On 14 March 2012, the company has announced that a specific resolution designed to change the name from D1 Oils plc to NEOS Resources plc was approved by the Board. The reason for this change lies within an attempt to reflect the company’s strategy. Moreover, it allows distinguishing operations of the previous company from the new ones (NEO Resources n.d.). However, in order to analyse the gradual development of the company, it is essential to address its history.
D1, which was initially named D1 Power Limited, was developed by a group of individuals, including Karl Watkin and Alex Worrall. The primary focus of the company was todevelop a portable refinery technology with the purpose of producing biodiesel for the UK transport industry. Therefore, the company engaged specialists from the chemical industry in order to develop the project; consequently, several prototypes were built. However, the high price of rapeseed in Europe, the main feedstock for biodiesel production, rendered exploitation of this technology commercially unattractive. The Group then sought an alternative feedstock and explored the detailed economics, yields and suitability of a variety of specific energy crops. Thus, jatropha was selected as its preferred feedstock, thereby focusing the Group’s activities on securing output from these specific plantations.
Additionally, the Board determined that refining capacity would be a pivotal link in the Group’s strategic supply chain; therefore, an initial commercial biodiesel refinery was manufactured and operated on a test basis. In 2004, D1 Oils Trading acquired all rights of D1’s range of modular biodiesel production equipment from the original designer.
In order to reach its objective of becoming a global producer of biodiesel that can be characterized as sustainable and low cost, the company needs to implement a strategy, which is based on the necessity to secure plantation rights and establish refinery operations in order to control and manage its overall operations on a regional basis.
D1 Oils plc floated in October 2004 with a prospectus, outlining plans for low cost bio fuel production on 37,000 hectares of plantations in Africa, India and Philippines. It had options on additional 6m hectares. The jatropha is native to India; moreover, it can grow on wasteland. D1 Oils plc set out to exploit this potential by creating alliances with associate companies in India that would grow the bushes, while D1 marketed the harvest.
Jatropha, an oil-yielding tree that can grow on degraded soils in arid conditions, is one promising feedstock that would not have to compete for valuable agricultural land. A UK company, D1 Oils plc, has made arrangements to cultivate this plant along train tracks in India, on mining-degraded soils in the Philippines and on a waste water dumping ground in Egypt.
The economic viability of biodiesel from jatropha depends largely upon seed yields. While aiming to cultivate biodiesel in the developing world, D1 Oils plc has chosen jatropha as its primary feedstock due to the plant’s high oil content, as well as its ability to tolerate a wide range of climates. In addition, its productive lifespan consists of as much as 30 years.
A significant step in the evolution of D1 Oils plc was marked by a specific agreement. It was signed to form a joint venture in China, 51% owned by D1 Oils plc, that would not only grow the plants, but would have a refinery ability to produce 20,000 tonnes of biodiesel a year. The £2.5m start-up costs would be financed entirely by the Chinese. The Indian government granted a licence for the export of jatropha seeds for use in China and elsewhere.
D1 Oils plc announced its expansion in Madagascar two months later. There were spotted 17,000 hectares of existing jatropha plantations. The company made arrangements in order to harvest the output, despite the fact that the trees were being used as supports for growing vanilla.
According to Hobson (2008), D1’s shares increased from an initial 150p to a peak of 475p in less than five months. Despite the mentioned increase, D1 Oils plc still had to demonstrate that it could grow, harvest and refine insufficient oil quantities along with finding markets.
Gradually, more hectares were brought into production, while refining capacity at Middlesbrough and overseas were coming on stream, but success in selling output had an unfortunate consequence. With supplies from jatropha trees insufficient to meet the amount of refined oil that D1 Oils plc had contracted to supply, it was necessary to buy inexpensive vegetable oil in 2006 to make up the shortfall.
According to Hobson (2008), D1’s share price graph shows a series of surges on hopes that the company would be taken over followed by a decline to ever lower troughs, with company shares dropping below 100p for the first time in early 2008. In the meanwhile, the Group had run up increasing losses as cash was ploughed into the expanding operations. Therefore, it decided to withdraw from its UK refining business. This decision meant writing down the value of assets by £22.8 millions. Furthermore, the company was forced to place 64.4 million new shares at 25p each, which comprised a 34% discount to the stock market price of 37.75p.
D1’s experience has not been without challenges, but the company has developed knowledge that can support the development of jatropha as an energy crop and possibly as an animal feed. Government policy can assist the development of jatropha cultivation in a number of ways. According to company officials, government programs that could be beneficial include micro financing for small farmers, reductions of import tariffs on farm machinery, and favourable taxation of jatropha oil. Furthermore, D1 Oils plc is involved with countries that predominantly have government programs for rural development designed to support the development of jatropha.
According to the annual report, there have been a number of significant changes implemented to both the Board and operational structure of the Group over the last sixteen months. The Board`s principal objective is for the Group to achieve profitability and cash flow sustainability within a manageable time horizon. Meanwhile, the running costs were substantially reduced from £220,000 to £75,000 per month, which comprises 66%. The reduction was achieved due to the closure of jatropha plantations in Zambia, Malawi and Indonesia, while a considerable efficiency was achieved within India and the UK. The Group was refocused to non-edible oils seeds found in India. In order to guarantee financial stability in the future, a specific strategy was initiated. The focus shifted from research and development towards commodity trading. However, it is essential for the management team not only to develop its knowledge regarding the complexities of the Indian market, but also to study the commodity market spread pressures and operational activities in a thorough way. Consequently, incremental developments are expected each year. These include higher yields and increased oil content for jatropha seeds, better control of pests and diseases, and better understanding of agronomy and plant husbandry. Despite the fact that challenges still remain within this sphere, jatropha is most viable in countries with low wages and high fuel costs. Therefore, there is a need for improving its viability in other countries. In addition, an efficient strategy based on research programs should be implemented in order to improve the yield and its value.