THE company building the world's largest biodiesel plant last night confirmed it had received a takeover approach.

The troubled Biofuels Corporation, which agreed a life-saving financial package with its bankers on Friday, said it had received a tentative approach from a mystery suitor.

A statement said: "(Biofuels) can confirm it is in very preliminary discussions, which may or may not lead to an offer being made for the whole of the issued ordinary share capital of the company.

"A further announcement will be made in due course."

Last month, Biofuels, which is based in Billingham, on Teesside, suspended trading of its shares on the stock market and went into crisis talks with financial backers.

The move was believed to have come after it lost its major customer, Petroplus Refining Teesside.

But last week, Barclays agreed to back the renewable fuels company with up to £92m. However, the lender could still call the loan in at any time.

Biofuels has completed its £21m alternative fuels plant at Seal Sands, near Billingham.

The plant was due to start operating in September, but a series of delays has pushed that back to February next year, which has created further debts for the company.

Anthony Platts, of Tees Valley investment managers Wise Speke, said: "There is clearly long-term potential in this business, but the short-term is undecided, particularly in light of the recent refinancing.

"However, any investor looking to the long-term may see through this and see the business as a viable option."

He said that Barclays as good as owned the business, as it had the power to call in its debts at any time, leaving the company insolvent.

Any investor who bought the business would be able to secure its long-term future, as Biofuels would be less reliant on its funders.

But the majority shareholders, which include John Nicholas, one of the Australian founders of the company, are unlikely to want to sell, as they would walk away with no more than their initial investment.

The largest shareholder is institutional investor Morgan Stanley, but the Biofuels' board owns a majority stake in the company.