Pacific Ethanol, Inc.

Transcription

1 Pacific Ethanol, Inc. (Nasdaq: PEIX) Third Quarter 2016 Financial Results November 3, 2016

2 Cautionary Statements Statements and information contained in this communication that refer to or include Pacific Ethanol s estimated or anticipated future results or other nonhistorical 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 domestic and international demand for ethanol and co products, growth for these products, as well as margins, commodity prices and export conditions; expectations regarding improvements in production assets and the carbon intensity of ethanol produced; expected gains from hedged positions; production levels of cellulosic ethanol and premiums and enhanced profitability from cellulosic ethanol; the timing, effectiveness, and costs and energy savings, of technologies implemented at Pacific Ethanol s plants; the ability of Pacific Ethanol to timely and successfully execute on, and the effects of, its initiatives to optimize production, improve plant efficiencies and increase yields, reduce operating costs, and lower the carbon intensity of ethanol produced; 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; the expected adoption and growth of 15% ethanol blends; 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 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 laws and regulations; 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 August 5,

3 Third Quarter 2016 Summary Net sales grew 10% over Q3 15 to $417.8 million Total gallons sold were a record million Third party gallons sold grew 16% over Q3 15 Net loss was $3.8 million Adjusted EBITDA was $9.3 million Quarterly Revenue & Total Gallons Sold ( in thousands) $422.9 $417.8 $380.6 $376.8 $ Q3'15 Q4'15 Q1'16 Q2'16 Q3'16 Net Sales Total Gallons Sold 3

4 Cellulosic Ethanol Production Generating Value Now generating high value Renewable Identification Numbers (RINs) at Stockton facility First of its kind registration from the Environmental Protection Agency (EPA) o Production uses Edeniq Pathway and Cellunator technologies o Achieving targeted yield increases of > 2% o Expected to provide meaningful contribution to plant profitability o Long term goal to expand cellulosic production technology to additional plants Pacific Ethanol s Stockton, CA ethanol facility 4

5 Installing Solar Power 1 st Ever Commercial Solar Electricity Project at a U.S. Ethanol Plant 5 Megawatt solar photovoltaic (PV) power system at Madera plant Reduces cost of operations Displaces approximately one third of the grid electricity currently used Expected to cut annual utility operating costs by over $1 million, not including tax credits Source: SolarEnergyArena.com Expected to be fully operational in early 2018 after interconnection agreements with local utility company Improves carbon score Drives premium pricing on ethanol produced due to reductions in carbon intensity California s Low Carbon Fuel Standard supports premium pricing for ethanol produced with lower carbon scores 5

6 Additional Plant Investment Initiatives Initiated startup of industrial scale membrane system at Madera plant Expect to begin commercial operations of cogeneration technology at Stockton plant by December 2016 Lower operating costs Reduce energy demand Increase yields Low cost operating platform 6

7 Serving Multiple Markets o Leveraging leading market share Boardman, OR 40mmgy Dry Mill position on the West Coast to expand throughout the country Stockton, CA 60mmgy Dry Mill Burley, ID 60mmgy Dry Mill Aurora, NE 110mmgy Dry Mill Aurora, NE 45mmgy Dry Mill Pekin, IL 100mmgy Wet Mill o Expanding ethanol distribution Madera, CA 40mmgy Dry Mill Pekin, IL 60mmgy Dry Mill capabilities through transportation arrangements such as recently signed unit train agreement at Pekin plant HQ Pacific Ethanol Plants Marketing Partner Plants Terminals 7

8 Fundamentals Support Continued Demand U.S. Motor Gasoline Demand based on 4 Wk Average Corn vs. Crude Oil Millions BBls per Day Corn [USC/BSH] WTI [USD/BBL] Year Range CBOT Corn cts/bu NYMEX WTI $/bbl Source: NYMEX, CBOT, EIA 8

9 Low Carbon Fuel Standards 12% 10% 8% 6% 4% 2% 0% 1.0% California LCFS Program Reduction in Carbon Intensity 2.0% 3.5% 5.0% 7.5% 10.0% onwards o o o o The California Air Resources Board (CARB) re adopted the LCFS with the revised program effective Jan SB 32 passed in CA legislature, granting state government the authority to extend LCFS to 2030 Oregon LCFS initiated Jan for a 10% reduction in carbon intensity by 2025 RFS is successful carbon policy at the national level California Ethanol Premium $/gal (CI 69.6) Pacific Ethanol currently receives a $0.08 per gallon premium over standard Midwest ethanol on each CA production gallon sold into the CA market Source: OPIS 9

10 Renewable Fuel Standard o Breaching the blend wall o Only Federal fuels policy to reduce greenhouse gas 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 25.0 Billion Gallons Source: Renewable Fuels Association. 10

11 Encouraging Industry Outlook Expect a strong and supportive environment for ethanol into 2017 o Oil prices are forecasted to remain stable or move modestly higher o Supply and Demand expected to remain well balanced o Domestic demand set to strengthen as E15 expands, driven by new infrastructure and higher blending levels called for by the RFS o Export forecasts remain robust as US ethanol remains the most competitively priced octane component in world markets 11

12 Consolidated Statement of Operations (Figures below in thousands, except per share amounts) 3 Mos. 9/30/16 3 Mos. 9/30/15 9 Mos. 9/30/16 9 Mos. 9/30/15 Net sales $ 417,806 $ 380,622 $ 1,183,039 $ 814,419 Gross profit (loss) 6,364 (7,380) 25,137 (2,113) SG&A 5,971 7,446 20,436 16,344 Operating income (loss) 393 (14,826) 4,701 (18,457) Fair value adjustments (69) 1,202 (53) 1,413 Interest expense, net (3,874) (5,167) (16,643) (7,187) Other income, net Provision (benefit) for income taxes (3,925) (245) (6,095) Consolidated net loss (3,518) (14,663) (11,658) (18,120) Net loss available to common stockholders $ (3,837) $ (14,982) $ (12,607) $ (18,979) Net loss reflects the following o o o o Higher beginning inventory valuation resulting in elevated production costs in a falling price market Non cash mark to market adjustments related to open hedge positions Lower margins in the ethanol trading business resulting from an intra quarter drop in ethanol prices Significant repair expense Net loss per share, basic & diluted $ (0.09) $ (0.36) $ (0.30) $ (0.63) Adjusted EBITDA (1) $ 9,282 $ 2,432 $ 31,319 $ 5,212 (1) A reconciling table for Adjusted EBITDA is available on slide 18 of the presentation 12

13 Balance Sheet Highlights (Figures below in thousands) At: Sep. 30, 2016 December 31, 2015 Cash & cash equivalents $ 40,639 $ 52,712 Current assets $ 197,218 $ 197,942 Total assets $ 657,126 $ 674,680 Current liabilities $ 213,099 $ 72,909 Total liabilities $ 296,644 $ 303,136 Stockholders equity $ 360,482 $ 371,544 Total liabilities & stockholders equity $ 657,126 $ 674,680 13

14 Strategy for Growth o Evaluating and investing in innovative technologies that optimize plant efficiencies, improve our carbon score and ultimately enhance our profitability o Reduce cost of capital by restructuring term debt o Leverage diverse base of production and marketing assets to expand share of renewable fuel and co product markets Leverage diverse assets Implement plant improvements Strengthen balance sheet Lower carbon score 14

15 THANK YOU 13

16 APPENDIX 16

17 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 EBITDA as unaudited net income (loss) attributed to Pacific Ethanol before interest, provision (benefit) for income taxes, fair value adjustments, purchase accounting adjustments and depreciation and amortization expense. A table is provided at the end of this presentation that provides a reconciliation of Adjusted EBITDA to its most directly comparable GAAP measure. Management provides this non GAAP measure so that investors will have the same financial information that management uses, which may assist investors in properly assessing the company s performance on a period over period basis. Adjusted EBITDA is not a measure of financial performance under GAAP, and should not be considered an alternative to net income or any other measure of performance under GAAP, or to cash flows from operating, investing or financing activities as an indicator of cash flows or as a measure of liquidity. Adjusted EBITDA has limitations as an analytical tool and you should not consider this measures in isolation or as a substitute for analysis of the company s results as reported under GAAP. 17

18 Adjusted EBITDA Reconciliation (Figures below in thousands) Net loss attributed to Pacific Ethanol 3 Mos. 9/30/16 3 Mos. 9/30/15 9 Mos. 9/30/16 9 Mos. 9/30/15 $ (3,518) $ (14,663) $ (11,658) $ (18,033) Adjustments: Interest expense* 3,874 5,167 16,643 7,134 Provision (benefit) for income taxes Purchase accounting adjustments Fair value adjustments * Adjusted for non controlling interests Depreciation and amortization expense* Total adjustments (3,925) (245) (6,095) 8,700 8, (1,202) 53 (1,413) 8,857 8,355 26,526 14,919 12,800 17,095 42,977 23,245 Adjusted EBITDA $ 9,282 $ 2,432 $ 31,319 $ 5,212 * Adjusted for noncontrolling interest. 18