Tuesday, March 18, 2008

Renewable Energy Group Pulls Back from IPO

Wow, looks like the biodiesel sector isn't going to do so hot in the eyes of Wall Street. Renewable Energy Group (normally referred to as REG in the industry) is a little skittish about the black and white future of biodiesel producers in an Annual Report. That's the second IPO implosion in the last few months (first Imperium backed away and swapped management and now this).

My source was OPIS which offers a news email service which I'm on right now. I've pasted the news piece below.


Iowa biodiesel marketer and producer Renewable Energy Group (REG) withdrew its plan to file an initial public offering (IPO), it told the U.S. Securities and Exchange Commission (SEC) this morning.

Eight months after announcing plans to raise up to $150 million in common stock, REG said it withdrew the filing "on the grounds that current market conditions do not support a public offering ... at this time."

No further information was provided in the SEC filing. Credit Suisse, Goldman, Sachs & Co, Banc of America Securities and Thomas Weisel Partners had been listed as underwriters on the IPO. A handful of biofuel companies have announced plans to halt or stop production, until high feedstock costs are reduced.

Over the weekend, the 30-million gal/yr SoyMor biodiesel plant in Albert Lea, Minn., was the latest company to halt production. "Due to current biodiesel economics, the board of governors of SoyMor Biodiesel, LLC are suspending the production of biodiesel at this time," according to a notice posted on the company's website. "SoyMor's board of governors has reviewed all possible alternatives regarding the plant's operations and have concluded that the suspension of production is the most prudent decision to ensure long-term viability of SoyMor," the notice added.

SoyMor is one of four biodiesel plants that REG operates, but which is owned by third parties. REG bills itself as a full-service biodiesel company, including biodiesel production, management, marketing, sales and plant construction management. The REG network currently includes seven operating biodiesel plants, accounting for more than 222 million gal of annual biodiesel production, with three additional plants under construction. However, in its IPO filing, REG said it planned to use some of the net proceeds to finance half of the expected construction costs for the three new biodiesel plants. With the IPO withdrawn, it's unclear whether REG will scale back its plans for the three new facilities.

Well. When the big dogs start backing up a little its a good sign that tough times are immediately ahead. Time to batten down the hatches and get ready for the rough weather.

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