TROUBLED biodiesel producer the Biofuels Corporation may have turned a corner with the announcement it has begun producing fuel at its Teesside plant.

The Billingham company had expected to start production at its Seal Sands plant - the largest of its kind in Europe - in September, but that was before a series of delays and the loss of a major customer.

Biofuels suspended trading of its shares and went into crisis talks with financial backers in November, reaching an agreement with Barclays to bankroll the plant.

In the New Year, the company announced that it expected production to begin by the end of last month.

Yesterday, in a statement to the stock exchange, it said: "The board of Biofuels is pleased to announce that, following the successful completion of a comprehensive commissioning programme, the first biodiesel has been produced at its Teesside plant."

Quality checks are being carried out on the biodiesel and, once they are completed, full production can begin.

Dermot Roddy, chief executive of Renew Tees Valley, the body set up to champion the renewable fuels sector in Teesside, said last night the move was good news for the region.

He said: "For me, the key point is that this is the biggest biodiesel plant in Europe, possibly the world, and it is on Teesside.

"A lot of people said it could not be done, but they have gone and done it."

The first fuel from the plant is likely to be used in power stations rather than cars.

Once quality tests are completed, and production is increased, the fuel will be suitable for use in vehicles, Mr Roddy said.

Investors were unimpressed by yesterday's news, with the share price dipping.

They were expecting full production to begin by the end of last month and were not expecting yet more tests.

Biofuels said in January it had funding of about £92.9m - enough to see it through to full production.

The company was set up by Australian businessmen John Nicholas and Max de Grussa, and raised £15m when it floated on the stock market last year. The pair remain shareholders, although Mr de Grussa left the company last year and owns a smaller share.