Apr 2015 Financial News

New energy start-up to raise $450m on JSE

Apr 01, 2015

THE Caribbean Energy Finance Company Ltd (CEFC) is set to become the first renewable energy finance company to hit the stock market, not just in Jamaica but anywhere in the Caribbean, and it is aiming to attract as many small investors as possible.

The company already has $50 million on its balance sheet from private investors, but is looking to raise another $450 million via the Junior Market of the Jamaica Stock Exchange. Its IPO was published on Monday night.

"The company is seeking to raise $452 million by inviting applications for up to 64.7 million ordinary shares in the invitation," stated the prospectus.

"We will be the only renewable energy company on the market anywhere in the Caribbean," Chairman Leo Williams told the Jamaica Observer in a recent interview.

The company will specialise in providing renewable energy solutions through affordable finance options. Its main target will be companies around the Caribbean.

As a result, companies -- including manufacturers -- should be able to more easily cut themselves off from the grid and produce their own electricity via various renewable sources, including solar, wind, co-generation, hydro, biomass, geothermal, and potentially even new green methods as yet unknown.

The company projects to earn some US$401,000 net profit from US$1.7 million in revenues in 2015 and US$474,000 net profit from US$1.9 million in revenues in 2016.

Investors can buy shares in the new company for $7.30 each, with a minimum buy of 1,000 shares, Williams said.

The company will be "starting very lean", Williams said, with a small staff of CEO Byron Ward and a handful of others.

Damian Lyn, who along with Williams is a co-founding director of the company, brings knowledge and potential business from his other company, Alternative Power Sources, which sells and installs renewable energy equipment. As a result, new business is likely to include projects from The Bahamas, where Lyn has a branch of his company, and elsewhere.

Noting that electricity is too expensive in Jamaica, Lyn brought a nationalist element to the company's launch. "We have to do what is good for Jamaica and to build this economy," he said.

The listing has a number of brokers, including one that is linked with the credit unions, to maximise access for small investors. "It is the first time ever a credit union has participated in an IPO," Williams said. "We don't want to lock out the small investor in any way."

Lyn agreed: "We wanted to make sure the public could invest in a social good for the country and help build the economy."

Tech-savvy investors will even be able to access the offer via their cellphones. "So we aren't joking. We want to open this up to the average investor," Williams said.

Williams, who previously worked at Jamaica Money Market Brokers (JMMB) and is a graduate of Princeton University and Wharton Business School in the USA, said the business concept is a multiple win-win.

Currently, companies that want to adopt renewable energy have to take a big bite out of their cash flow, Williams said, but leasing via CEFC will allow them to break that cost into affordable "little bites".

The lease agreement allows the client company to reduce its capital expenditure costs and treat the changeover to renewable energy as an operational expense, Williams said.

Other accounting benefits include the ability for the leasing companies to treat the equipment as a depreciating expense.

In addition, investors in CEFC can benefit from the five-year corporate tax break given to new companies on the Junior Stock Exchange, Williams said.

But the biggest benefit of all might be reducing their energy spend, Williams added.

The company is looking at projects throughout the Caribbean -- not just the English-speaking islands, but countries like Haiti and the Dominican Republic as well.

It already has a number of clients lined up, including the University of the West Indies with a US$1.5-million project for the Chancellor's office at Mona. UWI in Cave Hill, Barbados, is another likely client.

The incentive for renewable energy can be even higher in some of the smaller Caribbean islands, Williams said, as they can have rates as high as US$0.45 and even US$0.55 per kilowatt hour, as against $0.42 in Jamaica.

"So it's even more salient in some of those other markets," Williams said.

The offer opens on April 13 and closes on May 4. The invitation will offer 24 per cent of the company to the general public.

Upon full subscription the founding directors -- Williams and Lyn -- will dilute ownership from equal shareholding at 46.4 per cent each to 29.10 per cent for each founder. Other directors include company secretary Fayval Williams, Andrew Adams, Karlene Bailey, and Robert Jones. MV/L Stockbrokers are the lead broker to the deal.

"The board intends to use the proceeds of the invitation for the following purposes [of] establishing the business premises of the company in Kingston, payment of start-up expenses inclusive of salaries for three executives initially, including the chief executive, purchase of solar photovoltaic (solar PV), and other renewable energy-generation equipment for onward leasing to commercial and other customers in Jamaica, marketing, and development of opportunities to originate lease solar and other renewable energy generation equipment to commercial and other customers in Jamaica and elsewhere in the Caribbean [and] payment of the expenses of the invitation," stated the prospectus.

 

Source:
BY RICHARD BROWNE & STEVEN JACKSON
Jamaica Observer
Wednesday April 1, 2015    

http://www.jamaicaobserver.com/business/New-energy-start-up-to-raise--450m-on-JSE_18679635