Lignol to take 40% in biodiesel maker Neutral Fuels

Sep 5, 2013 - Canadian biorefining technology firm Lignol Energy Corp (CVE:LEC) said today it would acquire a 40% interest in sector firm Neutral Fuels Parent Co as part of a loan deal.

The target company operates two closed loop biorefineries in Dubai and Melbourne where it makes biodiesel from used cooking oil supplied by McDonald's Corp (NYSE:MCD). In exchange the latter receives 100% biodiesel, also known as B100, to use in its delivery fleets. The closed loop business model has been tailored specifically for McDonald's.

As part of the plan, Lignol will extend AUD 4.07 million (USD 3.7m/EUR 2.8m) in loans in two tranches to Neutral Fuels to support the next phase of the McDonald's partnership. That will involve the start-up of closed loop biorefineries in the Asia Pacific, Middle East, Africa (APMEA) region under a deal with the McDonald's Restaurants used cooking oil biodiesel programme. Under the transaction, Lignol will also take a 51% stake in Neutral Fuels' Australia and New Zealand biodiesel arm Neutral Fuels (Melbourne) Pty Ltd.

“LEC's next generation technology provides us with some exciting options for the future,” said Karl W Feilder, chief executive and chairman of The Neutral Group.

The first-tranche AUD-2-million loan is to be funded by October 15, while the latest date for the second-tranche loan of AUD 2.07 million is January 15. The transactions need regulatory nods. Once completed, Neutral Fuels’ current management team will remain in charge of the operations.

(AUD 1 = USD 0.914/EUR 0.692)

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