Quarterly report pursuant to Section 13 or 15(d)

2. PACIFIC ETHANOL PLANTS

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2. PACIFIC ETHANOL PLANTS
9 Months Ended
Sep. 30, 2014
Pacific Ethanol Plants  
2. PACIFIC ETHANOL PLANTS

Consolidation of PE Op Co. – The Company concluded that since PE Op Co.’s inception, through the point the Company became a 91% owner, PE Op Co. was a variable interest entity because the other owners of PE Op Co., due to the Company’s involvement through its contractual arrangements, at all times lacked the power to direct the activities that most significantly impacted its economic performance. However, since the Company’s acquisition in December 2013 that brought its ownership interest in PE Op Co. to 91%, the Company has obtained and maintained sufficient control both by way of agreements as well as based on structural control of PE Op Co., such that PE Op Co. is no longer considered a variable interest entity, and as such the Company consolidates PE Op Co. under the voting rights model. Noncontrolling interests decreased from $5,683,000 at December 31, 2013 to $3,888,000 at September 30, 2014 due to the Company’s purchase of an additional 5% interest in PE Op Co., which reduced noncontrolling interests by $5,921,000, which was partially offset by net income attributed to noncontrolling interests of $4,126,000 for the nine months ended September 30, 2014.

 

The Company’s acquisition of its ownership interest in PE Op Co. does not impact the Company’s rights or obligations under any of its contractual arrangements. Further, creditors of PE Op Co. or its subsidiaries do not have recourse to the Company. Since its acquisition, the Company has not provided any additional support to PE Op Co. beyond the terms of its contractual arrangements.