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Renewable Energy News
Wind News:
Robert Preston, Craig Millar Energy, reports on NEG Micon's (Danish wind turbine manufacturer) New York City presentation this summer:
NEG's message was that they expect to maintain their 15% market share in the wind industry going forward. They expect wind will continue to grow at over 20% a year but for wind to generate just 4% of total world demand by 2010, growth will have to be around 30%. The offshore wind market is just beginning and their competitor, Vestas, now has a one year reference. NEG expects to get their first offshore deal soon.
When I arrived at the NEG meeting room, set up for 40 people, I was fortunate to have the CEO's full attention because no one else showed for the presentation. By the time you read this, I may have bought NEG's stock. Maybe I can sell it when the meeting room becomes full.
NEG is posed to restore its profitability and maintain its market share in a growing market. Its capitalization relative to its earnings potential is at a discount to other wind stocks. In fact, I believe all the wind stocks may be undervalued right now.
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Feature Story:
What The Blackout Means for Alternative Energy Investors
Shares of many alternative energy companies surged when the largest blackout in North American history renewed interest in distributed energy and a more efficient grid.
American Superconductor Corp. (AMSC), whose superconductor cables eliminate grid inefficiencies, spiked 43%, making it the second highest percentage gainer on Nasdaq for the day. AMSC's competitor, Intermagnetics (IMGC), gained 20%.
Fuel cell company shares spiked too. For example, Proton Energy Systems (PRTN) rose 18%, Plug Power (PLUG) 23%, and Energy Conversion Devices (ENER) 18%. Fuel Cell Energy (FCEL) and Quantum (QTWW), also jumped.
What does this mean for alternative energy investors? We asked our contributing partners, Patrick McVeigh of Lowell, Blake & Associates and Eric Becker from Trillium Asset Management, and Bob Preston of Craig Millar Energy, to give us their take on the situation.
All three experts believe the blackout is a material event and will spur the growth of alternative energy technologies. Eric Becker expects it to result in increased federal funding for energy reliability, which will help the superconductor companies. "The stocks may have gone up more than is appropriate because of the black-out, but I think there's a legitimate reason behind the stocks that went up."
Bob Preston notes that although we may hear about power loss only when it affects 50 million people, it is a recurring, serious issue for businesses now. "Businesses will find ways to insure against loss of revenue and capital from intermittent brittle grid power," he points out. "Companies that have a clear vision of sustainable energy will demand a greater valuation that could reward investors. We've heard a lot about the move toward a hydrogen- based energy structure but it still hasn't garnered the type of enthusiasm it deserves. The blackout is a wake-up call."
"I would wait to buy many of the alternative energy stocks because they just had a nice run and will probably come down in price - especially those that jumped based on what may happen over the next 3, 5, or 10 years," says Patrick McVeigh. "FCEL's price is still attractive because it was significantly undervalued prior to the blackout."
When prices tend to jump up on sentiment as they do during an event like a blackout, Preston uses it as a selling rather than a buying opportunity. If you own American Superconductor, for example, you might want to take some profits since it jumped so high.
More than 300 publicly traded companies are working on energy-related solutions. Which companies might sustainable investors focus on?
Among the two superconductor companies, our experts continue to express more confidence in Intermagnetics. "American Superconductor went up more because it's the pure play but I think they are in a precarious position," explains Becker. "They are burning through too much cash and may have a tough time surviving. They may make it with enough government subsidies, but I'm not convinced they have the technology to get to commercialization. IMGC is still relatively cheap because there's still little value being placed on its superconducting power division. Most of the value in the stock reflects the MRI (healthcare) division (see Progressive Investor Issues 4 & 9 for more on IMGC).
"IMGC didn't move as much as AMSC because they have a profitable on-going healthcare business making MRI machines. It gives investors an "option" on the grid technologies. We own IMGC, but not American," says Preston. "It's not clear when utilities will invest in this technology. At a recent utility conference there was no mention of advanced technologies; the focus was on cost-cutting."
"Intermagnetics may have a product five years from now, but I'm much more interested in companies that have products now like Fuel Cell Energy (FCEL)," says Patrick McVeigh. "For some businesses, like hotels, the blackout could be the catalyst to take the leap and purchase a fuel cell now for back-up."
McVeigh thinks fuel cell and wind companies - that have products right now but have been waiting for a market - should benefit the most. The blackout will certainly push the U.S. energy bill along - the key for wind stocks. "We like Vestas much more than the other wind stocks because it has a better balance sheet and its market share is growing in Europe, particularly in Germany. They had a very good quarter in terms of earnings."
Vestas hasn't been doing as well in the U.S. because of the stalled energy bill and because General Electric (GE) is doing so well here. GE has a long-term relationship with Florida Power & Light (FPL) in the conventional energy business, which they are leveraging on the renewable energy side. Instead of selling generators to FPL, they sell wind turbines. McVeigh thinks Vestas will do well in the U.S. when the energy bill passes. Vestas' valuation is still decent at 17, he says.
Fuel cell companies will likely be recipients of increased subsidies, according to Becker. "The blackout raises awareness of the need for back-up power supply and fuel cell products are getting close enough that more subsidies will lead to more installations. This will accelerate the path to commercialization by building demand and production volume to help bring costs down."
Among the fuel cell companies, Preston is impressed with Proton Energy Systems (PRTN), the leading company that converts water into hydrogen through electrolysis. Currently they are in the hydrogen delivery business, not the energy business. They supply hydrogen to industries like the semiconductor industry, where it is used as part of the manufacturing process. Rather than delivering hydrogen in a canister by truck, they make it right at the production line.
"Eventually this is what will be used to fill hydrogen cars but first it will be used in these industrial processes, and next in stationary applications - back-up systems. Many cell phones didn't work during the blackout; telecommunications companies need to upgrade their back-up systems. Proton can provide a system that competes with a battery or a diesel engine," explains Preston.
"Their management is excellent," he continues. Robert Shaw, one of the gurus in distributed energy venture capital invested in them (along with Evergreen Solar).
Hydrogen needs to be stored so it can be used when it is needed. On the storage side, Bob Preston likes Millennium Cell (MCEL), a tiny company that has patented a process to store hydrogen in borax. "The military applications to supply fuel for M2/M3 Bradley Tanks in the field are compelling," he says. "Hydrogen can be dropped in bags from a helicopter! He also likes Quantum Fuel Technologies (QTWW), backed by General Motors, which makes lightweight tanks to store hydrogen.
