Leaf Clean Energy Share Discussion Threads

[tiltonboy] 12/3/2015 19:05

Can't find the trade, but it looks like a big stake has changed hands. Looking at the numbers, it looks remarkably like the Lansdowne holding.

[flyfisher] 09/1/2015 10:33

Wind and solar are normally electricity generating, the replacement for which would be gas or coal fired power stations, so I don't see the oil price having much impact unless gas prices fall, but then gas prices are quite dependent on location.
I don't see any impact on tyre recycling, but oil price could impact on the ethanol investment in brazil, however Brazilian gasoline prices are pegged by the government.
On balance the o/p fall is a small negative.

[stemis] 09/1/2015 09:59

It won't have helped....

[skyship] 08/1/2015 17:22

Reviewing my small holding here. Two things immediately obvious - one bullish, one bearish:

# The last NAV statement gave 89.90 cents or 52.57 pence at US$1.7103/GBP1. So with Sterling having crashed down to US$1.515 - the Sterling value NAV would now be c59p - a nice increase......regrettably:

# What price "green" company valuations with the oil price having halved?!

Any views?

[pvb] 24/11/2014 19:41

Jim Potochny has stepped down from the Board effective today. Jim will continue as chief financial officer of the Company.

[flyfisher] 21/9/2014 18:01

Hi skyship, I am a little more optimistic than yourself.

The recent results indicated that 2 assets which would seem to have a combined value of $40m or so are under due diligence for sale.
Another is up for sale and they are evaluating options for Invenergy.

That gives 3 remaining assets with no short term sale plan, the combined cost of which was around $39m, with a book value likely to be lower, say $25m.

Whilst the 3 remaining assets may require some follow on investment, it looks to me like the company will have surplus cash available to distribute within the next year. So whilst it may take 3 or 4 years to fully liquidate, their seems a good chance of a short term return of a substantial proportion of the current s/p.

[skyship] 21/9/2014 15:27

40p to 55p in 3.5yrs delivers 9.46%GRY. Reckon I'll hold on that basis; especially as I too believe the NAV has been kitchen-sinked more than somewhat!

[spectoacc] 18/9/2014 16:41

Fair points @greasynut, thanks.

[greasynut] 18/9/2014 13:44

The new board will obviously want to set a low target against which their future performance will be judged.
Having said that, many of the valuations are based on market value of proposed transactions, so probably not much wiggle room there.
No doubt they were cautious with the other estimates and forecasts.
Let's hope this NAV is not too far from reality, with more space for upside than downside.
Note that they have realigned the incentives based on return of cash to shareholders. That should help to move things along, but will also reduce the ultimate NAV by a few %.
Note that Crystal Amber's thesis was mainly based on their estimate of the value of Invenergy Wind, so that's the one to watch. If they can get a decent premium on that then the ultimate turnout should be ok.

[spectoacc] 18/9/2014 08:51

I got sucked in too; but don't think I can sell down here at NAV discount & hoping Cyrstal Amber at least know what they're doing.

[tiltonboy] 18/9/2014 08:31

Taken for a fool...again...

The Crystal Amber statement and their subsequent buying are not backed up by this statement.

Looks like another GFIR over again.

Lesson to self...leave alone deeply discounted assets with poor visibility.

[spectoacc] 18/9/2014 07:49

I hope that's a kitchen sink job, as it's a hell of a NAV drop. Note on timescale is slightly more positive, assuming there's returns made along the way:

"In addition, as with all private equity investments, Leaf's investments are illiquid and cannot be realised without the assistance of the underlying portfolio company and/or other shareholders. Therefore, there is no set timeline for realising Leaf's investments and it is difficult to precisely predict when the work of the Leaf Board and management will be complete. However, it will likely take several years to realise all of the investments."

[jlo10] 17/9/2014 08:26

Crystal Amber taking up the 4275000 reduced by BlueCrest
Which shows confidence on the part of the institution with best understanding of the assets

[skyship] 09/9/2014 17:31

Well, herewith what they stated in the Circular:

Timing:
Conditional upon approval by Shareholders of the new investment policy, the Board is committed to realising its investments as soon as reasonably practicable, albeit with an emphasis on maximising the value returned to Shareholders and within no specified timeline.

The Board will regularly review progress in implementing the Company’s new investment policy and the then current position of
unrealised investments.

However, in challenging market conditions, the Company may have difficulty in disposing of investments. In addition, as is the case with all private equity investments, all of the Company’s investments are illiquid. The Board believes that these investments will require detailed strategic planning in order to obtain optimal value for Shareholders on disposal and this may take considerable
time to achieve.

As already mentioned there will be no set period for the realisation of the Company’s investments.

The Board is committed to distributing as much of the available cash as quickly as reasonably practicable having regard to cost efficiency, requirements under Cayman Island law, the AIM Rules and retaining sufficient cash for the purposes of funding ongoing administrative expenses incurred by the Company.

In determining the timing of any return of capital to Shareholders, the Directors will take into account the amount of cash available and the costs associated with such return of capital.

[simon gordon] 09/9/2014 15:08

SKY,

Have you contacted Crystal Amber to see if they have a timeline in mind?

[skyship] 09/9/2014 14:04

The timescale for liquidation is just as important as the sum realised.

Interesting to note as a base figure - 40p to a realised 60p in 4yrs time (30/09/2018) would deliver a GRY of 10.5%.

So any combination of a higher figure and lesser time would add to that lowball figure - possibly quite significantly. For instance, 65p by 31/03/18 would deliver 14.6%!

[greasynut] 08/9/2014 21:50

FYI

If the true NAV is $160m, then I estimate the per share NAV to be about 75p.

Crystal Amber expect a degree of write downs prior to realisation.

Anyone know how many of the portfolio companies actually turn a profit?

[flyfisher] 08/9/2014 20:53

Leaf, has recently added to its investment in Lehigh, funds seem to be for global expansion but are less than what was originally being sought.

[tiltonboy] 08/9/2014 19:11

I also topped-up/averaged down...but onl a modest amount!

[skyship] 08/9/2014 17:42

Thanks for that Simon - Added a few @ 39.75p

[tiltonboy] 08/9/2014 12:12

Very re-assuring.

[spectoacc] 08/9/2014 08:35

Thanks @Simon, hadn't spotted that.

[simon gordon] 08/9/2014 07:37

Crystal Amber - 8/9/14:

Leaf Clean Energy Company ("Leaf")

Leaf is an investment company set up in 2007 by EEA Fund Management Limited, the manager of Trading Emissions PLC, to invest in clean energy projects, predominantly in North America. The company listed in June 2007 at 100p a share, raising $386 million net. Leaf has bought back 71.3 million of its own shares at a cost of $79.3 million. Adjusting for these purchases would reduce the net amount originally invested at IPO to $306.7 million. Net assets at 31 December 2013 were $181.9 million, implying a loss of 41 per cent of capital.

Back in 2007, investors took interest in US renewables in the belief that the US would soon join carbon trading schemes. As EEA did not have direct presence in the US, it joined forces with Shaw Capital to source investment opportunities. By the end of 2009, less than three years after IPO, the portfolio was substantially invested in 11 companies, and the poor performance of its investments was evident. Leaf's first investment was $20 million of preferred stock in biodiesel firm Greenline Industries, which had already filed for bankruptcy proceedings.

Ethanol producer Range Fuels Inc. (another $20 million investment) closed down in 2011 without having reached production. A third, solar panel producer MiaSolé (also a $20 million investment), would be written off and sold in 2012. As happens when much money chases few opportunities in new asset classes, the wisdom of some investments would come under scrutiny.

In March 2010, as some investments were unravelling, board director Bran Keogh became an executive director. Shortly after, EEA Fund Management ceased to be the manager and Leaf set up an in-house team under the leadership of its executive director. Unexpectedly, now that Leaf was managed in-house, the transparency of its reports reduced. As they were written off, both Range Fuels and MiaSolé disappeared from Leaf's reports, with no explanation. Disclosure of ownership structures and valuations became minimal, as did the news flow from Leaf.

Fees remained out of line with operations. Despite bringing management in-house, Leaf spent $17.6 million over the next three years to oversee a portfolio of less than a dozen companies, including minority investments. As the companies have matured, we estimate that only three required active management.

Despite the increasing maturity of holdings, no information on revenues or earnings has been provided which would enable market participants to have greater visibility of the current financial position of each underlying investment. The valuations in the portfolio are instead undertaken on discounted future cash flow forecasts, despite these holdings not being cash generative. In our view, this is a wholly assumptions-based approach, over reliant upon estimates of future cash flows.

When the Fund initiated its investment in October 2013, Leaf was trading at 45% discount to its then prevailing net asset value. In our view this was the result of a poor investment track record and the scale of its annual running costs.

Leaf however has some attractive investments and amongst those stands out a convertible investment in Invenergy Wind, acquired for $40 million. Invenergy Wind is North America's largest wind power generation company, and has developed more than 8,000 MW of renewable and natural gas power generation and energy storage facilities. Additional value should be obtainable from some of the other operating projects such as Johnstown Regional Energy. Cash on the balance sheet stands at $19.1 million.

Following engagement with the board, the Fund took decisive action to change the leadership of the company. We called an EGM to remove Peter Tom as chairman and Bran Keogh as executive director and proposed that Mark Lerdal became executive chairman, with a clear mandate to realise the investments in an orderly fashion. An incentive package was agreed, centred on the cash returned to shareholders. Leaf's board soon agreed to the changes. The renewed board reviewed the portfolio and initiated steps to realise assets. It has moved decisively, cutting additional funding to MaxWest, a company with an unsuccessful technology for gasification of waste water.

Excluding MaxWest's $17.2 million carrying value, and allowing for the cash burn, our estimated NAV is $160 million, implying that Leaf is now trading at approximately 50 per cent of its NAV. Whilst in our opinion additional write downs are likely, we are confident that Leaf can return cash to shareholders significantly in excess of its share price.