Ormat Industries Ltd. (TASE: ORMT) today announced that it was postponing plans to develop and build a commercial biodiesel facility at this time. The company added that it had invested $1.8 million to date in R&D in the project to date, which would be reported in the company's profit and loss statement.
Ormat announced 18 months ago that it would invest $35-50 million in a biodiesel production facility within two years. The company said at the time that it would invest $13.5 million in R&D in the venture over five years. Ormat is collaborating with an academic institution, whose identity it declines to disclose, and with Evogene Ltd. (TASE:EVGN) on the development of high-yield non-edible plants for biodiesel production. Ormat added that it would focus on the development of these plants.
Ormat is foregoing construction of the biodiesel plant because prices for commodities, including commodities for biofuel production, have soared rendering biodiesel much more expensive to the point of being economically unviable. For example, prices for soy beans, one of the crops used in biofuel production, has risen from $3-4 per bushel over the past year to $12.
IBI Investment House analyst Yuval Zehira says, "Today, most biodiesel and ethanol companies in the world are losing money because of high commodities prices."
Zehira added that, for Ormat, the freeing up of the $35-50 million slated for the biodiesel facility increased the likelihood that the company might distribute a dividend. In the struggle for control of the company between Ormat's controlling shareholders, the Bronicki family and Gazit Inc. (TASE: GZIT) chairman Chaim Katzman, the Bronickis borrowed $150 million from Bank Hapoalim (TASE: POLI; LSE:80OA) to buy Ormat shares. They will need large dividends to repay the loan.
The Bronickis currently own 35.25% of Ormat through Bronicki Holdings Ltd., while Gazit owns nearly 19%. Katzman has belied market predictions, and continued buying Ormat shares in small blocks without let-up, despite the blocking maneuver by the Bronickis.
Published by Globes [online], Israel business news - www.globes-online.com - on January 7, 2008
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