11 th Annual JMP Securities Research Conference

Transcription

1 NASDAQ: PEIX 11 th Annual JMP Securities Research Conference May 16, 2012

2 Cautionary Statements With the exception of historical information, the matters discussed in this presentation including, without limitation, the ability of Pacific Ethanol to maintain and expand its position as the leading marketer and producer of low-carbon renewable fuels in the Western United States; the ability of Pacific Ethanol to improve various aspects of its business, including profitability, costs, yields, diversity of revenue streams, debt structure at the operating plant level and plant ownership; and the ability of Pacific Ethanol to resume production at the remaining idle California plant, which is at the discretion of the third-party plant owner are forward-looking statements and considerations that involve a number of risks and uncertainties. The actual future results of Pacific Ethanol could differ from those statements. Pacific Ethanol refers you to the Risk Factors section contained in its recently filed Form 10-K filed with the Securities and Exchange Commission on March 8,

3 Demonstrating the Strength of Pacific Ethanol s Business Model Pacific Ethanol s mission is to be the leading marketer and producer of low-carbon renewable fuels in the Western United States 2011 Achievements Retired in full $35 million in senior convertible notes Increased ownership interest in the Pacific Ethanol Plants from 20% to 34% Diligently managed costs & operational efficiencies to support future growth Founded in January 2003 IPO in March 2005 First pure play public ethanol company Headquarters in Sacramento, CA 160 employees 2012 Objectives Evaluate opportunities to increase plant ownership Implement a more cost competitive plant debt structure Improve operational efficiencies to increase yields & reduce production costs Broaden revenue streams in all business areas Return the Pacific Ethanol Madera plant to production 3

4 billion gallons Renewable Fuel Standard Driving Ethanol Demand Renewable Fuel Standard vs. Installed Capacity RFS- Conventional Biofuel RFS - Advanced Biofuel Installed Capacity blend 10% blend 15% Source: PEI projections 2012 U.S. required conventional ethanol demand at 13.2 billion gallons per year (BGY) 15 BGY conventional biofuel by 2015; 36 BGY total biofuel by 2022 under current Renewable Fuel Standard (RFS) 2011 U.S. gasoline consumption ~ 137 BGY Higher level blends & investment in existing & new technology required to meet RFS goals 4

5 Ethanol: A Practical & Meaningful Energy Solution Ethanol Lowers Gas Prices and Provides Savings to Consumers Ethanol blending reduced the average American household s gas costs by $1.09 per gallon (1), or >$1,200 in 2011 (2) If ethanol were eliminated from the fuel supply, the estimated gas price increase would range from 41%-92%, equivalent to $5.60-$7.70 per gallon (3) $3.60 $3.40 $3.20 $3.00 $2.80 $2.60 $2.40 $2.20 $2.00 RBOB Gasoline and Ethanol Prices (Nearby Futures) Ethanol Futures RBOB Futures (1) Source: Hayes & Du Study 2012, (2) Source: Energy Information Administration, Census Bureau and Hayes & Du, Study 2012 (3) Source: Renewable Fuels Association 5

6 Ethanol = Food and Fuel Corn used in ethanol production is livestock feed not food Ethanol producers are feed producers Production concentrates protein, fat, minerals and fiber into nutritious feed product Corn price has a minor impact on food price; petroleum is the single largest contributing factor to the price of food Continued increase in yields per acre allows for land to be used for food, feed, fuel, and fiber USDA projects 14.8B bushels in 2012 the largest corn crop in history Million Bushels 18,000 16,000 14,000 12,000 10,000 Historical Corn Usage by Sector Carryout Ethanol Exports Industrial Distiller Grain Feed 8,000 6,000 4,000 2, Data Source: Monsanto, USDA 6

7 Corn $ per bushel Ethanol $ per gallon Focusing on Improving Profitability Business model enables Pacific Ethanol to mitigate commodity pricing exposure risks Lock in margins to improve plant profitability and liquidity Source corn from Midwest and/or local markets near production facilities Contracts with suppliers guarantee delivery of corn even in tightened supply conditions Focus on reducing costs & increasing yields Diversify revenue streams with additional coproducts Corn & Ethanol Price Comparison 3.50 CBOT CORN OPIS LA Source: PEI Calculations 7

8 Organizational Structure Pacific Ethanol, Inc. New PEHC (1) Kinergy PECOL PEMV PECOL PEMV PES PEM PES PEM Pacific Ag Products ZeaChem Production Marketing Asset Management (1) Pacific Ethanol, Inc. holds a 34% ownership interest in New PE HoldCo LLC and its subsidiaries 8

9 Pacific Ethanol s Diversified Business Model Production Marketing Asset Management Delivered enhanced plant efficiencies Reduced plant production levels to adjust for lower ethanol demand Kinergy & PAP contributing steady & sustainable earnings Management service agreements contribute to parent company s cash flow 9

10 Destination Market Advantage Less expensive to move corn than ethanol & distillers grains Unit vs. single; ease of handling; turnaround times; double-handling vs. 30% less processing energy when not drying distillers grains (no dryers) Higher nutritional content; ease of handling; no product burned off Proximity and understanding of local markets Access to ports and international market Storage value for grain and ethanol assets Lower carbon footprint delivers significant value 10

11 Ethanol Production and Exclusive Supply Pacific Ethanol Markets Production from its Facilities and its Partner Plants Pacific Ethanol Plants Marketing Partner Plants Columbia Boardman, Oregon Op. Capacity: 40 MGY Current Status: Producing Stockton Stockton, California Op. Capacity: 60 MGY Current Status: Producing Magic Valley Burley, Idaho Op. Capacity: 60 MGY Current Status: Producing Madera Madera, California Op. Capacity: 40 MGY Current Status: Idle Front Range Windsor, Colorado Op. Capacity: 50 MGY Current Status: Producing Calgren Pixley, California Op. Capacity: 55 MGY Current Status: Producing Differentiated with destination plant model Produces ethanol & wet distillers grain Among the lowest carbon intensity produced in the US Keyes Keyes, California Op. Capacity: 55 MGY Current Status: Producing 11

12 Marketing Marketing Businesses Diversify Revenue Streams & Provide Stability Kinergy Growing market share in an expanding market Favorable ethanol blend economics Low-carbon fuel standards Differentiated marketing & distribution Pacific Ag Products Value of WDG Grain & feed transloading & services Marketing WDG for all Pacific Ethanol Plants 12

13 Production and Marketing Advantage: Ethanol Facilities, Terminals, and Midwest Supply Unique & extensive market coverage Calibration of ethanol production & purchases responsive to market dynamics Midwest Ethanol to Kinergy HQ PEHC Plants Marketing Partner Plants Terminals 13

14 Asset Management Diversifies Revenue Streams & Contributes to Parent Company Cash Flow Providing asset management services to All four Pacific Ethanol Plants ZeaChem s 250,000 gallon per year cellulosic integrated biorefinery Focusing on profitability Optimizing performance of individual production plants to attain better yields, reduce costs & improve efficiencies Multi-year focus on advanced biofuels; introducing alternative feedstocks to existing plants 14

15 Financial Review $300 $250 $200 $150 $100 $50 $0 Quarterly Net Sales All figures in millions $ $ $215 $ $ Q1'11 Q2'11 Q3'11 Q4'11 Q1'12 Quarterly Total Gallons Sold Q1'11 Q2'11 Q3'11 Q4'11 Q1'12 Annual Net Sales Annual Total Gallons Sold $1,000 $800 $600 $400 $200 $0 $901 $317 $

16 Recent Financial Results For the 3 mos. ended 12 mos. ended (in thousands, unaudited) March 31, 2012 March 31, 2011 December 31, 2011 Net sales $ 197,719 $ 173,148 $ 901,188 Gross profit (loss) $ (7,477) $ 2,564 $ 19,399 SG&A $ 3,378 $ 4,188 $ 15,427 Operating income (loss) $ (10,855) $ (1,624) $ 3,972 Net income (loss) avail. to CS $ (5,268) $ (294) $ 1,809 Adjusted EBITDA * $ (2,533) $ 1,450 $ 5,253 * A full reconciling table of Adjusted EBITDA to GAAP net income is included on slide 23 of this presentation. 16

17 Balance Sheet Review (in thousands, unaudited) March 31, 2012 December 31, 2011 Cash $ 4,981 $ 8,914 Current Assets $ 58,212 $ 66,748 Current Liabilities $ 12,099 $ 8,982 Working Capital $ 46,113 $ 57,766 Liquidity position remains strong as cash & excess working capital line availability total ~$27M as of March 31 st Improved financial terms of Kinergy line of credit Increases credit facility from $35M to $40M, including $10M accordion feature Extends the term two years to the end of 2015 Folds in Pacific Ag Products AR to the borrowing base 17

18 Executing Strategy to Build Shareholder Value Pacific Ethanol s mission is to be the leading marketer and producer of low-carbon renewable fuels in the Western United States Utilize industry expertise, logistical advantages & strategy for growth to build leadership position in production, marketing & asset management Evaluate opportunities to increase plant ownership Implement a more cost competitive plant debt structure Improve operational efficiencies to increase yields & reduce production costs Broaden revenue streams in all business areas Return the Pacific Ethanol Madera plant to production Leverage transformed balance sheet to grow market share & deliver profitability 18

19 Visit our website: 19

20 APPENDIX

21 Integrated Marketing & Distribution Kinergy Marketing Founded in October 2000 Marketed 424M gallons in 2011 Provides transportation, storage, and logistical services to customers Extensive market presence in Western U.S. Customer base: Large integrated oil companies; Independent refiners and distributors Pacific Ag Products Founded in June 2003 Marketed 1.4M tons in 2011 Manages corn procurement and risk management Develops and markets value-added feed products Explores alternative, lower cost feedstocks for incremental use in existing ethanol plants 21

22 Management Team & Board of Directors Management Team Title Yrs. in Industry Background Neil Koehler CEO and Founder, Director yrs in producing and marketing ethanol in CA Director of the CA Renewable Fuels Partnership Bryon McGregor CFO years in treasury, banking and finance Christopher Wright VP and General Counsel 5 23 yrs in growth company BOD advisory Focus on securities and strategic transactions Greg DiBiase VP Supply and Marketing yrs in petroleum industry Paul Koehler VP Corporate Development 9 20 yrs in energy project development & marketing Board Member Title Background Bill Jones Michael Kandris Doug Kieta Larry Layne Jack Prince Terry Stone Chairman and Founder Director Director Director Director Director 20 years in California politics, 8 of which as Secretary of State ( ) Central Valley farmer and rancher President, Western Division of Ruan Transportation Management Systems 30 years of experience in transportation and logistics SVP for Calpine Construction Management Oversaw $18B build-out of power assets Former Vice Chairman of Sanwa Bank Former Chairman of the Board of Eureka Funds Former President and CEO of Dairyman s Cooperative Creamery Association Former EVP of Land O Lakes CPA, 30 years of experience in accounting and taxation Owner of accountancy firm 22

23 Reconciling Table: Adjusted EBITDA to Net Income (Loss) 3 mos. ended 12 mos. ended (in thousands, unaudited) March 31, 2012 March 31, 2011 December 31, 2011 Net income (loss) attributed to Pacific Ethanol, Inc. Adjustments: Interest expense* $ (4,953) $ 18 $ 3,074 1,149 1,534 6,136 Interest income* (9) Fair value adjustments 33 (926) (7,559) Depreciation and amortization expense* 1, ,611 Total adjustments 2,420 1,432 2,179 Adjusted EBITDA $ (2,533) $ 1,450 $ 5,253 * Adjusted for noncontrolling interest in variable interest entity. 23