5th Aug 2010 13:05
First Half 2010 Newsletter
This Newsletter of the Investment Adviser to the Ludgate Environmental Fund Ltd ("LEF" or "Fund"), covers the period from 1 January to 30 June 2010 and describes the Fund's performance, our view on current market conditions, the progress made by investee companies and current transactions in the cleantech sector.
Fund Highlights:
·; Sale of Azure Dynamics delivering the Fund a 1.8x return on its investment, equivalent to an IRR of 46.9%.
·; Investment of £0.7 million into Hightex with the expectation of creating value from its solar cooling subsidiary, SolarNext.
·; Interest and dividend income of £0.6m generated in the six month period to 30 June 2010.
·; Recommended dividend of 1.65 pence per share (2009: 1.5 pence).
Investee Company Highlights:
·; RAP: signed a three year supply agreement with a major European food manufacturer
·; agri.capital: the company has 48MW in operation or under construction
·; New Earth: Avonmouth plant ready for start of construction
·; Hydrodec: signed a joint venture agreement with Kobelco Eco-Solutions to exploit the Hydrodec technology in Japan and across the wider East Asian market.
·; Terra Nova: plant on schedule to be operational in Q1 2011
·; STX: revenues increased consistently through Q1 and Q2 2010, shareholder structure reorganised.
In the six months to 30 June 2010, the NAV per share decreased to 98.8p from 103.9p on 31 December 2009 equivalent to a 4.9% decrease per share. This resulted principally from a decrease in the share prices of Hydrodec (quoted share price) and STX Services (adjusted based on lower profits after tax results).
In April 2010, the Fund made a recommended investment of (i) £0.3 million into Renewable Energy Generation ("REG"); and (ii) £0.7 million into Hightex, a leading designer, fabricator and installer of energy efficient membranes. The Investment Adviser has been in discussions with Hightex to create value from SolarNext, its solar cooling subsidiary. The Fund made a follow-on investment into REG anticipating significant capital appreciation in the medium term. LEF sold all its shares of Azure Dynamics delivering the Fund a 1.8x return, equivalent to an IRR of 46.9%.
On 2 August 2010, LEF announced the placing of £10 million of new shares. The Investment Adviser acted as placing agent.
Performance Data
|
|
Q4 2009 As at 31Dec09 |
Q1 2010 As at 31Mar10
|
Q2 2010 As at 30Jun10 |
|
Share price (Pence) |
95.5 |
95.5 |
92.5 |
|
Warrants price (pence) |
10.5 |
10.5 |
10.5 |
|
Net assets(£m) |
47.8 |
46.2 |
45.4 |
|
No. of shares in issue |
45,966,419 |
45,966,419 |
45,966,419 |
|
NAV per share (pence) |
103.9 |
100.5 |
98.8 |
|
Market capitalisation (£m) |
43.9 |
43.9 |
42.5 |
The Market
Global investment in cleantech venture deals was $4.06 billion for H1 2010, just ahead of the previous record of £4.04 billion in H1 2008. In Q2, investment into 140 companies was driven by an increasing number of larger deals and follow-ons. The restricted IPO market for exits continues to drive up the amounts invested in unquoted securities.
Three larger deals of more than $100 million were noted during the quarter including the $350 million for Better Place, $189 million for Fisker Automotive, and $115 million for BrightSource Energy. The industry sectors benefitting from record investment were solar, biofuels, and smart grid. Solar is the sectors' most successful area receiving $811 million to mark its third highest quarter ever.
Central to the record investment in H1 2010 was the resurgence of solar, and a high volume of follow-on rounds, a response to the lacklustre and unpredictable state of the cleantech IPO market. Goldwind and Solyndra's recent IPO withdrawals were typical, and Tesla's successful floatation, the exception. Tesla's $202 million IPO in the US was notable, but globally, the cleantech IPO market concentrated in China which received $1.7 billion, or 75 percent of the $2.3 billion raised worldwide in the three months to the end of June.
A broader range of investable cleantech sectors has developed from the historically dominant renewable energy market. Worldwide transport was the most invested in the period by amount while energy efficiency attracted the most transactions.
In the UK, there is growing support for the waste recycling market where LEF has particular strengths. A March 2010 UK Government report from the Waste and Recycling Action Programme ("WRAP") concluded that the best way to get rid of waste was recycling. It highlighted the development of anaerobic digestion for food and vegetable wastes and recycling for higher grade plastics, papers and wood but recognised the role of energy recovery via incineration, when other methodologies were uneconomic or impractical.
This increased policy focus supports LEF's investments in the waste and recycling sector, which includes the UK waste treatment and waste to energy company New Earth Solutions Group and similarly in the French electronic waste recycler, Terra Nova. LEF is examining further investment opportunities in waste recycling and waste to energy.
A Department of Energy and Climate Change ("DECC") consultation document, published 31 March 2010, reported that the biomass industry had brought to its attention that up to 5GW of dedicated biomass, energy from waste, gasification and anaerobic digestion projects had been stalled due to uncertainty over Renewables Obligation ("RO") support. DECC confirmed that a system guaranteeing consistent subsidies for renewable energy technologies, known as 'grandfathering', would apply to biomass plants, including Energy from Waste ("EfW") and Anaerobic Digestion ("AD") as well as dedicated biomass and technologies, such as gasification and pyrolysis, to treat waste.
Investment Portfolio
As at 30 June 2010:
·; Combined investments valued at £27.9m in ten companies, (61.5% of net assets).
·; £15.9m (57%) of investments made by the Fund are in the form of convertible loan notes, preferred stock or working capital facilities, each with a coupon of between 8% and 10% per annum.
·; £14.6m (52%) of investments made by the Fund are structured to provide a 1.5x liquidation preference or minimum return.
·; Total income generated from the investments during the twelve months ended 30 June 2010 totalled £2.3m, which equates to a net yield on all investments of approximately 5% per annum.
The following table presents the Investment Portfolio as at 30 June 2010 based on historical costs (using the exchange rate at the point of investment):
|
Curreny:£m |
|
|
Investment Amount £m |
|
|
||
|
Company |
Activity |
Notes |
Equity |
Convertible / Other |
Total |
Fair Value |
% of NAV |
|
agri.capital |
Biogas |
(a) |
6.4 |
- |
6.4 |
6.5 |
14.2 |
|
New Earth Solutions |
Waste treatment |
|
3.0 |
2.0 |
5.0 |
5.4 |
12.0 |
|
Rapid Action Packaging |
Food Packaging |
(b) |
1.5 |
3.7 |
5.2 |
5.2 |
11.4 |
|
Hydrodec Group |
Oil Recycling |
|
3.5 |
3.0 |
6.5 |
4.4 |
9.7 |
|
Terra Nova cv |
Electronic waste recycling |
|
2.7 |
- |
2.7 |
2.7 |
6.0 |
|
STX Services |
Environmental Broking |
|
0.6 |
- |
0.6 |
1.6 |
3.4 |
|
Hightex Group |
Solar cooling |
|
0.7 |
- |
0.7 |
0.8 |
1.7 |
|
Phoslock Water Solutions |
Water treatment |
|
0.4 |
- |
0.4 |
0.5 |
1.0 |
|
Renewable Energy Generation |
Wind developer |
|
0.7 |
- |
0.7- |
0.5 |
1.0 |
|
Emergya Wind Technologies |
Turbine manufacturer |
(c) |
2.7 |
- |
2.7 |
0.4 |
0.8 |
|
|
|
|
22.2 |
8.7 |
30.9 |
27.9 |
61.5 |
|
|
|
|
|
|
|
|
|
|
Cash at bank |
|
|
|
|
|
16.7 |
36.7 |
|
Other assets/liabilities |
|
|
|
|
|
0.8 |
1.8 |
|
|
|
|
|
|
|
45.4 |
100.0 |
|
|
|
|
|
|
|
|
|
Notes to table:
(a) In the form of (i) €3m Series E 8% Preference Shares and (ii) €4.3m Series F 10% Preference Shares.
(b) Includes committed £1.5m working capital facility. As at 30 June 2010, £1.2m had been drawn down.
(c) In the form of (i) €2.0m 8% Preference A Shares, (ii) €1.0m 8% Preference B Shares, (iii) €251,847 Preference C Shares, and (iv) €250,000 Preference D Shares. Under IFRS, it is required to state the cost of investment at its fair value following conversion of the original loan note to Preference Shares; this increases the cost of investment to £4.5m per the interims as at 31 December 2009 rather than the £2.7m stated in the above table.
agri.capital GmbH
Biogas Developer, Owner and Operator
Valuation at 30 June 2010 (method): £6.5m (guaranteed minimum return)
Investment: €3.0m (£2.5m) (8% Preference E Shares with Detachable Warrants) and €4.3m (£3.9m) (10% Preference F Shares with Detachable Warrants)
LEF Ownership:undetermined
Date(s) of Investment:Q4 2008, Q2/Q3/Q4 2009
Company Summary:
agri.capital is a specialist developer, owner and operator of biogas plants, established in 2004. The business uses manure and crop silage to produce biogas. This methane-rich gas mixture is either burned onsite to create electricity and heat, or is cleaned and fed into the existing natural gas network. The fermentation residue is used as a high-quality fertilizer, returning nutrients to the soil. agri.capital uses proven technology from leading German EPC contractors and can rapidly roll-out fixed-price plants. The Company has secured feedstock contracts to match the off-take tariffs resulting in stable plant revenues.
Investment During The Period:
No further investments were made during the period.
Recent Highlights Include:
·; Largest operator of biogas facilities in Europe with 60 plants in operation and management across 51 sites with an installed capacity of approximately 40.5 MW.
·; Additionally, the Company had 7 sites under construction (around 9.1 MW of capacity).
·; As at 30 June 2010, the company had 48 MW in operation or under construction.
·; Capacity utilization of operating facilities remained high, at around 92% for the second quarter of 2010.
LEF has an observer seat on the Board of agri.capital. Nick Pople and Bill Weil, of the Investment Adviser, are alternates as the LEF observer.
New Earth Solutions Group Limited
Waste Treatment and Renewable Energy
Valuation at 30 June 2010 (method): £5.4m (at historical cost)
Investment: £3.0m (Preferred Ordinary Shares) and £2.0m (10% Convertible Note)
LEF Ownership:undetermined
Date(s) of Investment:Q3 2009
Company Summary:
New Earth Solutions Group Limited("NESG") is a UK business comprising the waste treatment company, New Earth Solutions Ltd and the renewable energy company New Earth Energy Ltd. New Earth Solutions helps local authorities to meet their obligations to divert waste under the EU Landfill Directive and contributes to composting and recycling rates. It has existing and planned operations in the south and central England and contracts to receive waste from several local authorities. It has pioneered enclosed composting and biological treatment in the UK. New Earth Energy is developing and delivering innovative third party advanced thermal technologies to support the use of waste-derived feedstock for renewable power plants and combined heat and power schemes for public and private customers.
Investment During The Period:
No further investments were made during the period.
Recent Highlights Include:
§ February 2010 - Environmental Permit for 50,000 tonnes per annum facility issued at Cotesbach. New Earth Energy submitted preliminary accreditation to Ofgem for Canford plant to install a waste to energy plant.
§ March 2010 - £4m investment by NERR plc, bringing total funds raised recently to £13m.
§ March 2010 - Two new food waste contracts for £360,000 with Countrystyle for the plant at Blaise and £140,000 from Denbighshire secured for the plant at Sharpness.
§ April 2010 - A contract extension for Canford was secured from Bournemouth Borough Council to August 2014.
§ May 2010 - Phase I and II of remediation works at Avonmouth have been completed and the site has been handed over for commencement of construction works.
§ June 2010 - the planning application for a 7MW renewable energy scheme at Avonmouth to be co-located with the MBT facility has been submitted.
LEF has the right to appoint a director to the Board of NESG. Nick Pople and Bill Weil, of the Investment Adviser, are observers on the NESG Board.
Rapid Action Packaging Limited
Food Packaging Solutions
Valuation at 30 June 2010 (method): £5.2m (at historical cost)
Investment: £1.5m (Ordinary Shares), £2.5m (8% Convertible Notes) and £1.2m drawn down of the £1.5m Working Capital Facility
LEF Ownership:31.3% (assumes full conversion of Convertible Notes and exercise of all Warrants)
Date(s) of Investment:Q2 2008, Q2 2009
Company Summary:
Rapid Action Packaging Ltd ("RAP") specialises in the design, manufacture and supply of innovative, ergonomic, cost effective and environmentally responsible packaging systems particularly for the "food on the move" marketplace. RAP's unique packaging solutions combine the benefits of both paper and film technologies to improve packaging as a vital tool in sales growth for food retailers whilst also putting a strong emphasis on environmental performance and responsibility. All RAP's products are available in fully recyclable materials. It has licensed production of certain of its products to third parties in the US and Asia. In Europe, product design, sales and production are based in Ireland and the UK.
Investment During The Period:
In June 2009, LEF committed to provide a £1.0m working capital facility to RAP to fund the purchase of equipment, installation costs and planned increased stock levels in advance of a new product launch aimed at Continental Europe and North America in the first half of 2010. In the period, RAP drew down a further £0.5m of the working capital facility reaching the facility's £1.0m headroom. In May 2010, LEF agreed to provide a £0.5m extension to the original working capital facility, and as at 30 June 2010, a total of £1.2 million had been drawn down.
Recent Highlights Include:
§ The modified atmosphere sandwich packaging system (MA Packaging) has been launched with a major European food manufacturer - with RAP entering into a three year supply agreement.
§ Trials of MA Packaging are also underway in the US with three of the fastest growing national convenience stores undertaking regional trials.
§ The existing Flexible Food Wrap has also been successfully launched in two UK supermarkets which both introduced a hot range of takeaway food.
§ New manufacturing equipment installed earlier in the year is operating according to expectations.
LEF has a seat on the Board of RAP. Nick Pople, of the Investment Adviser, is the LEF representative.
Hydrodec Group PLC (AIM:HYR)
Specialist Oils Recycling
Valuation at 30 June 2010 (method): £4.4m (quoted share price and Black Scholes)
Amounts Invested:£3.5m (Ordinary Shares), £3.0m (8% Convertible Loan)
LEF Ownership:c. 9.0% (assuming full conversion of the Convertible Loan)
Date(s) of Investment:Q4 2007, Q1/Q2/Q4 2008, Q1/Q2 2009
Company Summary:
Hydrodec's technology is a patented sustainable oil refining process that takes existing spent oil as feedstock to produce new specialty oils thus creating a virtuous "green" cycle. The process is closed loop and produces no harmful emissions. Hydrodec's first commercial process re-refines the used transformer oils that insulate and cool utility transformer boxes. It currently has commercially operating plants in New South Wales in Australia and Ohio in the US, the largest market for transformer oil in the world.
Investment During The Period:
No further investments were made during the period.
Recent Highlights Include:
§ March 2010 - Announced an important agreement with its Japanese partner, Kobelco Eco-Solutions of the Kobe Steel Group, for a 50/50 joint venture to exploit the Hydrodec technology in Japan and across the wider East Asian market. The agreement was signed at the end of April 2010.
§ March 2010 - the Company's working capital position was affected by lower than anticipated sales and margins from December to February 2010 and reduced trade credit terms from certain US feedstock suppliers. Addressing the working capital shortfall, the Company raised £2.0 million before expenses at 10p per share. Re-refined transformer oil sales in the first quarter of 2010, were expected to be about 25% lower than the Q4 2009 amount of 4.4m litres reflecting the continuing weak market.
§ April 2010 - Announced that conditions in the transformer oil market had improved with prices appearing to enter an upward trend. Allowing Hydrodec some modest improvements in margins. Current cash generation was sufficient for the Company to meet its next interest payment on the CULS. Re-refined transformer oil sales increased from 3.8m litres in 2008 to 11.8m litres in 2009.
§ July 2010 - Announced record Q2 sales volumes of SUPERfine, up 79% to 6.0m litres on Q1 2010 (3.4m litres) and up 36% on its previous high in Q4 2009 (4.4m litres) - revenues also rose to a record US$4.7m during Q2 2010. The Company announced the appointment of a new FD and COO to the Board.
Terra Nova SAS
Electronic Waste Recycling
Valuation at 30 June 2010 (method): £2.7m (at cost)
Investment: £2.7m (Preference Shares)
LEF Ownership:c.25%
Date(s) of Investment:Q4 2009
Company Summary:
Terra Nova is a French company established to develop a printed circuit board treatment and recycling business. The team behind Terra Nova has extensive experience in the metals industry having worked together for a number of years at Metaleurop, a quoted lead, zinc and precious metal processor. The company has commenced construction of a 30,000 tonnes per annum pyrolysis plant to pre-treat printed circuit boards for the major metal smelters. The new facility will help meet the requirements of the EU Waste from Electrical and Electronic Equipment (WEEE) Directive, easing the pressure to export harmful waste to the developing world. Terra Nova is located within the Arcelor-Mittal industrial site at Isbergues (Pas-de-Calais), France.
Investment During The Period:
No further investments were made during the period.
Recent Highlights Include:
§ Construction of the pre-treatment and recycling plant for printed circuit boards in Northern France continues to be on time and on budget.
§ Positive discussions with potential customers with overall improvements in the price of the off-take product. Discussions have already commenced for production volumes greater than the capacity of the plant.
§ Operations are expected to start by Q1 2011 as planned.
§ R&D efforts continue to show promise for future operational enhancements.
LEF has a seat and, additionally, has observer status on the Board of Terra Nova. Charles des Forges, a member of LEF's Advisory Panel, has been nominated as Chairman of the Supervisory Committee and Bill Weil and Nick Curtis, of the Investment Adviser, are alternates as the LEF observer.
STX Services B.V.
Environmental Product Broking
Valuation at 30 June 2010 (method): £1.6m (EVCA Valuation methodology)
Investment: €0.8m (£0.6m) (Ordinary Shares)
LEF Ownership:24.9%
Date(s) of Investment:Q4 2007, Q1/Q2 2008
Company Summary:
STX is an Amsterdam-based company specialising in the broking of environmental financial products with a particular focus on the carbon markets. STX has mostly been active in broking EU Emission Allowances ("EUAs") but has diversified into transactions in Certified Emission Reduction ("CERs"), Biofuel Tickets, Green Certificates and other environmental trading. STX is active across the European markets.
Investment During The Period:
No further investments were made during the period.
Recent Highlights Include:
§ The uncertainty in the run-up to Copenhagen in December 2009 and a reduction in EUA trading, in particular, impacted the Company's profitability for the year ending 31 March 2010, leading the Investment Adviser to adjust STX's fair value in line with a consistent valuation approach to its earnings.
§ STX decided to buy back shares from one of the principal investors of the Company, resulting in a percentage increase in the share ownership for all other shareholders. LEF's percentage ownership increased from 19.2% to 24.9%. In a related transaction, STX's Managing Director also acquired additional shares from the same investor.
§ Range of revenue generating products expanding to include: EUAs, ERUs, AAUs, VERs and CERs (spot and forward); RECs, LECs, GOOS, and Green Certificates (spot and forward); biofuel tickets; physical biofuel; biofuel feedstock; Green Gas Certificates and NOX. STX's revenues are increasing consistently through Q1 and Q2 2010.
§ The Investment Advisor notes the EU statement that it might cut the allocation of allowances toward the end of Phase II in December 2012, and that it still might look to increase its target cut in emissions in Phase III (to 2020) from 20% to 30%, benefitting the carbon markets.
§ Team has expanded and two new junior traders and a back office employee joined the team in Q1 2010. Following these new hires, STX will comprise 13 brokers, 3 support staff and 2 directors.
LEF has a representative on the Supervisory Board and on the Credit Committee of STX. Nigel Meir, of the Investment Adviser, is the LEF representative on the Supervisory Board and on the Credit Committee.
Hightex Group Plc
Membrane Structures and Solar Cooling
Valuation at 30 June 2010 (method): £0.8m (quoted share price)
Investment: £0.7m (Ordinary Shares)
LEF Ownership:5.3%
Date(s) of Investment:Q2 2010
Company Summary:
Hightex is a specialist engineering company with two core activities: Hightex designs, fabricates and installs large area, architectural polymer membranes for roofing and façade structures; its SolarNext subsidiary has developed air-conditioning systems whereby solar energy replaces electric power. The SolarNext solar cooling kit is able to be retro-fitted to many kinds of structures and is managed by an innovative, proprietary controller that can efficiently manage multiple input sources (solar, district heating, biomass, CHP). Hightex membranes are typically used for sporting stadiums and arenas; transport terminals; shopping malls as a competitive alternative to glass: it enables complex shapes to be created and is also safer than glass in the event of an explosion. Hightex uses environmentally friendly materials and is focused on innovative technology and coatings, which help to reduce a building's energy costs.
Investment During The Period:
In April 2010 LEF acquired 10 million ordinary shares at 7.3 pence per share.
Recent Highlights Include:
§ Announced preliminary results for its year ended 31 December 2009, including an increase of 23.5% in turnover to €20.0 million, gross profit up by 100% to €4.2 million (both versus 2008) and a profit before exceptional items of €1.1 million.
§ Recent operational results include completing the retractable roof at Wimbledon Centre Court, the 2010 FIFA World Cup stadiums in Johannesburg and Cape Town and the Munich Olympic Hall.
§ In the second half of 2009, Hightex announced contract wins amounting to €45.3 million relating to the roofs over the Warsaw National Stadium and Kiev Olympic Stadium (both for the UEFA 2012 European Football Championship) and the retractable roof and fixed façade for the new BC Place Stadium in Vancouver, Canada.
Dr Charles DesForges, Executive Chairman of Hightex, is on the Advisory Panel of LEF and Chairman of Terra Nova S.A. Charles Sebag-Montefiore, non-executive director of Hightex, is also an executive director of Ludgate Investments Limited, Investment Adviser to LEF.
Phoslock Water Solutions Ltd (ASX: PHK)
Water Treatment Technology
Valuation at 30 June 2010 (method): £0.5m (quoted share price)
Investment: £0.4m (Ordinary Shares and Warrants)
LEF Ownership:3.0%
Date(s) of Investment:Q3 2008, Q2/Q3 2009
Company Summary:
Phoslock is a unique water treatment product, invented and developed by the Commonwealth Scientific & Industrial Research Organisation (CSIRO), Australia's national scientific organization. Phoslock retains phosphorus and provides a protective capping to sediments preventing phosphorus re-release, thus improving water quality for human use and aquatic life as well as preventing harmful algae blooms. Phoslock is used for lakes, drinking water reservoirs and other high value water bodies. PWS is headquartered in Sydney, Australia, with offices in Kunming, China and Bremen, Germany, and is represented by licensees and agents in another ten countries.
Investment During The Period:
No further investments were made during the period.
Recent Highlights Include:
§ January 2010 - Received tenders for six separate projects globally totalling in excess of 2,500 tons or c. A$6.0m in sales revenue.
§ February 2010 - the results of various trials carried out in Canada shows that Phoslock was 95% effective in removing phosphorous and confirmed international data that the substance is safe in the environment.
§ March 2010 - Announcement that four applications, totalling over 150 tons, have been completed in Australia, South East Asia and in Scotland, UK. Decisions on a further 13 applications are currently pending in Germany, UK, Poland, the Netherlands and Denmark, and if confirmed, are all expected to take place in 2010 and require a total in excess of 400 tons.
§ June 2010 - Announced that in Q1 2010, the Company was cash flow positive from operations demonstrating significant progress in commercialising Phoslock.
Renewable Energy Generation (AIM:WIND)
UK Onshore Wind Development
Valuation at 30 June 2010 (method): £0.5m (quoted share price)
Investment: £0.7m (Ordinary Shares)
LEF Ownership:less than 1%
Date(s) of Investment:Q3 2008, Q2 2010
Company Summary:
Renewable Energy Generation ("REG") is a UK focused renewable energy group, quoted on AIM (RWE), principally involved with wind power generation and bio power. The Group develops, owns and operates UK wind farms and also generates power in the UK from refined, used vegetable cooking oil.
Investment During The Period:
LEF acquired 500,000 shares at £0.52 per share in April 2010.
Recent Highlights Include:
§ October 2009 - Announced the sale of AIM PowerGen Corporation (REG's wholly owned Canadian subsidiary) to International Power Canada, Inc. for an initial cash consideration of C$124.8m. REG will focus on the UK onshore wind (currently 7 UK fully operational wind farms totalling 21.3MW).
§ November 2009 - Acquisition of High Haswell, a 4 MW consented site for £0.8m with build targeted for completion by the end of 2010.
§ November 2009 - Announced that it had repaid all outstanding debt, and was looking to accelerate the company's wind development with investment of c. £100m (debt and equity) in the next three years. REG Biopower signed its first commercial contract with the Port of Dover. Development portfolio of over 350MW as at 31 December 2009.
§ June 2010 - Announced that the Company has acquired 4.95MW wind farm for an initial cash consideration of £2.8 million and a further cash consideration of £1.2 million payable subject to receipt of planning permission to repower the site. Currently comprising 11 turbines, the St. Breock wind farm in Cornwall has been generating electricity since 1994. With an average annual output of approximately 11 GWh, the site generates enough renewable energy to supply over 2500 homes.
§ June 2010 - Announced that the Company has purchased two Vestas V80 2MW wind turbines for its consented site at High Haswell in County Durham.
Emergya Wind Technologies B.V.
Wind Turbine Manufacturing
Valuation at 30 June 2010 (method): £0.4m (re-valued at €0.03 per share based on latest Preference Share Issue)
Investment: £2.2m (8% Preference Shares) and £0.5m (Preference Shares with Warrants)
LEF Ownership:2.5%
Date(s) of Investment:Q4 2007, Q3 2008, Q2/Q4 2009
Company Summary:
EWT is a Dutch-based manufacturer and supplier of wind turbines and turnkey wind parks. It specialises in the development and manufacture of advanced direct-drive (gearless) wind turbines. EWT was established in 2004 by the acquisition of the intellectual property of Dutch wind turbines manufacturer Lagerwey. The current product consists of the 750 KW and the 900 KW series and EWT is also developing 2 MW wind turbines for onshore applications.
Investment During The Period:
No further investments were made during the period.
Recent Highlights Include:
§ January 2010 - Eric Bakker previously responsible for the creation of BP Alternative Energy, and for the development of some 600 MW of wind energy in the US, has taken steps to solve the issues that have impacted EWT negatively under the close scrutiny of the Investor's Steering Committee.
§ February 2010 - 54 of the 55 wind turbines for the first Chinese project have been erected, electrical installation has been partially completed, with the majority of the wind turbines commissioned.
LEF has observer status on the weekly Steering Committee of EWT. Edward Daniels, of the Investment Adviser, is the LEF representative.
Azure Dynamics Corporation (TSX:AZD)
Electric and Hybrid Electric Drive Technology
Divestment During The Period:
The remaining 1,429,000 shares were sold at prices ranging from 16p to 19p which delivered a 1.8x return (a profit of £130,000 from a £167,000 investment), equivalent to an IRR of 46.9% over the period.
Deal Flow
As Investment Adviser to the Fund, we monitor portfolio companies closely for current performance and future prospects. To facilitate growth, a number are likely to require additional funding in 2010/11 and the Fund would expect to support this through further investment.
We continue to review the new investment opportunities from the marketplace, as well as those generated internally. The placing that the Fund has recently announced will enable the Investment Adviser to recommend several investments currently under review.
The impact of legislative change on potential investment opportunities is currently uncertain. In the UK, the announcement by the Department of Energy and Climate Change ("DECC") on feed in tariffs and grandfathering in biomass permits created some confusion and led to certain investment projects being placed on hold or cancelled. However, the DECC's consultation document, published 31 March 2010, stated that up to 5GW of dedicated biomass, energy from waste, gasification and anaerobic digestion projects had been stalled due to uncertainty over Renewables Obligation ("RO") support and as a result, DECC confirmed that 'grandfathering', would apply to biomass plants.
This has removed a level of uncertainty and allows us to move forward with due diligence on several potential investments. All of these potential investments will therefore be able to receive the same level of support under the RO system of subsidies as they did when first accredited, and for a 20 year period.
Other Fund Data
ISIN Number - shares JE00BIYW3102
ISIN Number - warrants JE00BIYW3L02
Reuters RIC Code - shares LEF.L
Reuters RIC Code - warrants LEFW.L
Bloomberg code - shares LEFLN
Bloomberg code - warrants LEFWLN
Contact Details
Nigel Meir
Ludgate Investments Ltd
6th Floor, 80 Cannon Street
London EC4N 6HL
+44 20 7621 5770
www.ludgateenvironmental.com
Important Information
Past performance is not a guide to future performance. The value of investments and the income generated from them may go down as well as up and are not guaranteed. You may not get back the amount you originally invested. Changes in rates of exchange and stock market performance may cause the value of investments to fluctuate. Where investments are made in unquoted securities or smaller companies, their potential volatility may increase the risk to the value of, and the income from, the investments. Net Asset Value (NAV) performance is not the same as share price, and you may realize returns that are lower or higher than NAV performance.
Related Shares:
LEF.L