SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
8-K
CURRENT
REPORT
PURSUANT
TO SECTION 13 OR 15(d) OF
THE
SECURITIES EXCHANGE ACT OF 1934
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Date
of Report (Date of earliest event reported)
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August
23, 2006
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PACIFIC
ETHANOL, INC.
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(Exact
name of registrant as specified in its charter)
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Delaware
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000-21467
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41-2170618
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(State
or other jurisdiction of
incorporation)
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(Commission
File Number)
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(IRS
Employer Identification
No.)
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5711
N. West Avenue, Fresno, California
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93711
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(Address
of principal executive offices)
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(Zip
Code)
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Registrant’s
telephone number, including area code:
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(559)
435-1771
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(Former
name or former address, if changed since last
report)
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Check
the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions (see
General
Instruction A.2. below):
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Written
communications pursuant to Rule 425 under the Securities Act (17
CFR
230.425)
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o
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Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
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Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act
(17 CFR
240.14d-2(b))
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Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act
(17 CFR
240.13e-4(c))
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Item
1.01. Entry
Into a Material Definitive Agreement.
Construction
Agreement for the Boardman Project between Pacific Ethanol Columbia, LLC
and
Parsons RCIE Inc. dated as of August 28, 2006
On
August
23, 2006, Pacific Ethanol Columbia, LLC (“PEI Columbia”), a wholly-owned
subsidiary of Pacific Ethanol, Inc., entered into a Construction Agreement
for
the Boardman Project (including related exhibits and schedules, the “Agreement”)
with Parsons RCIE Inc. (“Contractor”).
The
Agreement provides for construction management and construction services
by
Contractor for the construction of a 35 million gallon nameplate capacity
ethanol production facility (“Facility”) in Boardman, Oregon. Under the
Agreement, Contractor is to perform all specified work associated with the
construction of the Facility (“Work”). Contractor may perform its duties by
having any portion the Work performed by third party subcontractors and vendors.
PEI Columbia is to pay Contractor approximately $24.2 million as full payment
for all Work to be performed by Contractor under the Agreement (the “Separated
Contract Price”), subject to certain specified exclusions. Of this amount, 5.0%
is due within 5 days of the execution of the Agreement and the provision
by
Contractor of a performance and payment bond related to the services to be
performed by Contractor under the Agreement. Contractor may request monthly
progress payments in accordance with a specified payment schedule and PEI
Columbia is required to make such payments within 20 calendar days of receipt
of
such request, subject to certain limitations, including lien waivers and
disputed amounts. All payments are also subject to a 7.5% holdback, which
amount
will be held by PEI Columbia as security for the performance of Contractor’s
obligations under the Agreement, and which is to be released at the time
of
mechanical completion of the Facility, less certain other amounts that may
continue to be withheld until final completion of the Facility.
Contractor
is solely responsible for the performance of the Work. Contractor is entitled
to
additional compensation, as reasonably agreed by PEI Columbia and Contractor,
to
the extent that Contractor’s ability to complete the Work is materially impacted
by unexpected delays or defects caused by PEI Columbia’s separate contractors,
subcontractors, suppliers or vendors, or by PEI Columbia’s inability to timely
obtain all necessary permits for the Facility. In addition, if Contractor
encounters any subsurface conditions not reasonably foreseeable and which
vary
materially from the conditions referenced in the Agreement or the related
preliminary soils reports and such conditions materially increase or decrease
the Separated Contract Price, then Contractor is to notify PEI Columbia and
PEI
Columbia may issue a change order to address such conditions or terminate
the
Agreement. PEI Columbia is required, with assistance from Contractor, to
timely
obtain and maintain, at its own cost and expense, all necessary permits
associated with the Facility and PEI Columbia has agreed to compensate
Contractor for any changes to the Work made during the permit process which
requires additional work beyond the scope of Work specified in the Agreement.
Risk of loss for the Facility passes to PEI Columbia on the mechanical
completion date.
PEI
Columbia may, at any time, request an addition to or deletion from or other
changes in the Work, and the Separated Project Cost will be subject to
adjustment in the event that complying with such request would result in
an
increase or decrease in the cost of performing the Work, shorten or lengthen
the
time needed for completion of the Work or require other modifications to
the
rights and obligations under the Agreement. Such changes are to be made pursuant
to written change orders and any agreed upon modifications causing an increase
in the Separated Project Cost are also subject to an additional 16% mark-up
for
labor, materials and supplies, rental rates and subcontractor costs. Contractor
may also request a change in the Work and such changes are also to be made
pursuant to a written change order. If the parties agree to the changes,
then
the Separated Project Cost will be adjusted accordingly. In addition, other
circumstances may permit Contractor to propose changes to the Work, including
specified force
majeure
events,
delays caused by PEI Columbia, third-party delays, certain changes in law
and
unforeseeable subsurface conditions. If the parties agree to the changes,
then
the Separated Project Cost and the schedule for completion will be adjusted
accordingly.
All
equipment supplied by Contractor and all Work is subject to inspection and
testing by PEI Columbia and its designees as well as any financing parties
associated with the financing of the Facility. Contractor is required, at
its
own cost and expense, to correct or replace any Work that contains a defect
or
is not otherwise in accordance with the Agreement.
PEI
Columbia is required to supply, at its own expense, all natural gas,
electricity, raw water and all potable water at the Facility site and is
required to dispose of all wastewater. PEI Columbia is also required to obtain,
at its own expense, any easements and rights of way over the property of
others
to allow Contractor and its subcontractors and vendors access to the site.
In
addition, PEI Columbia is to provide complete, approved-for-construction
and
permitted drawings for the Facility, designed and laid out for the
site.
Contractor
must perform the Work in compliance with a specified project schedule, including
achieving mechanical completion by June 24, 2007 (the “Guaranteed Completion
Date”). Subject to limitations as a result of certain delays, in the event that
Contractor fails to achieve mechanical completion by the Guaranteed Completion
Date, Contractor is required to pay to PEI Columbia liquidated damages in
the
amount of $10,000 per day or partial day beyond the Guaranteed Completion
Date,
to the extent that Contractor achieves mechanical completion within 90 days
of
the Guaranteed Completion Date. In the event that mechanical completion is
not
achieved within 90 days of the Guaranteed Completion Date, Contractor will
be in
default and PEI Columbia may terminate the Agreement and Contractor must
continue to pay liquidated damages in the amount of $10,000 per day until
the
aggregate amount of liquidated damages paid equals $1.5 million. The Guaranteed
Completion Date is subject to adjustment based on various circumstances,
including delays caused by PEI Columbia, reasonably unforeseeable subsurface
conditions, force
majeure
events
and other circumstances.
PEI
Columbia must pay Contractor an early completion bonus of $5,000 per day
for
each full day that mechanical completion is achieved prior to the Guaranteed
Completion Date; provided, that the early completion bonus is not to exceed
$1.0
million.
Contractor
is required, at its own expense, to obtain and maintain insurance policies
satisfying certain specified requirements and coverages on the Facility and
the
Work to be performed by Contractor. Prior to initial site mobilization and
continuing through the final acceptance date, PEI Columbia is required to
obtain
and maintain insurance policies satisfying certain specified requirements
and
coverages on the Facility.
Contractor
provides various customary representations and warranties under the Agreement,
including warranties pertaining to defects in the Work due to faulty workmanship
and which appear within a period of 12 months following mechanical
completion.
PEI
Columbia is entitled to terminate the Agreement in the event of the continued
existence of certain specified defaults by Contractor following specified
grace
periods. PEI Columbia is entitled to terminate the Agreement for convenience
upon notice to Contractor, and in such event, Contractor would be entitled
to a
specified termination payment equal to the unpaid portion of the Separated
Contract Price based on the Work completed through the termination date,
expenses reasonably incurred by Contractor in departing from the Facility
site
and terminating contracts with its subcontractors and vendors and certain
other
specified expenses. PEI Columbia may also suspend all or a portion of the
Work
for its convenience, however, PEI Columbia must reimburse Contractor for
the
costs associated with such suspension. Contractor is entitled to terminate
the
Agreement in the event of the continued existence of certain specified defaults
by PEI Columbia following specified grace periods, and in such event, Contractor
would be entitled to a specified termination payment based on the Work completed
and 80% of the anticipated profit for the unperformed Work.
Each
of
PEI Columbia and Contractor have agreed to customary obligations to indemnify
each other in the event of certain specified losses. Each of PEI Columbia
and
Contractor have also agreement to certain customary confidentiality
obligations.
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Item
9.01.
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Financial
Statements and Exhibits.
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(a)
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Financial
Statements of Businesses Acquired.
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None.
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(b)
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Pro
Forma Financial Information.
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None.
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(c)
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Exhibits.
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Number
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Description
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10.1
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Construction
Agreement for the Boardman Project between Pacific Ethanol Columbia,
LLC
and Parsons RCIE Inc. dated as of August 28,
2006
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SIGNATURE
Pursuant
to the requirements of the Securities Exchange Act of 1934, the Registrant
has
duly caused this report to be signed on its behalf by the undersigned hereunto
duly authorized.
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Date:
August 29, 2006
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PACIFIC
ETHANOL, INC.
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By:
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/S/
WILLIAM G. LANGLEY
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William
G. Langley
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Chief
Financial Officer
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EXHIBITS
FILED WITH THIS REPORT
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Number
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Description
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10.1
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Construction
Agreement for the Boardman Project between Pacific Ethanol Columbia,
LLC
and Parsons RCIE Inc. dated as of August 28,
2006
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