Finance Minister Mrs. Gilowska signed an ordinance cutting the budget
support for biodiesel use in motor vehicles in its proposal for the budget bill
for 2007, in line with the plans announced on December 14th 2006. The
excise tax break for using biodiesel with 10% content of biocomponent
would be cut from PLN/l 2.2 to PLN/l 1.0. The chamber of biofuel producers
has filed a protest against the cuts, saying that it could threaten the
successful launch of biodiesel market in Poland.
Our view:
We view the ministerial decision as negative news for ElstarOils, as it would
result in lower discount in the biodiesel retail price versus standard diesel
fuel, from 5.8% to 2.6% on our estimate. It would bode for a slower start of
biodiesel market in Poland, resulting in some domestic producers exporting
their output (Skotan), while others would probably put on hold their capacity
buildup plans (Solvent). ElstarOils CEO Mr. Rosnowski said that despite the
unfavorable decision on the tax regime, the company budget for 2007 would
remain unchanged. We reiterate our Hold rating for the stock.