Renewable Energy
May 06
By Aaron Pressman
Clean energy may be the wave of the future, but shares of alternative energy suppliers have taken investors on a wild ride. After getting hit hard by the credit crunch last year, the sector has rallied recently as stimulus plans from the Obama Administration and other governments promise substantial sums for renewable energy projects. The Market Vectors Global Alternative Energy ETF, which tracks 30 companies around the world, lost 61% last year but has risen 22% over the past three months.
Much of the money will likely go to the industry’s biggest and best-known companies, like Denmark’s wind farm developer Vestas Wind Systems or solar-panel maker First Solar of Tempe, Ariz. There will also be opportunities for smaller players. But “this can be a hairy sector for investing in early-stage companies,” says Edward Guinness, co-manager of the Guinness Atkinson Alternative Energy Fund.
While solar and wind projects are now commonplace, geothermal power is less developed. Geothermal systems typically use heat found deep underground to make steam and generate electricity. WaterFurnace Renewable Energy in Fort Wayne, Ind., builds heat pump systems that don’t require deep drilling for homes and businesses. The technology takes advantage of modest but consistent temperatures of about 55 degrees found a few feet underground. Air pumped underground is heated or cooled, which reduces the load on traditional heating and cooling systems and cuts energy bills by about two-thirds. Over time, that offsets installation costs. Revenue is growing 50% a year, and installations haven’t been hurt by the credit crunch, says Jack Robinson, lead manager of the Winslow Green Growth Fund. Guinness’ fund owns Energy Development Corp., a Philippine utility that oversees a dozen geothermal plants and consults on projects for others.
Stocks in the biofuels area have been crushed, not just by difficulty obtaining financing but by overbuilding and rising prices for key ingredients. It isn’t clear which players will survive. Still, the sector could one day generate big profits so it pays to stay up to date, says Guinness. He thinks Maple Energy, a Peruvian oil and gas producer, could become a leading ethanol supplier. Even so, Guinness sold the stock last year after a runup. “When they get their plant up and running, they’ll be the world’s lowest-cost ethanol producer,” he predicts. But he’s waiting to see how the project progresses.
President Barack Obama’s plan to reduce air pollution with a system of tradable pollution rights, known as “cap and trade,” could lead to the development of trading exchanges rivaling those for stocks, bonds, and derivatives. U.K.-based Climate Exchange, a publicly traded company, is the leading player in European pollution-rights trading, but Guinness says it’s too pricey at more than five times expected 2009 revenue (it has yet to show a profit). Unless a national cap-and-trade system becomes a reality in the U.S., the stock is too speculative, he says.
Another player, World Energy Solutions of Worcester, Mass., trails Climate Exchange in revenue. But new Environmental Protection Agency chief Lisa Jackson is familiar with the type of system World Energy has developed, which could bode well for the technology, says Winslow’s Robinson. “They’re a small player but are just becoming profitable and growing at a 50% rate,” Robinson says. Investing in it now, he adds, is like being a venture capitalist
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READING LIST
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May
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- Investing in the Smart Grid - Utilities (marketwatch)
- Free Financial Help ( PC Magazine's Recommended W...
- FDIC Warns on Foreclosure Scams, Extends Extra Pro...
- GM Reaches a Deal with Largest Bondholders (NY Times)
- GM bondholders unite (Bloomberg)
- Closed End Funds - Municipal Bonds (the Street,com)
- Website for GM Bondholders
- Economic Stimulus Plan Jobs - Where to Look (Kipli...
- GM Bondholders Hanging Tight - NY Times Dealbook
- Slow & Steady Starting to Look Good - Municipal Bo...
- Main Street GM Bondholders (from theStreet.com)
- Why You Need Bonds in Your Mix (from dshort)
- Financial Times: GM Bondholders to Obama: We Are M...
- Bank of America, Merrill Preferreds Downgrade (Dow...
- Starting a Business? Incorporate For Free
- The Bailout Banks - How are They Doing (Barrons)
- Renewable Energy, Clean Technology: Water, Solar, ...
- Highest Yield (from Kiplinger Magazine)
- GM Restructuring Plan: More on Monday (Marketwatch)
- Beware of Hot Tips , Penny Stocks (N Y Times)
- GM financials point toward Bankruptcy (Bloomberg N...
- Work from Home that's Not a Scam (WSJ)
- Mini-Links let you track your followers (New York ...
- GM Bondholders Group loses Loomis Sayles (Bloomberg)
- GM stock wipeout (Reuters)
- Wind Power Companies (Wall St Journal)
- Your Retirement Paycheck: Model Portfolios from Ki...
- WSJ Deal Journal: Basis Trade ( Bond + Credit Def...
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