The main activity of Biofuels is the large scale production and exploitation of biodiesel and glycerine following the construction and commissioning of the initial plant.

Biodiesel is produced from vegetable oils and, as an environmentally friendly product, can make a significant contribution towards reducing green house gases and meeting Kyoto targets.



RNS's from BFC can be viewed at:

http://www.uk-wire.com/cgi-bin/index?search_type=3&words=bfc&go.x=17&go.y=8

http://www.biofuelscorp.com/

The fall is certainly overdone...dead cat bounce on the way.

Guardian: (7th May 2005)

"On Aim, Biofuels, which is building Europe's largest biodiesel plant on Teesside, fell 30.5p to 113.5p. Traders said a roadshow in the wake of last week's shock profits warning had not gone well. That is not surprising, given that shareholders coughed up 32m in a share placing at 230p barely two months ago."

So does it look good or bad for tomorrow?

BAD!!!!

I would not count the RNS of 29th April as a "profit warning", albeit a second announcement of delays, especially just after raising more money - always likely to cause depressed sentiment.

Did not know about the road show - that may have failed to impress, as reported.

I did not take this to mean more than 4 weeks loss of revenues in the current year - not significant over time.

wilbs - pull yourself together, man! although I also follow the theory of paradoxical intent.

Overall I'm with hlyeo98 on a significant bounce up, but against the background of the overall negative low caps market, it may be slower and lower than otherwise.

Up 1.5p so far this morning, against the market.

SD

Here's some light reading on Biodiesel.



The biodiesel production process
1. Extraction.
Rapeseed contains an average 40% oil content. 98-99% of this can be removed and utilised. The extraction of vegetable oils is a well-established industry.
There are two main processes for the extraction of vegetable oil.
(a) Mechanical Extraction using a series of presses.
(b) Mechanical extraction/solvent extraction - the mechanical extraction being an initial crushing process before removing oil in the solvent extraction process.
(a) Mechanical Extraction.
This is a process of mechanical separation of the oil from the oil seed. This process produces a crude oil and a cake meal, which contain approximately 10% of the oil content.
The seeds are firstly cleaned to remove stones and pieces of metal, which may be present. Once the seeds have been cleaned, they are broken open to aid in the mechanical extraction.
The prepared seeds are crushed under great pressures using a screw press, which causes the cells within the seed to rupture, allowing the release of the oil.
Depending on the intensity of the pressure 50-75% of the oil content can be removed by this method.
(b) Solvent Extraction.
This is a process where by a solvent (usually Hexane) is used to remove the oil. Prior to solvent extraction, most processes use a mechanical extraction process to remove around 20% of the oil content. The remaining cake is then fed into a solvent extractor on a moving bed. The solvent is sprayed over the cake in a counter-current clockwise stream and the oil is removed, as it is soluble in the solvent. The solution is then taken off and the solvent is distilled off leaving the crude oil. From this process around 1-2% oil content remains in the meal.
2. Refining.
Once the crude oil has been extracted, it then must go through a refining process. The impurities present in the oil need to be removed as they can effect the transesterification process. For example if there is a high percentage of phosphorous in the oil, then the methanol and oil could form an emulsion so strong that the process would have to be stopped and the product rejected. The process would then have to be restarted.
3. Degumming.
This process is used to remove the phospholipids, minerals, chlorophylls and colloidal proteins [ AAEOI using phosphoric acid. The phosphoric gums settle out, as they are denser and can be removed by centrifuging the solution.
4. Bleaching.
Bleaching is a process used to remove the colour pigments in the oil. These pigments are absorbed into the bleaching earth. The bleaching earth also removes trace metals, soaps and oxidation products
5. Neutralisation.
The addition of a alkali (Caustic Soda) in a centrifuge removes the free fatty acids. As well as this, the process also removes heavy metals, which would start the oxidation of the oil.
6. Esterification.
This is a chemical process where methanol is mixed with the refined oil to produce Rape Methyl Ester (RME) and glycerine. This process is carried out with the aid of a catalyst to speed up the reaction. Excess methanol/catalyst solution is used in this process to ensure all the oil is converted to esters. The oil and methanol are mixed at a ratio of 1 methanol to 10 of oil.
This is a slow process, which takes up to 8 hours under vigorous agitation. Once all the oil has been converted to RME/glycerine the separation can be carried out.
The methanol is then removed from the mixture by distillation. This methanol can then be recycled back into the process.
The remaining RME, glycerine mixture must then be separated. This can be carried out by simple use of gravity as the glycerine has a higher density than the RME. Alternatively, a centrifuge can be used to separate out the mixture.
The RME then needs to be washed with warm water to remove any catalyst or soap which may remain.
At this stage, the RME (Biodiesel) is around 98% pure, which can be used directly in diesel engines. If the Biodiesel does not meet required standards at this stage it may need to go through further purification in order to meet specification set by the engine manufacturers.
The esterification process can be carried out in one of two ways. It can be carried out in:
(a) Batches
Batch processing is a processing method where by a given amount of oil/methanol is put into the reactor. Once the reaction is complete the batch is moved on to the next stage and another batch is fed into the reactor.
Or
(b) Continuous
Continuous processing is a method where by a continuous flow of oil/methanol is fed into the reaction system and the reaction mixture is continually moving through the process reaction vessels.



Biodiesel economics
The principal variable cost in biodiesel production is the value of the the oil feedstock. In economic models developed by northeast biofuels costings have been based on the following assumptions:
Raw material 100% Oilseed Rape
Minimum till farm cost basis
Biodiesel plant local to diesel blending
Solvent extraction (<1% residual oil)
Rape meal into both feed and fuel
Refined glycerine
Plant depreciation over 15 years
10% Return on capital employed
Using these assumptions the cost of biodiesel at the pump is built up as follows:
Based on an oilseed rape ex-farm value (4 year average) of 142/te

Cost of refined oil (after extraction) 29.5 pence/litre
Cost of esterification 10.3 pence/litre
Duty (after 20pence/litre reduction) 27.1 pence/litre
Distribution costs 6.5 pence/litre
VAT 12.8 pence/litre
Total 86.2 pence/litre
Fossil diesel price (UK avg. April 2004) 78.1 pence/litre
Difference 8.1 pence/litre

wilbs

May 06, 2005
Asian Palm Oil for Euro Biodiesel

Reuters. Asian palm oil could supply up to 20% of the European Unions biodiesel needs by 2010, Pascal Cogels, the head of Fediol, the EUs vegetable oils federation, told Reuters.
The reason is price: palm oil is one of the least expensive vegetable oils.
The winners in that scenario would be Malaysia, which produces 45% of the worlds palm oil and Indonesia (39%).
The EU currently imports about 3.5 million tonnes of refined and crude palm oil every year, chiefly from those two countries.
A 20% share of biodiesel would mean between some 300,000 and 350,000 tonnes of additional palm oil imports, according to Fediol.
Rapeseed oil now makes up between 80%85% of the EU biodiesel.


wilbs

Let's say gross profit (before overheads, interest, depreciation, amortisation) needs to be at least 10% of cost price (+ VAT on this profit margin). So the selling price has to be 95.83p per litre.

So how do they plan to achieve this price, given the prevailing cost of mineral diesel? Is the latter likely to rise much? Can they reduce their costs by bulk processing? Should they run the numbers for jatropha beans?

As you were, permission to collapse in a puddle, Wilbs!

SD

There's not a puddle big enough SD!!!
Many other Biodiesel companies are using the jatropha beans, how does it compare to the palm oil in climate change. i.e. Yeild, cost to harvest & price? This is with reference to the biodiesel policies in India.

'Jatropha appears to be the feedstock of choice because of its ability to thrive under a variety of geo-climatic conditions, its low gestation period and its high seed yield.
Around 10 lakh hectares (3,861 square milesan area 1.5 times the size of Delaware) of land across the country has been identified for Jatropha plantations'

This is taken from the D1 oils prospective.



With the establishment of biofuels strategies in other markets, the Directors believe that the global demand for biofuels will rise beyond its current growth rate of 14.5 per cent. per annum when projected demand expands to include Asia and selected African markets, target markets for the Groups operations. Based on current capacity, feedstock availability and positioning in the market, the global production of biodiesel is expected to reach 2.7 million tonnes (approximately 3 billion litres) by 2010. Governments globally are facilitating the integration of biodiesel into their industrys fuel mix by introducing a number of policy instruments, mechanisms and incentives for its production. Germany currently has zero excise duty on biodiesel compared with k0.48/litre on duty on petroleum diesel and the UK has a duty reduction of 0.20/litre compared with 0.471/litre of duty on petroleum diesel.

So far as the Directors are aware, D1 Oils is the only company which is focused on global commercial production of Jatropha as a feedstock for biodiesel. The Directors anticipate that other producers will consider using Jatropha as a biodiesel feedstock and consider that there will be ongoing competition from existing biodiesel feedstocks.

Currently, the Directors consider that the closest competitor to the Groups refining technology is the Austrian company, BDT Biodiesel Technologies. This company produces small scale biodiesel refineries but the Directors do not believe that it is in the feedstock supply business nor is it focused on selling its refineries outside of the EU market.


wilbs

Wilbs - BTW now you mention it, BFC are meant to be using Palm Oil, although they may have done a dummy run with Rapeseed to test their process plant. Does this make a difference to the figures above?

SD

Interesting point SD.
What would you use? Palm or Jatropha?
I have tried to find out prices on both but not having much luck.

The EU biofuels policy currently relies on an assumption that the heavily-subsidised cultivation of rapeseed will meet its biodiesel targets. However, this is a very large assumption. Already some 3 million hectares of agricultural land across the EU, an area roughly the size of Belgium, grows 10 millon tonnes of rapeseed. But since just 20% of this is ultimately used for biodiesel as opposed to food oil, another whole Belgium would have to be covered in the yellow rapeseed blanket to meet the targets. Rapeseed tires the land, and requires expensive crop rotation and fossil-based fertilisers. Growing rapeseed also has an opportunity cost of preventing farmers from growing more environmentally-friendly, less intensive, and often more profitable produce such as cereals or organic root vegetables. Under these circumstances, the supply of rapeseed oil is unlikely to be able meet the demand


Jatropha grows quickly, is hardy, establishes itself easily even in arid land, and is drought-tolerant, requiring only 300mm of annual rainfail. It grows especially well in South and West Africa, and South East Asia. Jatropha can even be grown on semi-arid land using waste water, making it a useful tool in the prevention of desertification. Each Jatropha tree can produce an average of 3.5 kilos of beans each year depending on irrigation levels.



Editor's Note: Jatropha is an example of a plant that could be grown even if it didn't yield biofuel. It is useful for restoring soil, combatting desertification, and providing fertilizer. It requires minimal inputs of water and grows in extremely poor soil.

Any plant that is a cash crop anyway and costs almost nothing to grow can't be a bad candidate for an economically viable biofuel. Distilleries for biofuel exist throughout the world; biofuel is a form of solar energy harvested from the land, and wherever land and water are abundant, biofuel is cheap and the flow never wanes.

In Africa, India, Asia and the Americas, Jatropha is one of the most promising feedstocks in what is becoming a worldwide biofuel bonanza. Europeans are planting and investing in Jatropha fields in all these places and elsewhere.
If 2,200 Jatropha trees are planted per hectare, each hectare could yield up to 7 tonnes of beans per annum. Jatropha beans can produce oil yields of up to 40%

wilbs

By all accounts, palm oil is destroying the rain forests so in my book, jatropha is the best option in producing biodiesel. I would be interested in the price comparisons for all three and why BFC chose palm.


http://www.foe.co.uk/resource/reports/greasy_palms_summary.pdf

BTW, DOO are down 7.25%

wilbs

Here's something no one has mention yet...

at a 95p buy price the company is valued at about 43m. They recently raised 30m. Back in Sept 04 they had 6m cash which they have probably spent by now.

So it looks to me like the SP can't logically go below about 70p.

At the current SP if you strip out the cash the company is valued at 13m. If they get anywhere near their forecast of 14m profit per annum, then the potential upside from here is huge.

I have jumped back in!!!

Good call tallsii. I am close to doing the same. I think we are entering the "revulsion stage", where all those hardbitten investors who waited for the turn have finally thrown in the towel. That's the time to buy. Hope to buy tomorrow, just hope there isn't a big bounce before I get in.

rgrds
gk

If you check the trades you'll a massive sell that went though late in the day. I think there will still be volume for you to buy tomorrow.

Also, I think one of the things that has really hammered the price is the stock overhang that was generated when the new issue was not fully taken up. It was underwriten and I guessing the underwriter has been trying to recover some money.

Consider me revolted, gallick. Too sick to sell now, at any rate, although pretty much all square on this share having sold 1/3 of holding at the very top. Should have sold it all then and ducked the rights issue, according to my friend Hindsight who always has invaluable (quite so!) advice.


SD

in regards to the pricing of the diesel....i recall reading something in the Shares mag "Blue skies" issue some months ago, that there was some kind of discount or rebate to BFC per/litre from the UK government, so that it could be kept below the price of normal environmentally unfriendly diesel......need to dig out that copy of Shares mag......

i have previously quickly researched myself (as i was about to invest in Australian Renewable Fuels float in Aus.) and found in AFR's prospectus some useful info on the ins and outs of the type of oil source used - as many of these plant oils still do create some greenhouse gases (i think), and so there is some order of ranking in regards to which is best etcetc.

From memory, jatropha is best, then it's rapeseed, then palm or the other way around, then sunflower, and somewhere down the list was tallow (basically beef lard/fat - which AFR is going to use)

You'll find this info in their prospectus (rather than relying on my memory), on the following site;
http://www.arfuels.com.au/default.asp?V_SITE_ID=1

At this low sp for BFC, i also think that it's a good opp. to get in.

from page 17, 03feb05 shares mag;

"This month the government introduced a 20p per litre tax discount in the UK for biodiesel, which is mostly made from palm oil.

This subsidy is worth over 50 million per year to Biofuels. The aid is needed because it is more expensive to convert vegetable oil than mineral oil into diesel. Conventional diesel would have to rise 50% to close the gap."

Current UK Government policy

The UK Government has recognised that there is a strong case for biofuels, and has put in place a duty reduction (derogation) of 20pence per litre for both bioethanol and biodiesel. The duty on fossil based road fuels is currently 49.1pence per litre (click here for details).

However those interested in developing a large scale biofuels industry in the UK, using UK sourced raw materials, have calculated that at least a further 8pence per litre reduction in duty is required (click here for details). northeast biofuels support this view.

Investment in domestic biofuels production facilities is taking place, but is based on using waste cooking oils and tallow (click here for details), and importing raw materials such as palm and soy oils (click here and also here for details).

A Government consultation on biofuels was held during 2004 (click here for details), lead by the Department for Transport. This helped clarify the desirability of further Government support.

A recent EU directive has set reference values (non-mandatory) for member states to achieve 2% biofuels use in transport by 2005 and 5.75% by 2010. It is widely accepted that the UK will not meet the headline target for 2005, but biofuels have the potential to contribute towards it. EU Governments were required to announce their approach, in the form of indicative targets to meeting these reference values, by early July 2004.

wilbs