The Week In Cleantech: March 31, 2012

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Jeff Siegel

March 26: Tesla Motors (NASDAQ:TSLA) Upgraded to $49

  • A123 Systems (NASDAQ:AONE) announced today that it will have to replace battery modules and packs that may contain defective cells. The replacement is likely to cost about $55 million. The stock is down about 4 percent in pre-market. If the broader market stays positive today, the damage could be contained. I expect to see a number of follow-up articles blasting A123 because, well, the company works in the electric vehicle space and it’s received government support. The combination of the two makes it a popular target.
  • On the upside of electric vehicles today, Wunderlich just upgraded Tesla (NASDAQ:TSLA) from hold to buy, with a $49 price target. I’m a huge fan of Tesla, but admittedly a bit surprised at the $49 price target. My personal opinion is that $49 is a bit optimistic. I’m more comfortable with somewhere between $36 and $38 right now. Of course, this would certainly be an instance of where I’d be happy to be wrong.

March 27: GE (NYSE:GE) Lands $200 Million Saudi Deal

  • GE (NYSE:GE) has announced that it landed a $200 million supply contract with Saudi Arabia. The deal has GE supplying steam turbine technology, power generation services and distributed control systems for Saudi Electricity Company. Saudi Arabia is looking to add an average of 4 gigawatts of power each year with the goal of doubling grid capacity by 2020. For those who want exposure to energy, but don’t want to go “all-in” on a pure play, GE is a great way to do it. It’s a solid long-term investment with a nice dividend.

March 28: Japan Seeks Natural Gas Assets In The U.S.

Early this morning we learned that Japan’s second-largest city gas distributor Osaka Gas, is in talks to import natural gas from Dominion Resources, Sempra Energy and Freeport LNG. Apparently, Osaka is looking to invest in LNG-export plants in Texas, Louisiana and Maryland, as well as fields near those facilities.

Following Fukushima, Japan’s LNG imports have surged. And some are expecting the U.S. to ultimately supply 20% of all Japan’s natural gas imports. As I’ve mentioned in the past, I’m extremely confident that the U.S. is going to start exporting more and more of its natural gas bounty. Between new demand in Japan and the fact that the stuff is going for $12 per million BTUs in Europe and $18 in a few Asian markets, there’s no way we’re not going to jump on this opportunity.

The fact is, natural gas is dirt cheap right now. And producers will not ignore the boatloads of cash they can make from exports. In fact, there are currently nine domestic producers in line to get approval to export roughly 10 billion cubit feet of LNG per day. Despite those who think we need to hoard everything, the market will dictate the decision on this. I remain extremely bullish on LNG exports.

March 30: Bombardier (TSX:BBD-B) Lands $208 Million Rail Deal

  • Finavera Wind Energy (TSX-V:FVR/ FNVRF.PK) has received an environmental assessment certificate for its new Tumbler Ridge wind project. This is actually a pretty big deal as this decision allows the company to finally move forward on construction of the project, which has been under development for about five years now. This is a very thinly-traded stock, and I’m not sure how many people realize the significance of this announcement. It’ll be interesting to see how the stock moves today. But at $0.34, I imagine there will be some buyers this morning.
  • Bombardier (TSX:BBD-B/BDRBF.PK) (TSX:BBD-A) announced this morning that it has received a $208 million order for 16 TWINDEXX Vario multiple units for operation on the Kiel-Hamburg and Flensburg-Hamburg railway lines. A TWINDEXX what?!!!   Here’s a picture of one:


If the market cooperates today, there could be a little bit of momentum for the stock. If Bombardier was strictly a train play, I’d be all over it. But there’s still a bit of stink on the company’s Aerospace division, which took a hit last quarter. That being said, I don’t think this division is quite as bad off as some would lead you to believe. Certainly the company’s business jet market is doing pretty well. I’ll be interested to see how next quarter’s aerospace division performs. As for its rail division, it remains solid.


Disclosure: Long IAALF

Jeff Siegel is Editor of Energy and Capital, where these notes were first published.


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