Solid Energy sells its biofuel arm to management

MANAGEMENT BUYOUT: Karl Hatton, left, and Martin Johnson are the Green Fuels team.
MANAGEMENT BUYOUT: Karl Hatton, left, and Martin Johnson are the Green Fuels team.

Solid Energy's biofuel company has been sold to its management, two Christchurch men who are confident of making a profit with the business that stumped the state.

Biodiesel New Zealand has been sold for an undisclosed sum to former fuel business manager Martin Johnson and former production manager Karl Hatton along with long-time customer Stark Bros and another silent partner.

The Middleton-based business has been renamed Green Fuels while its diesel brand, Biogold, remains the same.

The biofuel refinery converts used cooking oil into environmentally friendly biodiesel.

It will be run by Johnson and Hatton alone compared with under state-owned Solid Energy when about six people were based at the Marylands Place refinery.

Johnson, Green Fuels managing director, said the company's overheads had dropped significantly given the company was now two-strong.

Production had dropped to about 600,000 litres a year, but Johnson hoped to build up to 1 million litres annually.

Green Fuels will make small deliveries itself and contract out delivery of larger volumes. Previously the company used its own dedicated drivers.

Johnson was confident the business would be profitable, competitive with mineral diesel and that customers would see the benefits in ecological responsibility.

"Both Karl and I are passionate about making and supplying environmentally friendly fuels and when the opportunity came to purchase the business both of us jumped for it."

Stark Bros managing director Andrew Stark said he had looked hard at the business plan put by Johnson and found it compelling.

"It's made locally in Christchurch, it would otherwise be a waste product. It's the whole story that goes with it: It's New Zealand at its best."

He believed the business, of which Stark Bros owned a third, would be better suited to private ownership with a smaller team.

"It's always difficult with a corporate structure. Certainly we would be looking at doing things at a lower cost structure than is possible with a corporate entity. There will be some things that the corporates can do better - a bit flashier with more money sloshing round - but Martin will run it as a fairly tight ship."

Now-resigned Solid Energy chief executive Don Elder has said Biodiesel was not profitable without government subsidies, which have finished. "Biodiesel is a business we no longer believe we should be in and we want out as soon as possible. Nobody knows better than us, coming from the industry, how hard it has been to make renewables economic."

Solid Energy could not immediately answer how much money it had pumped into the business.

It said they would regard the query as an Official Information Act request and would investigate.

Green Fuels production engineer Hatton has worked at the factory for more than seven years. He was hired by company founder Paul Quinn who sold to Solid Energy in 2007.

Hatton has set up storage tanks at the factory after the existing tanks were taken out and sold by Solid Energy. He cleaned and reconnected old tanks that Solid Energy had written off as past their useful life. He converted one of the tanks into a backyard pool for his home.

The Press