Environmental fund chooses Prochem for first regional investment

EIP acquired more than 5% of Prochem's shares, but would like to create a joint venture with the engineering company, the details of which have not yet been revealed. EIP has been purchasing Prochem shares since last November. Over that time, the company's market price oscillated from zl. 5.8-zl. 8.25. At an average price of zl. 6.7, the fund might have paid at least zl. 1.7 million ($480,000) for the 260,000 shares. Last Friday, the company's stock traded at zl. 6.95.
One of Prochem's specialties is designing and constructing environmental protection installations. Its customers include Gdansk Refinery, Philip Morris, Procter & Gamble, Akzo Nobel, Polfa Lublin and Pepsi Food.
"We're just money, and Prochem has the necessary skills," said Adam de Sola Pool, the fund's chief investment officer. "If there were a district heating plant needing modernization, we would provide the capital and Prochem would give the actual knowledge."
He said that although this was the first investment for the fund in Central Europe, EIB's investors have experience in similar ventures elsewhere. "Our investors are the leading investors in environmental projects in Western Europe and the United States," he said.
EIP is funded by CDC-Participations, France's largest environmental venture capitalist; the European Bank for Reconstruction and Development (EBRD); VMH International, which is a leading Belgian waste management firm, and the Swiss government. EIP is managed by CDC-Participations and the First Analysis Corp., the United States' largest environmental venture capitalist. It was created nearly a year ago after raising ECU 22 million.
"There is a big need for environmental investment in Poland," said de Sola Pool. "The EU estimates that ECU 35 billion is needed to bring Poland in line with its standards."
The life span of the fund is about 10 years, de Sola Pool said. "We are going to invest in a company for three years to restructure it, and then exit," he said. "Then we can recycle the money."
He also said that the fund expected a return of about 25-30%.
EIB bases its expectations on the performance record of investment funds with sustainable or environmental screening factors. According to Innovest's stock portfolio study, Standard & Poor's 500 companies with good environmental performances outperformed the S&P by an average of 2.8% per annum.
The fund wants to concentrate on projects that would reduce air pollution, such as upgrading heating plants, production plants, as well as hospitals, schools and other municipal facilities.
"We would like to become active in water protection too," de Sola Pool said. "If Prochem brings to our attention a company that deals with water protection we would consider it."
Prochem's capitalization is around zl. 38.5 million ($10.4 million), which places it outside the scope of interest of most major equity analysts. The volume of trading for its shares constitutes about 0.2% of the WSE main market's total volume.
Prochem's stock price has been rising since mid-January, reaching a price of zl. 7.7 on March 3, but then fell to close at zl. 6.95 on March 5, which was up just 1.5% since the end of last year. Its main shareholder is U.S.-based Fluor Daniel, which holds 33.66% of Prochem's stock. Other shareholders include Pioneer (6.85%) and CS First Boston Nominees (5.06%).
"Prochem is a very well-managed firm, both committed to sustainability and clean technologies," said de Sola Pool.
He also said this was EIP's first such investment, but it planned others in Poland and at least eight investments in Ukraine, Hungary, Slovakia, the Czech Republic and Romania.