Cash-hungry clean power ready to list IPOs

Clean Energy IPOs accelerate as capital markets recover, with renewables players in wind, solar, and geothermal targeting the Toronto Stock Exchange; secondary offerings, rising oil prices, and improved financing conditions revive valuations and development pipelines.

Canada's green energy sector looks set to deliver a healthy crop of public offerings in 2010 as a thaw in capital markets and a wealth of government incentives help lure back investors.

Bankers and analysts say a range of clean energy and technology companies are preparing for public listing, amid shoots of recovery in Canada's green sector, driven by a recovery in stock and energy prices, and hunger for cash to fuel development work.

"The IPO market is ready for a comeback," said David Williams, CIBC World Market's managing director of investment banking for power and utilities, who, after launching the CIBC green energy team at the bank, adds his firm is working on several such deals.

"The willingness of investors to listen to a story and understand the dynamics is back, as clean tech moving mainstream shows, whereas a year ago that would have been very difficult."

Interest in green energy faded during the financial crisis as oil, near $75 (US) a barrel on January 22, fell from a record $147 to below $35.

Companies that needed cash to develop clean power projects were especially hard hit, Williams said. The market erased the value of so-called "development pipelines" on fears that financing to bring work to fruition would not be found.

But as access to capital and debt markets eased, those concerns were calmed and share prices recovered.

A growing number of secondary offerings from listed green companies is another harbinger of IPOs amid a gold rush in green tech underway, said Duncan Stewart, a technology analyst with DSAM Consulting.

Recent secondary offerings include wind and hydropower developer Plutonic Power Corp., Brookfield Renewable Power Fund, environmental services company Newalta – and solar power equipment maker ATS Automation Tooling Systems.

Some small Canadian players have found a financial lifeline in General Electric Co., such as privately held Nexterra, which is jointly developing a biomass gasification system.

Clean power producers in the wind, solar and geothermal sectors are seen near the front of the IPO queue given a big appetite for cash to pay heavy up-front development costs, and as an agency urges new focus on green tech for the sector.

"The first six months of this year are going to be very busy," said Jacob Securities clean-tech analyst Khurram Malik.

Home to 123 green companies, Canada's Toronto Stock Exchange and TSX Venture exchanges have more such listings than any other market in the world, parent TMX Group says.

Analysts say the sector has flourished in Canada because the country's expertise in bringing natural resource companies to market is also needed for green energy firms.

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