Solar panels, biofuel production, wind and wave power, carbon credits trading and turbine development are among the varied activities by which renewable energy companies hope to exploit current concerns over securing sustainable supplies of power.

AIM-quoted companies play a significant role in the renewable energy game. PowerFilm, a maker of thin, flexible solar panels, is teaming up with steel giant Corus to develop and manufacture integrated solar roofing products for the building industry.

Novera Energy (56p) is using an East London site to turn household waste into fuel, while Shanghai-based ReneSola produces silicon wafers for the solar power industry. Carbon credits originator Camco International (51p), which can do forward deals, has built a portfolio of 100 million tonnes of greenhouse gas emission reduction projects, mostly in China and Russia, and is starting in South Africa.

Growth Company Investor’s report, ‘Renewable Energy Companies on AIM 2006’, sponsored by solicitor Hunton & Williams, shows that in the eight months to 1 September this year, 15 renewable energy companies had floated on London’s junior stock market. They raised nearly £491 million in the process.

That figure represents some 9.4 per cent of all the money raised in new AIM floats over the same period and easily outstrips the £352 million raised by 16 renewable energy companies in the whole of 2005 (See Table 1). With secondary fundraising by already quoted companies included, AIM investors stumped up £874 million for this sector in the 12 months leading up to 1 September.

An international market
Many renewable energy companies are based abroad and do most of their business overseas too, emphasising AIM’s growing role as an international source of capital. While 18 per cent of all companies quoted on AIM are from overseas, Growth Company Investor’s research reveals that 31 per cent of AIM’s renewable companies are based abroad.

Table 2 shows where most have come from. The figures demonstrate that floats from China, rising an average 53.7 per cent over the period under review, and UK floats, up 38.4 per cent, have far outperformed those from the USA, which are down an average 23.6 per cent.

As demonstrated by Table 3, the biggest single flotation, taking more than half the total raised, was Bermuda-domiciled Infinity Bio-Energy, which raised £270.5 million in May through broker Collins Stewart to fund Brazilian ethanol acquisitions. These included last month’s £58 million purchase of Alcana Destilaria de Alcool and Cristal Destilaria Autonoma de Alcool.

Isle of Man-based Trading Emissions, which made £4.5 million pre-tax in the 15 months to June trading CO2 emissions, followed 2005’s £135 million fundraising with a second bite of £175 million with the help of brokers Cenkos Securities and Numis. US backers helped London-based turbine maker Clipper Windpower raise £65 million through Wall Street house Lehman Brothers with its AIM float last year, and have been rewarded with a share price that has more than doubled to 508p on the back of contracts with US wind power developer UPC.

ReneSola, headed by its founder Li Xian Shou, raised £26 million at 79p in August through Hanson Westhouse and increased first-half profits eleven-fold to £3.4 million on turnover up fourfold at £12.6 million. Using silicon waste as a feedstock, the company claims productive capacity of 80 megawatts a year from its 36 furnaces.

International investment groups are among the strongest supporters of AIM’s renewable energy sector. US-owned Merrill Lynch leads the way in terms of both the number of investments made in the period under review, seven, and the market value of those stakes, £103 million, ahead of domestic institutions such as Invesco (£60 million) and Fidelity (£58 million), while the Bank of New York’s holdings stood at £37.4 million.

Winners…
Backing renewable energy companies has proved a distinctly uneven experience, as the share price performance figures in Table 4 prove, and that will no doubt continue to be the case. Some companies, such as US ethanol player Renova Energy and emissions exchange investor Climate Exchange, owner of the Chicago and European Climate Exchange, have been star stock market performers.

Others, such as Welsh wave power backer KP Renewables and Los Angeles-based solar roofing outfit Solar Integrated Technologies, have been dogs. This is a comparatively young sector though, often using new technologies and, as with biotech hopefuls and natural resource explorers, many of the players are some way from making profits, if they ever will.

At the time of the report only three companies – ReneSola, Climate Exchange and Renova Energy – are profitable so far. A fourth now is PowerFilm, which made £118,000 pre-tax in the first half year, more than twice its profits for the whole of 2005.

Renova, which produces, distributes and markets ethanol as a by-product from corn for use in vehicles in the US Midwest, floated at 69p last year and raised another £10.75 million last September at 215p to fund some hefty expansion. It now trades at 227.5p having hit 277.5p. Climate Exchange, which has transformed itself from an investor in the operators of carbon and sulphur emissions exchanges into a holding company for two of the fastest growing of these, has risen from its £1 float three years ago to 362.5p today.

ReneSola has more than doubled during its brief quoted life to 192p, after touching 227p, while PowerFilm floated at 125p in May and has since hit 177.5p before settling back to 160p. Others have proved more volatile.

ITM Power, boasting low-cost fuel cell technology, rose sevenfold from its 2005 float price of 50p to hit 351.5p, before easing back to 132.5p. Trading Emissions, floated at £1 last year, almost doubled to 195p before slipping back to 116.75p
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… and losers
At the other end of the scale, Brentford-based KP Renewables, which came to AIM in 2005 at 125p with Deloitte & Touche as nominated adviser, set itself the goal of becoming a major backer and developer of renewable energy projects and was awarded a £5 million grant from the European Welsh Office. However, it has not quite turned out as hoped.

KP has had a grim experience. With chief executive and 74 per cent-owner Dr James Watkins reportedly unwell, the shares were suspended in September at a lowly 19p, ‘pending clarification of the company’s financial position’.

There was talk of potential funding from the Middle East. But, as yet, nothing concrete has emerged.

Solar Integrated Technologies (SIT), floated at 171p in 2004 with KBC Peel Hunt as nominated adviser and broker, soared to 365p earlier this year. The company’s ‘photovoltaic’ (solar panel) roofing systems have gained increasing attention and SIT won a big contract to install them at Toyota’s car plant in New Jersey. However, a tenfold leap in first-half losses to £6 million and news of a review of project finance options, coupled with an admission of the need for cutbacks, sent investors running for the doors and the shares now languish at 26p, from which they could rally strongly once further finance is obtained.

Late last year, ReEnergy, headed by Roger Hewitt, who had previously built the Shanks group into a FTSE250 success story, raised £6.5 million at 75p to develop waste management and water treatment projects. A daunting £4.6 million interim loss dashed more immediate hopes and the shares have since fallen to 24p.