As world leaders gather for the Copenhagen summit, we look at five potentially exciting new clean technology companies:
A leading supplier of high-power lithium-ion batteries, A123Systems enjoyed a strong debut on Nasdaq in September when it raised almost $400m (£245m). Within a few days of the company's flotation, its shares were trading for double their IPO price.
Using nanoscale materials, A123’s battery technology delivers low cost per watt performance and supports a higher voltage than other long-life battery systems. This has made its products attractive to automotive firms, many of which have already signed deals with A123 to supply its batteries for use in new electric and hybrid vehicles.
But the company's products are designed for use in a wide range of applications. For example, the company has scored some success by partnering with Fortune 500 power firm AES Corporation, which is using A123's Hybrid Ancillary Power Units for grid stabilisation projects in several countries. It is also targeting portable power markets, such as power tools.
A123's technology is based on nanoscale materials that were initially developed at the Massachusetts Institute of Technology. Using nanophosphate electrodes, the company's products achieve significant performance over rival electricity storage technologies.
This makes the company's products ideal for applications in transportation, particularly new electric and electric-hybrid vehicles. offers a range of batteries and battery systems in different sizes, capacities and energy-to-power ratios to meet the different requirements of electric, hybrid-electric and plug-in hybrid vehicles, as well as heavy-duty hybrid vehicles and aviation applications.
A123's M1HD product for electric vehicles delivers high energy and power density, and it holds the current world record for electric vehicle acceleration over a quarter mile (0.97 seconds to get from zero to 60 miles per hour). The company's battery design for heavy-duty hybrid applications is 75 per cent lighter than lead-acid batteries (and 50 per cent lighter than nickel-metal hydride batteries), holds 25 per cent more power and has twice the service life.
Already, A123 has several relationships in place with automotive vehicle manufacturers for its batteries, including contracts with General Motors (developing nanophosphate batteries for the Chevrolet Volt), Norwegian car manufacturer Think Electric Vehicles, Shanghai Automotive Hybrid Vehicles and Chrysler.
Following its success in the automotive market, A123 recently set up a new business division dedicated to the market: the Automotive Solutions Group. It also set up a Cell Products Group, focused on cell design and development, and the two new divisions will operate alongside the company's existing Energy Solutions Group.
A123's recent third-quarter results revealed that revenues increased during the three months to 30 September to $23.6m (Q3 2008: $22.9m), although the company also increased its operating loss to $22.8m, compared with $18.5m in Q3 2008.
But after September's IPO, A123 has few money worries. In fact, a couple of months before the flotation, it received a $249m grant from the US Department of Energy to build advanced battery production facilities.
The shares, currently at $15.88 at the time of writing, look good value.
Floating on the New York Stock Exchange in June this year, Duoyuan Global Water is a leading Chinese domestic water treatment equipment manufacturer.
Through issuing American Depositary Shares (ADSs), the company raised $88m, which it is using to improve and upgrade its manufacturing facilities, produce new water treatment products and to build a research and development laboratory. Duoyuan’s products encompass key steps in the water treatment process: filtration; water softening; water-sediment separation; aeration; disinfection and reverse osmosis.
Recently-released results show that Q3 revenues increased 30.9 per cent to RMB255.2m ($37.4m) with net income improving 23.1 per cent to RMB73.4m.
Earnings per ADS were $0.49 for the quarter, a drop on the $0.63 per ADS reported for Q2 2009.
Duoyuan's ADS price has done well since its IPO, but at a price of almost $40 Duoyuan looks highly rated compared with earnings for the moment. However, the company is certainly one to watch.
London's Alternative Investment Market (Aim) has managed to attract several dozen small-cap clean-tech firms during this decade, but 2008 saw new clean-tech IPOs on the junior stock market fall off a cliff.
However, this year has seen a couple of notable clean-tech flotations on Aim. One of these was the arrival of wind-farm operator Indian Energy, which raised £9.8m when it joined the market at the start of September.
The firm is an independent power producer that plans to build 300 megawatts (MW) of generating capacity by 2013. Currently, the company produces around 25MW of electricity from one project.
The Indian wind sector had an installed capacity of more than 10,000MW by March this year and it accounted for two-thirds of India's renewable energy capacity. India already ranks as the world's fifth-largest wind power producer, but Indian Energy's management team believes that there will be plenty of further demand for wind power due to a continuing deficit in India's energy supply due to the economic growth rate of recent years.
Shares in the company not only give investors exposure to the wind sector, but are also a bet on India's continuing growth. With the shares at 80p at the time of writing, the company is valued at £20m, and is a speculative buy.
Striving to become the "pre-eminent geothermal energy company in the world", Magma Energy Corporation is fortunate to have a management team that boasts some impressive rèsumès. The company's president, Dr Frank Monastero, used to head up the US Navy Geothermal Program Office, where he was responsible for developing geothermal resources beneath territory controlled by the US Department of Defense.
Then there is Magma's chief executive officer, Ross Beaty, a geologist and resource company entrepreneur with nearly 40 years' experience in the international minerals industry. Mr Beaty has founded several successful resources companies, including Northern Peru Copper (which was sold in January 2008 for $457m) and Global Copper Corporation (sold for $500m in August 2008).
Indeed, Mr Beaty is one of the reasons Magma decided this July to float on the Toronto Stock Exchange – where it raised C$100m (£58m). "Our CEO is very well known on the TSX," says Dr Monastero, who points out that Mr Beaty has developed eight mining companies in total, selling seven of them (with one returning 3,500 per cent for investors).
Geothermal energy firms share a lot of attributes with mining companies as well as with other resources businesses, such as oil explorers. To be able to develop a geothermal power plant, it is necessary to find an underground heat source, water and fractures through which the hot water can travel.
But, as with oil exploration, just because geophysical data suggest the right elements are likely to be found, this does not necessarily mean that it will be possible to construct an economical well. And drilling a geothermal well can be expensive, with costs amounting to as much as $10m per hole.
This risk is another reason why geothermal companies such as Magma are choosing Toronto as a destination. TSX investors already have a good understanding of the issues that resources firms face when it comes to exploration and are not put off by such risks.
So far, Magma has one operational geothermal project at Soda Lake in Nevada. This is 100 per cent owned by the company and is currently operating at 8MW. Electricity generated at Soda Lake is sold to NV Energy Corporation under two 30-year power purchase agreements. Magma is spending $18.2m on doubling Soda Lake's capacity, which should be complete next year.
Elsewhere, the company has acquired an extensive portfolio of exploration projects in North and South America. Seven of these projects are in Nevada (a major geothermal energy state in the US), while Magma also has a couple in Oregon and Utah. The rest are in Argentina, Chile, Nicaragua and Peru.
In October, the company closed a share placing of C$21.6m relating to its purchase of a 43 per cent stake in Icelandic geothermal company HS Orka, the largest privately-owned energy company in Iceland.
HS Orka runs two geothermal plants that produce 175MW of electricity, while it also generates 150MW of thermal energy for district heating, and it has plans to increase its geothermal power production to 425MW by 2015. Much of the power is sold under US dollar contracts to a large aluminium smelter owned by one of the world’s lowest-cost aluminium producers.
During the year to 30 June 2009, Magma's revenues were $4.5m (against zero in 2008).
The company's net loss increased to $4.5m ($661,000 in 2008) as it incurred expenses connected to its geothermal exploration activities.
For the current year, Magma is planning a very aggressive expansion of its geothermal exploration activities at its assets in North and South America. The company's goal is to produce in excess of 100MW by the end of 2010 and hold geothermal properties that have independent estimates of more than 1,000MW of geothermal production capacity.
Dr Monastero is under no illusion about the risks involved, but he is optimistic. "We're a growth stock," he says. "We'll morph into a value stock with the arrival of cash flows as we become a utility. But it's going to take some years." A speculative buy.
A recent addition to Aim, Nanoco Group joined the market by way of a reverse takeover in March this year.
A Manchester University spinout, Nanoco is commercialising fluorescent nano-crystalline particles (quantum dots) of semiconductor materials that have unique chemical, electronic and optical properties thanks to their small size. The dots – so small that 80,000 of them can fit across the width of a single human hair – have applications in biological marking and flatscreen televisions. And they can also be used in clean-tech applications such as low-energy lighting and next-generation photovoltaic cells, as well as in security applications.
Quantum dots work by absorbing energy, usually in the form of ultraviolet light, and then emitting bright-coloured visible light. The colour emitted by a particular quantum dot depends upon its size: it can be tuned for visible emission between two and 10 nanometres. For example, a two-nanometre quantum dot emits blue light, while a 10-nanometre dot will emit red light.
According to Nanoco, solid-state lighting that mixes red and green quantum dots and applies them to a blue light-emitting diode (LED) can be used to produce white light more efficiently than through other methods. The company estimates that quantum dot-based LED lighting is at least twice as efficient as mercury-discharge lighting and up to 60 times more efficient than incandescent light bulbs. An additional benefit is that quantum dot-enabled lighting does not include environmentally-unfriendly heavy metals such as cadmium.
In the solar energy sector, Nanoco says initial research has shown that the use of quantum dots can potentially improve sunlight conversion efficiencies to levels of 40 per cent-plus, compared with 10-20 per cent using traditional photovoltaic devices. The company says it is working with a number of companies with relevant experience in this area, and samples of quantum dots in thin films are under evaluation by potential partners.
In its last financial year, Nanoco received a $2m payment as part of a $10m upfront revenue agreement with a major Japanese manufacturer of LEDs for the general lighting and LCD backlight markets. Nanoco expects to get the remaining $8m by the end of 2010 once it passes certain milestones agreed with the Japanese company.
According to Nanoco chief executive Michael Edelman, his Japanese customer currently manufactures 200m LEDs per month, and it is increasing this production rate to 400m units per month.
Such sums show what an exciting investment proposition Nanoco could be, especially when one considers the price that Mr Edelman says Nanoco is currently charging for its quantum dots – $5,000 per gram – and that each LED requires 0.1 milligrams of the material. The price is set to fall to $500 per gram once the LEDs become mass produced – even so, this would mean that Nanoco could potentially generate $20m per month from this one customer. Mr Edelman is also confident of further major deals with other companies in the electronics sector.
Recent maiden results for the business show that the firm's revenue increased by 85 per cent to £2m, while its pre-tax loss increased slightly to £780,000 (a £698,000 loss in 2008).
In the immediate future, the company is focusing on scaling up its manufacturing capacity and the delivery of its commercial product to its customers.
Nanoco's house broker Zeus Capital has come up with forecasts that suggest this scale up will be very aggressive. For 2010 and 2011, it estimates the company will generate £5.1m and £10m of revenues before a leap to £78m in 2012. Earnings per share are estimated to come in at 0.16p, 1.1p and 11.6p – very strong earnings growth for a company whose share price is 70p at the time of writing. Buy.
