Green sprouts in The City

The week in clean energy saw yet another green IPO on London's exchange, global solar profitability continue its resurgence and biofuels take a hit from US investors.

Infinis Energy, a renewable energy company backed by financier Guy Hands, raised £234 million ($400 million) in an initial public offering in London last week after pricing shares at the bottom of the range.

At 260 pence per ordinary share, the UK’s largest generator of power from landfill gas was valued at £780 million ($1.34 billion). That compares with an initial range for the share sale of 260 pence to 310 pence.

The offer comprised 90 million ordinary shares excluding over-allotments, representing 30 per cent of the company’s share capital on admission. Hands' Terra Firma Capital Partners holds 69 per cent of the ordinary shares and that will be reduced to 65 per cent should an over-allotment option be exercised.

The UK is, for the moment, a hotbed of clean energy project IPOs, with this Infinis flotation following those by four different quoted fund vehicles – Greencoat UK Wind, Bluefield Solar Income Fund, The Renewables Infrastructure Group and Foresight Solar Fund. The total raised by these five since March stands at more than £1bn ($US1.6bn), and Greencoat is now looking to execute a further capital-raise of up to $231 million in the coming weeks.

Over in the US, Codexis, the California-based producer of enzymes for biochemicals, fell in trading last week, hitting a record low, after sales plunged and the company said it is exiting the biofuel market.

The manufacturer’s partnership with Royal Dutch Shell to develop enzymes for biofuels ended last year. Shell chose to go with enzymes from Novozyme for Raizen, its joint venture with Brazilian firm Cosan, a producer of ethanol from sugarcane. 

Codexis' decision to exit the biofuel market was likely to happen considering that the handful of cellulosic ethanol projects under development have already inked deals with enzyme producers. Codexis would have had a hard time finding buyers for its product.

The company, based in Redwood City, will focus exclusively on enzymes for pharmaceuticals and chemicals, chief executive officer John Nicols said last week on an earnings call with analysts.

Meanwhile, it was good news for Canadian Solar last week. The best-performing solar manufacturer this year reported its first quarterly profit in more than two years as sales of power plants surged.

Net income for the third quarter was $US27.7m, or 56 cents a share, compared with a loss of $US43.7m, or $US1.01 a share, a year earlier, the Guelph, Ontario-based company said in a statement last week. Revenue increased 29 per cent to $US490.9m, with 41 per cent coming from sales of solar farms.

The company is focusing its efforts on selling power plants, which are more profitable than photovoltaic panels. 

Canadian Solar's results reflect a good quarter not only in terms of selling projects to release capital, but also in improving industry fundamentals as demand from Japan and the US more than counterbalances declining demand in Europe. In general, many PV manufacturing companies have returned to positive earnings before interest and tax in third quarter 2013.

Finally, the International Energy Agency released last week its annual World Energy Outlook report, making bullish predictions on renewable energy growth in China. The nation is expected to build more renewable power plants through 2035 than the US, the European Union and Japan combined, according to the agency.

The share of energy sources including hydropower, biomass, wind and solar in world electricity supply will rise above 30 per cent in that period, the IEA said, “drawing ahead of natural gas in the next few years and all but reaching coal as the leading fuel for power generation in 2035.”

EU carbon

European carbon tumbled last Friday, erasing gains made over the previous few days, as the market may be anticipating increased supply of UN carbon credits once their eligibility status is changed.

European Union Allowances for December 2013 finished Friday little changed compared to a week earlier. EUAs for delivery in December ended the session at €4.50/t on ICE Futures Europe exchange in London, compared with €4.49/t at the close of the previous week. Front-year permits were on an upward track at the start of the week, potentially on optimism that an agreement will be reached on a European Commission plan to temporarily curb an oversupply in the market. The December 2013 contract reached a weekly intraday high of €4.74/t on Wednesday morning before falling back, slipping further on Thursday as German power declined. Front-year EUAs declined to a low of €4.42/t on Friday. The European Commission announced that day the status of all pre-2013 issued Emission Reduction Units will be changed to eligible from pending/ineligible on 21 November. The market likely sees the new eligibility status as a sign of increased ERU supply ahead of December delivery.

UN Certified Emission Reduction credits for December 2013 plummeted 16 per cent last week to end at €0.42/t.

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