Environment
November 29, 2010
The Delhi Mumbai Industrial Corridor (DMIC) which is being jointly developed by India and Japan will also see the development of 24 Green Cities.The ambitious infrastructure project being built with $50-90 Billion will see a freight/railway/road transport corridor between India's 2 most important cities of Delhi and Mumbai.The resulting development along this transport corridor which will be passing through 6 states will make use of Green Technologies.Japanese Conglomerates like Hitachi,Toshiba,Mitsubishi will be involved in the building of this massive projects and will use their advanced energy efficient technologies to develop these Green Cities.
November 29, 2010
China has the world's largest hydro power capacity at 200 GW and it plans to double the capacity by 2020.China is mostly dependent on Coal Power and Hydro Power to meet the electricity demand from its fast growing economy.China has the world's second largest electricity capacity at 850-900 GW second only to USA at ~1000 GW.This will be soon be overtaken as China continues to grow at 8-10% and its electricity per capita is still much below developed world standards.China is already the world's biggest consumer of Energy and emitter of Greenhouse Gases.Despite rapidly investing in Nuclear and Renewable Energy,China's voracious demand has made the growth of Fossil Fuel Energy unsustainable.It already consumes 3 Billion Tons of Coal per year and is already importing around 180 million tons per year.
November 26, 2010
India has set up ambitious targets of meeting 15% of its Energy Needs from Renewable Sources up from around 5.5-6% in 2010.WIth India's Electricity Capacity expected to rise to 450 GW from around 165 GW,this would imply that around 67.5 GW of Electricity Capacity would be needed up from around 16 GW.This would mean around 5 GW of Capacity addition every year in the next decade which is a very tall order.20 GW could be met by Solar Energy according to the Jawaharlal Nehru Solar Mission (JNNSM).Most of the rest would have to met by Wind Energy.Biomass Energy has high costs and reliability problems which mini hydro potential is only 1 GW.Note this is just the capacity I am talking about,for meeting the electricity generation,capacity additions would have to be greater as Solar Energy and Wind Energy have only 20-30% Load Factor compared to 60-80% for Fossil Fuel Energy Sources.Nuclear Energy can contribute another 20 GW.
Renewable Energy in India is growing at a rapid pace increasing its share of the total capacity from 2% in 2003 to around 10% in 2010.However the share of electricity generation is still quite low at 3% due to the lower capacity load factors of Green Energy Sources compared to Fossil Fuel Sources.The Total Installed Capacity of Renewable Energy in India is around 16 GW with Wind Energy taking the Lion's share at almost 70% followed by Small Hydro at 15% and Biomass Energy at 12%.Solar Energy in India till now has a capacity of just 6 MW which is estimated to grow to 22 GW by 2022 making Solar Energy one of the Biggest Growth Opportunities in the Field of Indian Energy.
November 22, 2010
Climate Change in the last year has faced one hit after another which should culminate in the failure of the Cancun,Mexico talks which is to start on November 29.Note there are not many expectations from the Cancun Climate Change negotiations in sharp contrast to the Copenhagen Talks in 2009.Despite the global attention and expectations from the Danish hosted Climate Meet,Copenhagen was a total disaster putting Global Warming in the Backburner despite more and more evidence of the massive global harmful effects.In the recent year,the Fossil Fuel Lobbies have been trying to discredit the very agency in charge of spearheading the war against Global Warming.They have been largely successful with global polls revealing a distinct cooling towards Global Warming Efforts.China despite huge investments into Clean Technology is emitting more Carbon Dioxide while USA has completely given up its Global Leadership on the most pressing World Problem.Here are the Reasons why the Cancun Climate Change Talks would fail.
November 22, 2010
Coal Demand continues to grow at steep pace in India and China defeating the efforts of Climate Change Activists in the Developed World.Building a Thermal Power Project in Europe and USA has become exceedingly difficult due to concerns of the detrimental health,air quality and pollution effects of Coal Derived Electricity and Heat.Coal is considered as the Dirtiest Form of Fossil Fuel Energy making it a prime target in Climate Change Fighting Efforts.However China with around 3 Billion Tons of Coal Consumption and India with another 500 million Tons depend on King Coal for majority of their Energy Needs.While China generates 80% of its Electricity from Coal,India generates around 65%.While both countries have Huge Reserves and Production of Coal,their voracious demand is leading to surging imports.These Imports are being sourced from countries like Australia,Canada and USA which are going through Coal Mining Booms.Ports are getting congested as Infrastructure failed to meet the growing coal needs of India and China.
November 16, 2010
Valuation
MOIL has a Net Worth of Rs 1860 crores and a NAV of around Rs 110/share.The Company will probably earn around Rs 700 crore this fiscal year after doing Rs 465 crores last year (which was a bad year for the industry).Operating Cash Flow has been generally higher than the Net Profit leading to improved cash position over the last 4 years.The Capital Requirements of the Business is quite low leading to high Return Metrics.If the Government sells the 20% stake at Rs 1500 crore that would give the company a market cap of Rs 7500 crore.Taking out the Rs 1700 crore in cash would make the company be valued at 3.2x BV and 8-9x P/E.This is a substantial discount to Global Mining Companies.
Summary
Like Coal India Limited,MOIL looks like a very safe commodity investment at a cheap valuation.With growing Indian Demand,MOIL can hardly miss continuing on a steady 10-15% earnings growth over the next 4-5 years.If the commodity prices flare up again like 2008 due to QE2,then MOIL provides a big upside as well.Its a good investment for investors looking to invest in safe mining plays.With government ownership,the typical Indian management risk is also greatly mitigated.
November 15, 2010
Green Buildings are a huge multibillion dollar industry but from an investor's point of view the information and investment avenues about this very important Green Sector remains surprisingly scare.Most of the investment options in Green Buildings remains confined to huge conglomerates like Johnson Controls,Honeywell,Schnieder Electric,Siemens and a few small startups like Serious Materials.Most of the information about Green Buildings can be gleaned from the US Green Buidling Council and EPA.Interest in Green Buildings started in the 1970s and still remains a niche concept despite huge strides in the 21st Century.Certifications like LEED has brought awareness about Green Buildings but they still occupy a remote corner in the Green Investor's mind.In the Green Building Series,I will try to explain the concept of Green Buildings.For a start here is the Definition of a Green Building also known as a Sustainable Building.
November 13, 2010
Solar PV Technology have made a huge advance in the last 2-3 years leading to a demand explosion with more than 100% growth forecast this year.Crystalline PV Technology as well as Thin Film Technology like CIGs and CdTe have reduced their costs drastically.While Solar PV still requires generous government subsidies for their growth,grid parity has come very close.Solar PV Technology has become economically competitive in parts of Italy where a unique combination of high electricity rates and sunshine have made Solar PV Technology very attractive.Costs are being reduced at more than 10% per year which would make Solar PV competitive in 2-3 years in most parts of the world.However mainstream and reputed forecasters and companies like Boston Consulting Group remain blind and ignorant to this.BCG in a recent report has said that biofuels and Concentrated Solar Thermal (CSP) Technology will become competitive.I have issues with both of these technologies.
November 13, 2010
4) Parking Fights - Most of Indian cities are unplanned without any parking for most houses.This leads to a huge problem in terms of illegal parking.Even Legal Parking sees fights between neighbours leading to fights and sometimes even deaths.With thousands and millions of car hitting the roads every day and month,the problem is growing even more acute.No solution in sight as Indian politicians happily line up their pockets in corruption scams.
Summary
India's Transport Policy is a total mess with no solution in sight.Public Transport is not given enough money or resources to make a difference while Indian auto companies are making huge profits.Construction of the recent Metro Railway to Delhi's satellite city of Gurgaon has already been filled to capacity not reducing the pressure on the main highways which remain chock a block with cars 24 hours a day.India needs to massively invest in public infrastructure and dis-incentivize private modes of infrastructure like cars through congestion and fuel taxes.
October 30, 2010
Van Eck Global has come out with a Rare Earth Metals ETF (REMX) which offers investors an opportunity to get a diversified exposure to this commodity sector .Rare Earth has become a "geopolitical problem" rather than a demand/supply problem with Chinese monopoly over the mining and production of REE.Note materials for Green Industries have become a hot investment sector in recent days with current and future shortages fueling a strong price rally.Global X had launched a Lithium (LIT) ETF which is an investment vehicle into Lithium and Battery/EV producers.Like LIT which can hardly be called a pure play Lithium play,REMX is also not a pure investment into the REE sector.Rather it offers an investment into a wide variety of strategic ores and metals such as titanium,zirconium etc.REMX analysis shows that it is very well diversified geographically and across companies.This is a good in my opinion since many of the rare earth companies that have recently seen their stock prices shooting up are very risky.Most of these companies will take anywhere between 1-5 years to start production and the quality of their reserves,management,environment permitting etc. is highly uncertain.Note mining of rare earths is very environment unfriendly which is ironic since they are mainly used in Green Industry.Here is a list of the features of this new ETF
October 28, 2010
Siemens as a part of its Energy Efficinecy Efforts will go on a Green Makeover of its Office Locations in India.LED Lightining and other measures will be adopted to save Rs 3 crore in Energy Costs annually.15% of its current Energy needs will be cut by spending around $2.2 million in the next 2 years with a payback time of around 3 years.Siemens hopes to establish its Green Credentials in the Green Building Category by showcasing its inhouse efforts in Energy Efficiency.Note Energy Efficiency is the cheapest way to cut carbon emissions and is the lowest hanging fruit in mitigating Climate Change.It is perhaps the only Green Sector which does not require a subsidy to be economic.India is on a massive infrastructure building spree with $500 billion expected to be spent over the next 5 years.Green Buildings will go a long way in reducing India's growing carbon emissions and will save money as well.
October 28, 2010
Pennsylvania is the Ground Zero for Shale Gas Development globally with more than 2500 Gas Wells in Operation.The State is situated on top of the Marcellus […]
October 26, 2010
Chinese Monopoly over Rare Earth Elements has Foreign Governments worried
Rare Earth Elements (REE) have become a hot media top with the unofficial Chinese export embargo to Japan.REEs are crucial raw materials for a wide range of industries in the Green and Defense Sectors.The Chinese monopoly over the production and supply of these commodities have made EU and USA thinking of taking the WTO route.However this had not detered China from clamping down on the production and exports.China wants to use these minerals as a strategic resource to force Green companies to relocate to China and transfer hard to get technologies to local Chinese companies.Note while EU and USA are looking to export Green Product to China,the government there has shrewdly only given permissions to companies willing to transfer technology.
Can India take Advantage to become a Leading Supplier
Rare Earth Element Deposits are found in many places in the world but due the Chinese undercutting of prices and lax environmental regulations had all but shuttered every mine in the non-Chinese geographies.Recent Chinese moves have opened up oppurtunities for REE mines as prices have increased by almsot 5-10x in the last few months.Lynas Corp is opening up a mine in Australia while Molycorp is reopening its mine in Mountain Pass,Californa.India also has a long history of production and export of REE . However its production of around 2500 tons is only 2% of the estimated Chinese yearly production of 130,000 tons.
October 20, 2010
According to a report from Maplecroft,India and Bangladesh are the countries most at risk from the deleterious effects of Climate Change.The other countries in South Asia like Nepal,Myanmar,Pakistan are not far behind.Maldives the smallest country in South Asia is the heaviest in danger with its very existence at stake.Next in the list are African countries like Mozambique,Madagascar and others from Global Warming Changes like Droughts,Floods,Submersion etc.Note Climate Change has faced massive setbacks in recent time with the failure of the Copenhagen meet and not much chance of success with the next Cancun meet.USA and China the two biggest emitters of GHGs have been reluctant to move forward in the the Climate Change issue.Note the poorest countries are the most vulnerable to climate change and they have the least voice in climate change talks.Rich countries like Saudi Arabia have even blocked studies on climate change by poor island nations.
October 18, 2010
India's Massively Growing Industry is clashing head-on with the Environment leading to huge fissures.There have been numerous clashes already with many of the mega industrial projects being cancelled or shifted.Tata Motor's Nano Project in Singur,West Bengal was probably the most famous project to be scrapped after a huge people's uprising due to loss of land and livelihood.Unlike China,where industry manages to always win over people's protests,it is not that easy in India's Democracy.Orissa recently saw Vedanta Resources Bauxite Mining Project cancelled over loss of tribal sacred land loss concerns.This was a huge victory for India's environmentalists as officials and companies were found breaking forest and environment laws.Now POSCO which has been trying to build a $12 Billion Steel Plant in the Mineral Rich State of Eastern India finds that Green Approvals given might be cancelled by a panel of government experts.Note the POSCO project was stopped recently pending an environmental assessment whose report will be published on Oct 25.Despite hectic lobbying by POSCO and the provincial Orissa government,the project looks set for more delays.Note the Steel Plant which was started in 2005 is already way behind schedule.
October 18, 2010
Wind Energy in India is the biggest Green Industry currently with around 1 GW of Wind Power Capacity being installed in a year on average.The Growth in Wind Industry has been driven by states like Tamil Nadu who have heavily subsidized and promted Wind Energy.India at around 10 GW of Wind Capacity is the world's 5th largest Wind Energy Producer.However India remains far behind China in terms of Wind Energy Growth .Last Year China installed nearly 13 GW of Wind Energy which is more than India's total installed capacity of Wind Energy.With a target of around 230 GW by 2020,China is on track to install 20 GW of WInd Capacity a Year in the next 10 years which would make India a Pygmy.Also two of the largest Wind Turbine Producers Sinovel and Goldwind are from China.India despite producing a world class company Suzlon in the early states of Wind Industry Development is struggling.Suzlon has fallen on very hard times running big losses while other Wind Companies are of hardly any decent size.
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.
September 22, 2010
VA Tech Wabag is one of the best quality companies to come out with an IPO in the Indian Market in 2010.The Company boasts of a quality management,good technology and fast growth.Despite a hiccup in 2009,the company has picked up its growth in 2010 and operating in a fast growing Water Industry with good execution,it looks to have little downsides.While Low Net Margins and High Working Capital is a characteristic of the EPC sector it operates in,the company has constantly been able to improve on those parameters.
Summary
There is almost nothing to dislike about the company except the valuation which is a tad expensive at around around 28-30x,however the sector P/E is also around 30-35x and VA Tech Wabag deserves a premium.Given the high quality of the company and the Water Sector it operates in,I would invest in the company as the future growth is tremendous.Also the international diversification and the Recession Proof Water Industry makes this investment safer than your normal Indian EPC company which are asking for the same valuations.
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 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
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 11, 2010
The US Congress had got into the act in 2009 through 2 Bills to regulate the Hydraulic Fracking Process and told EPA to study the process.The Stakes are high for the Oil and Gas Companies as Shale Gas represent a Huge Opportunity.North America has been a pioneer in this Technology with Shale Gas Extraction expected to spread rapidly in different parts of the world.The EPA Study and US Regulations will be watched closely by other countries which are formulating their own regulations in this regard.
September 8, 2010
India’s Powerful Central Planning Commission has decided to give $500 million from next year to Indian States making the most Progress in Going Green.The Agency has […]
September 8, 2010
Finland is proposing to build a Billion Dollar Highway from its Capital Helsinki to a City near the Russian Border.This Highway will be the first Zero […]
September 5, 2010
Shale Gas Extraction has seen doubts being raised against its Environmental Safety Record.This new form of Fossil Fuel Extraction has seen a Gold Rush from Global Oil and Gas Majors looking to tap into this major new Energy Form.In the initial helter and skelter,environmental norms have been bypassed.Recently a NGO blamed regulators and companies of illegally diverting millions of tons of water in Pennsylvania.India's Biggest Private Company Relaince Industries has invested a huge amount in acquiring Shale Gas Assets in order to assimilate this Technology. The Indian government is writing a new Shale Gas Policy as India is said to have geographical formations with potential Shale Gas Deposits.
September 5, 2010
ndia is one of the fastest growing economies in the world with fundamentals indicating that this rapid growth will continue for the next 10-20 years as well.However Green Investing in India is fraught with risk since major Green Energy Companies like Suzlon and Moser Baer have proven to be abject failures till now.A Good Way to do make Green Investments into India is through Renewable Energy Focused Utilities.Tata Power which is one of India's largest utilities is looking to focus on Green Energy as well.The company has 16% of its power supplied from Renewable Energy Sources and is looking to increase it to 25% by 2017.
September 1, 2010
Coal India Limited (CIL) would be a safe stock to invest in if it priced in the indicated manner that is a $33 Billion Market Capitalization.This stock won't be a multi bagger but would offer decent price appreciation with almost no downside risks.At trailing P/E of 15x and 3 year average trailing P/E of 20x,the company is not expensive given its competitive strengths.Its dividend yield would be around 1.5% with growth of around ~10-12%.However if you exclude $8.5 Billion in Cash,then the stock seems cheap at around trailing P/E of 11x.It has a P/B of 6x and P/S of around 3x.With its ASP being at a 65% Discount to the International Price,the Company has a huge moat around its business model and I would recommend it as a Buy.
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.
August 25, 2010
Global hopes of an agreement on Carbon Emissions to stop the advance of Global Warming has been put in the Cold Storage.With little consensus and declining […]