Green Firms From China Get an Index

07/06/2010 at 10:29 pm Leave a comment

Author: Shai Oster

BEIJING—Silicon Valley venture-capital firm VantagePoint Venture Partners sifted through about 2,500 Chinese companies in everything from nuclear power to batteries to create an index of publicly traded Chinese companies in the low-carbon sector to raise the profile of the burgeoning segment.

VantagePoint, which is a major shareholder in electric-vehicle maker Tesla Motors Inc. among other alternative-energy and technology start-ups, launched the 35-company China Low Carbon Index on Saturday. Its partner, China Beijing Environmental Exchange, a city-government-backed financial institution seeking to become a trading platform for environmental stocks, will publish the index on its website, VantagePoint said.

Depending on how much attention the index gets, it could help the companies attract investors, though it isn’t clear what the interest will be.

VantagePoint managing director Melissa Guzy said the index was created to fill a gap because Western investors tend to overlook China’s green companies. Existing green indexes skew heavily in favor of U.S. or European companies, even though last year nearly half of the initial public offerings in alternative energy were Chinese, and they accounted for 75% of IPO proceeds, she said.

That low profile means Chinese alternative-energy companies are missing out on capital from institutional investors, such as pension funds, that often invest in an index of companies as a way to get exposure to a sector, she said.

And despite increasing media attention on Chinese companies like solar-power leaders Suntec Power Holdings Co., or Yingli Green Energy Holding Co., China lags far behind the U.S. in terms of private investment in start-ups. Last year, venture-capital firms invested $3.5 billion in U.S. alternative-energy companies, while they invested only $330 million in Chinese companies, Ms. Guzy said.

“People think that clean tech in China is crowded, but it’s not,” she said. VantagePoint’s criteria for selecting companies for the low-carbon index included a requirement that at least 50% or 3.5 billion yuan ($512 million) of annual revenue come from low-carbon business, that the company has good liquidity, transparency and a three-month average market capitalization of at least $250 million. Of the companies, about one-quarter are in wind, and one-quarter in solar. The remainder is split between nuclear, hydropower, batteries, energy efficiency, smart-grid, clean-coal and water-treatment companies.

From 2007 until May 2010, market capitalization for the companies increased 259% to $110.5 billion.

More than half of the companies are listed on China’s mainland stock exchanges, with the rest roughly evenly split between the U.S. and Hong Kong.

Ms. Guzy said sectors worth watching in China include firms working on building utility-scale batteries that could be used to store electricity generated from weather-dependent sources like wind or solar farms. Electric utilities around the world need a way to store power when conditions are good so they can dispatch it later when demand is high.

“We’re looking for bottlenecks that young companies can solve,” Ms. Guzy said.

Energy-efficient lighting is another potentially attractive sector because widespread adoption of the technology won’t require big changes in consumer behavior, she said.

And waste management has potential because of China’s rising problem with imported electronic waste from outdated computers being recycled in crude, highly polluting backyard workshops.

VantagePoint said the index could be used to gauge the health of Chinese clean-tech companies and that it plans to create investible products based on the index.

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Entry filed under: Renewable Energy.

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