Energy
October 12, 2010
GE is now looking to dethrone the No.1 Solar Energy Producer First Solar using its all round strengths.GE had invested in a Cadmium Tellurium Startup Prime Solar which is ramping up production.Note Cd-Te is the same technology which is used by First Solar.GE has said that it has managed to attain 15% efficiency on commercial glass.Don't know how much of it is true since First Solar only manages around 12% efficiency despite around 10 years of dedicated R&D.However if GE can even manage to get near to that level then it would surely give First Solar a run for its money.GE has also tied up with Japanese Solar Frontier to market its CIGs based modules.Note Solar Frontier or Showa Shell is building a massive 900 MW plant in Japan.This would make Frontier Solar one of the biggest Solar Players in the world.GE is offering an integrated solution comprising of modules,inverters,services and other BOS equipment to get a leg up on competition.
October 12, 2010
With most of the low hanging fruit of polysilicon costs already gone,the industry has to focus on efficiency to cut down on costs.Selective emitters,microinverters,DC-DC optimization and other technologies are already finding takers.A Number of microinverter companies like Tigo,Enphase Energy etc are tying up with global heavyweights like Suntech and Sunpower to increase their penetration and cut costs.National Semiconductor has also tied up with Suntech to integrate its products with Suntech Modules to improve efficiency and reliability.The Balance of Systems costs for Solar Panels and their Performance are not usually paid a lot of attention.But with every cent now making a big difference,these technology could make or break a company in this commoditizing industry.While the value addition and costs of these new products are still subject to market acceptance,its a major change for the industry.This is the next phase in the evolution of the solar energy industry as it looks to additional ways to cut costs and bring solar energy to grid parity.Look for M&A in this space as well since the industry is fragmented with a host of VC backed startups.
October 12, 2010
Rosatom has strong competencies despite the Chernobyl disaster as a black mark in its history.The Company has already constructed reactors in China,India and Iran during the Soviet Union Days and is constructing 5 reactors in foreign markets.With strong technology expertise and with laxer safety standards at home,it is trying to outflank Areva in its home turf.Note Areva is already facing losses from the Finland Nuclear Project which has proved to be a huge disaster.It additionally faces competition from Toshiba-Westinghouse which is ramping up its efforts to compete with Areva.GE-Hitachi suffers from a technological handicap compared with Toshiba and Areva,however GE cannot be underestimated because of its Global Reach and Industrial Strengths.Rosatom is that last thing that Areva needs in its shrinking home turf of Europe.Germany is facing huge opposition just for extending the life of its nuclear reactors while France has pretty much saturated its Electricity Market with Nuclear Energy.
October 12, 2010
Saint Gobain like Semiconductor Giant TSMC is betting on Copper Indium Gallium Selenium (CIGs) Technology rather than the mainstream crystalline silicon technology.CIGs is getting the most significant investments these days compared to other thin film technology.Yesterday Ascent Solar (ASTI) got an IEC certification for its flexible modules which would enable it to target the mainstream rooftop market from niche applications earlier.Miasole has improved the efficiency and costs of it CIGs greatly while Nanosolar can't be counted out because of its strong backers.Solyndra however remains mostly in the shadows despite around $1 billion in private investment.Stion is another strong contender partnering with TSMC and also thinking of opening a plant in Taiwan on its own as well.Saint Gobain is already a big player in the solar market as it suppliers glass to a lot of solar companies for their modules.Getting into panel manufacturing will further allow it to get a foothold of this new potentially giant industry.Du Pont,Dow Chemicals,Corning all have considerable presence in the solar equipment market as well.
October 11, 2010
Constellation Energy has become the latest USA Utility to cancel its proposed new nuclear energy plant to be built in Maryland.Despite a Loan Guarantee from Department of Energy (DOE) as part of the US Green Stimulus,Constellation has found the economics of the Nuclear Reactors as unworkable.In fact this is keeping with the trend of other utilities in the Developed World who have found New Nuclear to be too expensive.While a number of cyclical factors are at play (Wind Energy has also been affected) in hindering the development of these plants,it seems a secular shift has occured.Finland has become the poster boy of a Nuclear Project Disaster with the main developer Areva bleeding from losses as time and cost overruns have almost doubled.The increaseing costs of environment and safety regulations has increase manifold since the last spurt of nuclear energy construction in the 1980s.The Nuclear Renaissance has proven to be a complete failure in the Western Countries.While China continues with its aggressive Nuclear Expansion plans,construction in the US has come to a virtual halt.Exelon which is the largest Nuclear Energy Operator in the USA has also halted developed of 2 new reactors in Texas.These Utilities have said that they need much higher energy prices and a carbon tax before going ahead with reaction construction.Note Exelon recently bought a Wind Energy Operator as Solar/Wind become the favored Green Energy choices.
October 11, 2010
Coal India is coming out with India's biggest IPO offering in the Stock Market History.The company seems fundamentally strong on almost all aspects and is also pricing itself at a significant discount to its global peers.Both superficially and deep down,the analysis points CIL to be a very safe investment at a cheap valuation.Other analysts are also coming to the same conclusion,as Rating Agency has given CIL a 5/5 Rating which is probably the first in the history of IPO Grading .In order to give a more balanced perspective and avoid herd tendencies,I am listing out what the risks and negatives are with this company.Note this does not make me negative on the stock on which I am very positively biased.It is just to give investors the other side of the debate which I think general analysis will lack.
Despite the above Risks , I think that Coal India is one of the best quality stocks to come out in India's Primary Markets.However investors should be wary of the risks which will be glossed over by the mainstream media and brokerages . As with every investment however safe it might look,there are risks.This does not mean that investors should be fearful of every investment.It is by being aware of the risks,that prudent risk management can be done which is essential to successful investing.
October 7, 2010
Eastern Europe has seen a massive Green Energy Boom driven by EU 20% Renewable Energy by 2020 Target.Romania has been no exception to their Region Wide Green Growth.In fact Romania is said to have the best Wind Energy Sites in the whole of Europe with a 14 GW potential.The Government has attracted big Wind Developers like CEZ,E.ON and others through a generous Renewable Energy Certificate (REC) Scheme.Note the REC Subsidy Mechanism is a popular way of promoting Green Energy by making it mandatory for Utilities to procure a certain portion of their Energy Needs from Green Sources.They have to buy RECs from Trading Exchanges if they are unable to meet their targets.
October 7, 2010
Renewable Energy is Easter Europe has boomed driven by government incentives and subsidies.Many of these countries like Estonia,Bulgaria and Czech are cutting or already have cut generous feed in tariffs paid to Green Energy Investors.While Czech has seen an unprecedented Solar Boom leading to a massive public backlash,Estonia and Bulgaria have seen huge wind energy projects.The Green Energy has boomed in the last 2 years mainly as governments in these countries try to meet the Renewable Energy Target of 20% by 2020 set by the European Union.These East European countries have been hit hard by these EU directives as the costs have spiralled
October 7, 2010
Northrop Grumman the US Defense Giant and the largest US Shipbuilder as well is entering the Offshore Wind Energy Field.With Cape Cod very near to receiving the final approvals for setting up the first Offshore Wind Farm in the USA,Northrop sees a good opportunity.Shipbuilders around the world have recently entered the growing Green Sector of Offshore Wind.Korean Shipbuilders like Hyundai,Samsung have already set up Wind Turbine plants.Northrop on the other hand will team up with Gamesa to explore the Wind Energy field in the United States.Note Shipbuilding Industry is facing tough times with overcapacity and competition from Asian Players.Its critical for shipbuilders to look for newer greener pastures and Offshore Wind Energy is the best positioned space for them.It requires heavy industrial engineering and offshore operations both of which at shipbuilders excel at.
October 7, 2010
Coal India Limited (CIL) is the biggest IPO in the history of the Indian markets.The Company has generated a lot of investor interest because of a number of firsts.It is the largest coal producer in the world in one of the biggest demand growth regions.The company has excellent fundamentals being rated 5/5 by the rating agency.The government has disallowed anchor investors for the IPO as it finds that allocation could be construed as biased.Note Anchor Investors in Indian IPOs are favored investor who are preallocated a fixed amount of shares by investment bankers.This is similar to the US practice where all of the IPO is offered to institutional investors by investment bankers solely on their discretion.India is much more egalitarian in its approach to IPO regulation with a fixed amount 35% reserved for retail investors .The pricing of the issue has been a hot topic of speculation with the expected price range to give it a multiple of around 15x which is around 20-30% cheaper than comparable large US and China coal companies like Massey,Shenhua and others.
October 5, 2010
The Government of India has formed a high powered panel to look into replacing the usage of diesel powered gensets by Renewable Energy in Telecom Towers.India has around 300,000 Telecom Towers most of which are powered by expensive diesel generators.The reason is that a lot of the telecom towers are situated in far flung areas where the grid does not exist.Also the power supply in India is erratic and not reliable with 10 hour electricity blackouts not an infrequent occurrence.In these cases a backup supply of electricity supply is badly needed.Diesel Generators are the most popular form with Diesel heavily subsidized by the government in comparison to normal petroleum.Also Diesel Generators are widely available without huge capital costs.
September 29, 2010
General Electric being Smart in its Chinese Expansion
General Electric is looking to Invest Heavily in the new Age Green Industry like other Industrial Giants like Siemens,ABB etc.Having a Local Partner is a Huge Advantage since almost the whole of the Chinese Wind Industry is controlled by Chinese SOEs who favor local companies over foreign ones.EU and Japan have protested against discrimination over their domestic firms but not to much avail.GE is trying to circumvent the Discrimination Problem by giving a majority stake of 51% to Harbin Electric Machinery (HEC).However the Going will not be Easy for GE which is a Global Wind Market Leader because Competition is intensifying in the Chinese Market.Ming Yang Wind Power is looking to expand six fold to take advantage of the Growth in Chinese Wind Energy.Other Companies are doing the same.
September 29, 2010
United Kingdom a Laggard on Renewable Energy
UK has been the biggest laggard in Renewable Energy amongst the European Union.Despite being a leader in Offshore Wind,it severely lacks in other forms of Green Energy like Solar,Biomass etc.It has been very late in introducing a Feed in Tariff Scheme which has been a huge success in Germany and other countries.While there have been booms and busts caused by poorly designed FIT schemes in Czech and Spain,UK does not suffer from this problem.The Subsidy Scheme adopted by UK favors small distributed installations which is currently the aim of the other EU countries.This review has led to uncertainty in the minds of Green Investors as Government Subsidy is essential for reasonable returns.
Why UK is Reviewing the FIT
The Labour Government which implement this Green Policy has changed and the new PM David Cameron is trying to radically change the Government Policy.He has sharply curtailed the UK Budget and may want to change the Opposition Party set Green Policy as well.This seems to be the only justification behind this move which can only be described as erratic.
September 28, 2010
MingYang is the first Chinese Wind Energy Company to list its shares in the American Stock Exchange.There are a number of Chinese Solar Companies like Renesola,Trina Solar,Suntech etc which are traded in the USA but no Wind Energy Plays.In fact the number of Wind Companies trading on US Exchanges is almost non-existent.Clipper and Broadwind are hardly big players in the global market and provide little direct exposure to Wind Energy for US investors.MingYang is issuing 25 million ADS at a range of $14-16 share diluting around 20% of the company and giving it a market cap of roughly around $1750 million.The proceeds will be used in capacity expansion and R&D mostly.MingYang is the only significant non-state owned Chinese Wind Energy Company with a 2009 marketshare of around 4%.The Company has a very short history installing its first Wind Turbine just 2 years ago and has seen an exponential growth riding on the incredible Wind Industry Growth in China.Here are the advantages and disadvantages of the Company.
September 27, 2010
Tamil Nadu is one of India's most prosperous and industrially advanced states located at its southernmost extreme.The state has shown remarkable progress in the field on Wind Energy utilizing almost 80% of its Wind Power Potential with 40% of India's total Wind Installations.With the right mix of policies,Tamil Nadu has also become the hub of Wind Energy Manufacturing with Global Heavyweights like Suzlon,Gamesa,Vestas all building plants in the State.A number of new players like Sterling Infotech and Lietner have also started manufacturing Wind Turbines in Tamil Nadu due to favorable networking effects.The state is also generates the 3rd largest amount of biomass energy with around 340 MW installed.Here are the reasons why Tamil Nadu has become the Biggest Renewable Energy State in India.
1) Tax Holidays and Subsidies - The government has given attractive subsidies to attract Wind Power Developers to the state.Rs 3.39 ( 8c/Kwh) is the tariff given to Wind Energy besides another 1c/Kwh received from the Federal Government as Generation Based Incentive (GBI).The projects in the state easily make 25-30% returns on their investment attracting a whole host of private industry developers.The Industry also gets a 10 year tax holiday,custom duty exemptions and accelerated depreciation boosting the returns even further.A 20 year PPA at fixed prices helps in building investor confidence .
September 27, 2010
Renewable Energy The potential for UK feed-in tariff changes– PV-Tech Gamesa shares slide after Del Pinos sell stake – Reuters EDF, Constellation Said in Talks to […]
September 25, 2010
Bulgaria has also now decided to cap Renewable Energy Growth with around 12.5 GW of Green Energy applications lying in the backlog.Poorly designed and implemented subsidies are the root cause for such booms and busts.Poor Governance mechanisms are behind these Green Disasters.Bulgaria is the poorest European Union Country and can ill afford higher electricity prices.The government is targeting a 16% RE target by 2020 for which it wants to fix targets for different Green Energy Sources.The power grid operator has already warned of blackouts in case even half of the 12 GW Renewable Energy applications are actually constructed.Solar and Wind Energy have been incentivized with high FITs with global heavyweights like Siemens and Suzlon rushing in to build wind farms.
September 24, 2010
Offshore Wind Energy is starting to receive a huge amount of investment and attention both in Europe and Asia.Onshore wind installations facing the problems of visual impact,saturation of good windy geological locations and problems of low frequency noise.However Offshore Wind Farms face no such problems since they are located in high wind locations offshore far away from the general population.The largest Wind Farm got installed in the UK with Swedish Utility Vattenfal starting a 300 MW + Farm off the cost of Thanet.UK is at the vanguard of the Offshore Wind Energy Revolution with the largest amount of installations at 1340 MW.The Government has given out a number of approvals to another 30-40 GW of Wind Farms to a number of private players.This will not only substantially raise the Renewable Energy generated from UK but will also result in a huge number of Green Jobs and Investment.Already a number of Oil and Gas offshore companies are converting themselves to Green Ones to take advantage of the Offshore Wind Boom.The Wind Farms are being developed by big utilities like Dong,E.ON,EDP and RWE.
September 24, 2010
Independent Solar Project Developers are fast becoming extinct as Solar Panel Producers are fighting to gobble them up.The Solar Pipelines developed by these project developers have become very valuable for Module Producers who want to lock in to their captive demand.Despite a 140% y/y growth forecast in Solar Demand this year,the Solar Panel Production has managed to keep up.Huge amounts of capacity have been built up with Demand still precariously dependent on European Government Subsidies.There is always the danger of a Spanish meltdown happening in a crucial market which could lead to a major decline.Sunpower,First Solar and MEMC have been at the forefront of such acquisitions spending hundreds of millions of dollar in acquireing these developers.Most of these Project Developers have reaped a huge windfall as they had not constructed even 10% of their pipelines.The value given to these acquired companies was for their PPA,developement,environment permits,land acquisitions etc.
September 23, 2010
Maharashtra is one of the most industrialized states in India but it lags behind other states in Renewable Energy.The recent mandate by the Central Electricity Regulator to increase the requirement of Renewable Energy to 6% of Electricity Produced found Maharashtra having a severe shortfall.Maharashtra has the largest power capacity in the country with around 21 GW but most of it is thermal based generation.Despite having the second largest Wind Power Capacity with 2 GW which is around 42% of the state's potential.However Maharashtra is still considerably short of the 6% Renewable Purchase Obligation (RPO) set by it.With CERC set to increase the Green Energy Target to 10% by 2015,Maharashtra needs not only to meet the shortfall but also to increase the share of Renewable Energy.
September 23, 2010
However Tecpro Systems differs from the other 2 IPOs in the sense that it is primarily focused on the Power Sector Space.It is a leader in the ash handling and material handling systems and is currently diversifying into becoming a turnkey provider in this segment.Like other infrastructure players it has seen amazing growth in the last 3 years at around 70%+.Its margins have come down and stabilized at around 7%.Cash Flow have been negative due the breakneck growth and the high WC requirements of the Construction Sector.The valuation does not seem expensive with the promoters diluting around 15% of the company.
Summary
This EPC company seems a good investment to me though not as good as VA Tech Wabag.The valuation at around 17x P/E is not very expensive though the sector concentration increase the risk for the company.However given the management quality,this company seems a better investment that other construction companies.The growth prospects of the Power Sector in India is huge and Tecpro seems well positioned in this space with partnerships with other major companies like Va Tech Wabag.Though there is some concentration risk,I think Tecpro seems a subscribe.
September 22, 2010
TSMC Cost Targets Would be Incredulous coming from any other Company
TSMC has said that it would look to become amongst the top 5 suppliers in the world in the next 5 years and looks at a Cost per Watt of only 19c/watt in the next 3 years which would be further reduced to 14c/watt.This is much lower than the current costs for the Solar Leader First Solar which is at around 75c/watt.This target if achieved would make solar energy the cheapest form of energy and would definitely make TSMC No.1.Note First Solar is planning a cost target of 52c/watt in the next few years.TSMC is planning to start production in Q211 with 200 MW of production planned for 2012.
September 20, 2010
Earthquake Vulnerability - Large Dam Construction has been linked to increased propensity of Earthquakes.Massive Earthquakes in China and Uttarakhand in India were linked to the building of Massive Dams in these countries.Building of Massive Man Made Structures along geologically sensitive areas has not been properly studied and understood till now
Summary
While Hydro Power is a necessity for an energy starved and growing economy like India,its effect have to be properly assessed and understood before going on a hydro binge.NTPC lost almost $300 million after its 600 MW project was canceled 5 years after getting permission.This was done in the face of large scale protest by local groups and NGOs.2 other projects in Uttarkhand have also been rejected leading to more losses.
September 20, 2010
US Energy Utilities have been buying up Green Companies at a rapid clip these days taking advantage of the fall in valuations of Green Companies recently.Exelon bought Deere's Wind Assets while NRG Energy bought Green Mountain Energy.Constellation Energy already has around 10% of its 9 GW of Electricity Capacity being sourced from Green Sources.Its Smart Grid buy is synergistic to is Energy Trading Core Business.It will help in expanding its customer base and sourcing new opportunities.For CPower Investors which are mainly PE players,it would be a good exit as competition in the Demand Response is increasing .
September 20, 2010
Orient Green Power Ltd (OGPL) is Indias Largest Green Utility and is one of the areas that is a good way to invest in India's Green Energy Sector.The company is owned by the Shriram Group and a couple of PE Players will issue around Rs 900 crores (~$180mm) which will result in a market cap of $450mm.OGPL is a relatively new company setting up and acquiring most of its 200 MW capacity in the last year which comprised of 152 MW of Wind Energy and the rest is Biomass Energy.The company plans to increase this capacity 4 fold to around 1000 MW in the next couple of years with Power Plants in India,Europe and Sri Lanka.The centrepiece of this expansion will be a 300 MW Wind Energy Plant in Tamil Nadu for which $10 million has been already been spent.The company's past profits and cash flow have been negative which is not exactly a concern given that most of the capacity was set up in the last year or so.I like the company's growth plans and the sector in which it operates.India suffers from a huge power deficit and Renewable Energy is being heavily promoted through Government Subsides and Renewable Energy Madates by the CERC.Trading of Renewable Energy Certificates (RECs) should start in a year or so giving additional revenue streams to Green Energy Producers.Here are the pros and cons of the issue
September 19, 2010
Renewable Energy SMA Solar raises revenue guidance a second time: expects PV market to top 17GW in 2010 – PV-Tech Gigawatt scale: CEC approves Solar Millennium’s […]
September 17, 2010
Finland is a Fossil Fuel Deficient country getting 30% of its power from Nuclear Energy and 28% from mostly Biomass and Hydro Energy.It is constructing more Nuclear Power to meet it future needs but a Recent Nuclear Plant has caused massive headache.Finland's Power Sector has been in the news recently for all the wrong reasons.A Nuclear Plant being built on a Baltic Sea Island of Olkiluoto has entered the annals of Project Finance as one of the biggest Disasters.The main contractor Areva which is the worlds' leading nuclear equipment supplier has surprisingly totally messed up.The original plan of builing the 1600 MW nuclear reactor for 4 billion Euros has doubled to 8 billion Euros.There are reports of faulty concrete bases and steel containers.There is already a blame game between the constructing companies Areva,EDF,Siemens and the government.The time and cost delay has truly been of epic proportions.Areva which is a giant conglomerate has suffered losses on account of just this one project.
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 16, 2010
The Competition in the Battery Segment of Energy Storage keeps on increasing with entry of new players.While established players like LG Chemicals,Panasonic are increasing capacity,there has been a raft of new startups and biggies entering this segment.Toshbia,NEC,SK Energy,Sumitomo,Samsung SDI everyone wants a piece of one of the fastest growing segments of the Electric Vehicle Sector.This has already led to a supply glut leading to a decrease in ASPs.A123 Systems has recently opening a huge factory manufacturing Lithium Cells in Michigan with the help of US government grants.With Obama aiming to capture 40% of the EV Market by US companies,more such factories are expected to come online resulting in a further supply demand mismatch.China also wants to create national champions in the Clean Transport Sector and has line up huge subsidies as well.