D1 Oils has ditched its “earth to engine” business model after the biofuels developer announced a new share placing and the closure of two of its refineries to fund its future development and research.

The company has been hit by heavily subsidised US biodiesel imports and sharply rising feedstock prices and will now withdraw from refining and trading and concentrate on plant science and the planting of jatropha, a tropical oilseed bearing tree.

Its Middlesbrough and Merseyside refineries are to be closed and employee numbers will more than halve to 81. It also completed a placing of 64.38m shares at 25p – a 34 per cent discount to its 37¾p closing price on Tuesday – to raise £14.9m ($29.4m) after expenses.

The company also announced a £46.1m loss (£12.6m loss) for the year to December 31. Turnover of £10.6m (£1.6m) arose from the sale of 20,632 tonnes of biodiesel. These sales generated a gross operating loss after the cost of refining of £5.1m (£0.8m). Its loss per share widened from 39.98p to 74.85p.

Since its Aim flotation in October 2004, D1 has raised £99.1m – from its initial IPO and three subsequent placings. At the end of last year it had a net cash balance of £7.8m. The latest placing, supported by its leading shareholders, is expected to give sufficient funding to the end of 2009.

It said on Wednesday that because of the highly competitive market in Europe in which only very largescale operations were viable, it did not see the UK offering a viable location for refining and trading to meet domestic demand for the foreseeable future.

Elliott Mannis, chief executive, said: “We are a small company with a modest balance sheet. We can’t afford to play a wait-and-see game.

It’s not a good business strategy to throw good money after bad.”

The timing of D1’s restructuring comes ahead of the introduction next Tuesday of the UK’s Renewable Transport Fuels Obligation, intended to underpin the UK market for biofuels. However, D1 now believes UK demand will be met largely by US imports.

Its share price has reflected recent sentiment towards biofuels. Having peaked at £5.17 during a “green bubble” in March 2005, it closed down a further 2 per cent at 37p.

D1 will now focus on the technology and services required for upstream breeding, development and planting of new varieties of commercial biofuels crops, principally jatropha, which produces inedible oil from land unsuitable for arable agriculture.

Continuing activities include D1-BP Fuel Crops, a 50/50 joint venture with BP, the oil group. Total planting and rights to offtake from plantations in India, Africa and south-east Asia totalled 192,016 hectares at the end of March.