Bad harvest for biofuels?

Are biofuels an attractive investment proposition in the UK? The restructuring proposals from Teesside's Biofuels Corporation might suggest not. Shareholders in the company, which raised £15m in an AIM float in July 2004 and a further £32m in March 2005, now face a delisting and major dilution of equity in favour of slashing the company's debt with Barclays.

The company's statement (pdf here) splits the blame between technical problems at their Middlesbrough plant and a toughening commercial climate:
The combination of higher vegetable oil prices and lower biodiesel prices have together meant that the Company has been unable to make profits from the production of biodiesel. In particular the price of European biodiesel has been depressed by US biodiesel that benefits from both European market support mechanisms and US production subsidies[...] As a consequence, high-capacity production of biodiesel at acceptable margins has not been possible[...]

Biofuels Corp has had years of troubles, however, so it shouldn't be a death knell for the sector. The other big news of the day certainly suggests otherwise - BP and Associated British Foods, along with DuPont, have announced a major joint venture to produce bioethanol, just down the east coast by Hull. The £200m plant at BP's Saltend site will have a capacity of some 420m litres of bioethanol per year, based on locally grown wheat (assuming anything survives the current floods in the area, of course). The plant will potentially be convertible into producing biobutanol, which unlike bioethanol can be used in un-modified internal combustion engines and thus has a much larger potential market. A biobutanol demo plant will run alongside the main ethanol line.

ABF, via its British Sugar subsidiary, is also working with BP and DuPont on a 70m bioethanol plant in Norfolk which will use local sugar beet as a feedstock. Subject to final approval, the European Investment Bank will provide £120m project financing for the two developments, its first direct financing for biofuel projects.

Private equity investors seem to have shied away from UK biofuel investments, however - a distinct contrast to the US situation. There has been the odd tech deal - a recent example is last month's £15m syndicated round in Guildford-based TMO Renewables, developers of an improved patented process to convert biomass into ethanol, which sees its main market as the US - but no big production deals as have been seen across the Atlantic. Does that reflect different tastes for UK investors, or just the lack of huge farmbelt-friendly subsidies over here?