Pacific Ethanol, Inc. (Nasdaq: PEIX) June 2016

Transcription

1 Pacific Ethanol, Inc. (Nasdaq: PEIX) June 2016

2 Cautionary Statements Statements and information contained in this communication that refer to or include the Pacific Ethanol s estimated or anticipated future results or other non-historical expressions of fact are forward-looking statements that reflect Pacific Ethanol s current perspective of existing trends and information as of the date of the communication. Forward looking statements generally will be accompanied by words such as anticipate, believe, plan, could, should, estimate, expect, forecast, outlook, guidance, intend, may, might, will, possible, potential, predict, project, or other similar words, phrases or expressions. Such forward-looking statements include, but are not limited to, market conditions, including the supply of and demand for ethanol and co-products, as well as margins, seasonal margin patterns, commodity prices and export conditions; statements about the benefits of our production assets across two distinct markets in the Midwest and Western United States, including future financial and operating results, synergies, improved margins, cost savings and strategic advantages that may result from these diverse markets; the timing and effects of the installation of new technologies; the ability of Pacific Ethanol to timely and successfully execute on, and the effects of, its initiatives to improve plant efficiencies and increase yields, reduce production costs, lower the carbon intensity of ethanol produced, and produce cellulosic biofuel; expected selling, general and administrative expense amounts; the effects of Low-Carbon Fuel Standards in California and Oregon, and the premiums Pacific Ethanol may generate for its ethanol as a result of those programs; and Pacific Ethanol s other plans, objectives, expectations and intentions. It is important to note that Pacific Ethanol s plans, objectives, expectations and intentions are not predictions of actual performance. Actual results may differ materially from Pacific Ethanol s current expectations depending upon a number of factors affecting Pacific Ethanol. These factors include, among others, adverse economic and market conditions, including for ethanol and its co-products; fluctuations in the prices of oil and gasoline; raw material costs, including ethanol production input costs; changes in governmental regulations and policies; insufficient capital resources; the inability to successfully execute on plant improvement initiatives or install new technologies, or both. These factors also include, among others, the inherent uncertainty associated with financial and other projections; the inability to recognize the anticipated synergies and benefits of the Aventine acquisition, including the benefits of production assets across two distinct markets in the Midwest and Western United States; the anticipated size of the markets and continued demand for Pacific Ethanol s products; the impact of competitive products and pricing; the risks and uncertainties normally incident to the ethanol production and marketing industries; changes in generally accepted accounting principles; successful compliance with governmental regulations applicable to Pacific Ethanol s facilities, products and/or businesses; changes in the laws and regulations; changes in tax laws or interpretations that could increase Pacific Ethanol s consolidated tax liabilities; the loss of key senior management or staff; and other events, factors and risks previously and from time to time disclosed in Pacific Ethanol s filings with the Securities and Exchange Commission including, specifically, those factors set forth in the Risk Factors section contained in the Company s Form 10-Q filed with the Securities and Exchange Commission on May 9,

3 Pacific Ethanol, Inc. Mission: To be the leading producer and marketer of low-carbon renewable fuels Feedstock procurement Ethanol & coproduct production Marketing, transportation & logistics Distribution & customer services o 8 strategically located bio-refineries located in the U.S. o Production capacity of 515M gallons/yr. and over 800 M gallons/yr. of marketing volume o Co-product production capacity of over 1.5M tons/yr. (dry matter basis) o Positioned to access 48 states and export markets with ethanol production and marketing History: Founded in 2003, public in 2005 as the first pure-play ethanol company Stock Profile at 3/11/16: Nasdaq: PEIX Trading at $5.46 Market cap of $227.1M 3

4 Reasons to Invest Continued long-term demand for ethanol o Octane, carbon and cost benefits of ethanol driving market growth o Regulations support long-term increasing demand for renewable fuels Leveraging strong operating platform to drive growth o Strategically located biorefineries serve multiple markets o Unique diversity of geography, technology, feedstocks, logistics and products o Implementing plant improvements to increase efficiencies & yields o Organic growth and acquisitions to increase market share Strong financial foundation o Q1 16 net sales were $342.4M and Adjusted EBITDA was $1.6M o Repaid remaining $17M of term debt secured by western plants; Western plants are now completely debt free 4

5 Fundamentals Support Continued Demand Historically priced at a discount to gasoline, ethanol has been the lowest cost liquid transportation fuel commercially available in the world Lower oil prices driving new gasoline and ethanol demand Corn vs. Crude U.S. Motor Gasoline Demand based on 4-Wk Average Millions BBls per Day Jan-11 Oct-11 Jul-12 Apr-13 Jan-14 Oct-14 Jul-15 Apr-16 CBOT Corn cts/bu NYMEX WTI $/bbl Jan 2-Feb 2-Mar 2-Apr 2-May 2-Jun 2-Jul 2-Aug 2-Sep 2-Oct 2-Nov 2-Dec 5-Year Range Source: NYMEX, CBOT, EIA 5

6 Lowest Cost Source of Octane Ethanol vs. Alkylate Slate of crude oil supply and higher demand for premium fuel create octane shortage Auto companies calling for higher octane fuels to power next generation of increasingly efficient engines Higher blends of ethanol necessary to meet future octane needs Gulf Coast Ethanol Full Day Last Prompt($/gal) Gulf Coast Waterborne Alkylate Full Day Last Prompt($/gal) Octane Value Gulf Coast RBOB Unleaded Regular Full Day Last Prompt($/gal) Opens up new export opportunities as world markets are increasingly octane short ((93 Premium - 87 Regular)/6)* (113-87) Source: OPIS 6

7 Exports Create Growing Opportunity o In the first quarter of 2016, the U.S. exported approximately 250 million gallons of ethanol, an increase of 5% over the same period in 2015 o Global demand is growing 2-3% annually as global markets incorporate environmental and performance benefits o Approximately 30 countries have renewable fuel standards or targets Source: EIA, Department of Commerce 7

8 Top Markets for U.S. Ethanol in 2015 Canada 249 (30%) Netherlands 34 (4%) Mexico 34 (4%) Tunisia 26 (3%) Oman 33 (4%) India 47 (6%) China 71 (8%) S. Korea 60 (7%) Philippines 72 (9%) Brazil 116 (14%) Rest of world 12% Source: EIA 8

9 Renewable Fuel Standard o Breaching the blend wall o Only Federal fuels policy to reduce greenhouse gas (GHG) emissions o Need regulatory certainty to secure development of cellulosic ethanol projects RFS- Conventional Biofuel RFS - Advanced Biofuel Installed Capacity Industry Production Total Demand Incl. Net Export blend 10% blend 15% Domestic Ethanol Demand Source: Renewable Fuels Association. 9

10 Low-Carbon Fuel Standards CA LCFS requires refiners to reduce carbon intensity (CI) by 10% between 2011 and 2020 The California Air Resources Board (CARB) re-adopted the LCFS with the revised program effective Jan Oregon LCFS Initiated Jan for a 10% reduction in carbon intensity by 2025 RFS is successful carbon policy at the national level 12% 10% 8% 6% 4% 2% 1% 2.0% California LCFS Program 3.5% 5.0% 7.5% 10.0% 0% onwards California Ethanol Premium (CI 80.7) $/gal Pacific Ethanol currently receives a $0.10 per gallon premium over standard Midwest ethanol on each CA production gallon sold into the CA market Source: OPIS Aug-12 Oct-12 Dec-12 Feb-13 Apr-13 Jun-13 Aug-13 Oct-13 Dec-13 Feb-14 Apr-14 Jun-14 Aug-14 Oct-14 Dec-14 Feb-15 Apr-15 Jun-15 Aug-15 Oct-15 Dec-15 Feb-16 Apr-16 10

11 Ethanol Inventory & Spot Margin MM Bbls $/gal Ethanol Ending Inventory - mmbbls 20D Ethanol Demand - mmbbls Crush Margin $/gal Historical crush margin is calculated using formula: OPIS Chicago (CBOT Corn)/2.8*(1-co product return)-0.2* NYMEX NG Source: NYMEX, CBOT, EIA 11

12 Serving Multiple Markets Boardman, OR 40mmgy Dry Mill Stockton, CA 60mmgy Dry Mill Madera, CA 40mmgy Dry Mill Burley, ID 60mmgy Dry Mill Aurora, NE 110mmgy Dry Mill Aurora, NE 45mmgy Dry Mill Pekin, IL 100mmgy Wet Mill Pekin, IL 60mmgy Dry Mill Pacific Ethanol owns 8 biorefineries with a combined production capacity of 515M gallons per year of fuel grade ethanol Through its subsidiary, Kinergy, Pacific Ethanol markets and trades ethanol with a combined marketing volume of over 800M gallons per year HQ Pacific Ethanol Plants Marketing Partner Plants Terminals 12

13 Western Biorefineries Strategically located in the feed and fuel markets they serve Stockton, CA Date of Operation: September 2008 Annual Capacity: 60.0 mmgy Technology: Dry mill, WDG, corn oil, terminal Burley, ID Date of Operation: April 2008 Annual Capacity: 60.0 mmgy Technology: Dry mill, WDG, corn oil Madera, CA Date of Operation: October 2006 Annual Capacity: 40.0 mmgy Technology: Dry mill, WDG, corn oil, grain mill Boardman, OR Date of Operation: August 2007 Annual Capacity: 40.0 mmgy Technology: Dry mill, WDG, corn oil, CO2 13

14 Midwest Biorefineries Located near feedstock sources and directly linked to strong markets for ethanol and co-products Aurora, NE Date of Operation: 2012 Annual Capacity: mmgy Technology: Dry mill, DDG/WDG, corn oil Pekin, IL Wet Mill / Yeast Date of Operation: 1981 / 1999 Annual Capacity: mmgy / 55 mlbs/yr Technology: Wet mill, corn gluten feed, germ & meal, CO2, yeast Yeast plant Aurora, NE Date of Operation: 1995 Annual Capacity: 45.0 mmgy Technology: Dry mill, DDG/WDG, corn oil Pekin, IL Dry Mill Date of Operation: 2007 Annual Capacity: 60.0 mmgy Technology: Dry mill, DDG, corn oil 14

15 Dry Mill Co-Product Platform Distillers Grains with Solubles(DGS) & Wet Distillers Grains (WDG) Production of over 1M tons per year (tpy) (dry matter) of DDG& WDG Pacific Ethanol plants are strategically located near dairies and feedlots and able to sell WDG directly to those users in the heart of the livestock industries of California, Oregon, Idaho and Nebraska Distillers Corn Oil Production of over 85M pounds of corn oil All Pacific Ethanol facilities produce corn oil, which is sold into feed markets as well as feedstock markets for biodiesel production CO 2 Production over 100K tons annually Pacific Ethanol sells raw CO 2, another co-product of ethanol production, for processing into liquid CO 2 and dry ice 15

16 Wet Mill Co-Product Platform Corn Gluten Meal & Corn Gluten Feed Production of 265k tpyof corn gluten feed and corn gluten meal annually Corn gluten meal is used primarily as a protein source and corn gluten feed is used as fiber, starch and steep water source in poultry, livestock rations, fish and pet foods Corn Condensed Distillers Solubles (CCDS) CCDS is a palatable, free-flowing, energy and protein source for cattle and fits into a large number of feeding programs Corn Germ Production of 70K tons of corn germ annually Through the wet milling process Aventine separates off the germ of the corn kernel and sends it to third parties for further processing into corn oil and corn germ meal. Yeast Production of over 50M pounds annually When extracted from the starch stream in the wet mill, yeast is processed, dried, bagged and sold for animal, pet and human food applications and is AIB food grade and also Kosher certified 16

17 Plant Investment Initiatives Maintaining a disciplined approach to plant investments by focusing on projects that present the highest potential value to the company. Installing industrial Initiated trials of Enogen Began producing Installing cogeneration scale membrane system (hybrid) corn at cellulosic ethanol at technology at at Madera plant Madera plant Stockton plant Stockton plant Lower operating costs Reduce energy demand Increase yields Low-cost operating platform 17

18 Experts in Distribution & Customer Management Pacific Ethanol Marketing Through its subsidiary, Kinergy, Pacific Ethanol markets and trades ethanol with a combined production and marketing of over 800 mgy Marketing agreements with two other California ethanol producers Extensive trading relationships with Midwest ethanol producers and marketers Provides ethanol supply logistical services and inventory management Customers include both major and unbranded oil companies that distribute transportation fuel to retail customers Opportunities Growing market share in an expanding market Favorable ethanol blend economics Low-carbon fuel standards support demand Differentiated marketing & distribution capabilities 382.3M third party gallons sold in

19 Consolidated Statement of Operations (Figures below in thousands, except per share amounts) 3 Mos. 3/31/16 3 Mos. 3/31/15 Net sales $ 342,373 $ 206,176 Gross profit (loss) 1,069 (987) SG&A 8,317 4,905 Operating loss (7,248) (5,892) Fair value adjustments and warrant inducements 39 (173) Interestexpense, net (6,233) (1,015) Other income (expense), net 216 (129) Benefit for income taxes -- 2,700 Consolidated net loss (13,226) (4,509) Net loss to common stockholders $ (13,541) $ (4,692) Net loss per share, diluted $ (0.32) $ (0.19) Adjusted net loss $ (13,580) $ (4,519) Adjusted EBITDA (1) $ 1,619 $ (2,694) (1) Reconciling tables for Adjusted Net Loss and Adjusted EBITDA are available on slides 25 and 26 of the presentation, respectively. 19

20 Balance Sheet Highlights (Figures below in thousands) At: March 31, 2016 December 31, 2015 Cash & cash equivalents $ 19,207 $ 52,712 Current assets $ 170,233 $ 197,942 Total assets $ 643,199 $ 674,680 Current liabilities $ 57,556 $ 72,909 Total liabilities $ 284,615 $ 303,136 Retired $17M in debt o During the first quarter of 2016, Pacific Ethanol repaid the remaining $17.0M of term debt secured by its Western plants o The final payment was made in cash at par, with the lender waving the prepayment penalty Stockholders equity $ 358,584 $ 371,544 Total liabilities & stockholders equity $ 643,199 $ 674,680 20

21 Strategy for Growth Leverage diverse assets Execute plant improvements Strengthen balance sheet Improve carbon score Leverage state-of-theart, strategically located production facilities and extensive marketing reach to serve customers worldwide Focus on near-term returns with initiatives that increase yields, expand capacity and diversify revenue and product mix Minimize cost of capital, efficiently manage cash and optimize liquidity position Implement technologies and production practices that lower carbon intensity monetized through low carbon fuel policies 21

22 THANK HANKYOU 22

23 APPENDIX 23

24 Use of Non-GAAP Measures Management believes that certain financial measures not in accordance with generally accepted accounting principles (GAAP) are useful measures of operations. The company defines Adjusted Net Income (Loss) as unaudited net income (loss) available to common stockholders before fair valueadjustments. The company defines Adjusted EBITDA as unaudited net income (loss) attributed to Pacific Ethanol before interest, provision (benefit) for income taxes, fair value adjustments, and depreciation and amortization. Tables are provided at the end of this presentation that provide a reconciliation of Adjusted Net Income (Loss) and Adjusted EBITDA to their most directly comparable GAAP measures. Management provides these non-gaap measures so that investors will have the same financial informationthat management uses, which may assist investors in properly assessing the company s performance on a period-over-period basis. Adjusted Net Income (Loss) and Adjusted EBITDA are not measures of financial performance under GAAP, and should not be considered alternatives to net income (loss) or any other measure of performance undergaap, or to cash flows from operating, investing or financing activities as an indicator of cash flows or as a measure of liquidity. Adjusted Net Income (Loss) and Adjusted EBITDA have limitations as analytical tools and you should not consider these measures in isolation or as a substitute for analysis of the company s results as reported under GAAP. 24

25 Adjusted Net Loss Reconciliation (Figures below in thousands, except per share data) 3 Mos. 3/31/16 3 Mos. 3/31/15 Net loss available to common stockholders $ (13,541) $ (4,692) Adjustments: Fair value adjustments (39) 173 Adjusted net loss $ (13,580) $ (4,519) 25

26 Adjusted EBITDA Reconciliation (Figures below in thousands) Net loss attributed to Pacific Ethanol 3 Mos. 3 Mos. 3/31/16 3/31/15 $ (13,226) $ (4,380) Adjustments: Interest expense* 6, Benefit for income taxes* Fair value adjustments Depreciation and amortization expense* * Adjusted for non-controlling interests Total adjustments -- (2,700) (39) 173 8,651 3,292 14,845 1,686 Adjusted EBITDA $ 1,619 $ (2,694) * Adjusted for noncontrolling interests.. 26