Aspire Week in Review - Week Ended October 24, 2008

Oct 24, 2008
Author: Administrator

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Another miserable week for the renewable energy sector, with indiscriminate selling as hedge funds filed for through the doors of redemption. It has been remarkable to watch solar stocks hit new lows, many trading down to book value despite the fact that the fundamentals and outlook for solar remain as strong as ever. Sure, module oversupply may compress margins in 2009, but the demand enabled from the ITC, as well as the expanding state commitments for renewable portfolio standards should help mitigate some of the margin issues with higher volumes.

Navigant Consulting estimates that the extension of the ITC could drive 19,000MW additional solar installations, and increased investment of $232 billion between 2009 and 2016.

The metrics and growth forecasts for wind, geothermal, smart grid technologies, energy storage and management and electric, PHEV and hybrid automobile sectors are equally impressive but the market continued to discount these companies.
We don't buy the argument that $60 oil prices are going to deflate the demand for renewable sources of energy. The commitments in the private sector, government (on both sides of the aisle) and on an international basis are well in place. If anything, we have seen strengthening commitments both here in the U.S. and abroad in the last week to step up efforts to develop and adopt renewable energy. To be sure, there will inevitably be an negative impact to be felt by credit challenged end consumers (both on an individual and corporate basis) who may have to tone down plans or even push them forward a bit until their balance sheets become more accommodative. But hasn't this more than been priced in at this point to stock prices?

Pace LDK Solar, which at today's closing price of $15.70, is trading at 0.87 times this year's forecasted sales, and 5 times this year's forecasted earnings (while posting 100%+ revenue and earnings growth), or A-Power, which at today's closing price of $5.02, is trading at 4 times this year's earnings (which are also going to be up 100% on a Y/Y basis). To be fair, there are still sectors in renewable that give rise to more legitimate concerns, like the U.S. biofuels group which continues to face critics that blame it for higher food prices, and feedstock prices that continue to squeeze margins. And companies in development stages of their technologies (like next generation cellulosic), or which will require financing to build plants (like geothermal) - all of which foretell higher cap ex levels - will inevitably get discounted in the current tight credit markets.

But again, so many companies with strong balance sheets, demonstrated growth and increasing demand in the market for their products, have been sold off to what we think are remarkably oversold levels. This could be the opportunity of a lifetime for those that can manage to find the liquidity to invest smartly.

Biofuels and Biomass

Amidst the global financial meltdown and decline in oil prices, Agriculture Secretary Ed Shafer said this week that the U.S. needs to keep its commitment to developing renewable energy.

The Carbon Trust announced the launch of the Algae Biofuels Challenge with the goal of commercializing algae biofuel by 2020. The Carbon Trust could commit £3 million to £6 million initially.

And the New Fuels Alliance sent a letter to the California Air Resources Board (ARB) questioning ARB's plans to enforce indirect effects against biofuels as part of its Draft Regulation for the California Low Carbon Fuel Standard (LCFS) which was unveiled in Sacramento last week. The NFA generally supports ARB's research into the indirect effects of biofuels production but it cautioned ARB to not prematurely or in a piecemeal manner create and enforce rules.

Royal DSM executed a multimillion cooperative funding agreement with the U.S. Department of Energy to underwrite a portion of the R&D costs in developing "second generation" biofuels from non-food feedstocks. This funding is part of the DOE's program for making cellulosic ethanol cost-competitive with gasoline by 2012.

General Motors held a workshop in Beijing on sustainable non-food biofuels this week. It is working with the China Automotive Energy Research Center to develop sustainable biofuels policies in China - which is the third largest producer of ethanol in the world behind Brazil and the U.S.

Lignol Energy (LEC.V) signed a cellulosic ethanol project development agreement with Suncor Energy Products (SU.TO), whereby Suncor will assist Lignol with preliminary development work on its demonstration cellulosic plant in Grand Junction, Colorado.

Germany cut its proposed biofuel blends in fossil fuels for 2009, approving a proposal for oil refineries to mix 5.25% biofuels into fossil fuels, rather than the 6.25% previously planned. The 2010 target will not be 6.25% and remain fixed there until 2014.


Brazil Renewable Energy (Brenco) signed a long-term agreement to sell sugar cane-based ethanol to Lyondell Basell, Rotterdam, for export to the U.S. Shipments will start next year. The Brazilian ethanol will be turned into ethyl tertiary butyl ether in the U.S. and then re-exported to Japan as a gasoline additive. Brenco is building two ethanol mills expected to come online in 2009 with 340 million liters in production expected in the first year of operation. The initial sale to Lyondell will be 60 million liters and this will scale to 250 million liters when Brenco's mills reach 1 billion liters in production.  Brenco also has plans to build an ethanol pipeline with a 4 million liter throughput capacity by 2011, which will require a $1 billion reais investment.  The ethanol mills will require $1.8 billion reais.

Carbon Markets and Clean Tech

The IEA, in its 2008 Energy Technology Perspectives (ETP) study, said that energy-related CO2 emissions would grow by 130% until 2050 in the absence of new policies. The increase would largely be a result of increased fossil fuel usage.
Japan has launched a voluntary carbon market based on companies' stated goals. The trial market is supposed to accelerate further cuts in the private sector, which has been reluctant to impose a mandatory cap because of past efforts by industry to become more efficient. Japan has a stated goal of cutting GHGs by 6% in 2008 to 2012 from 1990 levels (Kyoto Protocol).  It has pledged long-term to cut emissions by 60% to 80% by 2050 from current levels.

The Australian government said it won't set a more aggressive target for carbon emissions by 2050. Its current target is to cut GHGs by 60% by 2050. Last week, Britain's Energy and Climate Minister Ed Miliband increased Britain's target for GHG reductions to 80% from 60%. Australia is scheduled to launch its carbon emission trading scheme in mid-2010, and will detail its plans by year-end with legislation to set up a cap-and-trade carbon trading system which will be voted on in parliament next year.

In a fundamental and critical point, France said this week that it wants to see a scheme in place that compels industrial companies from around the world are obligated to which would ensure a level competitive playing field, when it comes to emissions requirements, targets and trading. Without something like this, and a commitment from the world's leading economies including the U.S. and China, we will likely have to rely on countries, or coalitions of countries to 'do the right thing' - whatever that means. But governments will undoubtedly come under pressure from their industrial sectors if other industries around the world gain a competitive advantage in the market because their own commitments and requirements are lower.

The notion that France is putting forward is that companies that want to do business in the EU would have to show that they are complying with a carbon constraint regime of similar strictness that EU companies comply with.

UNEP (United Nations Environment Programme)  launched an initiative, a "Global Green New Deal", to re-focus the global economy towards investments in clean technologies and combating climate change. The Green Economy Initiative has three pillars: valuing and mainstreaming nature's services into national and international accounts; employment generation through green jobs; and laying out the policies, instruments and market signals necessary to accelerate the transition to a Green economy.

Fast Facts (provided by UNEP):

  • From 1981 to 2005 the global GDP more than doubled, while 60% of the world's ecosystems were degraded or used in an unsustainable manner;
  • Global energy subsidies range from $240 billion to $310 billion per year, or about 0.7% of GDP, but there isn't adequate support for renewable energy development; 
  • An additional investment of $50 billion per year in around 100,000 conservation areas worldwide could secure the $5 trillion-worth of services provided by these natural assets while generating millions of new jobs and securing livelihoods for rural and indigenous people; 
  • UNEPs Sustainable Energy Finance Initiative investments rose to $160 billion in 2007, up from $100 billion in 2006; 
  • Norway announced this month it intends to double its national research fund for renewables to $3.4 billion; 
  • This year, the UK announced a $100 billion investment to build 4,000 onshore and 3,000 offshore wind turbines by 2020 while creating about 160,000 jobs; 
  • About 50 countries including about a dozen developing countries have set renewable energy targets; 
  • Globally some 300,000 people are employed in wind power and about 170,000 in solar, and more than 600,000 are employed in solar-thermal, while about 1.2 million are employed in biomass energy; 
  • The German renewable sector now generates $240 billion in annual revenue, employs 250,000 people and is expected to provide more jobs than the country's auto industry by 2020; 
  • Two billion people globally do not yet have electricity, oil or gas to cook food for daily living; 
  • UNEP has worked with two banks in India to reduce the cost of solar loans in rural areas from 12% to 5% and then to 2%. 100,000 people were able to afford solar power, and the project is now self-financing and similar projects are underway in countries like Mexico (Solar Water Heating Program) which might have the potential to generate jobs for about 150,000 people by 2020, while corresponding to cumulative GHG reduction potential of more than 27 million tons of CO2 by 2020.

There are many more compelling statistics available on UNEP's site.

IBM has launched a Green initiative to help decision makers understand the role of technology in addressing and developing solutions to meet demands for energy, environment and sustainability requirements.

GE (NYSE:GE) said revenues from its energy efficient and environmentally friendly products and services will increase 21% to $17 billion in 2008, and its annual investment into clean tech R&D will exceed $1.4 billion. GE's ecomagination commitments for 2008 include:

  • Doubling investment in clean tech R&D with a $1.5 billion annual target by 2010. It has more than 70 ecomagination certified products, four times the size of its 2005 portfolio;
  • Increasing revenues from ecomagination products targeting $25 billion in annual sales by 2010
  • Reduction of GHGs from operations by about 8% in 2008 from the 2004 baseline, bringing cost savings of about $100 million to date; 
  • Reduction of global water use from 2006 to 2012 by 20%; and 
  • Maintaining public awareness campaign.

Electric Vehicles, PHEVs and Hybrids

Shai Agassi's Project Better Place is raising one billion Australian dollars (US $668.5million) to develop its EV infrastructure in Australia. Better Place will collaborate with Macquarie Capital Group Ltd. to attract investors to build recharging stations, and it also signed on Australian utility AGL Energy Ltd. to supply electricity from renewable sources like wind to power the network. Note: we reported a couple weeks ago about a rooftop solar installation that Premier Power (OTCBB:PPRW) completed which was equipped with solar charging stations for EVs. Renault and Nissan Motor are considering whether to provide vehicles to the Australian venture.    

Novex Delivery Solutions and EV conversion company REV Technologies announced an initial test program to convert 5 Ford Escape SUV's by REV into pure battery EVs. If all goes well, Novex will likely convert the rest of its fleet of 110 delivery vehicles.

The U.S. Postal Service began testing T3 Motion's electric, three-wheeled delivery vehicles at Sun City, Arizona's main post office. The vehicles have a range of 40 miles, a load capacity of 450 pounds and cost less than $0.04 a mile to operate. I had a chance to test drive a T3 vehicle at the company's Orange County headquarters and can attest to how cool and functional they are. This particular application makes a lot of sense.

Toyota announced its natural-gas Camry hybrid at the Los Angeles Auto Show. As yet, it doesn't have any plans to build more than the concept car, which was announced. And Toshiba announced it is going to invest $194.2 million to mass produce Lithium-ion batteries for EVs and PHEVs. Starting in 2010, it will make 3 million lithium-ion battery cells per month. It is currently making 150,000 per month.

Energy Management

PowerSecure (Nasdaq:POWR) announced $15 million of new business consisting of about $12 million of project-based business and $3 million of long-term recurring revenue contracts. The business is driven by its Interactive Distributed Generation systems, and the majority of the $12 million in project business will be recognized in 2009.


Power Integrations (Nasdaq:POWI) reported revenues in Q3 of $53.8 million, up 8% Y/Y. Gross margin was 54.2% compared to 53% Y/Y and Non-GAAP net income was $11 million, or $0.34 per share, compared with $10.1 million, or $0.32 per share last year. At quarter end, it had $225.2 million on hand in cash and investments, and it repurchased 788,400 shares during the quarter for a total of $20.2 million. In terms of Q4 outlook, management expects revenue to be down 15 to 25% over the Q3, with GAAP gross margin at 53 to 54%. Q4 GAAP op ex will be flat over the Q3. 

Energy Storage

Active Power (Nasdaq:ACPW) announced an order from Star Technology Services for its modular containerized PowerHouse product which will be installed in an ISP's data center to provide energy efficient and reliable critical power protection.

FuelCell Energy (Nasdaq;FCEL) and Enbridge (ENB.TO) announced the opening of the world's first Direct Fuel Cell - Energy Recovery Generation power plant. The $10 million plant produces 2.2MW and utilizes Satcon Technology's (Nasdaq:SATC) 1.2MW fuel cell power conditioning system.

Hydrogenics (Nasdaq;HYGS) announced that it is delivering Fuel Cell Power Modules with its power conditioning and controller modules to CommScope, Inc., which serves the worldwide telecom market. CommScope is expanding its products under Andrew Wireless Solutions, and the Hydrogenics HyPM fuel cell modules will be embedded as part of Andrew's EcoPower Integrated Fuel Cell Solution.


Active Power reported revenue of $12.4 million for the Q3, up 51% Y/Y. Net loss for the quarter was $4.1 million, or $0.07 per share, compared to a loss of $4.4 million, or $0.07 in the prior quarter and a loss of $3.5 million, or $0.06 per share for the same period last year. Management expects Q4 revenues in the range of $12 and $15 million, and positive Q4 operating profit. It expects a loss of about $0.02 to $0.04 in the Q4, with cash and investments to decrease by up to $3 million to meet working capital requirements.


The Interior Department said it is making 190 million acres of federal land in a dozen Western states for geothermal development. The Bureau of Land Management has issued 380 leases for geothermal projects since 2001, and geothermal resources are producing about 1,275MW of electricity on federal land.

Raser (NYSE:RZ) received the final $21 million installment of the tax equity payment under its definitive agreement for project financing and tax equity capital for its 10MW Thermo geothermal project in Utah.

Geothermal energy is going to be used at the Juneau, Alaska airport in a project that will be open for bid in mid-December. The project will cost about $1 million but it will pay itself off when heating fuel is higher than $3 a gallon.

Indonesia's Energy and Mineral Resources department said two geothermal plants, the 120MW Wayang Windu plant in West Java, and the 2.6MW Sibayak Plant in North Sumatra, could be in operation by 2009.

Japanese trading house Marubeni Corp. is putting together a consortium to acquire 40% of a Philippine company, Red Vulcan, with a controlling interest in geothermal power producer Energy Development Corp.  Red Vulcan is a holding company which last year purchased 60% of EDC for $1.35 billion.


The Federal Energy Regulatory Commission issued a relicense order for the Baker River hydroelectric project that authorizes Puget Sound Energy to add a new 30-MW powerhouse to the 170.03-MW project.

BC Hydro is seeking proposals to design, supply, and install two new turbine-generators at the 1,668-MW Mica Creek project, on the Columbia River in southeastern British Columbia. Developer Run of River Power said it pursuing development of 16 new hydroelectric plants totaling 280 MW in British Columbia's upper Klinaklini and Mosley watersheds.

And the government of Nicaragua has named Empresa Hidro Energia S.A. to supply turbine-generators and other equipment for the 630-kW Molejones hydroelectric project in Nicaragua's Region Autonoma Atlantico Sur.

Ethiopian Electric Power Corp. is inviting expressions of interest from firms to finance and construct the 371.5-MW Geba 1 and 2 hydroelectric complex.

The Asian Development Bank has approved an US$800 million, eight-year hydropower loan package to India's Himachal Pradesh State, including first-tranche financing of the 111-MW Sawra Kuddu and 65-MW Kashang 1 hydropower projects.

Smart Grid

PG&E in California is deploying as many as 3.3 million GE meters equipped with SmartMeter(tm)technology to customers in northern and central California. In total, PG&E plans to deploy 10.3 million SmartMeter gas and electric meters by the end of 2011 to its customers. The GE meters will be equipped with Silver Spring Networks smart grid/advanced metering infrastructure (AMI) communications technology.


Ausra launched its Kimberlina Solar Thermal Energy Plant in Bakersfield, California showcasing the solar thermal technology investor Vinod Khosla has been touting. The plant is expected to generated 5MW of electricity.

Wacker Chemie AG said it is going to increase capacity under its current 'Phase 8' expansion from 7,000MT to 10,000MT and will begin 'Phase 9' which will be an additional 10,000MT expansion that will increase capacity to 35,000MT by the end of 2011. The expansions will cost about €760 million.

Green Energy Technology is investing $5.05 million for a 40% stake in a new JV provider of slicing polycrystalline silicon ingots into wafers. The JV provider has begun factory construction and is expected to begin operation in the second half of 2009 with initial annual production capacity of 60MW.

PV Crystalox Solar signed a four-year 345MW multicrystalline silicon wafer supply agreement with a "long-standing customer".  Financial terms weren't disclosed.

Renewable Power (REC.OL) announced a long-term take-or-pay contract for the supply of fine particulate silicon with a PV-company based in Asia. The deal is worth more than $500 million.

China Sunergy (Nasdaq:CSUN) signed a multi-year agreement for a supply of high quality 8-inch crystal silicon ingot with Hitachi High-Tech Corporation and an affiliate. HHT will supply a total volume of 1,473 tons of silicon ingot from September 2008 through the end of 2011. Ingot pricing will be negotiated every three months.

Heliovolt said its factory for manufacturing commercial applications of its thin-film solar material will be online in early 2009. It says it will be able to produce solar cells exceeding 12% conversion efficiency out of GIGS in six minutes.

LG Electronics said it is going to invest 220 billion won ($168 million) into building two solar cell lines. It is going to convert one of its plasma display lines in its GUMI complex to build solar cell lines, which will have an annual capacity of 120MW each. The project is slated for start next month and will be complete by 2010.

Solyndra received orders from German PV integrator, GeckoLogic GmbH with about $250 million, through 2012. It said its backlog is now at about $1.2 billion.

Spire (Nasdaq:SPIR) is providing XsunX (OTCBB:XSNX) with components for XsunX's 25MW Thin Film PV solar module assembly process.


Duke Energy Carolinas cut its $100 million proposed rooftop solar program to $50 million, in response to critics that said it is too costly and blocks independent development. The initial program would have resulted in solar installations across 850 customers, but the $50 million program will still cover more than 420 sites. Duke plans on installing, owning and maintaining the equipment related to the solar operations.

Clear Skies Solar (OTCBB:CSKH) announced an $8 million agreement with Prayag Green Solar Power  to develop and construct a 2MW solar plant in India. The day Clear Skies made the announcement, its market cap was less than $6 million.

Phoenix Solar (PS4.DE) said it built a 10kw PV rooftop system on a German school in Sydney Australia.

Sun Edison is leading a program with 16 California State campuses to install 8MW of solar power. It will finance, build and operate the systems while the CSU campuses will purchase the solar energy at prices equal to or less than current retail rates.


Hoku (Nasdaq:HOKU) reported revenues of $1.9 million for the Q2, which came primarily from the downstream part of its business, compared to revenue of $239 thousand from fuel cell contracts for the same period last year. Net loss for the quarter was $1.4 million, or $0.07 per share, compared to a net loss of $1.0 million, or $0.06 per share last year. The company expects to report revenue of $15 million to $19 million for FY2009. In terms of its poly plant plans, it has secured more than $1.2 billion in new poly purchase orders in the past quarter, and about $2.3 billion in orders over the next 10 years.

MEMC (NYSE:WFR) reported revenues of $546 million for the Q3, up 2.7% on a sequential basis and up 15.5% Y/Y. Gross profit for the quarter was $269.7 million, 49.2% of sales, compared to $282.8 million, or 53.2% of sales in the Q2 and $238.8 million, or 50.5% of sales last year. Operating income for Q3 was $227.5 million, compared to $242.5 million in Q2 and $200.1 million last year. Net income was $182.8 million, or $0.80 per share. Management is targeting $540 to $600 million for Q4 revenue and gross margin in excess of 50%. Operating expenses are expected to be about $41 million.


The American Wind Energy Association (AWEA) said this week (see Research and Reports below) that the industry installed 1,389MW in the Q3, bringing the total to 4,204MW for the year-to-date. Expectations are for the total year end number to surpass the 2007 number of 5,249MW installed.

  • Texas added 693MW in the Q3, the most capacity of any state, and it has now moved into the 6GW territory, making it behind only Germany, India and Spain in terms of installed capacity;
  •  West Virginia is the state with the fastest wind power capacity growth, more than tripling its existing capacity with the addition of a 164MW project;

ACCIONA Energy (ANA.MC) signed a long-term PPA with Origin Energy for Australia's largest wind farm, the 192MW Waubra Wind Farm. Under the terms of the agreement Origin will be supplied with renewable energy and Renewable Energy Certificates (RECs) to support its mandatory requirements under the Australian Government's Renewable Energy Target.

First Wind LLC has received approval for its 300MW Milford Wind Corridor project, which is the first wind-energy facility permitted under the BLM's Wind Energy Programmatic Environmental Impact Statement for Western States.

Subsidiaries of NRG Energy and BP completed construction this week of the 150MW Sherbino I Wind Farm JV in Pecos County, West Texas. The wind farm consists of 50 3MW Vestas Wind Systems A/S turbines. BP Wind Energy North America expects to generate more than 1,000MW of wind power by the year end of 2008.

Suzlon (SUZLON.NS) saw its shares selling off today after announcing a 140-foot long blade broke on one of its turbines in a corn field in central Illinois. The company has been under pressure of late due to other reported problems with turbine breakdowns, cracked blades and underperformance. 


Gamesa (GAM.MC) reported nine-month financial results, with EBITDA of 367 million euros ($484 million). EBITDA margin was 15.5%. Net profit rose 67% to 143 million euros on revenues of 2.9 million euros. It said it expects EBITDA margin of 16-17% in the Q4. Management said it is stopping plant production, saying it would focus on improving its production process, and that it was waiting for confirmation from clients regarding their commitments. It acknowledged it is going to feel an impact on its business from the global financial market meltdown. It said its current pipeline is more than 11.5MW.

Iberdrola Renovables (IBR.MC) reported operating profit (EBIT) if 432.4 million euros, up 116%. EBITDA increased 114.6% to 768 million euros. Net profits rose to 230.8 million euros, compared to 48.7 for the same period last year. It said it is on track to install 2,000MW of capacity and it expects to post 400 million euros of net profit and 1.3 billion euros of EBITDA in 2008.

DOE Watch

The Department of Energy announced $7 million in funding for four projects to conduct climate research field studies in 2010 in order to improve on computer models that simulate climate change.


New Jersey Governor Corzine continues to press for more aggressive plans for renewable energy  in the state, and for the creation of green collar jobs. He said this week the state will target obtaining 30% of its electricity from renewable sources by 2020. The previous plan was for 22.5%. Corzine wants 1,000MW of wind energy a year by 2012 and 3,000MW by 2020. The new plans estimates about 20,000 jobs will be created by upgrading the state's energy infrastructure and investing in new technology.

Finance and M&A

Cobalt Biofuels completed a $25 million Series C round of funding with participation from Pinnacle Ventures, Vantage Point Venture Partners, the Malaysian Life Sciences Capital Fund, @Ventures, LSP and Harris and Harris. The capital will enable Cobalt to scale up production and commercialize its biofuels.

ICP Solar Technologies signed a binding LOI to purchase Ibersolar Energía with annual sales of about €120 million. The closing of the deal depends on financing by ICP of a minimum of $15 million on mutually acceptable terms. Post acquisition, the company will be 20% owned by existing ICP shareholders and 80% by existing Ibersolar shareholders on a fully diluted basis.

Magna Electronics acquired BluWav Systems, a developer and supplier of electric and energy-management systems for hybrid electric vehicles, PHEVs and battery electric vehicles. Terms of the acquisition weren't disclosed.

General Electric has raised its investment in A123 Systems  to $55 million.

Upgrades & Downgrades

October 20 - Archer Daniels Midland (NYSE:ADM) upgraded to OUTPERFORM by BMO Capital Markets. On 6/12/2008, BMOCM had rated ADM at a HOLD.

October 21 - Zoltec (Nasdaq:ZOLT) downgraded to NEUTRAL at Dougherty & Company with price target of $12.50. Previously Dougherty had a BUY rating on the stock with price targets of $20 (8/13/2008); $30 (7/29/2008); and $36 (4/4/2008).

October 21 - Itron (Nasdaq:ITRI) rated BUY at Lazard Capital with price target of $80. Previously Lazard had a BUY rating and price target of $115 (10/8/2007) and $95 (8/2/2007).

October 22 - Cosan (NYSE:CZZ) rated HOLD at Deutsche Bank

October 22 - Itron (Nasdaq:ITRI) raised to OVERWEIGHT from NEUTRAL at JP Morgan.

October 22 - Suntech (NYSE:STP) downgraded to HOLD from BUY at Collins Stewart. Previously Collins Stewart had a BUY recommendation and price target of $50 (2/21/2008) and $65 (2/14/2008).

October 23 - Otter Tail Power (Nasdaq: OTTR) upgraded to Buy by DA Davidson. Previously, Davidson had a NEUTRAL rating with a price target of $30.12 (9/19/2008); and a SELL rating with a price target of $37.90 (5/2/2008).

October 23 - Archer-Daniels (NYSE:ADM) rated EQUAL WEIGHT at Barclays Capital.

Research and Reports

AWEA 3rd Quarter 2008 Market Report

The U.S. wind industry installed about 1,400 MW of new wind capacity in the third quarter of the year, bringing the total installed capacity to over 4,200MW in the year and over 21,000MW overall. Some 8,000MW more are under construction for completion this year or next year. Over 7,500MW is likely to be installed in 2008. Source: American Wind Energy Association.


The biofuels segment is the one group that we have a tough time arguing has been oversold at this point, despite the fact that it is trading down 75% year to date. There is just too much uncertainty out there with respect to how these companies are going to build a long-term viable business model. The Andersons (Nasdaq:ANDE) has, by far held up the best, and this is because it has less exposure than the ethanol "pure play" refiners. Verenium (Nasdaq:VRNM) is a company we are bullish on in the long term, and think at today's closing price, it is really attractive, in light of the position it is building in next gen biofuels, but it is a ways off from commercialization on any scale. Verasun (NYSE:VSE), Aventine (NYSE:AVR) and Pacific Ethanol (Nasdaq:PEIX) are a mess, and Archer Daniels (NYSE:ADM) should at least benefit from its know-how in terms of lobbying for support in Washington. Watching Cosan (NYSE:CZZ) sell-off recently has been interesting in light of the fact that it is Brazil's ethanol juggernaut, but about 45% of its business is sugar and this has been in the tank in Brazil lately. Unlike the U.S., however, Brazil's market for biofuels remains robust, and it should be able to get back on track as soon as its economy gets back on its feet. 

The energy management group was down 14% this week with only Orion Energy (Nasdaq:OESX) managing to resist giving up double-digit losses. To be fair, it is down 78% year-to-date, which is higher than the group's weighted average decline of 71%. Consider this: Comverge (Nasdaq:COMV) started out this year on January 2, trading at $31.34. It closed today at $3.19. Has that much really changed with Comverge's business? We doubt it. 

The energy storage group closed down 17% this week. Remarkable as it is, this group, down 32% on the year, is actually outperforming our other indices. That is how bad it has been for the renewables. We think that energy storage is getting increasingly timely, as we get closer to prime time for the electric vehicle markets. Companies that will likely be major benefactors in this group include Hydrogenics (Nasdaq:HYGS), Maxwell Technologies (Nasdaq:MXWL) and Quantum Fuel Systems (Nasdaq:QTWW). 

The geothermal segment gave up 16% this week, amidst the broader market selloff. Probably the biggest concern for geothermal companies is access to capital to build out plants in a tight credit market. As is our take with just about every other sector that we report on, we think this risk is being more than priced into stock prices. On the other hand, excepting Calpine (NYSE:CPN) which is trading at 1.5x P/E (ttm) the multiples in the geothermal space still look expensive relative to solar (see below). Calpine's discount may also be explained by the fact that is pretty debt-heavy (debt to equity ratio of about 2.8). 

The upstream solar segment shed 10% this week, led by a 31% decline in DC Chemical's (010060.KS) stock and a 24% decline in REC's (REC.OL) stock. We can't argue with a straight face that the poly manufacturer's are being sold off at this point for any good reason other than market mania. However, with some massive expansion plans for plants set to come online in 2010-2011, and the entrance into the space by companies like LDK and Siemens, poly prices will inevitably be coming down with the increase in supply. As we have stated elsewhere though, this dynamic should be well-priced into the segment by now. Year-to-date, the group is down 49%. 

The midstream segment gave up an astonishing 23% this week. We think the selling is WAY overdone in this group, which is now composed of several companies trading below book. JA Solar (NYSE:JASO) is a case in point, which lost 42% of its capitalization this week alone! Here is a company that now has a market cap of $632 million, at $3.77, with a net cash position of about $1.50, will post a billion in revenue this year, and is trading at a 2009 PEG of less than 0.1. Or Trina Solar (NYSE:TSL), which closed at $10.67, down 31% this week, and has a market cap of $266 million, is going to post about $880 million in revenue this year and is trading less than 3x this year's forecasted earnings with a 2009 PEG of less than 0.1. Year-to-date the group is down 65%. 

The downstream solar segment gave up 15.77% this week. Concerns persist about whether these companies will be able to operate efficiently in tighter credit markets, and whether projects will be delayed. But the ITC, and the abundance of rebates and RPS' at the state levels, should mitigate much of this risk. Consider Massachusetts, where a typical 5kw system retails for about $43 thousand, but with the ITC, RPS and rebates available, can be reduced to as little as $8 thousand. With this kind of discounting the market, and paralleled in so many states, there should be ample demand to drive installations. Year-to-date, the group is down 65%. 

The solar equipment group was down 20% this week, with Satcon (Nasdaq:SATC) the only company not to give up double-digits. This group is one of the most obvious victims of a tighter credit market and concerns about projects getting pushed back. However, we saw GT Solar's  CEO Thomas Zarrella present at Piper's Solar Symposium a week ago and he indicated that while this is a concern, he hasn't been seeing any projects getting pushed back at this point. In any case, this risk is obviously getting priced in. 


The wind segment was also one of the worst performing this week, closing down 25%. This group has been exposed to concerns that have hurt other cap ex intensive segments of the renewable energy segment. It is ironic to see such poor performance on the heels of such an upbeat report from the AWEA on the growth of the industry. But this goes to our point at the outset of our newsletter this week - namely, the markets have completely discounted the growth and investment that has been and will continue to pour into the wind industry over the next 20 years. We are seeing increasing commitments in the U.S. and abroad to wind energy both onshore and offshore. To be sure, there will be setbacks along the way, whether it has to do with protecting bats, or in the case of Suzlon, with turbines that break. And as it should the market will price in the risk. But there continue to be companies that are outperforming, and in particular, we like Iberdrola (IBR.MC), A-Power (Nasdaq:APWR), American Superconductor (Nasdaq:AMSC) and Vestas (VWS.DE). 

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

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.

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