NTR Aims To Power Ahead
Sunday Business Post : November 14 2010
By Samantha McCaughren, Business Correspondent
Jim Barry, chief executive of NTR, has reined in expectations for the green energy company, after a difficult year which saw investors and lenders run for cover.
At the end of last year, he was hoping to raise $1 billion for NTR’s various subsidiaries, but it turned out that 2010 was not the year to go looking for that kind of money.
Although the company did raise several hundred million dollars, some shareholders have become restless in recent months as news from the company dried up. But, according to Barry, the company has had to slow down. It has pressed the pause button on its solar business for now, and its wind projects have been held up because of the hesitancy of major US utility companies.
Announcing results last Friday, Barry set out the new stall for NTR, although it remains to be seen whether more nervous shareholders have been soothed by the update. Barry said he remained confident about where he saw NTR going, and said he believed the ‘‘core’’ shareholders were in for the long haul, despite some of them experiencing liquidity pressures.
The company expects to raise funds for its wind energy business, Wind Capital Group (WCG), in the first half of next year. This process was delayed because contracts from the utility companies, known as purchase power agreements (PPAs), ‘‘haven’t flown at the pace we expected’’. One of the reasons that utilities have been cautious about new deals is the fall-off in demand for energy.
‘‘I think a lot of them have seen demand fall steeply, and they don’t expect it to bounce back,” said Barry. ‘‘They think there has been some fundamental demand destruction. Some utilities in the mid west have never in their history seen demand fall, even in a recessionary environment.”
But Barry said he was confident that NTR would secure contracts. ‘‘We believe we are very well-positioned to grab PPAs when they become available. While I thought we would have had a PPA by the second quarter of this year, certainly by quarter one or quarter two of next year we would expect to have PPAs in our hands again. The knock-on implication is that we haven’t had to fund the business.”
The company believes it will Be able to raise the hundreds of millions of dollars it needs. ‘‘You need a PPA before you get the money,” said Barry. ‘‘Every market is challenging at the moment, but with the quality of the business and its track record, I’d be very optimistic that the capital would be there.”
The money markets are tough, however. ‘‘Strategic investors aren’t really in the market. What you’re seeing is your private equity house having a look, sovereign funds having a look and infrastructure funds having a look,” he said. Barry was far more cautious about the prospects for solar business SES/Tessera, although he said he was still a believer in solar panel technology.
The company was originally expecting to commercialise the technology in 2011 but, although the project has developed, the commercialisation will not now happen for a couple of years. ‘‘We’ve taken a view that it’s too ambitious to commercialise next year,” said Barry. ‘‘I think now the question is, does that happen in 2012 or 2013?”
He said this would depend to a large extent on who they could secure as an equity investor. It had been expected that the solar project’s fundraising would be underpinned by the US Department of Energy loan guarantee scheme. But NTR’s revised time frame means that may no longer be necessary, according to Barry. The right equity partner could free up bank money.
So how long can NTR push Out the development of its solar energy project without the whole thing falling flat on its face? Barry said the energy could be produced at extremely competitive levels but, at some point, the rest of the industry would catch up. However, it will cost a lot of money to develop the project, and Barry wasn’t making any promises.
‘‘A lot of the big strategics want to go into renewables. I’d be optimistic we’d close, but it wouldn’t have anything like the same level of confidence as the WCG process,” he said. Some analysts have suggested that NTR is all about a play on solar technology, with tremendous returns if it succeeds. But Barry said NTR had not bet everything on the technology, and had many other strong strands to the business.
‘‘It is extraordinarily exciting technology, but NTR doesn’t fall or die [on SES/Tessera’s outcome],” he said. NTR has invested $228 million in the company to date. The parent company has taken on impairment charges of €147 million due, in part, to the delays in the solar project. Barry said its Greenstar waste businesses had met expectations in the year to March 2010, although there was no expectations of a great trading environment for Ireland or North America.
Ethanol business GPRE also met expectations. The publicly quoted company is the fourth-largest ethanol producer in the US, and NTR owns 31 per cent of its shares. Last Friday, NTR reported A post-tax loss of€210.6 million for the year to 2010, a number which won’t cheer shareholders ahead of next month’s agm. Barry said he would deliver details on liquidity prospects for shareholders, although it is not clear how specific this information will be. It remains to be seen whether this will be enough to reassure investors whose confidence has been shaken over the past year.