NTR: A Diversified Play on Alternative Energy
By Andrew K. Burger
20 Jan 2008 at 01:44 PM GMT-05:00
resourceinvestor.com
BAKU, Azerbaijan (ResourceInvestor.com) -- Ireland’s NTR plc has undergone quite a transformation since the turn of the millennium. Up until 2002, the company was known as National Toll Roads and as the operator of Ireland’s West-Link and East-Link toll bridges in Dublin and the North-Link toll motorway on the M1. Under the helm of CEO Jim Barry, it has since diversified and emerged as a leading player in the renewable energy, sustainable waste and environmental management and infrastructure markets, not only in the Irish Republic but in the U.K., Europe and North America as well.
NTR in 2006 revised its corporate strategy and said it would invest some 3 billion euros (US$4.2 billion) over the next three years in its core businesses: wind power developer Airtricity, integrated waste management systems provider Greenstar and sustainable biofuels/bioenergy company Bioverda. It also owns wireless network provider Irish Broadband and a 50% interest in Celtic Anglian Water, a leading player in Ireland’s water and wastewater services industry. That strategy is itself up for revision, however, as Airtricity’s North American business was sold to German utility E.ON for US$1.4 billion in October and an agreement to sell its remaining European and international business to Scottish and Southern Energy [LSE:SSE] for US$2.7 billion was announced in early January (see last week’s story).
Trying Times for Stock Market Investors
It’s trying times for stock market investors as the severity of mortgage market and credit problems in the U.S. has become increasingly evident, and painful, during 2007. The dollar continues to be weak in foreign exchange markets, and energy prices continue to rise. These conditions have made investments in European and U.K. markets relatively attractive to U.S. investors, at least outside of the especially weak banking, financial services and housing sectors.
The MSCI European Utilities index increased an absolute 18.8% in 2007, outperforming the MSCI Europe index, which rose a corresponding 15.5%. “In the face of the deepening credit crunch and concerns about the US slowdown the defensive attributes of the sector were rewarded by investors. While at a more micro level names in the space also benefited from the rising power price and their financial strength given balance sheets remain largely underleveraged, according to Goodbody Stockbrokers, a wholly owned subsidiary of AIB Capital Markets and the AIB (Allied Irish Bank) Group.
Though NTR is a public limited company, its shares are not traded on any exchange but on the Irish grey market. Ireland’s three largest stockbrokers – Davy, Goodbody, and NCB - make the market. There’s not a lot of public float, as ownership is concentrated in the hands of founding director Tom Roche and his wife Ann, who own 44.8% of the company, and One51, an agricultural cooperative which is looking to go public and owns 25.1%.
A Fast-Growing Greenstar ...
NTR’s total group revenue totaled 281.6 million euro (US$412 million) for the fiscal six months ending Sept. 30, 2007, 36.7% higher than the corresponding period in fiscal 2006. The Group officially booked proceeds from the sale of the West-Link toll facility during Q2 2007, which yielded an exceptional pre-tax profit of Euro 344.2 million after-tax to its attributable, bottom line profit of Euro 345.7.
Selling off its entire wind energy business – which should be booked during fiscal Q4 2007 - will make a sizeable contribution to NTR’s cash hoard. Given management’s ambitious expansion plans, and the competitiveness and capital-intensive nature of the markets it’s involved in, the capital will be needed and is likely to be put to use in short order.
Management’s focus on public-private partnerships and renewable energy, integrated waste management and infrastructure has certainly been timely and borne fruit. Besides earning an outstanding return on investment for Airtricity, its Greenstar and Bioverda subsidiaries have been expanding aggressively.
Integrated waste management subsidiary Greenstar through October 2007 had invested some US$200 million to expand in North America. The company acquired Pennsylvania-based Recycle Management and Todd Heller, Delta Management in Illinois, Iowa’s Mid-America Recycling and Damato Paperstock Corp., the largest residential recycler in Passaic County, New Jersey. Mid-America has 12 material recycling facilities operating in six central U.S. states and handles more than 750,000 tonnes per year.
The acquisitions make Greenstar North America one of the largest recycling processors in North America with revenue exceeding US$200 million and handling more than 1.1 million tonnes of recyclables each year through a network of 16 processing facilities across the northeastern and mid-western U.S.
Greenstar is also expanding in the U.K. and Ireland. In November it acquired the Verdant Group plc, one of the U.K.’s largest independent municipal services providers. Verdant’s core business is waste collection, recycling and other associated services under long-term contracts to local authorities, mainly in southeast England. The company’s revenue totals approximately GBP45 million per annum.
Biofuels ...
NTR’s Bioverda biofuels and bioenergy subsidiary is also growing rapidly. It currently operates two biodiesel facilities – in Neubrandenburg and Ebeleden, Germany - and has announced that it is developing more in Ireland, the U.K., Spain and the U.S.
Bioverda, in a joint venture with Virgin Fuels, is building ethanol plants in Obion, Tennessee (Ethanol Grain Processors LLC) and in Blufton, Indiana (Indiana Bioenergy LLC) and is investing in another in the Republic of Ireland’s Cork Harbour.
In May, it entered the U.K. market with the purchase of a majority shareholding in Tees Valley Biofuels, which plans to build and operate a large-scale biofuels facility in northeast England that plans to use locally supplied rapeseed via partnerships with local cooperatives that can be used to meet the fuel blending requirements of the U.K. Renewable Transport Fuel Obligation, which comes into effect in April 2008.
And Bioenergy Business
Fuels from biomass, landfill gas for electricity generation and combined heat and power (CHP) facilities are focal points for Bioverda’s bioenergy business. The company is selecting a site in Ireland for a 30 megawatt anaerobic digestion facility that will process organic waste stream of up to 200 thousand tonnes. It is also looking into the possibility of using anaerobic digestion of co-products from its ethanol and biodiesel plants in the Europe, the U.K. and U.S.
With EU recently ruling that renewable energy targets can be achieved from the biomass portion of alternative fuels, Bioverda is also actively exploring the development of biomass and CHP projects in the U.S., U.K., Germany, Spain, as well as projects in Central and Eastern Europe that can use feedstocks such as refuse derived fuel and solid recovered fuels.
Its straw and wood waste biomass electricity plants typically generate between 10-20MW, with combined heat and power (CHP) facilities positioned close to or next to a dedicated heat and/or steam off-take, according to company information.
Bioverda last April acquired Irish Power Systems Ltd., a landfill gas (LFG) utilization company that operates plants in Ireland that generate more than 20MW of electricity. Renamed Bioverda Power Systems Ltd, the company has since installed an additional 2MW of plant capacity and has received planning permission for a further 3.6MW. In total, Bioverda Power Systems owns and operates LFG utilization plants on seven local authority landfills in Ireland, installs LFG collection systems and provides flaring services for smaller landfills. |
