Imperium 'Still Under Stress' After Recapitalizing

The Seattle-based company said it has recapitalized as part of a plan to restructure the company. CEO John Plaza said he hopes to resume operations as soon as possible.

Troubled biodiesel firm Imperium Renewables on Friday announced it has recapitalized with an undisclosed amount of money from existing investors.

Most of the proceeds will go to paying its project lender, Société Générale, and other debts, according to the announcement.

"This investment reflects the continued support and vision of our investors who recognize the benefit of biofuels in general, and Imperium specifically," CEO John Plaza said in a statement.

Imperium, which has hired an unnamed independent debt-restructuring firm, said the move is its first step in a restructuring process that will include negotiations to settle its remaining debts with creditors while retaining enough capital to resume operations.

The company said it hopes to resume operations as soon as possible.

But the company isn't out of danger yet, Plaza added.

"This funding is a significant step in the process we set forth in January to turn this company around, but we still face hurdles as the amount of funding is limited," he said. "Despite the recent and overdue correction in the commodities markets, the biodiesel industry remains extremely volatile and the company is still under stress." 

The news is part of a growing trend of biofuel companies looking for alternative financing, said Rick Kment, a biofuels analyst at research firm DTN.

"One of the things we're probably going to continue to see is a kind of consolidation in the market, and it seems like the biggest thing these companies are doing right now is looking for alternatives – whether it's refinancing or looking for a partner or buyer," he said.

While commodity prices have fallen recently, they rose very high in the spring and the summer, leading companies to pay high prices for the crops they needed to make biofuels. Many of the companies locked in contracts for these feedstock materials at those high prices, Kment added.

A number of companies have gotten stuck between the costly feedstocks and the tight credit market, he said.

And that situation, along with other market conditions, hasn't made them attractive to new investors.

"Not a lot of investors are looking to invest in these companies," he said. "At this time, it looks like we're in a little bit of a standstill in the technology and also overall in the industry. People are really a little nervous about the future of biofuels at this point, due to some environmental concerns, feedstock concerns and uncertainty about what the new administration will mean to the industry. I think we will continue to see nervousness about that through the first of the year."

Venture capitalists are still interested in funding technologies to make biofuels from nonfood materials, including algae, but companies already making traditional biofuels have had a hard time. 

In spite of its capital problems, it's probably a good thing Imperium didn't go public. The company had filed for a $345 million initial public offering last year, after it had closed a whopping $214 million private-equity round. It announced it would delay the IPO in January, after then-CEO Martin Tobias, a former Microsoft manager, left the company in December (see Imperium IPO Delay Underlines Feedstock Shortage, Analyst Says and ).

Investors are nervous, and public companies are particularly under pressure to provide more transparency about where they stand, he said.

Kment pointed to speculation that VeraSun Energy Corp., which last month said it had hired Morgan Stanley to "evaluate strategic alternatives," could be looking for a buyer, and that Pacific Ethanol, which in August said it had secured a $40 million line of credit, is looking for more money.

In what might be further evidence of the industry troubles, or a new opportunity for companies looking for capital, Manta Venture Group Ltd., also based in Seattle, said its proposed joint venture with Northwind Ethanol Ltd. has fallen through.

"Manta and Northwind have been unable to settle key terms of a definitive agreement for the proposed joint venture," according to an announcement from Manta. "As a result, Manta is exploring other biofuel and solar power technologies."

As recently as August, the companies had planned to work together to produce cellulosic and starch-based ethanol using Northwind's technology. 

"It's a tight industry," Kment said. "Markets have tightened significantly over last few months, feedstock costs are high and energy prices have weakened. All this has continued to put a strain on the market."