Agrol Biotechnologies is aiming to raise up to HK$350 million, in what is likely to be the biggest fund-raising deal on the Growth Enterprise Market so far this year, according to market sources. It is planning to place 100 million new shares to institutional investors at between HK$2.5 and HK$3.5 each, they said. Agrol was set up in 1993 by Joachim Lukas and Brian Selby Hartley in Britain. It develops technology to produce ethanol to replace or complement petroleum-based fuels. The company said it had developed a 'novel fermentation process' utilising its 'patented genetically-engineered micro-organisms' to produce ethanol from renewable materials such as wheat straw and wood wastes. Traditional production processes use yeast to convert edible sugar into ethanol. Agrol is in the process of commercialising the technology that it believes would reduce 'substantially' the production cost of ethanol, which is also more environmentally friendly. Ethanol was first used as motor fuel before the 1950s but was replaced by cheaper petroleum-based fuels. Its popularity has risen in recent years on environmental concerns and supply volatility of petroleum. Agrol plans to use HK$130 million of the listing proceeds to finance part of the construction of a HK$220 million ethanol production plant in East Germany, which it wants to use as a 'showcase' to demonstrate the commercial viability of its technology. It is scheduled to be completed before November 30, 2003. Agrol has had no turnover in the past three financial years. Its net losses range between HK$10.9 million to HK$15.9 million. Main revenue sources will be one-time licence fees and periodic royalties on technology. The firm cautioned potential investors that the commercial viability of its micro-organisms-based fermentation process had not yet been proven, and its technologies could be challenged by competitors and potential competitors. 'It is difficult to quantify [our cost advantage versus traditional fermentation methods] as the group's technology has not been carried out on a commercial scale,' it said. Agrol said it was not aware of economically viable industrial scale production of ethanol via fermentation involving genetic engineering, but that a US competitor had reached pilot plant stage in developing a 'batch fermentation process' using a mix of yeast and bacteria. Other potential competitors were using genetically engineered bacteria found in the human gut and genetically engineered yeast in their processes. Executive director Carlton Poon - a renowned stock market commentator and a director at Worldsec International, lead manager of the shares placement - could see huge paper gains on successful listing of the firm. Mr Poon controls 617.87 million shares, or 55.4 per cent of the firm. His investment of about HK$35.2 million, at an average of 9.9 HK cents per share, would be worth about HK$1.85 billion, assuming the final placement price is HK$3.