World Economy and Markets
September 17, 2010
NRG Energy is one of the largest utilities in the US with around 22 GW of Installed Capacity.However like Exelon,the share of Renewables is relatively low at just 2% of its overall Energy Capacity.Though the US Administration has all but given up on an Energy and Climate Legislation,Big Utilities recognize the need to generate low carbon electricity.Some sort of Carbon Emissions Restraint will be imposed on Utilities sometime in the future with EPA itching for action in restricting CO2 Emissions.Green Sector Stocks have fallen like a rock in 2010 due to the Copenhagen Disaster and lack of movement on a Climate Bill by the US government.Therefore it makes sense for US utilities to buy Renewable Energy Assets on the Cheap.Exelon bought Deere Energy Wind Farms at a dirt cheap price.NRG Energy which has around 550 MW of Wind and Solar Capacity bought Reliant Energy last year for $300 mm.It has augmented its Renewable Energy Portfolio with another $350mm buy of Green Mountain Energy.
September 17, 2010
BYD has fallen almost 35% this year heavily underperforming the market as sales growth has slowed substantially.After a 140% growth in Auto Sales last year,this year the sales growth will go down to 30% as the company has reduced sales target to 600,000 from 800,000 earlier.Chinese auto sales have fallen and BYD has been specially affected with its workhorse F3 Model declining in popularity.The company delivered a good first half with $100 million in 2Q profits.However the company is still quite expensive at $15 Billion Market Cap which would give it a P/E of around 38x.Also the company's strategy to enter solar energy does not make sense.However BYD is a good story for the future.China has made a new Green Policy to create National Champions in the EV and Battery Industry.BYD is a perfect candidate with its strengths in both areas.While its execution in the EV sector is yet to give results,it is already planning into the future getting into the Grid Storage Sectors.I would not put money presently but would wait for a better entry point in the future.
September 17, 2010
Rise of American Protectionism – Two cases against China in WTO and "Buy American" Bills by Congress
USA is increasing its protectionist actions recently filing 2 cases in World Trade Organisation against China over Electrical Steel and Credit Card payment providers.Only last week a US Union had filed a complaint with the US government about the Predatory Practices of Chinese Green Companies.USA thinks that China has unfairly put duties on US made Steel and it is locking out Mastercard and Visa from the credit card processing market in China.There is little doubt that China indulges in favoritism and implicit and explicit support of domestic companies.However it the scale that is the only difference .Like all other things China also implements its policies king size.MNCs in recent times like GE,Google,Siemens have all criticized Chinse discrimination against foreign companies.However WTO remains an ineffective body to resolve complex Trades Disputes.The US Congress is also getting into the China-Bashing Act by passing 2 bills that mandate "Buy American" clauses.The US has already antagonized the Indian IT Industry by specifically targeting the Indian companies like Infosys and Wipro.These new bills target China making it mandatory for government departments to buy American made goods.With November Elections fast approaching,politicians are outdoing each other in protectionist rhetoric.
September 15, 2010
Note this Hydro Plant will cost around $31 Billion which is quite costly at $15/watt if the the $31 Billion is used for the 1800 MW capacity.This is is almost 15x the cost of a typical Hydro Capacity and would need massive subsidies.Papua New Guinea is a poor country and might receive aid from Australia but the $31 Billion would make even the richest country balk at this price.Australia is not exactly energy deficient with massive resources of coal,wind and solar energy.In Renewable Energy the country has been quite slow with provinces like NSW and South Australia promoting renewable energy through regional subsidies.Hydro Power is the main source of Clean Power accounting for 90% of the Clean Energy Mix.The Project will take 10 years to build and their remains an outside chance that Oil Prices become so high that 24 hr Hydro Power at that time might make sense at $15/watt.
September 15, 2010
With Every Country wanting to Use Exports to get out of their Tough Fiscal Situations,it does seem that Currency Manipulation will become a mainstream activity.Gold and Silver are already touching new highs and with countries hell bent on competitively devaluing their currencies,expect the precious metals to go even higher.
September 14, 2010
Global Imbalances back to pre-Lehman Days Global Imbalances are growing deeper by the day as the world returns to its unsustainable pre-Lehman days of Unbalanced Trade.Trade […]
September 14, 2010
While Japan is a big player in the Solar Energy Manufacturing Market,there are other significant players like USA,China,Germany which have not protested against this discrimination.So why is Japan so miffed as to approach the WTO over this issue.One reason that i can readily think of is the Huge Contract given to Samsung by the Ontario government.The agreement with Samsung gives it the subsidies to set up a huge solar and wind energy capacity in the province.The government will support the company through preferential grid access,subsidies and land.This has given a huge boost to the Green Ambitions of Samsung which wants to become a big player in the Renewable Energy Area.
September 13, 2010
China,India and South Korea have been leading the charge buying up Oil and Gas Assets at an incredible clip around the world.TEPCO plans to buy upto 50% of its Uranium needs from internal purchases as well raising LNG purchases.Japan lost out to South Korea in Economic Diplomacy when it lost out on Lucrative Nuclear Power Plant Contracts in UAE.It is now jostling with USA and China for building Nuclear Power in Vietnam.TEPCO is a leading member of Japanese Consortiums in international bidding
September 11, 2010
These risks are real and not going away any time soon.They are waiting tinderboxes which could flare up with a small spark.India has managed a substantial premium in valuations over other emerging markets over its Consumption Led Growth.Institutional Investors know no better than common ones as was apparent from the 2008 Lehman Crisis.They are playing the Emerging Market Game till the Music Lasts.Make Sure you are not the one who finds no chair when the Music Stops.
September 11, 2010
The Desertec Initiative is the Biggest Green Energy Project ever conceived with a vast scale and an ambitious vision.However Desertec falls short on many parameters which are described above for it to ever reach fruition.While small scale versions of this Concept can be implemented like that by Solar Millennium in Egypt,the massive energy framework conceived by Desertec is not feasible.The Huge Subsidies and High Costs make it uneconomical despite its Clean Energy Promise.
September 9, 2010
The South Korean Government has been one of the most proactive ones in promoting Green Industry.During the Global Financial Crisis,the Stimulus Program of South Korea had the highest percentage devoted to Clean Technology Initiatives.Driven by the Government,South Korean Conglomerates have been investing into Green Sectors.Samsung the biggest South Korean has already committed huge investments into CleanTech Sectors like Solar,Wind,LEDs.Korean Shipbuilders like Hyundai,Daewoo and Samsung are getting into manufacturing of Wind Turbines while Chemicals Giant Hanwha
September 9, 2010
Enbridge the Canadian Energy Company which is mainly into the business of Gas and Oil Distribution has been aggressively expanding into Renewable Energy in the past […]
September 9, 2010
China has overtaken the US and EU in Green Industry Leadership.US Utilities like Duke Energy have openly acknowledged Chinese primacy in this regard .Investment in the Renewable Energy Sector in China at $38 billion in 2009 was more than double that in the USA.Companies in the US are outsourcing Green Jobs to Mexico and China due to high costs and lack of Government support.2010 should see this gap widen further with Chinese plans to spend almost $760 Billion in Green Investments in the next decade.The Ernst&Young Ranking of the Most Preferred Green Investment Countries has further bolstered the case of Chinese Leadership.
September 9, 2010
One of the factors behind the Yen Rise is the Chinese record buying of Japanese Government Bonds (JGBs).The Japanese Finance Minister has become concerned as the Japanese cant reciprocally buy Chinese Government Bonds which are not freely traded.Note Japan has a huge government debt load of around 200% of Japans GDP which is mainly financed by domestic investors.China with its humongous Foreign Reserves is the biggest player in the Foreign Exchange Markets Today.
September 8, 2010
Increasing College Education in Developing Countries has led to Unemployement and Low Wages for White Collar Workers.The increasing number of people armed with College Degrees has […]
September 8, 2010
India’s IT Sector had recently become a victim of new US Protectionist Policies when US Legislature imposed a $2000 Visa Fee on Companies with a Large […]
September 8, 2010
The Indian Government had blacklisted Huawei and ZTE earlier this year on Security Concerns.These Firms were said to have close relations with the Chinese Government and […]
September 7, 2010
Germany is planning to extend the life of the nuclear reactors that are supposed to close in 2022 by an average of 12 years.Note extension will […]
September 7, 2010
The country also has a 20% Energy Efficiency Improvement Plan for 2006-2010 which it is almost sure to miss.China energy reduction plans have gone haywire due its fast growing economy's dependence on fossil fuels.China has recently talked of increasing the percentage of Renewables to 15% by 2020 from the single digit figure now but the progress of Energy Efficiency has been not upto the mark.China's Energy Efficiency in fact decreased in the first half of 2010 instead of increasing.This decrease is due to the breakneck industrialization occurring in Chinese provinces determined to outdo each other in the Growth Game.Diktats by the Central Party Leadership have failed to rein in the provinces.
September 7, 2010
Polysilicon Demand has been skyrocketing in the recent years due to Exponential Growth of the Crystalline Silicon Solar Cells.This made Elkem decide on building a 5000 ton solar specific plant in Norway through a new cheaper process of refining Silicon called Metallurgical Silicon.However the 2008 GFC and poly Oversupply has made this process suspect as $400/kg poly prices went crashing down by 90%.Timminico,a Canadian Producer which was in the process of setting up a giant mg-Si plant has almost collapsed as orders for this less refined Polysilicon Form dried up.
September 6, 2010
Asian Development Bank has made ambitious plans to Fund Clean Energy in Asia.It has already invested $5 Billion since 2005 and plans to increase it to […]
September 5, 2010
.Europe and UK remain in equally difficult conditions suffering to some extent from the debt induced overhang.Hong Kong and the rest of Asia in comparison have escaped relatively unscathed and countries in the region have resumed their strong growth trajectory.Its not a wonder then that global talent is looking at Asia for newer growth opportunities.Non-Resident Indians are migrating back to their homeland in record numbers to take advantage of the booming economy.Its the same in case of other Asian centres like Singapore,Hong Kong and Shanghai.Asian companies are now raising money from capital markets in HK rather than NY.
September 5, 2010
Now Japan has warned China that it will lose FDI if it continues to use such policies against foreign companies.Recent labor unrest in Honda and Toyota factories have become a sticking point for the Japanese.Opaque and confusing rules,export controls over rare earth minerals and heavily biased judiciary have made life quite difficult for the foreign companies.The European Union on the other hand has complained of the lack of access to the Chinese market.Rules meant to deter foreign investment has made EU companies look elsewhere.
September 5, 2010
Indian Cities are in general totally unorganized with drivers being scant attention to traffic rules.Space constraints make most cars park illegally as there are no garages.In India's Capital Delhi,it is a common sight to see fight between neighbours for parking spaces.Some of these fights have even led to murders and jail terms.Road Rage has become common malaise as nobody follows traffic rules and jams stretch on for hours.Indian cities are seeing a huge influx of cars on a daily basis with little expansion in road infrastructure.Sick people are known to have died in traffic jams as ambulances can't navigate the serpentine jams.
September 5, 2010
India and Russia have jointly developed the Brahmos Cruise Missile which is said to be one of the most advanced Cruise Missiles in the World.This Cruise Missile is also the Fastest in the world with a speed of 3000 km/hr or around 2.6 times the speed of sound and can be launched from multiple air,sea and land platforms.India's Traditional Adversaries Pakistan and China are one generation behind in the Cruise Missile Technology Race.While Pakistan's lone Cruise Missile Babur is based on the outdated Tomahawk Missiles,China's Cruise Missiles also don't match upto Brahmos in speed and sophitication.
September 5, 2010
The recent weather catastrophe in different parts of the world has pushed up the food prices.The Russian Wheat Export Ban imposed earlier had exacerbated the situation […]
September 1, 2010
China regards India warily and think it a threat to Chinese domination over Asia.India has responded meekly in the past but recent provocations have made India retaliate back.Chinese Navy presence in the Indian Ocean by building ports in Pakistan and Burma have further queered the pitch.China is also deploying advanced missiles at the Tibet Border while border violations are also rising.India's Cabinet is regarding this with increasing concern with a meeting called to assess the situation arising from Chinese troops in POK.An investment in India's Defense Industry makes good sense in such an environment
September 1, 2010
This Program will try to avoid the disadvantages of Feed in Tariff Schemes as it will introduce a Market Based Element into the Tariffs.However this project is still at a preliminary stage and will need a lot of fine tuning.Note similar scheme have been implemented in China and India as well.The Chinese 280 MW of Projects have seen cuthroat competition with loss making bids by State Owned Utilities.It remains to be seen whether California can make a success of this RAM Program where China has failed.Even India has reported a huge response for the JNNSM First Phase of PV Projects.The Success of this California program will be crucial as it might serve as a template for future programs by other states and the Federal Government.
September 1, 2010
Wind Energy in the USA has hit an Air Pocket in 2010 with Low Prices for Gas and lack of a Federal Push for Green Energy.The end of 30% Cash Grants for Wind Investments by 2010 end may lead to a worse 2011,if the incentives are not extended by the Congress.Note Wind Energy is the cheapest form of Green Energy with prices of 8-10c/KwH and the second most prevalent form of Renewable Energy after Hydro Power.China has become the largest installer of Wind Energy in 2009 with 13 GW showing a 100% CAGR over the last 2-3 years.
August 27, 2010
China is making massive investments into Africa exploiting the virgin natural resources of the Dark Continent for its voracious industries at home.Unlike the Developed Nations,the Chinese government has no qualms about the country's rulers or human rights violations.Not surprisingly as it has been accused by activists of violating labor and environment rights in areas where it has invested.Most of the African countries have despotic and corrupt regimes looking to sell the continents rich resources to anyone willing to pay them.They have found a compliant partner in China which gives them a red carpet treatment.Mozambique is the latest country to sign a MOU which would lead to Chinese largesse.