Pacific Ethanol's planned acquisition of Illinois Corn Processing and its plans to integrate ICP with Pacific's adjacent Pekin, Illinois, plant will provide significant cost savings and diversify products, the company said Tuesday.
"[ICP's] beverage- and industrial-grade alcohol business diversifies our revenue with a less volatile and more predictable revenue stream," Pacific CEO Neil Koehler said in a Tuesday afternoon call with investors. "These products typically have longer product terms than fuel ethanol, which can be effectively hedged to lock in margins."
Koehler added that ICP's existing contracts will remain in place after the deal closes and that some of the contracts extend into 2018.
The ICP acquisition is also expected to save Pacific on the marketing and logistics front.
As Pacific takes over ICP, the company's marketing arm will handle sales of ICP's ethanol products. ICP's plant is also located on the Illinois River, with direct access to the Mississippi River system.
That Mississippi access will open up Pacific's Illinois production to export markets. ICP already sends 50% of its sales to export customers, though that is primarily on the industrial- and beverage-grade side, Koehler said.
Pacific currently pays ICP for throughput to use the dock to ship its ethanol. Acquiring the facility will save Pacific money as they take ownership of the river access.
Koehler said there are just a few conditions remaining that stand in the way of closing the deal.
After the acquisition, Pacific's Pekin facilities will have a combined production capacity of 250 million gal/year. That capacity will be split between industrial-, beverage- and fuel-grade ethanol.
