A few weeks ago, newspapers around the world published retrospective articles on the fall of Lehman Brothers and the triggering of the stock market plunge across the world and Asia one year ago. The 2008 market collapse took many victims including Private Equity and Venture Capital firms as they limped along with little hopes of liquidity in the frozen market. The global cleantech venture capital industry did not fair much better, with the first quarter of 2009 showing a drop of 41 percent from the last quarter of 2008 according to the Cleantech Group. But after a promising summer rise in global equity markets worldwide the IPO market began picking up and nowhere more evident than in China. This has sent an assuring message to the rest of the world that Asia could perhaps lead the surge, bringing the first bundle of renewable energy companies to list on public markets coming out of recession. The recent listing of A123, the lithium battery maker was the first such U.S. cleantech company to be listed since July 2008.
That upsurge in IPO interest is now extending down to Southeast Asia as Thai investment banks have begun quietly surveying the market for potential IPO candidates in the renewable energy sector – posing new options for investor exits that were inconceivable only a few years ago. While any listing would likely be on the smaller capitalized trading platform called the Market for Alternative Investments, it would signal a marking point in Thailand’s green economy and tell the story of the country’s booming clean energy industry.
Unlike China where the largest renewable energy companies are manufacturers for wind turbines and solar panels for export around the world, Thailand’s green energy economy is largely local based (only very few of the companies have in-house R&D) focusing on building power plants under 10 MW’s using Thailand’s abundant agricultural waste products to produce energy. The two biggest sub sectors in Thailand are biogas (where companies build tanks or lagoons for waste water from starch or palm oil mills and other agro-industries) and biomass projects which combust rice husk or woodchips to generate power. Other countries in the region, such as the Philippines have better wind potential. On September 22, UPC Asia, already a wind power producer in the Philippines announced it was awarded a contract for additional expansion in Pagudpud, Ilocos Norte. Indonesia has geothermal and plenty of small scale hydro. In Thailand waste to energy is still the king of renewable power production.
Biogas and biomass power projects have been in operation in Western and Northern Europe for over twenty years but in Thailand this is a relatively new phenomenon. A combination of the Kyoto Protocol coming online with carbon revenue and favorable feed-in tariffs in Thailand has sparked the market and over 80 MW of biogas and hundreds of MW of biomass plants are now installed in Thailand. In August Thailand’s Executive Board the Thailand Greenhouse Gas Management Organization issued Letters of Approval for two more CDM projects: one rice husk biomass and a starch biogas project to move on to the UNFCCC. The feed-in tariffs were first implemented by ousted Prime Minister Thaksin Shinawatra, and improved upon by every administration since, has kept some of these Thai companies busy building these plants for agro facilities and external investors. Feed-in tariffs have been shown to be great market boosters. Experience in Germany which also has a feed-in tariff showed that it was instrumental in increasing the power generated by renewable energy resources from 6.3% in 2000 to more than 15% in 2008. In Thailand the number of applicants for Feed-in tariff connections has risen remarkably over the past few years and now number in the hundreds.
The World Bank has been keen to invest in this sector as well, recently announcing the availability of financing for renewable energy and energy efficiency projects. Programs in developing countries rose 24% in the last fiscal year to reach $3.3 billion, the highest ever.
These kind of major financing initiatives clearly highlight the continued potential for development of the industry and it gives more opportunities for cash strapped but promising companies to get the boost they need to jump up to a publicly traded platform. The only question left is which Thai renewable energy company will be the first to list and when.
Austin Arensberg is the business development manager of Prime Energy Investments Ltd, a Bangkok based investment firm for renewable energy