D1 Oils, BP divorce; jatropha JV unwound after capital raise falters; D1 signs Bedford Biofuels as plant science licensee

In the UK, D1 Oils and BP announced a not-unexpected Great Divorce in their D1-BP Fuel Crops Limited joint venture. D1 agreed to acquire BP’s 50 percent interest in the venture for $818,000, release of BP from all claims associated with the venture, and a royalty of $49 per ton of the first 20,000 tonnes of jatropha oil up to a limit of $980,000.

D1 said that, following the completion of the transaction, it will merge its Fuel Crops and Plant Science divisions and said that it will commence advisory services for third party companies. The companies said in a statement that the agreement is subject to D1 shareholder approval on July 23rd, and that BP has signed “an extension and amendment of the existing option and relationship agreement (originally signed in 2007) between BP and D1 and the parties have agreed to maintain an ongoing dialogue in relation to the potential supply of crude Jatropha oil  to BP.

Commenting on the split,  SG Biofuels CEO Kirk Haney said “BP’s withdrawal from the partnership is not a reflection on jatropha, but rather the product of a flawed business strategy that over promised and under delivered. BP and D1 chose to pursue an overly aggressive program utilizing unproven and under-performing accessions of jatropha in regions that are not best suited for the crop. The true promise of jatropha comes from unlocking its potential through genetics and proper agronomy.  Quite simply, BP and D1 failed to do this. While D1 is now pursuing what we believe is the proper approach – scientific development and crop improvements — the locations in which they’re working will continue to limit their success.”

A question for the future of D1 is whether they are too far along, have too much of a legacy to be able to capitalize and succeed with the new structure., and rid themselves of the ‘brand baggage’ acquired during this BP relationship.

Critics of the company pointed to an overly ambitions “soil to oil” strategy, which required the D1 venture to develop plant science, planting programs, and biodiesel processing capacity, all while existing as a public company. A very successful share offering was a high point of the D1 glory years, but the company’s strategy of acquiring relationships controlling up to 200,000 hectares in sub-Saharan Africa and getting plants quickly in the ground foundered when the price of oil, once projected by Goldman Sachs to rise to as high as $200 per barrel, collapsed in 2008.

According to Digest sources, D1 had been attempting to raise up to $100 million in new capital over the past 15 months, and lack of success in this effort was a factor leading to the divorce between BP and D1.

In related news, Bedford Biofuels and D1 Oils agreed in principal on a proposal to provide plant science and planting technology and services over a five-year period. D1 will provide a non-exclusive license for D1’s agronomy research and breeding technology and intellectual property to Bedford Biofuels.

Bedford Biofuels CEO David McClure said “The research and development D1 has produced is exactly in line with our business strategy to supply the growing world demand for non-food-crop biofuel. We couldn’t be more excited to have forged a relationship with D1, which we feel will be of tremendous mutual benefit to our business endeavors.”

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