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Originally published Friday, January 4, 2008 at 12:00 AM

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Biofuel firm cancels IPO

Imperium Renewables canceled its $345 million initial public offering Thursday in a move that came as little surprise. For one thing, the...

Seattle Times business reporter

Imperium Renewables canceled its $345 million initial public offering Thursday in a move that came as little surprise.

For one thing, the industry's financial underpinnings have, in one analyst's words, "severely deteriorated in recent months." For another, it lost its chief executive two weeks ago.

The Seattle company, which last summer began operating the largest U.S. biodiesel facility in Grays Harbor, blamed "unfavorable market conditions" for the IPO's withdrawal.

Imperium may instead seek private financing, according to a document filed Thursday with the Securities and Exchange Commission. A spokesman said the company wouldn't comment on future plans right now.

Imperium, which filed the IPO in May, had counted on using the money to build a string of similar facilities across the globe.

Its fast-track plans called for completing two more large biodiesel plants in Hawaii and Argentina by the fourth quarter of 2008, and another on the East Coast in early 2009.

The times should have been good for biodiesel makers: Oil just hit the $100-per-barrel mark, making the alternative fuel more competitive, and Congress passed an increased mandate for biofuel use.

But rising skepticism about the profitability of the biofuel business makes companies like Imperium a tough sell in the short term.

Houston-based analyst Pavel Molchanov blames the global bull market for agricultural commodities.

Prices for soybeans, the main raw material for biodiesel, have nearly doubled as more farmers devote their acreage to corn, which has squeezed profit margins for biodiesel.

The biodiesel industry also has ample unused capacity, as entrepreneurs hoping to cash in on the biofuels boom have scrambled to build new facilities.

"For biofuels, generally, it has just been a tough, tough year," said Molchanov, who works for the research firm Raymond James. Imperium's failed offering "reflects the difficulties of biodiesel economics right now," he said.

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The company is operating its 100 million gallon a year plant at full capacity, and pays for its operations from the cash flow from biodiesel sales, said spokesman John Williams. The company declined to revenues or profit figures.

Under former Chief Executive Martin Tobias, the company raised $113 million and borrowed an additional $101 million in early 2007.

But Tobias unexpectedly stepped down last month. In a terse statement announcing Tobias' replacement by founder John Plaza, the company provided no explanation for the transition.

The mystery surrounding the top executive's departure prompted speculation that it might have been caused by the failure of the IPO.

Plaza was unavailable for comment Thursday.

Williams declined to comment on Tobias' departure except to say that the company's board "made the decision based on a need for new leadership and direction."

Ángel González: 206-515-5644 or agonzalez@seattletimes.com

Copyright © 2008 The Seattle Times Company

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