New Issues Examined by Oliver Haill

Most of the money raised on AIM this year has been for investment funds, which, as brand new companies with minimal accounting baggage, are able to float more quickly. Founded by multi-millionaire property dealer David Lockhart, NewRiver Retail aimed to join the throng of such vehicles on AIM, with a £250 million float that would eclipse May’s £220 million funding for Max Property, backed by another moneyed property magnate in Nick Leslau.

However, despite Max’s precedent and with the book-running might of US broker Bank of America Merrill Lynch behind it, the placing back in June failed to drum up sufficient investment to reach its minimum requirement of £100 million.

Undeterred, Lockhart and co decided to lower their demands and floated the company with the £25 million they could muster. Lockhart and chairman Paul Roy, the founder of investment management firm NewSmith Capital Partners, have significant ‘skin in the game’, with stakes of 14.6 and 3 per cent, while Schroders, Artemis and UBS also contributed to the issue.

Proven performer

NewRiver represents a return to AIM for Lockhart, who has proven his credentials, having sold his development and investment group Halladale to Aussie giant Stockland in 2007 for £171 million.

The £25 million raised this time, ten times the £2.5 million he arrived on the market armed with back in 2001 with Halladale, represents the seed capital with which Lockhart and his team will source ‘opportunistic’ deals in UK retail property. Given its relative lack of cash firepower, NewRiver might look to conduct more joint venture deals – discussions are in progress to that end – though the team anticipates being able to rake in additional cash in due course.

Although many market watchers remain uncertain about the property sector’s medium-term prospects, there are certainly opportunities to make money from the sort of buying and selling that Halladale once astutely practised. Investors in the know have swiftly chased the shares up to 275p, a 10 per cent premium to the issue price.

Windia!

The market has not been quite as fervent about the month’s other arrival, Indian Energy, though it has still climbed by 2p from the 80p that investors paid for £9.75 million of its stock.

Indian Energy is foraging for its fortune in a niche already being tapped by other AIM businesses – KSK Power, OPG Power and Greenko – that of India’s huge power shortage. Whereas KSK and OPG are developing coal-powered plants, this newcomer is an altogether more sustainable option, more similar to Greenko, a supplier of biomass, hydro and wind power to Indian utilities. Its strategy relies on the Indian government’s stipulation that 10 per cent of the country’s power be derived from renewable sources by 2012, and 20 per cent by 2020.

Reducing risk 

Due to the structure of government support for wind energy in India, wind farms are not cultivated by developers, but by the turbine manufacturers themselves, who are happy to then sell them. Led by managing director Rupert Strachwitz, co-founder of private equity house Kingsbridge Capital, Indian Energy’s strategy is to mitigate risk by buying operating farms or projects at an advanced stage of development.

With its first wind farm producing 24.8 MW and cash flow positive already, Strachwitz says the company plans to get up to 300 MW by March 2013 and has 400 MW of potential projects, some named after national cricket heroes, including Gavaskar and Tendulkar. The float funds will be used to secure the next project, with the intention to return to the market to fund subsequent developments and also to move Indian Energy to the full list once its three-year trading history is complete.

Attacking what is a stable, though fragmented, market – India is the world’s fifth-largest producer of wind power but is still predicted to grow tenfold in coming years – Indian Energy looks a very interesting niche play.