Helius burns bright on the slope of enlightenment

By Philip Stafford
Published: May 29 2009 03:00

It should be boom time for the UK's emerging renewables and clean energy technology companies.
The opening of Britain's largest onshore wind park this week highlighted that projects to replace ageing fossil fuel-based power stations are under way.
With President Obama's plan to invest $150bn (£94bn) over the next 10 years in renewable energy and UK plans to harness the tidal power of the River Avon, government support has never been higher.
Even so, the danger is that investors will get carried away with the hype of projects that will take years to bear fruit.
Ernst & Young estimates the UK's energy companies would have to find another £234bn by 2025 to secure energy supplies and meet European Union targets.
Yet the short-term prospects for many projects are tough, with many dependent on improved bank lending to finance projects.
Bucking the trend is Helius Energy, which floated on Aim in 2007 to develop a UK portfolio of biomass plants that generate electricity. Proponents say biomass, which converts organic matter into power, could supply as much as 50 per cent of the world's primary energy needs by 2050.
Results this week showed a pre-tax profit of £18,875 against a loss of £1.17m a year ago. The company had net cash of £16.8m, largely derived from the sale of the rights to an unbuilt biomass power plant to RWE Innogy, the German utility group, for £28m last September.
RWE will invest a further €260m (£206m) to complete the plant at Stallingborough in Lincolnshire, which will run on waste wood, usually offcuts and tree wastage typically sent to landfill sites. Helius will also receive 13 per cent of the yearly earnings from the plant for the first 24 years of its operation.
Just as it promised in its Aim admission prospectus, Helius is using the sale of the project to fund similar developments such as a 7MW plant at Rothes in Scotland. The company has also applied for planning permission for a 100MW site at Avonmouth, near Bristol, which would use woodchip.
The main costs for a biomass plant are centred around gathering and transportation of feedstuff for the project. John Seed, group's managing director, disputes press reports doubting whether there is sufficient global quantity of feedstuffs.
In Helius's case, the Rothes plant will use waste from Speyside whisky distilleries as its feedstock. The Avonmouth plant is adjacent to the port to transport biomass from overseas.
The optimism has seen Helius's shares rise 85 per cent in six months yet it must be noted that we have been here before.
Two years ago London's listed renewable companies saw spikes in their share prices as investors became attuned to the energy issue and a steadily rising crude oil price.
The trajectory of companies such as Ceres Power, Ocean Power Technologies, Clipper WindPower and Novera Energy has often followed that of the Hype Cycle as envisaged by Gartner, the research group, in which early executive and investor enthusiasm is brought crashing down before a sense of realism pervades the sector.
Helius's business has all the hallmarks of the "slope of enlightenment" part of the cycle, where it sees innovation being used to good effect.
In Helius's case, it plans to use an industrial process not too far removed from current techniques to help energy companies meet renewable energy targets. That part of the cycle is also characterised by steadier growth but far less spectacular than the hype suggests.
Aim bounces back
For all the questions about Aim's corporate governance standards, the past month has been a reminder of the junior market's greatest strength; its ability to raise money.
The £200m flotation of Max Property and fundraisings by Vertu Motors and Platmin have boosted the statistics.
According to the London Stock Exchange, £470m had been raised in the first three weeks of May, which means it is likely to be the best month for fundraising since the £1bn achieved in June last year.
Perhaps the most interesting comment came from Advanced Computer Software, which raised £43m for its plans to consolidate the software market in the primary care market of the NHS.
ACS could have turned to private investors. After all, it was created by Vin Murria, chief executive, from a series of venture capital firms including Elderstreet Investments. Elderstreet's backer Michael Jackson built Sage, the healthcare software group, into an FTSE 100 company.
Yet Ms Murria said public markets gave money faster, on less onerous terms, and didn't impose the controls or the due diligence of private equity.
It's a clear statement from a highly experienced executive of why Aim remains an attractive option for budding companies.
philip.stafford@ft.com David Blackwell is away
Copyright The Financial Times Limited 2009