Shares in Renewable were suspended last Thursday after the company informed investors that Safari, a US company with which it had agreed a crucial contract to buy palm oil, was no longer able to supply the commodity.

Yesterday, after dealings recommenced, RPL's share price fell 75.75p to 38.75p, as the company said it would sue Safari for breach of contract. RPL has also served an injunction on Safari preventing it selling any stocks of palm oil to anyone else.

The palm oil is crucial to RPL, which raised �60m ( 89m) when it floated on the AIM in December. The money has been used to buy two power plants in the US which are being converted to run on biodiesel. With its contract for palm oil from Safari in place, RPL had hoped to begin producing electricity from one of the plants, in New York State, next January. However, the failure of Safari to deliver the oil makes this almost impossible, and RPL told investors last week that it now expected to make a loss in 2007, having previously forecast pretax profits of about �13m.

RPL said Safari had warned it would not be able to deliver the palm oil previously promised because of a near doubling in the market price for the commodity over the past 12 months.

RPL and Safari had agreed a price of $405 a tonne for the oil, based on the latter's agreement to buy it at $330 a tonne from suppliers in West Africa. The market price for palm oil is about $750 a tonne.

RPL insisted that investors' reaction to the news was overdone. It has accelerated investigations into the sourcing of alternative biofuels, such as oil produced from soya. It also said it has $50m in cash reserves that would enable it to continue trading for some time.