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May 24, 2014

SolarCity: Fanning the Flames

by Debra Fiakas CFA

SCTY residential solar.pngSolar power installer Solar City (SCTY:  Nasdaq) has attracted a swarm of shareholder lawsuits in recent weeks.  The stock is trading at a price level 44% below its 52-week high of $88.35 set in February 2014.  That has to be disheartening for those who were on the wrong side of the trades at those lofty levels. 

In February when traders were bidding $88 and change for SCTY, the stock was trading at about 50 times revenue and 47 times cash flow from operations.  Of course, since the company had yet to produce a profit, the price/earnings ratio was negative.  What was it about those valuation metrics that looked appealing?

From a technical standpoint SCTY shares had begun to look precarious even before the end of December 2013.  For example, the Commodity Channel Index (CCI) began signaling that the stock had entered overbought territory as early as the third week in December.  I frequently use the Moving Average Convergence/Divergence (MACD) line in combination with the CCI to make certain higher highs are not still in on the way.  Even with that nuanced analysis, the show appeared over by the end of January 2014.  Granted as the temperatures dropped in February, trading in SCTY was hotter than ever.  Unfortunately, it was more flame-out than solid price appreciation as the stock has been on a steady decline ever since.

So now that the stock price re-entered the atmosphere, is it a better value?  First quarter 2014 results, did not change the profitability picture for Solar City.  The company is still reporting substantial expenses that eat up profits.  However, in the twelve months ending March 2014, the company turned sales of $197 million into $150 million in operating cash flow.  The current price level near $50 per share implies a multiple of 30.7 times operating cash flow.  That is still rich, but an improvement from three months ago.

In one of my last posts on Solar City in March 2013  -  I suggested that management needs to spend a bit more time in explaining the company’s business model and a bit less time fanning the flames under the trading of its stock.  Apparently, they did not listen.  Analysts following Solar City do not expect the company to report a net profit any time soon, but it is clear the company has conjured a business model that generates positive cash flow.  Despite reporting net losses, the company has the cash resources to grow.  Management needs to fan the flames under that story.  The stock may not experience one of those dramatic climbs again, but there might be fewer lawsuits.

Debra Fiakas is the Managing Director of
Crystal Equity Research, an alternative research resource on small capitalization companies in selected industries.

Neither the author of the Small Cap Strategist web log, Crystal Equity Research nor its affiliates have a beneficial interest in the companies mentioned herein.

May 22, 2014

Investing In Solar Innovation

By Jeff Siegel

The road into the digital age has been paved with innovation. Everyday items have been electrified with panels and displays for endless possibilities of interaction.

Automobile windscreens, household appliances, even walls and furniture are lighting up all around us, wired with sensors and displays that receive and transmit information.

It seems the only surface left to electrify on this road to an everything-digital future is the roadway itself. Some folks believe one day soon, your local road network could be carrying not only the flow of vehicle traffic, but torrential flows of digital data and electricity as well.

Of the more than 4 million miles of roadways in the U.S., some 2.65 million miles are paved — occupying nearly 12,000 square miles of land, or about the area of the entire state of Maryland.

Now imagine if you covered that area with panels that are something of a cross between solar cells and digital displays. What you would have is an electrified road that generates enormous amounts of electricity from the sun’s rays by day, provides perfectly lit road markings by night, and keeps streets snow- and ice-free even on the coldest of days.

Slippery When Wet?

The brainchild of electrical engineer Scott Brusaw and his wife, the Solar Roadways system uses glass panels in the shape of hexagons that link together to coat the surface of roads, parking lots, and driveways.

Some folks question the safety of such a system. After all, glass is fragile, and no one would want to drive over sheets of glass, especially when wet.

But these panels have been specially designed to withstand more than normal amounts of weight and wear on even the busiest of city roads, with no loss of traction.

Embedded under the top layer of tough glass are arrays of photovoltaic panels that convert the sun’s rays into electrons. The electricity generated by the road panels can be stored in batteries during the day for powering street lighting at night, as well as augmenting the electrical needs of homes and businesses lining the street.

As well, heat cells can be used to warm the panels’ surfaces to melt ice and snow, keeping the road surface clear in adverse winter weather.

They could even be used to carry digital signals, including phone, television, and Internet data. No more digging up the road to install new cable lines.

Even overhead power lines could be eliminated, as electric power from power stations would be transmitted into homes and businesses via the Solar Roadway network.

Sounds Fantastic!

A series of important markers in the development of the Solar Roadway have already been established, including recognition and awards from GE (NYSE: GE), Google (NASDAQ: GOOG), the World Technology Award, and the IEEE Ace Awards.

Brusaw has also attracted attention to his electric road through speaking engagements at TEDx, NASA, and Google-sponsored Solve for X.

Funding milestones include the awarding of a two grants from the U.S. Federal Highway Administration, as well as contributions from a crowdfunding campaign on Indiegogo. The funding has paved the way for a prototype installation.

All in all, this sounds fantastic. But I have to be honest: Based on all the amazing and wonderful technologies I've seen fall through the cracks or blow up in investors' faces over the past two decades, I'm extremely skeptical that this thing will ever get off the ground.

Not only are you talking about working with a giant bureaucracy to transition miles and miles of roads — which alone would take at least a decade to cut through all the red tape — but if we can't fund basic infrastructure needs, you really think the government's going to be able to pony up for something like this? Especially considering that we're talking about solar here — the scapegoat for decades of flawed energy policies.

The truth is, we've been down this road too many times before. And as much as I love the idea of solar roadways, I wouldn't get too excited about this one. I sure as hell wouldn't invest in it, either. The fact that these folks crowdfunded through Indiegogo tells me there probably wasn't much smart money interest to begin with.

Look, if you're that hyped up about investing in the burgeoning solar space, stick with what you know works. Stick with companies that actually generate revenue. SunPower (NASDAQ: SPWR), SolarCity (NASDAQ: SCTY), even an alternative energy REIT like Hannon Armstrong (NYSE: HASI).

Point is, while immediately discrediting new technology does nothing to stoke the fires of innovation, throwing money at untested technologies and unrealistic goals hoping for a quick payoff will only leave you broke and angry.

And that's no way to live.

Jeff Siegel is Editor of Energy and Capital, where this article was first published.

May 21, 2014

Private Equity Giant Eyes Chinese Solar

by Doug Young

Following reports last month of the imminent formation of a major new private equity investor, media are now saying the company, China Minsheng Investment, has formally registered and is gearing up to make its first investments. The new company certainly has the resources and connections to quickly become a major player on both the domestic and global private equity scenes, with an initial 50 billion ($8 billion) in registered capital. Now it appears the company will start by helping to consolidate China’s embattled solar panel-making sector, which will become its first focus area.

According to the latest reports, Minsheng Investment formally completed its registration on May 9 in Shanghai, which is where several of its founding members are based. (Chinese article) One of its founders is Dong Wenbiao, chairman of Minsheng Bank (HKEx: 1988; Shanghai: 600016), China’s first privately funded bank. Previous reports said other Minsheng Bank officials would also invest in the new company. Another partner is Lu Zhiqiang, chairman of Beijing-based China Oceanwide, one of the country’s earliest conglomerates set up back in 1985.

Dong Wenbiao will act as chairman of the new company, while another Minsheng executive Li Huaizhen will be the general manager. The report adds that many of the new company’s other top executives will also come from Minsheng Bank. That’s a positive sign since Minsheng is considered one of China’s more entrepreneurial banks due to its private status, meaning it’s less likely to make decisions based on political considerations.

That said, many of the company’s top officials also have strong government connections, and its decision to focus initially on the solar panel sector also seems to have some political overtones. Beijing decided about a decade ago to strongly support the sector by offering a wide range of government support, in a move that quickly propelled China to become the world’s largest solar panel producer with more than half of the global market.

As with similar cases in China, many companies that flocked to the industry were state-run firms that had little or no experience in the sector but were simply rushing to help fulfill Beijing’s latest policy directive. Many of those facilities have been losing big money for the last 3 years, after the sector plunged into a prolonged downturn due to huge overcapacity created by the rapid China build-up.

Early signs last year seemed to indicate Beijing was preparing to engineer a consolidation for the sector, using the policy lender China Development Bank as the main driver. But such a unified rescue plan never came, and instead the market has so far seen a trickle of bankruptcies for big names like Suntech (OTC: STPFQ) and LDK Solar (OTC: LDKSY), and occasional acquisitions of smaller companies by big remaining players.

Beijing has indicated it won’t come to the rescue of bigger players like Yingli (NYSE: YGE) and Canadian Solar (Nasdaq: CSIQ), which are relatively healthy and can still raise limited money from overseas commercial sources. (previous post) But there are still dozens and probably hundreds of smaller state-run operations that are losing massive money and could become good acquisition and consolidation targets for the new Minsheng Investment.

We’ll have to wait and see how exactly Minsheng Investment proceeds, but I would expect it to move quickly following its recent registration and make its first acquisitions in the next few months. Most of those are likely to come at bargain prices, and the company could use its large cash pile to quickly assemble one or two major new “companies” with assets across China.

It would most likely shut down many of the weakest operations and move their best manufacturing assets into one or two single locations. Such an approach could produce an asset or two that would make an attractive purchase for Canadian Solar, Yingli or one of the other bigger remaining players in the sector, or even a foreign buyer. I would expect Beijing to provide financing for such a deal, which could come as soon as next year if Minsheng’s consolidation plan moves ahead.

Bottom line: Newly formed Minsheng Investment could become a consolidator for China’s smaller money-losing solar panel makers, assembling a new asset for eventual sale to one of the bigger remaining players.

Doug Young has lived and worked in China for 15 years, much of that as a journalist for Reuters writing about Chinese companies. He currently lives in Shanghai where he teaches financial journalism at Fudan University. He writes daily on his blog, Young´s China Business Blog, commenting on the latest developments at Chinese companies listed in the US, China and Hong Kong. He is also author of a new book about the media in China, The Party Line: How The Media Dictates Public Opinion in Modern China.

May 20, 2014

The Very Quick Guide To A Green Portfolio

Tom Konrad CFA

For many, the decision to get out of fossil fuels is an easy one.  It may be because it's the right thing to do, or because we see the risks of investing in businesses built around an unsustainable economic paradigm.  This article is not about that decision; it's about what to do next.

The Green Portfolio: What And Why

To a lesser extent, it also depends on what we mean when we say "green."  For simplicity, this article will focus on making your portfolio Fossil Fuel Free (FFF), meaning that the portfolio should contain no companies involved in the extraction, refining, or power generation from coal, oil, natural gas, and (usually) nuclear power. 

Many investment professionals with the strongest green credentials consider FFF investing less than ideal.  Rafael Coven, Managing Director of The Cleantech Group, states that investing in the efficient use of fossil fuels is usually the most cost-effective way to reduce our reliance on them. Yet the FFF movement is not just about the most effective way to reduce fossil fuel use. It also seeks to send a message that our reliance on fossil fuels and their influence on our political system is unacceptable.

Whatever a green portfolio means to you, make sure that the person implementing your strategy understands. Jan Schalkwijk, CFA, a portfolio manager at JPS Global Investments in Portland, Oregon, says that if your advisor tries to talk you out of your chosen strategy, it is time to find a new advisor. One frequent argument is that it will increase risk or lower returns. Schalkwijk cites research demonstrating this need not be true.

The Green Portfolio: How

There are three ways to implement a green portfolio: Selecting individual stocks, selecting mutual funds or ETFs, or paying an advisor to select them for you.  Financial resources enable us to pay for advice, while time helps us find good advice or make good investment decisions on our own. 

Your financial resource is your whole portfolio, not just the portion currently invested in fossil fuels. Mutual fund and advisor fees are based on the size of your account, and determine how much advice you can buy.

Investing Efficiently

Taking energy use as a metaphor, buying stocks and bonds is like buying wind turbines and solar panels, except in investing, we pay taxes on our gains instead of receiving subsidies. As with energy use, it's almost always best to reduce our expenditure (costs) before we increase production (invest.)

The easiest way to reduce expenditure is pay down debt such as mortgage, car loans, and credit cards. Upgrading our homes for efficiency and (sometimes) solar can also help. There are few better investments for taxable savings (as opposed to retirement accounts like IRAs.)


Building a portfolio starts with asset allocation.  An advisor will do this for you, or you can use an online asset allocation calculator like this one to find out how you should allocate you money between stocks, fixed income, and cash.


There are many green  mutual funds available, but few are completely fossil free; I focus on the latter simply to save space.  Exchange traded funds (ETFs) are usually a cheaper option, but broad-based fossil free ETFs are not yet available.

According to Garvin Jabusch, Founder and Chief Investment Officer of Green Alpha Advisors in Boulder Colorado, the only truly fossil free broad-based mutual funds he has been aware of are Shelton Green Alpha (NEXTX) and Portfolio 21 (PORTX).  Recently, PAX World and Green Century have begun dropping fossil fuel holdings from some of their funds as well. Most other green funds claiming to be fossil free simply avoid the 200 largest fossil fuel companies. This leaves thousands of smaller companies equally committed to fossil fuels.  NRDC and Blackrock recently announced new global equity indexes which will exclude fossil fuel companies, but we do not yet have details.

Unfortunately, few of these supply any allocation to fixed income.  The exception is the Green Century Balanced Fund (GCBLX), which provides a 19% allocation to fixed income.  The PAX World High Yield Bond (PAXHX) is a higher yielding but riskier fixed income option. Schalkwijk says a fossil free fixed income allocation could be met with a number of yield-focused equities (see below.)


Many advisors will help you create a green portfolio, but most will do so using mutual funds. If they do, you will pay two layers of fees: One to the advisor, and one to the funds. The double layer of fees may be hidden with commission-based advisors who are paid by the funds, but it's still there. If you're willing to do the work, you will probably be better off creating your own mutual fund portfolio as I describe above. I know of three green investment advisors who create portfolios of individual securities for clients, avoiding this double layer of fees. Of these, only Tom Moser of High Impact Investments in Tuscon normally takes clients with less than $50,000 to invest. The others are Schalkwijk's JPS Global Investments and Jabusch's Green Alpha Advisors. 

The level of customization these advisors are willing to offer depends on how much you are willing to invest, but if you and your advisor are in tune as to what you mean by “green,” they may not consider it customization at all. When choosing advisors, it is also important to understand what your costs will be (both in terms of the advisor's fees and the costs of the investments they select), and the services they provide.  Each of the three above has a unique perspective on green. If any one is not right for you, he will likely help you find someone who is.


For those with the time, inclination, and aptitude, a stock portfolio may be the lowest cost option. An often overlooked but very useful resource is the holdings of the fossil free mutual funds mentioned above. Other resources include my own writings and subscription services such as the Roen Financial Report.

On the income side of the picture, the Roen Report has just published a free report on green dividend investing. I am managing a fossil free equity income strategy with the income increased and risk reduced by option selling with Green Alpha Advisors.  We're currently only able to offer it in separate accounts of at least $100,000, but I frequently write about many of the holdings.

Your best investment options

How much you have to invest

Time you can spend

Less than $50,000

$50,000 to $100,000

Over $100,000

As little as possible




A good chunk now, not much ongoing




A lot; I like thinking about this


Advisor, Stocks

Advisor, Stocks


The easiest way to build a green portfolio is to work with an advisor who understands your goals and invests directly in green securities. A number of green mutual funds are also available to the small investor, but more risk-averse investors who need income have fewer options. Real world energy efficiency investments and paying down debt are the best green income investments.

DISCLOSURE: I receive compensation from both JPS Global Investments and Green Alpha Advisors for stock research and portfolio management services.

DISCLAIMER: Past performance is not a guarantee or a reliable indicator of future results.  This article contains the current opinions of the author and such opinions are subject to change without notice.  This article has been distributed for informational purposes only. Forecasts, estimates, and certain information contained herein should not be considered as investment advice or a recommendation of any particular security, strategy or investment product.  Information contained herein has been obtained from sources believed to be reliable, but not guaranteed.

May 19, 2014

NovX21: Urban Miner

by Debra Fiakas CFA

There's Platinum in them catalytic converters.
Mention platinum and most of us think about beautiful and expensive jewelry.  However, platinum can be found in the dullest of products.  Catalytic converters used in automobiles for emissions control represent about one-third of the demand for platinum. The devices attached to the rear of our cars uses a mix of previous metals to remove nitrogen oxides, carbon monoxide and hydrocarbons from engine exhaust.  The catalytic converter on a typical car uses a gram or less of platinum, while a diesel truck requires five to ten times that amount.  A gram may not seem like much by multiple that by millions of automobiles and you begin to get a picture of demand.

While there is steady and growing demand for platinum, supplies of this precious metal are anything but stable.  South Africa is the world’s largest supplier of platinum, producing as much as 70% of world supply.  Russia and Zimbabwe are number two and three.  Anglo American has closed some of its South Africa mines as the result of higher taxation and strikes by labors continue to plague the remaining operations.  Zimbabwe has banned exportation and has demanded in-country refinement in order to capture more of the value in the supply chain.  New political upheaval in the Ukraine, compounded by Russia’s aggressive actions in that region, has made some in the industry nervous about Russian supply sources as well.

Some manufacturers have simply replaced platinum in their catalytic converters.  However, NovX21 (NOV:  TSX-V, PORMF: OTC) is addressing the problem of supply with an ‘urban mine.’  The company has developed a chlorination process to reclaim platinum as well as palladium and rhodium from spent converters.  It takes NovX21 about two months to process a converter, but the time is well spent.  The process recovers as much as 97% of the precious metals in the ceramic component of each converter.  On average each ceramic component yields 3,000 grams of precious metals per ton of ceramic.  There is no waste with the NovX21 process, even the ceramic can be reclaimed and sold to a ready market for hydraulic fracturing materials.

The company estimates it will cost about CAD$168 per ounce to operate its reactors.  Compare that to the current price for platinum near CAD$1,466 per ounce.  Accordingly, it seems there is sufficient profitability to recover the $10 million capital cost of each plant.

Protected by U.S. and Canadian patents, it is a process that is economically competitive and environmentally friendly.  The Company has developed a line that is capable of processing 50,000 tons per year.  To scale up for higher volumes, a series of reactors can be placed side-by-side, sharing pre-processing and post-processing infrastructure.

NovX21’s closed loop system generates no emissions or wastes, giving it a ‘good neighbor’ profile.  The NovX21 process is apparently so benign it can comply with regulations for any industrial park.  This has impressed local officials in the Quebec, Canada area, who have expressed interest in locating NovX21’s first production plant in their district.

The company is counting on insecurity in the platinum supply chain to get its foot in the door with distributors.  Besides perfecting its process, management has been scouring the globe for sources of used catalytic converters.  Both Europe and North America   The company is also actively seeking off-take agreements and is prepared to offer samples and provide test results to demonstrate the quality of their reclaimed metals.

NovX21 management promised commercial production within the next year and is currently vetting sites for the first production plant.  Equipment sourcing and construction will follow before year-end 2014.  The first plant is likely to feature four reactors and have a capacity of 200 tons per year.  Construction is expected to require eight months to a year.

The stock of NovX21 trades on the Toronto Stock Exchange-Venture under the symbol NOV.  Although the stock has built of relatively good trading volume, but the stock is still priced at a thin Canadian dime.  One of the problems in valuation might the prospect of dilution.  NovX21 currently has 100 million shares outstanding, but another 55 million shares could be issued upon exercise of warrants and options the Company has issued in the course of raising capital and compensating employees and service providers.  Fortunately, I do not expect to see a flood of derivative exercises until the stock reaches the CAD$0.25 to CAD $0.30 price range.  The average warrant exercise price is CAD$0.23 and for the options it is CAD$0.21.

NovX21 is not a stock for everyone.  It is a stock that requires a tolerance for business risk and price volatility.  However, for those with nerves of steel and the patience to wait for commercial operation, NovX21 could be an interesting long-term play on ‘urban mining.’

Debra Fiakas is the Managing Director of
Crystal Equity Research, an alternative research resource on small capitalization companies in selected industries.

Neither the author of the Small Cap Strategist web log, Crystal Equity Research nor its affiliates have a beneficial interest in the companies mentioned herein.

May 16, 2014

The Solar PV Shipment Shell Game

by Paula Mints

Outsourcing has been a common practice in the photovoltaic industry since…always. Ignoring it in favor of reporting higher shipment numbers has been a common practice since…always. There is more outsourcing now than there was ten years ago because the industry is bigger. When the PV industry was at megawatt levels, outsourcing was at megawatt levels. Now that the industry is at gigawatt levels, outsourcing is at gigawatt levels. Today’s outsourcing is also more acceptable — in the past everyone did it quietly, today it is out in the open. Yet despite this openness and acceptability, double counting continues and the industry continues to be oversized.

Figure 1 presents the various metrics that make up the PV industry during a calendar year with the exception of grid connections.  These metrics are supply and demand inventory, commercial capacity, production, shipments, installations and defective modules.  Think of production and shipments as conducting a little dance in and around inventory levels. That is, production can be lower than shipments depending on inventory levels. Production can also be misreported, that is, shipments are sometimes used as a stand-in for production and vice versa. In breaking industry activity down into its various components (except for grid connections) it appears as if should be easy to correctly size the PV industry's annual activities. Nope. 

Figure 1: PV Industry Metrics, 2013

The Shipment Counting Shell Game

A shell game is a now-you-see-it-now-you-don’t trick of evasive maneuvering.  The rules (such as they are) consist of this: there are three cups and one small object such as a stone. The stone is placed underneath the cups, the cups are shifted around and everyone places bets as to where the stone will end up. 

Shipments of PV cells/modules are counted in order to arrive at the correct business size of the industry during a specific calendar year.  The point is to accurately size the megawatts based on the technology developed and manufactured at point A followed to its arrival at point B; everything from point B on is a new count.

Most manufacturers buy from other manufacturers and many include what they buy as their own production or in their shipment count.  Manufacturers with wafer capacity and module assembly capacity send out their wafers for tolling and then assemble the cells in modules in-house. For example, manufacturer A ships 1-GWp of wafers to Manufacturer B who returns 1-GWp of cells to Manufacturer A.  Both manufacturers report shipments of 1-GWp of PV cell technology and the PV industry is oversized by 1-GWp. 

Another way in which shipment numbers are inflated is when subsidiary relationships are unclear and nontransparent. In this case, Manufacturer A ships 100-MWp to a wholly owned subsidiary that may or may not install the technology and may even ship it back to the parent. In this way and over the course of many such exchanges the PV industry can also be oversized, significantly.

Why This Is Dangerous for PV

The PV industry has been experiencing accelerated growth for quite a few years — not always profitably.  It has also been underutilizing its available commercial capacity for quite a few years.  In 2013, capacity utilization for the PV industry was 82 percent — based on shipments to the first point of sale.  This is a vast improvement over the past few years during which capacity utilization fell at times below 60 percent. 

Overtime, the systematic oversizing of PV industry output, whether through outsourcing or through shipping to subsidiaries, has made the industry look significantly more successful than it is and helped (along with too low prices) bring about the end of most of its incentives.  Conventional energy, of course, does not need to worry about its success interfering with its ongoing incentives and subsidies. 

Pragmatically, stakeholders all along the PV value chain have a vested interest in having access to data about capacity, production, shipments and inventory that is as accurate as possible — for business planning purposes.  Successful strategies require good data.  Unfortunately, shipment reporting has often been a matter of saving face and looking successful more than arriving at an understanding of what is really happening. 

Think of it this way: you are wandering through a shopping mall and you come across a map of the facilities with a helpful icon indicating where you are in terms of the other stores as well as your destination.  The helpful icon typically reads: You are here. So, now that you know where you are, you can figure out how to get to where you are going, or, you can decide to go someplace else entirely.  If the helpful icon pretended you were further along, it would not be very helpful.  The point of shipment and production reporting is to offer accurate information as to where the industry is at a certain point in its history so that it can develop a strategy to get where it wants to go.

The PV Industry Is Here

Figure 2 offers capacity, production shipments and inventory from 2008 through 2013.  During this period PV industry capacity to produce commercial c-Si and thin film modules increased by a compound annual 34 percent with production and shipments increasing by a compound annual 44 percent.


Figure 3 presents technology (c-Si and thin film) shipment market shares for 2013.  Crystalline technologies had a 91 percent share of shipments in 2013.

Figure 3: Crystalline and Thin Film Shipment Shares 2013


You Are Here, Where Do You Want To Go?

One problem with outsourcing is that the farther production gets from the original manufacturer the lower the quality gets over time and the bigger an industry gets, the more outsourcing is conducted. Currently there are module quality complaints from Japan, the US, Europe as well as other countries.  In some cases, quality complaints go back seven or eight years (about the time the PV industry surged into gigawatt levels of shipments).  In many cases cells and modules are reshipped so many times that it is almost impossible to pinpoint where the lower standard production began in the first place.  Unfortunately, more than one region is responsible, so, pointing fingers is counterproductive to solving the problem. 

Outsourcing is not going away and, aside from the unfortunate oversizing of the industry, the focus should be on quality.  Back to oversizing the industry, at this vulnerable stage in its always vulnerable history, the PV industry should exert tight controls on both quality and representations of its size so that it can have a clear eyed vantage point from where it wants to go and how to get there.

Paula Mints is founder of SPV Market Research, a classic solar market research practice focused on gathering data through primary research and providing analyses of the global solar industry.  You can find her on Twitter @PaulaMints1 and read her blog here.

This article was originally published on RenewableEnergyWorld.com, and is republished with permission.

May 15, 2014

Obama's Next $2 Billion For Energy Efficiency: How To Take The Money And Run

By Jeff Siegel

It's all about the money.

I don't care how you slice it — when it comes to investing, personal politics are irrelevant.

This has long been how I've approached wealth creation, and it works quite well. Even as I denounced the continued reliance on outdated and economically inferior energy and transportation systems (i.e. the internal combustion engine and tar sands production), I make no apologies for profiting from new opportunities in fossil fuels.

My gains in shale over the past few years alone are reason enough to stick to this strategy.

Of course, when I'm given the opportunity to profit from new developments in cleaner energy, well, that just puts another smile on my face.

And last week, I was grinning like the Cheshire cat. You should be, too.

Easy Pickings

While I'm no cheerleader for the Obama administration, I'd be lying if I said some of his policies haven't made me rich. From his early initiatives in renewable energy to the tragedy that is Obamacare, if you're ever looking for an easy way to make some cash, just follow the trail of lucre from K Street to the White House.

What can I say? It's easy pickings!

Now last Friday, President Obama announced a new series of commitments and executive actions he plans to use to advance solar deployment and energy efficiency measures. The PR alone reads like a crib sheet for energy investors.

You see, one section in the follow-up press release instantly caught my attention. Essentially, it looks like a loose mission statement for a company that's already been landing fat government contracts for energy efficiency and renewable energy initiatives.

I'll tell you the name of the company in just a moment. But first, let me share with you the section to which I'm referring.

Follow the Money

Here it is:

Drive $2 Billion in Energy Efficiency Investments for Federal Buildings: Today, President Obama is announcing an additional $2 billion goal in federal energy efficiency upgrades to Federal buildings over the next 3 years... The $2 billion investment announced today extends and expands the President’s commitment to energy upgrades of Federal buildings using long-term energy savings to pay for up-front costs, at no net cost to taxpayers. Federal agencies have already committed to a pipeline of nearly $2.7 billion in projects.

Folks, last year I told you that the Obama administration was setting the stage for this kind of thing. Heck, it was in October of 2013 when I commented on the new Energy Secretary's first speech, which included the following statement:

Efficiency is going to be a big focus going forward. I just don't see the solutions to our biggest energy and environmental challenges without a very big demand-side response. That's why it's important to move this way up in our priorities.

Then, in December of 2013, the President ordered the federal government to get 20% of its energy from renewables by 2020. To put that in perspective, the federal government owns and occupies about 500,000 buildings.

There's no doubt this initiative has long been in the making. And last week, we got further confirmation after we learned that another $2 billion has been earmarked for this. I suspect some of this is going to trickle down to Hannon Armstrong Sustainable Capital (NYSE: HASI)

Lucrative Deals Coming

I first told you about Hannon Armstrong last year in my 2014 Alternative Energy Stock Predictions piece. In it, I wrote...

Hannon Armstrong is basically a specialty finance outfit that offers debt and equity financing for modern energy and sustainable infrastructure projects. The company has actually been around for more than 30 years, and since 2000 has provided or arranged nearly $4 billion of financing.

HASI focuses primarily on infrastructure projects that have high credit quality obligors, fully contracted revenue streams, and of course, inherent economic value. Some of these obligors include U.S., federal, state and local governments, high credit quality institutions and utilities.

The company is actually the leading provider of financing for energy efficiency projects for the government.

Hannon Armstrong released Q1 earnings on Monday. Results were pretty much in line with estimates, although the company's pipeline of projects in the second half was impressive enough to placate investors looking for bigger numbers. The stock continued to charge along nicely.

While HASI is not immune to broader market moves, I remain convinced that increased spending on the federal level will result in some very lucrative deals for this financing firm.

Invest accordingly.

Jeff Siegel is Editor of Energy and Capital, where this article was first published.

May 12, 2014

Spring Blossoms: Amyris First Quarter Earnings

Jim Lane
Lily flowered tulip.jpg
Lily flowered tulip 'Maytime'

photo by Tom Konrad

In California, Amyris (AMRS) announced net income of $16.4M on revenues of $6.2M for Q1 2014, after reporting a $32.6M loss in Q1 2013 on revenues of $9.0M. The change in net income was primary due to a non-cash benefit relating to outstanding convertible notes, a result of a decrease in the Company’s stock price at 3/31/14 compared to the stock price at 12/31/13.

In a release accompanying the results, the company highlighted that it:

  • Achieved combined inflows from product sales and collaborations during the first quarter of $17.9 million on a non-GAAP basis. On a GAAP basis, total revenues of $6.0 million.
  • Validated the performance of renewable jet fuel with a third demonstration flight — by Etihad Airways on a Boeing 777 — and remain on track for ASTM validation in the coming weeks.
  • Expanded its product development pipeline for the commercial introduction of a new cosmetic emollient and a solvent product.
  • Resumption of production at the Brotas biorefinery following planned maintenance and facility upgrades to restart in conjunction with the sugarcane harvest period in Brazil.
  • First month of farnesene production achieved better performance from prior year’s quality manufacturing runs. Now, farnesene yield is reported at around 80% of theoretical maximum.
  • Validated downstream processes and quality systems for growing product pipeline being commercialized soon, including jet fuel.
  • Received Roundtable on Sustainable Biomaterials (RSB) certification, the first of its kind in Brazil.

“During the first quarter, we delivered strong collaboration inflows, continued our focused commercialization activities, and ended the quarter with a stronger cash balance. We achieved a cash gross margin of 73% on sales and collaboration inflows of nearly $18 million,” said John Melo, Amyris President & CEO.

“Since quarter end, we successfully resumed farnesene production at the Brotas biorefinery with first month’s performance superior to our best fermentation runs in 2013 and remain on track for our objective of becoming cash flow positive during the second half of this year and profitable in 2015,” Melo concluded.

Resuming forward guidance

In a highlight for investors, Amyris reiterated its prior guidance for 2014, which was as follows:

  • Inflows. We expect to achieve total cash inflows, which includes revenues from renewable product sales and inflows from collaborations, in the range of $100 to $115 million for 2014. Specifically, we expect (a) to double sales of renewable products over 2013 and achieve positive cash margin from products in the range of $10 to $15 million in 2014 and (b) maintain collaboration inflows in the range of $60 to $70 million.
  • Expenses. We expect cash operating expenses for R&D and SG&A in the range of $80 to $85 million and capital expenditures less than $10 million in 2014.
  • Earnings. We expect to achieve positive cash flow from operations during 2014, with positive non-GAAP EBITDA during the second half of 2014, and to become profitable in 2015.
  • Payback. We expect cash payback for our Brotas biorefinery in the next two years (following 2013 start-up year), based on plant cash contributions of $10 to $15 million in 2014 and $40 to $50 million in 2015.

The product set

Here’s what Amyris is producing:

  • arteminisic acid.
  • farnesene — including farnesene-based elastomers, in collaboration with Kururay.
  • patchouli fragrance.
  • Three more molecules are in development, and there are reported to be 20 in the pipleline, with primary funding coming from R&D partners.
  • The company is announcing two new products: hemi-squalane (with a 5-7x market size vs. squalane, but lower average selling price), and a new solvent for the d-limonene market, which has a 17 million liter market size. The company is also expecting to sell biojet fuel and liquid farnesene runner this year.

Commentary from analysts

Rob Stone and James Medvedeff, Cowen and Co

“On the operational front, Amyris is introducing two new molecules, both with first revenue expected by year-end. The first is a new solvent molecule, which will fall under the performance materials banner that is a major contributor to long-term product revenue mentioned earlier. The second new molecule is an emollient that targets the consumer care market, which is expected to have a price point in the $8-12/kg range. Finally, as it relates to biojet sales, discussions are underway with four potential buyers (including one active contract negotiation), and sales are expected by the end of this year. Worth noting, however, is that Amyris is not aiming to sell “commodity” jet fuel, but rather expects to be able to charge a meaningful “green premium,” with the explicit goal of securing better gross margins. Operational and commercialization progress is encouraging. Full year guidance was reiterated, but it appears heavily back-end loaded and visibility remains low. Maintain Market Perform (2) and cut PT to $3.00 from $3.50.”

Mike Ritzenthaler, Piper Jaffray

We maintain our Neutral rating on shares of AMRS. Sales (both product sales and collaboration revenue) were about half of our estimate and management stated on the call that 2Q would fall short of consensus. 2014 targets (for cash inflows, expenses, and positive EBITDA) were reiterated. Approximately half of product sales and collaboration funding included in the targets are firmly contracted, which exposes the story to disappointments should the year not play out as management has forecasted. Nonetheless, we are encouraged by the success on the technology and liquidity fronts, but at the same time we hesitate to fully endorse the ramp at this point given substantial gaps that have materialized in the past.

Pavel Molchanov, Raymond James & Company

After a period of retooling while in the “overpromise and underdeliver” penalty box, 2013 was Amyris’ first year with operations truly in commercial mode, and the outlook for 2014 (and beyond) is encouraging. There is visible commercialization progress, but the top line’s reliance (for now) on partner-based R&D revenue makes quarterly results very choppy. In addition to updates on the production ramp-up at the Brotas plant, the market wants to see additional clarity on the pace at which Total will be scaling up its fuels joint venture with Amyris. We maintain our Market Perform rating.

The Bottom Line

We’re seeing the product line-up unfold – the multiple molecules are starting to become an impressive set where the company is realizing its potential. An improvement in the larger-volume, low-margin markets will help move the company towards more substantial than its tasty but ultimately limited prospects in markets such as d-limonene. Bioject will be key.

Jim Lane is editor and publisher  of Biofuels Digest where this article was originally published. Biofuels Digest is the most widely read  Biofuels daily read by 14,000+ organizations. Subscribe here.

May 11, 2014

It's Easy Being Green. Fossil Fuel Free Is Harder

Tom Konrad CFA

Disclosure: Long BEP, MCQPF. PENGF, AQUNF

Last week, I was surprised to discover that Brookfield Renewable Energy Partners (NYSE:BEP, TSX:BEP-UN) is not entirely renewable.

I’ve owned shares of Brookfield for many years, but as a relatively safe income stock, I’ve parked it in the back of my portfolio to gather dust and dividends. I apply my limited time for in-depth analysis to riskier stocks where a quarter’s earnings are likely to make a much bigger difference in the stock price.

I may have noticed the “Other” category in addition to BEP’s wind and hydroelectric generation before last week, but I would not have paid much attention.  4% of Brookfield’s power production is not going to make the other 96% of its production non-renewable, no matter how dirty it may be, at least in my own opinion.

BREP Operations

But my opinion is not the only one that matters.   I have been managing the Green Alpha Global Enhanced Equity Income Portfolio (GAGEEIP) since December with Green Alpha Advisors.  Green Alpha is currently offering GAGEEIP in separately managed accounts.  Like all of Green Alpha’s portfolios, we’re managing it to an entirely fossil free mandate.

I came across the “Other” category when I evaluated Brookfield and four other renewable electricity producers in terms of how many dollars it costs to buy a watt of renewable generation last week.  Since BEP was a holding of GAGEEIP, I had to dig deeper.  I found:

  • Brookfield owns two co-generation natural gas facilities in New York and Ontario.
  • These were acquired along with a larger purchase of hydropower assets several years ago.
  • The company is not actively trying to sell them, but would if “the right offer came along.”

It’s Not Easy Being Fossil Free 

I’m a fan of co-generation, where the waste heat from power production is also used.  Despite the fact that these facilities are often powered by natural gas, I’d consider Brookfield to be green even if co-generation accounted for the entire portfolio.  But no matter how green these facilities are, they’re not fossil fuel free, and we had to remove Brookfield from GAGEEIP.

Brookfield is now the fourth of my favorite green income stocks that aren’t in GAGEEIP.  The others are Algonquin Power (TSX:AQN, OTC:AQUNF), Capstone Infrastructure (TSX:CSE, OTC:MCQPF), and Primary Energy Recycling (TSX:PRI, OTC:PENGF).  All have some gas generation, although it's also cogeneration in the case of Capstone and Primary Energy.

So why not manage a green equity income portfolio rather than a fossil fuel free one?  Marketing.  Green Alpha’s current mutual fund, the Shelton Green Alpha Fund (NEXTX) is one of only four broad based mutual funds which is entirely fossil free.  As far as I know, there is not a single fossil free mutual fund or exchange-traded fund (ETF) targeting a high level of current income.  In fact, most have a distinctive growth emphasis, which is the natural consequence of investing in firms in emerging industries (renewable energy) rather than a mature one (fossil fuels.)

It’s simply much easier to explain “fossil fuel free” than “hardly any fossil fuels, except co-generation.”   And when an individual, a pension fund or university endowment decides to heed 350.org‘s call to go entirely fossil fuel free but needs to maintain a high level of current income, we’re to giving them somewhere to go.

DISCLAIMER: Past performance is not a guarantee or a reliable indicator of future results.  This article contains the current opinions of the author and such opinions are subject to change without notice.  This article has been distributed for informational purposes only. Forecasts, estimates, and certain information contained herein should not be considered as investment advice or a recommendation of any particular security, strategy or investment product.  Information contained herein has been obtained from sources believed to be reliable, but not guaranteed.

May 10, 2014

SolarCity: Sunburn, or Healthy Glow?

By Harris Roen

SolarCity (SCTY) fell 9.1% Wednesday when the company released its first quarter earnings report, but gained all of it back and then Thursday on huge volume. Still, the stock has plummeted 22% in three months, and is down 37% from its highs in February 2014. Is this just a healthy correction from its outsized 400%+ gains from the IPO just 17 months ago? Or have we entered into a new lower trading range more in line with financial realties? This article will analyze current developments to this distinctive energy stock, and project where SolarCity should go from here.


SolarCity Revenues Climb as Profits Fall

SolarCity revenues have been steadily gaining for over a year. Revenues are up 34% from the previous quarter, and are more than double the same quarter last year. At the same time, net income has continued to deteriorate, with losses twice that of the previous quarter. Revenues are not the problem, it is the expense side of the ledger that is keeping SolarCity in the red.


SolarCity Debt

SolarCity’s debt long-term debt is at reasonable levels, and improved slightly this quarter. Total liabilities/total assets fell to less than a percent to 69%. The current ratio, looking at short-term liabilities and assets, deteriorated somewhat, and now hovers around 2.3.

Comparing SolarCity debt levels to other industries poses a challenge because it is a hard company to categorize. We classify SolarCity primarily as a financial company because of the way it interacts with its clients through financing, lease arrangements, notes, etc, and how those instruments appear on the liability side of its balance sheet. Looking at debt for financial companies is different from other sectors because in many ways, their business is debt. Having said that, the chart above shows SolarCity’s current ratio compared to other industries the company is commonly grouped under. The higher the number the better, so SolarCity debt remains under control.


SolarCity Client Ratios

The chart above shows ratios of revenues and expenses per customer for FY 2009 through 2013. 2014 ratios are projected using current rates of customer growth, revenues and expenses. The results show a mixed picture for SolarCity.

Total revenues per customer have been steadily declining. This is to be expected, as SolarCity moves more and more into home and small business installations, revenues per customer get diluted when compared to its larger utility-scale clients. So long as client growth continues at an ample pace, which it has, falling total revenues per customer is not a grave concern.

Net revenues per customer, though still negative, have been steadily improving. In a company’s early stages, net loss per customer should shrink as revenues grow. This has been the case through 2013, and should remain around the same level for 2014. I view this as a very positive sign: the more this trend stays on track, the sooner SolarCity becomes profitable.

On a more negative note, SolarCity’s acquisition cost per customer has risen to over $2,700. It is still below 2010-2011 levels, but has not improved at the pace one would hope. This ratio must be kept under control as SolarCity’s business model hinges on unremitting growth of its client base. Similarly, total expenses per customer are below 2010-2011 levels, but have basically flattened since then.

Glowing Profits or Wall Street Sunburn?


Source: SolarCity Q1 2014 Earnings Conference Call

There is much conflicting analysis of whether SolarCity remains a good investment, or will turn out to be a case of Wall Street sunburn. I was concerned with projected time to profit for SolarCity in my previous article, and that bias remains. Total expenses per customer will need to drop significantly before SolarCity turns a profit, no matter how many customers they add. It could take several years before earnings turn positive.

On the other hand, SolarCity’s business model aims to do just that, bring expenses way down. By recouping the investment in panels in 5-7 years, revenues will continue to flow at essentially no cost for as long as the lease lasts and as long as the sun shines. And if its projections are realized, straight-line growth could mean enormous profits in the future. SolarCity is likely overpriced current levels, but I still remain bullish on SolarCity as a profitable long-term investment.


Individuals involved with the Roen Financial Report and Swiftwood Press LLC do not own or control shares of any companies mentioned in this article. It is possible that individuals may own or control shares of one or more of the underlying securities contained in the Mutual Funds or Exchange Traded Funds mentioned in this article. Any advice and/or recommendations made in this article are of a general nature and are not to be considered specific investment advice. Individuals should seek advice from their investment professional before making any important financial decisions. See Terms of Use for more information.

About the author

Harris Roen is Editor of the “ROEN FINANCIAL REPORT” by Swiftwood Press LLC, 82 Church Street, Suite 303, Burlington, VT 05401. © Copyright 2010 Swiftwood Press LLC. All rights reserved; reprinting by permission only. For reprints please contact us at cservice@swiftwood.com. POSTMASTER: Send address changes to Roen Financial Report, 82 Church Street, Suite 303, Burlington, VT 05401. Application to Mail at Periodicals Postage Prices is Pending at Burlington VT and additional Mailing offices.
Remember to always consult with your investment professional before making important financial decisions.

May 09, 2014

Renewable Energy Stocks By The kWh

Tom Konrad CFA

Disclosure: Long BEP.  Short PEGI $20 and $25 puts, short PEGI $30 and $35 calls, short NYLD $40 and $45 calls.

I recently sized up five renewable energy power producers using the metric that’s most often used for solar panels: Dollars per Watt ($/W).  It’s an intuitive metric, but has serious flaws both for evaluating solar installations and stocks.  Slightly better is Watts per Dollar (or W/$100 to make the numbers look nice) as shown in the chart from that article below.

The main advantage of W/$100 over $/W is that it’s additive: I can meaningfully stack the capacity contributions from various fuel sources.  (I.e. ookfield Renewable Energy Partners (NYSE:BEP) has 7 Watts of wind power, 33 Watts of Hydropower, and 2 Watts  of cogeneration for every $100 of Enterprise value, for a total of 7+33+2 = 42 Watts of capacity per $100.  You can’t perform a similar calculation with the number of dollars you have to invest in BEP to get a Watt of each type of energy production.)  That said, W/$100 retains the other disadvantages of $/W, most importantly that different types of power plants are used in different ways.

Watts per 100 dollars

Baseload plants such as geothermal run nearly constantly, while variable resources such as wind and solar produce variable amounts of power based on climatic conditions.  Dams allow hydropower to respond somewhat to demand for power, but run-of-river hydro facilities are totally dependent on water flows, and seasonal and annual flows are dependent on precipitation.

One way to account for all this is to look at annual energy production in GWh per year.  The data from the following chart is taken from each company’s 2013 annual report.  I had to drop SolarCity (NASD:SCTY) from the list because I could not find energy production data.

kWh per dollar

Ormat (NYSE:ORA) and NRG Yield (NASD:NYLD) only reported aggregate energy production for 2013, so I made some assumptions based typical capacity factors to allocate production between Ormat’s geothermal and waste heat operations, and between NRG Yield’s wind and solar farms.  Ormat’s products business which sells equipment to other geothermal and waste heat recovery operations is scaled based on the relative revenue earned by each segment, while NRG Yield’s thermal businesses provide heat or cooling, and are shown in thermal kWh, which typically have lower value than electrical kWh.

A new category which does not appear in the W/$100 chart is Brookfield Renewable Energy Partners’ (NYSE:BEP) Storage business.  This takes advantage of extra capacity in its hydroelectric dams buy pumping water back behind the dam when during times of low electricity demand, and allowing that water to flow back through the turbine and generate electricity when demand it high.

It’s interesting to note that Ormat and Brookfield look most attractive when evaluated on annual energy production, while NRG Yield looked best based on capacity.  This is because hydropower and geothermal are typically being used at closer to their potential output more of the time than solar and wind, and much more than NRG Yield’s thermal assets.   This variation is captured by a power plant’s “capacity factor,” which is the percentage of its theoretical maximum production it actually achieves.

The following chart shows the capacity factors actually achieved by these four companies in 2013:

Capacity Factors

Note that I had to guess at the relative capacity factors for NRG Yield’s wind and solar operations, since the company only provides aggregate energy production data.  In any case, NRG’s total renewable energy production is large relative to its renewable energy capacity,  so we can conclude that its wind and solar farms are in good locations for those resources.  There were no such complications with PAttern Energy Group (NASDAQ:PEGI) since all of its generation is wind power.

Final Thoughts

Annual energy production is still a very incomplete picture of the value of these company’s operations.  The value of electricity depends greatly on local market conditions, as well as the time and season.  Nor do any of these charts include the companies’ expansion plans.

Can we conclude anything from this series of charts comparing power produces by $/W, W/$100, annual kWh/$, and capacity factor? Perhaps only that it’s impossible to sum up a company’s operations in a single number, or even a hundred numbers.  Not that this will be a surprise to anyone who has cracked open a company’s annual report.

On the other hand, I never know what I’ll find when I decide to look at companies using a new metric.

DISCLAIMER: Past performance is not a guarantee or a reliable indicator of future results.  This article contains the current opinions of the author and such opinions are subject to change without notice.  This article has been distributed for informational purposes only. Forecasts, estimates, and certain information contained herein should not be considered as investment advice or a recommendation of any particular security, strategy or investment product.  Information contained herein has been obtained from sources believed to be reliable, but not guaranteed.

May 08, 2014

Flying into the Sun

by Debra Fiakas CFA

Shares of two solar panel producers appeared on one of our favorite stock screens the other day  -  energy stocks that have traded downward to a point they appear oversold.  Trina Solar, Ltd. (TSL:  NYSE) recently closed at $11.22, down 39% from its 52-week high set in early March this year, but well above where the stock was trading a year ago.  RenaSola, Ltd. (SOL:  NYSE) has followed a similar track, recently closing at $2.61 well above its 52-week low. 

The question for investors is whether investors should take advantage of the current price weakness to pick up shares of long-term winners in the solar power race…..or not!

Neither company has reported a recent profit.  RenaSola lost $258.9 million on $1.52 billion in sales in the last twelve months.  Trina Solar reported higher sales of$1.8 billion in the same period, but managed to keep its net loss at a more modest level of $72 million.  The losses came amidst a global shakeout in the industry, allegedly triggered by dumping by China’s numerous solar panel producers.

The half dozen or so analysts who follow these companies seem to think the worst is over.  The consensus estimate for Trina Solar is $0.86 earnings per share in 2014, followed by $1.52 in 2015.  Those estimates are the results of upward adjustments to published estimates made within the last couple of weeks.  Only one analyst has published estimates for RenaSola, but this brave soul also thinks RenaSola is going to report a net profit in 2014 and 2015.

If these solar companies are about to round the corner, it makes sense to load up for long positions at relatively cheap prices.  Or does it?

It is not hard to find viewpoints the solar industry.  For example, industry analysts at the sell-side firm Credit Suisse recently issued a warning on slowing growth in the solar sector.  If they are correct that means the competitive battle is about to go from bloody to gory.  There are hundreds of solar panel producers still operating around the world, with a good share of them located in China.  I believe some will not survive.  I think the ones that are more likely to survive will the among those that 1) have the most efficient and therefore most marketable solar panels and 2) have strong balance sheets with low debt and ample cash.

SunPower (SWPR:  Nasdaq) is widely hailed as the developer with the most efficient solar power technology, that is how well the solar cells convert the incoming solar rays into electricity.  While most solar panels deliver efficiency in the range of 11% to 15%, SunPower has developed panels that have tested at 20% conversion.  What is more SunPower has come up with a multi-junction concentrator that converts a whopping 44% of the solar energy they receive to energy.  When these two modules come into the market place, I would wager it will result in capture of significant market share.

Trina Solar offers solar cells with efficiencies in a range of 12.9% to 16.7%, while Renasola’s efficiency range is 13.5% to 16.0%.  Trina spent $131.7 million on research and development over the last three years or 4.1% of sales during that period.  Over the last three years RenaSola has spent $90.5 million on research and development or 1.8% of sales.

Interestingly, SunPower spent $179.4 million over the last three years, or just 2.5% of its sales to deliver those industry leading efficiency ranges.  It appears both Trina Solar and Renasola will need to step up their respective R&D games to keep apace.

Performance superiority has paid off for Sunpower, which has converted 1.3% of its sales to operating cash flow over the past three years.  Consequently, the company has managed to keep its debt level to a respectable level and its debt-to-equity ratio to 0.74.  Trina has been a net user of cash over the past three years, so it should be no surprise that its debt levels and are higher.  Its debt-to-equity ratio is 1.56.  RenaSola managed to squeeze out positive cash flow in the last three years, but its conversion ratio is less than 1.0%.  RenaSola’s tepid cash flow generation is probably why the company has racked up some debt to the point its debt has built up to 2.48 times is equity.

From these few data points, it might be premature to count RenaSola or Trina Solar out of the solar panel market despite that they do not compare favorably with the industry leader.  Both companies still have ample cash balances.  Coupled with an improving profit picture, some might conclude both have a chance to remain viable competitors in the solar industry.  In the meantime, traders appear skeptical and both TSL and SOL are trading as if the companies are about to fly into the sun and burn.  

Debra Fiakas is the Managing Director of
Crystal Equity Research, an alternative research resource on small capitalization companies in selected industries.

Neither the author of the Small Cap Strategist web log, Crystal Equity Research nor its affiliates have a beneficial interest in the companies mentioned herein.

May 07, 2014

Renewable Energy Stocks By Dollars Per Watt

Tom Konrad CFA

Disclosure: I and my clients own HASI and BEP. I have short call positions in NYLD and PEGI, and short put positions in PEGI.

Dollars per watt ($/W) is a lousy measure of the economics of solar, but it persists.

Most likely, it persists because it seems familiar.  We can pay $4 for a watt of solar, or $4 for a Iced Hazelnut Macchiato at Starbucks.  Unfortunately, while the analogy may seem apt, this is a lot like knowing you’re getting a Macchiato without knowing if it’s a Tall, Grande, or Venti.  The actual energy production from a solar system depends greatly on a number of factors, including location, orientation, mounting structure, shading, string configuration, and choice of inverter.

Nevertheless, dollars per watt persists.  You’ll find it even in industry reports like US Solar Market Insight from GTM Research, as seen in this graph of annual PV installations and cost in dollars per watt:

PV Installations dpw GTM Research.png

Dollars of Stock Per Watt

Knowing that I can’t beat them, I decided to join them.  I used dollars per watt to provide a rough guide of how much solar an investor gets when buying the stock of publicly traded companies that own or finance solar: SolarCity (NASD:SCTY), NRG Yield (NASD:NYLD) and Hannon Armstrong Sustainable Infrastructure (NYSE:HASI) in a recent article about solar leases.

Here, I take it a little farther, and look at $/W for all renewables.  Below I also include wind farm owner and developer Pattern Energy Group (NASD:PEGI), geothermal company Ormat Technologies, Inc (ORA:NYSE) and hydropower and wind partnership Brookfield Renewable Energy Partners (NYSE:BEP.)   I dropped Hannon Armstrong from the list because I was not able to obtain sufficient information from the company about the renewable projects it has financed in time for publication.

The following chart shows how much of each company’s stock you would have to buy to get a watt of each type of renewable energy production:

Dollars per Watt RE

Note that one weakness of $/W is that the numbers are not additive.  If you spend $43 on a share of NRG Yield, you will be effectively buying a little over 2 watts of wind power and a little over 6 watts of solar.  You can’t get the solar without the wind.  If you only want one watt of any renewable energy, the green bars show that you could spend about $2.50 on either Brookfield or Pattern, $3.63 on Ormat, $5.05 on NRG Yield, or $13.89 on SolarCity.

Of course, renewable energy is not all you get when you buy these companies.  With SolarCity, you also get the solar installation business, and Ormat has a significant business selling equipment and services to other geothermal companies.  Most of NRG Yield’s business is not renewable at all: it also provides heating and cooling in commercial facilities, and has significant natural gas generation.  About 3% of Brookfield Renewable Energy Partners’ generation is from two natural gas co-generation facilities acquired “as part of larger hydro portfolio transactions many years ago,” according to a company spokesman.

While dollars per watt can be easy to grasp when thinking about just one technology, the metric starts to suffer when we consider a portfolio of several businesses.  Things become a little clearer when you consider watts bought per dollar spent.  The following chart shows how many watts of each type of business you would get if you bought $100 worth of each company’s securities:

Watts per 100 dollars


Dollars per watt is at best a rough starting point when evaluating a bid for solar on your home, or for evaluating companies that own renewable energy generation.  On the other hand, it works well with the intuition we’ve honed with years of trips to the grocery store and coffee shops.  That intuition may make these charts useful as you develop your understanding of renewable energy power producers.

DISCLAIMER: Past performance is not a guarantee or a reliable indicator of future results.  This article contains the current opinions of the author and such opinions are subject to change without notice.  This article has been distributed for informational purposes only. Forecasts, estimates, and certain information contained herein should not be considered as investment advice or a recommendation of any particular security, strategy or investment product.  Information contained herein has been obtained from sources believed to be reliable, but not guaranteed.

May 06, 2014

Offshore Wind A Big Part Of Why GE Wants Alstom

Who's the Energy Alpha Dog? GE or Siemens?

By Jeff Siegel

General Electric (NYSE:GE) wants to acquire one of the largest companies in France, and it could get what it wants if Germany doesn't get in the way.

Alstom SA (AOMFF), the target of GE's desires, is a French energy and transportation company with a market value of approximately $11.5 billion. It deals in hydroelectric and nuclear power, environmental control systems, wind turbines and battery storage, as well as trains and rail infrastructure.

It's a huge company, and GE could spend as much as $13 billion to acquire it.

On Monday, General Electric CEO Jeff Immelt met with French President Francois Hollande and Economic Minister Arnaud Montebourg to iron out the potential wrinkles in this deal. International news outlets said Hollande has responded favorably to GE's approaches, but Alstom is staying quiet on any potential deals until later in the week.

On Monday, the company released a brief statement that it will “make a further announcement no later than Wednesday 30 April morning. In the meantime, the company has requested that the trading of its shares remains suspended.”

A Rival Suitor

Like General Electric, German industrial firm Siemens AG (NYSE:SI) approached Alstom with its own acquisition interests.

The German company announced on Monday that it wanted to discuss “future strategic opportunities” with Alstom's board. The following day, Siemens announced it would be making its own offer to Alstom, but only if it had access to Alstom's “data room” and that it could do four weeks of due diligence with management and staff.

The Financial Times said Siemens could trade its high-speed rail assets for Alstom's electrical power assets, but this swap is purely speculation at this point.

Ripe for the Picking

Alstom is huge, but it's by no means monolithic. It has undergone restructuring for more than a decade and is currently under a five-year investigation by the U.S. Department of Justice and U.K. Serious Fraud Office for alleged corruption.

In 2003, the company posted a $2.54 billion loss related to poor sales, outstanding debts, and a huge write-down for a wind turbine design flaw. It was on the verge of implosion, but was bailed out by the French government to the tune of $3.4 billion. It was one of the biggest bailouts in European history.

This bailout ended up blocking Siemens from acquiring Alstom's large turbine business.

Yet the company ended up having to sell off a number of its subsidiaries to pay its debts anyway. Since the bailout, it has sold various parts to other multinationals, including Vosloh AG (VOS.DE), Areva SA (ARVCF), and you guessed it, General Electric.

In 2011, GE bought a 90 percent stake in Alstom's Converteam for $3.2 Billion. That company specializes in electric power conversion components and was folded into GE Power Conversion.

As is the case with multinationals, GE has a lot of money floating around outside of the US. By some accounts, it's got nearly $60 billion in cash and equivalents. Rather than repatriate this money and subject itself to heavy corporate taxes, GE has been using it for acquisitions.

The acquisition of Alstom would end up being the biggest in GE's history.

Offshore Wind

Even though GE is a leader in offshore wind turbines, the power and water divisions suffered through depressed demand over the last three years. GE anticipates a worldwide turnaround in 2014.

Acquiring Alstom would give GE some new offshore wind farm contracts which could accelerate growth efforts. In February, Alstom won its first offshore wind export contract, promising five turbines for the Block Island wind farm belonging to Deepwater Wind.

As it happens, Siemens was jockeying for a contract there too, but negotiations fell through.

It seems like Alstom has a knack for thwarting Siemens, and GE has a massive chunk of cash to offer the company as it continues to struggle. But the ink isn't dry yet. So we'll have to wait to see how this one works out.

Jeff Siegel is Editor of Energy and Capital, where this article was first published.

May 05, 2014

Why Traffic Lights Are Turning Green For BioAmber

Jim Lane
As many technologies pivot or delay, one train keeps chugging on its route to biosuccinic acid, and markets like BDO, resins and polyols.

What is it about the business model that keeps on working? What can every integrated biorefinery learn from its approach?

In Minneapolis, BioAmber (BIOA) just announced a contract to supply a minimum of 80% of PTTMCC Biochem’s total bio-succinic acid needs until the end of 2017.

PTTMCC Biochem is a joint venture established by Mitsubishi Chemical and PTT, Thailand’s largest oil and gas company, to produce and sell polybutylene succinate (PBS), a biodegradable plastic made from succinic acid and 1,4 butanediol (BDO). The JV partners are building a PBS plant in Map Ta Phut, Rayong, Thailand that will have an annual production capacity of 20,000 tons, and is expected to be operational in the first half of 2015.

Now, let’s put this in context. According to NNFCC last year, the global market for succinic acid is between 30,000 and 50,000 tonnes per year. If this were mobile phones, it’d be like coming out of the box with a billion hand-set order. A single offtake deal, with a take-or-pay component, for something like one-fifth of global capacity? Huge.

The PBS plant in Thailand will consume approximately 14,000 tons of succinic acid per year at full capacity — under the new agreement, BioAmber could supply a minimum of 11,200 tons of bioisuccinic acid if that PBS plant operates at full capacity. BioAmber plans to supply PTTMCC from its 30,000 ton per year plant under construction in Sarnia, Canada.

Putting BioAmber into a larger context

What is exactly so special about a company making roughly 65 million pounds of a little-known renewable chemical, with a historically tiny global market?

After all, that is roughly equivalent, by tonnage, to a 10 million gallon first-gen biofuels plant — the kind that generally closes down these days because of a lack of economies of scale.

There are two reasons that we are looking carefully at BioAmber.

First, as former DOE Biomass Program Manager Paul Bryan opined at ABLC this year: “Focus on the right products first.” Bryan keyed in on biosuccinic in his ABLC presentation, highlighting the opportunities and advantages relating to the utilizing the oxygen in biomass.


Second, BioAmber is avowedly pursuing a strategy based in careful aggregation of strategic partners that bring investment and offtake as well as financing relationships, while building further applications for their molecules in work with R&D partners that could be expected to translate into commercial partners down the line. Which is to say, starting with an economically and environmentally advantaged molecule and then working in partnership with downstream customers to establish markets for that molecule.

It’s very different than the conventional biobased fuels strategy, which has been to set mandates to create market certainty, and use that to create a favorable financing environment, and encourage engagement with incumbents.

BioAmber’s first commercial plant in Sarnia: construction

Moving back to BioAmber, let’s look at the construction timeline — which has shifted back 4-6 weeks. The company’s first commercial has slipped into early 2015 unless the company can make up some time, which it indicates it might.

BioAmber CEO Jean-François Huc reports: “We’ve completed over 60% of the detailed engineering and are now focused on completing the detailed piping and electrical instrumentation work…For most for equipment purchases and work packages…we’re seeing bids there are coming in on or slightly below budget…giving us an increasing confidence that we can bring the plant construction in on budget.”

“To date we’ve lost approximately eight work days due to extreme cold and snow. We’ve also identified the potential for delays in a few key equipment deliveries. The current trend suggests that if we do not recover the lost days due to weather moving forward and we’re not able to mitigate the risks around the equipment delivery dates, the project completion could be delayed by up to four to six weeks.”


The commissioning period is estimated at five months — meaning that the plant could be operating in steady-state as soon as the end of the first half of 2015 — and BioAmber’s sales projections for 2015 are in line with that.

Huc comments: “When you mechanically complete and you commission and startup your plant, realistically you anticipate a three to five month period, three months being aggressive and five months being more conservative…Our expectation is that the plant would be running in a continuous stable mode after five months and…we hope to sell about 45% of the nameplate capacity in the first year.

BioAmber’s first commercial: customers

The company, meanwhile, has been hard at work on bringing on customers. The combination of Vinmar and PTT contracts will tie up nearly two-thirds of the plant’s nameplate capacity in 2015, and the biosuccinic requirements of the Vinmar deal will more than use the full capacity of the Sarnia plant (though Sarnia can be expanded to as much as 50,000 metric tons).

Huc added: “We brought on 18 new customers in 2013 that will help to base load Sarnia and we worked with a number of companies to test our bio-succinic acid in new and emerging applications that offer the prospect of significant growth.

New applications and markets

The key for BioAmber to reach beyond the limited direct market for succinic acid is through the development of new markets — using low-cost biosuccinic.

Huc comments: “Over the past year we worked with a number of innovative companies that validated our Bio-SA in several new applications.

“For example, in artificial leather they demonstrated that the polyester polyol made with Bio-SA offers better aesthetics including softer touch than the polyols made with adipic acid. This market reportedly consumes 150,000 tonnes of adipic acid annually. Another example is in foams made with Bio-SA and recycled PET. The Bio-SA provided performance benefits to the polyols that were made from recycled PET, including reduced viscosity, increased density and tensile strength, reduced brittleness and improved stability in addition to increased renewable content. These foams have been developed for a number of applications including insulation panels and the near-term market is estimated at 15,000 to 20,000 tonnes per year but with significant growth potential.

“Several coatings companies have also demonstrated that resins and polyols made with the Bio-SA offer advantages over adipates in paints and coatings. These advantages include better gloss retention and higher renewable content. We now believe that the total addressable market for Bio-SA in coatings is approximately 600,000 tonnes per year.

“Our goal is to sign supplier agreements with market innovators in these emerging market segments and to announce product launches incorporating Bio-SA over the coming year.”

The future BDO plant

Let’s look at BDO in some detail.

As BioAmber explained at the time of its IPO: “Succinic acid can be used to manufacture a wide variety of products used every day, including plastics, food additives and personal care products, and can also be used as a building block for a number of derivative chemicals. Today, petroleum-derived succinic acid is not used in many potential applications because of its relatively high production costs and selling price. We believe that our low-cost production capability and our development of next-generation bio-succinic derived products including 1,4 BDO, which is used to produce polyesters, plastics, spandex and other products, will provide us with access to a more than $10 billion market opportunity.”

The Vinmar relationship. The BDO opportunity signaled in the IPO became more vivid early this year when Vinmar has committed to purchase, in a 15-year master off-take agreement, 100% of the BDO produced in a 100,000 ton per year capacity plant that BioAmber plans to build in North America and commission in 2017, Under the terms agreement, Vinmar also plans to invest in the BDO plant, taking a minority equity stake of at least 10%, and has a right of first refusal to invest in and secure 100% of the off-take from a second BDO plant.

More on Vinmar. Vinmar has been selling close to 50,000 tonnes of BDO per year for the past several years. Vinmar also has project development and financing expertise having helped several partners secure project financing by leveraging Vinmar’s banking relationships and the take-or-pay agreements that they sign.

Pricing: Huc reports: “At recent BDO prices and to give you a sense of those the global average price over the past three years was approximately $2,800 per metric tonne according Tecnon OrbiChem data, the annual sales from this plant would be approximately 280 million representing over 4 billion in revenues over the term of the contract.”

Execution risk. Producing BDO from succinic at scale, at commercially feasible rates — well, there’s work left to do. BioAmber reports that “we’re continuing to work with our exclusive partner Evonik to scale up and commercialize the catalysts we have licensed from DuPont (DD).”

The timeline: Huc comments, “We’ve begun the site selection process in North America, building on the site selection process we had run a few years ago for Sarnia a lot, as you can imagine the front-end of this BDO plant it’s just a big succinic acid plant, so most of our requirements in terms of site selection are identical to those we used in finally choosing Sarnia…in parallel we’ll be working to see what kind of government support we can secure for that project so, that has to dovetail with a toll manufacturing facility coming online in the U.S. and a successful startup of the Sarnia plant and ideally all those things come together in the summer of 2015 so that we’re in a position to move to a financial close with a group of lenders and equity partners.

Cash burn

The company reports: “Our goal is to keep our cash burn under 20 million in 2014 while spending more money on BDO development and engineering for the remainder of this year as we prepare to bring the BDO toll manufacturing facility online next year.” The company has $83.7 million cash in hand, after reporting a net loss for 2013 of $33M, after a $39M loss in 2012.

PTT and Myriant

We’ll be watching that 2017 date carefully, for another reason. It may well suggest a completion date for a biosuccinic acid plant that PTT has been investigating with Myriant. PTT has, since January 2011, been a high-visibility strategic investor in Myriant, putting $60M in the company a few years back — and avowedly the companies have been signaling interest in PBS.

Reaction from BioAmber on the PTT deal

“This first succinic acid take-or-pay agreement is an important milestone for BioAmber,” said Babette Pettersen, BioAmber’s Chief Commercial Officer. “This contract guarantees significant sales volume for our Sarnia plant during its first three years of operation. PTTMCC is a major new buyer of bio-succinic acid and locking up this substantial volume commitment will strengthen our market leadership,” she added.

Jim Lane is editor and publisher  of Biofuels Digest where this article was originally published. Biofuels Digest is the most widely read  Biofuels daily read by 14,000+ organizations. Subscribe here.

May 04, 2014

Ten Clean Energy Stocks For 2014: May Update

Tom Konrad CFA

April Showers April showers fell on both the broad market and clean energy stocks last month, but my picks weathered the storm relatively well.  My clean energy benchmark (PBW) was down 5.9% since the last update, and my broad market benchmark (IWM) fell 1.7%.  Meanwhile 10 Clean Energy Stocks for 2014 model portfolio also fell 1.7%.  For the year so far, the clean energy benchmark is up 4.5%, having given back most of its large February gains, while the broad market is down 2.5%.  My model portfolio is up 2.2%, having risen less than the benchmarks early in the year, but having given back much less over the last couple months.  The six income oriented picks continue to outperform the four growth oriented picks (up 9% vs. down 8%), as is to be expected in this year's choppy market.

Performance details can be seen in the following chart and the stock notes below.
10 for 14 May

Individual Stock Notes

(Current prices as of May 2nd, 2014.  The "High Target" and "Low Target" represent my December predictions of the ranges within which  these stocks would end the year, barring extraordinary events.)

1. Hannon Armstrong Sustainable Infrastructure (NYSE:HASI).
12/26/2013 Price: $13.85.     Low Target: $13.  High Target: $16.  Annualized Dividend: $0.88.
Current Price: $13.15.  YTD Total US$ Return: -3.5% 

Sustainable Infrastructure REIT Hannon Armstrong fell in April as the market absorbed 5,750,000 additional shares of stock from a secondary offering priced at $13.00 at the end of the month, including the underwriters' full over-allotment option.  The total raised was $74.75 million before deducting underwriting fees at a price slightly above the $12.50 IPO price from last year.  Now that Hannon Armstrong has completed deployment of the funds raised in its IPO, secondary offerings will be necessary for the company to continue talking advantage of its many opportunities it has to invest in sustainable infrastructure projects.  

This offering is accretive to current shareholders, since the company's book value per share was $9.22 in the most recent quarter, and this will raise the book value (and equity invested) to a bit more than $10 per share by my calculation.  Since HASI is able to sustain a dividend of $0.88 per share using $9.20 in equity, they should be able to increase that to around $1 per share as they deploy the money over the next two quarters. 

Considering that it took the company approximately a year to deploy the $167 million raised in the IPO, we should expect another secondary offering within six months. 

2. PFB Corporation (TSX:PFB, OTC:PFBOF).
12/26/2013 Price: C$4.85.   Low Target: C$4.  High Target: C$6. 
Annualized Dividend: C$0.24.
Current Price: C$5.75. YTD Total C$ Return: 19.8%.  YTD Total US$ Return: 15.9%

Green building company PFB announced its 2013 results in March, but I neglected to cover them in the last update.  Revenue and Funds From Operations recovered somewhat from the depressed levels in 2012, while earnings were boosted greatly by a one-time gain from a sale-leaseback transaction of PFB's buildings. 

3. Capstone Infrastructure Corp (TSX:CSE. OTC:MCQPF).
12/26/2013 Price: C$4.05.   Low Target: C$3.  High Target: C$5.  
Annualized Dividend: C$0.30.
Current Price: C$4.06.  YTD Total C$ Return: 18.6% .  YTD Total US$ Return: 14.6%

A number of analysts upgraded independent power producer Capstone Infrastructure's stock in response to the new power purchase agreement for its Cardinal plant which I wrote about last month.  Four analysts now have a "Buy" rating on the stock, with three rating it "Hold."  Their average price target is C$4.64.

The company paid its regular quarterly dividend of C$0.075 on April 30th.

4. Primary Energy Recycling Corp (TSX:PRI, OTC:PENGF).
12/26/2013 Price: C$4.93.   Low Target: C$4.  High Target: C$7.  Annualized Dividend: US$0.28. 
Current Price: C$5.49.  YTD Total C$ Return: 12.5% .  YTD Total US$ Return: 8.7%

Waste heat recovery firm Primary Energy was also upgraded in response to its renewed Cokenergy contract, also discussed last month.  Jacob Securities increased its rating from "Hold" to "Buy," although this change was in part due to the firm's lower expectations for returns for the overall market of Canadian stocks.

The company announced its first quarterly dividend at the new US$0.07 per share rate payable to investors of record as of May 14th.  Note that although the stock trades in Canada, all of its operations are in the US, so it reduces exchange rate risk by paying dividends in US dollars.

5. Accell Group (Amsterdam:ACCEL, OTC:ACGPF).
12/26/2013 Price: €13.59.  Annual Dividend €0.55 Low Target: 11.5.  High Target: €18.
Current Price: €14.41. YTD Total  Return: 6.0% .  YTD Total US$ Return: 6.2% 

Bicycle manufacturer and distributor Accell Group gave a sale update.  Favorable weather helped European sales, but the cold winter hurt sales in the US.  Parts and accessories sales growth was good, leaving overall revenues in line with previous guidance.  The company's annual dividend was set at €0.55, payable to shareholders as of the end of April.

6. New Flyer Industries (TSX:NFI, OTC:NFYEF).
12/26/2013 Price: C$10.57.  Low Target: C$8.  High Target: C$16. 
Annualized Dividend: C$0.585.
Current Price: C$11.84.  YTD Total C$ Return: 13.9% .  YTD Total US$ Return: 10.1%.

Leading transit bus manufacturer New Flyer announced its deliveries, orders and backlog for the first quarter.  Financial results are scheduled for May 7th.  The company delivered more buses and continued to refill its backlog as the industry recovers from its multi-year downturn.  The first five of the company's new MiDi® mid-sized buses entered production in the first quarter. 

7. Ameresco, Inc. (NASD:AMRC).
12/26/2013 Price: $9.64Low Target: $8.  High Target: $16.  No Dividend.
Current Price: $6.27  YTD Total US$ Return: -35%.

The stock of energy performance contracting firm Ameresco continued to decline in response to investor disappointment with forward guidance, as discussed in the last update.  Company CEO George Sakellaris continues to take advantage of the depressed stock price to buy more of his company's stock.  Although I consider this a long-term play, I added to my own position as well.

8. Power REIT (NYSE:PW).
12/26/2013 Price: $8.42Low Target: $7.  High Target: $20.  Dividend currently suspended.
Current Price: $9.25 YTD Total US$ Return: 9.9%

Solar and rail real estate investment trust Power REIT closed on the previously announced purchase of 450 acres of land which will host a 60 MW solar farm in Kern County, California.  The farm is expected to be completed this year.  It also obtained a $26.2 million credit facility which should allow the refinancing of the bridge loans used to finance the last transaction.

At the end of the month, Power REIT's board granted CEO David Lesser an exemption from the requirement that no individual may own more than 10% of the company's stock.  The company's bylaws require such an exemption because Power REIT would no longer qualify as a REIT under IRS rules if the top 5 shareholders own 50% or more of outstanding stock.  Since no other individual owns more than the 5% limit after which a holding would have to be reported, Power REIT is not at risk of losing its REIT status as long as Lesser's holding remains below 30%.  Lesser told me that he wants the exemption so that he can continue buying the stock on the open market at what he believes are extremely depressed prices.

I was personally deposed as a "non-party" in the company's ongoing civil case against the lessees of its rail asset, Norkfolk Southern Corporation (NYSE:NSC) and Wheeling and Lake Erie railway (WLE).  The opposing attorney wasted a full four hours of everyone's time asking me about practically every email I had ever exchanged with company Lesser, the articles I've written, and the underlying documents I provided to her.  As far as I could tell, the only things she managed to prove through the exercise were that my articles should not be a basis for the eventual ruling in the case (not that this was ever at issue), and that she does not mind wasting her clients' and Power REIT's money pursuing wild goose chases.

Fortunately, it is my interpretation of the lease agreement that the lessees should be liable for both their own and Power REIT's legal expenses.  Not that my opinion is relevant; that will depend on the judge or the terms of an eventual settlement. 

She did apologize for the rudeness of a server who showed up at my house 10pm to give me the summons, but not for wasting everyone's time.  Of course, wasting everyone's time could be precisely what NSC and WLE want.

9. MiX Telematics Limited (NASD:MIXT).
12/26/2013 Price: $12.17Low Target: $8.  High Target: $25.
No Dividend.
Current Price: $10.65. YTD Total US$ Return: -12.5%

Global provider of software as a service fleet and mobile asset management, MiX Telematics introduced its web reporting suite "DynaMiX" to Europeans at the Commercial Vehicle Show 2014.

10. Alterra Power Corp. (TSX:AXY, OTC:MGMXF).
12/26/2013 Price: C$0.28. Low Target: C$0.20.  High Target: C$0.60. No Dividend.
Current Price: C$0.31   YTD Total C$ Return: 10.7% .  YTD Total US$ Return: 7.0%.

Renewable energy developer and operator Alterra Power announced a joint venture with its partner on a number of previous projects, Fiera Axium Infrastructure.  Alterra will own 51% of the project and oversee construction. 

Two Speculative Clean Energy Penny Stocks for 2014speculative May.png

Ram Power Corp (TSX:RPG, OTC:RAMPF)
12/26/2013 Price: C$0.08.  Low Target: C$0.00.  High Target: C$0.22. No Dividend.
Current Price: C$0.07   YTD Total C$ Return: -12.5% .  YTD Total US$ Return: -14.7%.

Geothermal power developer Ram Power completed the sale of its Geysers Project to US Geothermal (NYSE:HTM.)  The proceeds should help cover operating expenses while we await the results of the stabilization period and performance test of Ram's marquee San Jacinto-Tizate project.  Depending on the results of that test, Ram may be eligible for distributions from the project.  The test is expected to conclude on May 25th.

Finavera Wind Energy (TSX-V:FVR, OTC:FNVRF). 
12/26/2013 Price: C$0.075.  Low Target: C$0.00.  High Target: C$0.22. No Dividend.
Current Price: C$0.125   YTD Total C$ Return: 66.7% .  YTD Total US$ Return: 62.7%.

Shares of wind project developer Finavera continued to appreciate slightly in response  the completion of the assignment of its 184MW Miekle wind project to Pattern Energy Group (NASD:PEGI) which I discussed last month.

Final Thoughts

After the amazing run the stock markets had last year, it's not surprising that this year is more subdued.  The summer months tend to be particularly weak ones for the markets.  Hence I expect my safer picks to continue to do relatively well, and I am starting to increase the size of my market hedges. 

If I were to buy any of these stocks today, I'd be looking at Ram Power, because its performance is going to be all about the results of the geothermal capacity test due at the end of May, not about what the broad market is doing.  While I'd be tempted to buy MiX Telematics and Ameresco at current prices, I would not want to do so without a market hedge, because I feel weak market conditions could easily drive either lower.


DISCLAIMER: Past performance is not a guarantee or a reliable indicator of future results.  This article contains the current opinions of the author and such opinions are subject to change without notice.  This article has been distributed for informational purposes only. Forecasts, estimates, and certain information contained herein should not be considered as investment advice or a recommendation of any particular security, strategy or investment product.  Information contained herein has been obtained from sources believed to be reliable, but not guaranteed.

May 03, 2014

Can Alternative Energy Mutual Funds and ETFs Continue to Beat the Market?

By Harris Roen

Alternative Energy Mutual Fund Returns

Alternative energy mutual funds have proven to be an excellent investment over the past year or more, but those gains have flattened out as of late. MFs are up 33% on average with even the lowest returning fund, Gabelli SRI Green AAA (SRIGX), up 15% for the year.
The alternative energy sector is by far beating the overall market. For comparison, as of April 21 the tech heavy NASDAQ was up around 27% for 12 months, the S&P 500 by 20%, and the Dow Jones Industrial Average only 13%


Alternative Energy ETF Returns

Green ETFs are posting excellent gains overall for the past 12 months, up 51% on average. As with MFs, quarterly returns are relatively flat, with the exception of nice gains in First Trust ISE-Revere Natural Gas Index Fund (FCG) and iPath Global Carbon ETN (GRN).
An indication of how much the fortune of alternative energy ETFs have changed can be found by looking at long-term returns. Currently alternative energy ETFs are down 5.9% on average over a three-year time frame. Eight out of 14 funds, or a bit less than half, are trading down. Compare that with a year ago, when alternative energy ETFs were down 15.5% on average over a three-year time frame, with more than 70% of funds showing a loss. When looking at where annual returns were a year ago, about 40% of the alternative energy ETFs were down. On average the ETFs were flat for the year, as compared to the large one-year gains alternative energy ETFs are showing now…


Individuals involved with the Roen Financial Report and Swiftwood Press LLC do not own or control shares of any companies mentioned in this article. It is also possible that individuals may own or control shares of one or more of the underlying securities contained in the Mutual Funds or Exchange Traded Funds mentioned in this article. Any advice and/or recommendations made in this article are of a general nature and are not to be considered specific investment advice. Individuals should seek advice from their investment professional before making any important financial decisions. See Terms of Use for more information.

About the author

Harris Roen is Editor of the “ROEN FINANCIAL REPORT” by Swiftwood Press LLC, 82 Church Street, Suite 303, Burlington, VT 05401. © Copyright 2010 Swiftwood Press LLC. All rights reserved; reprinting by permission only. For reprints please contact us at cservice@swiftwood.com. POSTMASTER: Send address changes to Roen Financial Report, 82 Church Street, Suite 303, Burlington, VT 05401. Application to Mail at Periodicals Postage Prices is Pending at Burlington VT and additional Mailing offices.
Remember to always consult with your investment professional before making important financial decisions.

May 02, 2014

Can't Put Solar On Your House? Four Ways To Invest In Solar Leases

Tom Konrad CFA

Disclosure: I and my clients have long positions in HASI. I have sold NYLD $40 and $45 calls short.

The secret sauce for bringing residential solar into the mainstream is the solar lease.  With the simple value proposition of little or no money down and cost savings from day one, a homeowner does not have to be an environmentalist or green to be interested in the green of a solar lease.  He or she simply needs to live in a state where the combination of annual sunshine and state incentives provide the economics to make solar leases profitable for the lender and installer.

Low interest rates and the rapidly falling price of solar panels have rapidly expanded the number of states where solar leases are available in recent years, so much so that residential solar lease pioneer SolarCity (NASD:SCTY) grabbed 26% of the rapidly growing residential market in 2013.  Of the top five residential solar installers on GTM Research’s 2013 U.S. PV Leaderboard, four offer solar leases.  Commercial solar leases were pioneered by SunEdison (NASD:SUNE) a decade ago, but they only began to transform the solar market place when SolarCity and competitors like SunRun and Vivint Solar began offering them to homeowners.

Solar Gardens

While the opportunity to take advantage of attractive solar economics is expanding rapidly to more states, not every home owner has a suitable unshaded roof.  Those who want to democratize the solar opportunity usually favor community solar farms, also known as solar gardens.  These structures allow community members to each buy a share of a larger central solar installation, receiving credits on their electric bill, as well as a proportional share of the tax benefits. Unfortunately, creating solar gardens requires specific state legislation or action by the local utility or utility regulatory commission, and the difficultly of making such rule changes means that solar gardens are available in far fewer locations and to fewer individuals than solar leases.

Solar Crowdfunding

Solar Mosaic is also working to democratize solar investment through crowdfunding.  The company avoids the complexity of direct investment in solar farms by making loans to solar developers backed by a solar farm’s cash flow.  It then offers pieces of loans to small investors though its crowd funding portal, taking a small cut of the interest to pay for its operations.  While individuals can investment as little as $25, securities laws currently limit this opportunity to accreditied (i.e. wealthy) investors and residents of California and New York.

In practice, an even greater limitation has been the lack of available projects, with only $5.6 million invested in 34MW of projects since the first investment in late 2012.  That is approximately as much solar as 5,683 typical 6kW residential solar systems.

Fortunately, the size and number of Solar Mosaic’s loans has been increasing.  One particularly intriguing forthcoming project is the Mosaic Home Solar Loan in partnership with national installer RGS Energy (NASD:RSGE).  I expect this product will appeal to Solar Mosaic’s investors, since it will finance residential systems.  Financing solar for a homeowner will likely have more emotional appeal than financing a commercial installation on a convention center or school.

Another crowdfunding site, SunFunder, enables individuals to invest in solar projects bringing power to the developing world.  It offers interest-paying investments to accredited investors.  Ordinary investors can participate with loans that earn repayment of principal as well as interest credits in the form of “Impact points.”  Impact points cannot be withdrawn, but they can be re-invested in other projects.

Solar Bonds

It seems likely that it will be some time before Mosaic can get enough solar loans (residential or otherwise) into its system to satisfy investor demand.  Until that happens, and until Mosaic is able to offer investments to ordinary investors nationwide, many will have to look elsewhere to invest in solar installations.

One promising option on the horizon is bonds backed by solar leases.  SolarCity was the first to issue such bonds, with a $54.4 million offering in November of last year.  That offering was 71% backed by residential solar leases, with the balance backed by commercial solar.  They followed this with a 87% residential $70 million offering which closed on April 10th.   Like most green bond issues in recent months, SolarCity’s bonds were only available to institutional investors.  SolarCity has little incentive to offer these bonds to small investors, because demand from institutional investors greatly exceeded supply.

Another company likely to issue bonds partially backed by solar leases is Hannon Armstrong Sustainable Infrastructure (NYSE:HASI.)  This REIT invests in a wide range of sustainable infrastructure, and then issues Sustainable Yield Bonds (SYBs) backed by these projects, but also keeps some on its balance sheet.

Hannon Armstrong’s CEO, Jeffrey Eckel, told me in an interview that he believes Hannon Armstrong is unique in that it explicitly measures the climate emissions reduction associated with each project it invests in.  The first $100 million round of SYBs, issued in December, invested in projects which reduced greenhouse gas emissions by 0.61 metric tons per $1,000 investment.   That means a typical US-based investor with a carbon footprint of 17.6 metric tons per year could offset a year’s worth of emissions with a $28,852 investment in the first tranche of SYBs.  While that is far more than the cost of equivalent carbon offsets, such offsets are a cost, while SYBs are an investment which also pay a competitive 2.79% interest rate.

Investors interested in funding solar leases should be interested in Hannon Armstrong’s future SYB rounds, since the company just signed two deals to fund solar leases.  On April 16th, the company announced a deal to jointly originate and fund up to $100 million financing for distributed solar projects with Sol Systems.  This followed the April 3rd announcement that the company had provided $42 million in debt to fund SunPower Corporation’s (NASD:SPWR) residential solar lease program.

According to Eckel, solar leases tend to have a lower climate impact per dollar invested than most of it other investments, but the impact will be positive for both these investments.

Solar Lease Stocks 

With bonds backed by solar leases mostly being sold to institutional investors, stocks are probably the easiest way for individual investors to gain exposure to solar leases.  Both SolarCity and Hannon Armstrong are retaining a portion of their solar leases on their own balance sheets.  By far the purest exposure to solar leases will come from industry leader SolarCity, while Hannon Armstrong’s exposure to renewable energy projects will always remain below 25%, since this is a requirement of its REIT status.

SolarCity had deployed approximately 380 MW of solar through the end of March.  With a market capitalization of $5.28 billion, that means each $14 dollars invested in SCTY was backed by 1 watt of a solar lease.  In other words, if you’re thinking of investing in SolarCity stock as an alternative to putting solar on your roof, you’re essentially paying $14 a watt.  That is far more expensive than any installation SolarCity has installed.  The typical cost per watt for a residential solar system in California was $5.75 in the fourth quarter of 2013.

While Hannon Armstrong has funded far fewer solar systems, the two deals for $142 million described above should account for about 15% to 20% of its future market capitalization.  If the $42 million for SunPower comes in at $6 per watt, and the $100 million of distributed commercial systems cost $4 per watt, that will amount to a total of 32 MW of solar.  As of the end of 2013, Hannon Armstrong had invested 32% of its capital (or $202 million) in clean energy projects, some of which would have been solar.  If 20% of this was solar at $5 per watt, that would amount to another 40MW of solar.   Putting this together, my best estimate is that each $10 to $20 invested in HASI will include funding for 1 watt of solar, as well as 5 or more watts of wind and geothermal projects and yet more energy efficiency.  Unlike SolarCity, Hannon Armstrong is currently profitable and pays a 6.6% dividend yield at the current $13.34 stock price.

Another yield-focused stock with some investments in solar leases is NRG Yield (NYSE:NYLD.)  This company has a dividend yield of 3.1% at the current stock price of $42.50.  The company owns a mix of thermal and renewable generation, with 34% of its generation from renewables in 2013.  It owns 313 MW of mostly utility scale solar, and 101 MW of wind farms, and has a $2.09 billion market capitalization.  Hence each $6.67 invested in NRG Yield funds 1 watt of utility scale solar and 1/3 of a watt of wind.


If you always wanted to own a solar system, but lack a suitable roof, a large and rapidly growing number of investments are now available.  If your primary goal is attractive financial returns, the best investments are Solar Mosaic (4.4% to 7% yield) and Hannon Armstrong (6.6%.)

Solar Mosaic investments have a number of downsides, such as the limited number of available projects, restriction to accredited investors and residents of New York and California, and the requirement that you hold your investments to maturity.  While most of the money invested in Hannon Armstrong goes to fund types of sustainable infrastructure other than solar, each dollar funds approximately as much solar as a dollar invested in SolarCity, but also includes much larger investments in other types of clean energy and in energy efficiency.

At $6.67 per solar watt, NRG Yield is the cheapest way to fund solar with a stock market investment, but this company includes considerable fossil generation and has a much lower yield (3.1%) than Hannon Armstrong.

While none of these investments is perfect in its ability to replicate the economics and climate impact of putting solar on your home, the number of options is rapidly increasing.  If you live in one of seven states (MA,CO, ME, RI, VT, WA,DE, OH) you may be able to invest in a solar garden.  Until then, my top pick combining high climate impact with high yield and ease of investment is Hannon Armstrong Sustainable infrastructure.

This article was first published on the author's Forbes.com blog, Green Stocks on April 21st.

DISCLAIMER: Past performance is not a guarantee or a reliable indicator of future results.  This article contains the current opinions of the author and such opinions are subject to change without notice.  This article has been distributed for informational purposes only. Forecasts, estimates, and certain information contained herein should not be considered as investment advice or a recommendation of any particular security, strategy or investment product.  Information contained herein has been obtained from sources believed to be reliable, but not guaranteed.

May 01, 2014

Mantra Energy: The Future of Portable Fuel Cell Technology?

by Lee Shane

When one thinks of fuel cells and fuel cell technology some names immediately come to mind.  Ballard Power (BLDP) went public in 1993 and was listed on NASDAQ in 1995. A company that made its debut in 1997 was Plug Power (PLUG), a joint venture between DTE Energy and Mechanical Technology Inc.  Hydrogenics (HYGS) is a company that has been around for 60 years, but more recently has gotten investor attention for their fuel cell technology.

Most of the technology produced by well-known fuel cell companies share common features…

  1. They are based on fuel cell technology that requires hydrogen gas or a reformer that makes H2 out of the fossil fuel feed. They use a very expensive, very rare catalyst, Platinum.
  2.  Portable fuel cells are based on fuel cell technology that requires a PEM, Proton Exchange polymer Membrane
  3. They have all enjoyed various levels of success, but the existing technology appears to be limited to heavy vehicles (buses / forklifts) and backup power systems for specific applications.

The reality is that most of the existing fuel cell technology has never really reached the level of portability once imagined for fuel cells.

However one new entrant in the fuel cell sector may be capable of regenerating some of the early initial excitement. They have eliminated the Achilles heel, the PEM membrane, the bipolar plates, and the platinum catalyst…

That company is Mantra Energy Alternatives (MVTG) based out of British Columbia.

Recently MVTG has revealed their patented MRFC fuel cell. It is a "membrane-less" and "platinum-free" ultra-low cost fuel cell that appears to be totally unique in the market. As mentioned previously, the PEM membrane, the bi-polar plates, and the precious metals catalyst are among the most expensive and heavy parts of any fuel cell. The PEM Membrane is also one of the degrading components of PEM fuel cells, so the MVTG MRFC fuel cell is expected to have a much longer operating life, because there is no membrane to degrade. MVTG claims to have eliminated about 2/3rds of the cost of a typical PEM style fuel cell. 


We know the significant infrastructure challenges hydrogen gas still presents for widespread commercial deployment.  It was recently reported that even now there may be less than 15 commercially accessible hydrogen fueling stations available in the U.S.  But the MVTG-MRFC fuel cell does not require hydrogen gas. MVTG has eliminated the need for H2 gas feed in their MRFC fuel cells, and instead uses non-flamable liquid formates and formic acid as fuel.  It is the H proton bonded to the back bone of a CO2-molecule (which is formic acid) that is the hydrogen fuel that the MVTG-MRFC fuel cell uses, and in that state, formate-formic acid, it is non-flammable, and is stored at ambient pressure and temperature.  The MVTG fuel cell also does not require an expensive, energy consuming, bulky, and heavy reformer like other fuel cells use to handle direct fossil fuel feeds.

MRFC 2.png

The technology is the result of an impressive R&D collaboration from multiple Universities located in Canada, Japan, and the U.S.  The potential of this new fuel cell technology makes it worthy of acknowledgment.

Lee Shane works in information technology for a Fortune 500 company, and is an individual investor with over 20 years experience.  His focus is on small to mid size technology companies that have the potential to be disruptive, or offer benefits to the sectors they are targeting that legacy technology may not currently provide.  He has a strong interest in green building concepts and alternative energy and looks for hands-on opportunities in those areas

« April 2014 | Main | June 2014 »

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