Wave power IPOs set to surge as wind dies down

Scotland-based Pelamis, formerly known as Ocean Power Delivery until a recent revamp which saw former Conservative politician Colin Moynihan appointed chairman, is considering a listing as one option, according to its Chief Executive Phil Metcalfe.

Pelamis hopes to have its devices connected to the grid in Portugal later this year, following delays.

AWS Ocean Energy (Archimedes Wave Swing), which uses underwater buoys, has already put feelers out to the market and has not ruled out a listing, although it would not be for some time, according to a source close to the Scottish-based firm.

EDF-backed tidal firm Marine Current Turbines could also raise money through a listing, a source close to it said.

Although wave and tidal power could be a big contributor to global energy demand it will be a long time, at least seven years according to Pelamis' CEO, until they have enough scale to be cost competitive with onshore wind. It will be at least five years until they are cost competitive with offshore wind.

Panmure analyst Mark Davis said wave power offerings are difficult to price because wave firms cannot give exact figures on the benefits of scale. He said: "As a general rule I'd say wave is around three or four times more expensive than wind at the moment. "Wind costs around 1 million pounds per megawatt (enough for around 1,000 UK homes) whereas wave is around 4 million pounds. Wind has been around a long time and wave should come down now as it gets scale."

But the next couple years are critical in proving which technologies deserve further investment.

WINDS OF CHANGE

Although the wind sector is still very much in favor, with analysts expecting many years of growth, several smaller developers stopped planned listings on AIMs earlier this year.

China-focused wind developer Honiton did not get the interest it wanted and has since had more luck raising money privately in Hong Kong, according to Chief Executive Paul Eveleigh. It could still list in London or Hong Kong in future.

Minnesota-based wind farm developer Boreal Energy also scrapped a planned IPO, primarily because the company was not prepared to accept a substantial cut in its valuation, a source familiar with the situation said. It is now being bought by Wind Energy America WNEA.OB.

New Zealand Windfarms Ltd (NWF.NZ) also considered a London listing, but then decided to raise money in its homeland.