Teeside-based biodiesel producer Biofuel Corporation has been forced to restructure its debts only one year after it was opened by Prime Minister Tony Blair.

The troubled company, operator of Europe’s largest biodiesel plant at Seal Sands, said it would be holding further talks with Barclays bank regarding proposals to restructure its £100m debts.

In a statement, the company said if reorganisation went ahead, it would be “very likely” shareholders would see their share value diluted. It could also lead to the company cancelling its AIM listing.

Biofuel Corporation said Barclays, a major shareholder, had indicated it would “remain supportive” of the plant, which has been operating at 25% capacity since January.

At full capacity the plant should use a 250,000 tonne blend of oil seed rape, palm oil and jatropha, sourced from UK and European farmers.

‘Teething problems’

The company blamed its position on high oil prices and poor market dynamics.

However a Biofuel Corporation spokesman said the plant’s future was secure and it hoped to be back to full capacity by the end of the year, with the potential to meet 20% of the UK’s biodiesel demand.

Helen Athanasiou, HGCA environmental economist, said Biodiesel Corporation’s financial troubles were unlikely to affect the UK’s fledgling biofuels industry.

“The industry is just starting up so there are bound to be teething problems,” she said.

“Hopefully the market will sort itself out. At the moment stock prices are high and margins are low, but that can change. It’s really a case of wait and see.”