31st May 2005 07:30
D1 Oils Plc31 May 2005 D1 Oils plc Preliminary Results for the year ended 31 December 2004 and Placing of 9,732,617 New Ordinary Shares raising £25.8 million D1 Oils plc ("D1 Oils"), the UK-based global low cost producer of biodiesel,announces its results for the year ended 31 December 2004 and Placing of9,732,617 New Ordinary Shares at a price of 265p (the "Placing"), raising fundsof £25.8 million (gross of expenses). D1 Oils is expanding its operations in new and existing territories to meet theincreasing scale of opportunity in the biodiesel market. The net proceeds of thePlacing of £24.3 million will be used to leverage these opportunities and meetthe growing demand for biodiesel as a sustainable renewable fuel resource,assisting D1 Oils in its objective to become a leading producer of biodiesel andrelated feedstocks. Results and Placing: • Net proceeds from Initial Public Offering in October 2004 were £11.5m • Operational expenditure was in line with expectations, despite acceleration in D1 Oils' business plans leading to loss on ordinary activities before taxation for the year ended 31 December 2004 of £3.1m • Cash balance was £9.6m on 31 December 2004 • The Placing announced today raised £24.3 million (net of expenses) • 9,732,617 New Ordinary Shares have been placed at a price of 265p per Ordinary Share 2004 and Q1 2005 operational highlights: • Indian joint venture company, D1 Mohan Bio Oils Limited, expanded its initial planting target of 5,000 hectares to 100,000 hectares • Joint venture with Jazeera Modern Technology of Saudi Arabia announced to oversee planting of 5,000 hectares and up to 100,000 hectares of Jatropha in the desert outside Riyadh • Secured £25 million of third party financing for D1 Oils' global operations • Current specification of D1 20 refinery successfully completed its 24/7 test • Original planting programme expanded to cover in excess of 267,000 hectares, a seven fold increase over the 37,000 hectares of land stated in D1 Oils' Admission document • D1 Oils intends to deploy up to 9 D1 20 refineries by the end of 2006 as against a previous target of 3 stated in its Admission document New developments not previously announced: D1 Oils also announces today details of new joint ventures in China and SaudiArabia highlighting the additional global opportunities D1 Oils is pursuing. • In China, D1 Oils has entered into a conditional 50 year joint venture agreement with Sichuan Yangtze River Technology Company Limited, Chengdu, to develop a Jatropha biodiesel refining and feedstock supply business for the Chinese and International markets with a target of producing 500,000 tonnes per annum from the region as soon as practical. A minimum of 150,000 hectares and up to 2 million hectares of land is to be procured for the project • In Saudi Arabia, D1 Oils has entered into a strategic alliance agreement with Abdullatef Al-Rajhi International Group for the design, development and implementation of waste water management facilities and infrastructure for the reclamation of up to 300,000 hectares of land suitable for producing Jatopha crops Current trading and Outlook Since the financial year-end, D1 Oils' business has continued to trade in linewith the Directors' expectations and the Board remains confident about theprospects of D1 Oils during 2005. Certain key business goals have beenaccelerated, including the extension of planned planting programmes andexpansion of D1 Oils' operations in existing and new territories. D1 Oils willcontinue to implement and execute its business plan and will continue tostrengthen the security of its supplies by expanding its portfolio of sources ofoil. Commenting on the results and Placing, Karl Watkin, Chairman of D1 Oils said: "I am pleased to be able to report that D1 Oils is making excellent progress andhas accelerated certain key components of its business plan. D1 Oils has furtherincreased its opportunities worldwide as the market is getting stronger, partlythrough Kyoto and International government policy initiatives, giving us theopportunity to gain a further competitive advantage in key markets. The Placingannounced today will help D1 Oils to secure a leadership position throughenabling the company to pursue a more aggressive expansion policy and is a keystep towards our objective of becoming a leading sustainable global low costproducer of biodiesel." Philip Wood, Chief Executive of D1 Oils said: "The Placing and new joint ventures announced today will enable us to expandmuch more rapidly. We have increased our total planting targets seven fold sincelast October. We expect China and India to be two of the largest markets in theworld for biodiesel. In addition to the expansion of our business in India whereplanting targets have increased twenty fold, we now have an exciting new jointventure in China with the potential to put us in a market leadership position.Mirroring the substantial increase in our capacity to produce oil bearing seeds,we intend to significantly expand our access to refining capacity, includingincreased deployment of our proprietary D1 20 refining technology." Enquires:D1 Oils plc Karl Watkin, Chairman 020 7321 3885 Philip Wood, CEOBrunswick Gill Ackers 020 7404 5959 Kevin Byram Anisha Patel Notes to editors:D1 Oils plc is the owner of technical, marketing, logistical and otherintellectual property related to the establishment, development and harvestingof jatropha plantations, the extraction of oil from the harvested seed and theproduction of biodiesel and other valuable by-products from the vegetable oil. Background to and reasons for the Placing D1 Oils was admitted to trading on AIM in October 2004 with the principalobjective of becoming a leading, sustainable, global, low cost producer ofbiodiesel and related feedstocks. Since the publication of the AdmissionDocument, there has been a demonstrable escalation in activity in the renewableenergy sector generally and, more specifically, heightened awareness ofcorresponding key global policy drivers and legislative changes. The Companycontinues to monitor the rapidly evolving, emerging global biodiesel market andhas identified a number of potentially significant commercial opportunities ofwhich it wishes to take immediate advantage. Since Admission, the emerging global biodiesel market has been reinforced byseveral key events and related policy initiatives. The Kyoto Protocol came intoforce on 16 February 2005 and its agreed mechanisms and corresponding targetsare now capable of being enforced. EU countries are continuing to implement theEuropean Biofuels Directive, which has set indicative targets for a minimumlevel of biofuels (5.75 per cent. by 2010). A number of European countries arein the process of discussing, or have already implemented, fuel duty exemptionsfor the use of biofuels. The Directors believe that these initiatives andmechanisms, combined with a higher global price of mineral-based oil and themove by a number of other non-EU countries towards setting biofuels targets andtax exemptions, are creating substantial continued global interest in therenewable fuels market. The Company now wishes to raise additional finance to expand its existingcapital base to implement a number of specific projects and initiatives, takingadvantage of the increasing global acceptance of biodiesel as a sustainablerenewable fuel resource. The Company announces today that it proposes to raiseapproximately £25.8 million (before expenses) by the Placing of 9,732,617 NewOrdinary Shares at a price of 265p per Ordinary Share. Since the Company's admission to AIM, the Directors have accelerated certain keycomponents of the business strategy in order to exploit available opportunitiesand further enhance the Group's competitive advantage. Substantial progress isbeing made, consistent with the Group's phased roll-out strategy, including thefollowing: • strategic joint ventures and commercial relationships D1 Oils Trading has established, in both new and existing territories, additional strategic joint venture arrangements and commercial relationships, expanding the Group's plantation rights, land portfolio and global operational presence. • planting programme the existing planting programme (including that of its joint venture companies) has been expanded to cover in excess of 267,000 hectares of land (to be planted by the fourth quarter of 2006), a seven fold increase over the 37,000 hectares of land stated in the Admission Document. The Group (including its joint venture companies) has also now secured options to contract over a total of approximately 9.2 million hectares of land (subject, generally, to the successful completion of initial plantation projects). This is an increase of approximately 3.3 million hectares of land, almost 56 per cent. over the original amount of 5.9 million hectares of land under option as at the date of the Admission Document. • crude oil supply contracts D1 Oils Trading has negotiated further 10 year oil purchase contracts and commercial arrangements for the delivery of up to 78,000 tonnes per annum of crude Jatropha oil (more than triple the original 24,000 tonnes per annum stated in the Admission Document) from third parties in India and Africa (approximately 29,000 hectares equivalent), with first delivery expected during the course of the fourth quarter of 2005. The Group currently intends to either transport this crude Jatropha oil to its UK refinery operation or those operations expected to be commissioned during the course of 2005 in Port of Durban, South Africa and Port of Chennai, India. • research and development activity D1 Oils Trading has expanded and invested in research and development activities designed to enhance quality and performance across the supply chain, from initial cultivation through to biodiesel production. • D1 20 refinery D1 (UK) has continued the successful on-going testing of the Group's D1 20 modular, refining technology. In particular, the company has accelerated the development programme in order to enable the refinery to process a broader range of type and quality of oil. Over the course of the next 18 months, the Group (including its joint venture companies) intends to install up to 9 D1 20 refineries (as against the 3 D1 20 refineries stated in the Admission Document). • financing arrangements D1 Oils Trading (or certain of its joint venture companies) has obtained third party equity investment or financing arrangements (totalling approximately £25 million) with banks and commercial partners. Target markets and operations The Group has substantially developed and progressed its activities within the 4regions of Africa, Asia Pacific, Europe and India (in which it operated at thetime of the publication of the Admission Document) and has established a numberof new operations, strategic alliances and commercial relationships, principallyin China and the Middle East. A number of the Group's more significantdevelopments are set out in detail below. Africa On 19 January 2005, D1 Oils announced that it had identified approximately17,000 hectares of existing Jatropha plantations in Madagascar and was in theprocess of making arrangements to access the output from these plantations.These Jatropha trees, currently used as supports for growing vanilla, arealready yielding seeds and the Directors expect the harvesting of this crop tobegin during December 2005. In addition, D1 Oils is in the process of agreeing contracts with several farmerassociations and NGOs whereby stand alone Jatropha plantations will be developedin up to five regions within Madagascar. The Group's target is for a minimum of5,000 hectares to be planted in each of these regions during the course of thenext 18 months and for a total of up to 200,000 hectares to be planted duringthe course of the next five years. Initial planting will commence in two regionsduring the course of the second half of 2005. D1 Oils intends, subject toagreement of acceptable commercial terms and appropriate fiscal incentives, tointroduce refining operations as soon as practical utilising its proprietary D120 refinery technology. The Directors anticipate that crude Jatropha oil notrequired for local refining will be exported. On 22 February 2005, the Company announced that it had agreed terms withRolls-Royce to provide a US$1 million finance facility for the D1 20 refinery(to be located in the Port of Durban, South Africa) which is expected to bebuilt and fully operational by the end of 2005. The Directors continue tobelieve that such arrangements are an attractive method of financing andexpanding the Group's (including its joint venture companies) portfolio ofrefineries. The Company has reviewed its commercial activities in Burkina Faso and nowproposes to expand the scope of operations through a joint venture between D1Oils Trading and Biodiesel Corporation. The parties are still in negotiations asto the precise detail, including their respective equity participations. Shouldthese negotiations not be concluded, the Company's Burkina Faso operations willcontinue on the basis as previously agreed and described in the AdmissionDocument. Further details of the proposed joint venture are set out below indetail in the section headed "Current developments". The Company is currently in the process of setting up D1 Oils Ghana in order toassist with the restructuring of existing Ghanaian operations. On completion ofthe restructuring, the Directors believe that title to identified land which isbeing developed to grow Jatropha, including the existing 12,000 hectare pilotproject, will be transferred to the Group whereby the entire farm management andproduction process is controlled, managed and operated direct by the Group. TheDirectors are confident that this would result in greater returns on D1 Oils'investment, enhanced flexibility and improved control over the project andexpect that seed planting will commence in June 2005. India On 19 November 2004, the Company announced that Jatropha trees owned by theCoimbature Jatropha Producers Association ("CJPA"), grown on 300 hectares inTamil Nadu had reached oil bearing stage within a year of planting, more thansix months ahead of expectation. The Directors consider it to be best practiceto prune the trees to encourage further growth, particularly in order toincrease seed productivity, and not to harvest these initial oil bearing seeds.Accordingly, the Directors continue to anticipate that the first commercialharvests of oil bearing seeds on D1 Oils' plantations (or those of its jointventure companies) will be, on average, within a period of approximately 24months from first planting. The Group is also entering into a research anddevelopment project with the CJPA in terms of which the parties are in theprocess of establishing a 250 hectare model farm, a 5 hectare pilot plantationand training centre in the region. D1 Oils announced, on 24 January 2005, that D1 Mohan had increased its 2005planting target from 5,000 to 100,000 hectares. D1 Mohan also reconfirmed itscumulative target of 5 million hectares to be planted over the course of thenext 5 years. The Directors anticipate that, on maturity, this initial 100,000hectare plantation project could yield approximately 270,000 tonnes of crudeJatropha oil per annum. The Company now has the option to export 25 per cent. ofthe crude Jatropha oil produced by D1 Mohan for sale to international customersor refining in its own D1 20 refineries. Previously, all crude Jatropha oilproduced by D1 Mohan was to be retained for domestic biodiesel production. D1Mohan intends to commission at least one D1 20 refinery, at the Port of Chennai,India, during the course of the second half of 2005. On the same date, the Company also announced new third party off-take agreementsfor the supply of crude Jatropha oil through to 2015. D1 Oils Trading has alsoentered into a number of 10 year crude Jatropha oil supply agreements withindependent contractors who will be responsible for planting, maintenance,harvesting, expelling, crushing and delivery of the resulting crude Jatropha oilto D1 Oils Trading. The Company anticipates that these new contracts willprovide an additional 10,000 tonnes per annum of crude Jatropha oil for exportduring the course of 2006, rising to approximately 50,000 tonnes per annumduring the course of 2009. On 14 April 2005, the Company announced that D1 Mohan had signed a memorandum ofunderstanding with the State Bank of India ("SBI") to provide a 1.3 billionIndian Rupees non-recourse finance facility (approximately £15 million) to localfarmers in Tamil Nadu to facilitate the planting of up to 40,000 hectares ofJatropha. D1 Mohan will purchase the harvested seeds and payments will bereleased to the local farmers following deduction of SBI's repaymentinstalments. At the time of its admission to AIM, D1 Oils assumed thatproprietary seed and growing medium supplies would be provided at D1 Oils' cost.However, with the availability of these types of banking facilities, the farmersare now purchasing these supplies. This development provides D1 Mohan withadditional revenue and enables the business to expand more rapidly as theworking capital requirements for each hectare are reduced. D1 Mohan is currentlyin discussions regarding similar funding arrangements in respect of theremaining 60,000 hectares of this initial project. Asia Pacific The Board's strategy in this region has evolved whereby the Group intends, priorto the commencement of larger scale plantations (including the 10,000 hectareinter-cropping project detailed in the Admission Document), to initially promotethe establishment of model farms. The Directors are confident that this willdemonstrate the physical characteristics of Jatropha and intend to launch avisible training and marketing centre to raise regional crop awareness. To date,four model farms (generally over approximately 5 hectare sites) are beingestablished in different regions of The Philippines by stakeholders who includegovernment, industry and agriculture groups. In addition, the Group iscontinuing to negotiate with relevant third parties and seek strategic partnersto help it secure and develop more significant areas of land for larger Jatrophaplantations. The Philippines Coconut Authority continues to be committed to the original10,000 hectare project. However, the parties have verbally agreed to modify theoriginal agreement such that a full scale planting programme will not commenceuntil the initial model farm projects have created greater regional awareness ofthe characteristics and potential commercial benefits of Jatropha. The initialD1 20 refinery intended to be installed in the Port of Subic Bay, ThePhilippines, during the course of 2005, will now be commissioned when sufficientvolumes of feedstock are available to be processed. On 5 May 2005, the Company announced that D1 Oils and Atlas Mines Corporation("Atlas Mines"), an established mining and resource company based in ThePhilippines, had agreed to undertake an initial study in order to assess thepossibility of planting Jatropha on the company's mining sites and producingbiodiesel, on site, using the D1 20 refining technology. The project willutilise bioremediation, a means of restoring soil that has suffered erosion andpollution in the mining process, by using Jatropha to help replace lostnutrients. The President of The Philippines planted the first seedling at theproject site in Toldeo, Cebu Province. If the results of the study are positive,a model farm will be established within the course of the next 6 months and,thereafter, a seed bank. Atlas Mines has agreed to fund the entire costs of thisinitial project. In addition, Atlas Mines has already identified an initial7,000 hectares of degraded land where Jatropha will be planted in order toproduce fuel for power generation to operate off-grid mining facilities. The Group has also identified Thailand as an attractive market within the AsiaPacific region which has the additional benefit of well established governmentpolicies supporting the development of biofuels. The Thai Ministry of Energy andthe UK Department of Trade and Industry have jointly sponsored a pilotplantation in the region to raise the awareness of Jatropha as part ofThailand's biofuels strategy. D1 Oils Asia Pacific is in advanced negotiationsto plant and manage the pilot project (using D1 Oils' proprietary seeds andgrowing medium) and to have full rights to the harvested seeds. D1 Oils intends that its operations in the Asia Pacific region will be executedon a similar basis to its activities in other territories. Accordingly, D1 Oilsis in the course of pursuing a number of commercial and industrial opportunitiesand is currently in discussions with several large corporate entities with theintention of securing appropriate joint venture partners. Europe D1 20 refinery update On 8 April 2005, the Company announced the successful completion of a rigorous24 hour per day, 7 day, continuous production trial of the latest specificationof the D1 20 refinery. During this trial, the refinery produced biodieselmeeting EN 14214 standard which was subsequently sold, on commercial terms, toGraystone Automotive Limited, a UK transportation and logistics company. Thetrial was witnessed and independently audited by Mott MacDonald, a global powerengineering consultancy. The trial was conducted using rape seed oil and theCompany stated that crude Jatropha oil would be processed by the D1 20 refineryas soon as sufficient quantity of raw feedstock was available and pre-processingunits designed to process a wider range of both food and non-food gradevegetable oils, currently under construction, were completed. This was initiallyanticipated to be during the second half of 2005. Since the date of this announcement, the Company has completed fabrication ofthe pre-processing units which are now subject to testing and commissioning.These units will be deployed in combination with the D1 20 refinery, allowingfor a wider variety of type and quality of oil to be processed. The Company hasalso bought out the existing D1 20 refinery asset finance lease from GrovefieldFinance Limited (in respect of the UK-based D1 20 refinery). It is intended thatcrude Jatropha oil will be processed once sufficient volumes of raw feedstockare available from the Group's supply contracts. D1 (UK) Limited has scheduled afurther 24 hour per day, 7 day, continuous production trial of the D1 20 and itspre-processing units, using crude Jatropha oil, for the second half of 2005. Refining strategy In the Admission Document, the Group originally identified a refinery capacityrequiring 3 D1 20 refineries. On the basis of the expanded 2006 cumulativeplanting target of approximately 267,000 hectares, the Directors anticipate thatthere will be a requirement for larger scale refineries. Accordingly, theDirectors are currently evaluating a number of options with a view to securinglarger scale refining capacity, including the following: • building larger scale refineries using the D1 20 technology; • designing and commissioning new, bespoke, larger scale refineries, which may utilise existing, 'off-the-shelf' refining technology; • entering into joint venture arrangements with third parties for refining capacity; and • selling surplus crude Jatropha oil to third party refinery operations. The Company is currently in negotiations with a third party which has excessbiodiesel refining capacity, with a view to it processing crude oil on theGroup's behalf. The Directors believe that, if negotiations are successfullyconcluded, this arrangement will assist to complement the Group's capacity andhelp to create shorter term revenues from the second half of 2005. Middle East On 16 February 2005, D1 Oils announced that it was developing a renewablebiodiesel business in the Kingdom of Saudi Arabia ("KSA") in partnership withJazeera For Modern Technology ("JMT"). A newly created 50/50 joint venture, D1Oils Arabia, will manage the plantation of Jatropha trees to provide feedstockto produce renewable biodiesel from former desert land. Initially, 5,000hectares of land, to be owned by the joint venture, will be provided by JMT. JMTwill also provide D1 Oils Arabia with access to an additional 100,000 hectareson successful completion of the initial project. The commissioning of the firstD1 20 refinery in the KSA will take place when there are sufficient quantitiesof feedstock available to be processed. Research and development The Group continues to be committed to achieving quality control and security ofsupply throughout its supply chain and has made progress in this regard,securing large scale volumes of planting seeds, developing customized growingmedia for Jatropha and researching the possibility of producing higher oilyielding Jatropha seeds. D1 Oils Trading has substantially expanded the research facility carrying outthe Group's ongoing seed testing research and development programme in order toprovide D1 Oils with a secure and quality supply of seeds for the cultivation ofJatropha. The Group's Indian based product development centre, the PDC, hascollected over 100 different genotypes of Jatropha and is currently cultivatingand testing these specimens for quality and adaptability to different growingregions globally. D1 Oils Trading has also entered into a separate research anddevelopment agreement with a third party who will help to support the researchat the PDC in the production of custom-designed, region and site-specificJatropha seedlings which enhance germination, survival and yieldcharacteristics. On 12 August 2004, D1 Oils Trading entered into an agreement with an Indianresearch facility for the supply of 50 tonnes of planting seeds (which have beendelivered and paid for) and for the incremental supply of 25,000 seedlingsdeveloped from a tissue culture process (at a cost of 18 Indian Rupees perseedling). D1 Oils Trading has now cancelled the tissue culture element of thiscontract, at no cost to the Group, and has placed secure orders for a total of 9million tissue cultured seedlings with an existing laboratory specialising inquality micro-propagation (at a price of 3.6 Indian Rupees per seedling). Thesecontracts are being supplied 'motherstock' material by the PDC in order toensure suitable quality control and Group management. These orders will befinanced and used by the D1 Oils Arabia joint venture, further details of whichare set out below in the section headed "Middle East". Current developments Since the date of the Admission Document, the Company has continued to executeits business strategy in the Group's existing territories, while pursuing anumber of additional opportunities, in new and existing territories, to purchasevegetable oil and enter into joint ventures or strategic alliances to developadditional biodiesel and related businesses. The Directors are of the view that,at this stage in the Company's development, and in order to quickly seize uponavailable, already identified expansion opportunities, additional equity fundingis required. This, taken in tandem with the leveraged finance made available by,or in the course of being negotiated with, a variety of third party financialinstitutions and strategic joint venture parties will allow the Group tomaintain its current growth. It is possible that, where negotiations are ongoing, agreement may not beconcluded in the short term or, indeed, at all, and Shareholders should be awarethat there can be no guarantee that the Company will be able to enter intocontractually binding arrangements in the foreseeable future. The principalterms on which the material opportunities are being negotiated or have beenconcluded are summarised below. • China On 19 November 2004 the Company announced that it had entered into a heads of terms with the Sichuan Yangtze River Technology Company Limited, Chengdu ("Sichuan") to form a new joint venture operation, D1 Oils China. D1 Oils Trading today announces that it has entered into a conditional 50 year joint venture agreement to develop a Jatropha biodiesel refining and feedstock supply business for the Chinese market. The first stage in this venture is for D1 Oils China to assess and audit the volume and quality of existing Jatropha growing in the region. Following this investigation, D1 Oils China will identify the extent of the first area required to be planted in order to reach its stated 500,000 tonnes target from the region as soon as practical. Lance Browne, a member of D1 Oils' Consultancy Panel has been assisting the Company in conducting these negotiations. This joint venture includes the following elements: • initial equity contribution of 49 million RMB (approximately £3.1 million) by Sichuan and 51 million RMB (approximately £3.22 million) by D1 Oils, in order to capitalise the joint venture and provide sufficient initial working capital facilities, with an equity participation split of 49 per cent. and 51 per cent. respectively; • Sichuan to procure the assignation of a minimum of 150,000 hectares and up to 2 million hectares of suitable land for the cultivation of Jatropha; • D1 Oils Trading to provide technical personnel, training for agronomy and refinery activities; and • D1 Oils Trading to supply certain agronomy technology, input supplies and management services. D1 Oils China will evaluate the appropriate refinery strategy to match itsexpected feedstock production. • India The Company is currently involved in advanced negotiations with a third party with a view to developing a joint venture, on an exclusive basis, within the North East of India for the purposes of developing a biodiesel business. Although the details of the arrangement are still the subject of negotiation and have yet to be finally agreed, the Directors intend that, if negotiations are concluded, the joint venture arrangement will include substantially all of the following elements: • equity contribution by each of D1 Oils Trading and the third party, in order to capitalise on the joint venture, with a view to agreeing a split of equity participation whereby D1 Oils Trading retains the majority share; • the assignation, by the third party, to the joint venture of sufficient land to commence at least a 10,000 hectare project and an option to acquire or lease additional land of up to approximately 1 million hectares; • a royalty secured by D1 Oils Trading, payable by the joint venture, based on a percentage of the sales value of the biodiesel produced; • at least one D1 20 refinery to be purchased by the joint venture; • the supply of certain agronomy technology, input supplies and management services by D1 Oils Trading; • a long term guarantee to purchase the resulting biodiesel produced to be provided by the third party; and • non-recourse banking facilities, on economic terms, to be provided by the third party in order to purchase capital equipment, input supplies and project financing for the joint venture. The Directors believe that D1 Oils is currently considered to be a leadingpromoter of biodiesel by the Indian Government and, taken together with itsexisting D1 Mohan joint venture, it is a leading biodiesel company in India. D1Oils has recently been granted an export licence by the Indian Government inrespect of Jatropha seeds. D1 Oils has also approached The National Oilseeds andVegetable Oils Board, a Ministry of Agriculture Department, seeking itsrecognition and accreditation of the PDC as an official Indian Research andDevelopment Centre. The Company also announces today that it has reached agreement with a thirdparty crude Jatropha oil producer with a view to entering into arrangements tosupply D1 Oils Trading with crude Jatropha oil, at commercial rates, with anoption to export the oil. It is anticipated that the supply of up to 60,000tonnes per annum of crude Jatropha oil will commence during the course of 2007(for a period of a minimum of 10 years). • Middle East D1 Oils Trading today announces that it has entered in to a strategic alliance agreement with Abdullatef Al-Rajhi International Group ("AAIG") for the design, development and implementation of waste water management facilities and infrastructure for the reclamation of up to 300,000 hectares of land suitable for producing energy crops in the KSA. Pursuant to the strategic alliance, AAIG will be responsible for the following elements: • paying all costs or provide the necessary financing to implement the plantation element of the proposed project, including leasing up to 300,000 hectares of land suitable for the commercial production of Jatropha crops for a minimum lease period of 20 years. Leasing fees will be compensated for under a revenue sharing arrangement as mutually agreed upon by both parties; and • all KSA permits, certificates and local and federal government authorisations related to the project. D1 Oils Trading will be responsible for supplying, on commercial terms, thefollowing elements: • access to tissue cultured Jatropha seedlings, suitable for the cultivation of up to 300,000 hectares of land, and agri-extension kits, including growing media, bio-fertilisers, nursery supplies, planting tools and planting instructions required to cultivate Jatropha; and • technical personnel, training in agronomy and refinery techniques, certain agronomy technology, input supplies and management services, product specifications, to produce organic fertiliser domestically from Jatropha oil seedcake, and design specifications for the construction and design of regional composting units. It is intended that the strategic alliance will be operated by D1 Oils Arabiawhich will purchase one D1 20 refinery and corresponding pre-processing units,located at a site to be designated by AAIG. • Africa As previously mentioned above in the section headed "Africa", the Company has reviewed its commercial activities in Burkina Faso and intends that a new joint venture operation, D1 Oils Burkina Faso, be set up between D1 Oils Trading and Biodiesel Corporation. The Directors intend that, if negotiations are concluded, the agreement will include substantially the following elements: • Biodiesel Corporation will transfer to the joint venture, its rights to the pilot plantation land of 10,000 hectares and the corresponding option to contract approximately an additional 990,000 hectares of land; • D1 Oils Burkina Faso will contract to purchase D1 Oils' branded seeds, seedlings and growing media at commercial rates and to purchase a minimum of two D1 20 refineries at market rates; • Biodiesel Corporation will provide farm management services and sell the harvested seeds back to the joint venture at US$50 per tonne; and • D1 Oils Burkina Faso will be responsible for producing crude Jatropha oil and converting that oil into biodiesel which it intends to sell into the local market (planting is currently scheduled to commence during the third quarter of 2005). Following the completion of an initial environmental assessment, the North WestProvince Government of South Africa is in the process of establishing eight 100hectare pilot plantations. Although there is no contractual commitment, theGroup is in discussions with the Government with a view to entering into anarrangement for the purchase of harvested seeds. Current trading, prospects and use of proceeds The audited results for the period ended 31 December 2004 were announced earliertoday. Since the financial year end, the Group's business has continued to tradein line with the Directors' expectations, and its expansion opportunities havebeen increased by securing approximately £25 million of third party financingfor the Group's global operations. D1 Oils Trading (or certain of its jointventure companies) is in negotiations to secure further equity investment orfinancing arrangements with banks and commercial partners. As at 31 March 2005, the Group's net cash balance was approximately £4.2million. The Group's operational expenditure to date is in line with theexpectations outlined in the Admission Document, despite the acceleration of keycomponents of the business plan as outlined above. The Directors believe that there are a number of positive variations from theiroriginally anticipated use of proceeds received at the time of the Company'sadmission to AIM (as stated in the Admission Document) which can be broadlysummarised as follows: • the previous planting target of 37,000 hectares has been increased to 267,000 hectares. In the Admission Document, the Directors anticipated that planting costs would be in the region of approximately £0.9 million, although the spend to date is actually approximately £0.4 million, principally on the advance purchase of seeds, pre-payments for seedlings and land preparation costs; • the continuing development of the D1 20 refinery and, in particular, the research, design and fabrication of the pre-processing units has resulted in an additional spend of approximately £0.7 million, compared to the Board's previous estimate of approximately £200,000; • the Group spent approximately £0.9 million buying out the existing D1 20 refinery asset finance lease from Grovefield Finance Limited (in respect of the UK-based D1 20 refinery); • the terms of the acquisition of the intellectual property and know-how in the D1 20 refinery technology from Mr Steve Davis were renegotiated. Mr Davis waived his right to the previously agreed £0.9 million payment in lieu of the immediate sale of his and his family's entire holding of 1,385,000 Ordinary Shares to the trustee of the D1 Oils Employee Share Trust for a total consideration of £3,462,500. The consideration for this Ordinary Share purchase was loaned to the trustee direct by D1 Oils. Further details of this arrangement are set out below in the section headed "D1 Oils Employee Share Trust"; and • the build out programme of the 3 D1 20 refineries planned for early 2005 has been delayed, resulting in a net, short term saving of £0.5 million. The Placing will raise approximately £25.8 million (before expenses). ThePlacing will expand the Company's capital base, support the implementation ofthe Company's strategy and, the Directors believe, enable the Group tocapitalise on the expansion and research and development opportunities in newand existing territories. More specifically, your Directors intend that the netproceeds of approximately £24.3 million raised by the Placing. • approximately £6 million in respect of equity investment and providing sufficient working capital for D1 Oils China in order to establish operations in this key market; • approximately £5 million in respect of equity investment and providing sufficient working capital for the proposed joint venture in North East India and for expanding the working capital base for D1 Mohan to fund the accelerated roll-out of its planting operations; • approximately £6 million building out the refinery strategy on a regional basis, the current expected roll-out programme (including up to 9 new D1 20 refineries), further research and development and the proposed investment in larger scale refinery technology; and • approximately £7.3 million accelerating the implementation of additional global opportunities and corresponding operations and general working capital purposes. Details of the Placing The Placing is expected to raise approximately £24.3 million (net of expenses).Pursuant to the Placing, 9,732,617 New Ordinary Shares are being placed firmwith certain institutional and other investors at a price of 265p per OrdinaryShare. D1 Oils Employee Share Trust The Directors believe that the success of the Group will depend to a high degreeon the future performance of the management team and recognise the importance ofensuring that all employees are well motivated and identify closely with thesuccess of the Group. The Company has formed the D1 Oils Employee Share Trust, anewly established employee share trust founded for the benefit of such of theemployees and former employees of D1 Oils and its subsidiaries and theirspouses, widows and widowers, children and step-children (under the age of 18)and in such manner as the trustees may determine (from time to time). Thetrustees are wholly independent of the Directors. On 8 February 2005, D1 Oils announced that it intended to contest vigorously aclaim which had been lodged with the High Court for approximately £725,000 inrespect of a dispute over payment for services and intellectual property rightswith Mr Steve Davis and his wholly-owned company SIF. In the Admission Document,D1 Oils provided for the payment of the disputed amount to be made using part ofthe original placing proceeds. However, subsequently, on 6 April 2005, D1 Oilsannounced that it had settled, at no additional cost to the Company, a claimagainst it of approximately £1 million in respect of this dispute. Under theterms of the settlement Mr Davis agreed to sell his and his family's entireholding in D1 Oils of 1,385,000 Ordinary Shares to the trustees of the D1 OilsEmployee Share Trust for £2.50 per Ordinary Share, a significant discount to themid-market closing price of £3.70 on 31 March 2005, the last dealing day beforethe settlement price was agreed. The £3,462,500 consideration for the purchaseof these Ordinary Shares was loaned to the trustees direct by D1 Oils. EXPECTED TIMETABLE 2005Dealings expected to commence in the New Ordinary Shares 8.00 a.m. on 14 JuneCREST Member accounts expected to be credited with New Ordinary 14 JuneSharesShare certificates for New Ordinary Shares expected to be 14 Junedespatched on or after DefinitionsThe following definitions apply throughout this document, unless otherwisestated or the context requires otherwise: "Act" the Companies Act 1985 (as amended) "Admission" admission of the New Ordinary Shares to trading on AIM and such admission becoming effective as provided in Rule 6 of Part 1 of the AIM Rules "Admission the Company's AIM admission document dated 21 October 2004Document" "AIM" AIM, a market operated by the London Stock Exchange "AIM Rules" the rules of the London Stock Exchange governing admission to and the operation of AIM "Articles" the articles of association of the Company "Bell Lawrie" a division of Brewin Dolphin Securities, the Company's Nominated Adviser and Broker "Biodiesel Biodiesel Corporation B.F Limited, a company registered andCorporation" incorporated in Burkina Faso, whose registered offices are located at Ouagadougou, Burkina Faso "Board" or the board of directors of the Company"Directors" "Brewin Dolphin Brewin Dolphin Securities Limited, which is authorised andSecurities" regulated by the Financial Services Authority "Business Day" any day (excluding Saturdays and Sundays) on which banks are open in London for general non-automated banking business "Certified" or "in an Ordinary Share which is not in uncertificated formcertified form" "CJPA" Coimbature Jatropha Producers Association, formerly known as Aavin Dairies and/or The Coimbature District Co-operative Milk Producer's Union Limited "Company" or "D1 D1 Oils plc, a public limited company incorporated andOils" registered in England and Wales with registered number 5212852 "CREST" the computerised settlement system to facilitate the holding of and the transfer of title of shares in uncertificated form, operated by CRESTCo Limited "CREST Member" a person who has been admitted by CRESTCo Limited as a System Member (as defined in the CREST Regulations) "CREST a person who is, in relation to CREST, a System-ParticipantParticipant" (as defined in the CREST Regulations) "CREST Participant the identification code or membership number used in CRESTCode" to identify a particular CREST Member or other CREST Participant "CREST The Uncertificated Securities Regulations 2001 (SI 2001 No.Regulations" 3755) as amended "D1 Mohan" D1 Mohan Bio Oils Limited, a company incorporated and registered in India, under registered number U74999TN2005PLC055668 "D1 Oils Africa" D1 Oils Africa (Pty) Limited, a company incorporated and registered in the Republic of South Africa under registered number 2002/009707/07 "D1 Oils Arabia" D1 Oils Arabia, a company in the process of being incorporated and registered in Saudi Arabia "D1 Oils Asia D1 Oils Asia Pacific, Inc., a company incorporated andPacific" registered in The Republic of The Philippines under registered number CS200406183 "D1 Oils Burkina D1 Oils Burkina Faso Limited, a company in the process ofFaso" being incorporated and registered in Burkina Faso "D1 Oils China" D1 Oils China Limited, a company in the process of being incorporated and registered in China "D1 Oils Ghana" D1 Oils Ghana Limited, a company in the process of being incorporated and registered in Ghana "D1 Oils India" D1 Oils India (Private) Limited, a company incorporated and registered in India under registered number U74999DL2005PTC135699 "D1 Oils South D1 Oils South Africa (Pty) Limited, a company incorporatedAfrica" and registered in The Republic of South Africa under registered number 2002/017705/07 "D1 Oils Trading" D1 Oils Trading Limited, a company incorporated and registered in England and Wales with registered number 4645184 "D1 (UK) Limited" D1 (UK) Limited, a company incorporated and registered in England and Wales with registered number 4468088 "EU" the European Union "•" or "Euro" the Euro, currency of the EU "FSMA" the Financial Services and Markets Act 2000 "Group" the Company and its subsidiary undertakings "London Stock London Stock Exchange plcExchange" "New Ordinary the 9,732,617 New Ordinary Shares to be issued in connectionShares" with the Placing at the Placing Price "NGO" non-governmental organisation "Official List" the Official List of the United Kingdom Listing Authority "Ordinary Shares" ordinary shares of 1p each in the capital of the Company "Overseas Shareholders who have a registered address outside the UKShareholders" "PDC" the Global Product Development Centre, the Group's research facility located at Coimbature, India "Placees" subscribers for the Placing Shares procured by Bell Lawrie (as agent for the Company) pursuant to and on the terms of the Placing Agreement "Placing" the arrangements for the procurement of subscribers for the Placing Shares by Bell Lawrie pursuant to the Placing Agreement "Placing the conditional agreement dated 31 May 2005 between (1) BellAgreement" Lawrie and (2) the Company relating to the Placing "Placing the document published on 31 May 2005Memorandum" "Placing Price" 265p per New Ordinary Share "Placing Shares" the 9,732,617 New Ordinary Shares to be placed in connection with the Placing at the Placing Price "POS Regulations" The Public Offers of Securities Regulations 1995, as amended "RMB" China Yuan Renminbi "Shareholder(s)" the person(s) who are registered as holder(s) of Ordinary Shares from time to time "UK" United Kingdom of Great Britain and Northern Ireland "UK Listing the Financial Services Authority acting in its capacity asAuthority" the competent authority for the purposes of Part VI of the Financial Services and Markets Act 2000 "uncertificated" or recorded on the register of Ordinary Shares as being held in"in uncertificated uncertificated form in CREST, entitlement to which by virtueform" of the CREST Regulations, may be transferred by means of CREST "US" or "United United States of America, each state thereof, itsStates" territories and possessions and the District of Columbia "US$" or "dollar" United States dollar "£" United Kingdom pounds sterling The following financial information has been derived from the Annual Report andFinancial Statements for the year ending 31 December 2004 but does notconstitute statutory accounts for the periods ending 31 December 2004 or 2003. The statutory accounts for the year ended 31 December 2004 will be delivered tothe Registrar of Companies following the company's annual general meeting. Theauditors have reported on those accounts; their reports were unqualified and didnot contain statements under s237(2) or (3) Companies Act 1985 Chairman's Statement Review of the reporting period I am pleased to announce our results for the year ended 31 December 2004, ourfirst results, since the Company's Ordinary Shares were admitted to AIM inOctober last year. I can report that the Group is making good progress as itseeks to establish itself as a leading sustainable global low cost producer ofbiodiesel. Since its admission to AIM last year, the Group has continued toimplement its strategy. Certain key business goals have been accelerated,including the extension of our planned planting programme and expansion of ouroperations in existing and new territories. Financial results In the year ended 31 December 2004, the Group's loss on ordinary activitiesbefore taxation was £3,064,277, which is a loss per share of 47.53p. The cashbalance at the end of this period was £9,562,364 after financing receipts of£12,702,085 in the year. The working capital spend to date is in line with theexpectations outlined in the Admission Document, despite the acceleration ofcertain key components of the business plan. D1 Oils brand D1 Oils is building a global brand. We are working closely with government andindustry stakeholders in territories, including India and Thailand, and continueto expand the Group's presence and brand globally. Employees, joint venture partners and Consultancy Panel Much hard work and dedication has been applied throughout the Group to implementour strategy and build our business. Our joint venture partners have assisted usin creating our presence in our operational regions, while our Consultancy Panelhas also contributed to accessing new prospects, including opportunities inChina. I would like to thank all of our staff, joint venture partners and ourConsultancy Panel for their contribution throughout 2004 and into 2005. Current trading and prospects Since the financial year end, the Group's business has continued to trade inline with the Directors' expectations. The Group has further increased itsexpansion opportunities and has secured approximately £25 million of third partyfinancing for the Group's global operations and the Board remains confidentabout the prospects of the Group during 2005. Karl Watkin MBEChairman Chief Executive's Report Market drivers The emerging global biodiesel market has been reinforced recently by the signingof the Kyoto Protocol and the continuing implementation by EU member states ofthe Biofuels Directive which has set indicative targets for a minimum level ofbiofuels of 5.75 per cent. by 2010. We are also seeing other markets acceptbiodiesel as a sustainable, renewable fuel resource and have identified China asa new territory in which to pursue additional opportunities. We are alsocontinuing to seek expansion opportunities in India and elsewhere. Strategy and overview of operations We aim to take advantage of the increasing global acceptance of biodiesel as asustainable renewable fuel resource in pursuit of our strategy to become aleading sustainable global low cost producer of biodiesel. This has meant thatsince admission of the Company's ordinary shares to trading on AIM in Octoberlast year we have been able to expand our planting targets and pursue newopportunities which have been made available to us, including securing thirdparty financing. On 14 April 2005 we announced that our Indian joint venture company, D1 MohanBio Oils Limited, had expanded its initial Plantation planting target of 5,000hectares to 100,000 hectares by the end of 2005. D1 Mohan has also secured £15million of third party funding for farmers to take up the planting andcultivation of Jatropha which will fund the planting of up to 40,000 hectares ofJatropha. On 16 February 2005 we announced that a new joint venture with Jazeera ModernTechnology of Saudi Arabia will soon oversee the planting of 5,000 hectares ofJatropha in the desert outside Riyadh. The joint venture company has an optionto expand the territory available for planting to 100,000 hectares. We believethis is an example of our ability to customise our business in individualoperational regions. Refining capacity The current specification of the D1 20 refinery has completed its 24/7 test andwe have completed the fabrication of additional pre-processing units (which aresubject to commissioning and testing) and which will allow us to process a widervariety of type and quality of oils. We are pursuing options to achieveadditional refining capacity to meet the anticipated increased refining demandresulting from crude Jatropha oil to be produced pursuant to the increasedplanting targets. Outlook We believe that the Group is well placed to benefit from the many opportunitiesthat are expected to arise. The Group will continue to implement and execute itsbusiness plan and will continue to strengthen the security of its supplies byexpanding its portfolio of sources of oil. Philip WoodChief Executive CONSOLIDATED PROFIT AND LOSS ACCOUNTFor the year ended 31 December 2004 Note Year ended 49 week 31 December period ended 2004 31 December Note 2003 £ £ Administrative expenses (3,024,838) (704,478) --------------- --------------- OPERATING LOSS 4 (3,024,838) (704,478)Interest receivable and similar income 77,155 -Interest payable and similar charges (116,594) - --------------- --------------- LOSS ON ORDINARY ACTIVITIESBEFORE TAXATION (3,064,277) (704,478)Tax on loss on ordinary activities 7 - - --------------- --------------- RETAINED LOSS FOR THE FINANCIAL YEAR WITHDRAWN FROM RESERVES 8,17 (3,064,277) (704,478) =============== ===============LOSS PER ORDINARY SHARE Basic and diluted loss per ordinary share 9 47.53p £7,044.78 =============== =============== All activities derive from continuing operations. The Group has no recognised gains and losses other than the loss for the currentfinancial year and preceding financial period and therefore no separateStatement of Total Recognised Gains and Losses has been presented. During the period the holding company, D1 Oils plc, acquired a new subsidiary D1Oils Trading Limited. The profit and loss account has been prepared using mergeraccounting and is presented on a pro forma basis as if the Group had been inexistence throughout both the current and prior periods. Further information isgiven in note 1. A consolidated profit and loss account from the date of incorporation of theholding company is given in note 26. CONSOLIDATED BALANCE SHEETAs at 31 December 2004 Pro forma Note 31 December 31 December 2004 2003 £ £ FIXED ASSETSRelated Shares:
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