The dance of the utilities around alternative energy continues . . .

Energias de Portugal - a portuguese utility with substantial renewable assets, is considering floating those same assets an IPO which some analysts reckon could be worth 8.9 to 11 billion euros. It's funny how that kind of size doesn't even seem like such a big deal these days. A few years ago, when I started looking at alternative energy stocks, the largest at just about $1 billion market cap. was New Zealand's Trustpower. What's interesting here is that EDP are looking at floating only 20-25% of the unit. That tells us that they see this market as having a long way to go and they want to stay invested in it, if not raise that cash specifically for further renewable investments.

I think we're going to see a lot more action from the utilities in the renewable sector in the years to come and not only because they have the money. Utilities need to get their hands on renewable assets in order to meet rising targets for renewable energy, particularly in Europe, the United States Canada and Australia. So if you're a independent renewables firm, contemplating an IPO in testing market conditions, here's another idea; organise a private auction between cash rich national and regional utilities for the sale of your company. You might actually get more !

PG&E Corp is quietly ramping up alternative energy assets - see page 14 of this pdf. What's quite exciting is that they are investing in some quite radical assets - like Finavera's 100 MW wavefarm and more recently, 175 MW of geothermal, subject to full regulatory approval. BTW, you should also be aware that PG&E Corp owns a subsidiary called (i.e. not the same company)  Pacific Gas and Electricity  which already has a substantial hydro resource.

It did occur to me that the diversified approach of the utility ramping up alternative energy assets, combined with  the dull conventional power assets make them a less volatile investment for investors worried about an alternative energy bubble. I suspect the utility angle on alternative energy is greatly under appreciated. With a stable, but consistent income of electricity paying customers, they have an easy to understand repeat business model, which may just make them the primary defensive stocks of the alternative energy sector.

I do really enjoy taking a look at all the companies coming through into the AEI universe - I've still got a few more to add, but wanted to share these with you now.

Enova Systems - who produce electric drive systems for fuel cells and hybrid vehicles
Fersa Energias Renovables - who invests in other companies that are engaged in the production of renewable energy, such as biomass, solar and wind. They've actually just gone into Panama to invest EUR 700m in 400 MW of wind farms there - of all the places !
Pyeong San Co - who manufacture steel components for wind turbines such as flanges, gear rings and rotor shafts. Here are a few pictures of their flanges. A flange by the way is a plate or ring used to form a rim in this case at the end, middle and beginning of a wind turbine's tower, to which it is fastened. As you can imagine, it has to be very, very strong.

The image of the unemployed Australian who likes nothing better than surfing, beers and barbecue has been transformed by the strength of the economy, their currency and increasingly, a fast-rising alternative energy sector.

No question, Australian commerce has done very well over the last 10 years and no one seriously doubts that this will continue, pending the election on November 18th. We've all heard about the amazing mineral resources of this sparsely populated, continent-sized nation. Yet alternative energy investors should play close heed to their emerging alternative energy plays and also, assuming you're coming out of dollars, the ongoing strength of the Aussie dollar. That's because . . .

The AUD has just about doubled in value since April 2001 against the USD.

Anyway, here are those 3 new stocks (all listed on the ASX) and I have to say, they're a very eclectic mix;

Wind Hydrogen Ltd, which IPO'ed in September, has some proprietary technology for converting wind-powered electricity into hydrogen via electrolysis
ZBB Energy, which stands for Zinc Bromine Batteries - used in backup for intermittent renewables
Solco Ltd, which make solar heating, solar pumps and solar power products

KP Renewables is fighting for its life.

They have just reported a pretax loss for the period to June 30, 2006 of 2.27 mln stg compared with a loss of 83,865 stg for the same period a year earlier, on nil turnover.
directors have resigned and bizarrely, their home website www.kprenewables.com has been suspended.

There have been a few alternative energy companies of late who believed they could raise the cash in an IPO and then use that to make alternative energy acquisitions and subsequent returns for stockholders. I'm beginning to have my doubts about this sort of model. It works on the presumption of superior investment knowledge of those Directors over the experts in any of the given fields of expertise of wind, solar etc.

They also face the problem that in alternative energy, there is a lot of money chasing not a great deal of product. So not overpaying for assets and underperforming the market is very difficult to do.

Novera Energy, a company engaged in waste gas and wind power has just chosen to change domicile from Australia to the UK. This is pretty much the final stage in it's anglo-isation, if you'll forgive the phrase. Since listing on AIM in 2005, the company's focus has become more and more UKcentric.

Four-fifths of sales still come from landfill operations and according to this detailed article, profits are still 2 years away.

What is also potentially troublesome is that the author of the article believes the stock price of Novera is driven by the hopes of more UK windfarms coming onstream. You have to wonder if that is not too optimistic. No UK government has ever supported windpower so much as the current one under Tony Blair. And yet they were unable to force through windfarm developments through the planning system at anything like the rate they anticipated. A new government in the next few years will not be as favourable. And it seems at least possible that the likes of Novera - a minnow - will always be outbid on rights to a potential windfarm site by a bigger player.

Meanwhile, the future of building profitable onshore wind farms should really be in Central and Eastern Europe, rather than Western Europe. That was so yesterday's investment story. In Germany today, most of the good wind sites are now taken and the UK - more for planning reasons - is not a great future market either.

Here's a post that touches on the crunch issue for many alternative energy companies;
Do you want jam today or jam tomorrow?

The posting talks briefly about Renewable Energy Holdings.

So here's my take on the jam - viewed as what is cost effective and able to generate profits free of government intervention.

Jam today technologies - now until 2010

Waste (landfill) gas
Onshore wind
Solar thermal
Geothermal

Jam tomorrow technologies - post 2010

Biodiesel
Bioethanol
Biogas
Energy storage
Offshore wind

Jam the day after tomorrow technologies - post 2025

Fuel cells
Solar PV
Wave

Satcon Technology Corp is having a rough time of it on the Nasdaq.

The company has requested a hearing because its market cap. had fallen below $50,000,000 for 10 consecutive business days as at August 30th. This means it has failed to comply with the continued listing requirements of The Nasdaq Global Market.

What a ridiculous, arbitrary rule. Why not 11 days and $49 m dollars?

And why have such a rule at all?

Whenever I see round numbers, I become immediately sceptical and suspicious of overly bureaucratic activity. No wonder smaller US companies are now seeking to list on AIM rather than the Nasdaq. I'm sure there are people out there who can argue otherwise, but I don't really see the benefit of this rule to aspiring companies or the Nasdaq.