Oil price forces Australian Renewable Fuels into receivership

Global decline in oil prices and higher feedstock costs resulted in reduced trading margins

Oil price forces Australian Renewable Fuels into receivership
ARF halted share trading on Monday.


The country’s biggest biodiesel producer Australian Renewable Fuels (ARF) has gone into voluntary administration as a result of a slump in the global oil price and changes in the Federal Government’s taxation policy for domestically produced biodiesel.

PPB Advisory’s David McEvoy and Nick Martin have been appointed to act as voluntary administrators.

While there has been a global decline in oil prices, cost of feedstock – renewable biological materials used to produce clean fuel – have escalated, resulting in a reduced trading margin for the company.

"The historical long term correlation between the barrel price of oil and the cost price of feedstock has broken down," ARF directors said in an official statement released on Thursday.

"This has been exacerbated by the extent of the dramatic fall in the oil price and hence our selling price for biodiesel.

"That contrary movement and break in the historical correlation has impacted negatively on gross margins," the statement reads.

The directors have also blamed the Federal Government’s change in policy of taxation on cleaner fuels for pushing the company into its present situation.

In the 2014-15 Federal Budget the government announced it would cease to offer grants to cleaner fuels, including biodiesel, renewable diesel and certain blends containing biodiesel.

It was declared that the excise duty rate for cleaner fuels will be phased in in equal annual increments starting July 2016 until it reaches the final rate in July 2030.

This change resulted in ARF’s further dependency on its investors.

The company tabled many proposals to restart operations if or when satisfactory gross margins returned in order to keep the business afloat, including seeking customer price hike, idling production facilities, cutting down corporate expenditure and pursuing profitable export opportunities in the United States.

However, for any of these options to work ARF required its major lenders to allow the company retain funds in addition to paying off all outstanding trade and employee dues.

The proposals were rejected by the debt providers, forcing the company to enter voluntary administration.

ARF is maintaining operations for now as PPB Advisory looks for options to maximise value for all of ARF’s stakeholders and searches for a buyer.

The company halted share trading on Monday but expected the halt to last just two days.

ARF has already admitted that 2015 was a difficult year, one that saw it noting subsidised imports affecting domestic sales and the company forced to restructure its board and head office, move the head office to Barnawatha and undertake other cost reductions.

ARF has three biodiesel plants – one each in Victoria, South Australia and Western Australia – and exports 80 per cent of the 500,000 tonnes of feedstock a year.

It employs about 50 people at its facilities in Victoria, South Australia and Western Australia.

The company sells biodiesel to many wholesalers and petrol distributors, including Shell, BP, Greenfreight, Viva Energy Australia, Woolworths and Meredith Dairy.

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