27/9/06 (The Guardian)   -  The reputation of the "green" power sector was badly dented today when Biofuels admitted it had been forced to halt deliveries due to another bout of technical problems at a new plant.

But in a separate development, the industry was given a welcome boost when Lord Oxburgh, the former Shell UK chairman and a respected scientist, agreed to take on the chairmanship of D1, another emerging green energy company.

Shares in Biofuels plunged 18% to 64p after the company told its annual meeting that its Teesside facility, which makes biodiesel from soya, palm and rapeseed oils, had been forced to cut output. "We are working towards a permanent solution and, in the meantime, the group, with its commitment to quality, has taken the prudent step of delaying biodiesel deliveries," it said in a statement.

Sean Sutcliffe, chief executive, said setbacks were to be expected in a new sector. "It's inevitably going to be two steps forward and one back," he said. Full production should be resumed as early as next week.
The latest setback comes barely a month after Biofuels had to cut production to 53% of capacity due to other technical problems. Will Wallis, analyst at Numis Securities, said he was prepared to accept the problems were a "temporary glitch" although he advises clients to sell Biofuels shares and is worried by its £80m debt. The company told its annual meeting it was still operating inside its banking facilities but they would expire at the end of the year. New financing should be revealed before then, a spokesman said.

Plant-based fuels are blended with conventional petrol and diesel at a ratio of around 5% to 95%. This will become an EU requirement by 2010. Tesco has been a major seller of the mixed fuel on its forecourts. The big oil companies are increasingly interested in biofuels as a way of cutting carbon emissions.

BP is among names that have been attached to D1, the biodiesel company which is building up its refining capacity in Middlesbrough. This is just a few miles from the troubled Biofuels facility in Billingham - the two held merger talks earlier in the year but the discussions came to nothing and were broken off.

D1 was not prepared to comment on whether Lord Oxburgh had been drafted in to help fend off unwanted suitors. "Lord Oxburgh is a long-standing advocate of the need to address climate change issues but also has a wealth of wisdom and experience of the corporate sector," said Mr Sutcliffe.

The 72-year-old Lord Oxburgh is an adviser to the "green" investment bank, Climate Change Capital, but his open and forthright style made him a somewhat controversial figure at Shell.

D1 reported an expected loss of £4.7m for the first six months to June 30, against £3.4m for the same period last year.