved (see The Week: Plugging Into Renewable Energy).
And in its earnings Friday, Aventine Renewable Energy (NYSE: AVR), reported increased demand for ethanol and said the commodity spread – or the price of the ethanol minus the cost of the corn used to make the fuel – had gone up a penny to $1.29 per gallon in the second quarter from $1.28 per gallon in the year-ago quarter (see Aventine Posts Loss Despite Record Sales).
Aside from the Stockton plant, Pacific Ethanol said it still plans to build a cellulosic-ethanol plant in Boardman, Ore. The company in January won a $24.3 million grant from the U.S. Department of Energy to build the plant, which it said would be completed by late 2009 and would produce up to 2.7 million gallons of ethanol from cellulosic biomass annually (see press release).
Dickson said the company also is evaluating the possibility of increasing the production capacity at the planned plant, but would not disclose the new potential capacity.
Dickson, who said “the project was ready to go” – the financing was in place, the land had been bought and the equipment had been purchased – when the company decided to halt the plant, added that he doesn’t know whether the project’s hiatus is permanent or not.
Pacific Ethanol’s stock was up 2 percent Monday to $1.95 per share after the company announced it had secured $40 million in credit from Wachovia Capital Finance Corp. The company in March raised another $40 million by selling shares to Lyles United (see Pacific Ethanol Gets Much-Needed Cash). It also announced $34.25 million more in financing in May.
The company’s shares have fluctuated from a low of $1.45 per share to a high of $13.26 per share in the last year, falling 13 percent in March after the company released preliminary fourth-quarter earnings that indicated a loss three times larger than expected, then growing 60.6 percent in May when its first-quarter earnings beat expectations.