Quarterly report pursuant to Section 13 or 15(d)

2. PACIFIC ETHANOL WEST PLANTS

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2. PACIFIC ETHANOL WEST PLANTS
6 Months Ended
Jun. 30, 2015
Pacific Ethanol West Plants  
2. PACIFIC ETHANOL WEST PLANTS

As of June 30, 2015, the Company owned 100% of its four ethanol production facilities located in the Western United States through its holding company, PE Op Co., namely, Pacific Ethanol Madera LLC, Pacific Ethanol Columbia, LLC, Pacific Ethanol Stockton LLC and Pacific Ethanol Magic Valley, LLC (collectively, the “Pacific Ethanol West Plants”) and their holding company, Pacific Ethanol Holding Co. LLC (together with the Pacific Ethanol West Plants, the “Plant Owners”).

 

The Company concluded that since PE Op Co.’s inception, through the point the Company became a 91% owner of PE Op Co. in December 2013, 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. Since December 2013, as a result of owning 91% of PE Op Co., the Company, with its significant majority position, had the ability to make most all decisions on its own, and therefore determined that PE Op Co. was no longer considered a variable interest entity.

 

In May 2015, the Company purchased the remaining 4% ownership interest in PE Op Co. that it did not own, and now as the 100% owner of PE Op Co., continues to consolidate PE Op Co.’s financial results under the voting rights model.

 

For the prior periods in which the Company did not wholly-own PE Op Co., it adjusted its consolidated net income (loss) for the income (loss) attributed to PE Op Co.’s other owners. The remaining amount after this adjustment resulted in net income (loss) attributed to Pacific Ethanol.

 

Noncontrolling interest decreased from $4,475,000 at December 31, 2014 to $0 at June 30, 2015 due to the Company’s purchase of the remaining 4% ownership interest in PE Op Co. for $3,828,000, resulting in a reduction of noncontrolling interest of $4,388,000, and loss attributed to noncontrolling interest of $87,000 for the six months ended June 30, 2015.

 

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. do not have recourse to Pacific Ethanol, Inc. Since its acquisition, the Company has not provided any additional support to PE Op Co. beyond the terms of its contractual arrangements.