Some face a tough financial climate but hope for better times after a 'transition'
Joyce Hooi Business Times 31 Dec 10;
(SINGAPORE) Some firms are bursting with promise while the future of others is fraught with uncertainty as the green sector treads gingerly beyond 2010.
For several companies this year, it has been a case of pain before gain. The trek to promising times has been riddled with bottom lines sinking ever further into the red.
Solar thin-film company Anwell Technologies Ltd, for example, almost tripled its losses for the nine months ended Sept 30, from HK$108.6 million to HK$319.6 million (S$53.2 million).
Its original business - the manufacturing of optical discs like DVDs - put the squeeze on gross margins with rising raw material costs and falling selling prices.
Chief financial officer Ken Wu prefers to think of this whole year as a 'transition period for the company', as it sidles more and more into the sexier territory of solar energy, while its optical disc business provides a baseline of steady, if unexciting, income.
With mass production of solar thin-film starting in March and income from the solar segment being produced in earnest from Q4 this year, the tide of losses might soon be stemmed. Mr Wu expects the solar business to represent more than 50 per cent of the firm's revenue by 2012.
Another green firm that is putting up with some red ink in anticipation of fatter times is EcoWise Holdings.
The firm, which had pinned its hopes on converting coal-fired power plants in China into biomass co-generation plants, has seen its Wuhan project become the albatross around the neck of its earnings.
Even as Q3 revenue increased 39.1 per cent to $19.37 million (thanks to the acquisition of a Malaysian tyre-retreading firm), its net losses more than doubled year-on-year to $428,000 partially because of implementation costs at the Wuhan plant, in which it had a 49 per cent stake.
EcoWise is, for its part, trying to plug the costs coming out of Wuhan. 'We are taking action and seeing improvements,' Low Kian Beng, EcoWise's deputy chief executive officer told BT. In January 2010, the operation of the coal-fired power plant was ceased to halt operational losses.
Its great green hope for 2011, however, has shifted closer to home, with revenue coming from the Malaysian side.
What EcoWise is particularly excited about is the biomass co-generation system in Marina South that it was contracted to design, build and operate for 15 years.
As with Anwell, shareholders will have to hang in there for the long haul, with revenue from the Marina South site expected to start rolling in from 2012.
While some green firms were done wandering in the wilderness, The Think Environmental Co (TTEC) appears to be changing its route to the Promised Land.
Just a little over a year ago, its name was Asia Tiger and it made office furniture. As of its latest results, its UK associate, Think Greenergy, had not started its waste-to-energy operations and its other UK associate, Think Environmental, is racking up huge losses in the waste processing business, DMG analysts noted in their report on the firm this month.
For the half-year ended Sept 30, the group waded in $1.87 million of red ink. In a more perplexing turn, the firm recently announced its foray into a second brand-new area in a span of about 12 months: gold mining in Mali.
'Given that the management has no proven record in offshore gold mining, and offshore gold exploration is filled with uncertainty, we view (TTEC's) choice of business diversification negatively,' said DMG analysts Tan Chee How and Terence Wong.
Its environmental segment, which the analysts deemed 'troubled', is unlikely to be the firm's saving grace next year. Think Greenergy is unlikely to start operations until the financial year of 2012 at the earliest, the DMG report said.
For its part, the firm maintains that its latest investment is 'opportunistic' and that there is 'no conflict in its commitment to being an environment-friendly company in this new area of gold exploration and production' due to its 'clean mining methods'.
Another firm - Sunpower Group - is making the transition into the green sector with decidedly less trauma.
It branched out from pipe supports more than a decade ago into heat pipe exchangers, waste gas and energy recovery systems. Its 35 million yuan (S$6.84 million) plant started production earlier this month without incident and its revenue and profit are up in healthy double-digit terms for the nine months ended Sept 30.
Executive director Frank Mah has an outlook for next year that is both sanguine and unequivocal.
He told BT: 'I have good feelings about 2011. I feel that Sunpower's position in the market is getting better and better. I can foresee that 2011 will be better than 2010.'
The big boys in Singapore who have set their sights on the green sector also expect better times ahead.
'We believe we will see more rapid development and investment of 'green' infrastructure around the world, and this will present opportunities for investors to benefit from this unique asset class,' said Thomas Pang, CEO of Keppel Infrastructure Fund Management, trustee-manager of K-Green Trust.
