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What is Pacific Ethanol?

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  • Written By: Mary McMahon
  • Edited By: O. Wallace
  • Last Modified Date: 24 June 2018
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Pacific Ethanol, Incorporated, is a publicly traded company based in Sacramento, California. The company had roots in the provision of car repair services, turning to ethanol production in the early 21st century. Like many ethanol producers, Pacific Ethanol was hit very hard by the economic crisis which unfolded in 2008 and 2009, raising questions about whether or not the company would survive.

Known by the ticker symbol PEIX on the NASDAQ exchange, Pacific Ethanol has two subsidiaries: Pacific Ag Products and Kinergy Marketing. Pacific Ag Products sells animal fodder produced as a byproduct of ethanol production, while Kinergy Marketing markets ethanol and promotes the use of biofuels. The company's goal was to respond to a rising demand for ethanol which was anticipated by many analysts when crude oil prices started to rise and consumers began to express concerns about fossil fuel pollution.

As of 2009, Pacific Ethanol owned ethanol production plants in California, Colorado, Idaho, and Oregon, and held stakes in plants in several other locations. However, the financial crisis put the company in an awkward position as demand for ethanol fell and corn prices rose, making the company much less profitable to run. In January of 2009, production was scaled back and some plants were temporarily closed. By May 2009, Pacific Ethanol was filing for Chapter 11 protection, raising questions about whether or not the company would weather the financial crisis.

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According to the company's annual report issued on 31 December, 2009, analysts had concerns what without access to capital, Pacific Ethanol might not be able to remain in business. This situation was hardly unique to Pacific Ethanol, as a number of other major ethanol producers expressed similar concerns, and some also filed for bankruptcy protection or utilized other measures to try and keep themselves afloat.

Like many companies which are found or which realigned to provide their core services and products which take advantage of emerging market trends, Pacific Ethanol gambled on a market trend and may have lost. Statements issued by the company indicated that it hoped to be able to work out arrangements with creditors which would prevent bankruptcy in the short term and keep the company solvent until demand for ethanol met expectations. The company faced a number of obstacles, including criticism of biofuels, changes in public opinion about ethanol, shifting demand, and the rise of other alternative fuels which could compete with ethanol for the attention and money of the public.

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