WIND

Creating a buzz and delivering a profit

ADAM BARBER

November 8, 2013

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When it comes to assessing a company’s financial worth – particularly ahead of an IPO – the calculation of a fair valuation is critical. And it takes a fair bit of number crunching to get there.

Don’t glaze over. Stick with it. Since, with a number of major listings on the horizon for both New York and for London, this one’s pretty important.

And for the record, although there’s been reference made to an IPO, this time around we might be one of the rare exceptions that’s not talking about Twitter.

That’s the very same social media darling that, with 230 million users and a share price set at $26, was handed a preliminary equity value of $18bn as it made its debut on the New York Stock Exchange last week.

In fact, Twitter’s share price soared to roughly $45 on its first day of trading, valuing the company at a whopping $31bn.

And that’s before the company even works out how to make a profit.

However, while the next big Silicon Valley dream has just got underway in the US, across the pond, another new stock market entrant, Infinis, is getting ready for its turn.

The energy developer, owned by private equity firm, Terra Firma, has increased the company’s EBITDA by 25% over the past three years alone, reaching £125m in March 2013.

That demonstrates some strong cash flow and good growth prospects that are directly driven by the amount of electricity it exports to the grid.

This means that the company has been valued at up to £930m, with the order books closing on Wednesday.

Currently, landfill gas still makes up the majority of its revenues – having generated £41.9m out of its £56.7m total in the past quarter alone.

Nevertheless, onshore wind has made an increasingly strong showing – contributing a not insignificant £14.4m over a three-month period. Something that, when compared to a £300,000 contribution from Infinis’ hydro business, shows real promise.

That though, is not the only thing that is raising expectations ahead of the float.

In September Infinis appointed Ian Marchant, former head of Scottish and Southern Energy as its new chairman for the new plc. That’s a seriously smart hire for one of the most high profile European renewable energy power generators and it does much to inject an additional shot of confidence and further steady the ship.

Moreover, it also goes some way to reiterating the importance of having a high-profile figurehead steering the company through a rapid period of development and growth.

And whilst Marchant himself may have said some none too complimentary things about the private equity industry in the past, we’re sure he’d agree that Terra Firma has played a vital role in growing Infinis, which the firm bought for £106m in 2003, to the company it is today.

True, Twitter may be valued at almost thirty-three times as much as this profitable energy developer. However, the flotation of Infinis is proof that the renewable energy sector is already creating a buzz amongst investors.

What’s more, it’s already worked out how to consistently deliver a profit.

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