Pacific Ethanol, Inc. (PEIX)

TheHuney (42.68) Submitted: 7/11/08 5:15 AM

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In terms of long-term survival, VSE should have a huge leg up on PEIX; that is, if both of them don't eventually die (as they probably should). So if I were going to long one and short the other, I'd do the exact opposite.

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mikotian (99.96) Submitted: 7/17/08 11:46 AM

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I wouldn't be too sure of that.
1) VSE has a HUGE debt load from their ill timed acquisitions. I wouldn't be surprised if they go BK in the next year or two
2) VSE's plants are all in the midwest. There are very little economies of scale to be had in running these plants. Maybe you can shave a few cents from more efficient logistics, but that's about it.
3) PEIX's plants are in CA, WA, and other Western states. It's much more difficult to permit new plants in the West due to water and other environmental concerns. So, these plants have little local monopolies. More importantly, they can sell their WDG's locally, and not ship them all over the country. This garners huge savings, especially in natural gas, which is going up in price every day.

They are both crappy businesses, but I definitely would not bet on VSE over PEIX. Besides, this is a very short term bet, that is going against me :(

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