News

July 15, 2007

Joint Venture Between D1 Oils And BP Highlights Value Of Agronomy Assets

By Rue Swabey

In June UK based D1 Oils, which plants and refines jatropha for use as a biodiesel feedstock, announced a joint venture with BP. The oil company will pay £32million in return for 50 per cent of the joint venture vehicle plus a 16 per cent call option (at an average strike price of 251p) in the equity of D1 Oils. Both parties will invest £24million over the next five years. BP’s backing is a powerful endorsement of D1 Oils’ business model at a time when the viability of bio-fuels is being questioned.

There are two main concerns: the rising cost of feedstock, which is eroding profitability and the use of edible oils as feedstock for biofuel production, which is pushing up food prices. On both counts D1 Oils scores well. The landing price per tonne of jatropha is around US$575 compared with around US$900 for rapeseed and in contrast to other feedstock, jatropha is not edible. In addition it grows on degraded soil and has limited irrigation needs. However there is a risk that large-scale...