Some positive news for biofuels players

ENCOURAGING signs from two key biofuels players points to a potential recovery for the sector, recently besieged by rising feedstock costs and plant commissioning problems.

Mission NewEnergy, which has a 100,000 tonne per annum biodiesel plant in Malaysia and a second 250,000tpa plant to be commissioned in March, is one of the very few biofuels companies to have progressed to ongoing profitable operations.

After posting its maiden profit of $2.3 million for the 2007-08 financial year, Mission has forward sold 80 per cent of capacity of its first plant, with similar capacity expected to be forward sold of its second plant.

At the company's annual general meeting, Mission managing director Nathan Mahalingam said the company had performed well on several fronts.

"We expect capacity of our second plant to be sold out as US and Europe come out of winter in early 2009. The level of enquiries from large and serious buyers has been most encouraging," he said.

The company is also progressing with its commercial-scale Indian jatropha plantation business, which is expected to grow by 57 per cent to 222,580 hectares this calendar year.

In addition to supplying crude jatropha oil, the plantations will create income through the generation of carbon credits, or Certified Emission Reductions, currently trading at about $A20 per tonne of carbon dioxide.

"Mission's early adoption of jatropha and subsequent decision to enter the business in 2006 means that we anticipate the first commercial quantity of crude jatropha oil in calendar year 2009," Mr Mahalingam said.

Listed producer Natural Fuel announced last week that it had signed a 12-month contract with a Europe-based oil and gas commodities trading company to supply up to 50,000t of biodiesel a month from its Singapore biodiesel facility.

But while the Singaporean subsidiary is showing positive signs, the same can't be said for the Australian business.

Natural Fuel Australia, which has a biodiesel facility in Darwin, was placed into administration late last year following ongoing commissioning problems and the withdrawal of funding support from joint venture partner, Babcock and Brown Environmental Investments.

The biodiesel sector has been plagued by rising feedstock prices and tightening margins, with declining oil and mineral diesel prices making the so-called green alternative less economically attractive. But in recent months, the sector has been buoyed by a drastic decline in feedstock prices.

The price of crude palm oil dropped from $US1,300 a tonne to $US400/t over the last three months of 2008.

The price of tallow also fell, dropping from $1,050/t to less than $600/t by November, with expectations it could fall to as low as $520/t.

The slight improvement in margins has not been enough to rescue North Perth-based Australian Renewable Fuels, however.

Last week, the company entered into a contract for sale to sell the company's Picton land for $3 million, with the contract providing for a five-year lease back of land on which the biodiesel plant is situated.

The company announced it had entered into heads of agreement with Mining & Rural Investments and Australian Enterprise Holdings, which have agreed to lend ARF $250,000 each.