Trans Atlantic acquisition

Much needed access to capital is being afforded Canadian wind developer AIM PowerGen Corporation following its purchase by Renewable Energy Generation Limited (REG), a company listed on London Stock Exchange's Alternative Investment Market. REG paid C$29.1 million for AIM in a deal closed in early August.

AIM, developer of the recently commissioned 99 MW Erie Shores project in Ontario, has a strong team and a 2600 MW pipeline of projects across Canada, says CEO Mike Crawley. "What we lack is ready access to capital, both for the ongoing development of projects and for the construction of projects. And that is what the deal with REG offers us," he says.

According to Crawley, REG has raised over C$150 million in the past 15 months and it has access to further capital through its institutional shareholders. "It has a number of large European institutional investors that have already invested and have expressed interest in continuing to invest. And it also has access to other investors through its public listing," he says.

AIM had been approached by other potential buyers, he adds, but it was REG's European connections that his company found attractive. "In Europe there is a very good understanding of renewable energy among large institutional investors. We think it is a great market to tap, and there is a growing interest in Canada. They see Canada as being where Europe was ten years ago." Another factor was REG's desire to retain AIM in its entirety.

AIM is also planning to use its new found financial clout to provide development capital to other companies by partnering with them on projects. "We started out like many other developers across the country ... no money and having to identify sites and figure out how to raise capital, so we understand how difficult that can be," says Crawley. "What we think we can offer is the opportunity to partner with somebody who was just like them, but just has greater access to capital and experience in actually constructing projects."

For REG, the acquisition is an opportunity to develop its international business. The company started about 18 months ago with a plan to target the UK and Eastern Europe, says Andrew Whalley, CEO of REG Power Management. But its experience as the major equity investor in Poland's 50 MW Tymien wind project (Windpower Monthly, November 2005) showed it that "doing business outside your own country and not speaking the language or understanding the culture was tricky," he says.

The "wall of money" that has flowed into Eastern Europe since then has also, Whalley says, bid returns down to levels REG considered too low to invest. "We started looking around for other countries that we thought were interesting."

It settled on Canada for a variety of reasons, says Whalley, including a common language and culture and policy support for wind development. While it now has a foothold across the Atlantic from its UK base, Whalley says the company has no plans to expand south into the massive US market. "We're not interested in the US to be honest. There are lots and lots of very big companies doing the US. It seems to be a tax-driven market, rather more so than most other markets and we are not a tax player in that respect."

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