Engineering News

Pacific Ethanol Acquires 42% of Front Range Energy, LLC and Extends Marketing Contract
Wednesday October 18, 8:00 am

Transaction is Accretive to Earnings

FRESNO, Calif., Oct. 18 /PRNewswire-FirstCall/ -- Pacific Ethanol, Inc. today announced the acquisition from Eagle Energy, LLC of a 42% minority interest in Front Range Energy, LLC ("Front Range"), the owner of a 40 million gallon nameplate ethanol plant located in Windsor, Colorado.

The ICM-designed Front Range facility is currently running at an annual production rate of 47 million gallons. The plant began full production in June 2006.

Pacific Ethanol purchased 10,095 Class B Voting Units, representing a 42% interest in Front Range, in exchange for $30 million in cash, 2,081,888 shares of Pacific Ethanol common stock, and a warrant to purchase up to 693,963 shares of common stock at any time before October 17, 2007 at an exercise price of $14.41 per share. The number of shares issued to Eagle Energy was calculated to have a value of $30 million, based on the average of the closing prices of Pacific Ethanol's common stock for the 10 trading days preceding the closing, and has a value as of closing of $35,975,000 based on today's closing price of $17.28 per share. The exercise price of the warrant was based on the average of the closing prices of Pacific Ethanol's common stock for the 10 trading days preceding the closing. The securities sold in this private placement have not been registered under the Securities Act of 1933 and may not be offered or sold in the United States in the absence of an effective registration statement or exemption from registration requirements. Pacific Ethanol has agreed to file a resale registration statement on Form S-3 within 10 days after the closing of the transaction for the purpose of registering the resale of the shares of common stock issued at the closing and the shares of common stock underlying the warrant.

Pacific Ethanol and Front Range already have a significant relationship, announced upon the completion of Front Range's plant in June 2006, pursuant to which Pacific Ethanol markets all of the output of the plant (fuel ethanol and wet distillers grain), procures the corn feedstock, and manages plant operations. As a part of Pacific Ethanol's purchase of an ownership stake in Front Range, the parties have extended the term of the ethanol marketing agreement until June 9, 2013.

Neil Koehler, President and CEO of Pacific Ethanol stated, "This transaction is immediately accretive to earnings and accelerates our goal to be the leading ethanol producer in the western US. Our acquisition of a stake in Front Range in effect adds approximately 20 million gallons to our annual operating production capacity. This represents a significant step in achieving our stated annual production capacity targets of 220 million gallons by the middle of 2008 and 420 million gallons by the end of 2010. This agreement further cements our close working relationship with Front Range Energy. And finally, as this plant supplies local markets for both fuel and feed, obviating the need to ship our product long distances, it is also a perfect fit with Pacific Ethanol's low cost destination business model."

Front Range Energy's majority owner, Dan Sanders, said, "We are delighted to have Pacific Ethanol as a partner in this operation, given our existing relationship and their proven expertise in the production and marketing of ethanol and feed products in the western US. Pacific Ethanol's ownership in our company also strengthens our position as we evaluate a potential expansion of the Windsor plant and other new production opportunities."

Source: Pacific Ethanol, Inc.

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