Change of plans for biofuels stocks

Perth companies Jupiter Energy and Australian Ethanol have been forced to revise their capital raising plans after a downturn in investor support for the biofuels sector.

Biofuels was one of the hottest sectors on the stock market for a few months earlier this year, but investor support has rapidly waned as some of the existing producers have revised their expected earnings.

Sydney-based Australian Biodiesel Group has spooked the market by announcing two earnings downgrades in the past two months.

Its 2005 prospectus forecast an $8.2 million profit but the company said last week it expected a $10.8 million loss.

Perth-based Australian Renewable Fuels was another producer to downgrade its earnings outlook this year.

The waning investor support was reflected in the share price of Perth companies Mission Biofuels and Sterling Biofuels, which completed major capital raisings earlier this year at $1 per share.

Mission shares were still above the issue price but well below their peak of $1.88, while Sterling shares have plunged to 63 cents.

Jupiter Energy, chaired by Eddie Smith, announced this week that its subsidiary Jupiter Biofuels had scrapped plans for a $75 million initial public offering.

The company said it intended to proceed with development of its biofuels project in Malaysia but would raise the funds through the ASX-listed Jupiter Energy.

Funding of between $40 million and $50 million would be needed by the end of 2006 to ensure the project remained on track and it was likely further funding would be needed in late 2007.

Australian Ethanol, chaired by Peter Anderton, is pursuing the development of a biodiesel project in North America and an ethanol project in Victoria.

It announced last month that it would scrap plans for a $31 million share placement and an associated share purchase plan for existing shareholders.

“The directors felt that the recent share performance in the overall market, particularly the energy and biofuels sectors, had adversely affected the AAE share price and made the placement terms unattractive to investors,” the company said.

It said the performance of some biodiesel projects being pursued by other groups in Australia had adversely affected the market.

It also acknowledged that its share price was adversely affected by the termination of a $US30 million funding deal with US company Amaranth, which was earmarked for its North American project.

The company is negotiating replacement funding. Its share price is currently 43 cents, well below the planned placement price of 52 cents per share.