Biofuels investment push

Three Western Australian biofuels companies are moving ahead with capital raisings collectively worth more than $150 million despite the sector being hit with several setbacks.

Australian Ethanol has announced plans to raise more than $50 million in new equity to fund the construction of its first ethanol plant, at Swan Hill in Victoria.

Jupiter Energy has confirmed plans to spin-off its Malaysian biodiesel project into a new company, Jupiter Biofuels, which is due to release a prospectus next month for a $70 million public share issue.

A third Perth company, Sterling Biofuels, recently issued a prospectus for a $35 million share issue to fund its own biodiesel plant in Malaysia.

Jupiter and Sterling are following the lead set by another Perth company, Mission Biofuels, which commenced construction this month of a biodiesel plant in Malaysia.

Australian Ethanol executive chairman Peter Anderton agrees the sector has been overheated, noting that the US market has been described as being in a ‘dot corn’ boom.

He believes this will present opportunities for companies with robust projects and solid finances.

“We see a bit of a shakeout in the industry and see that as an opportunity,” Mr Anderton told WA Business News.

The withdrawal of Brisbane company Global Ethanol Holdings’ $470 million share offer earlier this month was a clear sign of investors’ new-found caution.

The sector has not been helped by the operational and financial setbacks announced by two listed biodiesel producers.

Perth-based Australian Renewable Fuels said in June it was unlikely to meet its 2006 profit forecast and was headed for a loss, while Brisbane company Australian Biodiesel Group said its forecast $8.2 million net profit was likely to become a $2.6 million pre-tax loss.

Against this backdrop, Australian Ethanol, which was backed initially by Multiplex and the Roberts family, has released further details of its two projects.

It has locked in $US60 million ($A80 million) in funding for a biodiesel plant in Nebraska in the US, which is designed to produce 190 million litres per year using a feedstock of soya oil.

Mr Anderton said the company planned to steer clear of biodiesel in Australia until issues surrounding feedstock supply, technology and legislation were clarified.

Instead, it is proceeding with construction of Australia’s first grain ethanol plant in Victoria.

The $75 million plant is designed to produce 100 million litres of fuel grade ethanol per year from a feedstock of corn, wheat and barley.

Equity funding will come from a $31 million share placement, a share purchase plan likely to raise between $4 and $6 million, and a $20 million draw-down facility.

Jupiter Energy executive director Geoff Gander said he was close to finalising contracts and approvals for the company’s planned biodiesel plant.

Jupiter, chaired by Eddie Smith, is planning to spin off the biodiesel project via an in specie distribution of shares to existing shareholders.

Mr Gander said Jupiter expected to raise just over $5 million in fresh equity from the exercise of options, which is necessary if option holders want to participate in the in specie distribution.

This would be followed by Jupiter Biofuels’ $70 million IPO.

Jupiter’s biodiesel plant will have a design capacity of 280ML, substantially larger than the 110,000L plants being built by Sterling and Mission.