Subiaco company Natural Fuel has launched Australia’s biggest biofuels float at a time when other companies in the sector have either scrapped capital raising plans or suffered a hammering by investors.
Subiaco company Natural Fuel has launched Australia’s biggest biofuels float at a time when other companies in the sector have either scrapped capital raising plans or suffered a hammering by investors.
Natural Fuel managing director Dick Selwood is confident the $80 million initial public offering will succeed despite the problems suffered by other players in the sector.
“I don’t like being compared to them because we’re not the same,” he said.
“They tried to raise money to start a business; we’ve been operating since 2002 in the United States.”
If the float succeeds, it will be the first good news in several months for a sector with a growing roll call of casualties.
Jupiter Biofuels had scrapped plans for a $75 million IPO, Australian Ethanol has cancelled a $31 million share placement, and Melbourne-based Axiom Energy has been forced to extend the closing date for its $36 million IPO, despite having the backing of wealthy investors such as Dick Pratt and Lindsay Fox.
Australian Biodiesel Group and Australian Renewable Fuels are trading near 12-month lows after downgrading their profit forecasts earlier this year.
The poor sentiment has washed back onto recent listings for Mission Biofuels and Sterling Biofuels, which are developing projects in Malaysia.
The loss of investor support reflects the change in market fundamentals, with oil prices falling in recent months, and concern over technical problems encountered by some producers.
Natural Fuel has signed up broking firms Commonwealth Securities and BBY as underwriters of its $80 million IPO.
It has also agreed to accept $14 million in oversubscriptions.
The offer price values the company at $500 million, which is less than five times the company’s forecast 2008 net profit of $119 million.
Mr Selwood said the feedback from investors was that the IPO was very attractively priced for investors.
“When I was doing the roadshow, they all thought it was cheap,” he told WA Business News.
Mr Selwood said the pricing of the offer reflected the current realities of the Australian market.
The prospectus forecasts were based on an assumed oil price of $US55 per barrel, which Mr Selwood said was based on expert advice.
The prospectus also showed that a 10 per cent change in the biodiesel price would have a big impact on profit.
Natural Fuel will be hoping its experience to date and use of proven technologies will convince investors it has dealt with the technical risks associated with biodiesel production.
The company is currently commissioning its first 140 million litres per year biodiesel plant in Darwin, which was built in joint venture with Babcock & Brown Environmental Investments.
It plans to use the float proceeds to build three wholly owned biodiesel plants in Singapore with a capacity of 680mL.
Natural Fuel also envisages the development of up to three biodiesel plants in Houston in the US and potentially the development of plants in Western Europe.
Mr Selwood said the company was aiming to be a global player so it could compete effectively.
“Biodiesel is becoming a mainstream part of the oil industry, which is clearly dominated by companies with an international reach,” he said.
He predicted governments around the world would continue to introduce tax and regulatory incentives for alternative fuels to ensure security of supply and lower greenhouse gas emissions.
