Business Irish

Monday 11 December 2017

Sun sets on NTR plan

The toll-road firm could see only clear skies in its bid to put solar dishes all over California, but storm clouds saw it lose a fortune, says John Reynolds

THE sizzling hot California sun was meant to earn a multi-million euro green energy fortune for former toll-road firm NTR, but instead the company lost €147m after failing to find deep-pocketed partners to back -- and make -- its space-age like solar Suncatcher dishes.

Having presided over such a staggering loss, chief Jim Barry left last week to take up a role at the green energy investment division at multi-trillion dollar fund BlackRock.

He walks away only a few months after the firm offloaded its failed southern California desert projects, at Calico and Imperial Valley, for just $100m (€72.5m), according to a source.

This was not the first time that the Dublin-based firm lost millions in the green energy business. In 2008, VBV -- NTR's biofuel joint venture with Virgin -- wrote down €80m after its business in Germany collapsed after being dealt a double blow by cheap Argentinian imports and the scrapping of a tax exemption at a stroke of German chancellor Angela Merkel's pen.

At the time, Barry said: "We get in deep very quickly; it's our great strength. We may get caught out sometimes but will take the hard decision when required."

Having seen their shares plummet from €1.35 late last year to a current price of 85c, NTR shareholders might be forgiven for having taken the view that the company under Barry's stewardship got out of its depth.

Having invested $220m in it to date, events over the past two years effectively landed multiple blows on the company. First it failed to find a partner to make tens of thousands of its Suncatcher solar-to-steam-to-power dishes, then it struggled in vain to raise the money to put them into production.

Compounding its troubles, in 2009 the company failed to secure a $1bn US government loan guarantee for one of its solar plants, which would have significantly boosted its efforts to raise a large chunk of the estimated $2.2bn cost of developing the two solar projects.

The third blow came from China, and took solar power firms across the US and Europe, who have been critical of the situation, by surprise. Fuelled by government subsidies of grants and land, China took the lead in cutting solar panel production costs, meaning its early stage, space-age like dishes -- even though more efficient at generating electricity than conventional solar panels -- became viewed as more risky.

"Early stage technologies like this have their own unique risks. They're tough to predict and can never be weighed up exactly," says Irishman John Rowland, a London-based investment manager with Consensus Business Group, which has advised the green fund of Abu Dhabi's Masdar on the risks of investing in US-based solar firm Solyndra.

"Just because your technology is good, as the Suncatcher is, it won't necessarily succeed. It's the old story of VHS vs Betamax video technology. Being a first mover is vital. Once you raise your initial money, you begin production and start selling and you get cash flow. You then achieve scale and edge into profitability," says Rowland.

Although they may use a small number of Suncatchers at some point in the future, K Road Power, which bought the Calico Project, is now poised to succeed where NTR failed. "You win the profit in this business by being creative with the financing. We're not technology experts, but we can do what the market wants and pick our technologies accordingly.

"Our solar technology is by far the most financeable at the moment, and it doesn't rely on a government subsidy. This isn't always the case with newer technologies like the Suncatcher," says managing partner Gerrit Nicholas.

Its Calico and Imperial Valley projects would have involved the numerous challenges that come with manufacturing tens of thousands of them, and then installing them on thousands of acres of the California desert.

NTR only got as far as completing a trial installation near Phoenix in the Arizona desert, where a giant 38-foot mirrored Suncatcher dish has been tracking the sun's rays and producing power since January last year.

In the meantime, new owner K Road Power will quickly roll out its conventional solar panels at the fully permitted, and more valuable, Calico project.

But in January the Quechan Indian tribe filed a legal challenge to the Imperial Valley project, claiming that it hadn't been consulted about it, and raising concerns that building tens of thousands of solar dishes there threatened rare plants and creatures such as bighorn sheep and desert tortoises that live in the desert wilderness.

Back in Dublin, former ESB International chief executive Michael McNicholas has been installed to replace Barry and to steady the ship.

In the meantime, given the monumental scale of the losses from the biofuel and solar businesses, key shareholders such as Philip Lynch's One51, Tom Roche senior and the Roche family would be forgiven for never going near a green energy business again.

The events of the past two years or so may leave them pushing for the company's wind energy and biofuels businesses in the US to be floated or sold off in an orderly fashion so they can hold on to as much of their cash as possible and not risk further losses.

Sunday Indo Business

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