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Market malaise is no stranger to the green sector, but Evergreen is seizing the opportunity to create much-needed value
by Dan Coatsworth
Institutional investors disenchanted with the performance of listed green companies are to be invited to swap their holdings for a stake in a new Aim-quoted business seeking to be a conglomerate in green matters.
Evergreen Securities plans to build up an investment portfolio of renewable energy and green technology companies. It will offer them access to financing, recruitment services, management consultancy and research. ‘We are not company doctors, but want to drive value in green businesses,’ says chief executive Peter Greensmith. ‘We won’t offer cash for company shares, nor are we simply trying to flip investments out quickly. Evergreen is simply offering, to the companies we invest in, access to the
right people who can help develop green business.’
Evergreen has been created by, and will assume the Aim listing of Ethanol Investments. Share-holders in the latter will vote on the effective reverse takeover on 19 May.
Its first move will be to acquire the non-wood pellet assets from Libra Natural Resources, including a 11.39% stake in Prometheus Energy, a methane capture group planning to delist from Aim because of cost pressures and funding concerns. A 1.16% stake in miner Coal International is also included in the transaction. Although not strictly a green company, Evergreen justified the investment on grounds that the resources group has interests in reclaiming waste coal.
It has offered £1 million in shares for an 18.38% stake in banking group London Bridge Capital, which it believes can assist its green company interests with financing. Greensmith says he expects Evergreen to take a holding in a headhunting firm specialising in the renewable energy sector.
Talks are already underway to buy into a group that could offer research reports to increase the profile of its green interests. Greensmith says Evergreen’s management team will also be available to help portfolio constituents, boasting significant experience in banking and providing advice to energy companies.
‘Many listed green companies are going to struggle to attract new investment unless there is a clear sign of cash flow and revenue. It is part of the wider malaise in capital markets which could see several green stocks delisted. We believe there are interesting opportunities from this development and will offer institutions an exit route, by swapping their investments for a stake in Evergreen,’ explains Greensmith.
The value in green
Evergreen is not the only one who believes there is value in helping green businesses who may be, at face value, experiencing problems or lacking resources to grow. Aim-quoted finance house Impax Group acknowledges that current market conditions have hurt many small cap green share prices, but says many stocks are still an ‘attractive investment’. investment manager Jon Forster explains: ‘In the current state of stock market volatility and economic uncertainty, many fund managers are looking to get out of small, unprofitable companies. With this forcing down share prices, it can pay to look for companies with good ideas who perhaps have been oversold.’
Around 11% of Impax’s quoted Environmental Markets Fund is invested in sub-£100 million companies. Forster is cautious on the biofuels and solar sectors, saying there are input cost and over-supply issues, respectively. He sees better value in the waste industry, particularly companies with earnings visibility.
Ludgate joins the fray
Ludgate Investments is also targeting this market with its Aim-quoted Ludgate Environment Fund. Somewhat similar to IP commercialisation companies, such as Angle and IP Group, Ludgate is far from a passive investor. It uses investment stakes to help companies with their business development, offering City expertise and help to find the right management. The fund has a heavy weighting towards pre-IPO companies, but all are revenue generating. ‘We have invested in start-ups before and for every five companies, only one makes it. The risk/reward is wrong, as you have to spend a huge amount of time with the business for them to succeed,’ says chief executive Nick Pople.
Ludgate’s current investments include two Dutch companies, wind turbine group EWT and carbon broker STX. The environmental fund also holds 7.5% of energy technology firm Hydrodec, and 2.8% of waste treatment specialist Virotec International – two companies that look set to merge after Hydrodec made an all-share offer for Virotec in April.