Biofuels firm forced to close down refineries

Biofuels firm forced to close down refineries

Apr 10 2008 by Karen Dent, The Journal

BIOFUEL business D1 Oils is pulling out of production and has announced the closure of its Middlesbrough refinery because it cannot compete against heavily subsidised producers in the US.

The company is also shutting its refinery in Bromborough on Merseyside. Around 40 jobs are under threat on Teesside and around 47 at Bromborough, as revealed on nebusiness.co.uk yesterday.

D1 Oils chief executive Elliott Mannis said: “We are in consultation with our employees. There is clearly a strong likelihood that we will have to let people go.”

Mr Mannis said it was “inappropriate” to give a date when the plants would close because the consultation with staff was continuing.

He said the AIM-listed company, which this week revealed losses of £46.1m in the year to December 31, 2007, was refocusing the business to concentrate on growing the non-edible biofuel crop jatropha, which is grown in India, Africa and Asia.

It has raised £16.1m to ease cash concerns by issuing an extra 64.3m shares to existing institutional shareholders at 25p each, a 34% discount to Tuesday’s closing price.

Mr Mannis said: “This is a big vote of confidence from shareholders and will keep the company cash positive through to the end of 2009.” D1 Oils will now focus on its joint venture with oil giant BP called D1-BP Fuel Crops Ltd, which was launched last October.

D1 Oils is the exclusive supplier of jatropha to the project and it will also continue its work on developing other plants for biofuel.

Mr Mannis said: “We will concentrate on planting one million hectares of jatropha trees in the next four years.”

D1 Oils was forced out of biofuel production because it could not compete with US producers, which are able to claim subsidies on biodiesel in the US and again when the fuel is exported to Europe.

Entrepreneur Karl Watkin, who founded D1 Oils but stepped down as non-executive director last month, said it was a “shame” the business had been forced out of production, but he added: “They should have done it 12 months ago.”

Roberto Rodriguez, a biofuels analyst at New Energy Finance, said that D1’s decision to refocus the business was not unexpected.

He said: “All European producers have had a bad time because the biodiesel coming from the States and South America is cheaper than they can produce.

“D1 Oils only has small plants and they are even less competitive because they do not have the economies of scale.”