MARKET DEVELOPMENT
Renewable Power warns of loss, shares plunge
Renewable Power warns of loss, shares plunge
13/7/07 LONDON, (Reuters) - Shares in Renewable Power and Light Plc (RPL.L: Quote, Profile , Research) lost more than half their value because it expects to make a loss in 2007 instead of a $25 million pretax profit predicted by the house broker, the firm said on Friday.
The company blamed the turnaround on the loss of its supply of palm oil which it planned to use to generate electricity in two power plants it is converting to run on biodiesel.
Renewable Power is suing its supplier, Safari Group Inc, in the United States for breach of contract for failing to deliver the palm oil for an earlier agreed price. Its oil palms are grown in West Africa.
Palm oil prices doubled since the start of 2006, before recently falling back. They are still up over 70 percent for the period, driven by demand for biofuel.
Renewable Power now faces difficulty buying palm oil at a price to make its operations profitable unless it can secure the supply from Safari at the agreed tariff.
It has obtained a temporary restraining order preventing Safari from transferring the palm oil to anyone else.
Renewable Power is considering its strategy, including using other feedstock crops, buying feedstock firms, or growing its own palm oil, while it sues Safari, a spokesman said on Friday.
It thinks it can secure feedstock at prices materially lower than those available on the open market, it said in a statement.
Renewable Power, which floated on London's Alternative Investment Market in December, should not face any short-term funding problems because it has $50 million in the bank.
House broker Libertas Capital had been expecting a pretax profit of $25 million in 2007 before the supply problems.
Shares in Renewable Power, which started trading again on Friday, following a suspension on Jul. 5, were down 61.1 percent by 0817 GMT, valuing it around 42.3 million pounds ($85.9 million).
The company blamed the turnaround on the loss of its supply of palm oil which it planned to use to generate electricity in two power plants it is converting to run on biodiesel.
Renewable Power is suing its supplier, Safari Group Inc, in the United States for breach of contract for failing to deliver the palm oil for an earlier agreed price. Its oil palms are grown in West Africa.
Palm oil prices doubled since the start of 2006, before recently falling back. They are still up over 70 percent for the period, driven by demand for biofuel.
Renewable Power now faces difficulty buying palm oil at a price to make its operations profitable unless it can secure the supply from Safari at the agreed tariff.
It has obtained a temporary restraining order preventing Safari from transferring the palm oil to anyone else.
Renewable Power is considering its strategy, including using other feedstock crops, buying feedstock firms, or growing its own palm oil, while it sues Safari, a spokesman said on Friday.
It thinks it can secure feedstock at prices materially lower than those available on the open market, it said in a statement.
Renewable Power, which floated on London's Alternative Investment Market in December, should not face any short-term funding problems because it has $50 million in the bank.
House broker Libertas Capital had been expecting a pretax profit of $25 million in 2007 before the supply problems.
Shares in Renewable Power, which started trading again on Friday, following a suspension on Jul. 5, were down 61.1 percent by 0817 GMT, valuing it around 42.3 million pounds ($85.9 million).