Nova Biosource Fuels to idle biodiesel plants

By Erin Voegele | February 10, 2009
Web exclusive posted March 4, 2009, at 10:14 a.m. CST

According to a Feb. 27 document filed with the U.S. Securities and Exchange Commission, Nova Biosource Fuels Inc.'s board of directors has authorized management to idle the company's Seneca, Ill.-based biodiesel plant and suspend plans to restart its Clinton, Iowa-based biodiesel refinery.

In accordance, management has begun to reduce the company's workforce at these locations. According to the SEC filing, the company intends to continue operating the Seneca refinery until on-hand feedstocks and consumables have been processed, after which the refinery is expected to be idled.

According to the filing, these actions are the result of an unexpected Feb. 22 breakdown in negotiations with a working capital financing source and the inability to obtain financing from other sources, and as a result, the refineries lack sufficient working capital to continue operations.

Nova Biosource Fuels is considering restructuring operations and is in discussions with WestLB AG, the project lender for the Seneca refinery. The filing was signed by Jay Fillman, Nova Biosource Fuels' chief financial officer.

According to a Feb. 17 SEC filing, WestLB agreed to waive the requirement of Nova Biofuels Seneca to make its scheduled principal and interest payments originally due on Feb. 17; the new filing date was March 3.

On Jan 28, Nova Biosource Fuels filed its annual report with the SEC. According to the report, Nova Biosource Fuels currently owns and operates three biodiesel refineries: the 60 MMgy Seneca facility, the 10 MMgy Clinton County refinery, and a biodiesel refinery in Butte, Mont., which is used primarily for research, development and technology demonstration purposes.

The Seneca facility began operations in March 2008. The Clinton County refinery began operations in May 2006, and was purchased by Nova Biosource Fuels in September 2007. In late September 2008, a fire broke out in the Clinton County facility's primary methanol recovery column. According to the company's annual report, repairs to the Clinton County facility are complete. The plant was expected to restart operations in late January or early February.

Nova Biosource Fuels also recently announced that the company has received notice from NYSE Alternext US LLC, formerly known as the American Stock Exchange, that it's not in compliance with Section 1003(a)(iv) of the NYSE Alternext US LLC Company Guide. This means the company's financial condition has become so impaired that the Exchange questions the company's ability to continue operations and/or meets its obligations as they mature.

In order maintain its exchange listing, Nova Biosource Fuels must submit a plan of compliance by March 30, advising the Exchange on how the company intends to regain compliance by Aug. 27. If the plan is accepted, Nova Biosource Fuels may be able to continue its listing during the plan period up to Aug. 11, during which time it would be subject to periodic review. If a plan is not submitted or the company submits a plan that's not accepted or a plan is accepted but the company is not in compliance with the continued listing standards at the conclusion of the plan period, or does not make progress consistent with the plan, Nova Biosource Fuels may become subject to delisting proceedings.

Furthermore, the Exchange also notified Nova Biosource Fuels that the company's common stock has been trading below $0.25 per share since Oct. 22, 2008. On Feb. 26 the common stock price closed at $0.06. As a result of this low selling price, the company's common stock may not be suitable for auction market trading. The Exchange notified Nova Biosource Fuels that it deems it appropriate for the company to affect a reverse stock split to address its low selling price. If this is not completed in a reasonable amount of time, the Exchange may consider suspending dealing in, or removing the company's common stock from the list.

Click here to view Nova Biosource Fuels' full SEC filings.
 
 
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