Bum steer on the cow farts
WHEN former Anglo Irish Bank chairman Peter Murray, onetime Bank of Ireland and Aer Lingus finance chief Paul D'Alton, British boardroom heavyweight Sir Robert Malpas and ex-EU commissioner Franz Fischler signed up with Irish green firm AgCert, they must have really believed that trading cow farts was a good idea. By all accounts, it was a very bad idea.
AgCert, headquartered in Sandyford and listed on London's AIM, must be in the running for the worst performing share in the world. Less than 18 months ago, AgCert shares traded at over stg 272p, having floated at 140p in 2005. Last week you could have picked them up for about 1.5p. That means that €100 invested 18 months ago is now worth just 55 cent. There are very few companies that have seen more than 99 per cent of shareholders' money completely obliterated in such a short time. Certainly none with such a heavy hitting and blue chip board. And indeed such a well-paid bunch.
For a small company, AgCert rewarded its executives well. Very well. D'Alton, the finance director was paid nearly €462,000 last year, including a €116,000 bonus. He has a three-year contract. Less than two months ago, he was granted nearly €250,000 worth of options. The non-executive directors like Murray, Malpas and Franz Fischler also get serious wedge. Murray -- the senior independent director -- was paid nearly €118,000. That's more than any of the ordinary non-execs get at Bank of Ireland. He also owns 54,000 shares.
AgCert was set up to tap into the hugely hyped green market. It was to collect methane from cow farts on vast indoor farms in Brazil and Mexico, get rid of it in bio-digesters and then trade these greenhouse gas reduction credits with polluter firms. Deals were signed with ESB, EdF and BHP Billiton. It was all smiles for AgCert.
Within months of floating, it was clear that something really wasn't working. AgCert's chief executive left after three months. But there were deeper problems. The whole business model was arseways. The 600-odd farms across Mexico and Brazil were about as reliable as a Cavan builder. Some produced the goods some of the time. Others just didn't. The cows weren't tooting enough for AgCert to meet its commitments to clients. Failure to deliver precisely on these yo-yo volumes meant AgCert's derriere was hanging out the window. As business plans go, this was truly silly.
Eventually somebody called stop. A €29m rights issue in April saw the announcement that strategy was to be "reconfigured". AgCert revealed that it wasn't going to make any more of these bio-digesters and it was pay out €50m to extricate itself from a contract that it couldn't fulfil. Ouch. It was going to trade certs rather than create them and diversify into all kinds of other wheezes including forestry.
But the clock was ticking on AgCert's delivery contracts. It desperately tried to renegotiate schedules that it wouldn't be able to meet. Then out of the blue, a corporate saviour appeared. A large European energy trader was ready to supply the missing credits so that AgCert could meet its obligations. Last week, that deal collapsed.
The latest share price tumble means that AgCert is now worth little over €5m from a float value of €215m. In April, it said that it has enough money to see it through to profitability by the end of 2008. It has certainly raised enough, with over €110m committed through new equity, debt arrangement and pre-paid delivery deals over the last year.
AgCert is in negotiations with financiers about its future, although it has declined to make any comment. The AgCert dream could just end up as hot air. Extremely whiffy hot air.
