Let’s face it; the record on conventional biofuels as a carbon-reducing, environmentally friendly, energy security-enhancing, cost-effective solution has come in for an absolute battering in recent months. And that’s not altogether unfair. Food prices have risen because the feestocks are not quickly scaleable, the rainforests in Borneo are being decimated to grow palms, no one will ever be oil price independent from instability in the Middle East (especially a WMD exchange between Israel and . . . take your pick) and oil prices are still going up.

So enter the slimy, green stuff.

When I look at this, I see a failed pond. Oxygen poor, virtually lifeless. But algae likes that. Alternative energy enthusiasts are intrigued because the energy density of algae is much greater than crude. Algae can also be refined to make petrol, diesel, jet fuel, and chemical feedstocks for plastics and drugs.

There is as yet though, no listed stock - according to AEI criteria - in the business of algae. Just this OTC stock, Global Green Solutions, which is mentioned in this article here. I suspect that will change in the next few years. And the dream is to connect a coal plant’s CO2 emissions to an algae pond - this project here in New Mexico believes a 1 acre algae pond can absorb between 258 - 450 tons of carbon dioxide a year. It does seem though that we need a lot more enhanced genetic engineering of the enzymes to make this a large scale commercial reality.

Certainly D1 Oils plc think so. Their plan is to exploit Europe’s high demand for biofuel by producing oil from jatropha seeds. They (rightly, in my view) doubt that Europe’s rapeseed and waste oil can plug the gap. And they have also managed to attract the interest of oil giant BP. As this article says, jatropha is so tough, it can ” . . . grow in tropical and subtropical wastelands . . . deserts, garbage dumps and rock piles, where food crops wouldn’t stand a chance. Moreover, it’s a low-maintenance shrub, needing about 600 mm of water, but which can survive three years of drought by dropping its leaves“.

Ok, but it’s always worth examining the sceptical side of any investment story. And this piece here Jatropha: Too much hype on little known plant from the Philippines does a pretty good job. It questions, citing experts, how quickly after plantation commercialization can be achieved, the yield in kilos per hectare and oil content in percent in Philippine conditions.

Still, with D1 BP’s joint venture getting set to plant one million hectares and an estimated 300,000 hectares per year thereafter, we’ll find out soon enough how effective Jatropha really is.

China Biodiesel, in a disturbing echo of Biofuels Corporation’s basic inability to deliver plant on schedule, has just announced that in the second half of 2007, turnover will be affected by the consequence of delays in building the extension to the plant in Longyan and the delay in completing the new plant in Xiamen.

I don’t want to comment (because I don’t know) about all the capital sources of China Biodiesel’s expansion plans. But the big picture is that if we are moving into a global credit crunch, or at least a period of tighter money, one might want to take a hard look at all alternative energy companies that are engaging in an investment-led rather than organic expansion.

When credit is cheap, some companies are wont to invest and expand like crazy. Other companies are however more sanguine and take a longer view of the business cycle, choosing to expand out of profits. So which of these approaches works best?

Both and none of them - it’s just that no strategy works continuously forever. The econosphere is a constantly evolving race without a finish, fuelled by the shifting sands of the capital markets. In other words, what works well today may not do so tomorrow and even lose money the day after.

And I have a sneaking suspicion that the progress in electrical transport just might in a few years, leave biofuels high and dry.

When starting this blog, I knew it would happen eventually; a listed alternative energy company would fail and have to be taken off the stockmarket and of course off AEI.

Tomorrow, Biofuels Corp will have its trading facility cancelled on the AIM market of the London Stock Exchange, effective from 07:00. Henceforth, the company will be trading under the name of Earls Nook Limited.

So here are my post-mortem thoughts on Biofuels Corp, which as you’ll see from the 1 year chart, has lost a lot of money for its investors.

1. The company name was wrong - you can’t brand yourself with a generic term, especially when their core business was biodiesel, a small part of the global biofuel industry. Imagine calling microsoft the software company.

2. I have severe doubts about companies going public without a business up and running in place already. Biofuels Corp was a development company. Couldn’t they have seen a VC instead?

Venture Capitalists are active managers and owners, sometimes taking a seat on the board, in exchange for a sizeable chunk of equity, proffering valuable management advice and firing when need be. Fund Managers and retail investors who provide capital on the public market are manifestly not in this category. In reality, the IPO comes as the crowning glory, the final stage or the exit for a company, not as the seed capital.

3. The idea behind Biofuels Corp in principle was sound - Europe has high biofuel targets in place, and most of the contribution will probably be met by biodiesel as the relevant feedstock crops grow better there.

So au revoir Biofuels Corp - for AEI, you were the first, but you won’t be the last to go . . .

Biofuels Corp soared 46 pct on Friday after confirming that it has reached agreement to roll over its banking facilities, dealers said.

At a guess, I would say this has to be one of the top 5 most volatile stocks in the AEI universe. It is down however a staggering 90% plus a year ago, so an awful lot of people must have lost wardrobes of shirts on this stock. And takeover talk by Biopetrol Industries AG, seems to have subsided.With it’s paltry capitalisation of around $10 million, it finds itself below the radar of most fund managers with liquidity concerns. If and only if it was able to recover a little bit, the turnaround might well be quite stunning.

2nd hand cooking oils - a fast rising feedstock for biodiesel - aren’t always lightly cooked extra virgin olive oil from elegant Italian restaurants. As this story mentions, it may include Burger fat from abattoirs.

The company in question - Agri Energy - is planning to invest GBP 50m in a power plant in Wales, that will create 35 megawatts of power in capacity and 200,000 tonnes annually of biodiesel.

The company is clearly leaving behind its Australian bioethanol roots. Most of the world’s bioenergy companies have a specific focus in one key area. Agri Energy appears to be going in the other direction. For more details, see there website here.

China Biodiesel, the AIM-listed Chinese firm which sources used cooking oils to produce biodiesel, has just posted much improved annual results; turnover has surged 51.1% to RBM105.3m (Chinese Yuan) for the year with pre-tax profit increasing to £38.8m from £28.2m the year before. Meanwhile their 2010 biodiesel production target has been set at 350,000 tonnes.

“Our focus going forward will continue to be on expanding production to meet demand, in China and abroad, whilst developing our technology and ensuring that the business is managed with maximum efficiency,” said the group.

Oil is a big part of Chinese cooking - and with 1.3 billion people, there’s plenty left over nationwide after it’s been tossed about in the family wok a few times. According to this concise article on biodiesel in China from late last year;

“In 2005, China manufactured 110,000–120,000 tons of biodiesel fuel; in 2006, production is expected to reach 1 million tons.”

and the same article says that potentially, China could recover 2.25m tonnes of used cooking oil for biodiesel. It does appear though that bigger players - like state-owned China National Offshore Oil Corp and foreign investors are starting to move in. Can the likes of smaller independents such as China Biodiesel plc continue to play a growing role against such behemoths?

What is clear is that the recent rise in food prices caused by rising biofuel targets around the world has been deeply unpopular. In China, with it’s hundreds of millions of rural poor, this is potentially a much greater problem. That’s why many would find it hard to disagree that the biodiesel foodstock of choice in China will be used cooking oils for at least the next few years - environmental pros aside, it is after all the cheapest feedstock.

The US Department of Defence is the largest consumer of diesel and distillate fuels in the United States. So O2Diesel investors ought to be pleased that the DoD is now testing O2Diesel’s proprietary fuel blend.

This piece of good news comes after a terrible decline since last May’s great biofuel sell-off. 2006 results showed the company still to be a long way from profitable - sales of just $250,000 and a loss of $13 million.

Nevertheless, it is still rated as a speculative buy by J M Dutton.

Since its dismal profit warning earlier in March, Biofuels Corp is recovering.And according to this article published yesterday, some brokers suspect that Biopetrol Industries may be looking to take over the company. Biopetrol unlike Biofuels Corp can point to some good corporate results - 2006 sales up approx. 46 % and Group profits up 78 %.

Well if this does happen, I suggest they name the new firm Biodiesel Industries AG. Calling yourself Biofuels or Biopetrol when your core business is biodiesel is just plain misleading.

Biopetrol Industries AG - surely not the best choice of name for a biodiesel company - has just tripled fourth-quarter profit to more than 3 million euros as it finished building a new plant in Rostock, Germany.

The company now has a capacity of 350,000 tonnes of biodiesel production a year. Said Biopetrol Industries’ Supervisory Board Chairman, Werner Klink;

“Biodiesel is now the leading sustainable alternative fuel. As long as the sun goes on shining, there will be plants. Biodiesel made from vegetable oil helps to protect the environment, safeguards jobs and opens up attractive long-term investment options.”

And according to this great wiki, biodiesel can also point to a higher energy density of 42.2 MJ per kg compared to just 30 for ethanol. That means that for the same weight of fuel, biodiesel can take you much further.