The evolution of Australia’s capital market has meant that few clean energy-focused venture capital funds and active private equity investors exist.

Institutional investors, while voicing an interest in more ‘mature’ areas of the industry, have rarely committed to renewable energy projects in light of commercial uncertainties – driven in part by regulatory indecision.

In 2011, a group of directors have worked to remedy these trends with the establishment of the SIM Venture Securities Exchange (SIM VSE), a stock exchange dedicated to raising primary and secondary capital for ‘clean tech’ and renewables companies.

SIM VSE will commence trading in November 2011, and its Chief Executive Ann Bowering says that it will act to mollify the effects of barriers to retail investment in clean energy.

“Australian clean technology companies, including clean energy companies, are struggling to access capital for commercialisation and expansion,” Ms Bowering explains. “SIM VSE will create a ‘hub’ for investment into companies that provide solutions to sustainability challenges, particularly in relation to clean technology, sustainable energy and environmental services, not unlike the technology hub created by NASDAQ in the early 1990s.”

Ms Bowering says that this type of model is one of the most effective mechanisms by which capital can be brought into a sector to facilitate its growth.

Breaking boundaries

SIM VSE has been designed to attract skilled advisors and informed investors by concentrating on the single yet diverse sector of clean technology, and it is set to provide a place where similar businesses can list side-by-side for meaningful analysis and comparison.

A financial hub for clean energy in Australia requires the genuine participation of investors and companies from across Asia; the SIM VSE will therefore be focused on the Australasian market space.

“For decades, Australian entrepreneurs have known that to achieve any great scale of commercialisation, they must break into overseas markets – and this is equally relevant for Australian clean tech,” Ms Bowering notes.

“China in particular will play an important role in the commercialisation and expansion of Australian clean tech companies because it has the size, demand, capital and political will to take forward many of Australia’s businesses.”

Some equity markets overseas, such as the FTSE Global Sustainability Index or the NYSE Acra WilderHill Clean Energy Index, have created sector-specific indices, Ms Bowering explains.

“These indices group together baskets of clean tech companies that are otherwise listed amongst the general market of securities.”

As distinct from the international stock exchanges that focus on the ‘environmental products’ component of the clean energy economy (by providing a platform for trading energy or carbon contracts), SIM VSE focuses on facilitating capital investment directly into clean technology companies.

Effects of carbon pricing

Since the announcement of the Federal Government’s proposed carbon mechanism in July 2011, SIM VSE has received close to a dozen companies seeking to list on the exchange.

“Some of these entities are seeking to raise capital as part of the listing process, and others are simply looking to position themselves to readily access capital in the future – hopefully off stronger, market-determined valuations,” Ms Bowering says.

“The successful passing of the carbon pricing legislation through the Lower House of Federal Parliament on 12 October 2011 opens up a whole new world of opportunities in the clean energy and clean tech sectors.

“I expect that small-, medium- and large-scale projects where financial modelling had been previously constrained by the opaque future of the carbon regulatory scheme will now be given the green light.”

The year ahead

SIM VSE expects that in the short term, investment will continue to flow into small- to medium-sized companies with proven technologies, differentiated market positioning and existing or immanent revenue streams.

In the longer term, as a grouping, the companies listed on SIM VSE should be more successful than those that are listed on general markets, according to Ms Bowering.

“This is because companies listed on SIM VSE will be, by definition, better positioned to take advantage of business opportunities created in a resource constrained economy, and less impacted by the costing of previously unaccounted for negative externalities,” she notes.

“One of the key strategic benefits of the clean energy industry is that it is underpinned by a very real driver; limited natural resources.”

Success is SIMmering

The first company to list on SIM VSE, Telezon Limited, will do so in November 2011. Telezon is currently listed on the Australian Securities Exchange (ASX), and has voted to delist from the ASX and move to SIM VSE.

Also expected to list around this time are two Chinese operations, supported by Australian and Chinese brokers.

“The first is an expanding, profitable solar mounting rack design and sales business based in Shanghai, China, while the second is a second-generation solar energy generation company,” Ms Bowering says.

“Other sectors covered in our cross-section of companies coming to market include those in building products, manufacturing materials, tidal energy generation and wind energy generation.”

Ann Bowering is the Chief Executive Officer and a founding Director of SIM VSE. She is also a Director of the National Stock Exchange of Australia. As a Chartered Accountant, Ms Bowering worked for KPMG for over ten years, and in 2007 she became the Head of Business Development and Operations for systems consultancy firm Lucsan Capital before moving on to develop SIM VSE