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March 29, 2007

Poll Question: How do you promote alternative energy?


This poll opened on March 29, 2007 and closed on March 30, 2007.


How do you promote alternative energy? Check all that apply.

Total voters for this poll: 46

invest in alternative energy stocks 18% (38 votes)

support regulation of carbon emissions 13% (26 votes)

support renewable energy standards 13% (27 votes)

live an energy efficient lifestyle 15% (30 votes)

vote for candidates who support alternative energy 13% (27 votes)

buy green power 8% (16 votes)

use alternative fuel 5% (11 votes)

seek out products made with alternative energy 12% (24 votes)

I'm an activist 3% (7 votes)


March 25, 2007

Inverter Stocks: A Backdoor to Solar and Wind Energy

Avoiding the Rush

Whenever there is a gold rush, the people who make the real money are seldom the gold miners, but rather the suppliers to the miners that come home with the lion's share of the profits.   This is not because there is not an incredible amount of money to be made in mining gold, but because the nature of a gold rush is that too many optimistic miners are encouraged by the early profits of a few to rush to pursue too few opportunities.

To many, the rush into solar stocks seems to be just that sort of gold rush.  The boom in solar IPOs certainly reminds me of the type of feeding frenzy in which incautious investors are likely to get burned.  And we are also seeing some other signs of rampant speculation, where investors are buying poorly managed (or even dishonest) companies with almost the same fervor of well managed ones.  There's little doubt that the future is bright for solar power, but picking solar companies that are going to survive and thrive in that bright future is becoming increasingly difficult in an increasingly crowded field.

Things Photovoltaic Makers Need

In a gold rush like this one it makes more sense to look at the suppliers.  The most obvious suppliers for solar photovolatic (PV) manufacturers are the suppliers of solar grade silicon, from which most PV panels are made.  This is what I was doing during last summer, and my favorite silicon supplier, MEMC Electronic Materials (NYSE:WFR) has doubled since then (a much better performance than I was expecting in such a short time.)  I have since taken most of my (and my clients') gains.  With many wondering how long the silicon supply shortage will last, and the explosion of companies advancing thin film and concentrating photovolatic technologies to get around the shortage, it seems simpler to get off the silicon roller coaster than to predict when prices will peak or guessing which PV technology will be the most economic in a couple years.

Thinking about suppliers to PV manufacturers, we might also think of Spire Corp. (NasdaqGM: SPIR), which supplies solar manufacturing equipment, but that stock is also trading at its 52-week highs, and is up about 50% in the last six months, and has tripled in the last five years, yet is still unprofitable. [UPDATE: Applied Materials (NasdaqGS:AMAT) just won a contract to supply a thin-film production line to Spain's T-Solar Global. As a supplier to the PV industry, AMAT is worth inclusion in my Alternative Energy Blue Chip Portfolio.]

While I'm used to investing in unprofitable companies, I prefer to buy out-of-favor unprofitable companies, rather than ones that have recently had a big run-up.  Which brings me to my current favorite supplier to the PV industry: makers of the inverters which convert DC power from PV panels into the AC power used by most of our appliances and the grid.  (Small inverters are also used in campers to provide A/C power for portable TVs and other electronics.)

Wind turbines also use a similar device called a converter, although wind converters convert the "wild AC" produced by wind turbines into the more domesticated variety used on the grid.  Many manufacturers make both PV inverters and wind converters.  Many also make power supplies which convert AC to DC power, since these are basically inverters operating in reverse.

North American Stocks

Here is a run-down of the major manufacturers traded in the US and Canada:

Xantrex (TSX:XTX or Pink Sheets: XARXF): Makes a range of solar inverters from 10 to 225 kW and wind converters for turbines up to 1.5 MW.  They are also well established small inverters for cars and campers and other power conversion products.  And, unlike many other alternative energy companies, they have had profitable years in 2005 and 2006.  This is likely the safest investment among power electronics manufacturers, but, by the same token, has the least possible upside.  Xantrex's stock has been flat for the last couple years (after falling about 40% from its IPO in 2004: not a lot of excitement here, which is exactly when I like to invest.

SatCon Technology Corp. (NasdaqCM:SATC) operates in a broad range of power electronics businesses, including grid support and power quality, as well as power conversion.  Their wind converters are designed for turbines from 250kW to 2MW and larger.  Their PV inverters are designed for systems from 30-500kW in size.   SatCon is not currently profitable, and is unlikely to become profitable in the next couple years, but the earnings trends seem to be in the right direction, and they are in the rapidly growing industrial segment of the market.  SATC also fell immediately after its IPO in 2002, and has been gyrating rather wildly since then.  It's currently down about 60% from its price at the IPO, and seems to be showing some signs of life.

Sustainable Energy Technologies (Toronto Venture: STG; Pink Sheets: STGYF) makes a low voltage inverter suitable for residential sized systems and charging battery backups that they market as having superior efficiency and reliability, which they also market for use with fuel cells.  In addition, they sell a vertical axis wind turbine.   STG is definitely the most speculative of the three, but also the greenest and purest play on alternative energy.  Given its speculative nature, it's probably best to wait for a pullback before investing.

These companies do not have the market to themselves by any means; major competitors include the private German Compaies SMA (Sunnyboy inverters and Windyboy converters) and Fronius.  Nevertheless, there is little excitement around the stocks (except for STG which is such a tiny company that the only limit on its stock price is speculators' greed) and yet they have as much potential to benefit from the growth of Solar as do the much hyped solar stocks.


DISCLOSURE: Tom Konrad and/or his clients have positions in the following stocks mentioned here: WFR, XTX, SATC,STG.

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.

March 24, 2007

Fuel Tech - Driving Profits by Cleaning up Coal

Fuel Tech (Nasdaq: FTEK) is one of the fast growing public greentech / cleantech companies focused on cleaning up dirty coal.

I have known John Norris, the CEO of Fuel Tech, and his family for years, and have had the pleasure of following his career for some time. He's one of the many former nuclear engineers that grew up in the electric utility industry. He has held utility executive positions including CEO of Duke Engineering & Services, SVP and CEO of Duke Energy Global Asset Development, and Senior Vice President, Operations and Technical Services, at American Electric Power (NYSE: AEP).

He took the reins at Fuel Tech early last (the stock promptly started climbing), and when I ran into him at a recent conference, filled me in on the goings on at this cleantech company that I not previously followed. I had a chance to chat with John for the record on Cleantech Blog about Fuel Tech in specific, and his thoughts on emissions technologies, carbon and greenhouse gases, and cleaning up electric utilities. I hope you enjoy.


You are relatively new to Fuel Tech, what compelled you to join the company?

I started with Fuel Tech as an Executive Consultant in April of 2005 to try to open doors with utility execs. When the Board approached me late that year about becoming the CEO, I thought about what I had seen over that last 8 months and really liked the prospects for growth. I have had the opportunity in the past to build high growth, highly profitable enterprises including one the most fun periods in my life in leading Duke Engineering & Services. This reminded me a lot of that experience, although I think Fuel Tech has even better prospects than DE&S had when I first got there.


What are the key drivers an investor should understand for the recent and continuing growth of the business?

There are several. On the Air Pollution Control (capital projects) side, investors should watch for market penetration of Ultra systems in the China/Pacific Rim market as well as a broader acceptance our all our NOx reduction technologies in the US market. They will be able to track this by watching for our announcements regarding contract wins. On the Fuel Chem (specialty chemical) side, the key driver is market acceptance by utility coal units. Again they can track this through our announcements.


And in short - what did cause the recent revenue growth?

I tend to credit the good looks of the CEO, but others do not necessarily support that conclusion. [Note to readers: John's picture is on their website, so you can judge his conclusions for yourself!] --- I think the real reason is that we have better defined our products and services and have recognized a much broader market for those services. We have a more focused R&D effort to bring solutions to client problems quickly. And it doesn’t hurt that customers are looking more earnestly for ways to reduce pollution and increase efficiency. All of these have come together for us in sort of a “perfect storm?. Still, we have to deliver results for our customers and for our investors.


Do you view Fuel Tech as part of the emerging cleantech investment theme?

Very much so, but also maybe with an important difference. Too often the greentech sector has, in my opinion, over-promised and under-delivered for clients and for investors. We aim to be a different breed in those regards.


If I understand correctly, Fuel Tech has long been a leader in post combustion pollutant reduction systems, and pre-combustion technologies are a newer business for you. Is this correct? What does the future hold? Where is the industry going?

Fuel Tech has long been a leader in post-combustion NOx control as you mention. Our Fuel Chem product line is really a combustion/post-combustion technology that helps reduce slag problems, dramatically reduce SO3 emissions (both in the boiler and across an SCR), and improve plant efficiency thus reducing CO2 emissions in the process. These latter two items have only recently (in the last few years) become important to customers. I think in the future clients will much more strongly focus on all these and other environmental and operational issues, both domestically and internationally.


Can you give us some color on the overall direction and key issues in the regulatory environment for these pollutants?

For all air pollutants the direction is towards dramatic reduction. You can sense that the whole world is looking to clean up the environment and they are not so much focused on CO2 but rather all the more serious pollutants (SOx, NOx and Hg especially).


You reported all time high international sales for 2006. How much of the business do you expect to be from overseas in the next 2 to 3 years? What has happened on that front? Has the growth been because it is a newer area of focus for the company, or because the overseas markets are growing? And how does China play into the company plan?

Our dramatic international revenue growth in 2006 really came from our projects in China. I expect China and the Pacific Rim to become a much larger part of our business going forward. China consumes more coal today than we do in the US and within a decade they will be using about 3 times the coal we use. The Chinese have now recognized the pollution issues of smog and acid-rain (from NOx and SOx emissions) and are working hard to do something about that. The upcoming Olympic games has heightened the sense of urgency to clean up the air and water. We have worked hard for a number of years to establish our credibility there and to demonstrate our technologies. In 2005 we won two major contracts to demonstrate our NOxOut SNCR and eventually our NOXOUT Cascade technologies and then earlier this year we won two major contracts to install our NOxOUT ULTRA urea to ammonia system on new plants who have the catalyst NOx control technology installed (SCR). Those wins position us well to really make this a major and growing part of our business going forward.


What about C02? In a Kyoto world, is Fuel Tech looking at C02 reduction, sequestration, or capture technologies? If so, what can you share about that?

Our Fuel Chem targeted injections can typically reduce CO2 emissions by 1 to 1.5% for coal utility plants, while dramatically reducing slag and SO3 operational issues and emissions. That may not sound like much but it very hard to make any significant CO2 reductions in plants and our reductions can be achieved while actually REDUCING plant costs. A 1.5% CO2 reduction for a 500 MW plant would be a reduction of about 8 tons/hr or about 65,000 tons per year of CO2 emissions. That is not insignificant and there is much interest in this in China and India especially where we can sell the emission reduction credits on the European Kyoto market (if done thru our Italian subsidiary).


A large portion of your business has been focused on cleaning up NOx or other pollutants at coal fired power plants. With low-carbon power likely to be a larger and larger portion of the global generation mix, what does this mean for the coal-fired pollution control sector?

While I strongly support the push for more renewable energy sources and a renewed push for nuclear power (I am a nuclear engineer as you know), the reality is that for our lifetimes and beyond fossil fuels will supply most of our energy needs. I think our company has a long and exciting future in making those energy sources cleaner and more efficient and thus making this planet a better place.


You announced not to long ago a series of company firsts, among others:
- Installation of a NOx Out Cascade System on a Coal fired boiler
- Commercial SNCR/RRI project
- SNCR lignite fired application
What does this actually mean for company?

We are looking with great haste and much effort for ways we can provide a much broader array of solutions for clients in pollution control, efficiency gains, and operations and maintenance cost reductions. We have a dedicated R&D team of our best and brightest folks focused on this effort and their work has paid off. One technology that you did not mention is our Targeted Corrosion Inhibition Program was introduced in 2006 and which is aimed at helping municipal solid waste plants dramatically reduce the corrosion rates in their boilers. Our patent in this area was but one of 7 patents applied for or granted here in the US and another 12 internationally. We are on the leading edge of technologies in these areas and we intend to stay on that leading edge.


Revenues are obviously up, and you’ve said you expect revenues to increase 20-27% in 2007, with growth from both technology segments. What about 2008, 2009 and beyond, what markets and which products do you expect to deliver the longer term growth?

We do intend to grow but have provided no guidance beyond 2007.


In 2006 compared to 2005, the gross margins were down in the NOx Reduction business, but up in the Fuel Treatment business. Net income for the 4th quarter was down year over year, even though 2006 vs 2005 was up significantly. Can you talk a little about this, as well as tell us what the long term margin objectives are for the company?

First, our revenue for 2006 was up 42% over 2005 and our pre-tax income in 2006 was up 64% vs 2005. (These results were above our guidance.) The net income (after tax) blip you mentioned is that in 2005 we recorded $4.3 million in non-cash tax benefits related to the anticipated utilization of new operating loss and tax credit carryforwards. So we believe our performance in 2006 was considerably better than 2005 and has positioned us to do even better in 2007.


You keep a healthy amount of cash and no debt on your balance sheet. What is your view on the company’s capital structure?

I love our capital structure---lots of cash, no debt, unsecured borrowing ability and a business model that is delivering rapid growth in revenues, profits and cash.


And I know you’ve had to discuss this a lot lately, but the stock price has doubled in the last year, and P/E and valuation metrics are looking rich. What is your view on how the capital markets should look at the stock and valuation?

Personally I think this is a great buying opportunity (and I just recently did so in my personal accounts). If you believe that we can and will execute our business plan and grow this company rapidly and profitably then today’s stock price is not over-valued at all. If you don’t believe that we can and will execute and achieve the results, then the stock price is already too high. It all depends on what you believe about the Fuel Tech team.


And if I was an investor interested in the company, what should I be looking for over the next 6 to 12 months?

You should be watching for contract announcements to see if we are winning in the market-place. The first quarter will be the hardest for us from a results point of view but the orders need to come over the next 6 months if we are going to deliver this year’s revenue and profit results. We are working hard to make that happen, but until the contracts are in hand it is just talk.


Neal Dikeman is a founding partner at Jane Capital Partners LLC, a boutique merchant bank advising strategic investors and startups in cleantech. He is founding contributor of Cleantech Blog and a Contributing Editor to Alt Energy Stocks.

March 22, 2007

US Exchanges And Environmental Investing

An interesting bit of follow-up on my article last week about exchanges and environmental markets. Both the NYMEX [NYSE:NMX] and the Chicago Climate Exchange (CCX) [OTC:CXCHF.PK] have partnered up, in the past 2 weeks, with specialty cleantech and alt energy index makers to launch derivatives products.

On March 14, Chicago Climate Futures Exchange (CCFE), a wholly owned subsidiary of the CCX, and WilderShares LLC, announced (PDF document) a licensing agreement to launch a futures market based on the WilderHill Clean Energy Index [AMEX:^ECO]. The ECO is also the underlying index for the Powershares WilderHill Clean Energy Portfolio ETF [NYMEX:PBW].

The CCFE-ECO Index futures, as they will be known, are the CCX' first foray outside of the world of emissions trading and into the realm of cleantech investing. If you were wondering where a pure-play environmental exchange would ever diversify, you got your answer.

Then, on March 20, NYMEX concluded an agreement with Ardour Global Indexes, LLC "to introduce alternative energy index futures and options contracts." The contract will be based on the Ardour Global Index (AGI) series, of which I counted 6 on Ardour's website (priced either in USD or in EUR).

To be sure, listing derivatives based on alt energy and cleantech is different from seeking exposure to pure environmental markets as I defined them last week. Nevertheless, this is all parts and parcels of the same broad movement. Once solid cash markets for environmental commodities are in place, the relationship between environmental markets and cleantech/alt energy stocks/indexes will become clearer, and a larger array of options will becoming available for investors to hedge their bets or exploit inefficiencies.

So let me reiterate what I said at the end of last week's article: keep an eye on how exchanges are positioning themselves with regards to environmentally-driven markets, as these markets will present very attractive growth opportunities in years ahead.

P.S. The Climate Exchange ADR [OTC:CXCHF.PK] has rebounded somewhat since last week - it closed at 16.25 today up from around 12.50 last Thursday.

DISCLOSURE: I do not hold a position in any of the stocks discussed in this article.


March 20, 2007

Carbon Emissions ETF

Today, while reading an article on cleantech ETFs by The Motley Fool, I found out that XShares Advisors LLC and the Chicago Climate Exchange were working on a carbon emissions-based ETF (PDF document).

There is not a lot of info available on what exactly this ETF will track. We reported back in November that UBS had launched an index based on European carbon prices. As noted by Richard Kang at around the same time, this index is well-suited for something like an ETF.

If any of our readers have any further insight on this, don't hesitate to share it with the rest of us.

Solar Power on Wallstrip

TheStreet.com is running a video segment on solar power as part of its Wallstrip series. The segment's date is 03/20/2007.

If you're a long-term solar follower you definitely won't learn too much here. Nevertheless, the vid does a good job of outlining governmental efforts to boost the growth of solar in the US. Short and interesting.

The segment is especially positive on: FirstSolar [NASDAQ:FSLR] and Trina Solar [NYSE:TSL].

Positive on: Canadian Solar [NASDAQ:CSIQ], Ascent Solar [NASDAQ:ASTI] and Suntech Power [NYSE:STP].

Negative on: Sunpower Corp [NASDAQ:SPWR].


March 19, 2007

A Blue-Chip Alternative Energy Portfolio

Update: an expanded version of this portfolio appears here.

Alternative Energy: Risky but Alluring

For many of my older or more cautious clients, investment in small, profitless (or nearly so) startup alternative energy companies is inappropriate.  Even a diversified ETF such as the Powershares Wilderhill Clean Energy portfolio (AMEX: PBW) is too volatile due to its heavy exposure to profitless renewable energy companies such as Evergreen
Solar (ESLR)
(NasdaqGM: ESLR).   Because of this, in the last year PBW has been over $24, but as low as $16.24.  While such volatility can lead to supercharged profits when you are riding it in the right direction, many investors cannot sleep at night if one of their holdings lose a third of their value in just a couple months (as PBW did last year.)

Nevertheless, growing awareness of Global Warming, Peak Oil, Gas, and Uranium, and energy security worries are leading to broad interest in alternative energy among people who do not fit the typical aggressive speculator profile of people who can shrug off a 50% loss in a single holding over a short period of time. 

The Blue-Chip Solution

Fortunately, not all companies involved in alternative energy are risky startups.  For an investor who is willing to own stocks which are not pure-play companies, getting an exposure to quality businesses in alternative energy can actually be easier than finding quality companies among the firms whose business is purely devoted to a singe renewable energy technology.   In fact, many of the industry leaders are actually divisions of larger conglomerates.  For instance, the largest US Wind Turbine manufacturer is GE Wind (NYSE: GE), while Sharp Solar (Pink Sheets: SHCAY) is the world's leading manufacturer of solar modules.   Conglomerates are by far the easiest way to invest in Energy Efficiency, the dullest but most profitable alternative to conventional energy generation.

While these companies lack the sex appeal of overnight high flyers like First Solar (NasdaqGM: FSLR), which has doubled since its IPO less than six months ago, they also provide a lot more downside protection than bombs like Distributed Energy Systems (NasdaqGM: DESC) which down about 60% over the same period, and off over 80% from its all time high.  Any investment adviser or financial planner will tell you that diversification is key to a healthy portfolio: these companies have built-in diversification from their wide array of businesses.  Below, I highlight some of my favorites.

Using your Ecomagination

I've already mentioned GE's leadership in wind turbines, but their Ecomagination division (with it's attendant publicity) also includes a healthy does of energy efficient technologies, including not only the familiar compact fluorescent lamps, but also LEDs, more efficient gas turbines, consumer products, and on and on.  Their Jenbacher engines are widely used to generate electricity from a wide variety of biogas, and a the also have a solar photovoltaic division (which used to be the independent PV company AstroPower, which they bought out of bankruptcy.)  GE does play the whole Ecomangination thing up, while they are still selling pulverized coal plants as well (they were the planned supplier for TXU... and they'll probably still sell three of those.)  On the other hand, GE's CEO Jeffrey Immelt has said "Renewable energy, energy efficiency, environmental technology - we're going to own it."  I believe he's serious about that, and GE will try to "own" all those things.  They have a better chance of owning renewable energy than First Solar, and if they are going to "own" renewable energy, wouldn't a renewable energy investor want to own GE?

An efficient choice

Another favorite of mine is Johnson Controls (NYSE: JCI.)  Johnson's Building Efficiency segment "engages in the design, production, and installation of control systems that monitor, automate, and integrate building operating equipment and conditions."  In short, they are deeply involved in  the next generation of more efficient buildings.  Since energy efficiency is the most cost effective form of alternative energy, this business is much less susceptible to the wild roller-coaster ride of other alternative energy stocks which gyrate wildly in response to fears (or hopes) of skyrocketing energy prices.  They also have a joint venture with Saft to produce batteries for the hybrid vehicle market, which GM recently awarded a battery development contract.

Some call it "Trash," I call it "fuel."

You might be surprised at my next pick: Waste Management (NYSE: WMI).  What does trash have to do with renewable energy?  As a feedstock.  Not only does WMI have recycling operations, but they operate at least 86 landfill gas projects which produce electricity, but also have 17 waste-to-energy operations.  While in the short term, rising fuel prices will cut into their operating margins, capturing methane (a highly potent greenhouse gas) should be a valuable source of carbon credits (once there is a market for these), and recycling is an excellent way to save energy compared producing raw materials.  Another future potential revenue source from alternative energy will be waste to energy.  While WMI already operates 18 waste to energy facilities, there is a lot of room for new developments such as plasma conversion, which can make the process cheaper and more efficient.

Climate Action Partnership

You might also look for blue chip companies by looking at their actions.  Companies which feel they are strategically positioned for serious political action to prevent climate change will probably also be lobbying for such action.  In January, seven major companies formed the Climate Action Partnership with three national environmental nonprofits.  They are calling for real cuts to carbon emissions, and you can bet that part of the reason is they feel it will benefit their shareholders (if they called for action on climate change, but felt that it would hurt their shareholders, those same shareholders could legally sue them for any damage to the bottom line.)   The fact that the cuts they are calling for are fairly aggressive is significant, because many industry lobby groups have called for carbon regulation, but only because they (rightly) fear that if they're not at the table when the negotiations take place, they'll end up being served as the main course.

Here's a quick rundown of the companies in the partnership, and why I think they are each participating:


  • Alcoa: lightweight recycled aluminum  for more efficient vehicles.
  • Caterpillar: Much waste methane electricity generation is based on CAT engines and turbines.  They also stand to benefit from the rush to biofuels because they are a major supplier of farm equipment. [UPDATE: it turns out that this is not actually true. They sold their farm tractor segment in 2002, and it was never a large part of their operations.]
  • Duke Energy: While not a major generator of renewable energy, they are hoping carbon regulation will benefit their nuclear heavy strategy (they're also doing some good things in cogeneration aka combined heat an power.)
  • DuPont has been reducing their carbon footprint for two decades, and they also have considerable biofuels operations.
  • FPL Group: Currently the world's largest operator of wind energy.  Less talked about, they also own more concentrating solar power stations than any other utility.
  • GE: see above.
  • PG&E: Great energy efficiency programs, wind, solar.
  • PNM Resources: Before this, I had never associated PNM with environmental responsibility (or irresponsibility for that matter.)  Greenwashing?  Their territory has a lot of potential for concentrating solar power and wind... I hope that's what they're thinking.   I'd love to hear your opinions. 

That's not the entire list. Others that come to mind are ADM (biofuels), Deere (farm equipment), Siemens (Wind, PV, transmission), and Owens Corning (wind turbine blades).   The point is that there's no problem filling a diversified portfolio with large, stable companies that can also benefit from rising energy prices and regulation of carbon emissions.  Your alternative energy portfolio is less limited by lack of choice or aversion to risk than it is by unwillingness to accept some bad with the good.

I like to look not for companies that are perfect, but more for ones that are headed in the right direction.  A profitable portfolio is built on tomorrow's winners, not yesterday's.  The same can be said for an environmentally responsible portfolio.

DISCLOSURE: Tom Konrad and/or his clients have positions in the following stocks mentioned here: ESLR, GE, Sharp, JCI, WMI, Dupont, FPL, ADM, Deere, Siemens.


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.

March 18, 2007

The Week in Cleantech: Mar. 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, David Talbot at MIT's Technology Review told us how to nanocharge solar. Nanotech's role in cleantech should continue to increase steadily in the years ahead. On that note, Inside Greentech discusses a report on cleantech and nanotech.

On Wednesday, Stephen Trimble at Defense Tech told us that the army was foreseeing a natural gas crisis. Those who follow the coal-to-liquid space know that the army has been looking into this. But that would be at best a band-aid solution.

On Wednesday, Kevin Bullis at MIT's Technology Review discussed a recent MIT study arguing that the future is precarious for coal. Making coal clean will be, in my view, one of the most dynamic areas of cleantech research in the coming decade.

On Friday, the WSJ's Energy Roundup wondered whether Qatar could become a wind power giant. While the potential would be there for off-shore wind, Qatar would have a long way to go to catch up to the leaders pack.

On Friday, Tyler Hamilton at Clean Break noted how last week was a busy one for Canadian cleantech firms.

On Friday, the WSJ's Energy Roundup sang the Ballad of the sad CAFE for us. I have one thing to say about large auto makers' constant complaining about raising fuel efficiency and pollution standards: yaaaaawwwwnnnnnn...

On Friday, Jack Uldrich at The Motley Fool informed us that FuelCell was generating a spark. I too was surprised by Clean Edge's numbers, but definitely worth keeping an eye on.

March 15, 2007

Environmental Markets: The Next Frontier in Environmental Investing?

The term environmental markets remains foreign to most investors (and environmentalists!), even though these markets represent, in my view, a very compelling investment story. Although we've discussed trading in carbon emissions in the past, I thought I would expand a bit and talk about environmental markets in general, and about good ways to play them.

What's An Environmental Market?

Environmental markets exist at the confluence of two movements:

(a) A growing desire on the part of national and regional governments in several countries to both limit environmentally-damaging behavior and to promote the growth of alternative energy sources

(b) A realization by policy-makers that economists were indeed right - if you let the market sort it out on its own you will most likely end up with a more efficient outcome than if you try to tell it what to do

Environmental markets serve one of two purposes.

First, scarcity for an undesirable environmental commodity is created via regulation (e.g. a cap on emissions of a pollutant) and market participants must determine, among themselves, who needs that commodity most and what is a fair price to pay for it. A token example, and one which we've discussed here on several occasions, is trading in greenhouse gas emissions, also called carbon trading.

Second, the production and/or use of an environmentally-desirable commodity is mandated by government, and market participants are allowed to trade certificates worth a certain number of units of that commodity. The best example in this case is the use of Renewable Energy Certificate (REC) programs in several US states to promote renewable energy. RECs certify that a certain amount of green power has been produced and pumped into the grid, and a company under obligation to use renewable energy can buy RECs to meet that obligation instead of producing the clean power directly.

To be sure, environmental markets are, by and large, far from mature. The European Emissions Trading Scheme (ETS), the largest and most liquid environmental market in the world, continues to be dominated by brokers. Latest estimates place the share of OTC markets at around 71% of total traded volumes for the ETS, while exchanges get the remainder. With regards to RECs, there are issues with their transferability between jurisdictions.

But environmental markets are at most a few years old, and never in their history have there been as many policies and regulations in place to favor their expansion. As issues of scale, liquidity and jurisdictional transferability are worked out, I am certain that we will see the rise of healthy cash markets for a number of positive and negative environmental commodities, further bolstered by advances in electronic trading.

Who's Playing Environmental Markets?

What initially got me thinking of writing this post was a press release by a Massachusetts-based, Toronto-listed company called World Energy Solutions [TSE:XWE] announcing that a solar REC trade had been completed through its trading platform. In its own words, "World Energy is an energy brokerage company that has developed the World Energy Exchange online auction platforms, through which a diverse set of energy buyers and sellers can trade energy, financial instruments and renewable energy credits [...]" Basically, it's an exchange.


Then, out of curiosity, I decided to check, after hearing that it had made an unsolicited bid for the Chicago Board of Trade, whether IntercontinentalExchange [NYSE:ICE] offered any environmental products. Turns out it does: it recently launched an ETS-based futures contract in collaboration with the European Climate Exchange, the outfit responsible for about 75% of volumes in the European exchange-traded carbon market.


And then I remembered that, about a month ago, the Montreal Exchange, the exchange responsible for derivatives in Canada, had announced a Canadian energy-focused strategic partnership (PDF document) with NYMEX. Canada has become, by most accounts, a global energy heavyweight. The Montreal Exchange also recently set up the Montreal Climate Exchange (PDF document) in collaboration with the Chicago Climate Exchange. Part of the NYMEX partnership entails opening offices in Alberta, not only home to Canada's famous oil sands but also the largest single source of its infamous greenhouse gases. A recent research note (PDF document) by CIBC World Market conservatively estimates the value of a potential Canadian carbon market at around C$12 billion (circa US$10.2 billion) - not a bad niche to be in.

Finally, I would be remiss if I did not also mention Climate Exchange plc, a little outfit we've discussed on several occasions in the past. Climate Exchange [LSE:CLE or OTC:CXCHF.PK] owns both the European Climate Exchange and Chicago Climate Exchange, and is about 19% owned by Goldman Sachs. Of all of the companies discussed above, this is the only environmental trading pure-play.


So What's Point of All This..?

Environmental markets are currently in their infancy, but there are a number of macro drivers at play that should see them emerge as healthy industries in their own right. Over the next decade, they will become larger in size and value, more liquid, increasingly exchange-based, and, because of their nature, many of them could be international before too long (e.g. the carbon market).

But environmental markets are, by and large, playgrounds for institutional actors. Most retail investors, if they want a piece of that pie, will likely have to look at the intermediaries that allow environmental trades to take place - namely exchanges. As an asset class, exchanges have done extremely well over the past few years, and it would be worth keeping an eye on how they position themselves with regards to environmental markets, as these markets should offer good growth potential.

DISCLOSURE: I do not have positions in any of the securities discussed in this article.


March 13, 2007

Poll Question: What is the most important risk associated with investing in pure-play environmental stocks?

This poll opened on March 14, 2007 and closed on March 15, 2007.

Total voters for this poll: 62

oil prices 21% (13 votes)

political volatility 7% (4 votes)

investing in the wrong sector 10% (6 votes)

picking the wrong company in that sector 39% (24 votes)

diversified players like GE prevailing and the pure-plays being swallowed up 18% (11 votes)

other 5% (3 votes)

March 11, 2007

EnerNOC: Demand Response IPO

Lunch with an Efficiency Expert

Yesterday, I had lunch with Howard Geller, Ph.D., one of our nation's leading experts in energy efficiency and energy policy. Howard is the director of the Southwest Energy Efficiency Project (SWEEP), former Executive Director of ACEEE, and has a Doctorate in Energy Policy from the University of Sao Paulo in Brazil.

My first question for industry experts is which companies are doing good things in their feilds, and I was especially interested in Howard's answers because energy efficiency is so much more difficult to pin down than most other types of renewable energy. If you want to invest in wind power, you can choose from a list of over a hundred companies. Investing in energy efficiency is much trickier: it is possible to buy manufacturers of more efficient products, such as LEDs or hybrid vehicles, but the greatest gains in efficiency come from better system design. If you want to invest in hybrids, you might buy Toyota (NYSE: TM), but you might also consider investing in batteries, or efficient electric motors. And a hybrid car is an extremely simple system when compared to efficient buildings.

EnerNOC and Demand Response

We talked about several public companies, but for most of them, energy efficiency is only a small part of their operations. There's no Vestas of energy efficiency. An then he mentioned a company I had not yet heard of, because they are not yet public. EnerNOC specializes in demand response and energy management, which basically means making better use of the generation capacity we already have. If we are going to avoid building more coal plants and make better use of intermittent power from renewable sources such and wind and solar, we can invest in expensive electricity storage, or we can shift our use of electricity to times when it is easier to supply. This is exactly what demand response technologies enable.

In addition, Demand Response allows utilities to delay the construction of new transmission by reducing peak loads, and helps to prevent power outages. Large cities such as New York are particularly good prospects for demand response, because they have the added constraint that additional transmission is particularly hard to add in densely populated areas.

IPO filing

EnerNOC recently filed with the SEC for an IPO. The lead underwriters are Credit Suisse Securities (USA) LLC and Morgan Stanley & Co., whom you can contact for a prospectus. I just did so myself, and will review it to determine if I will recommend that any of my clients participate. Note that this article shall not constitute an offer to sell or the solicitation of an offer to buy; that can only be done through the prospectus when it becomes available.

Market and Competition

I expect the market for Demand Response services and enabling technology to grow rapidly over the next few years. TXU will likely be a big customer for demand response services as a way to meet rising peak demand without building 8 of its 11 planned new coal plants. Demand response is also likely to be an enabling technology to get more intermittent resources on the electrical grid, allowing people to use power when it's being generated for free by the sun or wind, and to use less when it has to be drawn from limited or expensive power storage or generated with dirty and increasingly expensive fossil fuels.

EnerNOC does not have the space to itself. In addition to private competitors like Energy Curtailment Specialists, Inc., ConsumerPowerLine, and Comverge which are also busy inking deals with utilities. One public (but not pure-play) competitor is Energy Connect, a subsidiary of Microfield Group, Inc. (OTCBB:MICG). But given the potential rapid growth of the industry, there should be room for many companies to participate and thrive.

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

DISCLOSURE: Neither Tom Konrad nor any of his clients hold positions in EnerNOC.

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.

March 10, 2007

The Week in Cleantech: Mar. 5 to Mar. 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, Jefferies revealed that investors were bullish on solar power, ethanol and hybrid transportation. The results of this survey will surely surprise some people.

On Wednesday, Travis Johnson at One Guy's Investments told us all about indirect investing. This is indeed a great strategy for investors wanting exposure to cleantech and alt energy minus some of the risks associated with pure plays. Thanks to Seeking Alpha for this one.

On Wednesday, Dane Muldoon at Autoblog Green discussed the results of a study that found that biodiesel massively reduces dangerous emissions. The next step is to ensure that the price customers pay at the pump reflects the true costs of gasoline's dangerous emissions.

On Wednesday, Mark Clayton at the Christian Science Monitor wondered how green nuclear power was. This debate will surely heat up in the year to come.

On Thursday, Kimi Shi at Pacific Epoch informed us that yet another Chinese company was planning a US IPO. Consolidation, anyone?

On Friday, Mike Millikin at Green Car Congress informed us that the US and Brazil were moving to formally cooperate on biofuels. On a related note, those with a paid subscription should have a read at this article from the WSJ.

March 08, 2007

Trading Alert: AAER Inc. (TSE:AAE)

I took 2 long positions yesterday (1 in my normal trading account and the other in my retirement account) in an emerging Canadian integrator of megawatt-sized wind energy conversion systems (i.e turbines) called AAER Inc [TSE:AAE]. Besides turbine assembly, the company also provides a range of services to clients in the wind industry, ranging from assistance in project planning and financing to post-installation maintenance.

Now it must be said from the outset that is a very speculative play on North American wind and not suitable for all investors. I entered one of my positions at C$0.38 and the other at C$0.39.


What initially poked my interest in this stock was a Jan. 17 press release stating that a small wind turbine manufacturer had just signed a 10-year lease agreement to take over a former car factory in the Canadian province of Quebec. I looked into this further and found out that, a few months earlier (Nov. 22, 2006), AAER Inc. had signed a C$35 million contract to deliver and maintain, for a period of 6 years, 17 1.5 MW wind turbines to Katabatic Power Corp., a privately-held wind farm developer based in British Columbia. Katabatic is going to use the turbines for its Mt. Hays project, and has an option for a further 17 turbines in 2008.

The Company

AAER Inc. has only existed in its current form since Nov. 7, 2006. Before that date, it was known as Bolcar Energie, a publicly-listed capital pool company that had been established with the sole purpose of making an acquisition in the turbine manufacturing space. Although Bolcar filed its preliminary prospectus as far back as July 2003, AAER did not go public until May '06, following a qualifying transaction with Bolcar. On Nov. 7, after a reverse takeover, Bolcar was terminated and the company became officially known as AAER Inc.

AAER's most recent financial disclosure, available on SEDAR, sheds very little light on what the firm currently looks. Filed under the Bolcar name, the company reported a total loss of C$2,532,406 on revenues of C$7,491 for the 6-month period ended Sept. 30, 2006. For the previous fiscal year, ended on March 31, 2006, Bolcar reported a loss of C$1,665,136 on no revenue.

I didn't pay too much attention to Bolcar's numbers here as the firm had not begun operating when it last filed. Unlike certain sectors like fuel cells, wind is a proven business and the name of the game is not to burn through cash for years hoping for a blockbuster technology sometime in the future - new players in this sector should be able to generate sales and produce operating earnings rapidly, as the competition from well-established firms is stiff. So far, I like what I'm seeing from AAER.

What I liked

Here are the key elements that sold me on AAER:

A) Their board of directors features an impressive roster of well-connected individuals that could greatly help strategic partners (i.e. wind farm operators) land good contracts. Most notably, Ted Moses, one of the most influential First Nations people in Canada, could be key in securing the support of Aboriginal communities in several regions. Aboriginal communities will play a large part in the development of Canada's wind industry because of the land they now control, especially in the northern parts of many provinces.

B) Canada is slated to become one of the top markets globally for wind energy between now and 2015, with installed capacity forecasted to grow tenfold from its current 1,500 MW to around 14,000 MW. Within Canada, Quebec is expected (PDF document, go to p.6 for the executive summary in English) to be one of most aggressive jurisdictions with regards to developing wind energy, with installed capacity forecasted to grow from around 215 MW today to 4,000 MW by 2015. AAER is very well-positioned to benefit from the growth of the wind industry in Quebec, and has already demonstrated that it has the rest of Canada on its radar. AAER states that it's business target is North America as a whole. This brings me to...

C) I really like the fact that AAER is doing business with Katabatic. The Mt. Hays project really is the tip of the iceberg - the real meat lies with a project called Banks Island. As reported on Katabatic's website, "Fortis Bank rated the North Coast of British Columbia as the number one wind resource in the world. Banks Island was independently assessed by Helimax (as part of a 2002 study on BC Wind prospects) to have 2,780 MW available." Katabatic has found a financier of renown, Deutsche Bank, to help bankroll its Banks Island project. Banks Island would be developed with a view to exporting green power to the largest power market in North America, California. I have not come across any information indicating that AAER might get a piece of that action. However, its MW-scale turbines, adaptable for the tough conditions encountered in northern BC, would be a great fit for such a project...not to mention the fact that the 2 entities already have a business relationship.

D) The company just announced a private placement of 3,284,856 shares at C$0.35 per unit, as well as the issuance of 314,200 warrants entitling the holder to 1 common share and 1 common share purchase warrant at a price of C$0.60 for a period of 2 years. A little over a month ago, AAER entered into a share-for-debt agreement under the terms of which it issued 97,417 common shares at a price of C$0.3375 per share "in settlement of outstanding indebtedness aggregating C$32,878.09." I like the fact that these transactions took place at close to the price that I paid for my positions, and that there are investors out there willing to bet that the stock will trade over C$0.60 within 2 years (although we're admittedly talking about not very many shares).

A Word of Caution...

Now needless to repeat that this is a highly speculative investment that entails a number of risks. What's out in the public domain so far looks very good to me, but that doesn't say much since there really isn't much publicly-available information on AAER Inc. Nevertheless, as I stated before, I am quite bullish on wind in North America, and this could do quite well for me if I'm right. I'll report back on this trade in a few months.

Until then, happy alt energy investing!

DISCLOSURE: Charles Morand is long AAER.

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.

March 07, 2007

A Welcome to Our New Editor: Tom Konrad

I am happy to announce that Tom Konrad has joined Alt Energy Stocks as an Editor. You may already be familiar with Tom's writing at EE/RE Investing and his professional services at TomKonrad.com.

Tom Konrad is an independent investment advisor and financial analyst specializing in renewable energy and energy efficiency companies. He has a Ph.D. in mathematics from Purdue University, and is a level II candidate for the Chartered Financial Analyst designation. He serves as Treasurer for both the Colorado Renewable Energy Society and Ratepayers United Colorado.

In the short time Tom has been with us, he has has produced two excellent pieces - one on biodiesel and the other on renewable energy income trusts. These posts demonstrate the wealth of his experience, knowledge and insight.

We are glad to have him join us as an editor and we look forward to sharing more of his work with you.

March 05, 2007

What to Make of the TXU Deal?

Last weekend, TXU Corporation (NYSE: TXU) made the stunning announcement that it would be acquired by two private equity giants -- Kohlberg Kravis Roberts (KKR) and Texas Pacific Group (TPG) -- in a transaction valued at $45 billion.

Press release

Two things leap out at me from the announced deal.

First, the investors are willing to pay a 25% premium over the recent share price, while at the same time committing to a 10% rate reduction for TXU's residential electricity customers in Texas. KKR and TPG are no dummies: it must mean that they truly think they can run TXU much more efficiently than it has been run -- even though TXU has been widely viewed as a glowing success story since the meltdown of the merchant power markets in 2002. If a "good" utility TXU can be taken over by a private equity group at a premium price and earn the required rates of return on invested capital while cutting prices to customers, pretty much any electric utility should be in the same boat. Conclusion: there must be a lot of fat in the utility industry that can be cut with more aggressive management. If I were a large institutional investor in an underperforming utility, I'd be pressing the executives to dress the company up for sale. If I were a senior manager in the utility sector, I'd be expecting to be pushed to a much higher degree of performance for shareholders. If I were a mid-manager or lower level employee at a utility, I'd become increasingly worried about my job.

Second, the investors are the prime movers in axing 8 of 11 announced coal fired powerplants from TXU's growth ambitions, in lieu of increasing expenditures on customer efficiency by $400 million. This will be a major reversal for John Wilder, TXU's CEO, who has been loudly touting a vision for massive coal expansion. I'm certain that Wilder's rich payday from this lucrative deal will help soften the blow to his ego, but it will be interesting to see how Wilder copes under his new owners. These are smart investors, and they seem to be saying that energy efficiency (along with renewables) is a much better investment than new coal fired powerplants -- especially in a world with likely future carbon restrictions. This deal no doubt sends a signal that the capital markets are increasingly unwilling to make big bets on continued status quo in the utility industry. Wall Street is saying that the utility industry must change, and that it isn't just going to keep dumping money into utilities that want to perpetuate the 20th Century.

Based on initial reports, it appears that there are few hurdles to the deal being closed, but I remain curious as to how KKR and TPG expect to monetize their $45 billion investment. It seems like there are three possibilities: simply holding the company and recouping returns via dividends from improved operations, flipping the company to another owner (or re-taking the company public) at a higher price, or breaking the company apart and selling the pieces to more natural owners. I'm sure they have thought through these possibilities in great detail, though it's not obvious to me.

The examples of private equity attempting to earn attractive returns through investments in the U.S. electric utility sector have, to date, been not very successful. Let's hope this deal works out for the investors. I'd love to see many more utilities bought by private equity firms and shaken up. I bet that many utility CEO's and management teams wouldn't last long under the reins of more aggressive owners. And, I'd bet we'd see better environmental performance from these historically lethargic companies. I hope the TXU deal is the beginning of a trend.


Richard T. Stuebi is the BP Fellow for Energy and Environmental Advancement at The Cleveland Foundation, and is also the Founder and President of NextWave Energy, Inc. Richard is a Contributor to Clean Tech Blog where this story was first published.

March 04, 2007

Change Winds Blow for Renewable Energy Income Trusts

Renewable energy is still very much in its infancy, which means that companies in the space are either profitless or high-multiple startups, or divisions of much larger companies (GE Wind (NYSE:GE), or utilities such as FPL Group (NYSE:FPL) and Xcel (NYSE:XEL) which get much of their power from conventional generation.) This presents a dilemma for investors who understand the compelling drivers for the sector, but whose risk tolerance or financial needs indicate an income-based investing strategy.

Canadian Income Trusts in Renewable Energy

A few Canadian Income Trusts have historically gone some way towards filling this niche. These include the Boralex Power income trust (BPT-UN.TO / BLXJF.PK), Algonquin Power (APF-UN.TO/AGQNF.PK), and the Clean Power Income Fund (CLE-UN.TO/CEANF.PK).

The Boralex Power Income Fund owns an electricity generating asset mix of approximately 45% hydroelectric (by 2005 revenues), 32% wood residue (biomass) with some cogeneration, and 23% natural gas fired cogeneration. It is managed and 23% owned by its parent utility, Boralex (BLX.TO/BRLXF.PK).

Algonquin Power Trust owns a mix of hydroelectric generation (25% of sales), cogeneration (42% of sales), Alternative fuels (9% of sales), and infrastructure (24% - mostly waste disposal and treatment. Percentages based on 2005 data.) Alternative fuels (mostly landfill gas, municipal solid waste, and some wind) comprise the fastest growing segment of the portfolio.

Finally, the Clean Power Income Fund, which trumpets itself as "the first income fund to be certified under Canada’s Environmental ChoiceMProgram," owns a mix of electricity generation assets consisting of landfill gas (37% based on 2005 cash flow), biomass (27%), hydropower (26%), and wind (10%). They are completing the Erie Shores 99MW wind project which will increase the wind portion of the portfolio.

Disappearing Tax Advantages

While none of these have the stability of a bond fund, they have gone some way towards bridging the gap between volatile startups and predictable income, allowing a broader spectrum of investors to participate in renewable energy. However, they were all organized to take advantage of a provision of Canada's tax code which conferred significant tax advantages, similar to the advantages enjoyed by REITs and Master Limited Partnerships in the US. Those tax advantages were scheduled to be phased out over the next four years to the surprise of the financial markets in November, and while some are still fighting the tax law changes, the trust management of these three trusts have, by their actions acknowledged the reality of the changes.

Within the last week, The Clean Power Income Fund board has agreed to be acquired by Algonquin Power, subject to the approval of its unitholders, while The Boralex Power Income Fund has announced that it is up for sale, possibly to be acquired by its parent, Boralex, which currently owns 23% of the fund and acts as its manager.

Risks and Opportunities

For the traditional income investor, primarily interested in stability, all this activity and the volatility is bad news, but it presents opportunities for the risk tolerant investor interested in purchasing solid, income producing assets, something of a rarity in retail renewable energy investing. It's impossible to say what good price entry levels are for any of these funds, but they are all considerably cheaper than they were before the tax changes were announced in November.

Prospective investors should also understand the tax implications (which depend not only on the changing laws, but on the nationality and tax status of the account used) before investing.

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

DISCLOSURE: Tom Konrad and some of his clients hold positions in The Clean Power Income Trust and the Algonquin Power Trust.

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.

March 03, 2007

The Week in Cleantech: Feb. 26 to Mar. 2

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, Jim Fraser at The Energy Blog warned that high grain prices could threaten the viability of ethanol.

On Tuesday, Rob Day at Cleantech Investing looked at the numbers for us.

On Tuesday, Dana Childs at Inside Greentech told us how an insurer warned oil companies about renewable energy.

On Thursday, Neal Dikeman at The Cleantech Blog told us what the trouble was with water.

On Friday, Himanshu Pandya at Financial Nirvana gave us the heads up to keep an eye on these stocks during this downturn. Stocks discussed: Suntech Power [NYSE:STP] and Fuel Tech [NASDAQ:FTEK].

On Friday, Worth Civils at the WSJ's Energy Roundup discussed T. Boone Pickens' contention that oil production has peaked.

March 02, 2007

Wall Street And Climate Change Get Cosier And Cosier...

A couple of interesting news from Wall Street this week in the realm of carbon finance.

Firstly, on Tuesday, JP Morgan announced the launch of what is, as far as I can tell, the first ever bond index with a special climate change risk overlay. In the interest of disclosure, I was tangentially involved with this project. While this overlay probably won't have much of an impact in the very near term, it will be interesting to see what happens once constituent firms are all subjected to some form of greenhouse gas regulation.

Second, on Thursday, Lehman Brothers announced the appointment of company veteran Theodore Roosevelt IV "to head a new effort to address the challenges of global warming." I bet a great deal of his activities will be focused on figuring out ways to address the opportunities of global warming too.

Have a good weekend!


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