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Tuesday, September 28, 2010

Pacific Ethanol Signs Over 20% of Facilities for $53 Million

Is Pacific Ethanol foolish for taking on new debt or are they preparing for the loss of six billion in subsidies set to expire in December?  The blenders credit, and another which limits competition from imports. A similar scenario played out last year when a biodiesel subsidies were allowed to expire and were not renewed.

"Pacific Ethanol, Inc. (PEI) (Nasdaq:PEIX), the leading West Coast marketer and producer of low-carbon renewable fuels, announced today several transactions intended to further improve the company's balance sheet and position the company for continued growth in the ethanol industry. On September 27, 2010, PEI entered into agreements to issue senior convertible notes (Notes) in the aggregate principal amount of $35.0 million to institutional investors, which agreements are expected to close on or prior to October 11, 2010. In addition, on September 27, 2010, PEI signed an agreement to sell its minority ownership interest in Front Range Energy, LLC for $18.5 million in cash that is expected to close coincident with the closing of the issuance of the Notes. Total gross proceeds from these two transactions are expected to be $53.5 million. On September 28, 2010, PEI entered into agreements to purchase for $23.3 million a 20% ownership interest in New PE Holdco LLC (New PEH), which is the owner of PEI's previously-owned four ethanol production facilities. As a result, PEI will hold the largest equity ownership position in New PEH. Further, PEI intends to retire $17.0 million in corporate debt, accrued interest and fees owed to Lyles United LLC and Lyles Mechanical Co. (Lyles). The balance of the proceeds is expected to pay transaction fees and to provide approximately $10.0 million of cash reserves to PEI's balance sheet."

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