Newly public wind company Xzeres raises $4M

Enlarge Image

Xzeres will market turbines developed by Abundant Renewable Energy LLC.

Wilsonville-based Xzeres Wind Corp. has raised more than $4 million from investors as it looks to tackle the fast-rising market for small wind-energy systems.

The news marks a reversal of fortune from a year ago, when the company was fighting through bankruptcy as Abundant Renewable Energy LLC, a privately held Newberg company.

It has since been taken public after its assets were transferred into a publicly held shell company, similar to a reverse merger.

The transition was led by Core Fund Management LP, a Portland-based hedge fund that invests primarily in small-cap public companies.

Core Fund had provided a nearly $1 million bridge loan to Abundant Renewable in 2008 and received the company’s assets out of bankruptcy in exchange for relieving the debt, said Steve Shum, a principal at Core Fund and the interim chief financial officer at Xzeres.

Now Xzeres is entering a global small wind turbine market that could double in size to more than $400 million by 2013.

It does so with a market-accepted catalog of products developed by its predecessor, Abundant Renewable Energy, which in the past five years deployed about 100 wind energy systems across the country.

“It’s a startup environment, but we have the benefit of an established, well-regarded product,” said S. Clayton Wood, the company’s president.

The 12-employee company disclosed in a pair of public filings over the past two weeks that it raised just more than $4 million in capital through two private placement offerings at $1 per share.

Lack of capital led to Abundant Renewable Energy’s descent into bankruptcy. The case was dismissed in February and Core Fund pushed forward in acquiring Abundant Renewable Energy’s Assets and transitioning them into the public company, a process that concluded in March.

Going public through a shell company can be a faster and less expensive alternative to initial public offerings. But it has drawbacks.

Such alternative entrances to public markets are typically the domain of unknown companies trading on lower-profile exchanges.

“One of the downfalls with these is you usually end up on the bulletin board and sometimes you get stuck there. Nobody knows about you,” said Meghan Leerskov, assistant managing editor with Petaluma, Calif.-based DealFlow Media, which publishes the Reverse Merger Report.

This week Arizona-based ECOTality proved the move from bulletin board to Nasdaq stock can be made, but there are plenty of examples to the contrary.

The global market for small wind power systems is forecast to grow from last year’s $203 million in sales to $412 million by 2013, according to a December report from Boulder, Colo.-based Pike Research.

Last year alone, the U.S. small wind energy market drew $82.5 million in private equity investment, which outpaced the industry’s $82 million in U.S. sales. Over five years, small wind has generated $250 million in equity investment, said Ron Stimmel, a small wind systems expert with the American Wind Energy Association.

Much of the interest is driven by the recent availability of tax incentives focused on small wind, including a new eight-year federal investment tax credit worth up to 30 percent of the system’s cost.

While a majority of the market share is held by about 10 companies, Stimmel said there are about 95 small wind systems manufacturers in the U.S. and 250 worldwide.

Xzeres hopes to take an aggressive approach to the market, with a goal of producing and shipping 80 wind turbine systems during the fiscal year ending Feb. 28, 2011.

Within two years, Wood said the company hopes to develop a larger turbine, filling a market gap for products between 10 kilowatts and 1 megawatt.