Renewable Energy Group cancels IPO

Ralston, Iowa-based Renewable Energy Group withdrew its plans for a $150 million initial public offering, becoming the second biodiesel producer of the year to pull out of a share sale.

In a filing with the U.S. Securities and Exchange Commission, Renewable Energy Group cited current market conditions as the reason for the withdrawal, but said it could undertake a "subsequent private offering" to raise some cash.

"By pulling our S-1 filing, REG adds flexibility to the way in which it can strategically grow the business," Jeff Pattison, CFO of Renewable Energy Group, said in a statement.

"We're very optimistic about REG's future and the biodiesel industry's future, yet current capital market conditions require us to think differently."

In January, Seattle's Imperium Renewables canceled plans for a $345 million IPO (see Imperium Renewables puts IPO on hold). The move from Imperium came less than two weeks after the biodiesel producer dumped its chairman and CEO (check out Martin Tobias out at Imperium).

Renewable Energy Group originally filed for its offering last July. Credit Suisse was set to be the lead manager on the deal.

Renewable Energy Group operates a 132 million gallon network of biodiesel production facilities, but currently only owns one 12 million gallon per year facility, with four plants in the network owned by third parties.

The company's plans to expand its network with more wholly-owned facilities is likely to be put on hold, as it intended to put earnings from the share sale toward more plants.

Renewable Energy Group already has two wholly-owned plants under construction in Louisiana and Kansas, both set to pump out 60 million gallons per year.

But the company had hoped to build additional plants, using the IPO earnings to cover "approximately one-half of the construction costs of three new wholly-owned network facilities, each of which is expected to have 60 mmgy production capacity," according to its IPO filing.

The filing pegged the total cost for the three new plants at $211 million to $248 million.

One of the plants was set to be located in Cairo, Ill., with the other two to be sited on or near the east or west coast.

The company's shelved sale follows a series of delays and closures in the biodiesel industry, as well as an increase in the price of soy, a major feedstock for biodiesel.

A report from the U.S. Department of Agriculture last week projected that the U.S. soybean stockpile will shrink, dropping to a less than three-week supply before this fall's harvest.

The USDA also cut its forecast of soybean oil for biodiesel to 2.8 billion pounds, down 600 million pounds for the marketing year ending Sept. 30.

Beatrice Biofuels in Nebraska has seen delays in its 50 million gallon per year plant due to cold weather and manufacturing defects, but the price of soy could also be a factor.

Melbourne, Australia-based Agri Energy, Beatrice's parent company, has put a hold on any project development in its home country, and said in January that it would sell its U.S. biofuels business for $42.5 million (see Agri Energy sells U.S. biofuel assets).

At the time, Agri Energy chairman and CEO, Peter Anderton, said "Investment support for company has been adversely affected by the poor performance of the biofuels industry in the Australian market, high feedstock costs worldwide and delays to completion of the project."

In Minnesota, producer SoyMor Biodiesel has suspended operations at its 25 million gallon per year plant, citing "current biodiesel economics." SoyMor's sole facility was designed and built by Renewable Energy Group.

As for that potential subsequent private offering, Renewable Energy Group has a substantial group of backers that could be helpful.

The company raised $100 million in a Series A led by Natural Gas Partners in 2006, with a who's-who of the agri-business world also participating in the round.

Bermuda-registered Bunge (NYSE: BG), one of the world's largest oilseed processors, took part in the funding, along with London's ED&F Man, a bulk liquids transportation and storage and commodity trading company.

Iowa's West Central Cooperative, another backer, is a grain, agronomy and soybean processing firm. Renewable Energy Group was formed from the biodiesel operations of West Central.