Shares in Renewable Power & Light (RPL) plunged 66pc after the company, which listed on the Alternative Energy Market in December, warned that the loss of a key contract meant that it will sink into the red this year.
RPL shares were suspended last week after the termination of a supply contract for palm oil used to generate electricity in two biodiesel power plants.
The alternative energy company said that it was suing the supplier, Safari Group, claiming breach of contract.
Analysts had forecast that RPL would make profits of around £12.5m this year.
Palm oil has soared in price in the past couple of years because it is in increasing demand as a fuel additive. RPL said that it would have to pay a much higher price for palm oil than under the terms of its Safari contract.
The oil, the world's most traded vegetable oil, is used in cooking, cleaning agents and as a fuel additive.
Palm oil futures in Malaysia, the benchmark for the commodity, have soared 64pc in the past year, partly as prices for soybean oil, the main substitute, surged and record oil prices boosted demand for alternative energy.
RPL said the problem will delay the start of production at its Massena and Elmwood Park power plants in the US. The company said in a statement that it is not able to buy enough oil "to operate its plants economically using biodiesel", and is now looking to source direct from feedstock firms, rather than buy on the open market, or grow its own palm plants.
RPL said it has got a temporary restraining order preventing Safari from selling palm oil to anyone else. Safari's oil palms are grown in West Africa. The company said that it has around $50m (£24.5m) in the bank to help it through the current problems.
RPL shares closed down 114.5p at 38.75p.
The Bloomberg news agency reported that its calls to Safari's head office in New York went through to an answering service saying the numbers were "disconnected."
No one answered an email sent to the company requesting comment.
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