First published in the Quoted Cleantech newsletter, July 2011. Copyright Cleantech Investor 2011 

by Andrew Hore

At the beginning of May Sigma Capital decided to stop compiling its AIM Cleantech Index because the number of companies had dwindled and many of the original constituents were no longer quoted. Although there has been a dearth of new cleantech companies coming to AIM in recent years, there are signs that activity levels are picking up with more cleantech businesses either joining AIM or announcing their intention to float.

The market has been less keen on cleantech companies following a rush of flotations in the middle of the last decade. But overall flotation numbers have also declined sharply, so the downturn has not affected the cleantech sector only. Although the past few years have seen some cleantech companies joining AIM, such as Wasabi Energy and Ilika, these have been rare. However, there does appear to be a more sustained recovery in flotations recently, with a number of companies joining, or about to join, AIM within a few months of each other.  

One particularly noticeable feature of the cleantech companies coming to AIM is their international nature. Many are based outside of the UK, including the US, but they are all broadly international businesses selling their technologies around the world.

The recovery in cleantech flotations started with formerly PLUS-quoted China New Energy Ltd, which joined AIM on 23 May and raised £610,000 at 7p a share. China New Energy, which provides services to producers and users of bioenergy, had left PLUS-SX on 19 January 2009. The company’s share price went to a significant premium in the first few weeks of trading.

China New Energy was followed by waste-to-energy technology company PowerHouse, which reversed into AIM shell Bidtimes at the end of June, and Smart Metering Systems (SMS) and Waterlogic, both of which joined AIM early in July.

SMS, which raised £10 million, is awaiting the patent on its smart meter for the industrial and commercial sector. The smart meter, which can be used in both the gas and water markets, is undergoing commercial trials, and early results suggest that it is cheaper to install and operate than its rivals. 
Waterlogic raised £48.5 million. Although the company’s main market is water coolers, its purification technology can be used by utilities to clean up water.

Still to come is US-based clean water technology business MyCelx Technologies. The company, which is chaired by former minister Tim Eggar, specialises in cleaning up water for the oil and gas, petrochemical, marine and heavy manufacturing sectors. MyCelx claims that it can remove free, emulsified and dissolved hydrocarbons from water. The technology, which can also be used to remove polychlorinated biphenyls (PCBs) from liquids, works by attracting pollutants to a compound to which they then adhere, making them easy to remove.

AIM investors are no longer interested in early stage start-ups. They want to see a business that has already identified its market and is generating revenues. MyCelx is a good example of this: the company was founded in 1994 and took around a decade to commercialise the technology. Since then, Anadarko Petroleum, Toyota and the US Army have become customers.

However, not all the cleantech companies that want to float are making it to the market. For example, in May Environmental Waste Controls (EWC) planned to raise up to £4 million in order to grow its business, which offers waste recycling services to local authorities and organisations. Liverpool-based EWC is a profitable business and there was demand for the shares from investors. The stumbling block was the valuation, which the present 100% shareholder felt was not high enough, and so the flotation did not proceed.

These examples provide a clear indication that there is a range of cleantech companies wanting to join the market, and they are not dominated by any one sector.

The recent activity certainly does not constitute a boom, and this is a good thing. It means that the better cleantech companies can raise money, but more speculative ventures will still find it difficult. Existing quoted companies, such as TEG and Clean Air Power, have also been able to raise new funds. This is important because a flotation would be futile if more cash could not be raised at a later date to continue funding growth.

Recent Cleantech AIM Listings

May - China New Energy
June - PowerHouse
July - Smart Metering Systems
July - Waterlogic  

Planned Cleantech AIM Listings

MyCelx Technologies

Failed AIM Listings

Environmental Waste Controls

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