Shares in Renewable Power and Light (RPL), a two-year-old, independent power producer with plants in Manassa, NY and Elmwood Park, NJ took a 70 percent hit on Friday after it announced expected losses because of a contract dispute with a supplier of palm oil–a feedstock for the company’s biofuel operations.

The stock price tumbled after RPL resumed trading on the AIM after suspending trading on July 5. RPL announced six days later that it was suing Safari Group Inc. for failing to supply palm oil at an agreed fixed price. Safari has cited a substantial increase in the price of palm oil as the reason for its inability to perform under the terms of its contract.

The Financial Times reports that:

A surge in global demand for biofuels has worked to the advantage of some suppliers such as Anglo Eastern Plantations. Shares in the oil palm plantation owner have risen more than 30 per cent in the past six months.

But that surge has hurt companies that depend on the oil, including Biofuels Corp, which runs the largest biodiesel plant in the UK. Biofuels recently announced drastic restructuring plans to stave off bankruptcy.
Although RPL says it expects a financial loss in the currrent year due to the supply disruption, it adds that its balance sheet “remains robust with almost $50 million in cash and Net Assets of approximately $84 million.”
The company said it has identified and tested alternative supplies and that “palm oil, jatropha and soy oil offer the best potential to meet RPL’s requirements.”
In addition to its two power plants, RPL plans to build a refining facility in up-state New York to convert raw palm oil into B100 Bio-diesel fuel.

For more information on RPL, click here.