NTR To Power Ahead In 2010
Sunday Business Post : January 03 2010
By Samantha McCaughren, Business Correspondent
Jim Barry, the chief executive of renewable energy group NTR, jokes that, if anyone has a spare $1 billion, he could do with it at the moment. This is the level of capital the group aims to raise this year, in addition to huge sums of debt and tax credits. Barry also said that to some extent he has become ‘‘immune’’ to the scale of investment NTR is seeking, but in fact he is all too aware of the task which lies ahead. However, Barry said he is ‘‘absolutely confident’’ that the money needed by NTR’s various subsidiaries will be raised. The real issue is price in the current market.
The biggest equity raising will be for Stirling Energy Systems (SES), the company’s solar business, which is viewed by analysts as NTR’s biggest gamble to date. The company has two divisions - the manufacturing business, SES, and he development arm, Tessera. ‘‘I’m not concerned about the capture of capital because the underlying businesses are good businesses, so people will want to invest,” Barry said. ‘‘But 18 months/two years ago, there would have been a lot more competitive intensity which would give you a lot more comfort about the pricing of any equity raise. ‘‘I think the impact of the last 18 months/two years is that valuations are off. And we’ve made huge progress with our businesses and we still expect to see decent value progression, but it wouldn’t be as progressive as if we were in 2007.” Barry said there were many avenues that NTR could go down to source capital for SES and Tessera, from classic private equity houses to energy specific fund managers.
Sovereign wealth funds would be another category of investor which NTR could access, while some large pension funds and investment institutions have their own green investment strategy. Barry said there is a lot of ‘‘family’’ or high net worth money interested in green investment. This is not the type of money put together by the likes of Davy Private Clients. This is the type of money that doesn’t really exist in Ireland, the type of wealth that allows people to have family offices in major cities. Barry said that a strategic partner could be more important than price at the end of the day.
The fund-raising process is ‘‘well-advanced’’ with Chartered Standard and Goldman Sachs having been appointed last year to work on funding strategies for SES and Tessera. Barry suggests that the SES holding company itself could see a new investor join up with NTR which would help the funding process for the two individual companies. ‘‘We remain squarely behind the SES/Tessera business and will put more money in as well,” said Barry. However, he said that if a new partner coming on board made sense, it could happen early this year. It would happen ‘‘opportunistically’’. SES is often viewed as NTR’s riskiest punt. It is extremely money hungry and the technology has yet to prove itself commercially. Barry thinks, however, that the extent of the gamble is overplayed.
‘‘In financial terms it’s not [the biggest gamble] because we’ve put more money into wind at this stage. Come the middle of this year we’ll have put in as much, maybe a bit more into SES. So financially, it’s not ‘all on black’. But it is in the sense that we’ve moved into a new space and also because the potential of that business is exponential,” he said. ‘‘The whole portfolio is very strong, but because we have this potentially shooting star it’s easy for people to focus on that.” SES isn’t the only business seeking new equity this year. NTR’s Wind Capital Group will raise $150 million or more in the next six months. NTR’s investment in quoted ethanol business GPRE has now paid off, in that the company is trading at a level comparable to the average per share investment by NTR to date.
There are a lot of opportunities for consolidation in the ethanol sector, which is something on GPRE’s radar at present.
Waste management arm Greenstar will raise as much as $150 million.
In terms of unlocking capital within the NTR group, the company has some non-core assets which might realise some money. NTR is looking at options for its National Toll Roads business. Barry said this was ‘‘price exploration’’ and that the sale of the business was just one possibility. Other options would include taking in an investor for half the business or raising debt on the East Link or Drogheda Bypass. NTR also has a stake in broadband company Imagine and, if it were bought or opted for a listing, there would be an exit opportunity. NTR is strongly interested in listing a subsidiary and Barry said there is no philosophical objection to listing NTR itself. ‘‘It was definitely off the agenda seven or eight years ago. But it’s a valid option and it’s one we won’t dismiss lightly.
We do need to give our shareholders a perspective on future liquidity, there’s no question. It would be my own view that a lack of perspective on future liquidity has been a drag on the share price,” he said. ‘‘There’s no question in my mind that there are people who would like to get out of our stock, but there isn’t the depth of liquidity in our stock to let them get out,” he said. An announcement on a liquidity event and timing will be made this year.
Aside from the core businesses, NTR has dabbled in some very early stage renewable energy, such as algae projects. Barry said that these investments were like NTR’s research and development wing, lining up a pipeline of potentially big projects. If NTR is successful in commercialising the SES solar panel technology it would give the company a new level of credibility in the green space and it could hopefully develop some other energy sources into commercially viable businesses.
For Barry, the focus now is on getting momentum behind the various fund-raisings. Barry believes the battering taken by the Irish economy and its international reputation is ‘‘irrelevant’’ to NTR. ‘‘I still think, particularly in the US, it’s very positive being an Irish company,” he said.