Singapore (Platts)--14Apr2009

Australia's Natural Fuel has been placed under administration, according
to a statement on the Australian Securities Exchange web site Tuesday.
Ferrier Hodgson, which was appointed administrator of Natural Fuel by the
board, said in the statement that it was "working with the board and
management to look at options for the restructure of the company and its
financial position."
This latest development follows the suspension in the trading of Natural
Fuel shares on the ASX last Wednesday. Shares of the company last traded at
A$0.039($0.028)/share.
The renewable energy company had placed more than 53 million shares at
A$1.50/share in its initial public offering in December 2006.
But soon after listing, its shares plummeted from a high of more than
A$1.20/share as a mix of high palm oil prices, low biodiesel selling prices
and production problems at its Darwin plant hampered its business.
Eventually in September 2008, the 120,000 mt/year Darwin biodiesel plant
was placed under administration, after the withdrawal of funding support by
its partner Babcock and Brown Environmental Investments Ltd.
Natural Fuel, which burst onto the scene as one of the world's biggest
biodiesel producers when it opened up large plants in Darwin, Australia and
Singapore in 2007, has been battling hard to stay in business.
The company received a $40 million rescue package from Power Knight, a
unit of Jakarta-based Risjadson Group, earlier last year, in the form of a $20
million project finance loan, and buying $20 million worth of Natural Fuel.
But as biodiesel economics had not improved much, even a rescue package
could do little to save the company.
The company reported a net loss of A$47.5 million for the six months to
December 31, 2008, down 19% from the A$39.9 million loss it incurred for the
corresponding period in 2007.
One of the key reasons for its failure was that it had expanded too
quickly in a very short time, said a source familiar with the company's
business.
"The economics are not there; they expanded too quickly," he said,
adding that if palm oil prices had stayed low, the business would not have
fizzled out so quickly.
The failure of the business underscored the current dismal state of the
biodiesel market, with the cost of producing biofuels remaining high.
So, despite the recent moderate recovery in fossil fuel prices, and by
extension biodiesel prices, the increase in biodiesel prices lagged the
increases seen in feedstock prices, namely crude palm oil which recently hit a
six-month high.
A bright spot did emerge for the company though in January when it
announced a major biodiesel supply contract and its intention to arranging
working capital to fund inventories.
Its share price rose 54% that very day when the news emerged, closing
at A$0.071/share.
However, the following month the company said it was unable to find
inventory finance from lenders due to the current global financial crisis.
The 12-month contract signed with an unnamed Europe-based oil and gas
trading house was to supply up to 50,000 mt/month of biodiesel.
The biodiesel was to come from the company's wholly owned Singapore
subsidiary's Jurong Island plant, which has the capacity to produce 600,000
mt/year of biodiesel and 60,000 mt/year of refined glycerine. The plant was to
run at full capacity this year as a result of the sale.
--Weilyn Loo, weilyn_loo@platts.com