http://www.smallcappulse.com/index.php/alerts/detail/ en tpitcher@smallcappulse.com Copyright 2009 2009-01-06T14:48:00-08:00 http://www.smallcappulse.com/index.php/site/option_trading_strategy_for_yingli_green_energy_nyseyge_on_recent_gains/ http://www.smallcappulse.com/index.php/site/option_trading_strategy_for_yingli_green_energy_nyseyge_on_recent_gains/#When:13:48:00Z January 6, 2009 – We wrote on December 30, that our near-term price target for Yingli Green Energy (NYSE:YGE) was in a range of $8 to $9 (then trading at $5.34) and as of yesterday, it closed at $7.25, up $1.91 or 35% since we wrote than commentary. This morning the stock should get more of a lift on a stronger market and is approaching our target range. We continue to think the long-term fundamentals for YGE remain strong, and are sticking to our forecasts (see “Yingli Green Energy – Our Take”). Our outlook for the solar sector, which we think was way oversold in 2008 on concerns about module oversupply, declining poly prices and tight credit markets, is that a rally in January is likely, and we have been seeing that so far. But our outlook for the broader markets is for a sell-off after the initial buzz of optimism of the incoming Obama administration subsides later this month which could bring the markets back to test November lows. Against this backdrop, solar stocks will have a hard time holding their ground, so we think that these stocks will likely retrace some of their January gains. YGE, in our opinion, is no exception. Our recommendation, then, as a short-term trading strategy is to sell out-of-the money covered calls on YGE into strength (e.g., March 10s or June 12.50s) which would reduce cost average by $0.70 to $0.90 (assuming today’s price) or at least 13%. If the stock gets called away, the trade at $5.34 locks in a 115% gain (assuming March 10 call price) in just three months. If it doesn’t and we continue to see the markets churn sideways, then the call expires, the trade’s purchase price is lessened, and calls can be written again. Over the long term, we think Yingli’s stock moves well back into double digits but this will be a process as the broader markets still have much to work out and there is still significant perceived risk being built into valuations, including the solar sector. The option strategy we are discussing this morning is one way to take advantage of the near-to-mid term choppiness. Important Disclosure: The SCPEditor has no position in YGE.. The information provided here and in the comments are for informational purposes only and are not a solicitation to buy or sell any of these securities. Investing involves substantial risk and you should evaluate your own risk levels before you make any investment. Past results are not an indication of future performance. 2009-01-06T13:48:00-08:00 http://www.smallcappulse.com/index.php/site/ldk_solar_nyseldk_lowers_guidance_for_q4_and_fy2009_our_take/ http://www.smallcappulse.com/index.php/site/ldk_solar_nyseldk_lowers_guidance_for_q4_and_fy2009_our_take/#When:13:25:00Z January 6, 2009 - LDK Solar (Nasdaq:LDK) cut Q4 estimates for revenue to a range of $425 million to $435 million, from previous guidance of $555 to $565 million, based on revised estimates of 245 to255MW of wafer shipments and gross margins of 10% to 13%, down from guided shipments in a range of 260 to 270MW and gross margins of 18% to 21%. Management also guided lower for 2009 revenue to a range of $2.3 billion to $2.5 billion with gross margins estimated to be in a range of 22% to 27%. Previous 2009 guidance was for a range of $2.9 to $3.1 billion. The stock traded down in after hours yesterday on the news to $12.53, down 15.57%. LDK has been one of the solar companies we have been the most bullish on, and while the fact that its lowered guidance raises several concerns, we think the risk which has materialized into lower wafer shipments and delays in ramping production was already priced into the stock. Our previous trading range target for LDK was in the $23 to $26 range based on a 1.5x sales and 8x earnings multiples for FY2008 based on estimates sales of $1.77 billion and earnings of $371 million. After adjusting our sales and earnings targets downward to $1.64 billion and $317 million, respectively, we are lowering our target stock price to $22 maintaining our multiple targets of 1.5x forecasted sales and 8x forecasted earnings. We think that these multiples are more than defensible given what remains triple digit forecasted growth on both revenue (+213%) and income (+120%) on a Y/Y basis. Adjusting for FY2008 lowered revenues and income, of $2.35 billion and $470 million, respectively, our multiples imply a price target range against FY2009 forecasts of $31 to $33. Again, we think 1.5x sales and 8x earnings are absolutely reasonable against a 43% to 48% Y/Y growth rate and margin expansion from 11% to 23%. Important Disclosure: The SCPEditor is LONG LDK.. The information provided here and in the comments are for informational purposes only and are not a solicitation to buy or sell any of these securities. Investing involves substantial risk and you should evaluate your own risk levels before you make any investment. Past results are not an indication of future performance. 2009-01-06T13:25:00-08:00 http://www.smallcappulse.com/index.php/site/why_ldk_is_one_of_the_best_stocks_to_own_in_2009/ http://www.smallcappulse.com/index.php/site/why_ldk_is_one_of_the_best_stocks_to_own_in_2009/#When:15:52:00Z                                                                January 5, 2009 - LDK Solar (NYSE: LDK) closed at $13.12 on Wednesday, the last session of 2008, holding a market cap of $1.48 billion, about 1.06x trailing 12-month sales and 4.42x trailing 12-month earnings. We think this stock is remarkably cheap, and represents one of the best investment opportunities for growth oriented investors and it is the best one that we know of. Here is why. * Strong revenue and income growth - Most recent quarter (Q3) reported revenues of $541.8 million, up 22.7% sequentially and 241.4% Y/Y. Net income for the quarter was $88.4 million, or $0.77 per share, compared to net income of $149.5 million, or $1.29 per share in the second quarter and an increase of 112% from the $41.6 million, or $0.37 per share reported for the same period last year. Note: the decline income to $88.4 million from $149.5 million in the prior quarter resulted from a one-time revaluation of $60 million, or $0.50 per share relating to the change of a prepaid forward contract. * Strong performance and consistency - reported financial results on high end range of previous guidance in most recent quarter and again, raised its target for annualized production capacity for 2008 to 1.4GW, 2.3GW by the end of 2009 and 3.2GW by the end of 2010. * Strong backlog - booked more than 14GW in wafer orders pus 6GW of wafer processing service orders. To put this in perspective, LDK's sales in Q3 on 206.3MW in wafers were about $541 million. As of October 30, 2008, LDK had secured contracts totalling 1.8GW for 2009, which is more than 100% of its planned output for the year. Its forecasted revenues of $3 billion in 2009 are already locked in. * Solid balance sheet, cash position and access to capital - About $406 million in cash, or $3.06 per share, and a credit facility of about $430 million. Concerns: * ASP erosion and gross margins - as with other solar firms, LDK has had to deal with issues of module oversupply which are pushing down ASPs and creating margin pressure.In the most recent quarter, it reported declines in gross margin to 22.7% from 25.4% in the prior quarter (Q2). However, management attributed this to higher silicon sourcing costs and indicated that it actually increased its selling prices. Gross margins in the Q4 are expected to come in between 18% to 21%, which would be another decline, which would, in our opinion, reflect the industry conditions more accurately. LDK 's ASP per watt in Q3 were $2.48, management is guiding in Q4 that they will be $2.20 and in 2009 they will likely come in about 10% lower than at present to about $2.00. Management believes that as it begins to become more vertically integrated, moving its polysilicon production in-house, it will be able to buffer, and even improve margins. We should begin seeing this take effect in the second half of 2009. Managment has indicated that gross margins will bottom in Q1, 2009 and begin strengthening into Q2. It is also important to note that a significant amount of LDK 's margin pressure has been a consequence of a weaker euro. But the euro began strengthening against the dollar in the second half of December, and our outlook for the euro is bullish relative to the dollar, in 2009. * Polysilicon plant and production  - There have been concerns about LDK 's buildout of its poly plant, associated costs and access to capital in a tight credit market. In terms of progess getting its poly manufacturing facility on track, management said it expects to produce between 5,000MT and 7,000MT in 2009. This has been one of the few areas in terms of LDK's performance which haven't been on schedule, so its adjusted polysilicon output in 2008 is in a range of 15MT to 25MT.  * Long-term Take-or-Pay contracts - while these are a strength, in our opinion, of LDK 's business, providing long-term visibility on revenue, with pre-payments and fixed prices, there is some skepticism amongst analysts following the company that there could be cases where a customer experiencing financial difficulty comes to LDK providing little notice that it can't honor the contract any more, and whether LDK has enough incremental demand to make up for this volume. Management has addressed this concern directly and says the risk here is low, in light of the quality of its customers and prepayments already made. Our Take We think that the risks addressed by the concerns noted above have more than been priced into the stock price.  Keep in mind that in September, 2008, LDK raised $192 million at $41.75 per ADS, about 218% higher than Wednesday's closing price. We are forecasting $1.77 billion in revenue and $371 million in net income for FY2008 and $3 billion, with $600 million in net income for 2009. This equates to 239% Y/Y projected revenue growth for FY2008 over FY2007, and 69% Y/Y projected revenue growth for FY2009 over FY2008. And on an income growth basis, this equates to 158% Y/Y projected income growth for FY2008 over FY 2007 and 61% Y/Y projected income growth for FY2009 over 2008. We believe that our forecast estimates are extremely conservative, given the fact that we have three of the four quarters for FY2008 under our belt at this point, and LDK's contracts are long-term take-or-pay with prepayments, not to mention management's track record of hitting the high range of its guidance. That being said, we think that a 1.5x P/S multiple on FY2008 sales and an 8x P/E multiple on FY2008 income are easily defensible. These multiples would yield an implied $23 to $26 stock trading range, an increase of 75% to 98% respectively. To further emphasize how conservative we think our estimates and price targets are, consider the fact that management has already guided that it is oversold on capacity for FY2009, with more long-term take-or-pay contracts and prepayments. Now, assuming our target stock trading range of $23 to 26. At those levels, the stock would only be trading 0.89x FY2009 sales and 4.96x FY2009 income. The upside for LDK's stock is extremely compelling, we think. At 1.5x our forecasted FY2009 sales and 8x our forecasted FY2009 income, the stock trading range would be $39 to $42, a 197% to 220% increase from current levels - and keep in mind that LDK raised $192 million in a follow-on offering back in September, 2008 at $41.75 per ADS, so there is a market for this stock at significantly higher levels. IMPORTANT DISCLOSURE NOTE: SCPEditor is LONG LDK. The information and trades provided here and in the comments are for informational purposes only and are not a solicitation to buy or sell any of these securities. Investing involves substantial risk and you should evaluate your own risk levels before you make any investment. Past results are not an indication of future performance.   2009-01-05T15:52:00-08:00 http://www.smallcappulse.com/index.php/site/why_ldk_solar_nyseldk_is_one_of_the_best_stocks_to_own_in_2009/ http://www.smallcappulse.com/index.php/site/why_ldk_solar_nyseldk_is_one_of_the_best_stocks_to_own_in_2009/#When:15:17:00Z January 2, 2009 - LDK Solar (NYSE:LDK) closed at $13.12 on Wednesday, the last session of 2008, holding a market cap of $1.48 billion, about 1.06x trailing 12-month sales and 4.42x trailing 12-month earnings. We think this stock is remarkably cheap, and represents one of the best investment opportunities for growth oriented investors and it is the best one that we know of. Here is why: * Strong revenue and income growth - Most recent quarter (Q3) reported revenues of $541.8 million, up 22.7% sequentially and 241.4% Y/Y. Net income for the quarter was $88.4 million, or $0.77 per share, compared to net income of $149.5 million, or $1.29 per share in the second quarter and an increase of 112% from the $41.6 million, or $0.37 per share reported for the same period last year. Note: the decline income to $88.4 million from $149.5 million in the prior quarter resulted from a one-time revaluation of $60 million, or $0.50 per share relating to the change of a prepaid forward contract. * Strong performance and consistency - reported financial results on high end range of previous guidance in most recent quarter and again, raised its target for annualized production capacity for 2008 to 1.4GW, 2.3GW by the end of 2009 and 3.2GW by the end of 2010. * Strong backlog - booked more than 14GW in wafer orders pus 6GW of wafer processing service orders. To put this in perspective, LDK's sales in Q3 on 206.3MW in wafers were about $541 million. As of October 30, 2008, LDK had secured contracts totalling 1.8GW for 2009, which is more than 100% of its planned output for the year. Its forecasted revenues of $3 billion in 2009 are already locked in. * Solid balance sheet, cash position and access to capital - About $406 million in cash, or $3.06 per share, and a credit facility of about $430 million. Concerns: * ASP erosion and gross margins - as with other solar firms, LDK has had to deal with issues of module oversupply which are pushing down ASPs and creating margin pressure.In the most recent quarter, it reported declines in gross margin to 22.7% from 25.4% in the prior quarter (Q2). However, management attributed this to higher silicon sourcing costs and indicated that it actually increased its selling prices. Gross margins in the Q4 are expected to come in between 18% to 21%, which would be another decline, which would, in our opinion, reflect the industry conditions more accurately. LDK's ASP per watt in Q3 were $2.48, management is guiding in Q4 that they will be $2.20 and in 2009 they will likely come in about 10% lower than at present to about $2.00. Management believes that as it begins to become more vertically integrated, moving its polysilicon production in-house, it will be able to buffer, and even improve margins. We should begin seeing this take effect in the second half of 2009. Management has indicated that gross margins will bottom in Q1, 2009 and begin strengthening into Q2. It is also important to note that a significant amount of LDK's margin pressure has been a consequence of a weaker euro. But the euro began strengthening against the dollar in the second half of December, and our outlook for the euro is bullish relative to the dollar, in 2009. * Polysilicon plant and production  - There have been concerns about LDK's build-out of its poly plant, associated costs and access to capital in a tight credit market. In terms of progess in getting its poly manufacturing facility on track, management said it expects to produce between 5,000MT and 7,000MT in 2009. This has been one of the few areas in terms of LDK's performance which haven't been on schedule, so its adjusted polysilicon output in 2008 is in a range of 15MT to 25MT.  * Long-term Take-or-Pay contracts - while these are a strength, in our opinion, of LDK's business, providing long-term visibility on revenue, with pre-payments and fixed prices, there is some skepticism amongst analysts following the company that there could be cases where a customer experiencing financial difficulty comes to LDK providing little notice that it can't honor the contract any more, and whether LDK has enough incremental demand to make up for this volume. Management has addressed this concern directly and says the risk here is low, in light of the quality of its customers and prepayments already made. Our Take We think that the risks addressed by the concerns noted above have more than been priced into the stock price.  Keep in mind that in September, 2008, LDK raised $192 million at $41.75 per ADS, about 218% higher than Wednesday's closing price. We are forecasting $1.77 billion in revenue and $371 million in net income for FY2008 and $3 billion, with $600 million in net income for 2009. This equates to 239% Y/Y projected revenue growth for FY2008 over FY2007, and 69% Y/Y projected revenue growth for FY2009 over FY2008. And on an income growth basis, this equates to 158% Y/Y projected income growth for FY2008 over FY 2007 and 61% Y/Y projected income growth for FY2009 over 2008. We believe that our forecast estimates are extremely conservative, given the fact that we have three of the four quarters for FY2008 under our belt at this point, and LDK's contracts are long-term take-or-pay with prepayments, not to mention management's track record of hitting the high range of its guidance. That being said, we think that a 1.5x P/S multiple on FY2008 sales and an 8x P/E multiple on FY2008 income are easily defensible. These multiples would yield an implied $23 to $26 stock trading range, an increase of 75% to 98% respectively. To further emphasize how conservative we think our estimates and price targets are, consider the fact that management has already guided that it is oversold on capacity for FY2009, with more long-term take-or-pay contracts and prepayments. Now, assuming our target stock trading range of $23 to 26. At those levels, the stock would only be trading 0.89x FY2009 sales and 4.96x FY2009 income. The upside for LDK's stock is extremely compelling, we think. At 1.5x our forecasted FY2009 sales and 8x our forecasted FY2009 income, the stock trading range would be $39 to $42, a 197% to 220% increase from current levels - and keep in mind that LDK raised $192 million in a follow-on offering back in September, 2008 at $41.75 per ADS, so there is a market for this stock at significantly higher levels. SCPEditor Disclosure: SCPEditor is LONG LDK. The information and trades provided here and in the comments are for informational purposes only and are not a solicitation to buy or sell any of these securities. Investing involves substantial risk and you should evaluate your own risk levels before you make any investment. Past results are not an indication of future performance.   2009-01-02T15:17:00-08:00 http://www.smallcappulse.com/index.php/site/jesup_lamonts_yerger_weighs_in_on_a_power_nasdaqapwr/ http://www.smallcappulse.com/index.php/site/jesup_lamonts_yerger_weighs_in_on_a_power_nasdaqapwr/#When:13:40:00Z December 31, 2008 – Analyst Comments – Jesup & Lamont’s Brian Yerger weighed in on A-Power’s (Nasdaq:APWR) recent revision downward, and the subsequent selloff in its stock, rating the stock a BUY this morning with a $14 price target, a considerably higher level than yesterday’s closing price of $4.11. Here are his takeaways: ·         While APWR’s management revised 2008 guidance, it didn’t revise 2009 guidance, which is at net income of $70 million, with EPS estimated at $2; ·         Yerger is lowering 2008 and 2009 estimates. His 2009 revenue estimate has moved to $625.3 million from $756 million and his new EPS estimate is revised lower to $1.44 from $1.92. ·         Yerger believes that APWR’s shares are “attractively valued” at current levels and represent an opportunity for risk tolerant investors to exposure to China’s surging energy market. ·         Revised price target down from $19 to $14 based on 10x multiple of expected FY2009 earnings per share. We agree with Yerger that A-Power’s stock is attractive at current levels and think the risk, as well as adjusted estimates are likely priced into the stock at current levels. Our price target for the stock is in the $7 to $8 range, however, because we think there is a ‘believe-ability’ factor which APWR lacks right now with the Street and until it gets its communications strategy in order to begin building a stronger sense that it is credible, it will continue to get a significant discount to its growth and market opportunity. Important Disclosure: The SCPEditor is does not hold any position (Long or Short) in APWR. The information and trades provided here and in the comments are for informational purposes only and are not a solicitation to buy or sell any of these securities. Investing involves substantial risk and you should evaluate your own risk levels before you make any investment. Past results are not an indication of future performance. 2008-12-31T13:40:00-08:00 http://www.smallcappulse.com/index.php/site/a_power_nasdaqapwr_revises_downward_street_reacts_to_continued_lack_of_comm/ http://www.smallcappulse.com/index.php/site/a_power_nasdaqapwr_revises_downward_street_reacts_to_continued_lack_of_comm/#When:17:24:00Z December 30, 2008 – A-Power (Nasdaq:APWR) one of the stocks that we think has the most potential for growth in 2009, is getting beaten up this morning after management revised guidance for the Q4 downward – with revenue now estimated to come in at about $76 million, down from previous guidance of $158 million, and net income estimated at about $5 million from the previous guidance of $15.5 million. Management cited tough economic conditions which pushed contracts out into the next quarter which it had expected to close in the first quarter as the reason. Well, the stock is dipping below $4 at this point, which even at $4, represents a 0.52x multiple of adjusted sales estimates for this year, and 5.7x adjusted income, and Y/Y revenue growth remains respectable at 55%, while Y/Y income growth is now expected to be 53%, still respectable. As of the most recent quarter, APWR has about $1.75 in cash per share. Moreover, management didn’t say that it has lost the expected business, but only that it has been pushed out in the more challenging economic environment. On the distributed energy side of its business alone, its backlog is more than $800 million, more than 6 times its current market cap. Adding the expected close of turbines in negotiation would push the backlog over $1 billion. Management didn’t make any adjustments to its forecasted net income for FY2009, which is $70 million, but we will go ahead and discount that by 30% to $49 million. At the current $4 per share, the stock is trading at 3.4x our adjusted estimate of $49 million in net income in 2009. Granted, the company continues to do a miserable job communicating its business outlook to the Street, and is getting punished for it. Even before the revision today, the Street had been massively discounting the stock which implies a serious credibility issue. Today’s news won’t help, and neither will the fact that the Company still hasn’t placed a full-time CFO. So, our expectation is that the stock will continue to get a heavy discount in terms of valuation. We are adjusting our target price for the stock to about $7 and will wait to raise it again until management demonstrates that it has got its act together. Our target is based on an assumed 1x FY2008 sales of $260 million, and 10x assumed FY2008 income of $23.4 million. Assuming that the business remains in tact and that there isn’t any jeopardy to the current backlog, a $7 stock price would still be only 5.3x our adjusted income target of $49 million for FY2009. The real upside to the story for us now is when the company demonstrates its business is back on track. If it does, and can show us that it will be able to hit its original FY09 income target of $70 million, or even fall into a range of $60 to $70 million, we would adjust our estimates upward significantly. At the current level, however, we think that the risk to the story is more than factored in. Important Disclosure: The SCPEditor is does not hold any position (Long or Short) in APWR. The information and trades provided here and in the comments are for informational purposes only and are not a solicitation to buy or sell any of these securities. Investing involves substantial risk and you should evaluate your own risk levels before you make any investment. Past results are not an indication of future performance. 2008-12-30T17:24:00-08:00 http://www.smallcappulse.com/index.php/site/december_302008_yingil_green_energy_nyseyge_still_well_positioned_going_int/ http://www.smallcappulse.com/index.php/site/december_302008_yingil_green_energy_nyseyge_still_well_positioned_going_int/#When:16:28:00Z    December 30, 2008 - Yingli Green Energy (NYSE: YGE) is one of the midstream solar companies we touted in 2008, and continue to think is well-positioned in the group. That being said, the stock has been hammered, along with all of the other midstream solar firms. The stock opened on January 2, 2008 at $39.01. Yesterday, the stock closed at $5.34, trading at 0.66x our forecasted sales for 2008 of $1.05 billion (which would represent 88% Y/Y revenue growth, and at about 6x our forecasted 2008 income for YGE at $115.5 million (which would represent 116% Y/Y income growth). So the question is whether the stock is oversold at current levels, and whether it is timely now. The current stock price reflects a relatively downbeat Q3 earnings report (see below), concern about declining ASPs (management estimates that ASPs will decline by about 15% to 20% in the Q4, and by about 30% in 2009 from 2008 levels) and whether the business will have sufficient cash flow and capital on hand to cover its cap ex requirements in 2009 and planned expansion of capacity to 600MW. Management has iterated that its current cash flow and credit facility, as well as its expected cashflow will be sufficient. The December 23 announcement helps create some confidence that the business will be able to meet its expected $90 million in expected cap ex expenditures in 2009 (which will take capacity from 400MW to 600MW). On the positive side, polysilicon prices are also declining and this should help lower Yingli's blended poly costs, and unit cost per watt. Management expects this to decline by 12% to 17% in the fourth quarter and in 2009 by 40% to 45% from 2008 levels (which will provide  leverage on gross margins). Yingli intends to move upstream through the purchase of Cyber Power, which owns a poly manufacturing business - a vertically integrated model which is being pursued by other midstream firms like LDK Solar. The question here is whether the timing is right, in light of the fact that poly prices are expected to decline from the current $200 to $250 a kilo range to $100 in the next 12 months. On paper the move makes sense, and we certainly think companies like LDK will benefit from reduction of material costs and manufacturing costs associated with adding poly manufacturing to its portfolio - integrating the entire PV value chain, and gaining control over all critical aspects ot the production, and even in improving quality through tighter quality controls. Yingli can benefit in all of these manners, and the risks as we see it, are execution, getting the facility integrated efficiently and controlling costs in the process - in addition to ensuring it has sufficient capital on hand operate the integrated business. If it can, then the benefits should far outweigh the margin pressure poly is going to experience over the next 12 months or so. Recent Announcements December 23- Secured $70 million loan agreement with China Development Bank to fund its planned 100MW expansion, which will bring annual prodcution capacity in Q3 2009 to 600MW. December 19 - Signed sales agreements for 35MW and up to 65MW to two German integrators (20MW to City Solar, w/ option to purchase additional 30MW in 2009; and 15MW of modules to Wirsol w/ option to purchase additional 20MW in 2009). December 5 - Signed sales agreements with Germany-based IBC Solar for 91MW of modules (through Dec 2009). December 5 - Reaffirmed 2009 shipment forecast of 550 to 600MW of modules, and GM for 2009 of 24% (or better).Recent quarterly financial results (Q3) * Net revenues of $325.5 million, an increase from $289.6 million sequentially and $188 milllion from the same period last year. * ASPs were $4.04 per watt, down 3.8% from $4.20 per what in the Q2, 2008 (driven by depreciation of the euro against the RMB)* Total PV module shipments were up 17.3% to 80MW on a sequential basis. * Gross margin was 22.3%, down from 25.8% the prior quarter. * Op ex was basically flat on a sequential basis at $17 million, and represented about 5.2% of net revenue. * Operating income was $55.5 million, down 4.7% from the prior quarter. * Net income was $22.2 million, down from $30.2 million in the prior quarter.Our Take We mentioned at the outset the $5.34 represents a 0.6x multiple of our forecasted sales this year, and a 6x multiple of our forecasted income for YGE this year. If we look at the stock in a vacuum relative to its peers and against its most recent quarterly report, we don't think the stock is too oversold. If we look at the midstream solar sector (its peers) relative to the growth prospects of the industry and strong underlying growth drivers, we think the whole group is tremendously oversold, including YGE. For example, LDK Solar (NYSE: LDK) is trading at 0.77x our forecasted 2008 sales, and 4.25 our forecasted 2008 earnings. Relative to LDK, which continues to outperform all companies in its group, YGE still looks a bit expensive. On the other hand, we think that LDK's current valuation takes into consideration only the risk in the sector (module oversupply, ASP erosion, tight credit markets) and none of the upside (strong secular growth drivers driven by domestic and global legislation, increasing cell efficiencies and the fact that declining prices ultimately bode well for increased end demand). Our forecasted top-line sales number for YGE in 2009 is $1.45 billion, and our forecasted income is $159 million. We believe that these are conservative and defensible estimates, assuming 550MW of modules (the low end of YGE's guidance) shipped at ASPs per watt of about $2.65, well below industry estimates. Based on these assumptions, the stock is currently trading at 0.48x FY09 estimated sales and 4.33x FY09 estimated income. Our near term stock price target range for YGE is $8 to $9, a 49% to 68% increase from current levels, which would represent a 1x sales multiple of 2008, and a 0.72x sales multiple of 2009; and a 10x earnings multiple of 2008, and a 7.24x earnings multiple of 2009.Here is what other analysts are saying: ·         Jesup & Lamont rates at BUY with $11 price target (12/1/08) ·         AmTech Research rates at BUY with $6 price target (11/13/08)Important Disclosure: The SCPEditor is does not hold any position (Long or Short) in YGE. The information and trades provided here and in the comments are for informational purposes only and are not a solicitation to buy or sell any of these securities. Investing involves substantial risk and you should evaluate your own risk levels before you make any investment. Past results are not an indication of future performance.      2008-12-30T16:28:00-08:00 http://www.smallcappulse.com/index.php/site/yingli_green_energy_nasdaqyge_our_take/ http://www.smallcappulse.com/index.php/site/yingli_green_energy_nasdaqyge_our_take/#When:14:03:00Z December 30, 2008 – Yingli Green Energy (NYSE:YGE) is one of the midstream solar companies we touted in 2008, and continue to think is well-positioned in the group. That being said, the stock has been hammered, along with all of the other midstream solar firms. The stock opened on January 2, 2008 at $39.01. Yesterday, the stock closed at $5.34, trading at 0.66x our forecasted sales for 2008 of $1.05 billion (which would represent 88% Y/Y revenue growth, and at about 6x our forecasted 2008 income for YGE at $115.5 million (which would represent 116% Y/Y income growth). So the question is whether the stock is oversold at current levels, and whether it is timely now. The current stock price reflects a relatively downbeat Q3 earnings report (see below), concern about declining ASPs (management estimates that ASPs will decline by about 15% to 20% in the Q4, and by about 30% in 2009 from 2008 levels) and whether the business will have sufficient cash flow and capital on hand to cover its cap ex requirements in 2009 and planned expansion of capacity to 600MW. Management has iterated that its current cash flow and credit facility, as well as its expected cashflow will be sufficient. The December 23 announcement helps create some confidence that the business will be able to meet its expected $90 million in expected cap ex expenditures in 2009 (which will take capacity from 400MW to 600MW). On the positive side, polysilicon prices are also declining and this should help lower Yingli's blended poly costs, and unit cost per watt. Management expects this to decline by 12% to 17% in the fourth quarter and in 2009 by 40% to 45% from 2008 levels (which will provide  leverage on gross margins). Yingli intends to move upstream through the purchase of Cyber Power, which owns a poly manufacturing business - a vertically integrated model which is being pursued by other midstream firms like LDK Solar. The question here is whether the timing is right, in light of the fact tha poly prices are expected to decline from the current $200 to $250 a kilo range to $100 in the next 12 months. On paper the move makes sense, and we certainly think companies like LDK will benefit from reduction of material costs and manufacturing costs associated with adding poly manufacturing to its portfolio - integrating the entire PV value chain, and gaining control over all critical aspects ot the production, and even in improving quality through tighter quality controls. Yingli can benefit in all of these manners, and the risks as we see it, are execution, getting the facility integrated efficiently and controlling costs in the process - in addition to ensuring it has sufficient capital on hand operate the integrated business. If it can, then the benefits should far outweigh the margin pressure poly is going to experience over the next 12 months or so.  Recent Announcements December 23 - Secured $70 million loan agreement with China Development Bank to fund its planned 100MW expansion, which will bring annual prodcution capacity in Q3 2009 to 600MW. December 19 - Signed sales agreements for 35MW and up to 65MW to two German integrators (20MW to City Solar, w/ option to purchase additional 30MW in 2009; and 15MW of modules to Wirsol w/ option to purchase additional 20MW in 2009). December 5 - Signed sales agreements with Germany-based IBC Solar for 91MW of modules (through Dec 2009). December 5 - Reaffirmed 2009 shipment forecast of 550 to 600MW of modules, and GM for 2009 of 24% (or better). Recent quarterly financial results (Q3) * Net revenues of $325.5 million, an increase from $289.6 million sequentially and $188 milllion from the same period last year. * ASPs were $4.04 per watt, down 3.8% from $4.20 per what in the Q2, 2008 (driven by depreciation of the euro against the RMB) * Total PV module shipments were up 17.3% to 80MW on a sequential basis. * Gross margin was 22.3%, down from 25.8% the prior quarter. * Op ex was basically flat on a sequential basis at $17 million, and represented about 5.2% of net revenue. * Operating income was $55.5 million, down 4.7% from the prior quarter. * Net income was $22.2 million, down from $30.2 million in the prior quarter. Our Take We mentioned at the outset the $5.34 represents a 0.6x multiple of our forecasted sales this year, and a 6x multiple of our forecasted income for YGE this year. If we look at the stock in a vacuum relative to its peers and against its most recent quarterly report, we don’t think the stock is too oversold. If we look at the midstream solar sector (its peers) relative to the growth prospects of the industry and strong underlying growth drivers, we think the whole group is tremendously oversold, including YGE. For example, LDK Solar (NYSE:LDK) is trading at 0.77x our forecasted 2008 sales, and 4.25 our forecasted 2008 earnings. Relative to LDK, which continues to outperform all companies in its group, YGE still looks a bit expensive. On the other hand, we think that LDK’s current valuation takes into consideration only the risk in the sector (module oversupply, ASP erosion, tight credit markets) and none of the upside (strong secular growth drivers driven by domestic and global legislation, increasing cell efficiencies and the fact that declining prices ultimately bode well for increased end demand). Our forecasted top-line sales number for YGE in 2009 is $1.45 billion, and our forecasted income is $159 million. We believe that these are conservative and defensible estimates, assuming 550MW of modules (the low end of YGE’s guidance) shipped at ASPs per watt of about $2.65, well below industry estimates. Based on these assumptions, the stock is currently trading at 0.48x FY09 estimated sales and 4.33x FY09 estimated income. Our near term stock price target range for YGE is $8 to $9, a 49% to 68% increase from current levels, which would represent a 1x sales multiple of 2008, and a 0.72x sales multiple of 2009; and a 10x earnings multiple of 2008, and a 7.24x earnings multiple of 2009. Here is what other analysts are saying: ·         Jesup & Lamont rates at BUY with $11 price target (12/1/08) ·         AmTech Research rates at BUY with $6 price target (11/13/08) Important Disclosure: The SCPEditor is does not hold any position (Long or Short) in YGE. The information and trades provided here and in the comments are for informational purposes only and are not a solicitation to buy or sell any of these securities. Investing involves substantial risk and you should evaluate your own risk levels before you make any investment. Past results are not an indication of future performance. 2008-12-30T14:03:00-08:00 http://www.smallcappulse.com/index.php/site/memc_nysewfr_our_take1/ http://www.smallcappulse.com/index.php/site/memc_nysewfr_our_take1/#When:15:44:00Z December 29, 2008 - MEMC (NYSE:WFR) has been a favorite on the Street in terms of upstream polysilicon producers, and despite the fact that it has tripped up on several occasions this year, it is still getting relative votes of confidence. At $13.05, down from $89.61 on the first day of trading in 2008, the question is whether this is the time to buy, or whether there is still risk to the downside. The company showed signs of coming back in the Q3, after missing its own expectations in Q2, citing 'unanticipated' events which undermined the business during the period. It had a premature failure of a heat-exchanger at its Merano, Italy, facility that resulted in reducing its poly output by about 5%; and then its output at its Pasadena, Texas, facility suffered as a result of a loose pipe fitting which caused a fire. But then management lowered Q4 guidance on 12/17 to a revenue range of $400 to $425 million with GP in a 46% to 50% range, and op ex of $27 million. It cited deteriorating end demand for semi products and a weak macroeconomic environment. This was after it cut its Q4 forecast on 11/17 to a revenue range of $540 to $600 million, and its GP to a 48% to 50% range. In October, the company replaced its CEO, who resigned. The stock is trading at 4.2x earnings (ttm), but 6.62x our forecasted earnings for this year (08) of 442, and while it is trading at 1.38x sales (ttm), its is trading at 1.47x this year's forecasted sales of $1.98 billion. Both sales and income this year are expected to decline over 2007. Here is what analysts are saying: * Deutsche rates at BUY with $18.50 price target * UBS rates at BUY with $20 price target * Barclays rates at BUY with $25 price target * Friedman Billings rates at OUTPERFORM with $25 price target * Caris & Company rates at AVERAGE with $13 price target * Collins Stewart rates at HOLD * Ardour Capital rates at BUY with $28 price target The ratings and price targets made above are all as of November. We are inclined to side more with Caris' assessment for the near term at least until MEMC works out some of its issues. The bull market in polysilicon had been a major driver of MEMC's growth into 2008 but there is a massive amount of poly production coming into the markets beginning in later 2009 and into 2010 which will be a catalyst for bringing prices back down to earth, closer to $100 per kg by 2010 from the $500 level hit earlier this year. And more entrants into the markets will create further margin pressure. MEMC has been a favorite amongst analysts because its cost structure is one of the lowest in the industry, so it should be able to do relatively ok even with declining prices. We think the current $13 stock price probably takes into consideration most of the risk, and the stock could dip below $10 again before it makes its way back over the $20 mark. Along the way, declines in poly prices and increasing competition will continue to be headwinds. We would be buyers of MEMC anywhere under $10, all things being equal. Another strategy, if you want to own the stock over the longer-term, is to sell February 2009 $12.50 puts for $1.75 on it. If the stock dips to $10.50 or below you will likely get put the stock, at a cost of about $10.75 (17% discount to today's price). If it doesn't, you take in the $1.75 for making the committment (talk with your brokers about this strategy). Important Disclosure: SCPEditor is not long or short WFR. The information and trades provided here and in the comments are for informational purposes only and are not a solicitation to buy or sell any of these securities. Investing involves substantial risk and you should evaluate your own risk levels before you make any investment. Past results are not an indication of future performance. 2008-12-29T15:44:00-08:00 http://www.smallcappulse.com/index.php/site/capstone_initiates_raser_nyserz_with_buy_rating_and_our_discussion_with_ceo/ http://www.smallcappulse.com/index.php/site/capstone_initiates_raser_nyserz_with_buy_rating_and_our_discussion_with_ceo/#When:15:08:00Z December 22, 2008 – Analyst Comments – Capstone analyst Adam Adelman issued a BUY rating on Raser Technologies (NYSE:RZ) this morning, setting a $7 price target. Adelman’s takeaways: ·         Raser is transitioning from developmental stage to commercial viability; ·         Raser’s modular approach to building geothermal power plants will enable it to cut plant development times and its technology enables it to generate power from lower temperatures; ·         Secular trends – geothermal, as a baseload power source has advantages for utilities over other alternative energy sources like wind and power; and geothermal is poised for strong growth in general; ·         Raser as a strong growth strategy in place with plans to add 100MW per year over the next three years and 150MW per year thereafter; ·         Bottom cycling can contribute to additional cashflow; and ·         Power purchase agreements provide long-term stability and visibility to business model. Raser’s CEO Brent Cook recently weighed in on his outlook on geothermal with us: Aspire: What surprised you about the renewable energy/clean tech markets in 2008? Were there any significant developments (political, technological, consumer-driven and/or industry-driven) that occurred which you weren’t anticipating?   Cook:  How strong the markets continued to be for producers inspite of market turmoil. Also surprising was how lethargic and delayed congressional reaction was in passing the PTC despite a clear energy crisis.  Aspire: Obama’s administration has set a target of 10% of electricity coming from renewable sources by 2012, and 25% by 2025. In 2007, renewable energy’s contribution to total electricity generation in the U.S. was about .962 billion kWh per day, or about 8.4% of the total, and the EIA projects that by 2009 it will contribute about 1.039 billion kWh per day, or about 9.1%. Excluding hydropower, renewable electricity in 2007 represents only about 3% of installed electricity capacity and 2.5% of generation in the U.S. Do you think the 10% target is realistic by 2012 given the current global financial crisis?     Cook: Yes, it is an achievable target but should include all utility providers regardless of size or type.  Aspire: And where do you see the biggest contribution to reaching this target in terms of renewable energy sources?  Cook: Geothermal will clearly be a major producer once serious targets are established. There is a renaissance occurring now, but it will elevate as the targets are established. The South and other regions will have to adopt “fair” rules to acknowledge early adopters vs South region. Geothermal energy production costs about 5.5 to 0.10 cents per kWh. On this basis, and in light of the fact that geothermal is base-load power, it can compete with fossil-fuel energy sources. Yet growth has been pretty modest. Nameplate capacity for geothermal increased only by 3.7% from 2006 to 2007, while geothermal production and consumption actually decreased for the first eight months this year by about 0.8% over the same period in 2007. Compounded Annual Growth Rate (CAGR) (2000-2007) Wind – 30.7% Solar PV – 29.5% Concentrated Solar Power – 2.4% Biomass – 1.4% Geothermal – 0.7%  Aspire: What do you think the key reasons for the sluggish growth of geothermal are?  Cook: Indecisive incentives (PTC) with continued low priority to address transmission hassles. There will clearly be supply once serious demand and priority access to transmission is made possible.  Aspire: What are the key challenges to getting geothermal on a faster growth track in terms of production and consumption in the U.S.?   Cook: Stable policy making and transmission access Aspire: What do you think the Obama administration’s energy plan has for geothermal, in particular? What do you expect?   Cook: National RPS standard and longer term PTC and Refundable PTC legislation. Serious thought should be given to making drilling capital available to geothermal  Aspire: What factors do you think will help drive growth?   Cook: Access to capital; it is clearly the single largest deterrent  Aspire: The Geothermal Energy Association reported that, as of August, there was 2,957.6MW of geothermal power capacity online in the U.S., and that there was another 3,959.7MW of new activity identified (in Phase 1 through Phase 4). The 2006 Geothermal Task Force Report said that there could be an additional 18,146MW online by 2025. Heading into 2009, in the midst of the current economic environment, do you think these targets are still achievable?   Cook: Yes, but only if capital markets function   Aspire: Do you think there is any less urgency to ramp geothermal production in light of the pullback in oil prices? Why do you think the media and so much of Wall Street has so closely correlated the relationship between oil prices and alternative energy demand? Is it a mistake to do so? And, if so, Why?   Cook: I think the delays and hesistancy deals more with capital markets and banking reluctancy, not necessarily the price of oil. Over time if oil remains low it will likely have some impact, but I do not think it has had much impact in the west yet. Poor industry positioning and lack of capital access has hampered the geothermal industry to date. Power generation needs remain strong for geothermal.  Aspire: Geothermal has been around for a century. Where are you seeing geothermal technology advance, and how do you see those advances impacting the industry?   Cook: Low temperature and EGS will clearly expand the industry greatly. The number of low to moderate temperature sites is enormous and will be a target of future development focus. The industry will begin to recognize the need to departmentalize the various approaches; flash, binary, EGS, bottom cycle, etc.  Aspire: What can we expect from Raser Technologies in 2009?   Cook: Great progress on the outlined development plants and announcements of expansion on several fronts. Our plan is to deploy 100 MW per year of new facilities. We expect that we will begin some development in the International arena but the primary focus will continue to be the Western US. We will likely move ahead with major “partners” to exploit some of the fields that we have identified. 2008-12-22T15:08:00-08:00 http://www.smallcappulse.com/index.php/site/aspire_talks_with_aweas_randall_swisher/ http://www.smallcappulse.com/index.php/site/aspire_talks_with_aweas_randall_swisher/#When:13:29:00Z We had a chance to ask Randall Swisher, Executive Director of the American Wind Energy Association some questions about what he is seeing in wind energy trends and his overall outlook.   Aspire: What surprised you about the renewable energy/clean tech markets in 2008? Were there any significant developments (political, technological, consumer-driven and/or industry-driven) that occurred which you weren’t anticipating?   Swisher: Wind has been growing at such an explosive pace these last several years that I don’t think 2008’s record numbers are a big surprise, but they are notable.  This year, we expect about 7,500 megawatts of new wind capacity to be built in the U.S. which will make 2008 another year of 45% growth for the wind industry. As this growth has occurred, we’ve seen an increasing need to expand the supply chain for wind, including domestic manufacturing capacity.  This year, AWEA made a conscious effort to encourage new growth in this segment of the industry, with a special session at our WINDPOWER 2008 conference & exhibition and two sold-out supply chain workshops.  It’s worth noting that WINDPOWER 2008 attracted 13,000 attendees and 776 exhibitors from all links in the supply chain.  With this level of interest in the industry, we expect that more and more companies here in the U.S. will be moving into the dynamic wind energy market.  Aspire: Obama’s administration has set a target of 10% of electricity coming from renewable sources by 2012, and 25% by 2025. In 2007, renewable energy’s contribution to total electricity generation in the U.S. was about .962 billion kWh per day, or about 8.4% of the total, and the EIA projects that by 2009 it will contribute about 1.039 billion kWh per day, or about 9.1%. Excluding hydropower, renewable electricity in 2007 represents only about 3% of installed electricity capacity and 2.5% of generation in the U.S.Do you think the 10% target is realistic by 2012 given the current global financial crisis? And where do you see the biggest contribution to reaching this target in terms of renewable energy sources?   Swisher: A national renewable electricity standard is important for several reasons.  It signals a long-term, national commitment to clean energy and would streamline the uneven patchwork of RES policies that currently exists among the states, spreading the benefits of renewable energy to all parts of the country.  AWEA supports a 25% by 2025 RES.  An aggressive near-term target – like the 10% by 2012 in the Obama-Biden New Energy for America plan – is feasible, and essential to ensuring the rapid deployment of renewables with the end goal in mind.   Aspire: Wind energy production and consumption from 2000 to 2007 grew by more than 450%. Through August this year, production and consumption are up more than 44% from the same period last year. What do you think will be the key challenges in 2009 for continued strong growth in the wind sector? And what factors do you anticipate will happen, and need to happen to drive growth? Swisher: Wind is capable of providing at least 20% of our electricity supply by 2030 using existing technology.  The U.S. Department of Energy has analyzed the challenges and benefits of achieving the 20% wind vision in a report, 20% Wind Energy by 2030, which you can view at www.20percentwind.org.    Achieving this vision will depend upon two primary things:    1.     stable, long-term federal policy, such as a national renewable electricity standard of 25% by 2025 and a long-term extension of the production tax credit; also, in the face of the current financial crisis, the effectiveness of the production tax credit will be preserved by making it available on a refundable basis; and   2.     Federal policies that encourage investments in transmission infrastructure – a Green Energy Superhighway that will connect our abundant remote renewable resources with our population centers. AWEA’s policy recommendations can be found at www.NewWindAgenda.org.    Aspire: What is your outlook on transmission and storage issues for wind energy, and what recommendations would you make to companies developing them, and investors funding their development?   Swisher: Lack of adequate transmission infrastructure is one of the biggest obstacles to the long-term growth of wind power and other renewables in the U.S.  In essence, we simply don’t have enough transmission capacity to deliver low-cost power from windy rural areas into the cities where electricity is needed.  The wind industry supports federal policies that would bring about the construction of a high voltage, interstate transmission superhighway to deliver electricity over long distances, like the one envisioned in DOE’s 20% Wind by 2030 report.  (The report refers to the conceptual design of a transmission plan put forward by American Electric Power Co., one of the nation’s largest utilities, http://www.aep.com/about/i765project/docs/WindTransmissionVisionWhitePaper.pdf)   Storage, on the other hand, is not essential to achieving the 20% wind vision. One of the misconceptions about wind is that it will not provide a significant amount of our nation’s electricity without storage technologies in place. DOE’s 20% wind scenario makes it clear that wind can provide that level of electricity by 2030 without requiring additional storage.  As the penetration level for wind climbs to 20% and above, there will be the need for the electric industry to move towards more flexible sources of generation, such as hydro, natural gas or demand response.  Storage can be valuable, but it will usually be more expensive than other sources of flexibility in the system.  It is also important to evaluate the value of storage or other forms of flexibility as they apply to the entire utility system and not simply as dedicated back-up for individual wind projects.   Aspire: The U.S. has been a world leader in terms of additions of wind capacity and cumulative capacity, but it lags several other countries as a percentage of electricity consumption. Why is this, and what factors need to happen to make the U.S. a world leader here as well?   Swisher: The main obstacle to large scale wind power development up to now has been the lack of stable, long-term, national commitment to clean energy.  At the same time, wind power has achieved a number of key milestones that make it an attractive option for generating electricity on a large scale.   Here are a few of the key factors that have moved wind into the mainstream market:   ·         Fossil fuels are finite and increasingly expensive.  Costs for wind technology have come down at a time when costs for all new generation are rising.  ·         Demand for wind – and other renewables – is on the rise, due in large part to concerns about climate change.  Consumers want clean, reliable and affordable electricity and utilities are working to diversify their resource portfolios to help stabilize prices when fossil fuel costs are increasingly volatile and in anticipation of carbon regulation costs.  ·         The domestic supply chain is expanding, with the industry opening, expanding or announcing at least 50 new manufacturing facilities since January 2007.  In 2005, the average wind turbine installed in the U.S. utilized less than 30% U.S.-made components.  Turbines installed in 2008 use nearly 50% domestic components.    ·         The federal production tax credit (PTC) has been stable for several years in a row, enabling the wind industry to lay the groundwork for significant expansion in the coming years.    The long-term policies that the President-elect has indicated he intends to put in place – a federal RPS, a long-term extension of the production tax credit, and building a Green Power Transmission Superhighway - will be key to dramatically increasing the share of electricity that the country generates from wind.    Aspire: How do you see the current economic crisis impacting goals for wind energy growth?   Swisher: The current credit crunch is impacting the wind industry, as it is affecting every industry.   However, the wind industry continues to be well-positioned strategically, especially in relation to competing fuels and technologies.  Wind power remains among the most attractive energy investment options right now, because of its risk reduction qualities.  Wind is:   ·         a fuel-free resource, helping utilities hedge against  the risk of fuel price volatility,   ·         an environmentally sound resource, helping national efforts to reduce emissions that contribute to global warming, reducing water use, and reducing pollution; and   ·         an exceptionally short construction cycle compared to technologies such as coal and nuclear that can tie up huge amounts of capital for five to ten years or more of construction.   A number of challenges remain, however, and can be addressed by changes in federal policy.  For example, the federal production tax credit (PTC) needs to be adjusted (repaired) to make it effective in the current financial situation.  (See www.NewWindAgenda.org)   Aspire: What policy do you expect from the Obama administration and the next Congress in 2009 for the wind industry in the U.S.?   Swisher: See New Wind Agenda and Obama-Biden New Energy for America plan.  Aspire: Proponents of geothermal energy argue that it is favorable to wind energy for utilities because it is base load energy. What is your response to that point of view, and how do you see this issue playing out over the longer term?   Swisher: Each technology has its own set of characteristics, its own strengths and limitations, and that is why a mix is usually the best option.  Wind has a set of characteristics that make it attractive in a utility portfolio, including cost-effectiveness, its emissions-free nature, and its widespread availability. Utilities can typically add wind power to their portfolios without major adjustments in the planning, operations, or reliability of their systems, according to studies looking at experience or modeling wind integration scenarios, as well as experience in Europe where wind energy development is much more widespread.   Integration adjustments are lowest when new wind power is being integrated into a broad region with a diverse mix of power sources, such as natural gas and hydropower.  Improved use of forecasting, and large balancing areas also make the integration of wind power more cost-effective.  Many utilities have large amounts of wind power on their systems, including Xcel Energy, the utility with the greatest amount of wind.  Here’s a quote from Dick Kelly, chairman, president and CEO of Xcel:    “Wind power is an integral part of our generating portfolio, and it has become a significant part of our nation's response to environmental challenges like climate change," said Kelly. "With the right public policy, it will be a growing and affordable part of our long-term plans."   Aspire: What are you seeing in terms of the pace and availability of project financing for wind energy in the current economic environment, and how significantly is the AWEA reining in its projections for wind energy growth in the next few years as a consequence of the still eroding U.S. economy?   Swisher: It is too early for AWEA to estimate what the impact of the current economic environment might be on projections for 2009 and beyond.  The fundamentals of the technology are strong, and the countervailing factor will be the speed at which new policies are put in place by the new Administration.   As Ted Strickland, the Governor of Ohio, recently said in answer to a similar question about the impact of the economy on wind power:  “This is one industry that has a bright future and it is full steam ahead.”    Aspire: Can you elaborate further as to how optimistic you are that the incoming administration and Congress will respond positively to the renewable industry’s set of recommended priorities outlined by the AWEA, GEA, SEIA and Hydropower Association in November?     Swisher: We are enthusiastically looking forward to the opportunity to work with the new administration and new Congress.  Their agenda appears to be quite consistent with the agenda of the wind industry.  See the positions of the Obama-Biden New Energy For America plan, quoted in the Wind Energy for A New Era document at www.newwindagenda.org. 2008-12-22T13:29:00-08:00 http://www.smallcappulse.com/index.php/site/december_19_2008_idc_report_companies_becoming_increasingly_more_focused_on/ http://www.smallcappulse.com/index.php/site/december_19_2008_idc_report_companies_becoming_increasingly_more_focused_on/#When:18:37:00Z IDC reported this week that companies are becoming increasingly focused on their Green IT initiatives. In its most recent survey amongst 1,500 C-level business and technology executives across 10 industrial countries: ·         Energy costs continue to be the most pressing factor driving green IT adoption, with 71% of respondents saying this is their highest priority; ·         Amongst U.S. respondents, 77% identified energy as the most important factor behind green adoption of their companies; ·         Amongst European respondents, 74% identified energy concerns as the number 1 driver of green initiatives. The bottom line is that companies are focused on cost savings associated with reducing power consumption, which will continue to drive their plans to invest in energy efficiency. The greatest potential for energy savings worldwide is with buildings, which consume 40% of global energy and are responsible for about the same percent of CO2 emissions. About half of the energy is for space and water heating while the rest is used for powering appliances and office equipment. Elevators alone can account for 10% of a buildings total energy consumption. Companies like KONE and General Electric are building products for industrial and commercial sectors that use less energy, and programs are being developed at the state level and federal level here in the U.S. and by government bodies around the world to support energy efficiency efforts through legislation and economic incentives. Power Efficiency (OTCBB: PEFF) is a "pure play" company that is focused on motor efficiency, developing motor controllers for usage in industrial and commercial appliance applications that reduce energy consumption by 20% to 40% on average. Its customers include KONE, Mitsubishi Electric, Bloomingdales, Caesar's Palace, Borders, JKF International Airport, Otis Elevator, Macy's, ThyssenKrupp Elevator, Barrick Gold, Cemex, Berry Plastics and Westfield Group. Its E-Save™ technology has demonstrated the ability to reduce energy consumption to the industrial and commercial markets, and we expect that it will continue to build its presence here. But a more significant opportunity for Power Efficiency is to demonstrate E-Save's viability in the appliance market, where its newly developed single phase technology can be embedded in washing machines, dryers, refrigerators, and other appliances, improving efficiency on tens of millions of appliances each year. In a typical building, without elevators, these appliances represent as much as 27% to 30% of total energy use. In residential homes, the number is greater. The company's recent announcement with IXYS (Nasdaq: IXYS) is an important step to executing on the opportunity in the appliance market. IXYS is a Silicon Valley semi company with a diversified customer base of companies that build appliances, and a commitment of its own to improving power conversion efficiency. The partnership will set the stage for IXYS to sell and market Power Efficiency's single-phase controller to its customer base which is located throughout North America, Europe and Asia.How it works: Lightly-loaded AC motors are very inefficient. E-Save technology reads the load and reduces the amount of power to the motor, and when the load increases, the amount of electricity is instantly increased. This enables the motor to always run at a constant speed (full RPM). Power Efficiency's technology was installed at Caesar's Palace which resulted in 36% energy savings for the hotel's elevators, and provided it with a 60% internal rate of return on its investment. The U.S. elevator market alone is a $45 million opportunity for Power Efficiency, and it already works with the majors, including Otis, KONE and ThyssenKrupp. Energy efficiency is rightly perceived as the most immediate way to deal with reducing carbon emissions and energy costs for businesses, and it implementing technologies to achieve it are significantly more cost and resource effective, that investments in developing alternative energy power which also have to be managed under technical challenges such as transmission. The economics for Power Efficiency are compelling. E-Save typically offers a 3-year (or less) payback on investment, which is reduced significantly with utility rebates (approved by Southern California Edison, Xcel Energy, SDG&E, Nevada Power, Sierra Pacific and Anaheim Public Utilities). And the economics for the manufacturing industry are compelling as well. Domestic manufacturers spend more than $33 billion on electricity each year, and motors consume more than 60% of that total. Power Efficiency's management estimates that it can save the U.S. manufacturing sector about $1.7 billion per year, with 21 billion kWh reduction, 14 million tons of CO2 reduction, equivalent to 2.65 million cars being taken off the road. This is significant. The stock currently trades at about $0.14, or a market cap of about $5.6 million. We think that the stock price doesn't reflect Power Efficiency's market opportunity and validation in the marketplace. Our expectation for the business is to continue to develop traction through 2009 and establish a revenue run rate exiting 2009 closer to one times its current market cap. The opportunity, we think, is substantial. A 20% share of the estimated elevator market alone is $9 million. The appliance market opportunity dwarfs this number. The risk to the story, in our opinion is on the execution side. The technology is clearly validated (see the company's list of customers on its website) on the industrial and commercial side. The IXYS relationship will accelerate the path to validation on the residential appliance side. So we think a reasonable way to value this stock would be to focus on the industrial/commercial business opportunity, which we think is currently about $12 to $15 million annual based on existing applications (which can scale significantly as well), and to discount the residential appliance opportunity until the company hits some milestones on that side of the business, which we expect to see in 2009. At a $12 million market cap, which we think is reasonable, the implied stock price would be about $0.30. Over the long-term, if the company continues to scale both sides of its business, we think this should be just the beginning. We are pleased to be working with Power Efficiency from a corporate communications advisory perspective (see disclosure below). The business is well-positioned, we think to capitalize on the attention that is rightly being paid to driving energy efficiency as a priority on a global basis. We expect to see the company's financial performance validate this opportunity. 2008-12-19T18:37:00-08:00 http://www.smallcappulse.com/index.php/site/as_energy_efficiency_becomes_more_of_a_priority_power_efficiency_otcbbpeff_/ http://www.smallcappulse.com/index.php/site/as_energy_efficiency_becomes_more_of_a_priority_power_efficiency_otcbbpeff_/#When:15:05:00Z December 19, 2008 – IDC reported this week that companies are becoming increasingly focused on their Green IT initiatives. In its most recent survey amongst 1,500 C-level business and technology executives across 10 industrial countries: ·         Energy costs continue to be the most pressing factor driving green IT adoption, with 71% of respondents saying this is their highest priority; ·         Amongst U.S. respondents, 77% identified energy as the most important factor behind green adoption of their companies; ·         Amongst European respondents, 74% identified energy concerns as the number 1 driver of green initiatives. The bottom line is that companies are focused on cost savings associated with reducing power consumption, which will continue to drive their plans to invest in energy efficiency. The greatest potential for energy savings worldwide is with buildings, which consume 40% of global energy and are responsible for about the same percent of CO2 emissions. About half of the energy is for space and water heating while the rest is used for powering appliances and office equipment. Elevators alone can account for 10% of a buildings total energy consumption. Companies like KONE and General Electric are building products for industrial and commercial sectors that use less energy, and programs are being developed at the state level and federal level here in the U.S. and by government bodies around the world to support energy efficiency efforts through legislation and economic incentives. Power Efficiency (OTCBB:PEFF) is a “pure play” company that is focused on motor efficiency, developing motor controllers for usage in industrial and commercial appliance applications that reduce energy consumption by 20% to 40% on average. Its customers include KONE, Mitsubishi Electric, Bloomingdales, Caesar’s Palace, Borders, JKF International Airport, Otis Elevator, Macy’s, ThyssenKrupp Elevator, Barrick Gold, Cemex, Berry Plastics and Westfield Group. Its E-Save™ technology has demonstrated the ability to reduce energy consumption to the industrial and commercial markets, and we expect that it will continue to build its presence here. But a more significant opportunity for Power Efficiency is to demonstrate E-Save’s viability in the appliance market, where its newly developed single phase technology can be embedded in washing machines, dryers, refrigerators, and other appliances, improving efficiency on tens of millions of appliances each year. In a typical building, without elevators, these appliances represent as much as 27% to 30% of total energy use. In residential homes, the number is greater. The company’s recent announcement with IXYS (Nasdaq:IXYS) is an important step to executing on the opportunity in the appliance market. IXYS is a Silicon Valley semi company with a diversified customer base of companies that build appliances, and a commitment of its own to improving power conversion efficiency. The partnership will set the stage for IXYS to sell and market Power Efficiency’s single-phase controller to its customer base which is located throughout North America, Europe and Asia. How it works: Lightly-loaded AC motors are very inefficient. E-Save technology reads the load and reduces the amount of power to the motor, and when the load increases, the amount of electricity is instantly increased. This enables the motor to always run at a constant speed (full RPM). Power Efficiency’s technology was installed at Caesar’s Palace which resulted in 36% energy savings for the hotel’s elevators, and provided it with a 60% internal rate of return on its investment. The U.S. elevator market alone is a $45 million opportunity for Power Efficiency, and it already works with the majors, including Otis, KONE and ThyssenKrupp. Energy efficiency is rightly perceived as the most immediate way to deal with reducing carbon emissions and energy costs for businesses, and it implementing technologies to achieve it are significantly more cost and resource effective, that investments in developing alternative energy power which also have to be managed under technical challenges such as transmission. The economics for Power Efficiency are compelling. E-Save typically offers a 3-year (or less) payback on investment, which is reduced significantly with utility rebates (approved by Southern California Edison, Xcel Energy, SDG&E, Nevada Power, Sierra Pacific and Anaheim Public Utilities). And the economics for the manufacturing industry are compelling as well. Domestic manufacturers spend more than $33 billion on electricity each year, and motors consume more than 60% of that total. Power Efficiency’s management estimates that it can save the U.S. manufacturing sector about $1.7 billion per year, with 21 billion kWh reduction, 14 million tons of CO2 reduction, equivalent to 2.65 million cars being taken off the road. This is significant. The stock currently trades at about $0.14, or a market cap of about $5.6 million. We think that the stock price doesn’t reflect Power Efficiency’s market opportunity and validation in the marketplace. Our expectation for the business is to continue to develop traction through 2009 and establish a revenue run rate exiting 2009 closer to one times its current market cap. The opportunity, we think, is substantial. A 20% share of the estimated elevator market alone is $9 million. The appliance market opportunity dwarfs this number. The risk to the story, in our opinion is on the execution side. The technology is clearly validated (see the company’s list of customers on its website) on the industrial and commercial side. The IXYS relationship will accelerate the path to validation on the residential appliance side. So we think a reasonable way to value this stock would be to focus on the industrial/commercial business opportunity, which we think is currently about $12 to $15 million annual based on existing applications (which can scale significantly as well), and to discount the residential appliance opportunity until the company hits some milestones on that side of the business, which we expect to see in 2009. At a $12 million market cap, which we think is reasonable, the implied stock price would be about $0.30. Over the long-term, if the company continues to scale both sides of its business, we think this should be just the beginning. We are pleased to be working with Power Efficiency from a corporate communications advisory perspective (see disclosure below). The business is well-positioned, we think to capitalize on the attention that is rightly being paid to driving energy efficiency as a priority on a global basis. We expect to see the company’s financial performance validate this opportunity. The foregoing compilation relates to Power Efficiency Corporation and contains forward-looking statements, which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from the forward-looking statements. When used in this document, the words "anticipate," "believe," "estimate," "expect" and similar expressions as they relate to Power Efficiency or its management, are intended to identify such forward-looking statements. Power Efficiency’s actual results, performance or achievements could differ materially from the results expressed in, or implied by these forward-looking statements. For more detailed information the reader is referred to Power Efficiency’s Form 10KSB, 10QSB and other related documents filed with the Securities and Exchange Commission. This does not constitute an offer to buy or sell securities by the Company and is meant purely for informational purposes. Aspire Clean Tech Communications, Inc. (Aspire) its affiliates, officers, directors, subsidiaries and agents have been compensated by the Company for the creation of this document. Aspire receives $6,500 per month on a 1 year contract with a three month termination clause. Aspire has also been compensated 40,000 shares of restricted common stock of Power Efficiency.  In preparing this information, Aspire has relied upon information received from the Company, which, although believed to be reliable, cannot be guaranteed. This information is not an endorsement of the Company by Aspire. Aspire is not responsible for any claims made by the Company. You should independently investigate and fully understand all risks before investing. One of Aspire's officers, Todd M. Pitcher, is an affiliate of Small Cap Pulse, which is cmopensated $500 per month to provide marketing services for Power Efficiency on behalf of Aspire. . 2008-12-19T15:05:00-08:00 http://www.smallcappulse.com/index.php/site/analyst_comments_cowens_robert_stone_weighs_in_on_energy_conversion_devices/ http://www.smallcappulse.com/index.php/site/analyst_comments_cowens_robert_stone_weighs_in_on_energy_conversion_devices/#When:14:27:00Z December 18, 2008 – Analyst Comments – Cowen & Company’s Robert Stone commented this morning on Energy Conversion Devices (Nasdaq:ENER), after hosting a call with management yesterday. Stone said Q2 appears to be on track but he is cautious about project credit markets which could cause delays and the company to undershoot his estimates. Here are the key takeaways from Stone’s comments: ·         ASP and margin pressure remain concerns ·         ENER hasn’t cut production but less overtime and lower material costs (declining poly prices) could help gross margins ·         Stone is maintaining his OUTPERFORM rating, seeing 50% upside vs. the market in 12 months ENER is trading at about $26 this morning, still a pricey 46x earnings (ttm) and 19x Ev/Ebitda (ttm), as well as 3.8x sales (ttm). Management has provided the following guidance: ·         Q2 revenue in a range of $100 to $108 million, with solar product sales in a range of $85 to $103 million. Gross margin on solar product sales of 33% and total GM of 34%. ·         FY09 revenue in a range of $455 to $485 million, with solar product sales in a range of $430 to $450 million. Gross margin on solar product sales of 34% and total GM of 35%. Stone’s revenue expectations for ENER for FY09 is at $472 million, which will result in $1.66 per share, putting the implied EV/S at 1.6x and PE at 10.9x. It seems to us that the stock is probably already benefiting in large part from expected FY09 growth, relative to its peers which are trading at much deeper discounts. Granted, ENER will benefit from strong gross margins than most of its group which justifies a premium, but we question the premium that it is getting relative to, say, LDK Solar (NYSE:LDK) which is trading at about 5x this year’s forecasted earnings and less than 3x next year’s forecasted earnings. Here is what other analysts are saying about ENER recently: ·         Lazard rates at BUY with $32 price target (12/15/08). Lazard previously had price targets of $55 (5/9/08) and $40 (10/8/07); ·         Barclays rates at SELL (12/5/08) ·         Ardour Capital rates at HOLD with $45 price target (11/11/08). Ardour previously had price targets of $68 (8/29/08) and $60 (6/4/08); ·         Deutsche rates at HOLD (11/10/08). Deutsche previously had price target of $50 (5/9/08); ·         Citigroup rates at SELL with $17 price target (10/30/08). ·         UBS rates at HOLD (10/28/08); ·         AmTech Research rates at BUY with $59 price target (10/10/08); ·         Wedbush Morgan rates at BUY with $62 price target (10/7/08); The context that we put our current expectations for ENER in is the broader markets. The DJIA, at the current 8,833 level, is up 19% since lows put in back on November 21. The Nasdaq is up 22%. On November 20, ENER bottomed at $18.32 and is up 41% since that time. With cloudiness ahead on a macroeconomic horizon (deterioration in labor markets, continuing credit tightness and lower confidence) tied together with cloudiness within the solar sector (concerns about project delays, erosion in ASPs and free cash flow to fund expansion) we think are measured with respect to our expectations of stocks in general, and solar stocks in particular. That being said, the legislative framework (both domestic and global) to support continued solar growth has never been better. Prices are coming down upstream and midstream, which should get passed through downstream and to the end consumer. So we still expect solar to outperform the broader markets. We concur with Stone that ENER is a leader in this growth market, and is well positioned to capitalize on demand for thin film. We just think current valuations for ENER against the context of a broader market (DJIA and Nasdaq) which is on the high side of their ranges may be on the high side as well. We would be accumulating ENER anywhere below $21. Important Disclosure Note: SCPEditor is not LONG or SHORT ENER. The information and trades provided here and in the comments are for informational purposes only and are not a solicitation to buy or sell any of these securities. Investing involves substantial risk and you should evaluate your own risk levels before you make any investment. Past results are not an indication of future performance. 2008-12-18T14:27:00-08:00 http://www.smallcappulse.com/index.php/site/akeena_nasdaqakns_lowers_guidance_for_fy2008_global_hunters_cable_maintains/ http://www.smallcappulse.com/index.php/site/akeena_nasdaqakns_lowers_guidance_for_fy2008_global_hunters_cable_maintains/#When:16:57:00Z December 16, 2008 – Analyst Comments – Global Hunter’s Justin Cable weighed in today on Akeena Solar (Nasdaq:AKNS) a downstream solar company whose stock has been battered in recent months on concerns about widening losses and slowdown in solar project spending in the midst of the current recessionary environment. Cable maintained his NEUTRAL rating, and his previously lowered his price target of $2.50 (Cable had lowered his target on AKNS from $5 to $2.50 back on November 7). Akeena this morning issued revised guidance for FY2008 lowering its estimated Y/Y revenue growth to a range of 25% to 30% from 30% to 40%, citing delays in installations on a few of its larger commercial projects. Cable noted that he had already been assuming 30% growth in his revised estimates, which is the basis for his maintaining existing targets, but also noted that he advises staying on the sideline until the business shows more progress on getting to breakeven cash flow. As it stands, at $1.75 this morning, the stock is holding a $52 million market cap, about 1.23x this year’s sales, assuming 30% Y/Y growth. 2008-12-16T16:57:00-08:00 http://www.smallcappulse.com/index.php/site/rino_otcbbrino_serving_massive_china_markets_no_operational_exposure_to_us_/ http://www.smallcappulse.com/index.php/site/rino_otcbbrino_serving_massive_china_markets_no_operational_exposure_to_us_/#When:14:29:00Z December 16, 2008 – RINO International Corp. (OTCBB:RINO) provides wastewater treatment equipment and energy management systems designed to reduce industrial pollution and enhance energy utilization – two huge areas for growth, we think for the foreseeable future. The world’s most populated country, China continues to experience rapid industrial growth, massive migration to urban areas and the result is a surge in emissions of pollutants, and its industrial pollution is becoming a critical issue not only in the region but on a global scale. RINO’s focus it on the iron and steel industry, which is one of the largest contributors to water pollution and sulphur emissions. Consider the fact that a population of 300 million people are expected to be moving into China’s cities in the next 24 to 36 months, and how much this is going to tax steel production, amongst other things. This, in turn will create a massive opportunity for replacing legacy systems, to reduce SO2 emissions. China’s SO2 emissions levels are already well-above its targets, and continue to be driven by increases in steel production, and the sintering process in coal production. China’s SEPA has mandated about $18.8 billion in investment into flue gas desulphurization (FGD) through 2010 and as much as 10% of this will be invested into the steel sector, and there are further mandates for iron and steel sinters to reduce S02 emissions. RINO’s Products Wastewater System ·         Closed-loop system lowers consumption of water and increases energy efficiency in the process; ·         Scalable, allowing for follow-on orders from existing customers ·         Lower installation and maintenance costs, less floor space required ·         Average customer size is $3 million with 40% gross margins  Desulphurization Cleaning System ·         About 80% market share in China ·         Achieves 90 to 99% removal of SO2 ·         Customizable, lower installation costs, less floor space required, and automated process control ·         Customer cost is about $8 million per unit with 45% gross margins  Anti-oxidation System  ·         Reduces oxidation loss by more than 60% from current levels to about 1.2% ·         Customer cost is about $1.4 million In addition, RINO is introducing additional technology for cleaning sinter flue gases and sludge treatment (which consumer less energy, with zero emission and less cost) which will be commercialized next year. Financial Highlights ·         Guidance of $32 to $33.5 million for Q4, representing 85% Y/Y growth ·         At September 30, backlog of $61.1 million (about $29.4 million will be booked in Q4) ·         Through nine months, revenues of $98.5 million an increase from $46.1 million reported last year, with net income of $20.2 million – net margins of 21%. ·         $60.7 million in working capital Revenues this year are expected to be more than $130.5 million, and we think net income should come in around $28 million or so. Since 2005, RINO’s sales have ramped from $3.6 million. Given this impressive growth, and the remarkable potential for continued revenue and earnings expansion, we think the stock, which is currently trading by appointment at $3.75, representing a market cap of $93.75 million, has significant upside. The stock is trading .71x FY2008 forecasted sales and about 3.34x forecasted income. At 2x FY08 sales and 7x income, both defensible metrics we think, the stock price would be $10.44 and $7.84 respectively. In either case, the stock looks cheap at $3.75.   Important Disclosure: SCPEditor does not hold any position in RINO. The information and trades provided here and in the comments are for informational purposes only and are not a solicitation to buy or sell any of these securities. Investing involves substantial risk and you should evaluate your own risk levels before you make any investment. Past results are not an indication of future performance. 2008-12-16T14:29:00-08:00 http://www.smallcappulse.com/index.php/site/global_hunters_justin_cable_weighs_in_on_ocean_power_nasdaqoptt/ http://www.smallcappulse.com/index.php/site/global_hunters_justin_cable_weighs_in_on_ocean_power_nasdaqoptt/#When:15:23:00Z December 15, 2008 – Analyst Comments – Global Hunter’s Jason Cable weighed in on Ocean Power Technologies (Nasdaq:OPTT), downgrading the stock to NEUTRAL after the company reported quarterly results below expectations and amidst poor visibility. Last week Ocean Power released Q2 financial results: ·         Revenues for Q2 were $667 thousand, down from $1.6 million, and net loss was $6.1 million or $0.60 per share, as opposed to a net loss of $1.8 million, or $0.18 per share last year. ·         Revenues for the six months ended October 31, 2008 were $2. 5million, compared to $2.2 million for the same period last year, while net loss was $10 million, compared to a net loss of $4.3 million last year. ·         Contract order backlog increased to $8 million, from $3.7 million at the end of the previous quarter. ·         Cash & cash equivalents were $89.6 million at October 31, 2008. Cable was looking for revenues of $1.6 to $1.7 million for the quarter, and for a net loss of $3.9 million, or $0.38 per share. Cash burn was also higher than Cable had forecast. Given the lackluster results, Cable underscored that Ocean Power is very much still in development stages and needs to prove out its model further until he gets behind the stock. In the meanwhile, he recommends taking a sideline view on the stock. We couldn’t agree more. Adding its trailing six months and backlog, assuming it booked 100% of its backlog this year, the stock is trading at 4.2x  the $18 million or so number. In this market environment, where growth has been priced out of stocks given the near-term uncertainty, we think a multiple of 4x revenue for an unprofitable company is way overblown, and think the stock is probably more fairly valued at $1.60 to $1.70, or about 1x its run rate. We are optimistic about ocean and tidal power over the longer term, and Ocean Power is likely going to be a key player in this market as it evolves – if it can stay solvent. But, as Cable’s comments suggest, the stock is probably ahead of itself in the near term until the business matures a bit further. Important Disclosure: SCPEditor does not hold any position in OPTT. The information and trades provided here and in the comments are for informational purposes only and are not a solicitation to buy or sell any of these securities. Investing involves substantial risk and you should evaluate your own risk levels before you make any investment. Past results are not an indication of future performance. 2008-12-15T15:23:00-08:00 http://www.smallcappulse.com/index.php/site/aspire_talks_with_hokus_nasdaqhoku_darryl_nakamoto/ http://www.smallcappulse.com/index.php/site/aspire_talks_with_hokus_nasdaqhoku_darryl_nakamoto/#When:14:37:00Z December 15, 2008 – We recently had the opportunity to ask Darryl Nakamoto, CFO of Hoku Scientific some questions about what he is seeing in the solar sector: Aspire: What surprised you about the solar markets in 2008? Were there any significant developments (political, technological, consumer-driven and/or industry-driven) that occurred which you weren’t anticipating? Nakamoto: We were pleasantly surprised by the extension of the Federal Renewable Energy ITC. We did not foresee its inclusion in the legislation aimed at stabilizing the credit markets. In our local market, we were also very pleased by the progress represented by the Hawaii Clean Energy Initiative, which lays out a specific plan of action for the broad and rapid deployment of renewable technology throughout the state.  Aspire: Solar/PV energy costs between 21 and 38 cents per kWh to produce. We are still a ways off from reaching grid parity. When do you think that happens? And do you think this will be the key inflection point that will need to be reached to see solar production and consumption become a more significant part of the U.S. (and global) energy pie? What are other key factors?   Nakamoto: By virtue of geography, Hoku Solar, our PV integration and installation business in Hawaii, is already operating in a near-grid-parity environment. (Grid electricity costs in Hawaii range from $0.20 per kWh to more than $0.40 per kWh in some areas.) This effective price parity certainly helps drive demand, but from our perspective, it seems that prices must still continue to come down before the PV market reaches a true inflection point. For example, even with high electricity prices in Hawaii, we find that the market still requires government intervention to drive growth in PV consumption. Both State and Federal tax credits continue to provide a meaningful incentive for individuals and corporations to invest directly in their own PV systems. However, it is also worth mentioning that the tax credits do not seem to have inspired a corresponding amount of third-party investment into PV generation capacity. Based on the results achieved in other markets, it seems that a feed-in tariff may create the most favorable conditions for PV investment financing. To this end, we are again encouraged by the Hawaii Clean Energy Initiative, which includes a provision for a clean energy feed-in tariff.  Aspire: Conventional views in the industry expect polysilicon prices to plunge this next year with all of the new production coming online which will help supplies double while demand is only expected to increase about 30% to 40%. As a result, manufacturers of poly will see margins erode. Meanwhile, expectations are also for module oversupply to create ASP erosion in the midstream channel. At some point, shouldn’t all of this price erosion ultimately benefit the end consumer and stimulate demand? From a manufacturer’s perspective, what is your outlook on this dynamic, and what measures can you (and other manufacturers) take to adjust and protect your margins? Do efficiencies created by newer technologies at the poly plant level help compensate for erosion in poly prices?   Nakamoto: We anticipate prolonged and extensive downward pressure on pricing (and margins) throughout the PV value chain. Notwithstanding current market externalities, the falling prices should eventually help stimulate market demand. And, considering the heavily fragmented nature of the solar manufacturing marketplace, this pressure could also create a compelling case for consolidation and vertical integration throughout the industry.  In any case, we believe that companies who have good controls and stabilized COGS will succeed in passing cost efficiencies along to their customers while still maintaining healthy margins. The recent volatility in polysilicon pricing poses a severe challenge to producers whose businesses were focused on spot market sales. This, in turn, could cause some new market entrants to delay initial production and create a situation where much of the planned new capacity is unlikely to come online when promised, if at all.   Aspire: Some industry experts and analysts have lowered their expectations for solar growth in 2009 based on lower demand as a result of less government support in Europe. How big of an impact do you think that will have on overall growth, and to what extent do you think renewed support in Japan, as well as increasing legislative support in the U.S. will offset the situation in Europe?   Nakamoto: We believe demand in the U.S. remains relatively untapped, and are optimistic that continued emerging domestic demand will offset potential reductions abroad.   Aspire: What are the key issues, challenges and opportunities that you see storage playing in the progression of solar energy as a more meaningful energy source in the overall energy ecosystem?  Nakamoto: While distributed generation and storage will continue to play an increasingly important role in defining firm and resilient renewable power grids, near term strategies include the removal of net energy metering (NEM) limitations and/or the introduction of feed-in tariffs, like the ones contemplated by the Hawaii Clean Energy Initiative. Taking the cap off NEM addresses the local storage issue by allowing property owners to sell extra power back to the grid. At scale, this is useful – particularly on a grid with low-renewable penetration – because it encouraging the installation of large-scale PV systems at suitable locations and guarantees corresponding savings to the property owners in the form of credits for power fed back to the grid.   Over time, as utilities approach RPS goals and the grid penetration of distributed renewable generation systems increases, more sophisticated distributed storage systems may be required to firm up the clean power during the peak/off-peak cycle.   Aspire: What is your broader outlook on the solar industry in 2009 and for the next few years? Navigant Consulting, in a research report it provided the SEIA, said it expects that the 8-year extension of the ITC could “unleash $325 billion in private investment in the solar industry” over that time frame. To be sure, this would bode well for the industry’s growth – but do you think that we should temper expectations based on the current financial crisis, and if so, how much?   Nakamoto: We concur with many analysts who believe the fundamentals for the industry are intact and that the demand for clean, renewable energy will continue growing in 2009 and beyond.   We expect the extension of the ITC will help inspire this continued growth, and that the impact of the current credit market constraints may be too slow, but not stop, market expansion.   2008-12-15T14:37:00-08:00 http://www.smallcappulse.com/index.php/site/interview_with_power_efficiencys_otcbbpeff_steve_strasser_on_the_energy_eff/ http://www.smallcappulse.com/index.php/site/interview_with_power_efficiencys_otcbbpeff_steve_strasser_on_the_energy_eff/#When:17:39:00Z Alt Energy and Clean Tech Markets 2008 Year in Review and Looking Forward to 2009 Interview with Steve Strasser of Power Efficiency, December 10, 2008Steve Strasser is Chairman and CEO of Power Efficiency (OTCBB:PEFF), a technology company focused on developing energy efficiency solutions for electronic motors for industrial and appliance applications. Aspire: What surprised you about the renewable energy/clean tech markets in 2008? Were there any significant developments (political, technological, consumer-driven and/or industry-driven) that occurred which you weren’t anticipating? Please briefly explain.   Strasser: I was surprised by the renewal of the tax credits. In addition, there we have a new administration and leadership in Congress that will make a greater effort to promote this industry, and energy efficiency in particular.   What I am seeing with energy efficiency is that people and businesses have always been very interested in energy efficiency but the problem from an economic standpoint for businesses, as new technologies are evolving and being introduced to the markets, is that they weren’t providing a strict 2-year payback. But in the past year, I have seen companies increasing focused on the marketing and branding virtues of alternative energy and energy efficiency. The are making more of their investment decisions for energy efficiency technologies factoring in this marketing and branding element, which is making it a bit less critical that the technology offers a strict 2-year payback. The rate-of-return still needs to be compelling though. It is just that the issue of payback is relaxing a bit as energy efficiency becomes more of a corporate strategy.   For example, go to KONE’s website. It is focused more than ever on being perceived energy efficient. We are seeing this more and more.   Finally, we are seeing the utilities getting more interested in energy efficiency for industrial and not just residential.   Aspire: Why do you think energy efficiency has taken a back seat on Wall Street, and in terms of government investment to new power generation as a solution to global warming?   Strasser: This is an interesting question. So many people have been swept away by the solar and wind opportunities, which have shown really strong growth. These technologies show tremendous promise and will certainly be a huge impact over the long-term to our energy consumption.  But there also remain substantial technical and cost related challenges which they need to overcome before we see them adopted on a mass scale. Transmission is a huge and costly issue while neither wind nor solar are base load energy sources, which cause further imbalances to the grid. Utilities, which are increasing mandated to use a percentage of renewable energy as a result of portfolio standards, are forced to make huge investments into upgrading transmission capabilities. What we are seeing, is that more attention is being paid to the notion of energy efficiency, where these technologies have less cap expense up front, and also provide more of an immediate impact.  That being said, a key issue that energy efficiency is getting less attention on Wall Street, I think, is that there are very few ‘pure play’ energy efficiency companies. Energy efficiency and progress in technologies that are more energy efficient, and create energy efficiency to the consumer, are often folded into the portfolios of larger controls companies. But we have seen an uptick in sales of energy efficient motors, for example, from companies that haven’t publicized it because it is only part of a larger offering for them. Power Efficiency is one of the few pure play technology companies, in addition to lighting companies. But I think this will change in the next year, and more companies will come to the forefront which are specifically developing solutions to create more energy efficiency in the residential, commercial, industrial and transportation sectors.  In addition, there are currently only 4 states which allow energy efficiency to be a credit against a renewable energy portfolio (Nevada is one of them). I think this will change, and will encourage more concentration on energy efficiency.   Aspire: Which areas to you see the best opportunity to reduce energy consumption in the U.S., and what technologies have you seen developed that are most effectively handling that load?   Strasser: I think that energy efficiency and demand response are the way to have an immediate impact. And there needs to be smart meters - real-time metering.   Aspire: Obama has said that energy efficiency is the “cheapest, quickest, fastest way to meet our energy demand and to tackle climate issues.”  What do you think the Obama administration can do in his first few months in office to make energy efficiency a centerpiece of his energy policy?   Strasser: They should add mechanisms to encourage energy efficiency. The manufacturer needs an incentive to make more energy efficient equipment, in the form of tax credits and incentives. Also, in cases where the benefit is for many years, there needs to be an economic framework that helps to finance the energy efficiency component for consumers and purchasers. There can be loans for this type of purpose. The difference here is that if someone continues to use less energy, this cash-flow is real. Also you are decreasing carbon emissions and you will also create jobs. Government incentives are long term.  Taking a long term view – the government should incent and amortize investment in energy efficient technologies over time. One of the things we are trying to do is to talk with members of Congress and tell them to look at energy efficiency the same way they are looking at solar and impact, and it is cheaper, with an immediate impact.   Aspire: What are you seeing on the state level, in terms of energy efficiency legislative support?   Strasser: The most important thing is to equate energy efficiency with renewable portfolios on a dollar for dollar basis. There should be a law mandating a minimal percent for the utility. Utilities should finance the efficiency products, and there should be an equal rate of return on energy efficiency as there would be in a power plant. You will save a huge amount of transmission and shave a lot of peak.     Aspire: What opportunities exist in the stimulus package for energy efficiency?   Strasser: If they do the things I mentioned – for example, the guy selling the granulator can make his equipment efficient or not. His customer will want it, but if it too much of a hassle or his customer wont’ pay for it, it won’t happen. You need to provide the manufacturer with incentives to build it.  An interesting point about energy efficiency, is that there isn’t any specific representative to congress like there is with solar, wind and geothermal (SEIA, AWEA and GEA). Companies selling energy efficiency products are typically already well established and profitable – the others are all startups and their industries need to rely on lobby and advocacy in a much stronger way than companies developing energy efficient products. But there needs to some education and buy-in at the government level for technologies which result in even 5% greater efficiency should be supported. Just consider the electric motor market. On a case by case basis, 5% greater efficiency for an electric motor might not be enough of an economic incentive for someone to invest in it. But think about 5% energy savings over all of the electric motors in the market, and a 5% reduction of energy across the board. This would make a huge impact on the grid and on carbon emissions. But it won’t happen on an individual basis, and you need to have a framework to mandate and support it.  One of the things energy efficiency does is that it doesn’t force utilities to go through all of this transmission business. And energy efficiency only has positive environmental impact. We are talking with Senator Reid. There is going to be a number of energy bills – we are really working on convincing them that energy efficiency is a big deal. We have also been talking with representatives on the Ways and Means Committee.    About Aspire Clean Tech Communications, Inc. Based in San Diego, California, Aspire is a professional services and corporate communications firm focused solely on the clean tech and alternative energy industry. Aspire is the publisher of the Aspire Week in Review, and operates the website, www.smallcappulse.com, which also dedicated to commentary and analysis of the clean tech and alternative energy industry.   For more information about Aspire, please contact Todd M. Pitcher at 760-798-4938. The foregoing compilation relates to Power Efficiency Corporation and contains forward-looking statements, which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from the forward-looking statements. When used in this document, the words "anticipate," "believe," "estimate," "expect" and similar expressions as they relate to Power Efficiency or its management, are intended to identify such forward-looking statements. Power Efficiency’s actual results, performance or achievements could differ materially from the results expressed in, or implied by these forward-looking statements. For more detailed information the reader is referred to Power Efficiency’s Form 10KSB, 10QSB and other related documents filed with the Securities and Exchange Commission. This does not constitute an offer to buy or sell securities by the Company and is meant purely for informational purposes. Aspire Clean Tech Communications, Inc. (Aspire) its affiliates, officers, directors, subsidiaries and agents have been compensated by the Company for the creation of this document. Aspire receives $6,500 per month on a 1 year contract with a three month termination clause. Aspire has also been compensated 40,000 shares of restricted common stock of Power Efficiency.  In preparing this information, Aspire has relied upon information received from the Company, which, although believed to be reliable, cannot be guaranteed. This information is not an endorsement of the Company by Aspire. Aspire is not responsible for any claims made by the Company. You should independently investigate and fully understand all risks before investing. One of Aspire's officers, Todd M. Pitcher, is an affiliate of Small Cap Pulse, which is cmopensated $500 per month to provide marketing services for Power Efficiency on behalf of Aspire. . 2008-12-14T17:39:00-08:00 http://www.smallcappulse.com/index.php/site/analyst_comments_cowens_robert_stone_weighs_in_on_solar_stocks/ http://www.smallcappulse.com/index.php/site/analyst_comments_cowens_robert_stone_weighs_in_on_solar_stocks/#When:14:36:00Z December 10, 2008 – Analyst Comments – Cowen & Company’s Robert Stone weighed in this morning on several solar companies including Hoku Scientific (Nasdaq:HOKU), Evergreen Solar (Nasdaq:ESLR) and Ascent Solar Technologies (Nasdaq:ASTI), downgrading each of the stocks to NEUTRAL. Here are his takeaways: Hoku (reduced from OUTPERFORM to NEUTRAL) ·         Prepayment delays and potential difficulty obtaining additional financing in 2009 may slow startup of poly plant; ·         Cut FY09, FY10 and FY11 revenue and earnings estimates based on slower ramp, lower ASPs and reduced GMs; Evergreen Solar (reduced from OUTPERFORM to NEUTRAL) ·         Uncertainty in the PV market increases Evergreen’s execution risk in its capacity ramps; ·         Concerns about increased expenses in the current environment which Evergreen will need to launch its string-ribbon technology; ·         Further capitalization in 2009 is going to be tough; ·         Cut FY09 modeling lower ASPs and reduced GMs; Ascent Solar (reduced from OUTPERFORM to NEUTRAL) ·         Weaker Euro lowers ASP and margin assumptions; ·         Funding capacity expansion will be more difficult in current environment; ·         Widened expected losses for FY08/09, lowered revenue for FY10/11/12 on ASPs, lowered BIPV estimates and gross margins Other analysts targets on these stocks: ·         HOKU: Adour Capital rates HOLD with $3 price target (11/20/08) ·         HOKU: AmTechResearch rates BUY with $6.50 price target (10/10/08). ·         HOKU: Broadpoint Capital rates BUY (9/17/08). Broadpoint previously recommended at HOLD (6/24/08); ·         ESLR: JP Morgan rates UNDERWEIGHT (11/18/08); ·         ESLR: UBS downgrades to NEUTRAL (10/28/08); ·         ESLR: Stanford Research rates BUY with $6 price target (10/17/08); Stanford previously rated at BUY with $12.50 price target; ·         ESLR: Wedbush Morgan rates at HOLD with $5 price target (10/17/08); Wedbush previously rated at BUY (7/18/08); HOLD with $13 price target (6/20/0