Interview with Mike Proffitt, CEO of Renewable Energy Holdings

Positive cash flow often eludes renewable energy small caps, but Mike Proffitt, CEO of Renewable Energy Holdings, has steered his company into the black. Patrizia Rossi reports.

There is nothing like high oil prices and concerns over energy security to concentrate the minds of the world’s renewable energy producers. Since its AIM debut in February 2005, Renewable Energy Holdings (REH), an operator and developer of green energy projects, has more than doubled its market capitalisation from £14.5 million to £31.47 million.

Fast growth through the development of its wind farms in Germany and Poland, a biogas site in Wales, and the commercialisation of its proprietary CETO wave energy technology, have transformed last year’s interim loss of £1.2 million into a pre-tax profit of £1.1 million in the first six months to June.

“We are pleased to have moved into profit as this is what all young companies strive to do. We are one of very few renewable energy new starters on AIM that have managed to move into profit. I think there is something to be said about that,” says Mike Proffitt, REH CEO. 

Proffitt is alluding to a litany of failed AIM-listed green technology companies, such as Tanfield, an electric vehicle manufacturer worth £700 million at its peak and one of the largest companies on the junior market. Tanfield’s battery-powered cars were described by Tony Blair as a prime example of UK manufacturing and innovation. However, inflated share prices and question marks over sales led to its dramatic demise.

Powering ahead

In contrast, REH’s first-half revenues of £4.6 million – a 155 per cent increase on the same period last year and £50,000 more than the revenues generated for the whole of 2007 – have come from growing electricity sales derived from its proven technology assets in Germany, Poland and Wales. Some £2 million has been generated from the sale of rights to use its CETO wave energy technology.

In layman’s terms, the wave energy device sits on the seabed and pumps salt water ashore to generate electricity. REH is currently in joint ventures with Carnegie Corporation, Australian clean energy group, to bring CETO to market in the Southern Hemisphere and similarly with EDF Energies Nouvelle (EDF EN) in the Northern Hemisphere.

Proffitt notes: “Anyone who is going to put up that kind of money for the right to use CETO, essentially somebody else’s technology, must be pretty sure it is going to work. It gives us a lot of confidence.”

Capturing waves

In August REH unveiled its plans to enter into an agreement with Bermuda-based Triton Renewable Energy to supply Bermuda with wave-generated electricity. Under the terms of the agreement, Triton would develop the wave farms while REH would license the use of its technology and provide engineering support during the construction and operation of the proposed sites.

“Bermuda’s wave regime matches the design parameters for CETO as it has three-metre swells at six-second intervals, making it the perfect place to use the wave technology. From time to time, you can get these swells at these specific intervals just about anywhere, but you don’t get them all the time in many places. Bermuda is one of these places and has the characteristics that we need,” says Proffitt.

With little or no available land, Bermuda has turned to wave energy as a solution to exorbitant energy costs. The clean energy also addresses the islanders’ aesthetic concerns as the device is located on the ocean floor out of sight.

“They know they have one of the best wave regimes in the world. The waves we designed CETO for are there 85 per cent to 95 per cent of the time, so its economic performance will probably be better in Bermuda than most other places you can think of,” observes Proffitt. 

Talks between the two parties are expected to complete by the end of the year, and if successful would push forward the construction of a 2MW test site followed by a grid-connected 20MW wave power installation.

Once up and running, the joint venture, which falls under the agreement with EDF EN, would enter into a power purchase agreement with the local Bermuda electric utility company, which is looking to diversify its energy portfolio.

Bulking up

Proffitt explains that this latest development and the swing into the black indicate that the company has reached the next stage in its development plans, which is to build a strong executive team.

Recent appointments include Ian Gribble as financial director and Shane Bush as director of development & corporate finance. Bush brings with him 15 years’ experience in the global renewable energy market and M&A transactional experience. 

His recent deals include the world’s largest solar site, South Korea’s 20MW Dongyang plant. The site, set for completion this year, will enable South Korea to raise its clean and renewable energy usage to five per cent by 2011.

Bush’s plans for REH include an ambitious organic and acquisitive strategy and delivering the company’s obligations of generating 150MW by 2010.

The company is looking at licensing CETO projects in other regions besides Bermuda, including the Ile d’Yeu, off western France, Galway Bay in Ireland and Ucluelet on Vancouver Island.

The foundations of the company lie with wind, biogas and wave energy technology; however, REH’s portfolio of assets is not set in stone as Proffitt is keen to explore other options. 

“We made it clear to our investors when we listed on AIM that we would look for development opportunities in all renewable energy technologies; that we would be agnostic and not stick to any one; and that the opportunities for renewable energy technologies would be dictated by the region that the opportunity occurs in and our appetite for that region politically and financially.

“And solar in California is a very obvious opportunity.”

Patrizia Rossi

Patrizia Rossi

Patrizia was Editor of M&A magazine, a sister title to GrowthBusiness, from 2006 to 2009.

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Renewable Energy