GE, Siemens wind energy

Vestas Wind Systems is by far the largest manufacturer of wind turbines, but General Electric and Siemens both have large wind energy operations (with 8400 and 6600 respective installations worldwide). GE and Siemens have been hurt during the recent financial crisis, especially General Electric. GE is one of the most diverse companies in the world, but the stock price was battered by the difficulties at GE Capital. Siemens announced a plan during the summer to lay off over 17,000 employees worldwide to cut rising costs. Although the wind power divisions in both companies are appealing, they make up only a small portion of overall operations. You must invest in each company as a whole and performance hasn’t been good as of late.

General Electric’s turbine size ranges from 1.5 to 3.6 megawatts. Siemens has units ranging from 1 to 3.6 megawatts. Neither company is particularly detailed on the specifications of their turbines, most likely due to proprietary technology. Both companies install units for on and offshore use, and offer similar services to customers.

At the current time, both General Electric and Siemens are trading just up from their 52-week lows. Year to date the companies are each down over 50%. Even though this article is about wind energy, as an investor you cannot ignore the other business areas of these two companies. Both are large conglomerates and wind power is only a small part of each. GE and Siemens have attractive dividend yields and good historical performance. Look for these companies to rebound when industrials and the market have an upswing.

Green Collar Jobs

The terms blue collar and white collar worker have been around for quite some time, but a recently emerging adage is the “green collar” worker. If blue collar refers to manufacturing and industrial laborers and white collar refers to 9 to 5 office workers, what does green collar mean? It must have to do with forestry or conservation, right? It can, but there are many emerging careers paths in green collar employment.

The demand for green collar workers has been increasing over the last few years. The jobs in the sector as a whole can vary greatly, ranging from manufacturing to office support functions, with many different jobs in between. Manufacturing jobs include factory work at alternative energy companies, such as solar panel technician. Office jobs in the industry include budgeting for green projects and carbon accounting.

It is likely that there will be a shift in employment distribution, bringing white and blue collar workers to green industries over the next few years. Similar job function and employment training will make transition easier. Some universities are even offering green or sustainable MBAs, where studies include environmental economics, green marketing, and sustainable management. Not many schools offer sustainable MBA programs at this time, but the programs are growing and are destined to before more mainstream. The industry growth will help America’s job market and provide new careers for individuals from many different backgrounds.

PowerShares Alternative Energy ETFs

An earlier article discusses the Ardour Indexes, which model various areas of the alternative energy industry and are weighted based on market capitalization. The Van Eck GEX ETF models the Ardour Global Index as accurately as possible, but the company PowerShares has a few products which also model areas of alternative energy. WilderShares, LLC. is a company that tracks various areas of alternative energy. Unlike the Ardour Indices, WilderShares Indices are not based on the overall market capitalization of the companies that comprise it. According to the WilderShares website, no single stock will make up more than 4% of an index at the start of a quarterly rebalance.

PowerShares WilderHill Clean Energy Portfolio- PBW

The PowerShares WilderHill Clean Energy Portfolio (PBW) aims to replicate the WilderHill Clean Energy Index (of course before any fees). The index is currently made up of 53 different stocks, which get rebalanced and reevaluated every quarter. The index has companies in the power generation, clean fuels, energy storage, and other alternative energy related industries. To be included in the index, the stock must trade over $1, have a three month average market capitalization over 50 million, and have significant exposure to the alternative energy industry. PowerShares replicates this index with PBW, which is down significantly year to date obviously due to the poor market conditions and sector performance.

http://www.invescopowershares.com/products/overview.aspx?ticker=PBW

PowerShares Global Green Energy Portfolio- PBD

The Global Green Energy Portfolio (PBD) is based on the WilderHill New Energy Global Innovation Index. The index tracks worldwide clean energy companies, but has a global focus. It is similar to PBW above but a larger portion of the index is made up of international companies. The Global Green Energy ETF has less than 30% of its allocation in U.S. companies.

http://www.invescopowershares.com/products/overview.aspx?ticker=pbd

PowerShares has many different investment products to model various sectors and industries. The two mentioned in this article are both in the red for the year, but they are excellent representations of the alternative industries as a whole. Before considering investing, look at the links to see holdings in each ETF.

Chinese Solar Manufacturers

Past entries discussing solar energy have featured domestic companies, but there is a very large market for solar energy in Asia, particularly China. Numerous manufacturers base their operations in China, such as Yingli Solar, Solarfun, and Suntech Power. There are a few successful Chinese solar companies, but there are many small somewhat unknown firms as well.

Suntech Power had a very successful IPO in 2005, the stock was trading near $100 at the start of the year but is currently below $10. Solarfun is also down over 50% since its IPO in December 2006. Many Chinese solar companies look for a big debut through an IPO, much like during the internet stock boom of the late 1990s. Currently, solar companies abroad and domestic have been struggling due to the economic problems and decrease in oil prices.

As attractive as some of these companies may seem at the current discount, the Chinese solar industry is a speculative investment at this time. Many of the companies are largely unknown to US investors, and it’s difficult to assess the financial strength of the firms. The companies do have financial statements and data on sites like Google Finance and Yahoo! Finance, but the coverage on domestic companies by financial analysts is much more detailed. There are currently a few solar companies in China that will more than likely be successful, but the current financial turmoil makes it too early to tell.

Chesapeake Energy Issues New Shares, stock diluted.

Chesapeake Energy announced Friday November 28th that they filed forms with the SEC seeking to issue up to 50 million new shares of stock. This could raise up to $1 billion in capital for the company. The share price dropped over 15% during Friday’s trading session with the news of the possible new issuance. The company has been struggling over the past few months due to falling oil and natural gas prices. The new shares will most likely be issued in 2009.

Although the company has issued new shares of its stock many times in the past, the news hit the stock hard because Chesapeake also stated that they were having cash flow problems and may have trouble paying off future debts. Deutsche Bank, one of the underwriters of the new shares, claims that the new issuance is not being done because of cash problems. Deutsche Bank also stated that if the shares were issued today, it would give Chesapeake Energy a 17% expansion in share count. Although the new shares would dilute the current equity, it would provide the firm with around $1billion in cash (given the current market price). Chesapeake also recently sold domestic shale assets to Norwegian company StatoilHydro ASA for $3.38 billion.

When a company issues new stock, it will unavoidably dilute the current shares in the market. Chesapeake Energy is still rated a buy by numerous analysts who have looked at the company’s long term growth potential. The company will look to rebound as the demand for natural gas increases and fuel prices stabilize.

While watching CNBC over the summer, one would have certainly seen commercials about T. Boone Pickens’ energy plan. The oil magnate made his fortune in the 1980s in various takeover and buyout operations and is currently advocating the use of domestic and alternative energy. Pickens is pushing the use of wind farms for electricity generation and natural gas for use as a transportation fuel.

The plan calls for two big changes in domestic energy production. The first is eliminating natural gas as an electricity generation fuel and using it for transportation. Natural gas is highly available domestically and could be widely used for transportation. The second change is the use of wind power for electricity generation. Pickens looks to build wind farms in rural areas throughout the United States, which would free up natural gas supplies for use as a transportation fuel. Although natural gas is fairly cheap and abundant, it is much more valuable if used as a transportation fuel.

Pickens Plan is fairly simple in context, but the implementation will take a great deal of time and effort. Pickens has already invested $2 billion in wind turbines for delivery in 2010, but the project has been temporarily halted due to the decrease in oil prices the past few months. A hurdle to the initiative is inadequate electric grid infrastructure for the widely dispersed wind facilities. Further, natural gas turbines play an important role in managing short term demand variation on the power grid in a way wind, nuclear and coal power cannot.

http://greeninc.blogs.nytimes.com/2008/11/12/pickens-delays-his-plan/

If you are looking to support the Pickens Plan, you can join his New Energy Army below. He is currently looking for 2 million supporters by inauguration day with a goal of having a new energy plan within 100 days of the new president taking office.

http://www.pickensplan.com/act/

(image from pickensplan.com)

Vestas Wind Energy

Vestas Wind Systems A/S is not a household name in the United States, but the Denmark based company claims to be the largest modern energy producer in the world, with a market share of 23 percent. Vestas refers to wind energy as “modern energy” because it is clean, predictable, and renewable. Vestas, by far the largest alternative energy company in the world, makes up almost 20% of the Ardour Global Index, with First Solar being next comprising around 10% of the index. Vestas has installed over 35,000 turbines in 63 different countries and installs a new unit every four hours on average. .

Vestas manufactures various wind turbine models; the main components are made in Denmark. The largest turbine the company makes is the 3 Mw V90. It’s advanced materials and design makes it lightweight and more efficient than previous models. Vestas units have been hooked up for grid compatibility as well as used for offshore and rural applications. On the website, one can see the breakdown of where Vestas units have be installed throughout the world. So far, there are 9,641 Vestas turbines in the United States today creating over 5000 Mw of power.

Currently, Vestas Wind Systems A/S trades on the stock market in Copenhagen under the symbol VWS. There are two ADRs where one can purchase Vestas stock domestically under the symbol VWDRY and VWSYF, but only around 500 million shares are outstanding with an average daily volume of a little over 100,000 shares. VWDRY is one third of a share of VWS so its quote is one third the price. Many individuals may not recognize Vestas domestically, but the company is leading the pack in the alterative energy market. The ADRs have faired much better than other alternative energy stocks over the past few months and will continue to do well in the future.

Sales are strong, the company is expanding, and products are on backorder. However, Vestas stock has dropped nearly 70% over recent months, along with many other additional alternative energy companies. The company's stock may be a bargain at this time because of the quality of product and future growth opportunities.

Ardour Global Alternative Energy Index

Ardour Global Indexes, LLC runs numerous stock indexes, which model various groups of alternative energy companies. The five different indexes divide alternative energy companies into different global regions, as well as one index that models solar energy companies. The Ardour Global Composite Index is the largest, composed of 125 different companies. The rest of the indexes are broken down in to smaller regional sectors. The balancing of the index is based on the market size of the company. Some big names in the index include Vestas Wind Systems, First Solar, and SunPower.

The composite index is composed of companies in the following industries with a few examples given in each:

-Alternative Energy
Solar, wind, biofuel
-Distributed Generation
Fuel cells, diesel engines
-Environmental Technology
Clean coal, water treatment
-Energy Efficiency
Lighting, Energy recycling
-Enabled Technologies
Advanced materials, superconductors

The gamut of industries in the index is general indicator for the alternative energy industry as a whole. This is one of the few, if not the only index specifically tailored to model the growth of alternative energy. The composite index includes all companies dealing in the previously mentioned categories that have a large enough market capitalization. The sub-indices go through rebalancing where companies are added and removed to ensure accuracy. Ardour claims an unbiased approach and maintains independence when analyzing companies. The index will be an interesting tool to track the growth of alternative energy over the next few years. One can also invest in the index as a whole under the symbol GEX, which is an Exchange Traded Fund (ETF) run by VanEck.

More information on the Ardour indexes can be found at:

http://ardour.snetglobalindexes.com/

What the election means for alternative energy

With Barack Obama as the President elect for the United States, the coming years will bring many changes to this country (as we so often heard in the past few months). Either candidate would have hand their hands full come inauguration. The economy is in a slump due to the falling stock market and credit crunch and home prices and consumer confidence continue to fall, but what lies ahead for alternative energy? Both candidates favored the use of alternative energy as a way to reduce our dependence on fossil fuels, so the alternative energy sector would have performed well in the future regardless of what happened on Election Day. In reality, the sector will win out one way or another over time.

Change (it will be hard to use that word in the future without sounding partisan) in energy technology will start to become more and more visible throughout the United States in the coming years. Subsidies for alternative energy projects will increase making more opportunities for solar, wind, and biofuel firms to take on projects. Natural gas will become more widespread as a transportation fuel and dirty coal and dangerous nuclear power plants may become less dominate in electricity generation.

Some alternative energy technologies are approaching the cost effectiveness of traditional fuels such as oil and coal. Although natural gas is used in a similar manner as petroleum fuels, it is highly available domestically and is clean burning. Subsidies for alternative energy will probably become easier for startup companies to obtain. Increased research and design will give more advancement opportunities in various alternative energy technologies.

According to Obama’s energy plan, the administration plans on creating 5 million “green collar” jobs and investing $150 billion in the next 10 years. This injection of capital will help build a future of continued alternative energy use. The energy plan also includes cutting greenhouse gases, putting more plug-in hybrids on the road, and having 10 percent of the nation’s energy come from alternative sources by 2012.

Regardless of the candidate elected, green energy will be big business in the years to come. The industry itself is very diversified and the opportunity for job growth will be high. Hopefully the increase in alternative energy will stimulate the economy and bring more jobs across the nation.

Solyndra: The cylindrical solar system

Solyndra is a private company based in Fremont, California with a unique solar panel design utilizing flat roof spaces. The cylindrical shaped panels resemble fluorescent light bulbs and can be mounted flat on unsloped rooftops. Traditional solar panels must be angled towards direct sunlight to operate efficiently. Solyndra panels (or tubes) lie flat and can collect sunlight from multiple directions. The spaces typically existing between angled panels are eliminated with the Solyndra flat mounting panels. Solyndra panels use a thin film photovoltaic material, wrapping a full 360 degrees around the solar cylinder. This allows sunlight to be collected from both direct rays and rays reflected from the roof underneath the panel, improving collection efficiency. The roof is often painted white to maximize sunlight collection.

The company is young and only has a few installed systems, but the company claims there is enough rooftop space in the United States to supply 150 gigawatts of power using their round solar panels. Since the system lies flat, it is fairly simple to install and doesn’t require much modification to the existing structure. Many businesses may be attracted to the flat panel design because it won’t affect buildings aesthetically. The systems are often unseen from the street level because of the low profile design. This is one of the most unique solar companies around today; more can be read about Solyndra at:

www.solyndra.com

(image from http://solyndra.com/Products/More-Electricity)

Silicon vs. thin film solar cells

Today there are two main types of photovoltaic systems available. The mainstay of the industry and historic method of producing solar panels is with silicon. In short, silicon crystals in the panels harness the sun’s energy and electrons flow through the panels into a usable current of electricity. More can be read on the basics of solar energy at:

http://jc-solarhomes.com/photovolt.htm

 Silicon panels have traditionally been costly to produce and wasteful of material. Ingots of silicon are typically sawn into wafers and then made into panels. Solar grade silicon can reach the price of $500 per kilogram. Silicon panels are generally more efficient than their thin film counterparts and the physical panel itself is relatively simple to dispose of once its working life is through. 

Thin film solar panels are made from a micro thin layer of a semiconducting material such as cadmium telluride or other material combinations. These thin film cells can be made from a wide variety and combinations of materials, all of which depend on the manufacturer. Cost efficiency is an advantage of thin film solar arrays, but silicon is still generally more efficient for energy conversion at this time. First Solar of Arizona is one company successfully manufacturing the cheaper thin film panels, one disadvantage of their product is its toxicity and the eventual problem of disposal at the end of service life.

There is a high amount of competition in the solar energy business. Many companies are looking to produce panels as cheaply as possible and many of these small startups seem to come and go rather quickly. Over the next few years, there will be a greater separation between these two technologies. If the thin film technology becomes more efficient, a decline in the traditional silicon panels will be imminent.

 

http://www.sciam.com/article.cfm?id=solar-power-lightens-up-with-thin-film-cells

http://www.sciam.com/article.cfm?id=how-does-solar-power-work

Natural gas refueling at home: The Phill System

The existing infrastructure for gasoline and diesel fuels is immense. There is talk in the news recently of using natural gas as a transportation fuel, but there are few existing stations in the United States at this point in time. Currently the company FuelMaker (which is being acquired by Clean Energy Fuels Corp., CLNE) manufacturers a product called Phill, a home compressed natural gas fueling station. The system installs outdoors or in a garage and can refuel a natural gas powered vehicle over the course of a few hours or ideally, overnight. The system is being utilized by many fleet operations, such as city buses and other government vehicles. Some states like California already have a fairly widespread use of CNG. This home refueling station might be a big step in switching more vehicles to run on natural gas. 

Compressed natural gas may be utilized more as a transportation fuel in the future due to its low cost and domestic availability. The only commercially available consumer CNG vehicle is the Honda Civic GX. There are also many companies which install aftermarket CNG conversions for vehicles currently running on gasoline or diesel. The Phill System may make purchasing a natural gas vehicle more appealing to consumers, especially those who can use the car for commuting. Natural gas vehicles get about the same mileage per gallon equivalent as gasoline vehicles, but natural gas burns much cleaner and costs less. The Phill System is a big step in converting the nation’s vehicles to run on a domestic fuel source.

 

Read more about the Phill system, the Honda Civic GX, and CLNE at…

 

http://www.myphill.com/

http://automobiles.honda.com/civic-gx/

http://www.cleanenergyfuels.com/main.html

Evergreen Solar Q3 earnings announcement

Evergreen Solar announced third quarter earnings after trading hours October 16^th,and the share price tumbled the next day due to the small margin of revenue. The company lost 18 cents per share, far more than the expected loss of around 10 cents per share. The loss per share increased from the previous quarter, where the company lost 8 cents per share. The loss is attributed to the start up costs of the new Devens manufacturing facility. The net loss for the company is expected to continue into the fourth quarter of this year, with the company’s estimate between 8 and 10 cents per share.

Evergreen solar is still waiting days of profitability. Thus far, the company has yet to report positive earnings per share. According to the conference call the company has $309 million cash on hand, which is enough to complete the Devens manufacturing facility and produce 135 megawatts of product in 2009. Currently, the company is selling just over half of its product in the United States, with the rest of the sales coming from operations with EverQ in Europe and a small amount of business in Asia.

Although the company is currently in a period of expansion and negative earnings, good news did come out of this quarter’s conference call. The company announced two new long-term sales contracts, which will already put the 160mW Devens facility at full capacity beyond 2010. The contracts are with Mainstream Energy Corporation and AEE Solar Corp. These two contracts will put the total long-term sales backlog at over 1 gigawatt. This is a good sign for the company, as customers aren’t afraid of the current credit crunch and have faith in the quality of Evergreen Solar’s product line.

 

The conference call and other announcements can be found here:

 

http://www.evergreensolar.com/app/en/investors/

Energy Stock Horizon

The last two weeks have been a roller coaster ride for the stock market. The Dow Jones Industrial Average had its largest ever up and down point swings one week apart. With the large amount of recent volatility, alternative energy stocks have been heavily beaten down in price. Oil futures have also dipped below $80/ barrel this week, causing even further sell off energy related stocks.
With the recent decline in stock prices across the board, one may wonder if this is the time to own a risky alternative energy stock. Many of these companies rely on debt to finance their operations and long term loans will be harder to obtain in the near future. Even if banks and other financial institutions have the money on hand to loan out, they will be much more selective in their loan processes.
When considering the above mentioned risk factors, one may think stocks (including alternative energy companies) have been beaten down to very low price levels. Many of these have solid financials and good management, but have been pulled down along with the market. Although many of these seem like a steal, it may be awhile before the markets recover. Alternative energy requires a high amount of technology and many investors may flock to seemingly safer blue chip companies during times of financial hardship. Time horizon is an important factor to consider when investing in any stock, especially alternative energy. Recovery of the market is very unpredictable. Emotion can be difficult to contain, but one must keep a long term perspective when investing these days. 

Evergreen Solar stock drops over Lehman Brother bankruptcy

Evergreen Solar (ESLR, the company) closed Friday September 12th at a price of $6.30. Solar stocks were hit heavily on the drop of oil prices. To make matters worse for ESLR, Lehman Brothers filed for bankruptcy over the weekend. Lehman was the underwriter for $373 million of convertible senior notes payable in 2013. There are currently 164 million shares outstanding, so a substantial amount is held at Lehman. ESLR has no obligation to Lehman Brothers, but may suffer the consequences of not having the loaned shares returned. This transaction involved a lending agreement with Lehman where ESLR loaned 30.9 million outstanding shares to Lehman with the expected return of the shares by 2013, when the notes are due. The cash from the senior notes is currently held by ESLR, but the company now has the right to have the loaned shares returned or have the current market value paid back by Lehman. This will obviously be difficult due to the bankruptcy filings.
According to the conference call, Lehman Brothers was notified to return the shares to Evergreen Solar. There are many possible outcomes to this situation, but if Lehman Brothers falls into bankruptcy protection, Evergreen Solar would have to deal with creditors in order to get their shares returned. The shares are still considered on loan until 2013 and not part of outstanding shares on the market, thus will not be displayed on the accounting statements until that time.
As poor market conditions were pulling ESLR down to what seemed like a good buy point last week, something unforeseen happened driving the stock prices down to below $4. It is very hard to state at this point whether or not the stock is at a buy point. The Lehman bankruptcy could significantly hurt the company financially, but there may be claims to Lehman assets as the company enters bankruptcy. The course of these events will unfold over the next few months, providing more insight on the financial condition of Evergreen Solar.