Bloomberg New Energy Finance

Everyone’s a winner

Rohan Boyle, 15 Oct 13
Infrastructure initial public offerings on both sides of the Atlantic offer investors better returns than government bonds and provide developers with an opportunity to cash out. By Rohan Boyle

Clean energy is firmly back in favour among public market investors. After years in the doldrums, share prices have made substantial gains this year, while the ever-fickle window for initial public offerings (IPOs) is open to a select few, who are hurriedly making the most of what is a rare opportunity.

The NEX – a global index of 96 quoted clean energy companies – gained 46.4 percent in the first nine months of this year. In the third quarter, it added 16.6 percent, easily outstripping broader market indexes. The Nasdaq Composite Index added 10.8 percent over the same three months, and the S&P 500 Index of large-capitalisation stocks appreciated by 4.7 percent.

Buoyed up by this surge, companies and funds on both sides of the Atlantic have been courting investors with considerable success. Bloomberg New Energy Finance analysis shows that eleven entities raised USD 3.8 billion from debut offerings in the first nine months of this year, more than double the USD 1.4 billion raised from IPOs during the same period in 2012.

The latest wave of enthusiasm is very different from the clean energy mania that gripped public market investors back in 2006 and 2007. Back then, investors were buying into technology-led growth companies in what was a young niche sector. This time around, they are after something altogether more tangible – yield.

In August 2012, the yield on UK ten-year government bonds reached a low of 1.41 percent, having been 5.55 percent in July 2007. Meanwhile in the US, the ten-year Treasury yield curve slumped to 1.43 percent at the end of July last year, down from 5.29 percent in June 2007. These rates have since risen to just over three percent for UK gilts and 2.6 percent for the US equivalent – still little more than half their averages for the last 20 years of 4.8 percent and 5.1 percent respectively.

This is an abridged version of the article – the full text is available in new energy issue 05/2013

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