Investors still hankering for alternative energy IPOs

NEW YORK — Investors' appetites for new alternative energy companies remain robust, but tastes have shifted: While ethanol makers seem to have exhausted their favor, Chinese solar cell makers continue to pull in fresh capital.

According to IPOHome.com, 115 companies went public in the United States during the first half of the year. Of those, eight were in the alternative energy sector, compared to nine offerings for all of 2006.

"What we're seeing is a very strong pipeline" of renewable energy IPOs, both in the United States and overseas, said Michael Liebreich, chairman and chief executive of research provider New Energy Finance.

That's particularly true for solar and wind companies, he said. On the other hand, after a banner 2006 that saw three ethanol companies raise just shy of $1 billion in initial public offerings, ethanol IPOs have ground to a halt as concerns about high raw material costs and saturation curbed market demand.

BioFuel Energy Corp. has been the only ethanol company to go public in the U.S. this year and still it struggled to sell shares to investors. The company slashed its IPO price to $10.50 from a range of $16 to $18 per share and reduced the number of shares offered by about half to 5.3 million.

Last year, Aventine Renewable Energy Holdings Inc., U.S. BioEnergy Corp. and VeraSun Energy Corp. enticed investors hungry for exposure to the ethanol boom, spurred on by federal mandates to increase national consumption of the alternative fuel.

But a sharp run-up in the price of corn — the primary feedstock used by U.S. ethanol makers — threatened to squeeze producers' margins and put a damper on the public equity party. One company withdrew a shelf registration in November while a second ethanol producer hasn't updated plans for its IPO since filing in December.

Corn, which spent a decade trading around $2 a bushel, has traded for more than $4 a bushel several times this year. The increasing pressures on the nation's corn crop has resulted in a highly volatile market and increased risk for the ethanol makers.

AG Edwards analyst Ron Oster said he thinks market emphasis may turn toward biodiesel, a renewable fuel made from soybean or other vegetable oil. At least one biodiesel IPO is on its way: Seattle-based Imperium Renewables Inc. filed with regulators in May.

Meanwhile, IPOs in the solar sector have been dominated by China. Four Chinese solar power companies have had their debut in 2007, garnering $1.11 billion, after three solar companies went public in the last two months of 2006, raising $508.8 million, excluding overallotments.

According to IPOHome.com, JA Solar was one of this year's biggest winners with a return on the IPO price of more than 100 percent. JA Solar and its China-based competitors have lured investors with low manufacturing costs compared with U.S. and European solar-cell producers.

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