AS WIND turbine generator Vortec Energy gets ready for a 10-city roadshow: to promote its $10m public offering an overseas expert has warned small investors to steer clear, saying the company’s technology has little chance of commercial success.
Note: 16 January 2014. I am posting this article from the New Zealand Star-Times as an historical document. It’s been gathering dust on my hard drive–so to speak–ever since. DAWT cognoscenti will find it of interest.–Paul Gipe
American analyst Paul Gipe, and some in the local wind industry, are concerned Vortec may hurt the industry if its plans don’t pan out and investors get burned. They say small investors need better protection from such speculative investments.
That talk has raised the ire of Vortec’s managing director, Robin Johannink, who this week will lock horns with Mr Gipe, at an Australian wind energy conference. Mr Johannink said he was going to the Australian conference to counter Gipe’s claims. “I’m going for the jugular.”
Vortec Energy was established to build wind turbines using technology licensed from American firm Grumman Aerospace (now Northrop Grumman Aerospace). Grumman tested the technology more than a decade ago but could not make it commercially viable. But Vortec believes it can, using more economical material and techniques than were available to Grumman.
It said the suction effect of its turbine increased the wind’s power and gave five times the efficiency of a bare turbine motor.
With $4.5m from around 100 private investors and a $500,000 grant from the Government’s Foundation for Research Science and Technology, Vortec has built a prototype turbine near Raglan. Now it wants $10m to build two full-sized machines and drivel’the company to the brink of international viability. Investors are being offered subscriptions with a minimum purchase of 1000 $5 shares.
Mr Gipe, the keynote speaker at last week’s New Zealand wind energy conference, said the Vortec idea had been tried overseas and found wanting.
“Nothing the company has said convinces me its idea offers any significant improvement in technology. “Wind energy is not about great leaps forward. It’s about steady incremental improvements. They may be dull, boring and unexciting, but they work.”
He acknowledged the company’s prospectus was up front on the technology’s speculative and largely untried nature. However, he said the “buyer beware” philosophy underpinnig that argument wasn’t enough when it came to the rights of small investors who might be drawn into Vortec without understanding the risks.
“I think professionals in the wind energy field are obligated to speak out. We’ve spent 20 years bringing technology to commercial fruition and we have too much to risk to let the market dictate what happens.”
Vortec plans to list in 1999 on America’s Nasdaq stock exchange, used mainly by hi-tech companies. But Mr Gipe doubts the company will get past the regulatory authorities there, given that country’s rules to Protect small investors.
He said Vortec’s track record of development had much in common with other energy concepts that had failed to produce commercial returns.
Other overseas energy analysts have aiready cast doubts or Vortec’s claims. Heiner Doerner of Stuttgart University, writing on the Internet, warned the design wouldn’t work.
But Mr Johannink isn’t impressed with his critics. “Paul Gipe hasn’t seen the research data we have, he has no involvement with commercial turbines and he’s wrong to say we don’t represent a quantum leap in wind technology,” he said. “Come the end of September when our performance data is released he’s going to look very foolish.”
He said one of the reasons for the coming roadshow was to educate the public on wind technology and on the Nasdaq.
More than 1200 prospectuses had been sent to individuals and another 800 had gone to sharebrokers for their clients, said Mr Johannink. More than $1m had already been invested.
Securities Commission chief executive John Farrell said his organisation hadn’t seen the Vortec prospectus, but it was not its role to vet prospectuses. That was up to the Companies Office, part of the Commerce Ministry.
New Zealand differed from the US in that our emphasis on securities offerings, such as shares, was to get the information out to the public, then allow people to make their own decisions, Mr Farrell said.
In the US the authorities took a more active interest in the structure of the offering itself, making judgements on the likelihood of the offer delivering financial returns to investors.
“The US system is more solicitous for the interests of smaller investors from the outset,” he said. “But if once a Prospectus or document has come out it is thought to be misleading, we have the power to step in and cancel it.”