January 06, 2015

Ballard Terminates Azure Hydrogen Licenses; Can It Find A Better China Partner?

by Debra Fiakas CFA

Before the open of the first trading day of 2015, fuel cell developer Ballard Power Systems (BLDP:  Nasdaq) announced the termination of technology licenses to Azure Hydrogen, which was to have been Ballard’s introduction to the China market. The license agreements covered the sale of Ballard’s bus power module and telecom backup power system.  Ballard has charged Azure with breaching the agreements and the two companies have apparently not been able to come to alternative terms. 

Azure had made sales in the China and not all of the equipment had been paid.  Termination of the relationship casts some doubt on outstanding accounts receivable totaling $4.5 million.  Apparently the skepticism was sufficient to cause Ballard’s accountants to write off the full $4.5 million. 

While waiting to see that bit of bad news in the year-end financial report, investors can mull over the other consequence of the divorce from Azure  -  reduced revenue expectations.  Management reduced guidance for the December 2014 quarter by $3.0 million, but deferred a discussion of the impact on 2015 until late February when they were already planning to provide guidance for the upcoming year.

Most likely this is a temporary hiccup.  There are plenty of other players in China that would be capable of penetrating that market with fuel cells for both transportation and stationary applications.  Ballard should have plenty of options to forge another relationship.  What will be challenging is finding a credit worthy counterpart.  Ballard had required a $1 million upfront payment from Azure at the signing of the first license agreement in May 2013.  Shareholders might have thought that would have been sufficient to secure Azure’s business integrity.

Some investors might think the bad news provides an opportunity to accumulate shares of Ballard at an economical price.  BLDP gapped down in the first hour of trading following the announcement, giving up some of the gains the stock had made in the previous week.  The stock had been on a steady decline over the past several months, but the supply seemed to have been turned off with the expiration of tax-loss sales opportunities.

Ballard has managed to build revenue up to $70.4 million in the most recently reported twelve months.  The consensus among the half dozen analysts who have published estimates for Ballard is suggests the company was expected to report $73.4 million for the year.  With the termination of the Azure relationship and the elimination of that business in the fourth quarter, it appears the company is poised to report about $70 million in sales for the year.  That would suggest flat results compared to the prior year, but Ballard also has the write-off of the uncollectible accounts receivable.  Thus 2014 could be a down year in terms of sales.

Investors can expect a significant net loss in the year.  The trailing twelve month loss was $13 million through the end of September 2014.  The consensus estimates suggest few if anyone expects the company to breakeven anytime soon.  Ballard has a $32.7 million cash hoard to tide the company over.  At the present cash usage rate Ballard has about two years to ‘fire it’s engines’.  That might offer some encouragement to value investors who see the recent dip in price to pick up shares.

The implications of the license agreement termination came on a day most investors were likely taking the day off for an extended recovery from the New Year celebrations.  It is likely that there will be further reaction registered in the stock price with the rest of investors return from holiday merry making.  Then the year-end 2014 report at the end of February could evoke even further reaction as investors can see the bad news in numbers.

Ballard stubbed its toe in the final days in 2014 and waited until the first day of the New Year to give investors the good news.  Putting out the press release one day after New Year’s Day is not likely to shield Ballard from the harsh realities of the equity market.  Even more compelling buying opportunities might be ahead.

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.

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Oil and Gas

January 05, 2015

Alternative Energy Funds: 2014 Review

By Harris Roen

Mutual Funds (MFs)

Falling fossil fuel prices have hampered 2014 returns for alternative energy mutual funds. Returns are slightly down on average for the past three-month, with a third of funds showing losses. Monthly gains fared worse, with only 2 out of 14 funds in the black. One-year returns are flat on average, and range from a high of 8.3% for Gabelli SRI Green AAA (SRIGX), to a low of -14.3% for Guinness Atkinson Alternative Energy (GAAEX)…

  Alternative Energy Mutual Fund Returns

Exchange Traded Funds (ETFs)

Alternative energy ETFs had a wide range of returns for 2014, but ended mostly down. Only 3 out of 17 ETFs showed gains, with the average ETF falling -5.7%. If the two outliers are removed, the outsized returns of iPath Global Carbon ETN (GRN) and severe drop of First Trust ISE-Revere Natural Gas Index Fund (FCG), alternative energy ETFs averaged down -7.3% for the year…

Alternative Energy ETF Returns


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.

January 04, 2015

Ten Clean Energy Stocks: Past Performance And Predictions For 2015

Tom Konrad CFA

The last two months have not been kind to clean energy stocks.  Most commentators attribute the weakness to declining oil prices and the Republicans' strong showing in the midterm elections.  Whatever the cause, my 10 Clean Energy Stocks for 2014 model portfolio was dragged into a loss for the year where it had previously looked to return a small gain.  A large part of the decline was in the dollar's strength.  Measured in local currency, the average stock was flat, but the 8% decline in the Canadian dollar, 12% decline in the Euro, and 11% decline in the South African rand combined to pull the portfolio down 4.5% in dollar terms.

My benchmark Powershares Wilderhill Clean Energy Index (PBW) also suffered, ending the year down 14.5%, even though the the broader market of small cap stocks gained 5.4% for the year (as measured by the Russell 2000 index ETF, IWM.)

Long Term Track Record

Clean energy stocks are notoriously volatile.  While the broad market long ago recovered from its late 2008/early 2009 lows, my benchmark Clean Energy ETF never has, mainly due to a terrible decline in 2011, while the broad market fell only a little, followed by a further decline in 2012 while the broad market advanced.  Two or three blow-out years like 2013 would be needed to erase these huge losses.

Because of these risks, I have become increasingly conservative picking the ten clean energy stocks in my list.  I focus on stocks with positive earnings, and often dividend paying companies which appear undervalued.  While this caution kept the model portfolio from fully participating in the 60% upside achieved by my benchmark in 2013, it served readers well in 2010, 2012, and 2014, when the model portfolio produced an average gain of 3% to the average loss of 12% of the benchmark.  I would say I was not cautious enough with my picks in 2009 or 2011, although the model portfolio did beat its benchmark in both of of those years.

In the six years since 2009, the model portfolio has returned cumulative total return of 10%, which is quite unimpressive if not considered against the benchmark's cumulative annual loss of 43%.  You can find more details in the chart below.

long term returns 2014.png


The chart below shows detailed performance for the 10 stocks in the 2014 model portfolio.  Most of the year it looked like the portfolio would produce a modest gain, but the strong US dollar and a change in market sentiment which led to rapid declines in many clean energy stocks turned this into a 4% loss.  Two growth stocks, Ameresco (NASD:AMRC) and MiX Telematics (NASD:MIXT) were particularly hard hit, despite the lack of negative news.  This mirrored the sharp decline of the benchmark Clean Energy ETF PBW, which contains a large number of growth stocks.  See the chart below for details.

performance chart

I discuss the stocks which are also in the 2015 list, Hannon Armstrong Sustainable Infrastructure (NYSE:HASI), Capstone Infrastructure Corp (TSX:CSE. OTC:MCQPF),  Accell Group (Amsterdam: ACCEL, OTC:ACGPF), New Flyer Industries (TSX:NFI, OTC:NFYEF), Ameresco, Inc. (NASD:AMRC), Power REIT (NYSE:PW), and MiX Telematics Limited (NASD:MIXT) in the article Ten Clean Energy Stocks for 2015, which was published on January first.

The companies I dropped from the list,  PFB Corporation (TSX:PFB, OTC:PFBOF),  Primary Energy Recycling Corp (TSX:PRI, OTC:PENGF), and Alterra Power Corp. (TSX:AXY, OTC:MGMXF) are discussed here, along with the reasons why.  Mostly, they were dropped because the recent declines in clean energy stocks created new attractive opportunities, not because I no longer consider them attractive.  All remain in my portfolio, except for Primary Energy, which was bought out.

2015 Predictions

A year ago, I predicted clean energy stock returns would be modest to down, with my selections providing some protection from the downside risks.  The portfolio delivered, although not as well as I would have liked.  2015 is looking a lot more like 2013, when I said, "The abundance of great values among clean energy stocks this year bodes well for the performance of my annual model portfolio in 2013."  The 25% return for that portfolio was good, and the performance of the sector as a whole was stellar.

As in 2013, we enter 2015 with an abundance of clean energy stocks at attractive valuations.  Even though the year will not be without risk, I find myself optimistic for clean energy stocks.

Low oil prices are likely to be an economic stimulus as long as they last, and could continue to reduce interest in clean energy.  If the oil price remains low, this will be a drag on transportation related clean energy stocks (New Flyer, MiX Telematics, Accell Group, and FutureFuel Corp (NYSE:FF) in the 2015 list), but an oil price recovery could produce a strong tailwind.  Other clean energy stocks also seem to be strongly influenced by oil prices, even though there is little or no economic connection between them.  If we have not yet seen the lows for oil prices, I expect we will see them soon.  This should help both my picks and clean energy stocks in general.

Even with today's attractive valuations, a broad market decline or continued low oil prices could block a rebound.  But low clean energy stock prices today mean that the stage is set for the type of rebound we saw in 2013.  Even if that rebound does not materialize, the conservative nature of this portfolio makes another down year very unlikely.


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.

January 03, 2015

Electic Vehicle Subsidies May Clear A Lane In Chinese Traffic Jam

Bottom line: Traditional car makers will suffer from weak sales growth and plunging margins in China in 2015 and into 2016, while EV makers will start the new year slow but could see improvement by the end of 2015.

A flurry of headlines this week are sending ominous signals for the car industry in the year ahead, with both traditional and new energy vehicle makers likely to face an uphill road as China’s economy slows. The problem could be compounded as big new capacity comes online from many major automakers that have invested billions of dollars on expansion over the last 3 years. Other headwinds could come as major cities take steps to ease traffic congestion, with the southern boomtown of Shenzhen becoming the latest to implement a new program to control the number of cars on the road.

Things were already looking tough for the new energy vehicle industry, following recent reports of slower-than-expected sales for electric vehicles (EVs) from domestic leader BYD (HKEx: 1211; Shenzhen: 002594; OTC:BYDDF) and US high-flyer Tesla (Nasdaq: TSLA). (previous post) Most of the sector’s problems owe to wariness among Chinese consumers, who worry about the lack of infrastructure to support the new energy vehicle industry.

Sensing the lack of progress, Beijing is now signaling that government incentives for people who buy so-called “green” vehicles will be extended to 2020. (English article) The incentives were originally set to expire at the end of 2015, so this latest move could reassure some people who are still waiting to see whether infrastructure will improve. Such improvement is likely to come around the middle of next year, when many recent infrastructure initiatives start come on stream, helping sales of these new-technology vehicles to gain some momentum by the end of the year.

But improvement for EVs won’t come as much consolation to makers of traditional cars, which are probably looking at a much longer downturn that will put a chill on sales for 2015 and into 2016. In the latest signal of that accelerating slowdown, Toyota (Tokyo: 7203) has just said that it’s likely to miss its target of selling more than 1.1 million cars in China this year. (English article)

Toyota cited a faster-than-expected acceleration in the slowdown for China’s auto market for its latest forecast, and said growth next year will also be sluggish. China’s car market zoomed in the years after the global economic crisis on government buying incentives as part of a broader economic stimulus package. But it slowed sharply this year as China’s broader economy undergoes a major adjustment, and forecasters are now predicting relatively anemic sales gains in the 5-10 percent range for next year.

In another sign of headwinds the industry is facing, another media report is detailing complaints that many car dealers are making about aggressive sales targets set for them by the big automakers. (English article) The bottom line is that many dealers have ordered more cars than they can sell in order to please the car manufacturers, and as a result now have large inventories of unsold vehicles in their showrooms. That means they’re likely to sharply slow their new orders in 2015 as they sell off existing inventory, putting a further damper on car shipments from manufacturers.

As all these storm clouds build, another report is detailing one more of the industry’s problems in the form of looming overcapacity. That particular report says Korean automaker Hyundai (Seoul: 005380) is planning a major expansion of its Chinese capacity with plans for 2 new factories. (English article) Hyundai is the latest company joining a trend that has seen most of the world’s top car makers announce multibillion-dollar expansions of their China operations over the last 3 years.

Just how bad the automakers will suffer next year won’t become clear until the spring, as business returns to more normal levels after the Chinese New Year period. But I do expect that profit margins and sales growth will drop sharply for most major traditional car makers. New energy car makers will also suffer in the first half of they year, though their prospects could pick up towards the end of 2015.

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.

January 01, 2015

Ten Clean Energy Stocks For 2015

Tom Konrad CFA

2015 marks my seventh annual list of ten clean energy stocks.  An equal weighted portfolio of the ten stocks in each year's list has outperformed my industry benchmark every year except 2013.  2014 was no exception, but it was a bittersweet victory in that the model portfolio was slightly down while the benchmark lost considerably more in a very challenging year for clean energy stocks.

I will publish a wrap-up article for the 2014 list in the next couple days, but I wanted to get the 2015 list out on New Year's day. 

Again this year, I will be providing a high and low target for each stock.  These are the range within which I expect the stocks to end the year.  In 2014, three of the picks violated the downside targets, and none violated the upside targets.  I've also included annual dividends and yield, and Beta, a measure of market risk for US stocks.  Low Beta stocks generally perform better than high Beta stocks in market downturns; the market average Beta is 1.

Finally, I include a discussion of insider sentiment: company insiders buying or selling the stock.  Since company insiders usually receive stock as part of their compensation, insider sales are generally more common than insider purchases.  Hence insider buying is almost always a good sign, and I consider it particularly important in the small capitalization stocks I favor.  These stocks are more likely to be mispriced than larger, more widely followed stocks for which there is much more information available to investors.  Company insiders are the ones most likely to see such mispricing.  Since insider trading information is much easier to find for US stocks than foreign stocks, I include links to my sources of information for insider trading.

Income Stocks

1. Hannon Armstrong Sustainable Infrastructure (NYSE:HASI).
Current Price: $14.23.  Annual Dividend: $1.04 (7.3%).  Beta: 0.81.  Low Target: $13.50.  High Target: $17. 
Insider Sentiment: Mildly Positive. One insider is selling but three are buying; sale was an automatic sale which is unlikely to be a response to market conditions.
Why it's green: All financed projects reduce greenhouse gas emissions.

Hannon Armstrong is a Real Estate Investment Trust and investment bank specializing in financing sustainable infrastructure.  I consider it a peer of the yieldcos (companies that invest in clean energy infrastructure and use the cash flows to pay a high dividend yield to shareholders, but HASI trades at a substantial discount to most yieldcos because other investors seem to compare it more closely to mortgage REITs.  However, Hannon Armstrong's investments are very different from those of other mortgage REITs.

In 2014, management delivered on it promise to increase the dividend by 12-15%, something they expect to do again in 2014.  In 2014, the stock increased only 3.2% for a 9.9% total return for the year.  With the dividend yield now even higher than it was a year ago and more dividend increases likely, I expect even better results in 2015.

2. General Cable Corp. (NYSE:BGC)
Current Price: $14.90.  Annual Dividend: $0.72 (4.8%).  Beta: 1.54.  Low Target: $10.  High Target: $30. 
Insider Sentiment: Mildly Positive. No trades in last 3 months, but insiders are not selling incentive awards. One officer was buying at much higher prices ($21+) in August.
Why it's Green: The geographically dispersed nature of renewable energy resources means they require more wire/connections. Improving the interconnection of our grid also allows utilities to use existing generation more efficiently.

General Cable Corp. is a leading international manufacturer for electrical and fiber optic cable.  In 2014, the company disappointed investors because of weak demand for electricity infrastructure, especially in Europe.  The company is undertaking a restructuring to focus on its core markets in the Americas and Europe.  The company is also searching for a new CEO and expanding its board to include more members with operational experience. 

With the company trading near book value with healthy cash per share and in the process of selling its Asia Pacific operations, only a reduction in uncertainty should be needed to bring investors back to the stock.

3. Capstone Infrastructure Corp (TSX:CSE. OTC:MCQPF).
Current Price: C$3.20. 
Annual Dividend C$0.30 (9.4%).  Low Target: C$3.  High Target: C$5.  
Insider Sentiment:  Strongly Positive; 200,150 shares bought by 8 insiders over 3 months. Only sale was of preferred stock by an insider also buying common.
Why it's green: Capstone's energy division sells electricity and heat from gas cogeneration, wind, solar, and hydropower.  I consider its utilities climate-neutral.

Capstone was included in the 2014 list because I expected the worst possible result in its negotiations with the Ontario Power Authority over the future of its Cardinal gas cogeneration plant had already been priced in. That thesis initially paid off, with the stock rising significantly during the first half of the year.  Unfortunately, Britain's water regulator OfWat issued a final determination for rates at its Bristol Water subsidiary which fell considerably short of what the utility had proposed and vetted with consultants.  Bristol Water is considering appealing the ruling, but will operate under the determination beginning April 1st until at least August 2015, when the final appeal (if it takes place) will be resolved.

A previous appeal by Bristol water in 2010 resulted in a "significantly improved" business plan from the utility's perspective.

Even without an appeal, Capstone's management is confident that they can maintain the current C$0.075 quarterly dividend and increase funds from operations enough to bring that dividend back into line with its 80% target payout ratio by 2017.  I expect the stock to appreciate when investors regain confidence that the dividend and very attractive 9.4% current annual yield is safe.  Company insiders seem to share my confidence, with eight of them buying over half a million dollars worth of stock in the week since December 23rd, after a conference call discussing the OfWat ruling and management's outlook for 2015.

4. TransAlta Renewables Inc. (TSX:RNW, OTC:TRSWF)
Current Price: C$11.48.  Annual Dividend: C$0.77 (6.7%).   Low Target: C$10.  High Target: C$15. 
Insider Sentiment: Positive. One recent purchase, no selling.
Why it's green: All financed projects reduce greenhouse gas emissions.

TransAlta Renewables is the yieldco created by TransAlta Corporation (NYSE:TAC),Canada's largest Independent Power Producer with facilities in the Canada, the US, and Australia.  TAC is the sponsor majority owner of TransAlta Renewables and has stated that it intends to retain a majority stake because the dividend cash flows help it maintain its credit rating.

I believe that TransAlta Renewables trades at a discount to most other yieldcos because it is not listed in the US, and because it has not provided clear guidance regarding future dividend growth through the drop-down of additional renewable facilities.

I do not consider the lack of guidance a serious problem because the market seems to be overvaluing dividend growth compared to the current dividend.  Since yieldcos return most of their cash to shareholders, they can only increase their dividends by issuing stock or raising debt to buy new facilities.  While many yieldcos have a "Right of First Offer" (ROFO) on the renewable facilities developed/owned by their sponsor companies, these ROFOs do not confer the right to buy these facilities at below market prices.  This competitive market means that no yieldco will be able to acquire new renewable facilities at prices substantially below the others, and so their cash flow and dividend per invested dollar will be capped.  Hence, the current 10-15% annual growth in dividends that investors expect from yieldcos can continue only as long as investors are willing to provide yieldcos with cheap capital by accepting the low 3-4% dividends currently on offer from many yieldcos.  When the music stops, all yieldcos will be revalued based on more reasonable future dividend growth.  This should have little effect on today's high yield yieldcos (such as TransAlta, Capstone, and Hannon Armstrong) but could cause the stock prices of yieldcos with high expected dividend growth (NYLD, NEP, and TERP, for instance) to fall substantially.

5. New Flyer Industries (TSX:NFI, OTC:NFYEF).
Current Price:
C$13.48.  Annual Dividend: C$0.585 (4.3%)  Low Target: C$10.  High Target: C$20. 
Insider Sentiment:  Positive.  81,000 shares bought by a 10% owner and no selling over last 3 months.
Why it's green: Buses produce far fewer emissions, require less parking and road space, and have fewer accidents per person-mile than cars.

Leading North American bus manufacturer New Flyer took advantage of the industry downturn over the last few years to consolidate its lead in the North American bus market as well as expand its product offerings, especially in the fragmented parts and service market.  Aging bus fleets are leading to a market revival, and New Flyer is in an excellent position to benefit from this rebound.  New Flyer was one of the strongest performers in the 2014 list, but improving margins and the possibility of expanded production could drive even larger gains in 2015.

6. Accell Group (Amsterdam:ACCEL, OTC:ACGPF).
Current Price: €13.60. 
Annual Dividend: Varies: at least 40% of net profits. €0.55 in 2014 (4.0%).  Low Target: 12.  High Target: €20.
Insider Sentiment:  Mixed buying (7000 shares) and selling (10,000 shares) over 3 months.
Why it's green: Bikes and e-bikes are among the greenest forms of transportation. 

International bicycle manufacturer Accell remains in the portfolio for the third year in a row.  Over the last couple years,  the stock has appreciated slightly and paid €1.30 worth of dividends, while the business has improved substantially due to the acquisition of additional brands (Such as Raleigh and Currie) and distributors.  Business rationalization and increasing adoption of e-Bikes are also driving sales growth.  I expect the strength of Accell's business to drive some price appreciation and another healthy dividend in 2015.

Value Stocks

7. Future Fuel Corp. (NYSE:FF)
Current Price: $13.02.  Annual Dividend: C$0.24 (1.8%).   Beta 0.36.  Low Target: $10.  High Target: $20. 
Insider Sentiment: Mildly positive.  No trades in last 3 months. Previous buying in last year above current price ($14-$16), selling at much higher price ($20+)
Why it's green: Biodiesel has the lowest environmental impact per mile driven (roughly 1/3 of that of gasoline) of any conventional biofuel.

FutureFuel is a combined specialty chemicals and biodiesel producer which has been suffering from the expiration of the blender's tax credit for biodiesel and the uncertainty surrounding the EPA's decision to delay the release of cellusoic biofuel targets for 2014.  In November, the agency announced that it would not finalize the requirements until next year, when it is expected to announce the targets for 2014, 2015, and 2016 together.

FutureFuel's specialty chemicals business had also been suffering from some problems with ramp-up of a new product over the summer, but those problems seem to have been largely dealt with.  With the biodiesel market in flux, FutureFuel cut its dividend from and annual $0.48 to $0.24.  This will free up cash and could potentially finance acquisitions of weaker biodiesel producers if the industry downturn continues.

Over the last few years, the prices for biofuel feedstocks have been set by what biofuel producers can profitably pay for them.  This means that, even without government support, biofuel and feedstock prices will reach eventually an equilibrium where the most efficient producers can be profitable.  I expect FutureFuel to be one of those, and the current uncertainty is providing an attractive buying opportunity.

I wrote a more in depth article on FutureFuel in October.

8. Power REIT (NYSE:PW).
Current Price: $8.35
Annual Dividend: $0.  Beta: 0.52.  Low Target: $5.  High Target: $20.
Insider Sentiment: Mildly poitive. One small buy over last 3 months, no sales.
Why it's green: Owns land under solar farms and rail lines (efficient transportation.)

The ongoing civil action between rail and solar investment trust Power REIT and its lessee Norfolk Southern Corporation (NYSE:NSC) and sub-lessee Wheeling & Lake Erie Railway (WLE) looks likely to go to trial in early 2015.  The case grew out of Power REIT's attempt to foreclose on the lease due to WLE's refusal to pay a legal bill which Power REIT believes it is entitled to under a clause of the lease which states that the lessee is responsible for any of Power REIT's expenses which are "necessary or desirable" for maintaining its interest in the track.  NSC and WLE commenced the action to prevent the foreclosure on a lease which favors them greatly.

The two sides are very far apart in their interpretations of the lease.  Power REIT's interpretation seems is mostly supported by the lease itself, which the lessees say should be ignored in favor of how the parties have actually behaved under the lease over the last 50 years.  I find it impossible to predict how the judge will rule, but the downside for Power REIT is limited to a return to the status quo, while the upside could easily double the value of Power REIT's shares.  Even Power REIT's legal expanses could be reimbursed under the very broad "necessary or desirable" language of the lease discussed above.

At the current price, I see significant upside and limited downside potential from the civil action, and I am optimistic that potential will be realized in 2015.

9. Ameresco, Inc. (NASD:AMRC).
Current Price: $7.00
Annual Dividend: $0.  Beta: 1.36.  Low Target: $6.  High Target: $16. 
Insider SentimentMildly positive.  One director bought 2,500 shares with no selling over 3 months.
Why it's green: Provides energy efficiency and renewable energy solutions with a service model.

Energy service contractor Ameresco has been suffering for the last two years because its clients, mostly government entities, have been slow to finalize contracts.  Over the last two quarters, however, management has indicated that they see signs of improvement in certain markets.  They have also worked to diversify Ameresco's business into renewable energy development.

Despite these positive signs, the market has failed to reward the stock, which is now trading near book value.  Another quarter or two of improving market conditions should be enough to produce a strong price rebound.

Growth Stock

10. MiX Telematics Limited (NASD:MIXT).
Current Price: $
6.50Annual Dividend: $0.  Beta:  0.78.  Low Target: $5.  High Target: $20.
Insider Sentiment:  Neutral.  No trades in last 3 months. Previous trades mixed, but at higher prices.
Why it's green: MiX's fleet management solutions reduce fuel use and accidents.

MiX provides vehicle and fleet management solutions customers in 112 countries. The company's customers benefit from increased safety, efficiency and security.  Based in South Africa, Mix's stock price has suffered from the general decline of emerging market stocks over the last few months.  The falling oil price may also have hurt the stock, since many of its fleet management customers are in the oil and gas industry.

I don't expect the oil price to stay this low for all of 2015, and MiX's emerging market home belies the global nature of its revenues.  Considering that MiX delivered 15% subscriber growth in 2014 but the stock fell by almost half from what I considered an already undervalued level, this stock is poised for a massive rebound with any shift of market sentiment.

Model Portfolio Characteristics
Average Yield: Overall: 3.8%

Income stocks: 6.1%
Listing country
US: 50%

Dual listed in US and South Africa: 10%

Canada: 30%

Euro Zone: 10%
Location of business: Mostly US: 40%

US & Canada: 10%

Canada: 10%

Worldwide: 40%




Basic Materials

Real Estate




As I have in previous years, I will compare the performance of a model equal-weighted portfolio of these ten stocks against the Powershares Wilderhill Clean Energy ETF (PBW), which is the most widely-held clean energy ETF.  For a broad market benchmark, I will continue to use the Russell 2000 index ETF (IWM).

Given the heavy income focus of my picks, I am adding income-oriented benchmarks for the six income picks.  The first is a fossil free income oriented portfolio I co-manage with Green Alpha Advisors of Boulder Colorado called the Green Alpha Global Enhanced Equity Income Portfolio (GAGEEIP.)  This strategy combines high income green stocks with option selling to provide a high level of current income with a secondary objective of capital preservation.  We now have a full year's track record managing the strategy: The option strategy complicates return calculations, so I cannot give a precise return yet, but my back of the envelope calculation shows that it has returned approximately 5% after management fees over the past year, most of that in the form of income.

With this record, we will be looking for a mutual company to launch the portfolio as a fund in 2015.  If we succeed, it will be the first green (in fact, fossil fuel free) mutual fund that produces a significant level of current income, and will provide a natural complement to Green Alpha's fossil fuel free growth fund, the Shelton Green Alpha Next Economy fund (NEXTX.)

GAGEEIP is a strange benchmark in that it is an active fund and I am deeply involved in its management, but it does differ from the model income portfolio in its use of options and exclusion of fossil fuels.  While it includes five of the six income picks, it excludes Capstone Infrastructure, because of Capstone's natural gas fired cogeneration facility, discussed above.

For a more conventional income benchmark, I will also include the S&P Global 1200 Utilities Index ETF (JXI), which is also a benchmark for GAGEEIP.


Once again, I have weighted the list heavily towards income and value companies.  These tend to be less risky than the growth companies which people generally think of when considering investment in clean energy.  This choice will likely serve the model portfolio well if we have another challenging year for clean energy, as we did in 2008 and 2010 to 2012.  If we have another blow-out year like we did in 2007, 2009, and 2013, the model portfolio will likely again underperform its industry benchmark. 

Rising oil prices and depressed stock prices could easily bring the sun back for clean energy stocks in 2015, but I much prefer to be prepared for a storm.

Disclosure: Long HASI, CSE/MCQPF, ACCEL/ACGPF, NFI/NFYEF, AMRC, MIXT, PW, FF, BGC. RNW/TRSWF.  Short NYLD.  Tom is the co-manager of the GAGEEIP strategy.

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.

December 31, 2014

Energy Investing: What To Expect In 2015

By Jeff Siegel

Tonight, I will welcome in the New Year with family.

We'll feast on cured meats, pickled vegetables, and lamb neck stew.

We'll sip an old fashioned or two with apple and sage, share some laughs, and maybe even shed a few tears as we remember those we lost in 2014.

When the ball drops, we'll hug, kiss, and cheer on all that waits to be discovered in 2015.

There will be good and there will be bad, but I suppose it's the uncertainty of it all that makes life worth living.

Don't Fear the Uncertain

It was Joseph Campbell who said, “The cave you fear to enter holds the treasure you seek.”

I've always loved that quote.

Whenever I need a little push before venturing off on a new path, I remind myself of that quote. And I wanted to share it with you today because as we head in to 2015, it seems as if fear is weighing on our collective shoulders more than ever.

This is a shame, since we really don't know how 2015 will unfold. And until something horrible actually happens, it's really nothing more than an illusion.

Of course, it's easy to say something like this, but it doesn't change the fact that there are a lot of horrible things that could happen this year.

War, terrorism, plagues, environmental catastrophes, starvation — you name it. All of these threats are very real and cannot be ignored.

But we can't live our lives fearful of the outcome. Because if we do, we can't live. And if we can't live, we can't prosper.

A Profitable Year

In 2015, bad things will happen.

I suspect the tension between Russia and the U.S. will increase. The death toll from all these wars in the Middle East will rise. Rights will be trampled, waters will be poisoned, and taxpayers will continue to be pilfered like newlyweds at a timeshare presentation in Vegas.

But there are also a lot of great things that'll happen this year — especially for energy investors.

With the gutting of oil prices, the laggards in the oil and gas production space are going to go belly-up, and the small fish are going to get gobbled up by the sharks. This will shake out the losers and make it much easier for us to identify the winners over the long term.

New technological developments are going to push solar and electric car batteries to places we've never dreamed.

Solar installation costs will continue to fall dramatically, making it even more affordable for consumers — and more lucrative for solar companies like SolarCity (NASDAQ: SCTY), Vivint Solar (NYSE: VSLR), and SunEdison (NYSE: SUNE).

Cost reductions for electric car batteries will continue, while the quality of those batteries will increase. In fact, Tesla (NASDAQ: TSLA) just recently announced a new upgrade for its Roadster that will push its all-electric range to 400 miles.

Folks, three years ago, such a thing would've been little more than a pipe dream. Yet it's available right now.

Internationally, nuclear power will continue to be developed and expanded, particularly in China, India, and the Middle East. It's going to be a great year for uranium!

So enjoy your last remaining hours of 2014. Drink some champagne, eat good food, and spend time with your family and friends. But most importantly, get ready...

Because 2015 is going to be busy, loud, and very, very profitable.

To a new way of life and a new generation of wealth...


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

December 30, 2014

Tesla Tries To Jump-Start China Sales

Doug Young

Tesla Logo
Tesla launches
trade-in program.

Bottom line: Tesla and other EV makers is likely to face an uphill road in China for the next year, but prospects could start to improve in mid 2015 as new initiatives gain momentum.

Reports on a new trade-in promotion from Tesla (Nasdaq: TSLA) are recharging talk earlier this month that the high-flying electric vehicle (EV) maker isn’t doing as well as hoped in China, where sales have gotten off to a slow start. This kind of a sluggish start isn’t too unexpected, since EVs are rare in China and face many obstacles despite a strong push by Beijing to boost the sector. Tesla should be commended for its numerous efforts to promote EV development in China through a wide range of initiatives, but is also largely to blame for the building disappointment after it built up huge expectations for itself in the market.

Tesla drove into China with huge fanfare back in April, when charismatic chief Elon Musk came to the country to deliver his company’s first car in a widely covered event that coincided with the nation’s largest annual auto show. (previous post) After that Tesla announced a series of initiatives to promote its EVs, mostly aimed at building the necessary infrastructure to make car ownership more attractive.

But then the glitter started to peel off of Tesla’s slick veneer when media reported earlier this month that its China chief Veronica Wu had left just 9 months after joining the company. (previous post) That led to widespread speculation that Tesla was facing more headwinds in a market where it had previously indicated it could sell as many as 8,000 vehicles per year, second only to the US.

Now in the latest signal of the company’s uphill struggle, media are reporting Tesla has rolled out a new program allowing car owners to trade in their old vehicles towards the purchase of one of Tesla’s Model S sedans. (English article) Tesla announced the program in a statement, and said buyers in Beijing, Hangzhou and Shanghai can use the value of their old cars to help pay for a new Model S, which is currently priced at 648,000 yuan in China. ($104,000).

The reports say Tesla has exported about 3,500 cars to China since launching sales there in April, but its registered car park has only added about 2,000 vehicles during that period. That would imply that the company’s actual sales and pending orders awaiting delivery are probably in the 2,500-3,000 vehicle range — far less than the 5,000 vehicles per year that it hopes to sell in the market. Of course the company hasn’t been in China for a full year yet; but its current sales would still only translate to about 3,700 units sold on an annualized basis.

Of course, Tesla isn’t the only EV maker that’s had a tough time in China. The other notable case is domestic industry cheerleader BYD (HKEx: 1211; Shenzhen: 002594; OTC:BYDDF), whose shares went on a roller coaster ride earlier this month when a report came out spotlighting many of the company’s troubles.

BYD’s shares tumbled nearly 30 percent in a single day after the report came out, prompting the company issue a statement refuting some of the claims, including one that billionaire backer Warren Buffett was preparing to sell down his 10 percent stake. (company announcement) Since then the shares have bounced back somewhat, but they’re still at about half their 2014 high hit back in September.

All of this shows that both domestic and international EV makers will continue to face an uphill road in China, which isn’t too surprising due to the high degree of skepticism towards the sector by local car buyers. I personally think we could see a subtle shift around the middle of next year, as many of the new infrastructure initiatives come on stream and local governments boost their buying to support Beijing’s policy objectives. When that happens, look for prospects of companies like Tesla and BYD to finally start improving, though the shift could come slowly.

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.

December 29, 2014

Cheap Oil: Nemesis Or Sideshow?

by Garvin Jabusch

Next economics posits that for the global economy and earth's tolerances/carrying capacities to run in a mutually tolerable equilibrium, we must continue to make rapid advances in economic efficiencies in all sectors. For 7.3 billion of us (and counting) to thrive on finite resources and avoid the worst effects of climate change, we have to drive more and more economic output from less and less input. Fortunately, energy is one of the areas where we can quickly make huge strides in this respect -- but not with fossil fuels in the mix. On the contrary, in fact. Efficiency gains across the global economy in the last few years have been such that, according to a Bloomberg piece titled "America is Shaking Off Its Addiction To Oil," "the U.S. is consuming less oil per dollar of gross domestic product in more than 40 years." In part, it is this slowdown in oil demand growth that's causing downward oil price volatility. The long and slow shift away from dependence on some fossil fuels, in other words, is finally starting to cause ripples.

Short Term Effects of Less Expensive Oil

Oil's recent narrative has become familiar: worldwide supply-and-demand economics (mostly declining demand, according to the World Economic Forum), expansion of both Libyan field and U.S. shale production, and as always, speculation. All well and good, but fundamentally what does it have to do with the prices of renewable energy stocks? At present, very little.

Investors are understandably concerned with solar, wind and other renewable energy stocks following the same pattern of oil trades in the market. The perception that all energy production is similar and can be treated and traded as a monolith, however, is a false one. As general awareness of the differences between types of energy advances, we expect this trend to slow, and then reverse itself. Solar, wind and other renewables will not follow the same trading patterns as oil, because more people will soon know better.

Many experts and other pundits have been weighing in to make this point.  Lyndon Rive, CEO of SolarCity Corp. (SCTY) in a CNBC interview said, "the market doesn't understand the dynamics; this is a great opportunity to understand the issue and truly see if this is a big problem or not a problem and then capitalize on the opportunity. Oil has no effect or almost no effect on the cost of electricity in the U.S. In the U.S., almost no oil is used to create electricity, so even if oil went down to fifty [$50/barrel], it will have almost zero effect on the cost of electricity but the opposite is true too. If oil went up to a hundred and fifty [$150/barrel], it will have almost zero effect on the cost of electricity."

Rive's comments fit with Green Alpha's belief that investors are currently presented with a rare moment of market inefficiency, as broad markets struggle to clarify the role of a disruptive technology. In the near term, renewable energy investors should have little to fear from falling oil prices as there isn't much of an underlying reason why the two distinct assets classes should be valued in tandem. On the contrary, since the price of oil should not be affecting the price of renewables, one could use this moment of misunderstanding as an opportunity to initiate or add to a select solar and wind portfolio.

The first reason we believe this is that solar provides a competitive, economic advantage over diesel, coal or natural gas, because fossil-fuel prices, even if low at this moment, have proven to be quite volatile over time.  A recent New Yorker piece on oil prices points out that "…oil has historically been more volatile than most other commodities; a 2007 study found that in the U.S. it was more volatile than ninety-five per cent of other products." The same can't be said of wind or sunlight -- once the capital expenditure for the systems to capture them and convert them to usable energy has been made, the price for fuel is zero. Indefinitely. 

Again, Rive: "Fluctuations in oil prices have little impact on solar or many other renewable energy sources. This is partly why the economic proposition of solar is so compelling, unique and valuable…For example, up to 50% of the cost of a fossil plant is the expense of the fuel over the life of the plant, while sunlight is essentially free."

A recent energy cost analysis by investment firm Lazard validates the idea that oil pricing logically should be having a diminutive impact on renewables pricing, and goes on to calculate that the cost of energy from new utility-scale solar and wind power plants is increasingly competitive with more electricity-relevant comparative conventional fuels like coal, natural gas and nuclear, even without subsidies in some markets.


Image: Lazard, Levelized Cost of Energy Analysis -- Version 8.0, 2014

According to Lazard, the reason for this newfound economic advantage is that the long-term costs of utility-scale solar has fallen 20% just in the past year and 78% in the last five years. Declining almost as rapidly, wind energy costs are down 60% over the last five years.

With the application of Gordon Moore's famous law now visibly applicable to solar photovoltaic (PV) technology, and showing no signs of slowing anytime soon, it's plainly manifest that technology-based and commodities-based means of deriving energy do not belong to the same class of investable assets. Solar and oil, economically, scarcely share the same world.

In the Longer Run

The portfolio manager Jeremy Grantham has titled his latest quarterly letter (Q3 2014) "The Beginning of the End of the Fossil Fuel Revolution (From Golden Goose to Cooked Goose)." He writes, "As a sign of the immediacy of this problem, we have never spent more money developing new oil supplies than we did last year (nearly $700 billion) nor, despite U.S. fracking, found less -- replacing in the last 12 months only 4½ months' worth of current production! Clearly, the writing is on the wall. It is now up to our leadership and to us as individuals to read it and act accordingly." Grantham refers to U.S. fracking as "the Largest Red Herring in the History of Oil," noting that its economic advantages may be short-lived.

The International Energy Agency (IEA) has recently written that "The sun could be the world's largest source of electricity by 2050." Mostly, it says, because of declining costs, and not so much because it can help battle climate change, although that could be a growth factor as well.

The key point in this analysis is that solar is a technology, and it's past and future cost dynamics will look like technology -- becoming ever cheaper. Fossil fuels are commodities -- finite and expensive to locate, extract, refine and ship -- and fossil fuels have had and will have cost dynamics to match: very volatile. In the long run, 10-20 years from now, as our economy and infrastructure can make more and better use of renewables, the two will compete directly in a way that they do not now, but by then renewables, led by solar, will be so inexpensive that the cost comparison will no longer spark argument but will seem quaint. So different are the commodity and technology means of deriving energy that we at Green Alpha have proposed that they be classified as different sectors altogether.

Ultimately, as the next economy advances and we increasingly transition to using renewables (electricity) to power things that currently rely primarily on liquid BTU (such as transportation and some heating) solar and oil will indeed compete with each other directly. When that time comes, oil will again become cheap, because demand for it will have fallen dramatically as renewables, ever cheaper, command more and more market share. Even then, though, oil won't be economically competitive, because no matter how inexpensive any "cheap" fossil fuel becomes, it will always be more expensive than the free fuels employed by wind and solar. And any power plant converting fossils to electricity will also have far higher operating costs than do most renewables.

As Bloomberg's Michael Liebreich recently said, "The story should not be how falling oil prices will impact the shift to clean energy, it should be how the shift to clean energy is impacting the oil price."

Ultimately, the next economy can only thrive on power that is nearly free, inexhaustible, that does not contribute to systemic risks such as climate change and a toxic atmosphere, and that can be sourced nearly anywhere with a relative minimum of effort. Only solar PV, and to a slightly lesser extent wind, can reach this extraordinary level of economic efficiency. The writing is indeed on the wall, and the days of high market correlation between tech power and fossil power will soon be behind us.

Garvin Jabusch is cofounder and chief investment officer of Green Alpha® Advisors, LLC. He is co-manager of the Shelton Green Alpha Fund (NEXTX), of the Green Alpha Next Economy Index, the Green Alpha Growth & Income Portfolio, and of the Sierra Club Green Alpha Portfolio. He also authors the Sierra Club's green economics blog, "Green Alpha's Next Economy."

December 24, 2014

My Christmas Present To Readers: A Quick Look At Your Favorite Stocks

by Tom Konrad, CFA

Several readers have been leaving comments on my articles about the stocks they think I should include in my upcoming "Ten Clean Energy Stocks for 2015" list.  So far, I have not found one that gets me interested, but I have gotten useful ideas from readers in the past.  So now's your chance:

Leave a comment here about your favorite clean energy stock, and why you think it's a great pick for 2015.  I'll publish a compendium of your suggestions, along with my reactions to them in January.  But I'll try to look at them all before I finalize the 2015 list on December 31st, just so you have a chance of what you really want: me writing about your favorite stock every month for the next year.

Happy Holidays!


PS: Please limit your requests to one US-listed stock each. I'm not Santa Claus, and can only climb down so many chimneys in a night.

December 21, 2014

Ten Clean Energy Stocks For 2014: Out With The Old

Tom Konrad CFA

Plummeting oil prices, global economic weakness, and the Republicans' win in the US midterms have delivered a triple-whammy to clean energy stocks over the last few months.  Many of the stock declines are justified more by headlines than fundamentals.  My 10 Clean Energy Stocks for 2014 model portfolio has suffered, especially the riskier growth stocks.  The strong dollar has been a further drag on the six foreign stocks.

Since the last update at the start of October, the model portfolio is down 4.6%, for a loss since its December 27th, 2013 inception of 3.8%. In local currency terms, it would have returned a slight gain of 0.5% since inception.  For comparison, the most widely held clean energy ETF, PBW, lost 12% since the start of November, and is down 14.9% since the portfolio inception. My broad market benchmark, IWM, is up 2% and 4.2%, respectively.  Individual stock performance is shown in the chart below.

10 for 14 Dec 19 2014.png

Because I believe the declines of most clean energy stocks are not justified by fundamentals, I personally will not be selling any of these stocks at current prices.  That said, many clean energy stocks have declined even more drastically than these and now present better values than some in my 2014 list.  To keep my 2015 model portfolio manageable, I have to drop some to make room.  In this article, I will discuss the four stocks I am considering dropping from next year's model portfolio, and why. 

Individual Stock Notes: Sad To See Them Go

(Current prices as of December 19th, 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.)

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$4.44. YTD Total C$ Return: -3.5%.  YTD Total US$ Return:

While I'm very optimistic that green building company PFB Corp continue the recovery it has staged from its mid-October low, I'm dropping the company from the model portfolio because its low liquidity and Toronto listing makes it difficult for many US investors to buy.  If you already own it, I suggest you keep it.  Although PFB may face headwinds from a slowing housing market, the company benefits from low oil prices, which drive the price of the chemicals used to make the expanded polystyrene in its building products.  If oil prices rebound, that should benefit the Canadian dollar, which should provide a tailwind for US based investors.

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 (suspended after buyout announcement.)
Current Price: C$6.27.  YTD Total C$ Return: 31.4% .  YTD Total US$ Return: 21.3%

On December 19th, a consortium led by Fortistar completed the acquisition of waste heat recovery firm Primary Energy Recycling for US$5.40 per share (approximately C$6.27).  It was partly because I thought such a buyout was likely that I included Primary Energy in this year's list. 

8. Power REIT (NYSE:PW)
12/26/2013 Price:
$8.42.  Low Target: $7.  High Target: $20.  Dividend currently suspended.
Current Price: $8.65 YTD Total US$ Return: 2.7%

The fate of solar and rail real estate investment trust Power REIT still hinges on the outcome of litigation with the lessees of its rail asset.  This case will likely go to trial in the first quarter of 2015.  While I believe both that the facts of the case favor Power REIT, and that, even if the case goes entirely against the company after a lengthy and expensive trial and appeals process, it will not be catastrophic for Power REIT.  The lessee's goal in the case is to maintain the status quo when Power REIT attempted to foreclose. 

Power REIT's CEO tells me that the judge was hard to gauge during the most recent hearing, and I have no reason to change the rough valuation I gave for Power REIT during the last update.  That conservatively gave PW an expected value per share of about $10.75.

I was thinking about dropping Power REIT from the 2015 list mostly because of illiquidity, which causes large swings such as the recent decline for very little reason.  Since the last couple months have seen such a decline, I'll probably keep it in the 2015 list unless a Santa Claus rally brings it closer to my valuation.

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$0.33   YTD Total C$ Return: 17.9% .  YTD Total US$ Return: 8.8%.

Renewable energy developer and operator Alterra Power has delivered well in 2014, despite the weak Canadian dollar.  Although I think it is still considerably undervalued, I am considering dropping it from the list simply because its advance and other stocks' declines make it relatively less attractive, but I'll keep it in my own portfolio because I think it has farther to run.


With the recent sharp declines by many big name clean energy stocks, now is a great time for people with money to invest in the sector.  Although it's always nice to see bargains, it can be a bit painful to sell other stocks which may have also fallen to invest in the new opportunities.  Fortunately, followers of my annual model portfolio will have at least some cash from the buyout of Primary Energy to deploy next year.

As for the other three stocks I may drop from the 2015 list, I plan to hold them and will probably write about them again, even if I'm no longer covering them in my monthly updates.


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.

December 20, 2014

Commerce Department Finalizes Tariffs on Chinese and Taiwanese Solar Panels

Jennifer Runyon

Yesterday the U.S. Department of Commerce announced its final findings in the 3-year long trade war between the U.S. and China. Additional tariffs will be imposed on modules from China and Taiwan. Although this is good news for SolarWorld and other American solar PV manufacturers, many in the U.S. solar industry are not celebrating and the decision is expected to further divide an already shaken solar industry.

Specifically, Commerce determined that imports of certain crystalline silicon PV products from China have been sold in the U.S. at dumping margins ranging from 26.71 percent to 165.04 percent and that imports of certain crystalline silicon PV products from Taiwan have been sold in the U.S. at dumping margins ranging from 11.45 percent to 27.55 percent.  Finally, Commerce determined that imports of certain crystalline silicon PV products from China have received countervailable subsidies ranging from 27.64 percent to 49.79 percent.  Named in the suit, Trina Solar (TSL) and Renesola (SOL)/Jinko (JKS) received final dumping margins of 26.71 percent and 78.42 percent, respectively. Commerce also found that 43 other exporters qualified for a separate rate of 52.13 percent (PDF of fact sheet here lists all 43 exporters beginning on page 7.)

The China-wide entity received a whopping final dumping margin of 165.04 percent — this is for companies that did not cooperate with the investigation.

In the Taiwan AD (anti-dumping) investigation, mandatory respondents Gintech and Motech received final dumping margins of 27.55 percent and 11.45 percent, respectively. All other producers/exporters in Taiwan received a final dumping margin of 19.50 percent.

In the CVD (countervailing duty) investigation, Commerce calculated a final subsidy rate of 49.79 percent for mandatory respondent Trina Solar. Mandatory respondent Suntech and five of its affiliates (see final subsidy rates chart at the bottom of this article) received a final subsidy rate of 27.64 percent. All other producers/exporters in China have been assigned a final subsidy rate of 38.72 percent.

Next, U.S. Department of Commerce will investigate if the dumping injured U.S. manufacturing. If injury is found to have occurred, the tariffs will stay.  If no injury is determined, the investigation will be terminated. That decision will be made on or about January 29, 2015. However, U.S. Customs and Border Protection will immediately begin to collect cash deposits equal to the applicable weighted-average dumping margins. If injury is not found, the money collected will be refunded.

Industry Divided

The solar petitioner in the case, SolarWorld (SRWRF), applauded the decision. The company said that by comprehensively addressing the unfair trade practices of China and Taiwan, Commerce has paved the way for expansion of solar manufacturing in U.S. market.  Makesh Dulani, U.S. President of SolarWorld Americas believes the tariffs set the stage for companies to create new jobs and build or expand factories in the U.S. Last month, SolarWorld announced that it was expanding its Oregon factory and adding about 200 jobs.

Rhone Resch, president and CEO of the Solar Energy Industries Association (SEIA), said the ruling is “ill-advised” and feels that it will harm many and benefit few. “We remain steadfast in our opposition because of the adverse impact punitive tariffs will have on the future progress of America’s solar energy industry.  It’s time to end this costly dispute, and we’ll continue to do our part to help find a win-win solution,” he said.

SEIA held a webinar for its members on December 18 at noon EST to discuss the ruling.

SEIA’s non-neutral stance has raised some eyebrows in the industry.  Yesterday, PetersenDean, a privately-held roofing and solar company, called for Resch’s resignation as well as that of the full SEIA board because of its position in the case. According to PetersenDean Roofing & Solar President Erin Clark, the trade association’s support for China and Taiwan in these matters is a clear conflict with its own stated purpose to keep America competitive.

“SEIA has become nothing more than a tool used by Chinese companies to try and bankrupt and destroy American solar manufacturing. Thanks to some of these actions, thousands of American workers have lost their jobs in the past three years due to the closure of solar manufacturing plants in America. All of this at a time when our domestic economy and employment are struggling to recover from the devastating recession,” said Clark.

The Coalition for Affordable Solar Energy (CASE) thinks the decision will raise prices and kill jobs and believes the decision is in direct opposition to the pledges recently made by the U.S. and China to work together to curb global warming. “Hundreds of megawatts of solar projects remain unrealized due to deleterious solar trade barriers in the U.S., China, Europe and globally. Eliminating taxes in cleantech trade represents the lowest-hanging fruit in the global fight against climate change,” said Jigar Shah, President of CASM.

All of this contention comes at the heels of a recent announcement that the U.S. solar industry is on track to install 41 percent more solar in Q4 2014 than it did in 2013.  In total, the U.S. is expected to install 6.5 gigawatts of solar in 2014, a 36 percent increase over last year.

Jennifer Runyon is chief editor of RenewableEnergyWorld.com and Renewable Energy World magazine, coordinating, writing and/or editing columns, features, news stories and blogs for the publications. She also serves as conference chair of Renewable Energy World Conference and Expo, North America. She holds a Master's Degree in English Education from Boston University and a BA in English from the University of Virginia.

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

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