At the beginning of this month, there was the potential for four greentech companies to make it through the IPO window.
Here we are at the end of the month and only Petaluma, California's Enphase and its PV microinverter have made in onto the Nasdaq.
The other firms -- BrightSource Energy, Luca Technologies, and Enerkem -- withdrew their IPOs.
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Enphase has been a public company for almost one month now.
Enphase (Nasdaq:ENPH) priced its IPO on March 30 and saw its stock jump from the $6.00 start price. The company raised $54 million in its initial public offering and has a market cap of approximately $271.5 million. A colleague noted that this places the company in a micro-cap stock category. And that poses some challenges in the investor relations and analyst coverage department, which can impact the buoyancy of the stock. Other big challenges for Enphase are maintaining its meteoric sales growth amidst increasing competition and finding a path to profitability in a still-difficult market.
Enphase stock is trading at $6.91 as of April 24, 2011.
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BrightSource, a massive concentrated solar power (CSP) innovator and developer, pulled its registration statement with the SEC almost a year after registering, claiming that "the continued market and economic volatility are not optimal conditions for an IPO." It's less than happy news for BrightSource, its VC funders such as VantagePoint, DBL Ventures, DFJ, Alstom, et al., and the cleantech community as a whole. Google and NRG Energy were investors in the project.
BrightSource intended on raising up to $182.5 million in its initial public offering. For the year ending December 2011, BrightSource generated $159.10 million in revenues and lost $110 million.
BrightSource has signed 13 power purchase agreements (PPAs) to deliver approximately 2.4 gigawatts of installed capacity to two of the largest electric utilities in the U.S.: PG&E and Southern California Edison.
But that wasn't enough to excite institutional investors who seem to have delivered their verdict on CSP, or at least BrightSource's version of CSP.
“While we received significant interest from potential investors, the continued market and economic volatility are not optimal conditions for an IPO,” said John Woolard, President and CEO of BrightSource Energy. “As a company, we’ve consistently made decisions in the best interest of our shareholders, employees and customers, and we will continue to do so. Fortunately, we’re in a strong financial position and have the support of world-class investors and partners.”
GTM reporter Herman Trabish interviewed Keely Wachs, spokesman for BrightSource, and he provided some reasons why BSE pulled the IPO. According to Wachs, the broader equity market deteriorated over the course of the road show, with the most dramatic decline in the days leading up to expected pricing. Wachs said, "In the ten days leading up to our expected pricing, market movements were as follows:
- Volatility index (VIX) increased by 33 percent
- DJIA and S&P both fell 2.4 percent
- Nasdaq Cleanedge Index fell 6.6 percent
- Solar stocks fell dramatically; FSLR fell another 14.5 percent
- High growth / cleantech composite fell 8.9 percent
- Enphase priced 46 percent below range
- Negative newsfeed associated within the solar sector, including Solar Trust’s Chapter 11 bankruptcy announcement on April 4."
Despite adverse market conditions and inconveniently located tortoises, hawks, and environmentalists, BrightSource's Ivanpah construction continues to soldier on with power pledged to be delivered in 2013.
One question that arises is how BrightSource will source the funding for the other 2.4 gigawatts on its plate. More on BrightSource in these pages in the coming days.
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Luca Technologies of Golden, CO, which planned to raise up to $102 million in an IPO on the Nasdaq, has withdrawn its IPO efforts. In 2011, Luca reported a loss of $18 million and revenue of $1 million. In 2010, Luca reported a loss of $20 million with revenue of $2.4 million.
Luca Technologies' statement accompanying the retreat was, “We believe there are more attractive opportunities for us to finance our growth strategy, and we appreciate the strong support we have received from our existing investor group. We will aggressively pursue plans to deploy our technology in the U.S. and internationally. [...] The current market, depressed natural gas prices and ongoing economic instability do not support an environment for us to complete an IPO, even though we were well received by potential investors,” said Bob Cavnar, Luca’s CEO.
The firm uses naturally occurring microorganisms to generate natural gas. "Our proprietary technology stimulates native microorganisms that reside in subsurface hydrocarbon deposits, such as coal, oil and organic-rich shales, to accelerate the bioconversion of these resources into methane," according to the firm. Investors in the company include Kleiner Perkins Caufield & Byers and One Equity Partners.
According to the S-1:
We leverage the ability of naturally occurring microorganisms to convert subsurface hydrocarbon deposits, such as coal, to methane gas. This complex process is susceptible to interruption by various chemical and biological conditions, including traditional coalbed methane development, which involves removing water from the coal seam to reduce pressure and allow previously adsorbed natural gas to flow up a well. As a result, the natural and ongoing biogenic creation of methane gas slows or ceases, with a large mass of unutilized hydrocarbon deposit remaining in place underground.
To accelerate biogenic methane gas production rates, we use our proprietary Restoration Process to deliver customized nutrient formulations and water to restore coal reservoir habitats to conditions that may enable native microbial communities to be enhanced to create commercial volumes of natural gas on a real-time basis. We produce this newly created natural gas and deliver it to market using existing wells, pipelines and natural gas infrastructure.
Oil and natural gas resources developed and produced by the traditional E&P industry often exhibit production rates that peak early in the lives of wells, and then steeply decline as stored hydrocarbons are depleted and pressure is reduced. In contrast, wells producing newly created methane gas using our Restoration Process are more akin to “gas farms,” producing natural gas at lower, but constant or slightly increasing rates for extended periods of time.
Our Restoration Process is designed to sustain the life processes of naturally occurring microbial communities. We do not introduce foreign microbes, nor do we rely upon genetically-engineered microorganisms. Microbes are already present in coalbed water and are responsible for biogenic methane gas creation. The first step in our Restoration Process involves the identification and assessment of underground environments where the native conditions are suitable for microbial life activation, and where the biogenic process has been active in the past. As a second step, we perform lab and field studies to assess microbial activation. In the lab, using water and hydrocarbon deposits from a prospective basin, we attempt to identify optimal nutrient formulations for methane creation. These nutrient formulations are then field-tested prior to initiation of commercial activity within an area or basin.
Single-digit millions revenue that has decreased from the previous year does not seem like an encouraging sign for what looks like a wildcatting business, albeit one with an interesting biotechnology angle. This type of business might have been interesting when natural gas was at $7 to $8/mmbtu. The business is a lot less interesting at today's $2/mmbtu price.
A colleague remarked that the environmental regulations that Luca has to deal with make "BrightSource's compliance look like a credit card application by comparison."
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Enerkem had been scheduled to float at the beginning of the month but has repeatedly pushed out the date and lowered the amount of stock being sold. It withdrew its IPO registration on Thursday.
The firm is a Canadian municipal-waste-to-cellulosic-ethanol conversion company which filed its F1 with the SEC to go public on the Nasdaq in February of this year. The firm is looking to raise up to $131 million by offering 7.3 million shares at a price range of $17.00 to $19.00. The firm had $3.4 million in income and $26.4 million in losses in the last 12 months.
The company was founded in 2000, and has developed a “proprietary thermochemical technology” platform to process municipal solid waste (MSW) -- otherwise known as trash -- into syngas, which can then be converted into methanol and then ethanol, or other chemical intermediates.
Enerkem's platform can apparently accept nearly anything, including “mixed textiles, plastics, fibers, and wood.” The company also claims that its gasification process has lower operating and capital costs than syngas competitors “due to lower temperature, pressure and energy requirements to break down heterogeneous waste feedstock.”
Enerkem says it has validated its technology over the course of its 10-year operating history, first at a small-scale (4.8 metric tons per day) pilot plant in Sherbrooke, Quebec, Canada, and later at a commercial demonstration facility in Westbury, Quebec, Canada which is currently processing ten times that amount. The glaring issue is that Enerkem has yet to convert methanol into ethanol at its demo plant. It's not exactly a difficult process, but the fact that the company is waiting for a full-scale plant to do so could lead to production and logistical problems.
Of course, that's only a commercial demo plant. Enerkem is still in the development stage and has yet to generate any significant revenue. That may change soon: Enerkem is currently building a 10-million-gallon-per-year plant in Edmonton, and has already secured a 25-year MSW feedstock supply agreement with the City of Edmonton. The company claims that facility, with seven times more production than its demo plant, will have the lowest scale-up to full commercial capacity to date of any cellulosic ethanol producer, which helps mitigate ramp-up problems that can plague a firm's projections.
In addition, Enerkem has a pair of 10-million-gallon-per-year plants of the same design being developed in Pontotoc, Mississippi and Varennes, Quebec, Canada. On top of those facilities, Enerkem is negotiating non-binding agreements to sell its proprietary systems to two of its strategic shareholders, Waste Management of Canada and Valero. Other investors in the company include Rho Ventures and Braemar Ventures.
• At 10 million gallons per year, Enerkem thinks it can produce ethanol at $1.50 to $1.70 per gallon.
• Enerkem's most recent round of fundraising netted $30 million.
Additionally, the firm expects to receive payments for accepting trash, known as tipping fees. Enerkem cites an industry publication in saying that average landfill tipping fees were $47 per metric ton in 2009.
According to Enerkem, there are 140 million metric tons of waste produced in the U.S. every year that are suitable for its platform. At its target of 100 gallons of ethanol per metric ton of sorted waste, that's enough headroom for 14 billion gallons of ethanol production a year.
It all comes down to a familiar story with biofuel IPOs as of late: If Enerkem hits its projections, it has an interesting model in a sector that's not extremely populated.
But right now, that's still a big “if" despite the positive drivers of the U.S. Renewable Fuel Standards Program, which mandates that 16 billion gallons per year of cellulosic biofuels be blended in the national transportation fuel mix by 2022.
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What had the potential to be a market- and narrative-disrupting set of IPOs has turned out to be a fizzle.
Perhaps there is another crop of IPO aspirants in 2012 that might get the market's attention. Or perhaps it's Tesla's Model S introduction that will ignite the public's greentech imagination this year.