NTR was once the ‘green giant’ of the Irish eco-sector, but a close examination of the company’s financials today shows just how far the mighty have fallen!

NTR

This month’s financial results mightn’t look too bad on paper and Chief Executive, Rosheen McGuckian said she was happy with last year’s performance:

‘We are very pleased to report the successful execution of our plan ahead of schedule, which enables NTR to both aim to return capital to shareholders and to re-enter the UK and Irish markets with confidence.’

But, a look at the outcome of several poor investments over the last couple of years paints a very different picture.

Why a buy-back instead of a dividend?

The firm has just announced that it is returning as much as €100 million to shareholders in a complex share buy-back. Shareholders, will be happy, of course, but is it all just smoke and mirrors to deflect from an underlying crisis?

The fact NTR isn’t paying a dividend should be seen as a warning sign. This is because cash reserves, including money from the sales of a profitable toll bridge operation and a wind energy company have been wiped out by a series of disastrous investments elsewhere.

When Valuewalk asked NTR’s Nigel Heneghan about the reasons the company was replacing this year’s dividend with a buy-back scheme, he said: ‘The buyback was determined to be the optimal route to return significant funds to our shareholders.’

Troubled times for NTR

In reality, the entire green energy company has become increasingly risky due to changes to government policy, environmental legislation, multinational land grabs and massive demands for capital. For example, when Germany changed its biofuels regime, NTR took heavy losses on its Bioverda business. And investing in a solar company in California, just as Chinese manufacturers began flooding the same market with cheap solar panels, wasn’t exactly favourable for the company.

Even two of NTR’s best investments have faced serious setbacks. Shares in biofuels company, Green Plains Renewable Energy Inc. (NASDAQ:GPRE), were hammered when drought hit the corn harvest, pushing up fuel costs, and when question marks were raised over future support for wind energy in the US, NTR’s investment in the US company, Wind Capital, took a hit. Additionally, NTR lost somewhere in the region of €100 million of equity in the once hugely profitable Greenstar waste and recycling business in the US, Ireland and the UK due to higher costs for landfill, falling waste volumes and plummeting waste prices.

Despite this, NTR maintains it has not been affected by legislative changes:

‘We have not said that NTR has been adversely affected by government environmental legislation. We have, however noted in our annual report that US regulatory support for wind development can be cyclical, and as a result, we have repositioned the business towards running the assets we have in place rather than extensive new development in that market.’

The true picture

Nevertheless, the result of all these ventures is a €31 million deficit. The €100 million for the buyback will come from the company’s premium account, so, in effect, shareholders are simply getting their money back. Yet NTR’s spokeperson says the firm’s financials are healthy:

‘NTR has a strong cash position and is cash generative. Its growth plans have been taken into consideration when determining the amount to return to shareholders.’

Happier days

NTR’s shareholders have enjoyed better times in the past, such as the €275 million distribution back in 2008. eFlow, its Irish road toll business makes a huge profit, but the company will be under pressure to sell Wind Capital, a genuinely valuable asset, as well as Celtic Anglian Water. Again, however, NTR have told Valuewalk that the firm has no plans to sell any further assets and is focussing its efforts in the coming year on wind energy:

‘NTR has identified wind as being a sector which has sound growth fundamentals, attractive returns and a sector in which we have extensive experience and track record.’

However, stripped back to the bone, it would be hard for any analyst not to speculate that NTR is fast becoming a target for private equity. Shareholders might be advised to see the buy-back as an opportunity to take the money and run.