Clean Air Power, a company that has developed technology to run engines on a combination of diesel fuel and natural gas, started up in 1991 in smog-obsessed Southern California. But nowadays its headquarters resides in Oxford, England. And when the company made its stock market debut on Feb. 28, the listing turned up on the Alternative Investment Market, a London Stock Exchange subsidiary that caters to early-stage small caps.
But Clean Air Power is hardly alone in its transatlantic migration. Many businesses specializing in clean-energy technology are finding the Old World more hospitable than the New, when it comes to marketing their wares and raising money from investors. About 40 such outfits from the U.S., Britain, Canada, and Australia -- marketing everything from solar panels to wind turbines -- have listed on London's AIM in the past few years.
Listing in Britain lets the businesses avoid complying with tougher U.S. regulations under the Sarbanes-Oxley law. "For a company at our stage of development, being publicly listed gives our customers a sense of solidity and allows us to attract global investors, but we want to do it without too much red tape," says Peter Rowse, chief financial officer for Clean Air Power, which has annual sales of $8 million and has not yet made a profit. The company's AIM listing raised $17 million.
RECEPTIVE CONSUMERS. Many companies also find European investors more willing than Americans to make a bet on clean-energy technology, says John McKenna, managing director of Hamilton Clark & Co., a McLean, (Va.)-based investment firm that advises companies on AIM listings. "Energy is much more expensive in Europe, so investors understand the potential of these technologies," he says.
Consider the emerging field of marine energy, where clever machines make electric power from the rise and fall of the sea or the flow of tidal currents. Pennington (N.J.)-based Ocean Power Technologies is an early leader in this field. Its PowerBuoys, which make power by bobbing on the ocean's surface, are in the water off the coasts of New Jersey and Hawaii and are being used by the U.S. Navy. Yet even as the 12-year-old company struggles to stoke U.S. demand for this next-generation form of clean hydro energy, OPT was lured to list on the AIM in October, 2003. "We needed capital to grow, and it was there," says CEO George W. Taylor. London markets, he adds, had a better understanding of the potential for renewables.
European consumers are receptive, too. To encourage environmentally friendly technologies, European governments over the past decade have enacted generous tax breaks and other incentives that go far beyond anything available in the U.S. Germany, for example, provides low-interest loans to finance installation of photovoltaic systems, and owners of these systems receive per-kilowatt-hour payments for the electricity they generate, at a rate well above the price of conventionally generated electricity.
Government subsidies in Spain have helped make that country the world's fastest-growing producer of wind-generated electricity. Soaring oil prices only add to the attractiveness of energy generated by the sun and wind.
MODEST WINDFALLS. While it's rare for companies to move their headquarters from the U.S. to Europe as Clean Air Power did, many are setting up European sales outposts. Solar Integrated Technologies, a Los Angeles-based company that makes photovoltaic cells, recently opened a sales office in Düsseldorf, after listing on the AIM in 2004, to feed its growing business on the Continent.
So far, the sums raised on the AIM are modest, averaging about $20 million per company, according to a recent review by Hamilton Clark. The biggest to date was a September, 2005, listing by Clipper Windpower, a California-based wind turbine outfit that got $131 million. Compare that with $300 million fetched by Suntech Power, a Chinese solar-energy firm, in its New York Stock Exchange debut last December.
REWARDING BEHAVIOR. But U.S. energy legislation enacted last year could also give clean-energy tech companies a boost. For example, customers of Clean Air Power will have the right to claim tax credits for vehicle fleets using the company's diesel and natural gas technology. If U.S. investors start giving the sector a second look, the IPO action could shift back across the Atlantic.
Still, London listings are paying off handsomely for some companies. Shares of Solar Energy Technologies and Clipper Windpower are up about 60% since their AIM debuts, and Clean Air Power's have risen 15% since its Feb. 28 listing. For now, Europe looks set to continue as a friendly environment for the environmentally friendly.
Matlack is BusinessWeek's Paris bureau chief
With Adam Aston in New York
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