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Illustrating the Capital Age in the Environmental Protection Industry 【For free】

Listed Companies M&A NEEQ

PPP, M&A, big buyers, overseas investment... More and more companies in the environmental protection industry are feeling the capital power from these “money” words. We still remember that Beijing Enterprises Group Company Limited purchased German EEW for more than 10 billion Yuan. In the previous article, we pointed out that the strong financing capability behind 2.5 billion Euros financing is the most important point in this M&A battle. Indeed, with the expansion of the large market, hot money, and competitors in the environmental protection industry, a company’s financial skills are important criteria for setting a company apart, compared to the company assets alone. Let us look at the real picture of the environmental industry in the capital age based on the investment and financing data in 2015 of these listed companies 


 (Note: The statistical sample for this study includes 68 in the A-shares and H-shares and 249 in the NEEQ. There are a total of 317 listed environmental-protection companies, including most of the domestic public environmental protection companies.)


Overall situation

 

We have come to the following conclusion from the analysis of the investment and financing situations of large and medium-sized listed companies and environmental SMEs in NEEQ:

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Data Source: Listed company annual report by Umore Cleantech Consulting


This shows that environmental companies’ investment cash outflow and financing cash inflow are the main indicators of their investment and financing levels. In 2015, the financing and investment of 317 environmental listed companies was 176.7 billion Yuan and 83.7 billion Yuan, respectively by 37% and 54% year-on-year compared with 2014. In 2015, although the overall revenue and growth data of the environmental industry were not very good, the amount of investment and financing have increased considerably. It can be said that the capital age of the environmental industry has begun.


Situation in various environmental fields

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In the above figure, the investment and financing data of listed companies are sorted out according to the various environmental fields. It can be seen that the main source of investment and financing growth is still in the two large environmental fields, water pollution control and solid waste treatment. Especially in the field of solid waste treatment, due to the rapid construction of waste incineration plants in 2015 and the highly active M&A in the field of electronic waste and hazardous waste, investment and financing have increased significantly by 70-80% year-on-year growth compared with 2014. In addition, the environmental monitoring companies also implemented considerable acquisitions (especially overseas acquisitions) in 2015, and they have all achieved more than 100% capital growth. It is surprising that the investment and financing activities of environmental remediation enterprises have not increased significantly. The funds in this field hesitated in 2015, as the policy system and industry norms are not yet mature.


Industry level


One of the details for the EEW M&A mentioned above is that private waste incineration power generation company China Tian Ying Inc is also one of the main bidders. However, after Beijing Enterprises Group Company Limited M&A of 10.5 billion Yuan (corresponding to a premium rate of 227%), China Tian Ying Inc, whose total assets are 4.5 billion Yuan, may only have a minor role. Indeed, under the tide of the capital age, some companies have the capital operating capabilities that most environmental companies within other listed companies do not possess, relying on a strong shareholder background and some unique identity. Hengqiang's Matthew effect seems to be increasingly prominent in the environmental protection industry.


Let us look at this set of data. In 2014, the environmental listed companies for the top 10 financing amounts accounted for 57% of the total financing amount in China. In 2015, this proportion further increased to 63%. In other words, the total financing amount of 307 environmental protection listed companies was less than 2/3 of the top 10 financing amount. In contrast, the top 10 companies accounted for 45% of total assets.


Based on this, it is no exaggeration to say that the financing capabilities create the gap between the different levels of environmental companies.


The investment and financing amounts and assets of 317 environmental listed companies are as follows:

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Data Source: Listed company annual report by Umore Cleantech Consulting


Investment list


The details of investment and financing situation for A-shares and H-share listed companies with top ten investment cash flows in 2015 are as follows:

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The details of investment and financing situation for NEEQ companies with top ten investment cash flows in 2015 are as follows:

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We have come to the following conclusion from the analysis of the investment and financing situations of large and medium-sized listed companies and environmental SMEs in NEEQ


(1) Under the two major industry themes of M&A and PPP project investment, equity acquisition and project construction investment are the two largest investment directions for large and medium-sized environmental companies. In contrast, the purchase of financial products accounted for a significant proportion in the investment shares of the NEEQ environmental companies. The shortcomings of SMEs are in low utilization rate of funds.


(2) Project loans are the most important source of capital inflows for large and medium-sized enterprises. They show the importance of a strong credit endorsement in environmental project investment. For NEEQ environmental companies, the financing gap is not as large as expected. Most of NEEQ leading environmental companies could obtain a hundred million Yuan in cash through the financial loan. However, it is worth noting that the amount of funds obtained from the equity listing transaction accounts for a relatively small proportion of the financing amount, which shows that the NEEQ is still weak as a financing channel.


(3)Most of the large and medium-sized listed companies and NEEQ companies have achieved remarkable growth in investment, especially solid waste companies such as waste incineration, resource recycling, and food waste treatment. This shows that investment and financing are active in this area.


Conclusion


On the one hand, after sorting out the investment and financing data of the major companies in the industry, it is clear that the dramatic increase in the environmental financial area is certainly a good thing for the development of the industry. On the other hand, we witnessed that the types and levels of enterprises divided by the dimension of capital operation are increasingly clear. In the capital age, some leading companies take advantage of the unique capital strength. However, we hope that these differences come from the company's ability rather than their identity.


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