THE company building the world's largest biodiesel plant has been bailed out by financial backers following crisis talks, it emerged last night.

Last month, Biofuels Corporation suspended trading of its shares on the stock exchange. The move was believed to have come after a dispute began with its main customer, Petroplus Refining Teesside.

Yesterday, it said in a statement that it had convinced financial backers to provide more funding and resumed share trading.

Before work on the plant began, Biofuels signed a deal with Petroplus to take between 65,000 and 75,000 tonnes of biodiesel a year.

But Petroplus has pulled out of the agreement, saying the conditions of the contract had not been met.

The loss of its main customer is believed to be the reason Biofuels suspended trading on the stock market, to allow time for crisis talks with Barclays.

During that time, the future of its completed £21m alternative fuels plant, at Seal Sands, near Billingham, and of 40 staff, hung in the balance - but Barclays has now agreed to back Biofuels with £92m.

Because of the loss of its arrangement with Petroplus, the plant will only be operating at about 43 per cent capacity.

Only three months ago, it had customers for nearly 80 per cent of its capacity .

A spokesman for Petroplus said last night that he had "nothing to add" to Biofuels' statement.

The Biofuels plant was due to start producing biodiesel in September. The plant is now built, but it will not be operational until February.

The plant, which mixes palm or rapeseed oil with diesel, is in the process of being commissioned, but is still not ready for production.

Delays are believed to have led to extra costs.

A company statement said: "The board can confirm that it has reached agreement with its lender, subject to shareholder approval, on new conditional on-demand debt facilities. These facilities are to provide sufficient funding to see the plant through the full-scale production."

Chief restructuring officer Paul Horn, of Kroll Talbot Hughes, has been appointed temporarily to keep the company on course.

But Barclays has the right to demand immediate repayment of Biofuels' debts at any time - meaning the company could be plunged into liquidation if Barclays withdraws its support.

Biofuels is listed on London's junior stock exchange, the Alternative Investment Market.

It emerged last month that the company had been offered a £1.2m grant by One NorthEast, but it had not yet taken the money.

When Billingham-based Biofuels began work on the plant a year ago, it said it would put the North-East at the heart of the potentially prosperous renewable fuel industry.