Aspire Week in Review – Week Ended October 17, 2008

Oct 17, 2008
Author: Administrator

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We attended the Solar International Expo this week in San Diego and were amazed by the participation and attendance for the event by the industry trade, as well as Wall Street. On Tuesday, Lazard held a closed conference for the industry's leading solar firms, attended by its institutional clients, and yesterday, Piper Jaffray held a Symposium of its own for leading solar firms, and we attended that event, with a client of ours Premier Power (OTCBB:PPRW). Other firms in attendance at Piper's Symposium were JA Solar (Nasdaq:JASO), GT Solar (Nasdaq:SOLR), Canadian Solar (Nasdaq:CSIQ), Applied Materials (Nasdaq:AMAT), Energy Conversion Devices (Nasdaq:ENER), LDK Solar (NYSE:LDK), BP Global Wind and Solar (NYSE:BP), Suntech Power (NYSE:STP), ReneSolar (NYSE:SOL), Trina Solar (NYSE:TSL), Akeena Solar (Nasdaq:AKNS), Q-Cells (QCE.DE) and Solarfun (Nasdaq:SOLF). Here are some of our notes from the presentations:

Overall, one of the takeaways was that there are expectations for further commoditization in the wafer, module, cell and poly production segments of the market. There has been substantial expansion upstream from polysilicon manufacturers and entrance into the upstream markets from companies like LDK which will result in a substantial contribution to poly supply by mid-2010. GT Solar said its clients alone will bring on about 60,000 metric tons of supply by that time. The additional supply and increased competition will be instrumental in helping to driving prices down. Another key factor in helping to drive prices down in the upstream channel is the introduction of new technologies from firms like GT Solar that will create further efficiencies for producers.

This is probably good news, because firms at the mid-stream channel are going to need better pricing because there is expected to be some oversupply for modules that will also be a downward pricing influence. Module supplies were a major topic of discussion at the tradeshow, and at Piper's event, and the consensus was generally that, at least in the next 12 months or so, oversupply will likely be the dynamic in the market. A wild card here is the credit markets, and whether projects and production will begin to get cancelled and/or pushed out. The general take on this issue was cautious optimism.

Almost all firms, after reaffirming their own solvency and access to sufficient capital to manage their 2009 cap ex requirements, said that they hadn't seen any significant cancellations or projects getting pushed back yet. But they generally acknowledged that this may become an issue next year if the recession deepens on a global basis. Anton Milner, CEO of Q Cells, was a bit of an exception here as he did acknowledge that he had seen some companies slowing down their plans, at least in the near term.

Our take here is that companies that have strong balance sheets and access to capital will likely be able to stay their course, and even ramp capacity plans, while weaker capitalized companies will get weaker in this environment and be forced either to sell, or go the way of consolidation.

This was another interesting topic at Piper's Symposium - with producers' stock prices being as cheap as they are in this market, have capitalizations gotten so cheap that it may make sense for larger players thinking about getting into the upstream production business to buy, rather than build. This was a question put to both Reyad Fezzani, CEO of BP Global Wind and Solar, and to Anton Milner. Both acknowledged that this is an ongoing discussion at their respective firms, while Milner disagreed that companies have gotten cheap enough to make this an actionable strategy for Q-Cells. Samuel Yang, CEO at JA Solar, said that he sees the current market environment being a good time to ramp his company's capacity, and that JA Solar has the elasticity in its operating margins to withstand downward pricing pressure better than many of his peers.

There was also a substantial amount of interest in the downstream market, and the impact of the ITC. Rhone Resch President of the Solar Energy Industries Association said that lifting the cap on residential should be a key driver for the market, helping to unleash pent up demand. He also said the utility exemption repeal is important. Interestingly, he said that the SEIA is going back to Congress to work to fine-tune the legislation, perhaps requesting an adjustment for the credits to create rebates, making them refundable, which could be more effective in the current economic environment. He also said that in a couple weeks, industry leaders will be meeting to discuss and plan solar's agenda with the next Congress in the form of what he calls the "Big Ask". He added that we can also look for the next Congress to develop a Renewable Portfolio Standard, and in the process, he will be leading the SEIA's efforts to help create more market certainty for solar. The 8-year extension was a first critical step in this process.

Two downstream companies presented at the Symposium, Akeena and Premier Power. An interesting topic of discussion in both of these sessions is the fact that installed solar in the U.S. runs about $8 per watt while it is about $6 in Europe and $6.60 in Japan. Why is the U.S. so much more expensive? Barry Cinnamon of Akeena and Miguel de Anquin of Premier agreed in their respective presentations that there is an administrative layer in the U.S. cost structure that is a materially more expensive contributor to installed cost than there is in Europe.

Another interesting point that came out of discussion in the downstream markets is that the rooftop systems in Europe and in particular Germany and Spain are going to be much more attractive from an investment perspective than ground mount systems. This is a dynamic that plays particularly well into Premier's business, which has opened two offices in Spain and is exploring other areas for expansion in the EU region.

So, again, the general take for the solar industry is upbeat, although tempered by a cautiously optimistic outlook for the near term. The ultimate impact of the global credit crisis on the near term demand for solar is still unclear. Or, more accurately, the demand is as strong as it ever has been, and growing, but the impact of the global credit crisis on budgets to pay for projects in the near term is still unclear. The good news is that there is a strong and expectedly strengthening level of legislative support for the industry, and despite the rollercoaster that solar companies have endured in terms of Wall Street and stock prices, their access to capital for growth and production is still firmly in place.

Moreover, the trends at all channels continue to point to the progression of the solar industry to grid parity. Prices are coming down, efficiencies are increasing and when these dynamics hit the tipping point, adoption in the energy markets for solar will explode.

Around the World

The U.S.-India Business Council's "Green India" Summit was held this week in Washington, and Union Minister of Power, Shri Sushilkumar highlighted India's recent milestones and energy objectives, including:

• Signing of agreement between India and U.S. for Peaceful Uses of Nuclear Energy (India has big plans for nuclear, helping it add as much as 40,000MW by 2020);
• Plans to increase per capita availability of electricity to 1000 units by 2012, using the cleanest energy possible, which will be determined by geographical location, availability and affordability; 
• Promotion of renewables and energy efficiency through legislation like India's Electricity Act of 2003 which requires distribution companies to buy  a part of their total electricity from renewable sources, and offers preferential prices for power from renewable sources, and the Energy Conservation Act in 2001, as well as the establishment of the Bureau of Energy Efficiency; and 
• Most recent, the Prime Minister's National Action Plan with a target of achieving savings of 5% of energy consumption through energy conservation measures by the year 2012, as well as the National Solar Mission which aims to significantly increase the share of solar energy in India's total energy mix.

The U.S. Trade and Development Agency and the ministry of energy have signed a $572,000 grant to provide a cost-benefit analysis on the potential biofuel resources and technologies for Uganda. It the analysis will also recommend appropriate industry regulations and potential incentives for the development of "safe and responsible" biofuel production.

In the UK, Secretary of State for Energy and Climate Change, Ed Miliband, said that the UK is targeting an 80% carbon emission reduction by 2050. He said there will be amendments to the Energy Bill that will introduce a feed-in tariff to support small-scale renewable electricity generation. He also reiterated his intent to push Europe to maintain its target for 20% cuts in emissions by 2020 and a 20% renewable energy target.

Ireland said it plans to secure 40% of its electricity through renewable sources by 2020, up 7% from its previous target. It also said its greenhouse gas emissions (GHGs) decreased by more than 1% last year.

Biofuels and Biomass

DuPont (NYSE:DD) said its cellulosic ethanol joint venture, DuPont Danisco Cellulosic Ethanol LLC broke ground for its first pilot scale biorefinery R&D facility in Vonore, Tennessee.

East Coast Ethanol is expected to announce plans to build a $230 million corn-based ethanol plant in South Carolina. The plant will produce 110-million gallons-per-year. And First United Ethanol started production at its $185-million ethanol plant in Mitchell County, Georgia. The plant has capacity to produce 100 million gallons of ethanol per year.

SunMark Energy said the Henderson Economic Development Corp. in Houston, Texas, has approved a $130 million bond to finance the construction of a $160 million, 60MW woody biomass-fed gasification power plant. The construction of the plant is expected to commence in 2009 and the facility should be operational in late 2011or early 2012.

Rollcast Energy is planning to build a $170 million biomass facility in Newberry Country, South Carolina that will use biomass from regional logging residues and wood debris as feedstock. The facility is expected to be operational by 2011.

A Bulgarian-Portuguese joint venture, Mape Development, is investing 150 million euro into the construction of six biomass-fuelled power plants with a combined installed capacity of 30MW in Bulgaria over the next four years. The first plant will be built in central Bulgaria with a capacity of 5 to 10MW.

In the UK, Helius Energy said it is proposing the construction of a 100MW biomass power plant on the Bristol Channel. It has signed an option to lease an 18 acre site for the plant and is submitting an application for the development of the project to regulatory authorities.

In an important developing story, Kinder Morgan has completed tests to demonstrate commercial feasibility of transporting batched denatured ethanol in its 16-inch gasoline pipeline between Tampa and Orlando, Florida. It has approved $27 million to further expand its ethanol handling capability in the Southeast market, and it is also evaluating other opportunities for batched ethanol transport.

Brazil

Benedito Ferreira, director of the Sao Paulo Industry Federation said this week that several Brazilian firms are setting up a joint venture to finance research into cellulosic ethanol. The JV includes Copersucar, the Sugar Cane Industry Association, Unica, the local subsidiary of Bunge (NYSE:BG), Votorantum, Itausa (ITSA4.SA), and Brazil's Co-operatives Organization.  Brazil's crop research agency, Embrapa will do the technical research.

And Unica's President Marcos Jank said that the global credit crisis may slow investments into Brazil's ethanol industry. There have been 80 mills planned through 2012 and this year, 29 mills came online. Despite the fact that the fundamentals in Brazil for ethanol are starkly better than in the U.S. , the Brazilian ethanol sector has not been immune to the impact of lower sugar and ethanol prices and rising input costs. Brazilian demand remains strong, though, driven by the growth of the flex-fuel vehicle fleet.

Carbon and Clean Technologies

Allen Tweddle, member of the West Virginia Energy Authority, commented this week that solar and other renewable sources of energy are competitive threats to the coal industry. Tweddle cited strong growth in the solar industry of 35 percent per year (which is a contributing factor to lowering the price of silicon), while development of coal-to-liquid technologies is losing support.  The comments were picked up by the AP as if they were a revelation, and a 'wake-up call' to the states coal industry to get more aggressive about coal-related research.

The most rational, if not point-missing argument that the coal industry makes is that while the promise of solar, wind and geothermal is undeniable, it is not ready to scale to the levels of mass consumption any time soon and in the meanwhile, we need a gateway alternative or strategy in the form of clean-coal. Coal, therefore, must continue to "fill the gap" in the meanwhile.

There is truth to this line of argument, and rightfully so. But coal and renewable energy should be seen as competitive to one another. Passing legislation and developing long-term strategies to further entrench the energy markets into coal and oil, diverting budgets and investments that could otherwise accelerate the emergence of renewable energy sources at the utility level is just digging a bigger hole to fill at some point further down the road, and slowing down the progress the energy markets really need to make.

We highly recommend our readers refer to the report in the "Research and Reports" section of this newsletter entitled "Coal Power in a Warming World" published by the Union of Concerned Scientists for a thorough discussion on this subject. 

Royal Dutch Shell said this week that it has quadrupled spending on renewable energy projects this year and has spent $1 billion in the past five years on carbon capture, biofuel, solar and wind energy projects. It is waiting for approval of a C02 capture project at a coal-power plant in Australia.

The Marriott hotel chain is donating $2 million over four years to the Foundation for a Sustainable Amazon, which is running a project to help preserve tropical forests and combat global warming. Hotel guests will also be asked to donate $1 to the project. Brazil's Bradesco bank and the Amazonas state government each donated 20 million reais ($9.4 million) to the foundation as well.

Electric Vehicles and PHEVs

Hybrid Technologies (OTCBB:HYBR) demonstrated its LiV(tm) FLASH, an electronic version of the BMW Mini Cooper, at the ALT Expo.

Detroit isn't the only region of the auto industry that is feeling the pinch in the current financial crisis. This week Tesla CEO Elon Musk announced he is taking over again as CEO, readying the company for a headcount reduction, and adding that the company is going to delay the beginning of production of the Model S for about six months to mid-2011.

Ireland's Environment Minister John Gormley said this week that one in ten vehicles on Irish roads must be electrically powered by 2020. He added that the government is developing a strategy to meet this goal.

Energy Management

Comverge (Nasdaq:COMV) unveiled the PowerPortal(r) Home, in-home display which provides customers with energy consumption data, energy price information and utility messaging.

Echelon (Nasdaq:ELON) said Danish utility NRGi selected its Networked Energy Services (NES) Systems for its advanced metering infrastructure project which is slated to commence in the Q4, 2008 and to be complete by the end of 2011. The deal was contracted through its VAR, Eltel Networks A/S, which will deploy the NES infrastructure initially to 50,000 of NRGi's 200,000 customers. Over the term of the project, revenue is expected to be between about $5 and $20 million.

Orion Energy Systems (Nasdaq:OESX) launched its Orion Virtual Power Plant(tm) "negawatt" energy supply contract which is structured to enable customers to benefit from energy savings delivered through its energy management solutions with no up-front cost or investment. The contract qualifies as an operating expense on customers' financial statements, wherein customers purchase negawatts at a fixed rate, and Orion is responsible for the deployed assets during the delivery period. After the pre-determined negawatts are delivered, customers assume full ownership of the technology and benefit from the total amount of negawatts delivered over the technology during the remaining useful life. Orion is working on securing the IP for this new business model.

Energy Storage

Altair Nano (Nasdaq:ALTI) received an initial $540,000 order for four hybrid electric vehicle battery packs from DesignLine International which will be utilized in buses for three city transit customers, and one for a modular testing program.

Electrovaya (TSX:EFL) is partnering with Tata Motors and Miljo Grenland/ Innovasjon (see Finance and M&A below) to manufacture batteries and electric cars in Norway, using Electrovaya's proprietary Lithium Ion SuperPolymer(r) battery technology.

The Johnson Controls (NYSE:JCI)-Saft joint venture announced that it will be providing lithium-ion batteries for BMW's 7 Series ActiveHybrid car.

ExxonMobil Chemical announced an award for its battery separator film technology, which significantly improves the power, capacity, stability and safety margins of lithium-ion batteries. Exxon is partnered with Japanese firm TonenGeneral on the development of this technology.

Plug Power (Nasdaq:PLUG) entered into a strategy supply agreement with Rittal GmbH & Co. KG, wherein Rittal will integrate Plug's GenCore(r) fuel cell technology to create the RiCell 5000. Rittal will manufacture the hydrogen fuel cell units for sale into the chemical production, traffic and tunnel infrastructure, information technology and telco industries.

Geothermal

U.S. Geothermal (AMEX:HTM) was selected by the U.S. DOE to demonstrate viability of Enhanced Geothermal Systems ("EGS"), under the Raft River EGS Program which totals $9 million, with the DOE providing up to $6 million as part of a cost-sharing arrangement. U.S. Geothermal is providing "in kind" contributions to the program through the use of existing wells and technical data.

Hydropower

Electricity of Vietnam has invited applications for pre-qualification to provide engineering and civil works of the 156-MW Song Bung 4 hydroelectric project on the Song Bung River in Vietnam's Quang Nam Province. And Myanmar's Ministry for Electric Power No. 1 has named firms from Thailand and Singapore to build the 600-MW Taninthayi hydroelectric project on the Taninthayi River in southern Myanmar.

Brazil utility Companhia Paranaense de Energia Eletrica invites applications from potential partners to develop and operate small hydropower projects in Brazil's Parana State.

Ocean Power

Ocean Power Technologies (Nasdaq:OPTT) installed and commissioned one of its autonomous PowerBuoy(r) systems off the coast of New Jersey under contract from the U.S. Navy.

Development group Sark Renewable Energy has named Airtricity, a unit of Scottish and Southern Energy, its partner to develop tidal power off Sark, an island off the coast of France.

Atlantic Resources Corporation confirmed that a group of investors, including Morgan Stanley are planning to fund a £250m off-grid tidal-powered data center in the north of Scotland. The site is expected to be built by 2011.

Solar

Ascent Solar (Nasdaq:ASTI) provided updates this week, saying that it has about $99 million in cash and short-term investments, the majority of which is committed to purchasing manufacturing equipment and facilities as well as to working capital. It recently received an additional $15 million investment from Norsk Hydro. Its manufacturing facility in Colorado is in final stages of completion and should be ready for installation of equipment in the Q3, next year.

Energy Conversion Devices (Nasdaq:ENER) subsidiary United Solar Ovanic (Uni-Solar) will build its next manufacturing facility in Battle Creek, Michigan. It will begin construction on the $220 million, 120MW facility within weeks of the expected approval of Michigan's long-term state tax incentive package.

Evergreen Solar (Nasdaq:ESLR) signed contracts to supply more than 160MW of panels, under undisclosed financial terms, to Mainstream Energy Corp., AEE Solar and a Japanese trading company. Its backlog is now more than 1GW. It said it is building the panels at its Devens plant. Shipping will begin in 2009 and continue through 2012.

LDK Solar (NYSE:LDK) provided an update on its polysilicon plant construction project, saying that its smaller 1,000MT is complete and plant process commissioning has commenced, and with respect to its 15,000MT polysilicon plant, it is on schedule and it reiterated plans to produce between 5,000 and 7,000MT of polysilicon on 2009. And this morning it anno9unced a three-year "take or pay" contract to supply 90MW of multicrystalline wafers, commencing in 2009 to a U.S. based supplier. In addition, the customer will supply a minimum of 300MT of polysilicon and make a down payment representing a portion of the contract value to LDK.

Photon Energy, which just began trading on the Warsaw Stock Exchange's NewConnect market said it plans to build its solar capacity to 30MW by 2012. By the end of this year, it plans to operate 250kw of capacity.

Scheuten Solar Technology GmbH is extending its supply agreement with Neo Solar Power by five years, bringing the total contract value to $460 million.

Sharp is increasing production of PV panels at its Memphis, Tennessee facility from 60MW to 100MW, and it is increasing its thin film solar production to 1GW per year by 2012, from about 15MW this year. And SANYO Electric said it has increased production of PV modules by two times at its Monterrey, Mexico facility with current output capacity of 20MW, which is expected to grow to 50MW.

Yingli (NYSE:YGE) announced it won a bid to supply about 1.5MW of PV modules to China Mobile Communications Corp. Financial terms on the deal weren't disclosed.

GT Solar (Nasdaq:SOLR) announced a $46.8 million contract with Top Green Energy Technologies, a Taiwan-based solar cell producer.

Renewable Energy Corporation (REC.OL) selected Fluor Corporation to design, build and manage its planned solar panel manufacturing facility in Singapore. The contract is worth $420 million, and the facility will produce wafers, cells and modules. REC is planning 740MW of wafer, 500MW of cells and 590MW of module production by 2012. COO John Anderson said this week in an interview that business is presently holding up, but it "would be naïve" to think that the solar industry won't be affected by the global financial crisis.

SolarWorld AG (SWV.DE) said it has equipped a 15MW solar park in Asia, which will generate 23.5 million kWh of electricity per year.

Downstream

Hewlett Packard, SunPower (Nasdaq:SPWR), and GE Energy Financial Services dedicated a 1.1MW solar PV rooftop power system at HP's imaging and printing R&D facility in Rancho Bernardo. The system covers about 200,000 square feet of space. HP used Evergreen Solar 190 and 180-W panels for the system. HP entered into a PPA, purchasing competitively priced electricity from GE Financial Energy Services under its SunPower Access program. HP owns the renewable energy credits and green benefits of the system, which it can retire or sell. The system will provide 10% of the facility's power load.

Borrego Solar Systems announced a revenue increase of more than 100% for the fourth consecutive year, on pace to more than triple revenue from 2007 to 2008, surpassing 800 customers with installations totaling more than 23MW of solar energy.

Open Energy (OEGY.OB) unveiled a home energy control panel, the "EcoTouch Energy Management System" which is connected to a homeowner's solar installation and provides real-time detailed information including the number of kilowatt hours (kWh) produced by the system on a daily, weekly, monthly and yearly basis.

Solar Integrated Technologies (SIT.L) won a contract to supply and install BIPV roofing systems in the Pacific Northwest, for up to 1.1MW in production capacity for PGE customers. The project will use thin-film solar panels and is being installed by SIT on the rooftops of three ProLogis distribution warehouses, covering more than 328,000 square feet.

Spire (Nasdaq:SPIR) won a contract from XsunX (XSNX.OB) to provide elements of the Spi-Line(tm) 25TF turnkey factory to produce 25MW of amorphous thin-film modules.

Earnings

• Evergreen Solar reported Q3 product sales of $17.8 million, compared to $18.1 million last quarter and $15.4 million last year. Management attributed the lower sequential results to lower ASPs due to a stronger U.S. dollar in the quarter. Fees from the EverQ were $4.3 million in the Q3, compared with $4.6 million last quarter and $2.8 million last year.  Gross margin was $1.2 million, or 5.7% for the Q3, compared with $7.9 million, or 34.7% last quarter, and $4.5 million, or 24.9% last year. Management attributed lower GM to higher costs associated with initial production at Devens. Net loss was $23.9 million, or $0.18 per share for the Q3, compared to a net loss of $8.9 million, or $0.08 per share last quarter, and a net loss of $3.7 million, or $0.04 for the same period last year. In addition, Evergreen included about 4.4 million and 1.5 million shares in the EPS computation for the Q and YTD associated with a lending agreement with Lehman.
  
  In terms of guidance, Evergreen expects revenue in the Q4 in the range of $45 to $55 million, including about $4 million of selling fees and royalty payments from EverQ. Production is expected to be about 12MW to 15MW, including about 8MW to 11MW from Devens. GM will be between 5% and 10%, Op Ex will be between $12.5 million to $13.5 million, Op Loss of about $13 to $19 million and Net Loss of about $13 to $19 million, or $0.08 to $0.12 per share based on about 162 million shares out.
• SunPower (Nasdaq:SPWRA) raised its FY2008 profit forecast for the Q3 rose to $22.4 million, or $0.26 per share, up from $8.4 million, or $0.10 per share last year. Excluding one-time items, SunPower earned $0.60 per share. Revenue increased 61% to $377.5 million. SunPower expects FY revenue net income of $2.34 to $2.41 per share, up from $2.26 to $2.36 per share previously guided. Revenue is now expected to come in between $1.44 and $1.46 billion, up from a range of $1.39 to $1.44 billion. It expects cap ex to be about the same as this year. It is forecasting Q4 revenue to come in between $405 and $435 million, with earnings per share between $0.73 and $0.80. Revenue for 2009 is expected to come in between $2.05 and $2.15 billion.
  
  The report came a day after Citi Investment Research analyst, Timothy Arcuri lowered his earnings forecast for 2008 to $2.19, for 2009 to $3.19 and his 2010 estimate to $3.86 per share. Arcuri also said SunPower will need to raise money by early 2009 to meet current cap ex goals. Arcuri maintained his HOLD rating on the stock, and dropped his price target from $90 to $55. The stock closed up $10 to $50 on Thursday, the day of SunPower's announcement and the day after Arcuri's comments. CEO Tom Werner said that the company has no need to raise capital to execute its current business plan.
• Trina Solar (NYSE:TDL) said it expects Q3 revenues to come in a range of $285 to $294 million, higher than the previous guidance of $250 to $265 million. During the quarter, Trina shipped about 66MW of PV modules, at the top of its previously forecasted range of 62MW to 66MW. It said its gross margin for the Q3 is expected to be in the range of 23% to 25%, and its operating margin is expected to be in the range of 15% to 17%. It expects to meet or beat its 2008 revenue estimate of $850 to $900 million.
• Solar Power (OTCBB:SOPW) said it expects to report record revenues for Q3 of more than $19 million, and that through the first half of 2008, it has recorded revenues of $15.9 million. It will also provide an update to its 2008 annual guidance on its scheduled earnings conference call. The most recent guidance is for $36 million in revenues, representing an increase of 99% Y/Y.

Wind

American Superconductor (Nasdaq:AMSC) announced that it licensed two of its proprietary wind turbine designs to Hyundai Heavy Industries (Korean Stock Exchange:HHI) for its 1.65MW and 2MW doubly fed induction turbines. HHI will begin production of 1.65MW wind turbines by the end of 2009 initially targeting the U.S. market. In addition to upfront license fees, AMSC will receive royalty payments for the first several hundred

Conergy AG (CGY.DE) said its planned sale of Conergy Wind GmbH has been cancelled. One of the closing conditions was the transfer of public grants up to 3.5 million euros, which was rejected by the responsible authority. Conergy said it is still looking for a short-term solution.

E.ON and Masdar have formed a JV to invest in the London Array offshore wind farm project. Masdar bought 40% of E.ON's half-share of the project. Dong Energy owns the other 50%.

Vestas (VWS.DE) received an order for five units of its V90-3MW wind turbine for installation in the installation in the Ayyildz project located in Turkey. The project will have an estimated annual production capacity of approximately 57GWh. And it also announced an order for 18 more units of the V90-3MW turbine and 25 units of its V90-1.8MW turbine for installation on two projects in Spain which will have an estimated combined production of 260GWh. The order came from EDP Renoveveis.  This morning it said it has received an order for 116 V52-850kw wind turbines for Suniteyou Wind Farm III and IV in the Inner Mongolia Province, China. The order came from China Guangdong Nuclear Wind Power.

Zoltec (Nasdaq:ZOLT) said it expects to report sales in Q4 were up 17% to about $51 million, and the estimated sales for FY2008 will be up 23% to $186 million. CEO Zsolt Rumy said the numbers won't meet the company's own objectives, but it expects to achieve a revenue run rate of $500 million of sales by FY 2011. Zoltec has also started operations at its Guadalajara, Mexico facility.

The Bats and Wind Energy Cooperative (BWEC) has begun testing the impact of stopping wind turbines during low wind conditions to avoid killing bats.

Crisis of Confidence - A-Power's Update This Week

A-Power (Nasdaq:APWR) hosted an update call this week. The call was precipitated by a pretty remarkable selloff in the company's stock over the past month or so, exacerbated by the recent termination of its CFO. So the focus of this morning's call was to provide some further color on the company's management and oversight of the business, as well as to reiterate its financial and operational fundamentals and guidance. Here are the highlights:

• With respect to the termination of its CFO, this was in coordination with discussions with Nasdaq surrounding certain conflict of interest and non-compliance issues due to the fact that the CFO was professionally engaged concurrently by another firm. The management indicated there were no fraudulent activities involved or suspected. Meanwhile, management is in the midst of an aggressive search to fill this position;
• With respect to financial guidance, management reiterated that it is on track to post $35 to $45 million in earnings this year, or $1.04 to $1.34 per share, and it expects to post earnings of $70 million in 2009, or approximately $2.00 per share. 
• With respect to the business fundamentals, demand continues to accelerate on all aspects of its business. The recently announced $195 million distributed power deal has increased the backlog to more than $800 million. This backlog does not include an MOU for another deal worth about $300 million which is expected to close within the next month or so. It is also in discussion for additional distributed power projects in China and Southeast Asia.
  
  The wind business is also accelerating. Its manufacturing facility is ready and consists of two lines with total annual capacity of 1.1GW of turbines. It also plans to compete a second production facility in 2009, which will bring total capacity to 1.8GW, representing a potential revenue run rate of $2 billion. It expects both facilities to be at full capacity by 2010.
  
  Management said it expects delivery for the 55 turbine sale recently announced to begin this quarter and will run through July 2009. These turbines were part of a larger LOI announced earlier this year representing about $700 million in total. Management is working on signing additional contracts that were alluded to in the LOI for another 325 turbines.
  
  The company has secured components to produce 10 turbines this quarter and is securing additional components for the part of the delivery scheduled for 2009. All 10 turbines produced this quarter are expected to be recognized as revenue in 2008. The company is projecting 8% to 9% net margins on this business, and thinks that, when it eventually is able to source components on a domestic basis, these margins will expand.
• Finally, with respect to the capital markets and recent performance of the stock. Management said it understands that visibility is imperative and is taking several steps to improve that, and towards creating broader confidence from the Street in terms of its business and oversight. It has appointed a dedicated team in the financial department to making its financial reporting processes more efficient so that it can report in a more timely fashion, and more in line with domestic issuers. It has hired a Sarbane's Oxley consultant to improve controls and oversight. It is making its website more investor-friendly, equipped with more information about the business so that investors can be better informed. And it has extended an open-invitation to investors that would like to visit its China facilities. It is currently planning an investor day at its China facilities which it expects to be in November or December. It also said it will remain proactive in terms of scheduling road shows and meetings with Wall Street related firms to expand awareness and support.

Our take is that the business is fundamentally solid, and that the execution risk to both sides of its model have more than been priced into the stock price. Despite the update, and the fact that we think the stock is tremendously oversold at current levels, it opened up lower, trading at about $6.32 as we write this update. This is a $215 million market cap. This is a little more than 5x its projected earnings this year and about 3x fiscal 2009 guidance for earnings. This is a company growing its revenues and earnings by 100%, and with a backlog of well over $1 billion. At 15x this year's earnings, a modest multiple given the growth and opportunity for the business, the stock is trading at $18.

Our only criticism for the company is that it hasn't done a good job forming its communications team to the Street, and as a Chinese company where none of the management speaks intelligible English, this is important. The representative that they had on the phone this morning seemed overmatched for the task, and we are hopeful that they retain a more competent firm. For full disclosure, we have been lobbying for the business, because we are shareholders and we believe in the company. We will keep you posted on that, but as for the business itself, we are bullish.

DOE Watch

The DOE announced initial results of energy cost reduction by 84 military basis that have shifted from traditional lighting to compact fluorescent light bulbs, under the ENERGY STAR(r) Operation Change Out program. The change is expected to save more than 100 million kWh over the life of the bulbs, cut nearly $11 million in energy costs over the life of the bulbs and prevents emissions of more than 150 million pounds of CO2.

Politics and Government Updates

Colorado's Governor Bill Ritter said this week that renewable energy has generated about 90,000 jobs in Colorado.

On Nov. 4, Missourians will vote on Prop C, the Missouri Clean Energy Initiative, which would require the states there investor-owned electric utilities to generate or purchase 15% of their electricity from renewable sources by 2021. The legislation will likely pass, as there isn't any organized opposition to it.

In Florida, utility regulators are moving towards passing a rule that would require 20% of the state's electricity from renewable sources, but not until 2041. The commission voted Tuesday on formally proposing the rule, and a public hearing will be held in December before the rule is sent to the state's Legislature for action next year.  Florida Power & Light, the state's biggest utility has proposed 2030 as a target date, but wants to include nuclear into the definition of renewable.

The AP reported that NY's state Public Service Commission has added $42.6 million for money to be granted through 2009 to consumers and businesses purchasing and installing alternative energy equipment in an effort to increase electricity generated from renewable sources to 25% over the next five years. $20.6 million will be designated for solar electric systems.

Pennsylvania Governor Ed Rendell announced new state investments under the Small Business Advantage grants aimed at reducing energy costs and cutting waste. The Small Business Advantage Grant Program provides a 50% match of up to $7,500 for equipment or processes that reduce energy consumption, promote pollution prevention and increase profitability.

Finance & M&A

Private Equity firm Riverside Partners completed the acquisitions of Solar Works, Inc. and SolarWrights, Inc. to form a combined operating company creating the largest downstream solar firm in the Northeast.

Denham Capital is making up to an $80 million equity investment into Plantation Energy, toward the funding of a new manufacturing plant in Albany, Western Australia. Plantation is Australia's only manufacturer and exporter of Densified Biomass Fuel pellets.

JinkoSolar Holding closed a $35M B round of funding from China Israel Value Capital, Shenzhen Capital Group and Pitango. JinkoSolar intends to apply for a Nasdaq listing as soon as market conditions become more favorable.

Tata Motors acquired a 50.3% stake in Norway-based electric vehicle firm Miljo/Grenland Innovasjon for Kroner 12 million. Miljo will produce electric vehicles based on Tata Motors' products, in addition to manufacturing super polymer lithium ion batteries and developing related technologies.

Ener1 (AMEX:HEV) is acquiring an 83% stake in Enertech, a leading lithium producer of lithium-ion batteries in South Korea, for $45 million in stock, 2.56 million stock warrants and $600 thousand in cash.

CleanScapes, a recycling, organics and waste collection company closed a $1.6 million investment from SJF Ventures II, LP as part of a $10 million Series A round.

Soliant Energy, a solar module manufacturer, said it has raised almost $21 million in Series B funding, with Convexa Capital and GE Energy Financial Services participating in addition to Nth Power, Rockport Capital Partners and Trinity Partners.

MasTec Inc. is buying ethanol plant builder Wanzek Construction Inc. for $215 million to $200 million in cash and $15 million in assumed debt.

Real Goods Solar (Nasdaq:RSOL) announced a merger with Regrid Power, a Campbell, California-based solar integrator which generated more than $15 million in sales for the 12 months ended September 30, 2008. Consideration, including debt assumed, was less than 1x ttm revenue, consisting of one-third cash and two-thirds stock, as well as an "earn out" provision.

Green Plains Renewable Energy (Nasdaq:GPRED) completed its merger with VBV LLC. Simultaneously, at the closing, certain VBV equity holders invested $60 million in Green Plains common stock by purchasing an additional six million shares at $10 per share. Post-merger, Green Plains has four ethanol plants and eight grain elevators with expected annual operating capacity of 330 million gallons of ethanol and grain storage capacity of 22 million bushels.

Upgrades & Downgrades

October 13 - First Solar (Nasdaq:FSLR) rated BUY at Collins Stewart with price target of $210.
October 13 - Ener1 (AMEX:HEV) initiated at NEUTRAL at Cowen & Co.
October 14 - First Solar (Nasdaq:FSLR) upgraded to MARKET PERFORM at Friedman Billings with price target of $210.
October 14 - JA Solar (Nasdaq:JASO) downgraded to HOLD at Canaccord Adams. 
October 14 - SunPower (Nasdaq:SPWRA) reiterated at OUTPERFORM at Cowen & Company with a price target of $60.75.
October 14 - SunPower (Nasdaq:SPWRA) rated BUY at Kaufman with price target of $105.
October 14 - Metabolix (Nasdaq:MBLX) upgraded to BUY at Jeffries & Co. with a price target of $14.
October 14 - Covanta (NYSE:CVA) rated OUTPERFORM at Oppenheimer with price target of $26. 
October 16 - Ormat (NYSE:ORA) upgraded to BUY from HOLD at Stanford Research.
October 17 - SunPower (Nasdaq:SPWRA) rated SELL at Citigroup.
October 17 - SunPower (Nasdaq:SPWRA) rated ACCUMULATE at Janco Partners with price target of $65.
October 17 - Evergreen Solar (Nasdaq:ESLR) rated BUY at Stanford Research with price target of $6.
October 17 - Evergreen Solar (Nasdaq:ESLR) downgrade to HOLCD at Wedbush Morgan with price target of $5.

Research and Reports

Coal Power in a Warming World

If the United States continues burning coal the way it does today, it will be impossible to achieve the reductions in heat-trapping emissions needed to prevent dangerous levels of global warming. Coal-fired power plants represent the nation's largest source of carbon dioxide (CO2, the main heat-trapping gas causing climate change), and coal plant emissions must be cut substantially if we are to have a reasonable chance of avoiding the worst consequences of climate change. Published by the Union of Concerned Scientists

The biofuels segment closed down another 6% this week, led, surprisingly enough by a Brazilian firm, Cosan (NYSE:CZZ) which is indicative of the fact that even the Brazilian biofuels segment has been facing some pressure of late - though the internal fundamentals of the country's ethanol sector still can't be compared to the dismal environment here in the U.S. The Andersons (Nasdaq:ANDE) closed up 5%, and have been one of the few companies in the group that has managed to avoid a deep selloff. Archer Daniels (NYSE:ADM) had a good week, up 12%, and seems to have found a bottom in the $15 to $16 range. Year-to-date, this group is down a stark 72%. 

The energy management group shed 13% this week, with only Echelon (Nasdaq:ELON) managing not to give up any ground. Echelon reported another win with a European utility this week for its NES platform, which provided about the only upbeat news in the group. Orion (Nasdaq:OESX) gets some points for trade-marking a cool term, "negawatts", but it didn't do much to help the stock, which closed down 7%. Year-to-date, the group is down 66%. 

The energy storage group managed to close in positive territory this week, up 2%, led by Plug Power (Nasdaq:PLUG), up 25%, Fuel Cell Energy (Nasdaq:FCEL), up 15%, and Ultralife Batteries (Nasdaq:ULBI), up 13%. Year-to-date, the group has managed to hold up ok, relatively speaking, down only 19%. 

The geothermal segment closed down 6% this week, led by a selloff in Raser's (NYSE:RZ) stock. Calpine (NYSE:CPN) got a bounce this week, posting a 9% gain, as did Ormat (NYSE:ORA) closing up 15%. One of the bigger concerns in the geothermal sector continues to be the capital intensive nature of building power plants in the current tight credit markets. This uncertainty is likely to impact the group negatively for the near to mid-term, in our opinion. Year-to-date, the group is down 60%.

The upstream solar segment gained 2% this week, led by PV Crystalox (PVCS.L), up 22% and Tokuyama (4043.T), up 11%. DC Chemical (010060.KS) took a beating, closing down 21%. The general concern in the upstream poly segment is that orders may taper off into next year as customers face liquidity issues and access to the credit market continues to tighten. No one this week at the Solar Conference in San Diego acknowledged that they are seeing a slowdown in demand and orders yet, but everyone generally accepted that the impact of the financial crisis will likely impact the solar industry on some level. The key to navigating this trough will be securing pre-payments on orders, which is something that Hoku (Nasdaq:HOKU) has been pretty adept at. This week REC COO John Anderson said "We have not to date received any cancellations or postponements of shipments or orders, but it would be native to think the industry would not be affected." 

The midstream solar segment closed down 3% this week, as concerns about margins due to oversupply persists. We had a chance to see several of these companies present this week at the Piper Symposium and they generally acknowledged that there will be margin pressure into 2009. Companies like LDK (NYSE:LDK), who are becoming increasing vertically integrated, and actually moving upstream into poly production will likely be able to navigate these challenges more effectively, we think. Another interesting approach we have seen is Canadian Solar (Nasdaq:CSIQ), who has developed two lines - a high end and a lower end line, which President and CEO Shawn Xiaohua Qu, said will enable them to adopt to market conditions. Others, like Yingli (NYSE:YGE) are getting so cheap on a PEG basis that it seems they would have to begin looking attractive to larger players as an acquisition candidate. First Solar (Nasdaq:FSLR) was up 3% this week on a string up analysts comments and price targets closer to the $180 to $200 range (Goldman's target is closer to $100).

The downstream solar segment closed down about 8% this week, as concerns about customers' ability to finance solar systems continue to grow - despite the fact that the payoff on solar installations has been dramatically reduced by the recent extension in Congress of the ITC. Rhone Resch, Presidnet of the Solar Energy Industries Association indicated at this week's Solar Conference he has been approached by several integrators saying that they are already seeing a substantial  increasing in business and demand as a result of the passage of the ITC. Navigant Consulting recently concluded a study for the SEIA which showed that:
Navigant Consulting issued a Sept. 15, 2008 report analyzing the economic impact of extending solar investment tax credits set to expire December 31. Key findings were:

• In the solar industry alone, extending the 30 percent investment tax credit could result in 1.2 million new job-years by 2016.
• The solar industry creates high quality domestic jobs.  The greatest growth will occur in new manufacturing, construction, and engineering jobs, and in the roofing, electrical, and plumbing trades. 
• By 2016, the solar energy industry would create enough direct, indirect, and induced activity to support 440,000 jobs. 
• Extending the solar investment tax credits would increase domestic investment in the solar industry by $232 billion by 2016. 
• Solar energy could produce more than 28 gigawatts of power by 2016 (enough to power 7 million homes) if Congress succeeds in passing an 8-year extension of the 30 percent tax credit before it expires.  
• Solar energy manufacturing and installation jobs are spread across the U.S. The states that would see the greatest economic boom from an extended tax credit are California, Florida, Arizona, New Mexico, Nevada, New Jersey, Massachusetts, New York, Oregon, and Washington. 
• Also, Pennsylvania, Michigan, Ohio and the rest of the Great Lakes region would benefit significantly from an expansion of the solar industry, an area hard-hit by layoffs in the automotive and traditional manufacturing industries. 

The solar equipment segment posted a 1% gain this week, led by Satcon (Nasdaq:SATC) which gained 11%, and Spire (Nasdaq:SPIR) which closed up 5%. Year-to-date, only Satcon is in positive territory, up 5%.

The wind segment outperformed this week, closing up 7%, led by Broadwind Energy (OTCBB:BWEN), which was up 65%, seemingly finding support at the $6 to $7 level. Gamesa (GTQ1.BE) also had a strong week, up 32%. We are hopeful that other companies in this group have bottomed as well, as it has been one of the harder hit in the past couple weeks with all of the volatility. One of the reasons for this may be that wind projects tend to be pretty expensive on the front end to finance as well, and in the current market, there is a sense that many may be put on hold. This is a point that was echoed this week BP Global Wind and Solar's CEO, Reyad Fezzani - although with 20GW in the pipe in wind alone, and 1,000GW coming online this year, BP is one of the better capitalized companies in the space to keep up the pace. 

About Aspire Clean Tech Communications, Inc.

Based in San Diego, Aspire Clean Tech Communications is dedicated to providing strategic consulting and communications services to businesses operating in the alternative energy and clean tech industries. Our commentary and outlook on the public markets and the alternative energy can be found on a daily basis at www.smallcappulse.com.

For more information about Aspire Clean Tech Communications, Inc., contact Todd M. Pitcher at 858-518-1387.

This Aspire Week in Review was sponsored by Comanche Clean Energy, Inc., a leading Brazilian ethanol and biofuel firm bringing the lowest cost and most efficient alternative energy solutions to the world, and Hayden Communications, Inc., Wall Street's leading corporate communications firm. For more information about Hayden Communications, call 646-536-7331, for more information about Comanche Clean Energy; contact Todd M. Pitcher at 858-518-1387.

The Aspire Week in Review is brought to you by Small Cap Pulse the best source on the web for financial and economic commentary, stock recommendations, and a fresh idea. To learn more about Small Cap Pulse, call 858-509-9900.

 

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