* Optimism high on rising oil prices, stock markets
* DOE loan guarantees expire in Sept; budget debates loom
By Alina Selyukh
NEW YORK, Feb 18 U.S. investor demand for
initial public offerings from alternative energy companies
could cool if government subsidies for the sector decline.
There are many reasons to like "cleantech" companies, which
make energy products like solar cells or electric car
batteries. As conventional energy sources become increasingly
expensive, demand for alternatives also rises.
And the rallying stock market has many investors trying to
figure out what the "Next Big Thing" will be.
Cleantech companies could fit the bill, which have pushed a
number of them to go public in the past few months.
During 2008 and 2009, just five cleantech companies went
public. Double that number had IPOs in 2010, according to
Ipreo, which provides capital markets data and analytic
"We've seen an acceleration in IPO activity in cleantech
over the course of the last six months, and I certainly think
that investors are open to additional opportunities of
cleantech IPOs in 2011," said Pavel Molchanov, energy analyst
at Raymond James.
Investing in green technologies requires a lot of research
and faith as companies often try a public offering before
showing any revenue or a clear roadmap to commercial operation.
That means some green tech deals hit the market with fanfare,
but others flop.
Cleantech IPOs since July, however, have all risen, perhaps
reflecting the quality of companies or investor appetite.
"There is a lot of interest in greentech and a lot of
interest in the solar," said Benny Lorenzo, chairman and chief
executive at Kaufman Brothers. "There's less interest in wind
and these stocks haven't done as well."
With oil, coal, and natural gas prices on the rise or under
pressure, alternative energy sources gain appeal to investors,
said Raymond James' Molchanov.
"Certainly the fact that oil prices are at two-year highs,
that helps the economics of biofuels, helps public perception
of alternative energy across the board," Molchanov said.
As turmoil flares in the oil-rich Middle East and the oil
supply is under close watch, U.S. crude has lingered near $90
per barrel, especially benefiting biofuels makers.
Shares of the most recent biofuels maker to go public, Gevo
Inc (GEVO.O), have climbed more than 20 percent since the IPO
on Feb. 8. Shares of competitor Amyris (AMRS.O) have almost
doubled since floating in September 2010.
Cleantech startups have historically received a big boost
from federal funding, and funding this year could be under
High-risk, high-reward ventures like cleantech startups
thrive largely on venture capital but also commonly rely on
federal subsidies like loan guarantees, grants or tax breaks to
undertake big projects such as building plants.
Although President Barack Obama has requested $29.5 billion
for the Department of Energy's 2012 budget -- 4.2 percent more
than proposed for 2011 -- prospects for cleantech are unclear.
One of its biggest sources of support, the loan guarantee
program, is set to expire. The program insures loan payouts in
case the borrowing company is unable to pay them out.
"It would be a huge blow to the sector if the loan
guarantee program was scrapped," said Sheeraz Haji, president
of San Francisco-based research firm Cleantech Group.
Alternative energy IPOs could have a window of opportunity
to go public in the near term before these concerns really loom
large, but that window may shut.
"It's all about subsidies with these types of deals," said
Josef Schuster, president of Chicago-based IPO investment firm
IPOX Schuster. "Even rumors of them getting cut makes it doubly
as hard to go public as before."
Another hurdle is that the request to expand cleantech
funding comes at the expense of fossil fuels. Obama proposed to
repeal $3.6 billion in fossil fuel subsidies and cut budgets
for oil and gas research to help fund cleantech. Republicans,
in turn, have pledged to cut domestic spending by about 22
percent and highly oppose the proposed shift of funding.
"You've got some conflicting priorities to say the least,"
said Whitney Stanco, an energy policy analyst at MF Global.
"The debate is going to be a long and drawn-out process and
House Republicans are going to devote a significant amount of
time to cutting budgets and reallocating priorities."
The upshot -- once the dust settles -- may be fewer
subsidies for cleantech, and fewer opportunities for green
energy companies to attract public investors, analysts said.
(Editing by Dan Wilchins and Bernard Orr)