NTR Eases Into Era Of New Departures

The Sunday Business Post : July 26 2009

By David Clerkin

Few companies can report a €1.1 billion slump in their bottom line without triggering shareholder unrest, but NTR is a special case.

The renewable energy and waste management group had little to worry investors last week despite announcing after-tax losses of €46 million for the year to March, down from profits of €1.05 billion a year earlier. The fall-off was due to the non-recurrence of a series of once-off items in 2008, which included windfall gains from the sale of its 51 per cent stake in wind operator Airtricity and the exiting of its interest in the Westlink toll bridge in Dublin.

These sales meant NTR had divested itself of its two biggest operating businesses - leaving a huge cash pile to be reinvested in new ventures.

‘‘There’s been a very significant transition in the group over the past 12 to 18 months,” said chief executive Jim Barry. ‘‘We’re pretty much starting off again.”

Barry said NTR’s new startup businesses, which have a US bias and include a solar power generator, a new wind farm business of smaller scale than Airtricity and a significant biofuels operation, would dominate NTR’s focus over the next few years, complemented by Greenstar, the heavyweight waste management business that was one of the mainstays of NTR’s previous incarnation.

While group revenues increased by 15 per cent, Barry said turnover ‘‘was not really a measure of anything at the moment’’ and that investors should instead focus on the group’s current emphasis on developing its new divisions.

The move into solar was ‘‘a big departure’’ and ‘‘not something that we did lightly’‘, said Barry. But it will need hefty capital investment. NTR has outline plans to develop capacity of up to 1,000 megawatts - the equivalent of two large conventional Irish power plants - using its solar arm over the next three years, at a potential cost of up to $3 billion (€2.1 billion).

Barry is examining a range of options for financing the necessary investment, but gave little clues on his preference beyond stating that the funding would not be sourced at group level.

Options included project finance, use of US government incentives and potential third party investment using equity or mezzanine finance at project level.

NTR would seek to expand its solar operations beyond the US to suitable locations (those with lots of sunshine situated near areas with strong demand for power) such as Spain, Portugal and more exotics pots including Turkey and north Africa.

Barry also has ambitious plans to grow his new wind business in the US, in which NTR invested $150million last year. ‘‘Strategically, we did not want to get out of wind in the United States,” he said, despite the Airtricity sale. The new venture will focus on the mid western states, in areas that were unviable as recently as five years ago but which had become more attractive since then.

Barry reported tough headwinds facing Greenstar and his biofuels business, however.

Sharp falls in commodity prices towards the end of 2008, coupled with lower waste volumes on the back of shrinking economic activity, had caused problems for Greenstar’s business model, but a sustained effort to reduce costs had yielded results.

The ethanol business, meanwhile, had shrugged off problems experienced by rivals thanks to a focus on cashflow management and greater control over the supply chain.

Barry’s positive outlook for the group as a whole will have to be taken on trust by shareholders, however, as the transformation of his portfolio means little can be taken from the financials - for the time being, at least.