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January 2007 ArchivesSchmack Biogas may not spring to mind - or roll off your tongue too easily - when alternative energy companies arise as a topic of conversation. Nevertheless, they have bucked the trend since going public in June last year, by rising by more than two times their IPO price. I have only been able to find two listed biogas stocks, both of which appear to operate pretty exclusively on in Germany, Europe (Schmack) and the USA (Environmental Power Corp). That's why the fact that Schmack have taken over their principal German competitor augurs well for the company. Said Mr Ulrich Schmack; 'The acquisition of Hese Umwelt's Biogas division represented an outstanding opportunity for us in that our Group was able to absorb the main competitor targeting the utilities market. With the new company trading under its own name, Hese Biogas GmbH, we will be able to further expand our market shares.' Someone once said to me it's the boring businesses that do well in the long run. And if biogas afficianados will forgive me, biogas is not a sexy alternative energy play like solar power or fuel cells. So theoretically, there is less competition and potentially more profits. In other words, clever technology is not always a clever investment. Biogas though as a sector, just might be a good long term bet. Biofutures International, a stock which has had a pretty rough time since going public at the peak of the market in early May 2006, has just announced news that its unit Zurex Corporation Sdn Bhd has signed a deal with JJ-Lurgi Engineering Sdn Bhd which is to supply components to build a biodiesel plant in Lahad Datu in Sabah, Malaysia. Of background interest here is that Malaysia took the political decision in late 2005, to encourage biodiesel production from palm oil, to combat the high price of oil and to increase demand for domestically produced palm oil. The lesson from this is that whilst not everyone is convinced of the environmental and economic benefits of biofuels, in many parts of the world, they enjoy substantial political support. symbol company name change % Category AMEX:OTD O2Diesel Corp. -4.65 Biodiesel symbol company name change % Category NASDAQ:FCEL Fuelcell Energy (MM) 14.67 Fuel Cells Germany's solar companies are starting to move out of Germany. Solon AG fuer Solartechnik (SOO1 GY) gained 1.8 euros, or 6.4 percent, to 29.8 euros on news of their plan to buy up to 20 percent in Australia's CBD Energy Ltd. This would cost as much as 3 million euros and Solon's aim is to co-operate with CBD Energy as a turn-key contractor in implementing CO2-free power plant projects in Australia. All alternative energy in Australia faces one enormous hurdle - the world's cheapest coal. So even though solar has great natural advantages in Oz it will need support still to succeed - just like most other countries. symbol company name change % Category XE:B2I Biopetrol Inds Inh.SF 1 -3.75 Biodiesel symbol company name change % Category NYSE:WFR Memc Electronic Mtrl 19.69 Solar symbol company name change % Category NASDAQ:CSIQ Canadian Solar Inc. - Common Shares (MM) -8.09 Solar symbol company name change % Category LSE:SOLA Renesola 12.47 Solar Areva, a french nuclear power company is set to buy Repower - a German wind turbine manufacturer. This follows what I would call a long-time engagement, since I originally blogged about it in September 2005 (see entry "Now nuclear is buying into wind") - when Areva bought 21.1% of Repower shares. Actually, they have got to be kicking themselves for not buying the company outright back in 2005, when the stock was only a third of the price it is now. Ouch ! symbol company name change % Category TSE:WFI Wfi Industries Ltd -4.21 Geothermal symbol company name change % Category What's interesting here is that by no means were bioethanol stocks the biggest performers post President Bush's speech. As a rule, I try and stay clear of the politics on this blog - that's not what investment should be about. Numbers and facts should rule the roost, period. But investors have to take note of the rise in US biofuel stocks in anticipation of President Bush's speech. And we still don't know what he will say ! Meanwhile, today Pacific Ethanol has been upgraded by one analyst to outperform, which is pretty good timing for them. Oil meanwhile has closed up to $55. As I said in my blog here on the 17th January "Could it be that the oil selloff has overshot and that ethanol stocks may be on the way up again?" At the moment, the answer would appear to be yes. Prometheus Energy - a grand-sounding name for a company that deals in waste gas from trash - has just started producing LNG from natural gas emanating from the Bowerman Landfill in California, which will be used to operate public transportation vehicles in Orange County, California. This is a big site - just take a look at these pictures. Landfill gas by the way typically peaks in output over the first 5 years, after which it goes into the "exponential decay phase". There is a view that biomethane has much more potential than bioethanol or biodiesel. As I remarked here before, I like the low-tech approach to Prometheus; get the lowest cost methane possible and turn it into fuel. Some people find landfill intrinsically wrong, but I think they are wrong. You can only go so far with recycling and the other alternative, incineration, is much less desirable. Much troubled thin-film BIPV manufacturer Solar Integrated had a great day yesterday thanks to news that it has won a deal worth 13 mln usd with Tesco USA to provide a 2 MW building integrated photovoltaic (BIPV) roofing system for Tesco USA's distribution centre under construction in Riverside, California. R Randall MacEwen, Solar Integrated's president and chief executive believes it will be the largest roof-mounted solar installation in the world.
EDF energies nouvelles is joining forces with Greece's Public Power Corp to build wind-generated power facilities with a total power of 122 megawatts, scheduled for completion by 2009. The Greek islands can lay claim to some of the highest wind speeds in Europe, if not the world. So wind farms located there can perform at a much higher load factor. Late last year for example, the same Public Power Corp reached an agreement with Rokas to take part in a 2.4 billion euro (US$3 billion) wind park project on three Aegean islands. Greece already has quite a lot of windpower and stands to gain a lot more. Rokas, for example, is Greece's largest wind power firm, operating 13 wind parks with a total capacity of 193.2 megawatts. The aim to provide up to 600 megawatts of wind power by end 2009. Ascent Solar, a thin-film pv solar company, today rose 4.49% on a "transfer of contracts" from I.T.N. energy systems. A transfer of contracts by the way is also called a "novation" which is a legal term for transferring rights and obligations in a given contract over to another party. What's interesting here is that this novation has given Ascent Solar $3.5 m in government funding and research contracts. This is a small company with big plans. This year they aspire to launch their 1.5 MW thin-film plant (tiny!) which they hope to rapidly upscale to 100 MW by 2010. The company's target is to reach 5 cents a kilowatt hour from the current 20 cents a kilowatt hour with its building intergrated photvoltaics (BIPV). What makes this solar company different is; i) they see an application for their technology in space, near space as well as commercial and residential BIPV applications Well, my view is, good luck to them. But the road to low cost solar power is long and littered with roadkill. The thin-film solar is still under 5% of world solar demand - principally in Germany where I suspect thin film makes an even lower impact. BIPV companies who believed that a continous manufacturing run would bring down solar costs and maximize demand have been disappointing e.g. Solar Intergrated Technologies. Despite record silicon prices that ought to shift demand to to flexible low or non-silicon solar, the demand has yet to appear. Will Ascent Solar really be different? Let's see. A lot of people in the nascent ethanol industry have been more than a little concerned about the falling price of oil - just take a look at the daily WTI price here. No on has an exact universal figure, but they are worried because US-based ethanol production from corn is only in a profitable range when oil reaches $45 - $50 a barrel. At a recent OPEC meeting in New Delhi, the Saudi Oil Minister said that no additional cuts in production were planned and this sent oil prices down still further. But reading between the lines of what he divulged, it would appear that he may think that the already planned for 500,000 barrel a day cut due to start on Feb. 1st 2007 will do the job to take oil prices up again. So could it be that the oil selloff has overshot and that ethanol stocks may be on the way up again? Today after a quick glance (and I haven't looked at all of the ethanol stocks - see here for those) , Pacific Ethanol is trading up over 4%, Andersons is up nearly 5%, Aventine Renewable Energy Holdings is up 2.45% and this while WTI does not appear to be going south of $51. Meanwhile, last Friday, Pacific Ethanol was upgraded to neutral by a Bank of America analyst. The oil ethanol relationship fascinates me. Oil has been so volatile in the last year so timing is everything. For example, if one had bought WTI crude at the end of 2005 ($61.04) and sold exactly at the end of 2006 ($61.06), your total return would have been just 0.03% ! One way or another, I'm sure that the next couple of months in oil prices and the underlying performance in biofuel stocks could prove to be very interesting indeed. Trina Solar, one of a handful of Chinese stocks that have recently IPO'ed, appears to be stabilizing at a price just below $20 and a market cap. of about $100 million. Concerns were raised a few weeks ago that the IPO of Trina although moderately successful, may have been overpriced. The worry is that over the next couple of years, the smaller solar players will run into margin woes and silicon shortages much faster than the bigger players. This will consequently hamper their ability to compete. So all eyes will be on Trina's Q4 results due out shorty to see how well they are performing. Since going public in July last year, Aleo Solar underwent a big price slide until early November and has been recovering ever since. So news that they have EUR 35m of orders already in place for 2007 has to be good. Unlike certain German solar firms, this one is also expanding into foreign markets - like California for sales to Powerlight - add to that their newly opened 10 MW plant in Barcelona, Spain and you have a smallish German solar company keen to grow outside of the home market. It still has a way to go though to catch up with its IPO price. Conergy AG, today issued a profit warning and dropped over 8%. Last month Conergy received a massive subsidy of EUR 76 million - or as they call it, funding. This would then lead to another subsidy from the German Federal State of Brandenburg. From a pure economics perspective, I have very little confidence in Germany's solar boom. It's just that; i) it is so government subsidy dependant Investors meanwhile are chasing a subsidy-driven industry of returns ultimately underwritten by government, rather than productivity. One day - and I don't know when - these musical subsidies will stop. And Germany's solar industry will collapse as fast as alternative energy firms did following the demise of President Carter in the USA. Like any new fast-growing industry on the stockmarket, investors can’t fail to notice that the alternative energy sector is dominated by microcap stocks, pink sheets and otc bb stocks. At AEI, we decided early on that we would not be showing these stocks. These tiny companies may not trade for days or even weeks at a time and represent for many an additional risk premium in an already speculative sector. Arguably, it’s far more useful for a risk-averse alternative energy investor to know which are the biggest alternative energy companies. That’s because with liquidity comes a much larger measure of security – it is reassuring to know you can always sell the stock at a low spread. It’s strange, but somehow the internet has amplified attention to these micro alternative energy stocks. Personally, I’m pretty fed-up with all the spam email I receive urging me to buy them or the number of cheap websites that seem only to exist to promote them. It annoys me because this is not a true picture of what is happening – there are many big players in this industry. So I decided it was time to go to the other extreme and determine just who are the biggest alternative energy companies on the planet today. After all, for investors, size does matter. Every single company below is capitalized at over $1 billion. The first 16 are pure-play alternative energy stocks. The remaining 7 are not e.g. Iberdrola, but I have as ever, left out massive blue chips such as GE whose wind turbine sales are still in the low single digit percentage range of the total business. All of the market capitalisation figures and the underlying exchange rates were taken from Friday 5th and Monday 8th January 2007. The AEI World Rankings of the 16 Biggest Pure-Play Alternative Energy Companies No. 1 Renewable Energy Corporation Sector: Solar Market Cap. $8.987 Billion Description: REC's business activities are organized in three divisions: REC Silicon, REC Wafer and REC Solar. REC Silicon covers the polysilicon activities; REC Wafer covers production of multicrystalline wafers and monocrystalline ingots, while REC Solar covers the downstream activities of producing and marketing cells and modules.
Description: CEMIG (Companhia Energética de Minas Gerais) distributes power to more than 5 million customers in the state of Minas Gerais in southeastern Brazil, and generates most of its power from 36 hydro-electric plants. No. 3 Vestas Wind Systems Sector: Wind Market Cap. $7.466 Billion Description: Vestas’ core business comprises the development, manufacture, sale, marketing and maintenance of wind power systems. No. 4 Verbund Sector: Hydro Market Cap. $7.465 Billion Description: Verbund was until recently known as “Oesterreichische Elektrizitätswirtschaft-AG” or the Austrian Electricity Company. More than 80 % of Verbund’s hydro power capacity are bundled in its subsidiary VERBUND-Austrian Hydro Power AG (AHP). AHP generates almost 23 bn kWh per year, covering more than a third of Austria’s electricity consumption. The total capacity of its powerplants is 6,000 megawatt. AHP is the by far largest generator of electricity in Austria. No. 5 Gamesa Corp Sector: Wind Market Cap $6.710 Billion Description: Gamesa generates electric energy of renewable origin essentially based on the promotion and running of wind farms, the manufacture of wind turbines and the providing of services to the renewable energy sector. No. 6 Suntech Power Holdings Sector: Solar Market Cap. $4.984 Billion Description: Suntech Power Holdings Co., Ltd. specializes in the design, development, manufacturing and sale of photovoltaic (PV) cells, modules and systems. No. 7 Solarworld AG Sector: Solar Market Cap. $3.563 Billion No. 8 Q-Cells AG Sector: Solar Market Cap. $3.355 Billion Description: The core business of Q-Cells AG is the development, production and sale of high-performance solar cells made of mono- and multicrystalline silicon. No. 9 Sunpower Sector: Solar Market Cap. $2.491 Billion Description: SunPower Corporation designs, manufactures and sells high efficiency solar cells and solar panels that generate electricity from sunlight for residential, commercial and remote power applications. Their proprietary all back contact silicon solar cell technology produces up to 50% more power per square foot compared to conventional solar cells. No. 10 First Solar Sector: Solar Market Cap. $1.953 Billion Description: First Solar is a thin film pv module manufacturer which are based on cadmium (not silicon) with a 9% efficiency rating - very high for thin film. They are the highest volume manufacturer of thin film solar technology. Although US-based, they have a strong presence in Germany. No. 11 Conergy AG Sector: Solar Market Cap. $1.847 Billion Description: The Group's principal activity is to develop, produce and sell system components relating to Solar Photovoltaic and Solar Thermal technologies. No. 12 Trustpower Sector: Hydro Market Cap. $1.661 Billion Description: TrustPower (sorry, no price-feed yet available from the New Zealand Stock Exchange) is New Zealand's fourth largest electricity retailer, and serves a quarter of a million customers throughout New Zealand. TrustPower owns and operates 34 power stations and produces electricity exclusively from renewable sources and TrustPower's power stations produce enough electricity for 260,000 Kiwi households. TrustPower is majority New Zealand owned and is listed on the New Zealand stock exchange. No. 13 Verasun Energy Corp Sector: Bioethanol Market Cap. $1.389 Billion Description: VeraSun Energy Corporation is the second largest ethanol producer in the U.S. based on production capacity, according to the RFA. It focuses primarily on the production and sales of ethanol and its co-products. No. 14 Ormat Technologies Sector: Geothermal Market Cap. $1.350 Billion Description: Ormat Technologies, Inc. is a vertically integrated company primarily engaged in the geothermal and recovered energy power business. The Company designs, develops, builds, owns and operates geothermal power plants. It also designs, develops and builds, and plans to own and operate, recovered energy-based power plants. Additionally, the Company designs, manufactures and sells geothermal and recovered energy power units and other power generating equipment, and provides related services. No. 15 Energy Conversion Devices Sector: Solar Market Cap. $1.303 Billion Description: ECD Ovonics portfolio of alternative energy solutions includes Ovonic thin-film amorphous solar cells, modules, panels and systems for generating solar electric power; Ovonic NiMH batteries; Ovonic hydride storage materials capable of storing hydrogen in the solid state for use as a feedstock for fuel cells or internal combustion engines or as an enhancement or replacement for any type of hydrocarbon fuel; and Ovonic fuel cell technology.
Description: Nordex AG is a developer and manufacturer of wind turbines. Their products include the serial produced multi-megawatt wind turbines Nordex N90 and N80 as well as the powerful megawatt turbines Nordex S70 and Nordex S77 for onshore use. For the rapidly developing international markets they make a smaller unit, the N60. 7 Large caps and utilities with big alternative energy exposure As I mentioned earlier, there are also some very big companies that are not wholly exposed to alternative / renewable energy but nonetheless have an exposure worthy of investor’s attention. No. 1 Iberdrola SA – Sector: Diversified Alternative Energy – Market Cap. $38.202 Billion Description: Iberdrola is one of the leading private electric utilities worldwide, with its services, reaching 16 million customers -over nine million in Spain-, concentrated in generation, transmission, distribution and marketing of electricity and natural gas. Iberdrola is the largest renewable energy operator in the world. As of March 2006 it had installed capacity of 3914 Megawatts from renewable sources of which 3598 Megawatts come from wind power. IBERDROLA recently announced plans to build over 10,000 MW of renewable energy worldwide by the end of 2011. No. 2 Archer Daniels Midland – Sectors: Bioethanol and Biodiesel – Market Cap. $20.920 Billion Description: Archer Daniels Midland Company is one of the largest agricultural processors in the world. ADM processes crops to make food ingredients, animal feed ingredients, renewable fuels and naturally derived alternatives to industrial chemicals. No. 3 PG&E Corporation Sector: Hydro Market Cap. $15.687 Billion Description: PG&E Corporation is an energy-based holding company headquartered in San Francisco. It is the parent company of Pacific Gas and Electric Company. 20% of its electricity generating assets are large hydropower. No. 4 MEMC Electronic Materials Sector: Solar Market Cap. $8.960 Billion Description: MEMC is a leading global supplier of wafers to the semiconductor industry. Approx 10% of its sales (2006) are to the solar industry. No. 5 Sumitomo Titanium Corp Sector: Solar Market Cap. $3.958 Billion Description: Sumitomo Titanium Corporation's main products are titanium and silicon, the latter is a vital feedstock for the solar industry. No. 6 Avista Corp Sector: Hydro Market Cap. $1.220 Billion Description: Avista Corp. is an energy company involved in the production, transmission and distribution of energy as well as other energy-related businesses. As per the 2005 annual report, 54% of Avista's generating assets are hydroelectric plants. No. 7 Portland General Electric Sector: Hydro Market Cap. $1.686 Billion Description: Portland General Electric, headquartered in Portland, Ore., is a fully integrated electric utility that serves 791,000 residential, commercial and industrial customers in Oregon. The company has eight hydroelectric plants amounting to 509 MW and four thermal plants for gas and coal with a capacity of 1,466 megawatts. Conclusion Who said this was a tiny industry? Together these companies have a combined capitalisation of $150 billion – about the same size as the individual GDP of a handful of Latin American countries. Obviously, if you subtract the 7 latter non – pure plays then it comes to just $60 billion. What does fascinate me is though how quickly some of these companies have made it past the $1 billion mark. Of the top 16, at least 6 of them only took the IPO route over the last 2 years. Namely; Renewable Energy Corp (REC) You’ve probably spotted the pattern – 5 of the 6 are solar stocks. But then there’s also astonishing global diversity in the world’s largest cap. Alternative energy stocks. REC – the world’s biggest pure play – is based in Norway, Verbund is in Austria, Cemig is in Brazil, Suntech Power is in China and several are in Germany. Years ago, no one would have thought this possible. Yet the alternative energy story is not all high-tech. Hydropower – a technology well over a century old – features highly in the portfolios of many world utilities. In the case of New Zealand’s Trustpower – it is just about 100%. Hydropower will continue to have a major role because the lifespan of the plant – barring refurbishment- can be up to 200 years. It seems quite likely that 2007 should see a few more companies breaching the $1 billion ceiling whether by IPO or rising stock values. Long-term worries over hydrocarbon shortages and energy security can only work in their favour. AEI will be keeping a close eye on them all, so subscribe to our newsfeed ! Ron Miller, CEO of Aventine Renewable Energy Holdings, has just been giving evidence to the Senate Agriculture, Nutrition and Forestry Committee. I was particularly interested to see his claim that US ethanol had ". . . reduced oil imports by 170 million barrels of oil, valued at $11.2 billion" - that would correlate to the price of oil being nearly $66 a barrel. With oil prices dropping yesterday to as low as $53 that is going to be a harder argument to make this year. And yesterday ethanol stocks retreated not just on lower oil prices but on forecast of a forthcoming ethanol glut. Thomas Weisel Partners analyst Kevin Monroe said (in the same article) "With the potential for a near doubling of ethanol capacity from the current 5.4 billion gallon per year levels over the next 18 months, coupled with a potential smaller estimate than our original estimate of ethanol demand due to a lack of discretionary blending, we believe the potential for an oversupply situation in the second half of 2007 is significant," http://www.theautochannel.com/news/2007/01/09/033496.html Acta SPA, an Italian fuel cell developer listed on London's AIM, has had some good news. The company has been granted its first European patent for its proprietary technology, the platinum-free HYPERMEC branded catalysts. Platinum prices have been the bane of most fuel cell manufacturers for some time. There really is no better catalyst but the price of platinum is going up faster than their ability to significantly drop costs. So in light of market conditions, Acta should be well placed to take advantage of this intellectual property asset. Just over a year ago, platinum prices hit a 25 year high of $950 an ounce. The spot price is currently just under $1200. Just as the semiconductor industry competes with the solar industry for the supply of high grade silicon, here you can see the automobile industry who use platinum for catalytic converters competing with the fuel cell industry for the supply of platinum. My guess is that the auto industry will win this one hands down. COMPANY : % CHANGE : CATEGORY Verasun Energy Corp : -4.46 : Bioethanol COMPANY - CHANGE - % - CATEGORY A good piece here that lucidly illustrates the limits of scaling up on biofuels. Corn futures are now trading close to a 10 year high. As the article says . . . "Rising demand for alternative fuels is eroding supplies of crops normally used for animal feed or food processing. U.S. production capacity for corn-based ethanol, already at a record, may double in the next two years, and the government said last month demand for biodiesel made from soybean oil may rise 17 percent in 2007. The U.S. is the largest producer and exporter of both crops." This reminds me a bit of the solar industry - the same growing pains and rising prices that come from a competitive shortage of feedstock. For the solar industry it's the shortage of high-grade silicon for which they compete with a more powerful semiconductor industry; for the biofuels industry it's the shortage of crops for which they compete competing with the food industry. COMPANY - 2nd - 3rd - Move - % Change - Category COMPANY - 2nd - 3rd - Move - % - Category Econergy International , a clean energy and carbon developer has just bought an 80% share in a Brazilian wind project. An interesting facet of the deal which I admire is the 20-year agreement with Electrobras, Brazil's government owned electric company, who have agreed to purchase the electricity generated by the farm. A 20 year contract for a windfarm is a very good deal. Most of the time, it is only a 15 year Power Purchase Agreement, which quite often leads to only a few lean years of profits. A 20 year contract however lengthens the time horizon for the investment return and could allow government to more easily reduce the direct subsidies to windfarms. Time rather than technology is the key to price competitive windpower today. Yes, you read it right! Geodynamics has just been thrown onto the PR defensive. Following a test in Switzerland, fresh concerns have recently arisen that geothermal power could inadvertently start earthquakes. According to this report "... earlier this month, Swiss engineers halted a geothermal heat experiment after it set off a small earthquake. The tremor, near Basel on December 9, measured 3.4 on the Richter scale and caused widespread fear, prompting about 1000 calls to emergency services". Switzerland is not known for exciting news - so you can imagine this has caused quite a stir. Geodynamics should be well placed in Australia because it has a recognised potential for geothermal energy - the world's hottest known granite corridors, with temperatures reaching about 235 degrees at a depth of 3.5 kilometres. Additionally in Australia's favour is that it has the world's most geologically stable rock formation. That's why there was some plan (rejected) to plant all of the world's nuclear waste in the middle of the Outback a few years ago. |
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