ABG said the termination of the deal was due to changes in North American personnel and strategy at ABG and changes in strategy at ArcLight, but the fact is that even the company’s Australian operations are struggling.
While the 160 million litre per annum Narangba biorefinery in Queensland is still operating, ABG’s Berkeley Vale plant and its Moree vegetable oil crushing facility, both in New South Wales, have been mothballed.
ABG conceded in March that it was under considerable financial stress and urgently needed injection of working capital to continue trading.
Seeking shareholders’ approval for a rights issue, the company told shareholders that if the issue was not approved, ABG’s future could be in doubt.
“The company will have inadequate funds from neither existing operations nor [will it have] an immediate alternative source of funds to meet its financial commitments to enable the continuation of the business,” the board said in a letter to shareholders.
“In those circumstances, the directors will need to consider the immediate future of ABG Limited, including putting the company into administration.”
ABG has secured a $4 million loan from major shareholder Transfield and is now moving to raise up to $15.9 million by issuing up to 319.3 million shares at 5c each.
The company currently has 97.8 million shares on issue. When it floated in December 2005, shares were issued at $1 each; they are currently trading at 8.6c.
A year ago, biofuels were still a hot commodity.
But things began going wrong for the sector and ABG in particular, when the government changed fuel excise laws and associated regulation on July 1, 2006, reducing the advantages enjoyed by many biodiesel users.
“Customer confusion regarding excise changes and the threat of further adverse regulatory amendments heavily impacted biodiesel sales in the second half of the year,” ABG said.
Growing international demand for vegetable oils and the Australian drought’s impact on local feedstock prices also hit ABG and other biofuels companies hard.
