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February 28, 2007

A (nearly) Pure-play Biodiesel Stock

On January 29th, M~Wave [NASDAQ:MWAV] and private vertically integrated Biodiesel distributor Blue Sun Biodiesel announced a merger between the two, with Blue Sun becoming a division of M~Wave, and the merged company being renamed Blue Sun Holdings. Managerial control will also pass to "certain directors and the officers of SunFuels."

If this merger goes through as planned in the second quarter of 2007, US investors will have their first opportunity to invest in a stock focused on a biofuel which is much less controversial among environmentalists than corn-based ethanol. Estimates of the well-to-wheels Energy Return on Energy Invested (EREoI) for biodiesel range from about 1.93 and up, depending on the feedstock, although few numbers are available. The most commonly quoted EREoI for biodiesel is 3 or 3.2, but I've never found a reputable reference for that, and it will clearly vary widely depending on the oil feedstock, with waste oil being "best."

Speaking of feedstock, Blue Sun is a vertically integrated company with several farmer cooperatives raising oil exclusively for Blue Sun, often using varieties of mustard and canola being developed in-house by Blue Sun, although they have also used soy bought on the open market.

They have their proprietary blend of additives, which allows their Blue Sun Fusion biodiesel to offer superior cold weather performance. I've had several conversations with one of their distributors who uses their B100 in a dual tank diesel pickup, and he has been able to drive on B100 when the temperature is as low as 15 degrees F (-9C) (Unless you, like him are a mechanic who happens to carry around a spare fuel filter in your trunk and a spare tank on your vehicle, I would not recommend trying this... he has also had his fuel filters clog when he pushes the envelope too much... ). I'm no mechanic, and so I stick to B20 except during the summer when the temperature stays comfortably above 40F(+5C).

Their additives, according to a study by the National Renewble Energy Laboratory, allow the usual lower maintenance requirements due to the increase lubricity of biodiesel, and reduction of carbon monoxide, hydrocarbons and particulates also seen with most biodiesels, but Blue Sun's blend shows reductions in NOx as well, something that can be a serious issue for biodiesel producers, as we saw when Texas considered banning biodiesel because of increased NOx emissions last fall.

Finally, along with the announcement of the merger with M~Wave, they also announced a partnership with ARES Corporation to build biodiesel production facilities throughout North America, with the first in Clovis, NM. They had previously relied on contract biodiesel production at first tier facilities. Bringing production in house, combined with their own additives, they will have control of the entire biodiesel production and distribution chain (their distributors sign detailed agreements with them on how the biodiesel will be handled all the way to the pump) will likely help them cement their chosen market niche as the high quality biodiesel leader, which will give them a chance to compete with agricultural giants such as ADM and Cargill in the rapidly growing biodiesel marketplace.

Another publicly traded competitor is Earth Biofuels [OTCBB: EBOF], but their main competitive advantage is celebrity endorsement (BioWillie), rather than quality. Of course, investors considering buying MWAV as an early in to this quality biodiesel play should keep in mind that it ain't over til the fat lady sings when it comes to mergers and acquisitions.

Tom Konrad, Ph.D. is an independent investment advisor registered in the state of Colorado who helps people reach their investment goals while protecting the environment.

DISCLOSURE: Tom Konrad and clients hold positions in MWAV, as well as a private equity position in Blue Sun.

DISCLAIMER: The information and trades provided here are for informational purposes only and are not a solicitation to buy or sell any of these securities. Investing involves substantial risk and you should evaluate your own risk levels before you make any investment. Past results are not an indication of future performance. Please take the time to read the full disclaimer here.

February 26, 2007

Investing in Climate Change...Again And Again

I caught this one a little late, but thought it might still be useful.

The Globe & Mail, Canada's main national newspaper, is running, in its investment section, a segment on investing in climate change.

I didn't find all of it useful, but there are some interesting nuggets of information that are worth sharing.

More specifically, I enjoyed the piece on cleantech ETFs called "Go clean, invest green". It discusses The PowerShares WilderHill Clean Energy Portfolio [AMEX:PBW], the PowerShares WilderHill Progressive Energy Portfolio [AMEX:PUW], the PowerShares Cleantech Portfolio [AMEX:PZD] and the Claymore/LGA Green ETF [AMEX:GRN].

I also liked the piece entitled "Liquid assets" on investing in water. One key omission by the author, however, is the PowerShares Water Resources ETF [AMEX:PHO].

Unfortunately, the links provided above will probably only work until the end of February, after which you will have to fetch the segment in the Archives section under Issue #47.

DISCLOSURE: The author does not hold any positions in any of the securities discussed above.

February 25, 2007

The Week in Cleantech: Feb. 19 to Feb. 23

The Week in Cleantech is a weekly roundup of our favorite cleantech and alt energy blog posts and stories from across the web. If you know of a good piece that you think should be included here, don't hesitate to let us know!

This week, we particularly liked...

On Tuesday, Tyler Hamilton at Clean Break told us to stop obsessing about corn.

On Tuesday, Anders Bylund at The Motley Fool discussed 3 stocks that missed the mark. Stock discussed: Evergreen Solar [NASDAQ:ESLR].

On Thursday, Jennifer Openshaw at TheStreet.com informed us that it might be time to turn on alternative energy. Stocks discussed: Archer Daniels Midland [NYSE:ADM], Pacific Ethanol [NASDAQ:PEIX], VeraSun [NYSE:VSE], Ballard Power [NASDAQ:BLPD or TSE:BLD], Distributed Energy Systems [NASDAQ:DESC], Fuelcell Energy [NASDAQ:FCEL], Plug Power [NASDAQ:PLUG], Energy Conversion Devices [NADAQ:ENER], Evergreen Solar [NADAQ:ESLR], SunPower [NASDAQ:SPWR], Ormat Tech [NYSE:ORA], Environmental Power [AMEX:EPG], General Electric [NYSE:GE], Zoltek [NASDAQ:ZOLT], Powershares WilderHill Clean Energy ETF [AMEX:PBW], Guinness Atkinson Alternative Energy Fund [GAAEX].

On Thursday, Dallas Kachan at Inside Greentech wondered whether water was finally about to gush.

On Thursday, Neal Dikeman at the Cleantech Blog gave us a few big ideas from cleantech.

On Thursday, Mike Niehuser informed us on how we could capitalize on human change. Stocks discussed: Maxwell Tech [NASDAQ:MXWL] and Medis Tech [NASDAQ:MDTL].

On Friday. Jack Uldrich at The Motley Fool predicted that biodiesel would, in 2007, get a big pump. Stocks discussed: VeraSun [NYSE:VSE] and Archer Daniels Midland [NYSE:ADM].

February 23, 2007

Recent Momentum and a Direction for Alt Energy Stocks

I want to share with you some of the positive developments we have had here at AltEnergyStocks over the last few months and give you and idea of where things are going for us.

The changes we have seen are the result of Charles Morand and the quality content he has been delivering. Charles' informative and insightful pieces have increased our readership and given us a lot of attention from the cleantech community. Each week, we receive communications that commend us for our stories, seek partnerships, inquire about our media availability, or bring news and information to our attention. These communications tell us that our voice is being heard, our message is valued, and that we are headed in the right direction. Thanks for your feedback and emails, we love hearing with you think, and it is important for us to set a course for the site.

In addition to Charles' contributions, we also appreciate the detailed and insightful posts of Neal Dikeman at Cleantech Blog.

Our blog posts are increasingly being syndicated by Seeking Alpha and Yahoo Finance and mentioned by TheStreet.com . You may notice that we are now Seeking Alpha Gold Certified and display their logo in our right hand navigation.

More Quality Content - Editors Wanted
Our goal is to grow and expand the delivery of quality content and we are looking for one or more editors to help us with that. We are looking for people who are passionate about cleantech and alternative energy and who have solid writing skills. While we are open to a variety of backgrounds, we could really use someone with a trading background to give us the short term perspective on investing in alternative energy and clean technologies.

Sales Help Wanted
We are also looking for sales help to grow the site. As you may have noticed, we are offering Featured Company advertising. As I am spending my time on software development and Charles is busy with content development, promoting Featured Company advertising is something we have not devoted time to. Promoting featured company advertising is ideally suited to someone with an understanding of both internet advertising sales and the cleantech industry.

Please contact us for more information about becoming a writer for AltEnergyStocks or assisting us with advertising sales.

Automated News Gathering
In my first post here at AltEnergyStocks, I had mentioned a system of automated news gathering which brings together and organizes content from other cleantech and investment sites and blogs. This system is still to be implemented but has taken longer than expected. Unfortunately, the time lines I had set out in that post were not reached. Rather than set new time lines for this, I will just say that we are working on it and will try and get something out as soon as possible.

I hope this gives you an idea of what has transpired here recently and the direction we are headed. Your feedback is welcome and appreciated as always.

February 22, 2007

Interview: Ted Hollinger of Hydrogen Engine Center

The following is an interview with Ted Hollinger, President of Hydrogen Engine Center.

In a nutshell, what is Hydrogen Engine Center’s (HEC) main technology and what are its principal applications?

Development of proprietary electronic controls and other technologies to allow for the use of hydrogen and other gaseous fuels for the generation of power. These technologies have applications in many areas, including but not limited to the distributed power industry, airport ground support, co-generation with certain manufacturing processes, buses, marine engines and agricultural irrigation pump systems.

One of the main drivers you identify as necessary for strong uptake of your products is the high cost of gasoline and other fossil fuels. In the event that the energy bears are correct and that we are due for a major correction in the price of oil, how would this affect your growth prospects? Overall, how closely is demand for your products linked to the price of oil?

The main driver is air quality. We believe that the increasing interest in, and control over, air quality and emissions on the part of the EPA, Kyoto, state regulators and other regulatory bodies and sources of influence will have a material, positive and long-term effect on interest in our products. High gas prices help, but are a secondary effect.

You also mention growing worries about climate change as creating interest for your products. Have you been able to observe this, for instance in jurisdictions like California where greenhouse gases will soon be regulated?

Yes, there are tighter emission laws today than ever before. In the next few years they’ll get even tighter. Under our agreement with Sawtelle & Rosprim, Inc we expect to work with that company to design and build the world’s first ammonia-fueled irrigation pump system for the purpose of meeting California’s new emissions requirements scheduled to go into effect in 2010. Plans include integrating the Company’s ammonia-powered engines with Sawtelle’s pump technologies and expertise to complete a prototype system for testing and evaluation. We expect that the prototype system will be tested in California during the 2007 irrigation season.

In your latest Form 10-QSB, you cite a shortage of capital and problems with suppliers as reasons behind a change in your short-term focus away from developing the Oxx Power engines toward efforts to generate revenue through the sale of open power units and more conventional generator systems. When do you foresee a return to your primary strategic focus, and how will you seek to solve your capitalization and supplier

Although we cannot provide a schedule, HEC expects to get the next round of financing in the near future. Although HEC expects to be able to pursue its primary focus more aggressively after the financing is completed, it is important to note that, regardless of the status of the financing, the long-term vision of the Company has not changed

For the 9 months ended September 30, 2006, net cash /used/ in operating activities grew by about 1,400% when compared to the same period in 2005. When can investors expect positive operating cash flows?

Although we have an internal projection, we believe it is too early in our operations to share that information publicly.

Investors hear a lot about the promises of hydrogen, especially for the transportation sector. Most firms currently working on hydrogen-related technologies are, however, development-stage companies with negative earnings. What makes HEC stand out from the crowd from an investment viewpoint?

HEC has products in the field and hopes to be the first hydrogen company to reach break even. HEC’s engines and generator systems are cost effective and durable as well as easily serviced almost anywhere in the world.

I’d like to give you this opportunity to make a final comment.

HEC is leading the way in the use of hydrogen in industrial engine applications and distributed power generation. The Natural Resources Canada wind-to-hydrogen project is one of the first of its kind. We believe that airport vehicles, buses and marine engine applications are next.

DISCLOSURE: We do not have any positions in Hydrogen Engine Center.

February 21, 2007

The Truth Ain't That Incovinient Anymore, So What's Next?

I attended Al Gore's An Inconvenient Truth lecture in Toronto tonight.

I assume many of you have seen the movie so I'm not going to go into the details of the presentation, which is essentially the same as the movie give-or-take a couple of slides. Instead, I'm going to share with you some of the thoughts I had as I was listening to the former VP.

Firstly, I bought this whole climate change thing a long time ago and I've seen the movie, so substantively I got very little out of this. As with the movie, I thought Gore spent a disproportionate amount of time going over the evidence proving that climate change is actually occurring, and not enough on discussing how, in practical terms, we can solve the climate problem.

This brings me to my second main thought. One of the most fundamental drivers behind my confidence that cleantech and alt energy represent very attractive investment stories in the long run is the fact that they offer plenty of opportunities to have the cake and eat it too. Climate change and the environment are increasingly on the radar of politicians, and that’s only going to intensify as various ecological services (e.g. climate control, fresh water, etc.) get scarcer. This means that politicians will be pressured to take action, and that this action will create tremendous opportunities in a number of fields.

What I think is the main missing link in Gore’s crusade is a stronger focus on how embracing cleantech will not only help humanity solve its environmental problems, but also how it will help create value fro investors and generate economic growth. I think it is high time that pundits and politicians move away from a constant focus on the downsides (environmentally as much as economically) to a focus on the opportunities related to climate change.

As I’ve said before, this isn’t about changing the size of the pie, it’s about altering its composition. My humble advice to Al Gore (and to all of you out there who do this sort of stuff): re-weight the content of your presentation to focus on the value creation angle of climate change, and show investors and the public at large that not only is this nothing to be afraid of, but, that, if the regulatory and incentive frameworks put in place to deal with climate change are constructed adequately, many investors and companies will stand to make lots of money. This is not, in my view, a negative-sum game, and that's the point that needs to be driven home.

10 Stocks To Last The Decade...

Someone recently sent me a link to a Motley Fool piece entitled "10 Stocks to Last the Decade, Revisited". It appeared on Feb. 2 so some of you may have already read it. For those who have not, I thought it might be an interesting read because so many parallels can be drawn between the tech euphoria of the '90s and the cleantech euphoria of today.

In a nutshell, the author looks back at a summer of 2000 Fortune article in which 10 stocks were identified as sure winners for the next decade based on how hot they and their industries had been in the recent past. I don't want to take anything substantive away from The Fool so I'll let you read the article (it's short).

As you'll see, if Fortune had been your portfolio manager back in 2000 and had kept insisting on a buy-and-hold strategy to this day (provided you hadn't fired it yet)...well...you might not be completely broke as there are still 3 years to go to the decade, but let's just say that you'd be missing out on a pretty fun party.

Cleantech Will Revolutionize The World, But...

There is very little doubt in my mind that cleantech and alt energy will continue to gain prominence the world over and that, as investment categories, they will continue to offer very attractive opportunities.

After all, those who claimed back in the early 1990s that information technologies and the internet would revolutionize the way we organize our lives and do business couldn't have been more right. Tech impacts modern economies more than ever before and very few people even remember how they coped before the Crackberry.

Nonetheless, North America is awash with stories of people who got burned when the tech bubble burst. Valuations in the sector got driven to preposterous heights on the belief that these technologies were going to fundamentally reshape society. The belief was entirely right; the investment approach (i.e. fully thematic with no regards for business fundamentals) was highly risky.

Many cleantech and alt energy firms are not yet profitable, and, of those that are, profitability often depends on government support. These securities are thus not particularly well positioned to weather a massive shock to financial markets, such as a lengthy correction. Overall, cleantech and alt energy remain very volatile asset classes.

Now I'm sure there are plenty of traders out there who will be able to successfully turn the volatility into strong gains; I've done quite well trading in and out of a few alt energy stocks even though that's not a style that I favor. But in the medium and long terms, if you really want to be sure to pick the winners (and there will be some big winners), you should always keep a healthy focus on good ol' business and financial fundamentals like top-line growth, margin improvements, debt, and the ability to remain at the cutting edge of technological developments.

Remember, the belief is correct, but is the investment strategy appropriate?

February 17, 2007

The Week in Cleantech: Feb. 12 to Feb. 16

The Week in Cleantech is a weekly roundup of our favorite cleantech and alt energy blog posts and stories from across the web. If you know of a good piece that you think should be included here, don't hesitate to let us know!

This week, we particularly liked...

On Monday, Tate Dwinnell at SelfInvestors told us how to profit from the Advanced Energy Initiative, part II. Stocks discussed: Fuel Tech [NASDAQ:FTEK], Exelon Corp [NYSE:EXC], Entergy Corp [NYSE:ETR], Cameco Corp [NYSE:CCJ], Energy Metals Corp [NYSE:EMU], Usec Inc. [NYSE:USU].

On Monday, George Gutowski at Financial Skeptic told us how GE's proxy got high-jacked by a poor-performing, ideologically-oriented fund. Stocks discussed: General Electric [NYSE:GE]. Thanks to SeekingAlpha.com for this one.

On Monday, Jack Uldrich at The Motley Fool declared his love for Suntech Power. Stocks discussed: Suntech Power [NYSE:STP], BP Solar [NYSE:BP], Kyocera [NYSE:KYO], Evergreen Solar [NASDAQ:ESLR], and SunPower [NASDAQ:SPWR].

On Monday, Peter Fairley at Technology Review informed us that large offshore wind turbines were safe for birds.

On Wednesday, Stockerblog gave us an extensive list of fuel cell stocks. Thanks to SeekingAlpha.com for this one.

On Wednesday, James Fraser gave us the run-down on a merger that could create a cellulosic ethanol heavyweight. Stocks discussed: Diversa Corp [NASDAQ:DVSA].

February 15, 2007

Poll Question: What percent of your investment portfolio does clean tech comprise?

This poll opened on February 16, 2007 and closed on February 17, 2007.

Total voters for this poll: 60

0% 18% (11 votes)
1-10% 20% (12 votes)
11-20% 13% (8 votes)
21-30% 7% (4 votes)
31-40% 2% (1 votes)
41-50% 17% (10 votes)
51-60% 2% (1 votes)
61-70% 2% (1 votes)
71-80% 5% (3 votes)
81-90% 3% (2 votes)
91-100% 12% (7 votes)

February 13, 2007

Q4 2006 Renewable Energy Country Attractiveness Indices Out

Ernst & Young's Renewable Energy Group just released the Q4 '06 update for its Renewable Energy Country Attractiveness Indices (the document is not yet available on the website, but it should be soon).

In the words of Ernst & Young," the Country Attractiveness Indices provide scores for national renewable energy markets, renewable energy infrastructures and their suitability for individual technologies." These indices thus provide useful information for investors wanting to assess the desirability of company exposure to certain markets.

There are 3 indices (their names pretty much says what they are about): (a) the All Renewables Index, (b) the Long-term Wind Index, and (c) the Near-term Wind Index (this last index has a 2-year time horizon, and is useful in trying to assess near-term opportunities).

There are no huge surprises to report on for Q4 2006. The US retains the top spot in all 3 indices, which is good news for many of our readers.

One interesting thing I thought I would highlight is a short discussion in the Near-term Wind Index section on how certain Canadian provinces, most notably Quebec and British Columbia, have aggressive wind targets for 2007 that could create nice near-term opportunities. More specifically, Quebec is expected to put out RFPs for 2,000 MW of wind during the year...now that's no joke.

Other interesting excerpts from the report:

"The US retains pole position in the All Renewables Index as investors take a long-term view that political support has now turned firmly in favour of renewable energy. Wind, biofuels and solar are now key growth areas as the Bush Administration seeks to lower the country’s dependence on foreign oil."

Of China, which ranked 6th on the All Renewables Index: "Its position in the Indices recognises the potential in terms of market size and growth potential, but also recognises that this is a complex market and that the requirement for local partnering and presence is a barrier to some investors."

"Renewables in India are becoming a major part of the country’s energy mix, and its position in the All Renewables Index [tied in 2nd place with Spain] is largely a result of a political environment that is friendly to foreigners and even friendlier to an Indian-based renewables industry. Renewables contributed some 7% of India’s electricity in 2006, generated from around 9.1GW of renewable capacity – two-thirds of which come from wind power and around 1GW from bioenergy power generation."

February 11, 2007

"Reduce Overweight In Energy Stocks", Warns CIBC World Markets

Many of our Canadian readers will have heard about this already, but better later than never.

CIBC World Markets, the corporate banking arm of Canadian bank CIBC, made "a significant realignment in [its] equity portfolio this month by reducing [its] position in energy stocks from a 4.5-percentage-point overweight to a 3-percentage-point overweight", citing increasing risks linked to efforts by North American governments to reduce energy consumption and limit greenhouse gas emissions.

CIBC WM made the announcement in its latest Canadian Portfolio Strategy Outlook report (PDF document), released on Monday Feb. 5.

I decided to discuss this research note here for 2 reasons: (a) even though the report is called "Canadian Portfolio Strategy Outlook", the discussion on the short-term investment risks and opportunities linked to current efforts to combat climate change applies as much to the Canadian context as it does the US context; and (b) this is the 1st time, as far as I can tell, that a major North American financial institution not only acknowledges the investment risks associated with climate change, but also translates that acknowledgment into a realignment of its portfolio.

Here are a few more interesting excerpts from the report:

"As with so much of North American environmental legislation, the state of California, representing the world’s 12th largest energy market, is once again taking the lead. The state’s tough new legislation is targeting a reduction to 2000 emission levels by decade-end and an eventual 25% reduction to the Kyoto-benchmark 1990 level by 2020.

At the federal level, a bipartisan bill sponsored by Senators McCain, Lieberman and Obama seeks to establish a national cap and trade system for regulating greenhouse gas emission in the US economy, another sign that the issue has now crossed party lines"

"From mandating greater ethanol content in gasoline to raising minimum fuel mileage standards, governments are waging a war on carbon. We expect the rest of North America will likely adopt cap and trade systems for GHG emissions along the lines recently introduced in California.

Utilities and oil sand producers would be adversely affected. We have dropped our overweight in utilities and reduced our overweight in oil sands although the latter are still likely to be aggressively pursued by global energy giants."

"The 1.5-percentagepoint
(see quote above) weighting cut is in view of both lower-than-expected crude demand growth in OECD countries and the increasing likelihood of some form of cap and trade system in North America regulating greenhouse gas emissions."

"Within [...] the materials group, we favor the agricultural fertilizer group, where valuations have soared as increased government support for ethanol production bolsters corn acreage and forecasts of future fertilizer demand."

February 09, 2007

The Week in Cleantech: Feb. 5 to Feb. 9

The Week in Cleantech is a weekly roundup of our favorite cleantech and alt energy blog posts and stories from across the web. If you know of a good piece that you think should be included here, don't hesitate to let us know!

This week, we particularly liked...

On Monday, Tim Hussar at Finding Cents in the Market broke into biodiesel for us. Stocks discussed are: Nova Biosource Fuels [OTC BB:NVBF.OB] and NewGen Technologies [OTC BB:NWGN.OB]. Thanks to SeekingAlpha for this one.

On Tuesday, Bret Arends at TheStreet.com told us how Cheney's fund manager wasn't too happy with the Bush Administration's energy policy.

On Tuesday, Robert Aronen at The Motley Fool discussed the corn conundrum. Corn-based ethanol investors beware!

On Thursday, Thomas Ko made a good bet against Energy Conversion Devices [NASDAQ:ENER].

On Thursday, Dallas Kachan at Inside Greentech informed us that certain cleantech industries felt slighted by the new U.S. budget.

On Thursday, Eli Hoffmann at SeekingAlpha gave us the heads up on imminent carbon emissions trading-based ETFs.

On Thursday, Seth Jayson at The Motley Fool implied that cleantech investors would rather be right than rich. Stocks discussed are: Altair Nanotech [NASDAQ:ALTI], Capstone Turbine [NASDAQ: CPST], FuelCell Energy [NASDAQ: FCEL] and Hoku Scientific [NASDAQ: HOKU]

February 08, 2007

Forbes Is "Betting On Green Stocks"

Just a heads up that Forbes is running, on its website, a short slide show entitled "Betting On Green Stocks".

The magazine "queried some of the top-performing investment newsletter editors who cover green stocks for a few of their favorite current ideas."

Stocks discussed are: First Solar [Nasdaq:FSLR], SunPower [Nasdaq:SPWR], Medis Technologies [Nasdaq: MDTL], Suntech Power Holdings [NYSE:STP], and Fording Canadian Coal Trust [NYSE:FDG].

February 07, 2007

Poll Question: What is your primary motive for investing in clean tech?

This poll opened on February 7th, 2007 and closed on February 8th, 2007.

Total voters for this poll: 71

social and environmental responsibility 39% (28 votes)
short term return on investment (momentum) 15% (11 votes)
long term return on investment (secular) 41% (29 votes)
I'm not sure why I'm invested in clean tech! 4% (3 votes)

February 06, 2007

An Interesting Way To Play Cellulosic Ethanol

Last Friday (Feb. 2), the Globe & Mail's business section (the G&M is Canada's top national newspaper) ran an interesting piece by a senior business writer on cellulosic ethanol. I wish there was a way to view this article for free, but, unfortunately, the G&M charges for access to certain of its articles, and this is one of them.

The gist of the argument is as follows: (a) forget corn-based ethanol, the future lies with cellulosic (yyaawwnn...); (b) deep down inside, Bush knows this; (c) to make cellulosic ethanol competitive, you need super-enzymes that speed up the process of breaking down the cellulose and transforming the biomass into a liquid fuel; (d) because of 2 companies' super-enzymes, the cost of producing cellulosic ethanol will go from about $2.25 a gallon today to $1.07 by 2011; (e) it will be possible, then, to convert about 1 billion tons of biomass into liquid fuel annually, which will equate, in energy terms, to about 3.5 billion barrels of oil, and this without any adverse impact on the food supply.

Sounds interesting? It's because it is. Those of you who visit this blog often know that I belong to the camp of those who maintain that corn-based ethanol is nothing but a distraction.

The 2 companies identified in the article as holding the enzymatic key to unlocking the potential of cellulosic ethanol are: Novozymes, a subsidiary of Novozymes AS [OTC:NVZMF.PK]; and Genencor, a subsidiary of Danisco AS [OTC:DNSOF.PK].

Although both subsidiaries are based in California, both parent companies are Danish and their primary listings are on the Copenhagen exchange (Danisco AS [Copenhagen:DCO.CO] and Novozymes AS [Copenhagen:NZYM.CO]). The Pink Sheets listings are less than ideal...

Novozymes and Genencor have, respectively, a 40% and a 20% share of the global market for enzymes used in ethanol production.

The article concludes with this prediction by Michael Pacheco, director of the National Bioenergy Center in Golden, Colorado: production of cellulosic ethanol could reach 60 billion gallons by 2030, or 30% of total US gasoline consumption.

Besides the US, cellulosic ethanol will undoubtedly, once it can be produced on a cost-competitive basis, spread to other ethanol majors, most notably Brazil.

February 05, 2007

A Great Day For Solar Stocks, But Beware The Volatility!

Is it the unprecedented amount of media attention climate change is currently getting? Is it the State of the Union Address? Is it the price of oil? Or is it a combination of factors? In the end, it doesn't really matter; it's this time of year again and the value of the solar sector is heading north.

Today was a great day for solar stocks, while the market as a whole was mainly flat.

I remember this period last year very well. I was long Suntech Power [NYSE:STP] and Energy Conversion Devices [NASDAQ:ENER], acquired respectively for $22.25 on December 21, 2005, and $28 and change on August 23, 2005.

I got out of STP at $35.65 on March 17, 2006 (I've since re-entered and partly re-exited it). As for ENER, I exited it on January 12, 2006, at $50, and never bought it again. In both cases, the stocks were trading at very high multiples, driven mostly by speculation.

The point of this little tale is to highlight the fact that several solar stocks experienced big runs at around this time of year last year, followed by equally big falls as momentum investors moved on. Let's look at a few token solar stocks that were publicly-traded at the time.

Sure, much of the market corrected somewhat during the same period that these stocks did - but for this asset class, the fall from grace was quite pronounced.

Last year should serve as a cautionary tale going into this year: most of the companies in the solar sector are not yet profitable, solar is not yet competitive with conventional electricity generation technologies without government support, and the sector remains very volatile.

If you were able to scoop up some of those solar stocks before they began rising again in the late fall/early winter, it might be a good a idea to take some off the table soon. I purchased part of my current STP position (long) on June 15 at $24.29, as I found the valuation pretty attractive at that level. I got out of the June 15 portion of my position this past Friday at $36, after the company updated its Q4 guidance with weaker-than-expected results for the MSK side of the business (although they revised overall results upwards). Turns out I did that a tad too hastily...but I'm not too concerned - 48% over a 7.5-month period is fine with me.

Suntech Power is a solid long-term story, as are some of its sector peers like Energy Conversion Devices and Sunpower. But beware the volatility! I'm still long STP, but will not hesitate to liquidate all of my position if the price is right (or wrong, depending on how you look at it).

As much as I have faith in STP (and other solar stocks) in the long run, I have no doubt that when the market corrects - and it will eventually correct - this sector's value will deflate appreciably. Look out for good buying opportunities then!


DISCLAIMER: I am not a registered investment advisor. The information and trades that I provide here are for informational purposes only and are not a solicitation to buy or sell any of these securities. Investing involves substantial risk and you should evaluate your own risk levels before you make any investment. Past results are not an indication of future performance. Please take the time to read the full disclaimer here.

February 04, 2007

ADR For Climate Exchange plc

One of our readers made a useful comment on our last post about Goldman Sachs and Climate Exchange plc. I thought some of you who are unlikely to go back to that post might be interested:

"Hey this article on the Climate Exchange was great information. But you should tell your readers that there is an ADR trading OTC here in the states - CXCHF. Get it while the gettin is good. How long 'til GS takes this to the big board?"

Thanks for this heads up, cascadehigh.

UPDATE: Following this post, I got the following note from another reader:

"I have not been able to track down any financial info on this company. It trades on the pink sheets, which is immediate reason for caution. It's a very interesting prospect, but where can I find any info on this company?"

This is a very good point, and one worth discussing. Climate Exchange plc [LSE:CLE or OTC:CXCHF.PK] is an interesting beast because, although carbon trading and the CCX and ECX have been in the news plenty of late, there is very little publicly available info on the holding company itself.

Climate Exchange's primary listing is on the LSE's AIM. You can purchase, for GBP10, a Company Profile on CLE.L from the LSE. You can also buy a report on the company by Reuters for $20 here.

If you are looking for free investment-relevant info on CLE.L, I would recommend the following: (a) ADVFN's section on CLE.L; (b) the CCX' news section; the ECX' news section; and Hemscott's section on CLE.L (you have to register to access the information, but that is free of charge).

One of the most interesting "intangibles" about this company is that Dr. Richard L. Sandor, AKA the "Father of Financial Futures", is its chairman.

DISCLOSURE: I don't have a position in either CLE.L or the ADR.

February 01, 2007

Climatic Consequences

Allow me to introduce this post by saying that I wholeheartedly welcome the firming of a new trend in North America: namely viewing climate change as a value creation, rather than as a value destruction, proposition.

For the better part of the past decade, the climate change debate has been dominated by the the views of a small-yet-powerful collection of business actors with a lot to loose from seeing governments regulate greenhouse gases (GHG). This group, with its tremendous political influence, did everything that it could to stymie meaningful debate on the climate question, tirelessly arguing that moving to limit GHG emissions would equate to nothing short of economic suicide.

Fortunately, this era is coming to an end, and an increasing number of investors are now seeing climate change as a way to cash in on some new business opportunities being created across a number of sectors. Naysayers, I have this to say to you: fixing the climate is not about reducing the size of the pie, it's about altering its composition.

Now, with this in mind, let's move on to the meat of this piece: a new report by Citi entitled Climatic Consequences: Investment Implications of a Changing Climate (PDF document). I read this report last week and would definitely recommend it to folks who are having a hard time seeing where upside can arise from efforts to tackle GHG.

The report identifies 3 broad sets of "implications" related to climate change that can create business opportunities for certain companies:

Physical Implications: Select US natural gas exploration and production companies, farm equipment suppliers, agricultural biotechnology companies, and select US property insurers.

Regulatory Implications: Select electric utilities, engineering and construction firms, capital goods companies, natural gas suppliers, select automobile companies, food processors, fertilizer suppliers, wind and solar power companies, and companies focused on building energy efficiency.

Behavioral Implications: “Climate consultants? offering services that promote efficient energy usage, and companies that facilitate carbon trading.

The report lists 74 stocks, and briefly explains why each company is well-positioned to benefit from climate change.

This is a very instructive piece if you have limited knowledge of certain key clean tech areas such as clean coal, solar and wind, ethanol, etc., but especially of how these areas could see growing upside from efforts to combat climate change. The report does a good job of providing very useful information in an easy to understand, no non-sense format.

Citi does, however, warn of a few caveats:

"The key risk to our climatic consequences theme is that governments, regulatory organizations, and/or corporations no longer feel compelled to take near-term steps to respond to the perceived threat of global climate change.

In addition, part of our analysis is based on the assumption that restrictions on the emissions of various greenhouse gases will be tightened within a number of countries in future years, which may not happen for a variety of reasons, including political and economic considerations at a national and local level.

We further note that our analysis does not consider stock-specific metrics such as valuation, EPS, and P/E ratios, or balance sheets, market capitalization, and liquidity. Accordingly, when making decisions, investors should view thematic analysis as only one input. Further, since this analysis employs a longer-term methodology, the conclusions of a fundamental analysis may be different."

Have a good read!!

CNBC on Climate Change

Just a quick note to inform our readers that CNBC's On The Money (OTC) will feature a segment tonight on climate change and investment opportunities related to it. OTC airs at 7:00 pm EST.

We will provide a recap of this discussion later tonight.

UPDATE: I watched CNBC last night at 7pm and the segment did not air. I am not sure if I misheard the date of the segment, or if it was postponed by CNBC for some reason. If I do see or learn of the segment, I will be happy to post on it. If anyone has any information on the segment, please let me know about it.

Watch Out For Nissan

An interesting short piece in Wired's Autopia discussing Nissan's 2007 Altima Hybrid.

This is interesting because it is available now and at a reasonable price, and so the impact on company sales can be measured in the short term. I'm always wary of announcements involving technologies (let alone mass production) that are years away.

This harks back to the idea of bridge, or transition, technologies. Companies that are finding ways to make money from existing technologies while still keeping eye on promising future technologies are worth keeping on the radar.

« January 2007 | Main | March 2007 »

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