Bio Diesel manufacturer to list on ASX

Submitted: Tuesday, Nov 28, 2006 at 10:11

ThreadID: 39848 Views:2627 Replies:6 FollowUps:11

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Member - Norm C (QLD)

Those who see a big future in bio diesel in Australia and Globally may be interested in this.

Natural Fuel Limited has an IPO (Initial Public Offering) underway to raise $80,000,000 to fund further expansion of it's bio diesel production facilities. THe offer is underwritten by Commonwealthe Securities. The offer closes on 24 November and listing is expected on 21 December.

They have production facilities in Darwin (about to be commissioined I believe), Singapore (under construction) and planned for the USA and Europe.

I haven't read the prospectus yet, so have no view on the merits of the business and it's potential success. I'll read the prospectus and try to form a view over the next few days.

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Reply By: Member - Norm C (QLD) - Tuesday, Nov 28, 2006 at 10:23

Tuesday, Nov 28, 2006 at 10:23

For anyone interested, here is some info on the float. The link is to Share Scene, a site with many similarities to this one, but focussed on share market investing and trading.

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Follow Up By: Member - Norm C (QLD) - Tuesday, Nov 28, 2006 at 11:00

Tuesday, Nov 28, 2006 at 11:00

Sorry, not as easy to use as I thought. You have to click on ShareScene Float Info, then scroll down to Natural Fuel Ltd (about 80% down from top), then click on Natural Fuel Ltd in left column.

Can't find an easier way to give the link.

If you are interested, I guess you'll find it. If you are not, I suppose it doesn't matter.

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Reply By: mfewster - Tuesday, Nov 28, 2006 at 12:45

Tuesday, Nov 28, 2006 at 12:45

Australian Renewable Fuels ARW is already on the ASX and has two plants in production. Their share price has been hit by Federal governments policy on biodiesel. Any new companies listing will have same problem so be careful of investing.

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Follow Up By: Member No 1- Tuesday, Nov 28, 2006 at 12:52

Tuesday, Nov 28, 2006 at 12:52

yep certainly have...less than half than when they floated last year

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Follow Up By: Member - Norm C (QLD) - Tuesday, Nov 28, 2006 at 13:27

Tuesday, Nov 28, 2006 at 13:27

I'm not suggesting that NFL is a good investment. That's a decision for potential investors to make.
But it is a very different business to ARW, who only have operations in Australia and have had major production and management problems.
Certainly, they have not been helped by government policy, but their poor share price is more a factor of failing to meet production targets and generating substantial losses, when they had forecast to be profitable by now.
As at 1 Nov 06, they had no cash at bank (overdrawn by $600K) and still had production problems. They can't even qualify for the Australian Biofuels Infrastructure Grant yet due to the production problems. These are more issues of management than govt policy. I'm certainly glad I didn't invest in this one.

But regardless of individual company issues, there has been a lot of interest in bio diesel on this forum. The only way it will become viable is through substantial investment. Since the big oil companies are showing little interest in making this investment, it will have to come from somewhere else.

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Follow Up By: mfewster - Tuesday, Nov 28, 2006 at 20:33

Tuesday, Nov 28, 2006 at 20:33

Norm, Not really relevant to this forum, however I tend to track biofuel developments. Your info on this company differs from mine. My source is only the public announcements. I would have thought for example, that they are eligible for the grant, the production targets have been met and they are preparing to expand into N American market. They have the unique Australian rights to some rather classy European bio technology. I am not disputing your statements, just curious. What is your source of info?

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Follow Up By: Wazza - (Vic) - Tuesday, Nov 28, 2006 at 21:28

Tuesday, Nov 28, 2006 at 21:28

ARW needs 30 days of consistent production to get the grant. Would not hold my breath for that to happen.

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Follow Up By: Member - Norm C (QLD) - Tuesday, Nov 28, 2006 at 22:57

Tuesday, Nov 28, 2006 at 22:57

mfewster, the info I posted on ARW is available in company announcements to the ASX. Failure to qualify for grants and failure to achieve forecast profit were in announcement dated 6 June 06. Cash at bank of negative $600K was in announcement of 31 Oct (Commitments Test Entity 1st Qtr Report).

Wazza is right in that they need to achieve 30 days of continuous productioni to qualify for the grant. They have failed to do this yet. Put all that together with the lack of cash and poor share price (unable to raise more equity on favourable tems) and I can't see them expanding to USA real soon.

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Follow Up By: Member - Andrew W (SA) - Tuesday, Nov 28, 2006 at 23:23

Tuesday, Nov 28, 2006 at 23:23

yep Australian Renewable Fuels and Australian Biodiesel Group both have management issues and technical issues ...

Can't speak for how good the investment is though.

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Follow Up By: mfewster - Tuesday, Nov 28, 2006 at 23:34

Tuesday, Nov 28, 2006 at 23:34

Hello Andrew. I thought you would turn up in this thread sooner or later.
Norm, I checked ASX announcements. As luck would have it, an announcement today claims ARW are on target to meet outputs in January.

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Reply By: Member No 1- Tuesday, Nov 28, 2006 at 12:47

Tuesday, Nov 28, 2006 at 12:47

any co which has an ex pollie on the board must be treated with caution..:))))

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Reply By: Footloose - Tuesday, Nov 28, 2006 at 22:19

Tuesday, Nov 28, 2006 at 22:19

Oh no, a post on "green" investments. I think I've been here before.
How can I say great potential area for investment but you dont want to go broke doing the right thing, without someone telling me I'm losing credibility ? (If credibility was weight I'd be anorexic by now :))
An area where I have a lot of interest not translated to knowledge.
Please keep posting about bio events, where to get it, problems etc. Oh and any investment info in this area will also be taken on board.

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Reply By: mfewster - Wednesday, Nov 29, 2006 at 10:02

Wednesday, Nov 29, 2006 at 10:02

Ok, I am not totally sure of my facts here, but I think Natural Fuels illustrates one of the potential problems with biodiesel that will have worse consequences than dino. Bio can be made from lots of sources. If I understand the Nat Fuels current process, they are using tropical palm oil. This is the reason for the big jungle burn offs in Indonesia. The "wildfires" burn out jungle, after which palm oil plantations go in. Just where do bio plants in Darwin and Singapore source oil crops from? I am not advocating them as an investment, but I believe the ARW process is based on tallow and canola which are already Australian industries??

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Reply By: The Landy - Wednesday, Nov 29, 2006 at 10:40

Wednesday, Nov 29, 2006 at 10:40

Whilst diverging from the original topic, but still on the same subject of alternate fuels, specifically ethanol and bio-diesel. One development that is important not to be overlooked is the long-term affect that the production of these fuels will have on basic food crops.

Earlier this year a substantial rise in both the price of sugar and the price of corn was attributed to the rise in the price of oil. Theoretically (at least) it is argued that the price of the alternate fuels, bio-diesel and ethanol, is represented as a cost of production, unlike oil which is priced purely as a commodity and based on supply and demand factors. However, the price of sugar rose sharply as people bought it to divert into the production of ethanol. The same thing happened with corn and bio-diesel production.

On the face of it many will say does it matter if you consume neither. But the implication is that anything that can be turned into bio-diesel or ethanol will eventually start to respond to price movements, especially upward moves, in the price of oil.

The price of oil is linked into the cost of many basic items simply through the cost of transportation, manufacture of goods etc. But this relatively new development will eventually see a direct link formed. The price of oil goes up and all of a sudden the price of basic food items also go up. The situation will eventually occur where the price of bio-diesel and ethanol will match closely the price of the alternate dino-diesel, so no real advantage, but the cost of basic food items will be more expensive….

Food for thought?

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Follow Up By: Member - Norm C (QLD) - Wednesday, Nov 29, 2006 at 11:02

Wednesday, Nov 29, 2006 at 11:02

There is something to what you say Landy, but:
One day Dino oil WILL run out. Doesn't matter whose opinion you accept (something between 20 years and 200 years), but it WILL run out.
Alternatives that are made from crops will have ups and downs caused by supply not keeping up with demand (possible in early years), drought, flood, etc, but it WILL NOT run out.

If there is a major shift to ethonol, bio, etc there will eventually be a rough balance created between supply and demand, short term seasonal factors notwithstanding. There will occasionally be oversupply (like wine grapes in Australia at the moment), which should drive prices down for a while.

Fortunately, bio diesel can be made from many raw materials. If one is in short supply, it may be possibel to use another for a period.

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Follow Up By: The Landy - Wednesday, Nov 29, 2006 at 13:08

Wednesday, Nov 29, 2006 at 13:08

Hi Norm

It is certainly food for thought, whilst on paper there are good reasons for looking at alternatives, however, there are many (hidden) costs that many aren't counting on.

I'm not sure that we will be able to keep a balance between supply and demand when it comes to crops. Australia is experiencing severe drought and we are flat out growing anything at present.

The problem with our reliance on oil, diesel and petrol, regardless of how it is produced (bio/dino/ethanol) is that the world cannot afford short term supply glitches.

But the real issue will be the cost of it, the next time oil goes up substantially have a look at what some of them basic food crops do. Especially the ones that have an actively traded futures market.

Mind you, I'm not saying we shouldn't pursue bio/ethanol, but the costs will be far greater the what many people think.

Then there is the issue of GM crops, I can see the arguments that if you are growing canola for fuel then who cares if it is GM modified....that will open a whole new can of worms to be debated.

On 'Peak Oil' who knows when it will occur, some say it has already, but one thing is for sure, oil is simply going to trend higher over the next decade as the demand increases significantly.......as people switch to alternative fuels the basic underlying crops that can be used in the production of food will also go up......

Imagine, the price of beer linked to the price of oil or worst still, your best red.......geez!

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Follow Up By: Member - Norm C (QLD) - Wednesday, Nov 29, 2006 at 13:34

Wednesday, Nov 29, 2006 at 13:34

My comments on supply and demand reaching a balance of sorts were more a global outlook than just Australia. Our government isn't showing much interest in supporting this industry. The fact that NFL (subject of original post) is raising it's capital in Australia, but will have most of it's investment offshore is a fair indication of this.

Wine grapes used in ethanol and oil prices driving wine prices? Now that is a scary thought.

Tallow can be used in bio diesel production as well. Beef, lamb and pork prices might follow oil prices along with the beer and wine.

How's that for a future. Can't afford fuel for the 4B, nor meat, beer and wine. Might as well slit the wrists right now LOL.

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