Wind power? Where's the tech in that?

Our fund is widely known for our tech deals, with MKS (20x market cap. increase post our deal), Basis100 (100% share price increase post a Wellington-led transaction) and Airborne Entertainment (the Canadian Venture Capital Association’s 2005 VC deal of the year) being some good examples of how we help others succeed.

But tech isn’t all we’ll do. We recently participated in a $29 million transction for a Toronto-based wind developer named Ventus Energy Inc. (http://www.ventusenergy.ca/) The use of proceeds was to round out what is best described as a project finance opportunity. Teaming up with an insurance company (15 year term financing) and existing shareholders (equity and sub debt), this $80 million project attracted us for a variety of reasons, even though the project won’t be completed until mid 2007.

While we usually want to see the business up-and-running before we provide funds, this situation was unique: the wind turbines are very sought after; turn key construction; environmental permits in place; several power sales arranged; no input cost (unlike a software company, if everyone stayed home the business would still run); no risk of a near term change to the end demand market (will the North Eastern United States switch off their electricity any day soon?).

While our team approaches each opportunity with a particular perspective, we look at the entire picture. In this case, the trailing financial statements didn’t support a deal. But great partners (active shareholders and knowledgeable board members), valuable assets (turbines), an obvious need for the product (electricity) being produced, an awareness in the capital markets, and a comfort that the project would be completed as required were enough for us to proceed.

Flexibility is a key to success in specialty finance, and this opportunity is an excellent case study.

MRM