March 16, 2015

Rentech After Fischer-Tropsch

by Debra Fiakas CFA

A long article appearing in early March 2014 on Biofuels Digest about Emerging Fuels Technology (EFT) gave me pause.  The article has since been removed from the site but it was an interesting primer on Oklahoma-based EFT’s use of the Fischer-Tropsch process to convert carbon-based feedstock to liquid fuel, otherwise called Gas-to-Liquids. While Emerging Fuels Technology has been listed in Crystal Equity Research’s Alternative Chemicals Group of the Beach Boys Index of companies trying to harness energy from the sun through biomas, I must admit the company had not been taken seriously. 

There are reasons for my apathetic view. 

Fischer-Tropsch often referred to as FT for short is a series of chemical reactions to convert carbon monoxide and hydrogen into liquid hydrocarbons.  The reactions are triggered by a catalyst, usually cobalt or iron, and managed under high temperatures in a chamber or reactor.  The idea is quite beguiling: converting biomass or coal or even natural gas, especially stranded natural gas, to something useful like a liquid fuel.  Unfortunately, FT is expensive, requiring significant capital to build the reactor and attendant gasification, water handling, and fuel distribution systems.  Operating costs are not cheap either as all those systems require people to watch over them regular maintenance and repair.  Then there is the cost of replacing the catalyst when it wears out!

However, the Biofuels Digest article suggested EFT had achieved important efficiencies with its catalysts that could reduce the high costs of building and operating a FT-based gas-to-liquids plant.  EFT had managed to forge a partnership with an engineering firm Black & Veatch that specializes in the energy field and has worldwide reach.  Then at the end of 2014, EFT signed a memorandum of understanding with Airbus Group (AIR: Paris), which has made clear its interest in developing alternative aviation fuels.

Some investors might remember one of the most high profile developers of FT, Rentech, Inc. (RTK: Nasdaq).  Rentech exited the field with the 2013 shuttering of a demonstration plant in Colorado and the sale of property near Natchez, Mississippi that was to be the site of Rentech’s first gas-to-liquids production facility.  In winding down its gas-to-liquids development effort, Rentech indicated it would retain and protect its portfolio of patents.  Rentech owns a group of patents on FT-related technologies that purportedly improved upon the basic FT processes developed back in the 1920s.  Rentech also claims an effective, proprietary catalyst and tweaks to both the preliminary gasification and final refinement steps.  Even with all that innovation at its displosal Rentech elected mothball its efforts.   Over the last couple of years Rentech has morphed into a producer of wood pellets and a provider of wood chipping services to industry.  The company also has interests in nitrogen fertilizer production through its ownership in Rentech Nitrogen Partners LP (RNF:  NYSE).

Rentech voluntarily threw in the towel, but Germany-based Choren Industries was forced into bankruptcy as development costs and construction delays burned up capital resources.  After synthesizing the first liquid fuel from wood in a laboratory in 2001, and then building a commercial-scale plant in 2008, Choren stubbed its toe on its first large-scale ‘biomas-to-gas-to-liquids’ facility that was to have had the capacity to process 250 million liters of liquid fuel per year.  Like Rentech, the surviving Choren Industries has a series of international patents to commemorate its multi-stage gasification and fuel synthesizing process that the company still puts to use in protecting its gasification services.

Wood pellets and nitrogen are a long way from gas-to-liquids technologies.  Holders of RTK shares have found themselves short of a play on alternative or sustainable energy.  Unfortunately, for investors there is no investment play in EFT or any of its admirers either.  EFT is a private company that provides very little information to the public about its financial situation.  Its technology development and licensing business model may not require as many trips to the capital markets as an investor might expect from a company with plans to build production facilities.  On a trim operating and investment budget, EFT can remain quietly private for some time.  Assuming of course that EFT does not end up in the weeds like Rentech and Choren.

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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March 14, 2015

EU Likely To Impose Further Sanctions On Chinese Solar Firms

Doug Young

Bottom line: A widening investigation into violations of an anti-dumping solar panel settlement between China and the EU is likely to result in punitive sanctions, dealing a blow to the Chinese panel makers.

What started as some quiet rumblings earlier this week is quickly brewing into a major storm, with word that a landmark settlement between the EU and China a year ago to resolve an anti-dumping dispute over solar panels is quickly unraveling. In this case it’s probably more accurate to say the settlement was between the EU and actual Chinese solar panel makers, rather than an agreement between governments. That’s an important distinction, since Chinese companies are often far more likely to try to undermine such agreements by exploiting loopholes, unlike central governments that are usually a bit more trustworthy.

According to the latest headlines, the European Commission is expanding its probe to include a number of other firms from the 3 originally targeted, as it looks into complaints that Chinese solar panel makers are violating the year-old agreement that was supposed to resolve a dispute over unfair state support. Under the agreement, the Chinese companies agreed to voluntarily raise their prices to levels comparable with their western rivals to offset any advantage they might get from state support via policies like cheap government loans and subsidized land use.

The matter first poked into the headlines earlier this week when media reported that ReneSola (NYSE: SOL), Canadian Solar (Nasdaq: CSIQ) and ET Solar were being probed for potential violations of the agreement.  The reports weren’t more specific, but both ReneSola and Canadian Solar issued statements confirming they were being queried.

Now media are reporting that the European Commission’s widening investigation has seen goods seized in the European warehouses where imported panels are stored. (Chinese article) The reports say the EU has also sent lawyers to the companies’ headquarters in China to conduct inspections. All of this hints that things are developing quickly, and the Chinese panel makers could soon fine themselves formally accused of violating the agreement and subject to punitive tariffs.

The report I read didn’t name any sources for the news, but it appears to be based on interviews with officials from the Chinese solar panel makers who are probably worried about losing access to one of their biggest markets. The report specifically mentions that ReneSola, which sold more than a third of its panels to Europe last year, was saying it would pull out of the settlement agreement.

ReneSola’s intention is a bit strange if it’s true, since such a move would immediately subject the company to threatened punitive tariffs it was trying to avoid. Thus its intention would look a bit like an admission of guilt. I previously said that such violations wouldn’t surprise me at all, since Chinese firms are famous for signing agreements and then immediately looking for loopholes that allow them to undermine their partners.

Rumors that such violations were occurring have been common in industry circles, and a contact explained one scenario that companies are using to circumvent the agreement. Under that scheme, the companies sell their panels to buyers at the prices stated under the agreement. But then they tell the buyers to set up fake service and consulting companies, and rebate money to those customers by paying for bogus services.

Surprisingly, Chinese solar shares weren’t moving very much in the latest trading session in New York, with most up or down by less than 2 percent. But I suspect that’s because this is a breaking story and the latest news has yet to get priced in. At the end of the day I expect the Chinese companies will lose any credibility they had left in the European Commission’s eyes, and the EU will go through with its original plan and impose punitive tariffs similar to what the US has already done.

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.

March 12, 2015

Invest Where Solar Beats $10 Oil

By Jeff Siegel

In Dubai, solar is now cheaper than oil at $10 a barrel.

Yes, you read that correctly.

As reported by the National Bank of Abu Dhabi:

Dubai set a new global benchmark in December 2014: at 5.84 US cents per kW hour, the bid for Dubai Electricity and Water Authority’s 200 MW solar PV plant was cheaper than oil at US$10/barrel and gas at US$5/MMBtu.

You see, while oil in the U.S. is used primarily as a transportation fuel, in the oil-rich Middle East, the shiny black stuff is used to generate electricity. In fact, in Saudi Arabia, oil accounts for more than 65% of all electricity production. In Kuwait, it's as high as 71%, and in Yemen, it's nearly 100%.

Oh, to be a fly on the mud-brick wall when the proverbial poop hits the fan.

Meanwhile, consider this...

In the absence of Saudi Arabia's own domestic oil consumption, the desert kingdom could have generated an extra $43.8 billion in 2013.

With that kind of scratch in play, it's not surprising that the smart money is piling into a burgeoning solar industry in the Middle East.

Grid Parity for All!

In a new report written for the National Bank of Abu Dhabi, researchers have found that renewable energy technologies are fast approaching grid parity in most parts of the world.

And this was no Greenpeace report, either. This thing was actually produced primarily for the finance community in the Gulf region.

Here are some of its findings...

  • More than 50% of investment in new generation capacity worldwide is now in renewables.
  • $260 billion a year has been invested in renewable energy technologies worldwide for the past five years.
  • Green bond issues to pay for low-carbon energy projects reached $36.6 billion in 2014, more than triple the previous year.
  • Prices for solar PV modules have fallen over 80% since 2008.
  • Solar PV will be at grid parity in 80% of countries in the next two years.
  • Solar PV is already cheaper than grid electricity in 42 of the 50 largest U.S. cities.
  • Industrial applications of energy efficiency can deliver 100% payback in five years.
  • Modern wind turbines produce 15 times more electricity than the typical wind turbine in 1990.
  • The cost of energy storage is expected to drop to $100 per kWh in the next five years. Today it's about $250.

These data points are music to the ears of Middle East kings, presidents, and prime ministers. After all, in the Gulf region, oil is the lifeblood of many economies. And make no mistake — the cheap oil party going on right now won't last forever.

Truth is, in the Middle East, there is no greater choice for new electricity generation than solar. You know, because it's a freaking desert!

Quiet Integration

While I remain bullish on solar in the U.S., I'm becoming more and more attracted to the opportunities that could soon be spawned throughout the Middle East. In fact, I'm planning a research junket to the region sometime this year to get a firsthand look at what could soon be one of the most lucrative solar markets on the planet.

In the meantime, keep a close eye on the solar and solar-related companies that are actively investing in the region right now. These include, but are not limited to:

  • SunPower (NASDAQ: SPWR)
  • First Solar (NASDAQ: FSLR)
  • Schneider Electric (OTC: SBGSY)
  • SunEdison (NYSE: SUNE)
  • Trina Solar (NYSE: TSL)

This list will continue to grow, too.

Because while the Saudis and the U.S. play their game of chicken, behind the backdrop of all this nonsense and rhetoric, a strong and vibrant solar market is quietly integrating itself into a fossil fuel-addicted world. And it's doing so profitably.

Invest accordingly.

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.

March 11, 2015

EU Probes Chinese Solar Firms

Doug Young

Bottom line: The EU is likely to resolve its latest dispute with Chinese solar firms over implementation of a year-old pricing agreement, but the clash will undermine trust and hints at future conflict over the issue.

After several months of relative quiet, Chinese solar panel makers are back in the headlines this week with another looming trade dispute in Europe. This particular story, and much of the industry’s woes over the last 2 years, stems from broader western allegations of unfair government support for Chinese panel makers. In this case China and the EU signed a deal a year ago to resolve their dispute, but now the EU is accusing several Chinese firms of violating the deal.

The EU had previously threatened to levy punitive tariffs on Chinese panel makers, saying they received unfair support through policies like cheap loans from state-run banks and low-cost land from local governments. Washington made similar claims and ultimately did impose punitive tariffs, but the EU took a more conciliatory approach and reached a settlement after the intervention of several top government leaders.

The China-EU agreement reached last year didn’t really address the issue of unfair government support. Instead it attempted to level the playing field by calling on Chinese companies to voluntarily raise the prices of their panels to levels comparable to those of European firms. (previous post) Now we’re getting word that the European Commission has told at least 3 Chinese panel makers it believes they may be violating the agreement. (Chinese article)

It’s unclear if the action is limited to the 3 firms, which are named as Canadian Solar (Nasdaq: CSIQ), ReneSola (NYSE: SOL) and ET Solar, or if more names may also be involved. At least one of the trio, Canadian Solar, has issued a statement saying the European Commission has notified it of “potential issues” associated with its compliance with the agreement. (company announcement) It added it believes it has complied with the deal, and that no decision has been made yet by the EU.

The news sparked a sell-off for Chinese solar panel stocks, with ReneSola and Canadian Solar down by 6 percent and 2 percent, respectively, in the latest session. ReneSola is particularly vulnerable in this instance, since it relies completely on exports for its sales. Following the sell-off the shares have lost more than half of their value over the last 6 months, and are coming close to the $1 mark. Shares of other major solar panel makers also sagged, with Yingli (NYSE: YGE) and Trina (NYSE: TSL) also down by about 3 percent.

It’s slightly surprising that Canadian Solar investors were relatively less worried about the news, even though the company was named in the reports and confirmed the situation. But the fact of the matter is that investors have probably worried about this particular agreement ever since it was signed a year ago, and companies are being punished based on their exposure to the EU market.

The reason for investor concerns is relatively straightforward. Put simply, Chinese firms are famous for reaching this kind of deal, and then doing everything they can to undermine such agreements if doing so will benefit themselves. Thus, for example, a Chinese firm may sign an agreement agreeing to raise its prices, and then immediately start looking for loopholes in that same agreement that allow it to continue charging its previous lower prices.

It’s hard to comment in any detail on this particular development without knowing more about the European Commission’s queries. Those queries are almost certainly being prompted by complaints from local solar panel makers, who are hugely distrustful of their Chinese rivals. At the end of the day, the 2 sides will probably resolve this issue and the EU may implement a stronger system to ensure compliance. But this development will undermine the credibility of the Chinese companies, and could also hurt their sales as they are forced to raise prices to fully comply with the settlement.

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.

March 10, 2015

India Hates Coal

By Jeff Siegel

indiasolarIf you think the war on coal in the U.S. is bad, you ain't seen nothing yet!

We recently got word that India is set to double the tax on coal production, while promoting electric vehicles and renewable energy projects.

I'm pretty sure there's some Luddite reporter in Mumbai right now who's head's about to explode.

But that's neither here nor there.

While I'm no fan of regulatory regimes of any kind, I'd be lying if I said I wasn't happy to know that a crap-ton of money is getting funneled into renewable energy and electric cars in India, and not coal. This is for two reasons …

1.) India is one of the most polluted countries in the world. And while fuel wood, biomass, and traffic congestion are bigger culprits when it comes to air pollution, certainly reducing coal-fired power isn't going to hurt.

2.) Thanks to India's latest hard-on for renewable energy, we're now presented with even more opportunity to profit from from the inevitable transition of the global energy economy.

This is Huge

As it stands now, India plans to add 175 gigawatts of renewable energy generation capacity by 2022. 100 gigawatts of that will come from solar.

To put this in perspective, the U.S. currently has less than 18 gigawatts of solar capacity installed.

This is huge!

Analysts over Deutsche bank issued a report about a week ago which indicated that by 2022, 25 percent of India's power will come from solar. Analysts also suggested that solar will ultimately become the dominant source of electricity around the globe, generating $5 trillion in revenue over the next 15 years.

Deutsche bank notes that over the next 5 to 10 years, new business models will generate a significant amount of economic and shareholder value, and that “within three years, the economics of solar will take over from policy drivers (subsidies).”

I love it!

Here's more …

As we look out over the next 5 years, we believe the industry is set to experience the final piece of cost reduction – customer acquisition costs for distributed generation are set to decline by more than half as customer awareness increases, soft costs come down and more supportive policies are announced.

While the outlook for small scale distributed solar generation looks promising, we remain equally optimistic over the prospects of commercial and utility scale solar markets.

We believe utility-scale solar demand is set to accelerate in both the US and emerging markets due to a combination of supportive policies and ongoing solar electricity cost reduction. We remain particularly optimistic over growth prospects in China, India, Middle East, South Africa and South America.

The biggest solar player in India is Tata Solar Power, which is a subsidiary of Tata Power.

Other solar companies with a solid foothold in India include SunEdison (NYSE: SUNE) and First Solar (NASDAQ: FSLR).

Definitely keep a close eye on India throughout the rest of this year as new laws, regulations and incentives kick the Indian solar market into overdrive.


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

March 09, 2015

Hypersolar: Hydrogen In A Baggie

by Debra Fiakas CFA

The last post “Man Makes Mother Nature Look Like a Lazy Maid” featured the work of Harvard scientists who have developed a breakthrough ‘bionic leaf’ system that uses sunlight to split water into hydrogen and then combine it with carbon to make isopropanol, an alcohol that can be used as fuel.  It is very much like reverse combustion.  Kudos to Harvard!  However, the good folks at Harvard are not alone in their quest to outsmart Mother Nature.

In the late 1990s, the U.S. National Renewable Energy Laboratory in Golden, Colorado had reported progress with an artificial leaf that achieved 12% efficiency.  This an efficiency level well in excess of leaves in nature that only store 1% of the sunlight it receives as biomass.  Unfortunately, the Colorado artificial leaf was expensive, producing fuel that cost more than twenty-five times competing fuels.  That artificial leaf needed a great deal more work to reduce costs and achieve scale and efficiency over time.

At the California Institute of Technology or Caltech there are several dozen scientists working on similar artificial leaf technology, trying to build on the Colorado laboratory’s earlier successes.   Caltech is one of five Energy Innovation Hubs created by the Department of Energy to solve the critical energy and environmental issues facing the U.S.  A grant valued at $116 million has been provided to Caltech to support their experiments.

Caltech is trying to reduce costs by perfecting the photovoltaic element.  As proven in Colorado over fifteen years ago, electricity from a solar panel can be used to split water into hydrogen and oxygen.  A membrane is also used to keep the hydrogen gas separate.  Caltech is working with a more efficient configuration of electrodes with special semiconductor materials coated with a catalyst.  Iridium has been found to be the best catalyst for the oxygen electrode, but cost could be an issue.  High purity iridium sells for more than $4000 per 100 grams.  Thus the group is experimenting with various mixes of cheaper materials such as titanium, nickel, iron, cobalt and cerium oxide to find the best combination for light absorption and stability.  After analyzing over 5,000 different combinations the group has settled on silicon with a coating of titanium dioxide for the oxygen electrode.

Caltech has claimed the potential for up to 20% energy efficiency.   Even with such effective conversion of sun power to fuel, cost will be an issue.  Titanium is not free and silicon is expensive.  There is considerable more work that has to be done before investors will get a crack at even investment in privately held company not to mention shares of stock in a public company.

HyperSolar, Inc. (HYSR:  OTC/QB) in California claims it has found solutions for the cost issues that have plagued hydrogen to fuel developers.  HyperSolar describes its system as a ‘solar hydrogen generator’ that integrates the electrolysis function directly into a solar cell.  Its system combines a photoabsorber and a catalyst in a transparent water-filled plastic bag.  The company calls it a ‘baggie system.’  The bag inflates when exposed to sunlight as the hydrogen and oxygen form inside.  In December 2014, the company announced it has achieved 1.25 volts in its electrolytic element, which is sufficient to split water molecules into hydrogen and oxygen.  
HyperSolar is using nano- and micro-particles to cut down on materials costs.  Since the electrolysis takes place at a nano-level fewer photovoltaic elements are required and this reduces over-all cost.  Before HyperSolar’s recent achievements only photovoltaic cells using expensive silicon and titanium had been able to meet the voltage requirements. 

HyperSolar shares are priced at pennies, making it a stock unsuitable for all expect the most risk tolerant.  About 10% of the float changes hands each day, but even with good trading volume, the bid-ask spread is wide.  At the end of December 2014, the company had $62,222 in cash on its balance sheet, bringing into question the company’s capacity to execute on the business plan.  Management has foregone compensation, keeping the cash usage at about $40,000 per months to keep the company going.  A small capital raise at the beginning of January 2015, should tide the company over for another month or two.  Agreements with the University of Iowa and the University of California at Santa Barbara help keep working moving forward.

As a fully reporting public company it is relatively easy to follow HyperSolar’s progress.  It after recent accomplishments it is a company well worth watching despite its weak balance sheet. 

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.

March 06, 2015

Solar Storage Dream Becomes Reality

By Jeff Siegel

sune4While the solar industry continues to heat up, I maintain that one of the best plays in the space is SunEdison (NYSE: SUNE).

This is an aggressive operation, run by incredibly smart people. The company is well-capitalized, fairly liquid, and well-diversified in the energy space, boasting both a top-notch, vertically-integrated solar operation, and a basket of healthy wind assets, too.

The company is also now advancing on energy storage – the final obstacle to the creative destruction necessary to alleviate the world's reliance on fossil fuels.

In a press release this morning, SunEdison made the following announcement …

SunEdison, Inc., the world's largest renewable energy development company, and Solar Grid Storage LLC, a leader in deploying combined energy storage and solar PV systems, today announced that SunEdison has acquired the energy storage project origination team, project pipeline, and subject to customary consents and assignments, four operating storage projects from Solar Grid Storage. SunEdison now offers battery storage solutions to complement solar and wind projects worldwide, providing solutions that can benefit utilities, municipalities, businesses, and consumers alike.

"Storage is a perfect complement to our business model and to our wind and solar expertise," said Tim Derrick, General Manager of SunEdison Advanced Solutions. "Our strategy is to increase the value of the solar and wind projects that we finance, develop, own, and operate by improving their availability and ability to interact with the grid. With this acquisition we have added the capability to pair energy storage with solar and wind projects, thereby creating more valuable projects and positioning ourselves as a leader in the rapidly growing energy storage market."

The growth in the energy storage market is being driven by commercial and municipal customers who are interested in both immediate energy savings from solar and emergency back-up power from storage, and by electricity grid operators, who place a high value on storage for its ability to make the grid more resilient and less susceptible to failure. Renewable generation-plus-storage has proven to be a cost-effective way of integrating renewable energy such as solar and wind into the grid.

"Solar Grid Storage is unique in the storage industry in that we approach storage from a solar perspective. Understanding the core solar customer value proposition, as well as the ways that energy storage can add customer benefits and economic value to solar projects, enables us to deliver renewable energy projects that are more valuable for both customers and grid operators," said Tom Leyden, Chief Executive Officer of Solar Grid Storage. "Becoming a part of SunEdison, a renewable energy market leader with a strong pipeline of customers and development projects, positions us incredibly well to accelerate our growth and integrate energy storage with renewables to help create the electricity grid of the future."

Interestingly, this news comes less than one month after Tesla (NASDAQ: TSLA) genius Elon Musk announced that his company is about six months away from unveiling a new kind of battery that'll be able to power your home.

I'm telling you right now, the elusive storage dream is about to become reality. And it's companies like SunEdison and Tesla that are going to make fat wads of cash by getting this stuff out of the labs and into the marketplace first.

Invest accordingly.


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

SunEdison Adds Batteries to Its Arsenal with Acquisition of Solar Grid Storage

Meg Cichon

The renewable energy market has been slowly strengthening ties with energy storage, and it now seems to be tying a secure knot. Wind and solar developer SunEdison (SUNE) announced today that it bought the energy storage team, projects and 100-MW pipeline of Pennsylvania-based Solar Grid Storage (SGS).

SunEdison is now able to offer integrated battery storage solutions for its renewable energy project portfolio, and delve into an energy storage market that is set to grow 250 percent in 2015, according to a new report from the Energy Storage Association and GTM Research. The solar plus battery storage market alone is set to reach $1 billion by 2018.

“Storage is a perfect complement to our business model and to our wind and solar expertise,” said General Manager of SunEdison Advanced Solutions Tim Derrick in a statement. “Our strategy is to increase the value of the solar and wind projects that we finance, develop, own, and operate by improving their availability and ability to interact with the grid. With this acquisition we have added the capability to pair energy storage with solar and wind projects, thereby creating more valuable projects and positioning ourselves as a leader in the rapidly growing energy storage market.”

Solar Grid Storage saw market opportunity a few years ago when electric vehicle interest started improving battery technology and driving prices down, according to CEO Tom Leyden. It was also a time when significant weather events like Hurricane Sandy caused power outages, sparking greater interest in renewables and emergency power.

“A lot of things have moved in our direction, and because of the success in solar and wind, utilities are raising concerns about grid stability,” explained Leyden. “So there is a lot of interest in storage on a regulatory basis to create grid resiliency, an many companies and individuals want emergency backup.”

Solar Grid Storage offers an integrated inverter plus lithium-ion battery storage system that works best for commercial projects ranging from 150 kilowatts to 10 megawatts, along with valuable grid ancillary services. They are focused on the east coast, where they have a contract with grid operator PJM to establish and operate battery storage to help balance the grid. This contract creates a revenue stream, and allows SGS to go into solar and storage projects, according to Leyden. It currently has four completed projects in its portfolio, with several more in the pipeline.

While their focus has mostly been in the PJM territory, SunEdison’s wide U.S. and global reach will open new doors for the storage technology. “To grow we needed additional capital, so SunEdison decided to acquire us — they have a strong balance sheet and attractive financing, which are all good things for us,” said Leyden.

SunEdison has been in expansion mode for the past year or so. In February 2014, it established a yieldco called TerraForm Power (TERP). This yieldco model allows SunEdison to raise capital by selling its projects to TerraForm and then using the proceeds to purchase additional projects and pay investors. Since yieldcos have very strict criteria, SGS won’t be able to qualify just yet due to a lack of contracted revenue, but it hopes to rectify that by the end of the year, said Leyden.

Back in November, SunEdison and TerraForm announced the $2.4 billion acquisition of wind developer First Wind and its 1.3-GW portfolio, making SunEdison the largest renewable energy developer in the world. It also announced plans for a possible $2 billion polysilicon plant in China, a $30 million module plant in Brazil, and a $4 billion module plant in India to help along its more than 5 GW of potential projects in the region.

For now, Leyden said that SGS will focus on ramping up in the PJM market and moving into California, where there is storage procurement in place. Said Leyden, “Those are our two initial focuses, but we do want to expand beyond that — and we intend to — but it will take some time.”

Meg Cichon is an Associate Editor at, where she coordinates and edits feature stories, contributed articles, news stories, opinion pieces and blogs. She also researches and writes content for and REW magazine, and manages social media.  Formerly, she was an Associate Editor of ideaLaunch in Boston, MA. She holds a BA in English from the University of Massachusetts and a certificate in Professional Communications: Writing from Emerson College.

This article was first published on, and is republished with permission.

March 04, 2015

FuelCell Energy Rising

by Debra Fiakas CFA

Last week I was surprised to find FuelCell Energy (FCEL:  Nasdaq) on a list of companies registering a particularly bullish technical formation called an ‘Aroon’ indicator.  This measure that is designed to reveal stocks entering a new, decisive trend.  Shares of this fuel cell technology developer and producer had been in a steady decline through most of the year 2014, reaching a 52-week low price of $1.05 in January 2015.  However, since then FCEL has regained 27% from that low point.

The turn in fortunes seemed to coincide with an announcement commemorating one year of operation at a fuel cell park operated by Dominion Power (D:  NYSE) using five of FuelCell’s Direct FuelCell power plants.  Dominion produces 14.9 megawatts from the installation, which is sufficient to power 15,000 homes.  A heat recovery element adds to the efficiency of the plant.  Then again it must be noted that several of the major small-cap indices such as the S&P 600 Index has been on the rise since about mid-January 2015.  One way or the other FuelCell may have regained its ‘mojo’ in terms of its stock valuation.

Trading volumes near 3.7 million shares per day seem impressive, but this is still only 1.5% of the 'float'  or shares outstanding and not held by insiders.   Besides relatively shallow trading volume, FuelCell has been stalked by traders with a bearish view.  The number of shares sold short is around 14% of the float.  Based on volumes at each price level, I estimate a significant portion of the short interest was established at the $2.50 price level.   If I am right in this assessment, shareholders of FCEL cannot expect a ‘short squeeze’ without further price recovery.

I do not expect to see results for the first fiscal quarter ending January 2015 until well into March.  The consensus estimate is for a loss of two pennies on $48.0 million in total sales.  If achieved these results would represent 8% top-line growth and a reduction in the bottom line loss by half.  The company has been building sales and trimming its operating losses over the past six months or so.  Any upside surprise in financial results could reinforce the new found interest in FCEL. 

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.

February 28, 2015

Ten Clean Energy Stocks For 2015: A Fine February

Tom Konrad CFA

After a rough start to the yearMy Ten Clean Energy Stocks for 2015 posted a strong recovery in February. 

For the month, the model portfolio rose 7.9% in local currency terms and, 8.3% in dollar terms.  For comparison the broad universe of US small cap stocks rose 5.9% (as measured by IWM, the Russell 2000 index ETF), and the most widely held clean energy ETF, PBW, shot up 11.6%.

This year I split the model portfolio into two sub-portfolios of six income stocks (NYSE:HASI, NYSE:BGC, TSX: RNW, TSX: CSE, TSX:NFI, and XAMS:ACCEL) four value and growth stocks (NYSE:FF, NYSE:PW, NASD: AMRC, and NASD:MIXT). 

PBW (+11.6%) is a good benchmark for the value and growth stocks, which underperformed with a small gain of 1.6% in both local currency terms and dollar terms.  The six income stocks, on the other hand, gave a strong performance with a 12.0% gain in local currency terms and a 12.8% gain in dollar terms.  This is particularly surprising because global utility stocks (as measured by JXI) fell 3.5% for the month on worries about rising interest rates.  The fossil free Green Alpha Global Enhanced Equity Income Portfolio (GAGEEIP), which I co-manage, also bucked the global utility trend and turned in a 5.5% gain for the month.

For the year to date, the portfolio is up 3.1% in local currency terms, and down 0.2% in dollar terms.  This contrasts to a 4.2% gain for PBW and 2.5% for IWM.  The four growth and value stocks are down 6.1% in local currency terms and down 6.3% in dollar terms.  The income stocks are up 9.1% in local currency terms and up 3.9% in dollar terms.  GAGEEIP has gained 4.6% in January and February.

The chart below (click for larger version) gives details of individual stock performance, followed by a discussion of February news for each stock.

10 for 15 Jan.png
The low and high targets given below are my estimates of the range within which I expect each stock to finish the year.

Income Stocks

1. Hannon Armstrong Sustainable Infrastructure (NYSE:HASI).
12/31/2014 Price: $14.23.  Annual Dividend: $1.04.  Beta: 0.81.  Low Target: $13.50.  High Target: $17. 
2/28/2015 Price: $16.63. YTD Dividend: $0.  YTD Total Return: 16.9%.

The stock of sustainable infrastructure financier and Real Estate Investment Trust Hannon Armstrong staged a dramatic advance of 21.4% in February.  I believe this advance was catalyzed by an article by Brad Thomas, the author of a leading REIT newsletter.  In the almost two years since its IPO, Hannon Armstrong has been the odd man out among renewable energy yieldcos, because of its REIT structure and focus on energy efficiency financing so different from the higher profile renewable energy project ownership of other yieldcos.  There are also no real comparables among conventional REITs, meaning that HASI has also struggled to catch the attention REIT investors.

Thomas' strongly positive article seems to have changed that, and now REIT investors seem to be pricing HASI closer to what that would be expected from traditional REITs that have a comparable level of risk.  Not that I'm selling at this point; I'm happy to hold a company that pays a 6.3% dividend at the current price, especially since management expects to continue to increase that dividend by 12-15% over the next 12 months.

An ironic note to this whole story is that Brad Thomas himself was surprised by the sea-change his article catalyzed.  Reading between the lines of his comments, he made up his mind that HASI was very attractive, but decided to share his insight with his readers before buying himself.  He has an admirable policy of waiting 10 days between publication and trading a stock.  In this case, the stock was trading at $14.57 when he wrote the article, but it closed at $16.37 10 days after publication.  A more recent note from Thomas leads me to believe he is still waiting for HASI to pull back. 

Thank you Brad, for finally bringing Hannon Armstrong the attention I have been unable to attract with my many articles about the company since its IPO.  For your sake, and for anyone else who has not yet bought the stock at the very attractive prices we had for the last 20 months, I hope the pullback you're waiting for materializes.

2. General Cable Corp. (NYSE:BGC)
12/31/2014 Price: $14.90.  Annual Dividend: $0.72.  Beta: 1.54.  Low Target: $10.  High Target: $30. 
2/28/2015 Price: $15.04. YTD Dividend: $0.  YTD Total Return: 0.9%.

Last month  the stock of international manufacturer of electrical and fiber optic cable, General Cable Corp. declined 23% because of several analyst downgrades and worries about Europe.  A couple more downgrades followed before the company released its fourth quarter earnings and outlook for 2015 on February 4th.  The stock sold off that day, but I felt the discussion of restructuring and outlook were generally positive.  Investors seem to be coming around to my more optimistic point of view, since the company recovered all of its January losses in February with a percentage climb even more spectacular than Hannon Armstrong's.

3. TransAlta Renewables Inc. (TSX:RNW, OTC:TRSWF)
12/31/2014 Price: C$11.48.  Annual Dividend: C$0.77.   Low Target: C$10.  High Target: C$15. 
2/28/2015 Price: C$13.13. YTD Dividend: C$0.12832  YTD Total C$ Return: 15.5%. YTD Total US$ Return: 7.3%.

Investors and analysts also liked the strong earnings announcement from Canadian yieldco TransAlta Renewables, propelling the stock up another 3.6% after strong January gains. Scotiabank, Macquarie, and CIBC all increased their price targets for the stock, with the average price target now C$12.71.

4. Capstone Infrastructure Corp (TSX:CSE. OTC:MCQPF).
12/31/2014 Price: C$3.20. 
Annual Dividend C$0.30.  Low Target: C$3.  High Target: C$5.  
2/28/2015 Price: C$3.21. YTD Dividend: C$0.  YTD Total C$ Return: 0.3%.  YTD Total US$ Return: -6.8%.

Canadian power producer and developer (yieldco) Capstone Infrastructure lost ground gained in January, and is now down almost 7% in US dollar terms, although all of that decline is due to the weakness of the Canadian dollar.  I continue to think that this 9%+ yield company remains one of the best values among clean energy income stocks: it's high yield and low price are entirely due worries about a very disappointing decision by the regulator of its British water utility subsidiary.  Capstone is appealing that ruling, but management has stated that the dividend is not at risk even if the appeal fails.  Insiders has put their money where their mouths are by buying the stock on the open market.

In addition to the high yield (which alone seems sufficient reason to own the stock), there is potential for upside if the Bristol Water appeal is successful. Even if this appeal fails, I expect the high yield to cause the stock to appreciate as investors gain confidence that the dividend will not be cut.

5. New Flyer Industries (TSX:NFI, OTC:NFYEF).
12/31/2014 Price:
C$13.48.  Annual Dividend: C$0.585.  Low Target: C$10.  High Target: C$20. 
2/28/2015 Price: 13.91$. YTD Dividend: C$0.0975  YTD Total C$ Return: 3.2%.  YTD Total US$ Return: -4.1%.

Leading North American bus manufacturer New Flyer continues to announce significant new orders of buses, such as 110 compressed natural gas (CNG) buses and options ordered by Nassau county, NY, and smaller orders from Lane Transit in Eugene Oregon and Hamilton, Ontario for up to 20 hybrids and 18 CNG buses, respectively.  These orders follow on the strong backlog of orders I discussed in the last update.

Although a date has not yet been announced, the company should report 2014 fourth quarter and full year results in March.

6. Accell Group (XAMS:ACCEL, OTC:ACGPF).
12/31/2014 Price: €13.60. 
Annual Dividend: Varies: at least 40% of net profits. €0.55 in 2014.  Low Target: 12.  High Target: €20.
2/28/2015 Price: 16.06. YTD Dividend: 0.  YTD Total Return: 18.1%.  YTD Total US$ Return: 9.2%.

The stock of bicycle manufacturer Accell Group also advanced strongly in February.  This does not seem to be due to company specific news, but rather to growing interest by institutional investors in the bicycle industry.  It seems that fund managers, especially US fund managers, have become disappointed in the performance of golf companies, and are looking to replace these positions with well known bicycle brands.  Fund managers may be beginning to realize that bikes not no longer just for kids, and are increasingly popular among high income adults.

Outdoor retailer REI knows this fitness-conscious demographic well, and has recently begun offering Accell's "premium, high-performance, award-winning" Ghost Bike brand in its stores countrywide and on its website.

While it may seem strange that investment managers' attitude towards golf companies should have any bearing on how they feel about the bicycle companies, this connection is a product of widespread practice of diversifying and portfolios among industries.  While there is probably little economic connection between the economics prospects of Accell and Callway (NYSE:ELY), many fund managers specialize in certain industries.  When such analysts and managers upgrade or buy one stock in their universe, they often will downgrade or sell another stock.  Hence, if a mutual fund manager who specializes in sports equipment sells Callaway, it might not be surprising to see him buy Accell.

Even this annual list shows that effect.  I focus on clean energy companies, so in order to add four new companies to this 2015 list, I had to drop three clean energy companies I still liked from the 2014 list.

Value Stocks

7. Future Fuel Corp. (NYSE:FF)
12/31/2014 Price: $13.02.  Annual Dividend: $0.24.   Beta 0.36.  Low Target: $10.  High Target: $20.
2/28/2015 Price: $12.3 YTD Dividend: $0.06.  YTD Total Return: -5.1%.

Specialty chemicals and biodiesel producer FutureFuel, also recovered (and paid a 6¢ quarterly dividend) in February.  While there has not been significant company news, the EPA has made strong statements about getting "back on track" setting quotas under the Renewable Fuel Standard (RFS.)  The lack of quotas in 2014, and the delay of the 2015 quota are the main reason the stock is currently so cheap.  EPA transportation chief Christopher Grundler recently told a meeting of ethanol producers that the agency would combine three years' worth of standards -- for 2014, 2015 and 2016 -- into a single regulatory action. EPA plans to release a proposal this spring and finalize it by the end of November.  The RFS is at least as important to biodiesel producers like FutureFuel as it is for ethanol producers.

8. Power REIT (NYSE:PW).
12/31/2014 Price: $8.35
Annual Dividend: $0.  Beta: 0.52.  Low Target: $5.  High Target: $20.
2/28/2015 Price: $8.65. YTD Total Return: 3.6%.

Rail and solar investment trust Power REIT reversed some of its January gains.  Investors await a decision (or more likely, non-decision) in the summary judgment stage of its civil case with its lessee Norfolk Southern Corporation (NYSE:NSC) and sub-lessee Wheeling & Lake Erie Railway (WLE).  Unless the court renders a very strong summary judgement, a trial will begin in the next couple months.  I expect few of the outstanding issues to be resolved in summary judgment, so a trial is very likely.

Power RET released a new investor presentation on its website, which includes a management estimate of the net asset value of the company's assets if they were sold on the open market (page 19.)  Management feels that, even without a win in the civil case, its railroad asset is significantly undervalued compared to NSC's bonds, which have similar credit and cash flow characteristics.  However, the company has not revealed any plans to sell any of its assets, and would not consider a sale of the railroad asset before the civil case is resolved, even if a buyer could be found.

9. Ameresco, Inc. (NASD:AMRC).
12/31/2014 Price: $7.00
Annual Dividend: $0.  Beta: 1.36.  Low Target: $6.  High Target: $16.
2/28/2015 Price: $6.26. YTD Total Return: -10.6%.

Energy service contractor Ameresco will release fourth quarter and full year 2014 results before the market opens on March 5th.  Over the last two quarters, the company has spoken of signs that its market for may be recovering from a multi-year slump.  If the trend continues, the stock should reverse its long decline, possibly dramatically.

Growth Stock

10. MiX Telematics Limited (NASD:MIXT).
12/31/2014 Price: $
6.50Annual Dividend: $0.  Beta:  0.78.  Low Target: $5.  High Target: $20.
2/28/2015 Price: $5.65. YTD Dividend: $0.  YTD Total South African Rand Return: -12.3%.  YTD Total US$ Return: -13.1%.

Vehicle and fleet management software-as-a-service provider MiX Telematics released its third quarter fiscal 2015 results and increased its guidance for the full fiscal year ending March 31st.  I found the outlook and results discussion moderately encouraging, but other investors do not seem to see it that way.  The stock slipped 3.6% for the month.

MiX also signed its 500,000th subscriber in February.  To put this in perspective, US-based competitor Fleetmatics (FLTX) announced that it had achieved 500,000 vehicles under subscription in January.  I'm not sure how comparable MiX's "subscribers" are to Fleetmatics's "vehicles under subscription" but, if they are not the same thing, I have trouble seeing how MiX could have less vehicles under subscription than it has subscribers.  Further, Fleetmatics' offering is suitable to the small and medium sized businesses to which it caters, and so its offering is less sophisticated (and hence lower value) than the solution MiX delivers to the large multinational companies which are its core clients.

Given the similar size of the two companies' client bases, one would expect that the two companies would also be valued similarly.  In fact, Fleetmatics' enterprise value is $1.4 billion (approximately $2,800 per vehicle under subscription in January) compared to MiX's enterprise value of only $106 million, or $212 per "subscriber" in February.  Based on this metric, the market seems to be undervaluing MiX compared to FLTX by a factor of approximately 13.


I found the January declines of many of the stocks in this list inexplicable, and wrote that the start of February was an excellent time to buy any of them.  The rapid rises in Hannon Armstong, General Cable, and Accell Group show that I was right in at least these three cases. 

Several excellent values remain.  Capstone Infrastructure and MiX Telematics look particularly attractive at their current prices.  Ameresco also looks quite attractive, but its near term performance will hinge on the March 5th earnings announcement and management's outlook for the rest of the year.

Disclosure: Long HASI, CSE/MCQPF, ACCEL/ACGPF, NFI/NFYEF, AMRC, MIXT, PW, FF, BGC, RNW/TRSWF.  I am 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.

February 27, 2015

Tesla Vs. Hydrogen

By Jeff Siegel

One of Governor Arnold Schwarzenegger's dreams may soon be coming to fruition.

During his time as governor, while singing the praises of renewable energy progress in the Golden State, the Terminator would often tell tree-hugging Californians about his dream of building a hydrogen highway that would enable hydrogen-powered vehicles to run from Mexico to Canada — via California.

Not only did Prius drivers and vegans applaud the governor's dream, but it even got a decent amount of support from former GM Chairman Bob Lutz and President George W. Bush.

Since that time, California has managed to build only 10 hydrogen fueling stations in Los Angeles and San Francisco. But we got word over the weekend that the California Energy Commission is about to spend $20 million to build about 50 new hydrogen fueling stations.

According to the LA Times...

Starting in October with a new fuel station in the city of Coalinga, near I-5 in the San Joaquin Valley, hydrogen cars will be able to get from Los Angeles to San Francisco. Such vehicles can go about 300 miles on a fill up.

Hydrogen is Silly

Those who believe hydrogen represents the future of personal transportation have been quick to applaud this news.

Certainly it represents a small but meaningful step in instigating some early growth in the hydrogen vehicle market.

But here's the problem...

No one really cares now that Elon Musk has shown the world a much better mousetrap... and in the process, has been quite vocal about why he actually thinks hydrogen is “silly.”

Sure, the guy's got plenty of reasons to criticize potential competitors. But hydrogen isn't really much of a competitor, as Musk pointed out recently:

Hydrogen is an energy storage mechanism. It is not a source of energy. So you have to get that hydrogen from somewhere. if you get that hydrogen from water, so you’re splitting H20, electrolysis is extremely inefficient as an energy process…. if you say took a solar panel and use the energy from that to just charge a battery pack directly, compared to try to split water, take the hydrogen, dump the oxygen, compress the hydrogen to an extremely high pressure (or liquefy it) and then put it in a car and run a fuel-cell, it is about half the efficiency, it’s terrible. Why would you do that? It makes no sense.

If you're going to pick an energy storage mechanism, hydrogen is an incredibly dumb one to pick. You should just use methane, that's much, much easier. Or propane. The best case hydrogen fuel cell doesn't win against the current case batteries, so then obviously it doesn't make sense. That will become apparent in the next few years.

Too Late

Although I agree with Musk, there's no doubt that plenty of automakers are still getting quite aggressive on hydrogen.

Hyundai, Toyota, Honda, and Volkswagen don't really seem to be too interested in what Musk has to say about the issue. Of course, they also weren't too interested back when he first came on the scene with a silly dream of mass-producing a quality electric car.

You know how that dream turned out...


In any event, while there will likely be a few more opportunities to profit in the fuel cell space with companies like Plug Power (NASDAQ: PLUG) and Hydrogenics Corp. (NASDAQ: HYGS), over the long term, I wouldn't put too much faith in hydrogen vehicles getting as much love as electric vehicles.

In terms of price, performance, ease-of-use, and infrastructure demands, by the time the few automakers pursuing hydrogen actually have a decent number of these cars in the showrooms, electric cars will be even further advanced. Prices will have fallen further, driving ranges will have doubled (if not tripled), and high-speed charging infrastructure will be nearly as common as the infrastructure in existence today for internal combustion vehicles.

In other words, it's too late for hydrogen, because no one can put the electric vehicle genie back in its bottle.

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.

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