Monday, February 26, 2007

Green investment, dirty money

A big day for the cleantech investment sector, with news (reported here in the Guardian) that the (new) world's biggest buyout will be of a deep green hue -
A proposed $44bn (£22bn) buyout of Texas energy firm TXU, which is tipped to be the world's largest private equity takeover, will include an environmental commitment to scale back coal power stations and limit greenhouse gas emissions.
Kohlberg Kravis Roberts and Texas Pacific are putting the finishing touches to a purchase of TXU - a power generator which has been described as "public enemy number one" by US green lobbyists because of its aggressive programme of building coal plants.
It emerged yesterday that the two private equity buyers have held talks with environmental groups to win support for the takeover. To the delight of green organisations, the buyers have offered a radical change in direction - including scrapping seven of 11 new coal power stations and implementing clean air initiatives.
It was also hailed by green campaigners yesterday as a sign that powerful Wall Street and private equity financiers are taking environmental issues more seriously and that they recognise that polluting projects have become a significant business risk.
Tony Juniper of Friends of the Earth said the proposed deal made it clear that going low carbon would be one of the big business drivers of the next decade.

(later reports suggest the deal is pretty much sewn up).

The Guardian's headline - Private equity plays the green card in US - reflects the tone of the current row in the papers about private equity and its role in asset-stripping and anti-worker practices. While there's certainly questions about the activities of some of the big highly-leveraged deals, it's a shame to tar the whole industry which does provide some economically and socially desirable services in supporting innovative businesses or rescuing failing ones.

The current complaint about some VC grandees providing donations to the Labour party seems particularly daft. Of the names accused, I don't know Nigel Doughty or Jonathan Aisbitt, but Ronald Cohen is definitely one of the good guys - for a feature about socially-focused VC, including an interview with Cohen, I wrote back in 2003, see here.

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Monday, February 19, 2007

Heart of the city

When you've written lots of features on the countless grand projects, plans and proposals that fall under the urban and regional regeneration banners, it's interesting to actually experience the ones that make it off the masterplan and into concrete reality. So it is with Sheffield's 'Heart of the City' project (discussed, in its earlier stages, here and here - there's also an uncritical update by the current Yorkshire Business Insider team in this month's issue).

The new Barcelona-style Peace Gardens and the enclosed Winter Garden are now well established as a feature of Sheffield life. They're great public spaces. Unfortunately, some of the surrounding development seems a little less successful.

The St Paul's Place office block occupied by lawyers DLA can hardly be described, as Sheffield regen supremo Alison Nimmo did back in 2003, as "the best office building Sheffield has ever seen". It's a bit of an eyesore, frankly - arguably less attractive than the old eggbox town hall (so memorably destroyed in Threads) which it partly replaces. I recall Paul Firth, then DLA's top man in Sheffield, saying it'd be a landmark building to match Prince's Exchange in Leeds, which DLA features heavily in its own marketing in the region. Ah well.

The other big addition is the four-star Macdonald hotel, occupying the space between the Peace and Winter Gardens. We stayed there Friday night, the first time I'd been in since its completion. Ironically enough for the city without an airport, it's all very redolent of an airport hotel - JG Ballard, who has rhapsodised about the affectless beauty of the Heathrow Hilton, would love it. It's a little bit of Singapore in Sheffield - except it all falls rather short of Singaporean standards in the efficiency stakes. Lots of little things - the toilet not flushing, rubbish left in the room, cocktails made wrongly, a severely under-staffed reception - made our stay less than entirely satisfying. Still, it preserves the honorable Sheffield tradition of aiming for great things but not quite getting it right.

The reason we were staying over in Sheff was to see the ever lovely Jarvis Cocker in concert. His little chats between the songs were as charming as ever, with many concerning the disappearing bits of his old home town, from Castle Market to the Brincliffe Oaks. The gig finished with a ramshackle cover of the Human League's 'Being Boiled'. That, I reckon, is close to the real heart of the city.

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Simmering, if not bubbling

Provocative piece from John Naughton in yesterday's Observer on the evidence for TechBubble 2.0 (see previous posts).

Naughton notes two phenomena. First, the almighty Google:
On 31 January, for example, the company announced fourth-quarter profits that had nearly tripled ($1.03bn profit on a 67 percent jump in revenues to $3.2bn) This indicates a year-on-year growth rate of 70 per cent. And yet the main consequence of the announcement was a 2 per cent drop in the share price to $494, which suggests that investors had expected even better results. If this isn't bubble thinking then I don't know what is.
Second, the massive multiples being paid for social networking and user-generated content tech:
Colossally inflated valuations are an infallible indicator of a bubble. In the late 1990s, dotcom start-ups with 50 employees and zero profits were briefly valued at more than the market cap of Fortune 500 companies. In 2005, Rupert Murdoch paid $649m for MySpace and eBay paid $2.6bn for Skype, a VoIP [internet telephony] company. Last year, Google forked out $1.65bn for YouTube. Such valuations provide terrific incentives for ambitious geeks because the new web services require less upfront investment than the original dotcoms. What is YouTube, after all, other than some smart software for converting every uploaded video clip into a Flash movie, plus server capacity and bandwidth? Skype adds 150,000 subscribers a day and buys almost no hardware because it uses its subscribers' computers to do the heavy lifting.

All fair points, and I certainly agree there's plenty of bubble-like behaviour going on. Opinions do vary though. I'm writing a piece on the tech M&A market for Corporate Financier at the moment, so talking to a lot of sector advisors. Some acknowledge that there are some 'headscratching valuations' being paid at the moment, but note that these aren't feeding through into the mainstream of deals. Most are all-paper deals (as many of deals were in the dotcom bubble, of course). Others take the opposite view, with one saying: "There's absolutely no evidence of any bubble at the present time. It could be argued if it's erring anywhere, it's on the side of caution... There's absolutely no evidence of a bubble and I can't see anything happening to dramatically upset the balance in 2007."

It'll be fun seeing how it all pans out again.

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Tuesday, February 06, 2007

Kenyan bubble

Good report from the Guardian on the new and booming stock market in Kenya, which is showing all the symptoms of a bubble:

Kenya has gone share crazy. The incredible performance of the Nairobi Stock Exchange (NSE) - which is next to the public auditorium and provides the live share-price feed - is the talk of the country. From 2002 to 2007, the main NSE index rose 787% in dollar terms, according to Standard & Poor's, the investment research firm, making it one of the world's best-performing markets[...]
Stories of overnight wealth creation have created a huge frenzy for shares from people who have never invested in the stock market before. When KenGen, the state's biggest electricity company, listed its shares last year, there were queues at brokerages all over the country. Local media reported how small-scale farmers were selling their cattle to buy the shares. Banks suddenly offered "share loans" to people who had been considered unworthy of credit[...]
The Kenya Association of Stockbrokers said the success of the new listings meant that close to a million Kenyans now owned shares. Amish Gupta, chairman of the association, said: "Suddenly we have got the mass market buying stocks, not just the elite." Most new investors today are aged between 22 and 40, he added. "Savvy men and women looking for quick returns."

The bubble seems to be driven not so much by a loosening of credit, as is often the case, but by the abandonment of traditional saving methods, as well as remittances by expats:
vast sums of money have poured in from the diaspora; not just to sustain families, as before, but also to invest, helping the NSE index burst through 6,000 points for the first time.[...]
Historically, most people with spare cash kept it under the mattress. Wealthier individuals bought livestock, opened a stall selling clothes or mobile phones, bought a matatu minivan taxi or, most popular of all, purchased property.

When the bubble bursts, as it will, it'll hit hard, with the potential for serious political upset.

On a vageuly related note of investment trends and political worries (and not worth a post of its own), the Guardian also has a vaguely handwringing full-page feature on 'The rise and rise of private equity', something it takes as synonymous with big take-private deals. Take-privates have come in and out of fashion for many years now, and I've lost count of the number of times I've been told all the low-hanging fruit on the public markets have already been picked off. The current trend for big deals just reflects the weight of money held by the PE houses - whether the economic effects are good or bad remains to be seen.

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Friday, February 02, 2007

Summer Wine

This is Leventhorpe, England's most northerly vineyard (for now), located on the top side of Leeds. Obviously it wasn't looking its best when I visited it on a blustery January morning, but the rather better established vineyards of Baden-Württemberg weren't looking exactly verdant when I visited before christmas either.
Leventhorpe is the work of this man, former industrial chemist and teacher George Bowden. His story's told here, in a piece in the Telegraph last year, and here at He's a tremendously enthusiastic and knowledgeable chap, happy to talk at length about the subtleties of viniculture in a challenging climate.
It's hardly one of the great chateaus, with just six acres of vines and production based in a breezeblock shed at the bottom of the field. But they are producing very good stuff indeed. Leventhorpe wines have won a string of awards and competitions (not just against other English wines), and plaudits from folk like Oz Clarke and Rick Stein. Bowden's also managed to win official Yorkshire Regional Wine appellation status for his excellent Seyval Blanc.
After an extensive round of tasting alongside the grape press and tanks of developing vintage, we took home half a dozen assorted bottles, including one of their well-regarded sparkling (though not their rather idiosyncratic and very limited quantity red Triomphe). They're on the rack waiting for sunnier weather to make the most of their full, crisp flavours.

Thanks to Richard Jones for organising the visit.

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