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.

From OPIS BIOFUELS UPDATE:

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 With the IPO withdrawn, it's unclear whether REG will scale back its plans for the three new facilities.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.

Imperium Backs Off IPO

See Imperium's Press Release here.

My thoughts... Imperium just took itself private before it even went public.

The decision was made a few weeks ago not to go public. Martin Tobias said "Then why am I here if I'm not going to cash out in under 18 months?" Tobias exits, the team retools for a new cash flow and growth business model, and the rest is for the business papers to speculate.

See news below from Fox Business News online:

SEATTLE, Jan 03, 2008 (BUSINESS WIRE) -- Imperium Renewables, Inc., a leading producer of environmentally friendly biodiesel fuel, today announced that it is delaying its plans for an initial public offering. It has withdrawn its registration statement on Form S-1 as filed with the Securities and Exchange Commission.

John Plaza, Imperium's founder, president and interim CEO, said, "Given the current market conditions, our Board has determined that it is not the right time to pursue a public offering. We look forward to building on our success in 2007, during which we constructed and opened the nation's largest biodiesel plant."

In addition to operating its biodiesel plant in Grays Harbor, Washington, Imperium is focused on identifying and commercializing next-generation feedstocks and fuels at its research and development lab located at the original Seattle Biodiesel facility. Imperium is committed to continuing to innovate the renewable fuels industry, demonstrated by its proprietary biodiesel production processes that have been implemented at Grays Harbor, to its new work in alternative feedstocks.

Biodiesel is a clean-burning alternative fuel made from oils derived from farm crops, and can be used in any conventional diesel engine. It can be used in pure form (100 percent biodiesel) or in a "blended" form, in which it replaces a percentage of petroleum diesel. A U.S. Department of Energy study determined that biodiesel reduces carbon dioxide emissions by more than 50 percent compared to petroleum diesel. Imperium's high-quality fuel meets or exceeds ASTM D-6751 specifications.

About Imperium Renewables Imperium Renewables is a leader in the renewable energy industry. Headquartered in Seattle, Washington, Imperium Renewables currently operates a 100 million gallon per year nameplate capacity production facility in Grays Harbor, Washington, and is the largest producer of biodiesel on the West Coast.

Martin Tobias Steps Out of Imperium

On the way out last week this Imperium Renewables Press Release came across my email. (Also check out the CNet article as well as the Seattle Post Intelligence article)

It was a pretty big surprise to everyone which just drives gossip from every side of the industry. Truthfully I wasn't even thinking about work at all over the holiday. It didn't even strike me as relevant to post this news until a friend from the east coast asked about it.

My thoughts. Imperium has a pretty strong wind to its back. This leads me to wonder if this is a positive thing for Imperium as they move forward to their Initial Public Offering. A strategic restructuring to move forward.

A review of Imperium Renewables fortunes:

1) Imperium has lined up a few long term supply agreements (guaranteed off take and quantifiable cash flow).

2) Imperium has lined up a reasonable amount of oil supply from both Canadian canola and Pacific palm farmers (reasonably assured feedstock with a large leveraged buying position).

3) They have a large terminal in the tightest fuel supply region of the US with a mandated biodiesel blend coming in both Oregon and Washington (guaranteed market for their product with a low cost and higher volume capital infrastructure than any other biodiesel producer next to REG).

In short on a fundamental basic of business level they are sitting pretty. They just need to sell a boat load of stock to give them enough operating cash flow to grow as promised.

I think it would be hard for much of anything to be bad news for what they are doing. Regardless of which token, rockstar, legendary executive is their CEO. We will just have to wait and see.

Imperium's Utility Scale Contract: Part 2

Further comment and news about Imperium's utility contract to supply what will be the world's first utility scale biodiesel power generation project.

Found at Seattlepi.com on John Cook's Venture Blog.

Updates Provided:

• The power plant will be a 110 megawatt generating station.
  
• Imperium is working with local groups to determine the best local feedstocks.
  
• The Hawaiian Electric and the NRDC have also set standards for imported feedstocks (short description HERE; full policy HERE).
  
• The supplying point from Imperium will be a plant "similar" in size to the Grays Harbor plant.
  
• This plant is currently in the permitting phase in Kalaeola Harbor on Oahu. (See below)
  

Imperium Signs Utility Scale Biodiesel Deal with a Hawaiian Utility

I was directed to this tidbit by the BiobasedNews....

If you haven't heard of Imperium Renewables they are the proud owner of the world's first 100 million gallon capacity biodiesel plant in Grays Harbor, Washington. Now they can chalk up another distinction. They are also the proud supplier of the world's largest single consumer of biodiesel in the world. The Hawaiian Electric Company.

Story Below:

HONOLULU - Hawaiian Electric Company filed an application Thursday with the Hawaii Public Utilities Commission for approval of a biodiesel supply contract for its new Campbell Industrial Park generating station.

The contract is the result of a competitive bidding process.
The biodiesel will be supplied on an exclusive basis by Imperium Renewables.

The contract will continue through the end of 2011 and provides that Imperium will supply Hawaiian Electric's total fuel requirements for the Campbell generating station, anticipated to be between 5 million and 12 million gallons of biodiesel per year.

I'm impressed. Not only impressed but I'm jealous. Friggin jealous in fact (I've totally been working on trying to get an energy project off the ground for years). I'll have to congratulate Imperium next time I run into them at a Northwest Biofuels Association even.

With what I assume is a five year biodiesel supply contract the only issue remaining is a long term palm contract to go with it. Being that palm production is expanding my guess is that they probably already have such a deal inked. Combine the safety of a contract for palm with a big off-take agreement with a utility, and the upcoming IPO expected to pull over $300 million in cash makes this looks like a home run.

They have cashflow, capacity, likely have feedstock from Palm growers, and now a guaranteed buyer for the fix cost portion of a spanking new Hawaiian plant. Looks good for them.

The only curve ball is the volatility of maintaining that large of quantities of through put. Allot could change very rapidly in relationship to their bid numbers (just a currency revaluation could really put a damper on the competitive price of palm).

As I heard when many first criticized the concept of Imperium's business model. Usually its not a good idea to bet against Martin Tobias.