Australia’s largest biodiesel producer has been forced into receivership as a result of the collapse in global oil prices and changes in federal government policy.
Australian Renewable Fuels says it can no longer cope with the costs of producing its renewable fuel at a time when oil prices have slumped to under $US30 a barrel and dented demand for biodiesel.
While oil prices have plunged, prices for feedstock – renewable biological materials like animals fats and vegetable oils used to produce clean burning diesel – have jumped.
“The historical long term correlation between the barrel price of oil and the cost price of feedstock has broken down,” ARF directors said in a statement on Thursday.
“This has been exacerbated by the extent of the dramatic fall in the oil price and hence our selling price for biodiesel.”
The company needed to sell 48 million litres of biodiesel, which is safe to use in any diesel engine, to break even.
ARF sells biodiesel to fuel wholesalers and petrol distributors including Shell, BP, Greenfreight, Viva Energy Australia, Woolworths and Meredith Dairy.
It was developing a line of cheaper feedstock supplies from Asia, and had considered raising biodiesel sale prices, pursuing more exports to the United States, and cutting back on plant production to help keep the company afloat.
However these ideas were rejected by the company’s lenders, forcing it initially into voluntary administration before appointing KordaMentha as receivers.
ARF’s board also blamed its financial woes on federal government changes to biodiesel policies.
The government has scrapped its cleaner fuels tax grants scheme and provides subsidies for imported biodiesel.
“The continued and destabilising uncertainty of the federal government’s policy in regard to biodiesel over recent years had … increased the company’s financial reliance upon its debt providers,” ARF said.
ARF employs about 50 people at plants in Victoria, South Australia and Western Australia.
The company is maintaining operations for now while KordaMentha examines its books and searches for a buyer.