Australia's largest biodiesel producer, Australian Biodiesel Group, has announced that it is looking to raise AUD$15.9 million (US$12.4 million) to launch a new business plan after a difficult year in 2006. The money will be via a rights issue at 5c per share which values the company significantly below its current share price.

Changes to the Australian biodiesel market, including biofuels legislation, negatively impacted the company during 2006, which is now positioning itself to expand into North America where it is believed profits will be easy to come by. The biodiesel market has rapidly grown over the last three years in the U.S. on the back of rising oil prices, federal incentives and state based support of biofuels.

Analysis: A crippling drought and federal biodiesel incentives that are being phased out virtually before the industry has established itself in Australia have made it tough on the local producers. Expansion into the booming U.S. market is a good option, but what ABG are really praying for is for the drought to end and oil prices to go back up to last year's record highs.

Related:

• Consultant declares biodiesel has worse economics than ethanol
• On paying fines/taxes for your "free" waste veggie oil
• Chevron moving into biodiesel production

[Source: Egoli]

Pacific Ethanol, a company we're mentioned before because they're building giant ethanol plants around the western side of the United States, sold on Friday five and a half million shares of its stock to private investors for about $5 less each than the $31.52 stocks were valued at Thursday. The company also sold the rights to buy almost three million shares at $31.55 in six months. The stock market didn't like this at all on Friday and the price of the shares dropped $3.11 that day. The sale of stock to private investors like this is called, interestingly, a PIPE deal, which stands for Private Investment in Public Equity. Seeking Alpha has a detailed report on the sale, and says, "The CEO/CFO should be fired for even thinking about using a PIPE deal to raise money. PIPE deals have a well deserved reputation for being very dilutive and are also a sign that the company is desperate for cash. As such they tend to cause a rapid decline in the stock price - much worse than that caused by announcing a secondary public offering."

The article also mentions three officials in the company resigned at the end of April and explains further why all of this may mean that Pacific Ethanol could be in trouble.

[Source: Seeking Alpha]