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 Hopes of investors for a quick turnaround on biodiesel developer Imperium Renewables Inc.'s massive $113 million Series B investment round last February were dashed Thursday when the Seattle company announced that it was withdrawing a plan to go public. Although the move may be a setback for Imperium, advocates of new and more flexible types of financing for alternative energy projects could wind up cheering the news as a way of avoiding a bubble in the sector. The announcement is not too surprising, and it takes some pressure off the company as it moves forward with development plans using what is still a large war chest from its private investors. But it is an admission that Imperium was overly ambitious in gauging investor demand for alternative energy stocks. Inability to flip the company to the public early in its development exhibits the perils of financing large alternative energy projects using equity investment and could deter venture investors from similar capital-intensive bets on emerging clean technologies. But in the long run, avoiding a bubble in alternative energy equity investment could be a boon for an emerging market of asset-based debt and new types of financing for the sector. A recent report by London's New Energy Finance Ltd. showed that investment in clean energy worldwide was up 40% to $117.2 billion in 2007. But the research also highlighted the dominant role of asset financing in attaining that record number, accounting for more than half of the total. While the report showed that venture capital and private equity investment in the sector grew 27% to $8.5 billion, it noted that investors are retreating from later-stage deals to focus on earlier technology-based investments. Imperium took advantage of growing interest in biodiesel as the environmental and financial downside of ethanol production drew increased attention. Imperium founder John Plaza, who regained his CEO spot in late December with the resignation of Martin Tobias, told me at the time that the company essentially decided to go with equity financing for its initial large plant in Grey's Harbor, Wash., simply because it could. But he also said Imperium would seek asset-based debt financing for additional plants in Hawaii, Argentina and an additional unnamed location. The bulk of asset financing in clean energy in 2007 went to wind energy projects, which with the help of regulation in Europe has a relatively stable economic future. Wind accounted for nearly half of all asset-based deals, at $24.6 billion, but biofuels drew $14.5 billion, and biomass and waste projects drew another $7.1 billion. While Imperium's cancellation of its initial public offering certainly casts greater doubt on the biodiesel sector as a whole (and doubts about the company's sourcing and management instability certainly don't help), the decision could ultimately mean a better return for investors. If the company can complete new projects with leveraged asset financing and keep equity dilution to a minimum, Series B investors Ardsley Partners, Attractor Investment Management Inc. , BlackRock Investment Management Ltd., Capricorn Management LLC , Ecofin Ltd., Robeco, Silver Point Capital, Southport Energy Alternatives, Stark Biodiesel Investments Ltd. and Treaty Oak Capital Management, and particularly longtime backers Technology Partners, Nth Power and Vulcan Capital, could see a home run once the company goes to the public markets. - Clifford Carlsen See Feb. 22, 2007, story from TheDeal.com See Jan. 3 press release from Imperium Renewables See May 4, 2007, story from The Deal.com See New Energy Finance Ltd. announcement For more see Green Tech Blog, Cleantech and AmericanSolarEconomy
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