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EVs are a Struggle for A123, but Aptera is Back and They Thrive in Hawaii-The Week In Cleantech: 5/18/2012

Jeff Siegel and Tom Konrad CFA

May 14: New Flyer (TSX:NFI, OTC:NFYEF) Sees Bus Market Revival

North America's largest supplier of heavy-duty transit buses sees overall demand at an "all-time high." More here.

May 15: Electric Car Battery Company Struggles

JS:

A123 Systems (NASDAQ:AONE) has announced Q1, 2012 results. . .

Revenue fell 40% from $18.1 million in Q1, 2011 to $10.9 million. Net loss came in at $90.8 million, compared to a net loss of $53.6 million last year, and as of March 31, the company has $113.1 million in cash and cash equivalents.

I don't know a single person who was expecting to see anything positive coming from Q1. This stock, despite a lot of early optimism, has been getting crushed since early 2010. Sure, traders have been having a field day with this one. But those who initially thought AONE was a good long-term play left the building last year.

To be honest, it's unfortunate AONE has had such a rough go at it. Certainly I applaud any group of individuals with the stones to launch an energy storage company on US soil.

Besides intense competition from already established companies working in this sector, like Johnson Controls (NYSE:JCI) and EnerSys (NYSE:ENS), developing disruptive technology in this space is a costly, and extremely risky proposition. And of course, any young company looking to help develop next-generation electric vehicles is just asking for an avalanche of criticism from naysayers, partisan slaves and crotchety old bastards who still haven't figured out that supporting electric car development is actually a patriotic endeavor. I definitely expect those dolts to pump out a few op-ed pieces this week highlighting the $249 million grant AONE got from the government.

Regardless, when it comes to making wise investment decisions, none of this matters. You know the deal – never get emotional. And while I would love nothing more than to see AONE succeed, in this market environment, I have to continue watching this one from the sidelines.  Although it will be interesting to see how it does throughout the day.  The stock headed north at the open, climbing around 6 percent in the first 10 minutes of trading.

JS:

A vehicle with a 200 MPGe has just been saved from the scrapheap.

Aptera Motors has been through a lot in trying to get its ultra-sleek Aptera 2e off the ground, including, but not limited to completely running out of money and being denied a $150 million loan from the Energy Department.

Earlier this year, management announced that Aptera was shutting down its operations. However, thanks to a new Chinese-American partnership, Aptera may be back in business.

A few weeks ago it was announced that a Chinese investor purchased all of Aptera's assets, and is now looking to get the 2e on the market as early as next year.

Now known as Aptera USA, which is made up of several American minority investors and Chinese auto and motorcycle giant Jonway Group, the company is plotting a pan-Pacific assembly line for the 2e. The plan is to have the composite body of the 2e built at the Jonway facility in China and then shipped to Santa Rosa, California where Remy electric motors and batteries will be installed.

This type of pan-Pacific assembly isn’t unique. Coda Automotive has a similar method.

Rick Deringer, a real estate developer who helped broker the Aptera deal, says that pricing of the 2e has yet to be determined but that 25,000 could be manufactured next year with zero government assistance.

When Aptera USA bought the assets of Aptera Motors, it also purchased designs for prototypes and a list of 58,000 potential customers, including the 5,000 who had placed deposits on the 2e before Aptera Motors went out of business.

And here’s the kicker: Deringer also explained that one of the prototypes bought from Aptera Motors included plans for a four-door battery-powered car with the capability of getting just under 200 MPGe. In addition, Deringer said plans are in motion for developing a hybrid version of the 2e, an electric truck and solar-powered charging stations.

May 16: Investors Overreact to Explosion at LSB Industries (LXU) chemical plant

TK: Early Tuesday morning, an explosion at LSB Industries‘ (NYSE:LXU) El Dorado, Arkansas chemical facility damaged the facility.

The explosion was in the DSN concentrated nitric acid plant, and damaged both the plant and surrounding equipment.  No employees or anyone in the community was injured, and management believes that there was no environmental release.  The entire El Dorado facility was shut down pending an assessment and repair of the damage, but management was not able to provide any timeline.

The stock  sold off on the news, at one point down over $6, and closing down $2.36 at 30.01.  The stock is back up to $31.10in after hours trading, after a management conference call to discuss the incident.  Management tried to put the damage in perspective during the call.

Key points were:

  • The facility was insured for both damages (with a $1 million deductible) and business interruption after a 30 day waiting period.
  • The El Dorado facility accounted for 29% of operating profits from LSB’s chemical division in Q1, although this was expected to be lower in Q2 as the company’s Pryor plant was offline for much of Q1.  The chemical division accounts for about 2/3 of the company’s sales.
  • The El Dorado facility has lower margins that the company’s other facilities, which are currently benefiting from low natural gas feedstock prices (El Dorado uses anhydrous ammonia as a feedstock.)

Putting this all together, I estimate the uninsured potential cost to LSB from the accident  to be:

  • $1 million in property damage deductible.
  • 30 days of lost operating profits from El Dorado, or about $1.8 million.

With 22.34 million shares outstanding, this amounts to an uninsured potential loss of 12.5 cents a share.  It could, of course, be much lower.  The fact that no one was hurt and there were no environmental releases seem to indicate that the explosion was relatively contained.

The uncertainty around the nature of the explosion seems to have investors selling first and asking questions later.  Should the stock really sell off even $1 on a potential one-time loss of $0.125?

Before other investors gather their wits, this seems a great chance to get into a stock with a trailing P/E of about 9, no net debt, and significant growth expected this year.  For more details on LSB, see my coverage of their first quarter earnings call last week.

May 16: Western Wind (WNDEF.PK) to Acquire Big Project Pipeline.

Western Wind Energy announced a deal to acquire a 4 GW wind development pipeline for 8 million common shares, worth $12.8 million at $1.60/share.  A company spokesman told me that 40% (1600 MW) of the pipeline would be viable without the PTC.  It helps that most of the projects are in Renewable Portfolio Standard state, like CA and HI.

May 17: Electric Car Sales Soar in Hawaii

JS:

Electric car supporters often talk about the perfect storm. . .

A timely mix of high gas prices, sufficient electric vehicle infrastructure, strong policy support and enough inventory to meet demand.

While I continue to believe the US will reach this perfect storm in another 10 to 15 years, it's already begun in Hawaii.

According to the latest numbers, it looks like 1.2% of all vehicles sold in Hawaii last year were electric. This, compared to 0.1% on a national level.

Of course, this isn't particularly surprising. After all, residents of Hawaii are now shelling out about $4.50 a gallon for 87 octane. And for those looking to go electric, there's now one charging station for every 5,500 residents. This is actually a pretty big deal considering just how young the EV market is right now.

Hawaii has also been a leader in policy support. With a $4,500 tax credit, HOV access, and free parking at meters and parking garages, lawmakers in Hawaii have been quite aggressive in their efforts to get more EVs on the road. The Aloha State was even the first state to disallow condominium associations from blocking the installation of home charging stations.

As an added bonus, Hawaiian Electric Co. is now running a program that offers discounts on electricity rates when consumers charge their EVs at night. And most of that power comes from wind.

By necessity, Hawaii is quickly taking the lead in the US when it comes to transitioning to the new energy economy. And it is also by necessity that the rest of the nation will eventually do the same.

Hawaii currently has a 40% by 2030 renewable portfolio standard in place, and hopes to have 40,000 EVs on the road by 2020.

May 18: New Solar Tariff Puts American Jobs at Risk

JS: Well, it happened. . .

Chinese solar modules are now expected to be hit with huge tariffs.

Here's what the Coalition for Affordable Solar Energy (pretty much the most vocal and rational voice on this issue) had to say. . .

Leaders and member companies of the Coalition for Affordable Solar Energy (CASE) today responded to the preliminary Anti-Dumping ruling by the U.S. Department of Commerce (DOC) with the following statements:
 
Jigar Shah, the President of CASE, stated, “Today SolarWorld received one of its biggest subsidies yet – an average 31% tax on its competitors. What’s worse, it will ultimately come right out of the paychecks of American solar workers. Fortunately, these duties are much lower than the 250% tax that SolarWorld originally requested. This decision will increase solar electricity prices in the U.S. precisely at the moment solar power is becoming competitive with fossil fuel generated electricity.”
Read more.

TK: Stagecoach Group (LSE:SGC) expands in CA and TX with purchase of part of Coach America's businesses.  Read more.

Disclosure: TK: Long LXU, NFYEF

    JS: No positions.

Jeff Siegel is Editor of Energy and Capital, where his notes were first published.
Tom Konrad Ph.D. CFA is Editor of AltEnergyStocks.com, and a blogger on Forbes.com, where his notes were first published.




was posted on AltEnergyStocks.com.


       

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