Clean Energy Companies Offer Mixed Returns on London's AIM


2006 saw clean energy and carbon-related companies raised a total of £830m ($1.6 billion) in 37 separate transactions on London’s Alternative Investment Market (AIM). There are now 50 such stocks quoted on AIM, half of them based outside the UK. But how are investors faring as the world’s clean energy industry turns to AIM for its financing needs?

In a Research Note released today entitled “AIM for the Stars”, New Energy Finance finds that although overall the sector has yielded 16.8% return to investors, there are some sectors and strategies to avoid.
• The 50 AIM-quoted clean energy companies have a total market capitalisation of $7.8bn (£4.0bn).
• 2006 saw 17 IPOs and 14 secondary offerings, with a total of over $1.6bn raised – an increase of 67% on the total of $984.1m raised in 2005 (see figure 1). Clean energy companies accounted for 5.9% of the provisional total of $27.7bn (£14.2bn) raised on AIM in 2006.
• Anyone investing equally in each fundraising and holding on to their investment would be showing healthy annualised returns of 16.8% to the end of 2006. However, this top-line figure masks some very different investment returns from different subgroups within the resulting portfolio.
• Investing in each of the 45 IPOs since 2001 and holding until the end of 2006 would have produced overall annualised returns of 23.5%. Investing in the 24 Secondary Offerings, however, would have yielded negative annualised returns of -0.5% before dealing charges (see Figure 2).
• AIM-quoted clean energy companies are pursuing a range of business models, from pure technology development, through equipment supply, biorefining, power generation and services. Companies involved in the service sector, in particular financial services, lead the returns for investors with 68.0% annualised.
• Exactly half of the 50 AIM-quoted clean energy companies are non-UK-based, but because of their size, they account for 63.4% by value. Non-UK-based companies have lagged in terms of returns, yielding just 13.5% compared to the 19.7% generated by UK-based companies.
• Returns from clean energy-related fundraisings on AIM have varied widely depending on the year of investment. The class of deals dating from 2005 was the weakest in recent years, yielding aggregate annualised returns of just 6.7%.
• There has been a significant increase in the average deal size of fundraisings for clean energy companies on AIM, from $19.4m in 2004, to $44.4m in 2006, an increase of 129%.
• There is no obvious pattern among top-performing AIM-quoted clean energy companies, with a range of sectors, business models and companies represented. At the bottom of the table, a striking feature is how badly several renewable power generators have fared. “Going into 2007, two things are clear: that clean energy has moved into the mainstream of the energy industry and has a major role to play in combating climate change; and that London, and in particular the AIM market, has a vital role to play in its financing,” said Michael Liebreich, CEO and Founder of New Energy Finance. “That is why we focused on the question of whether AIM-quoted clean energy companies have actually been making money for their investors. What we saw was that, on average, they have. But investors need to be careful before snapping up each and every clean energy company, because there are some real under-performers in there too.” The research comes at an opportune time, as the London Stock Exchange is reported to be looking to improve the quality of new listings by changing the rules under which Nominated Advisors (NOMADs) bring companies to the market (as reported in The Times, 2 January 2007). An abridged version of “AIM for the Stars, can be found here: The full version is available to subscribers to New Energy Finance’s Insight Services.

About New Energy Finance:

New Energy Finance is a specialist provider of analysis to the world’s leading investors in renewable energy, biofuels, low-carbon technologies and the carbon markets. The company’s research staff of 50 (based in London, Washington, New York, Beijing, Shanghai, New Delhi, Tel Aviv and Perth) tracks deal flow in venture capital, private equity, M&A, public markets and asset finance around the world. New Energy Finance covers all sectors of clean energy: renewables (wind, solar, marine, geothermal, mini-hydro); biomass & biofuels; energy architecture (supply- and demand-side efficiency, smart distribution, power storage, carbon capture & sequestration); hydrogen & fuel cells; carbon markets and services. Services include the New Energy Finance Briefing, New Energy Finance Desktop, Newswatch
daily news service and Focus Reports on sectors and countries. New Energy Finance copublishes the world’s first global clean energy market index, the WilderHill New Energy Global Innovation Index (ticker symbol NEX). New Energy Finance’s subscription-based Insight Services providing deep market analysis to investors in Wind, Solar, Biofuels, Biomass, China, VC/PE, Public Markets and the US. The company also undertakes bespoke research and consultancy, and runs senior-level networking events. New Carbon Finance, a division of the company, provides analysis and price forecasting for the European, global and US carbon markets.

Michael Liebreich, CEO & Founder
New Energy Finance Limited
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Publication Date: 03 Jan 2007

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