initial public offerings (IPOs) trading on American exchanges

Sunday, September 25, 2011

Top Five Cleantech IPOs

Economic conditions have not favored cleantech companies intending to launch Initial Public Offerings on Nasdaq this year. But those that have gone public, and those registered but still waiting in the wings, point to uncertainties in the clean energy industry.

An Ernst & Young's report, Global IPO Trends 2011, showed that there were 150 companies in the US that had filed S1 forms for their initial public offering this year, the highest level since 2007, which would raise around $40 billion. Small high-tech and energy companies were behind this trend, it said.

Advanced biofuels may have reached a stage of maturation, while investors hesitate to reveal an appetite for riskier technologies. So far, 2011 has seen a cautious continuation of last year's trend, which saw the introduction of biofuels companies such as Amyris and Codexis.

Amyris (AMRS), backed by the Bill and Melinda Gates Foundation, has been as close to a clean tech overnight success as we've seen since its flotation in September last year. Its share price was initially priced at $16 and has peaked at $33.66 and deals with Total and Nikko chemicals have followed since for the company's yeast-based technology that turns sugars into hydrocarbons.

But as with many cleantech companies the costs of reaching commercial scale are enormous, and as Solyndra's collapse illustrated, sometimes unbearable. Amryis's second quarter losses for 2011 were $42.6 million compared with $19.9 million in the same quarter of 2010 – figures which overshadow revenue increases for the second quarter in 2011 of $32 million versus $12.7 million in 2010.

Solazyme, the most high-profile of this year's clean tech IPOs, entered the competitive and arguably overcrowded advanced biofuel space as a public company in May. Its industrial fermentation accelerates microalgae's natural oil production to form "drop-in" replacements for marine, motor vehicle, and jet fuels, dietary supplements and skin care products. Its IPO prices of 11m rose 15% from $18, raising $197.6 million on its Nasdaq debut.

Solazyme now has a market capitalization of $1.5bn and was listed by as number 2 in its top 10 companies by growth rate. Although quoted 2010 revenues of $37.97 million, and a three-year growth rate of an enormous 20,424% its losses in the second quarter this year were $17.0 million, which compares to $6.4 million in the prior year period.

Those losses are conservative in cleantech and can largely be explained by a growth of its operations, including 283,000 liters of military-spec diesel for the US Navy. The company has also struck deals with Dow Chemical, Chevron, Unilever Qantas and the US Navy. Eventually, the company aims to produce algal fuel oil for the fuels market at $3.44 per gallon.

Established by two college friends: Harrison Dillon and Jonathan Wolfson in 2001, a $22 million Department of Energy grant in December 2009 helped create the Solazyme company we see today.

Gevo, based in Englewood, Colorado, may not have achieved the media coverage enjoyed by Solazyme. But its backers include some very high-profile investors, such as Richard Branson's Virgin Green Fund and Vinod Khosla. On its first day of trading in February Gevo sold 7.15 million shares at $15 each, now trading at around $10.
Gevo's isobutanol can be used as "drop-in" fuels for gasoline and "drop-in" chemicals in the production of plastics, rubber or polyesters. Gevo is converting existing ethanol plants into biorefineries and since its IPO, it has begun to retrofit its ethanol plant in Luverne, Minnesota.

When completed next year, it will be the world's first commercial-scale bio-based ethanol facility. Isobutanol is said to be a better alternative to ethanol because it uses a yeast biocatalyst which can convert multiple feedstock and agricultural waste.
Patrick Gruber, Gevo's CEO, was previously at agricultural multinational, Cargill.
"Isobutanol made from renewable raw materials can be used to make a variety of everyday products such as rubber, plastics and fuel, and is a versatile solution to help displace our country's dependency on petroleum and create a biobased economy," he said.

Gevo aims to launch its product in the first half of 2012 and is also contesting patent law suit from Butamax Advanced Biofuels, a joint venture from BP and DuPont.

KiOR is a next-generation renewable fuels company that has developed a process to convert forest-based biomass into renewable crude oil for the transportation sector. It aims to access the $2 trillion global transportation fuels market while also benefiting from government programs, such as the US Renewable Fuel Standard. Each of the top 10 oil refiners in the US, who account for 70% of total capacity, will be required to purchase at least $1 billion worth of renewable fuels per year by 2022.

Founded by Khosla Ventures (KV) in 2007, the cellulosic fuels company now has Condolezza Rice on its board of directors. KiOR priced shares at $15 at its IPO in June but completed its initial public offering for 10 million shares a little lower, raising $137.5 million. It claims advantage over rivals in that it derives its fuels from wood and agricultural waste, while avoiding feedstocks such as corn or soy.

KiOR has signed an offtake agreement with Catchlight Energy LLC (CLE), a joint venture between subsidiaries of Chevron and Weyerhaeuser Company, which will supply forestry-based feedstocks for KiOR's first commercial renewable fuel facility in Columbus, Mississippi, due to start production in the middle of next year.

Silver Spring Networks
Silver Spring Networks filed its registration statement for its long-awaited IPO proposal in July. It is already the largest provider of Smart Grid IT software in the US and dominates Advanced Metering Infrastructure (AMI) in the utility sector. Distribution Automation, Demand Response and Distributed Generation are also target areas for the company. Its utility clients in the US include Florida Power & Light, Pacific Gas & Electric, Pepco Holdings and Australian utilities Jemena Electricity Networks in Australia and United Energy Distribution.

Whether Silver Springs Network will reach IPO is the subject of hot speculation. Overseas success has put United Energy Distribution on the radar for corporate M&A teams. But a rumored $3bn target valuation now seems relatively high after Toshiba's acquisition of Swiss smart meter specialist Landis+Gyr which has 8,000 utility customers worldwide for $2.3 billion earlier this year.

Either option presents Silver Springs Network with an opportunity for huge market penetration.
Eric Dresselhuys, executive VP and CMO, said: "We expect smart grids to become almost ubiquitous over time, but we'll likely see 85% penetration over the next 10 years. It is a very fractured market in the US, so it will take hundreds of utilities and 50 state regulatory commissions to make that happen. Deployment of smart grids is spurring innovation, so as the systems are deployed someone will invent some new killer app or gizmo that we can't even imagine today.

BrightSource filed for a $250 million public offering in April and since then the company has gone quiet on the S1 registration. But the utility-scale solar developer has been busy signing off power purchase agreements and applications for new projects.

Since BrightSource was founded in 2004, the solar developer has secured 14 power purchase agreements (PPAs) to deliver approximately 2.6 GW of installed capacity to PG&E and and Southern California Edison.
In April 2011, Ivanpah was partially financed with a $1.6 billion DOE loan guarantee. NRG Solar invested a further $300m in the project and another $168 million came from Google earlier this year.

BrightSource also has plans to expand globally through partnership with one of its corporate investors Alstom, which has a 17.8% stake in the company. It hopes to bid on projects in the Middle East, Northern Africa, South Africa and Southern Europe in partnership with the French energy company.

BrightSource's keystone project, the Ivanpah Solar Electric Generating System in the Mojave Desert, California, began construction in October last year. At 392 MW, it is the largest solar plant under construction and has off-take agreements with PG&E and Southern California Edison and equity investments from NRG Solar and Google.

BrightSource also has another in the pipeline two 250 MW solar power plants for its Hidden Hills project in Inyo County, California. In August 2011, BrightSource Energy filed an application with the California Energy Commission to develop the 500MW on federal lands.

BrightSource has racked $12.9 million in lease costs and claims that its proprietary solar thermal tower system will reduce land use by 33% or more compared with a typical PV farm or parabolic CSP plant.

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