Global economy woes which have gripped financial markets have made raising capital difficult again for some environmental technology firms, according to Vivek Tandon, co-founder of London-based Aloe Private Equity.
London-based Aloe Private Equity has 175 million euros ($253 million) of assets under management and now has three funds. Its investment portfolio includes 11 firms, mainly in the energy efficiency, renewable energy and recycling sectors.
“From a fund-raising perspective, these jitters in the market are very unnerving for investors,” Tandon told Reuters in an interview.
“Even now, trying to get banks’ financing facilities for some of our companies’ growth is very tough. Cash is expensive and cash is difficult to get.”
However, on the positive side, some large pension fund groups have set aside amounts for private equity.
“There is quite a large number of institutions out there who do now want some exposure to (…) the clean tech market,” Tandon added.
Project finance froze in 2009-2010 due to the economic downturn, hindering clean tech investment, but signs of a thaw emerged in late 2010 and early 2011.
However, Europe’s recent debt crisis and a U.S. downgrade have shaken global markets and fears mount that major economies are verging on another recession.
Clean energy stocks have consistently under-performed wider global stocks over the past month and year and some clean technology investors have been forced to pull out of projects and some firms have faced financial difficulties.
“In those companies which we’ve been able to finance ourselves, like Greenko, growth has been spectacular. In companies where we have had to bring in other investors, it has been much slower,” Tandon said.
India
Tandon said his firm sold one third of its shareholding in clean energy producer Greenko from its Aloe Environment Fund I last November.
The fund still owns a 13.7 percent stake in India-based Greenko, which has seen its shares rise steadily since it listed in London. They rose to a high of over 240 pence in May this year from a historic low of 36 pence in December 2009.
Greenko raised gross proceeds of 50 million pounds ($82 million) in June in a share placing and plans to beef up its renewable capacity fivefold by 2014.
Aloe Private Equity launched a third fund in May to raise 300 to 350 million euros to develop environmental technologies in Asia.
By the fund’s first close at the end of December, it should have secured commitments of 100 million euros, Tandon said.
Aloe wants to direct 60 percent of the capital raised toward India, 20 percent to China and the remaining 20 percent to other Asian growth countries.
“India is one of the few countries in the world where you can invest in renewable energy and make very good returns without any government subsidies,” Tandon said.
Although there is more bureaucracy involved in getting projects off the ground, there are distinct advantages to investing in India, Tandon said.
The world’s third heaviest polluter has a power deficit which has crimped its fast growing economy. Its consumer appetite is growing, raising demand for energy and more efficient processes to recycle waste.
Although solar power is not yet at grid parity level, wind, run-of-the-river hydro and biomass are already introducing electricity at grid power parity without government subsidies, Tandon said.
“In India, renewable energy is a no-brainer. You can get good returns if you can control the operational aspects of the company and control the installation and deployment of the renewable energy projects,” he added.
