KTG Energie leaped to top position among German biogas groups with the takeover of peer Deutsche Biogas in what could herald a wave of deals in the sector in the face of elevated corn prices.

The group, spun off from farm operator KTG Agrar in June, took to 50 megawatts its power output by buying for cash control of Deutsche Biogas from majority shareholder, and chief executive, Horst Lammers.

And KTG Energie will boast some 60 megwatts in electricity generation capacity by year end, a figure that chief executive Thomas Berger said was "enough to supply more than half a million people with clean energy".

"Moreover, we will talk our sales revenues and earnings to a whole new level," Dr Berger said.

Discount deal

Deutsche Biogas achieved sales of E32.3m in the year to March, and an operating profit of E5.7m.

However, the group's shares have fallen from a high of E6.20 in December to a low of E2.79 last week amid questions over financing for expansion plans, and over the high corn prices which have caught out many biogas groups, which often rely largely on the crop as a major feedstock.

Biogas plants create energy by breaking down crops, or waste products such as poultry muck or even abattoir waste, into gases which are burnt off to create electricity.

KTG Energie is believed to have paid a below-market price for its shares, and a total outlay of less than E10m, in the reverse of normal takeover deals, when the acquirer pays a premium.

Consolidation wave

And the deal looks likely part of a longer-running trend, with high corn prices appearing to be fuelling "industry consolidation", a company source told Agrimoney.com.

"A number of operators are having problems," the source said, with KTG Energie getting "offers often to buy new plants".

These would only be considered for purchase if deemed suitable on criteria including price and geography, being near the group's existing operations.

Raw material supplies

KTG Energie is being protected from the downturn by its close ties with KTG Agrar, still its majority shareholder, and a reliance for feedstock on second crops such as millet and Sudan grass which have seen far more limited price rises than corn.

Furthermore, KTG Energie is boosting its own financial firepower through a bond placement, which closes on September 27, aimed at raising E25m.

The group's shares closed 0.7% higher at E14.60 in Frankfurt.

Deutsche Biogas shares closed down 2.2% at E3.00.