Category Archives: Green Money

More Ethanol = More Fertilizer Needed for Corn

Taking stock of fertilizer company stocks

By Beth McKenna  
December 15, 2007 – 11:43 pm

There is a flip side to about everything in life, isn’t there?

Take corn-based ethanol. It’s a plus for the Midwestern farmers growing corn as it provides them with more demand for their crop. It’s a negative for people buying food — expecially those on tight budgets — as the additional demand drives up food prices.

To be fair, let’s note that there are also other factors that have driven up food prices to historic highs: rising transportation (fuel) costs; and growing affluence in Asia, which has led to an increase in demand for meat, which in turn has driven demand for grain to feed livestock. 

As many readers likely know, the US already has ethanol subsidies in place. And, as some may know, Congress just passed a bill increasing those subsidies (and Bush has said he’ll sign the bill now that several of the original clean energy subsidies were taken out).

So, for now, there’s no sense debating whether increased ethanol subsidies are a good or bad thing. For our purposes, this saying applies: IT IS WHAT IT IS.

The bottom-line: More corn being grown to produce the additional ethanol means that more fertilizer will be needed. Fertilizer company stocks, which have posted scorching returns over the past year (and longer), should continue to do well.

Here’s a look at some of the major fertilizer companies (in order of market cap*):

  1. Potash (NYSE: POT) – Canadian firm specializing in potash**, a form of potassium carbonate, as well as nitrogen and phosphate, fertilizers. Some stats: $39.7 B market cap; 173% 1-year stock return; 1.9 beta; 24% Return on Equity (ROE); 30% operating margin (OM); 39% quarterly revenue growth & 67% quarterly earnings growth.
  2. Mosaic (NYSE: MOS) — Minnesota-based company that is the industry’s other giant potash producer. Stats: $36.6 B market cap; 276% 1-year return; 1.5 beta; 15% ROE; 14% OM; 55% Q revenue growth & 180% Q earnings growth.  
  3. Agrium (NYSE: AGU) – Canadian company involved in nitrogen-based, potash, sulfur, and phosphate-based fertilizers. Stats: $7.8 B market cap; 92% 1-year return; other stats not immediately available (not listed on Yahoo Finance).
  4. CF Industries (NYSE:CF) — Illinois-based company that operates in two segments, nitrogen and phosphate fertilizers. Stats: $5.4 B market cap; 304% 1-year return; 0.9 beta; 27% ROE; 18% OM; 46% Q revenue growth & 1085% Q earnings growth.  
  5. Terra Industries (NYSE:TRA) — Iowa-based company that produces nitrogen and methanol products for agricultural and industrial markets. Stats: $3.6 B market cap; 260% 1-year return; 1.9 beta; 15% ROE; 23% OM; 28% Q revenue growth & 426% Q earnings growth.  
  6. Terra Nitrogen (NYSE:TNH) — Iowa-based limited partnership (LP) with a focus on nitrogen fertilizer products. Stats: $2.3 B market cap; 272% 1-year return; 2.3 beta; 98% ROE; 27% OM; 45% Q revenue growth & 232% Q earnings growth.  

*Market capitalization (cap): # shares of company stock x stock price

**Potash: There’s a limited amount of potash production globally, thus, it’s a very profitable product for those companies producing it. Potash comes from mines, and the cost of replicating these massive mines represents a major ”barrier to entry” or “moat” (meaning other companies can’t easily get into this biz).

Before investing, do like one of those Midwestern farmers and dig, dig, dig! A bit deeper. 

This article is not a recommendation to buy or sell any securities.

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Want Wind Power? Need Turbines.

Merrill Lynch forecasts these companies to be wind winners

By Beth McKenna  
December 15, 2007 – 9:53 pm

wind-cu-330.jpgwind-cu-330.jpgBy most accounts, there is a strong tailwind behind wind power.

Merrill Lynch in Europe recently published a report predicting that global wind energy capacity will soar at a compound annual growth rate of 22% between now and 2011. 

Three of the megatrends Merrill forecasts in this same report:

1. By 2011, the US will be the world’s #1 wind energy market, surpassing current #1, Germany.

2. The global wind energy industry will grow so fast that key component manufacturers will struggle to keep pace.

3. Despite rising demand, there isn’t likely to be a significant number of new market entrants, in large part because of the value buyers place on manufacturers with a proven track record.

It doesn’t take a Nobel-winning economist to realize that if, indeed, demand exceeds supply, and there are few new entrants, there will be some big-time winners among the existing component manufacturers.

The turbine manufacturers Merrill forecasts to be winners and why:

  1. Siemens AG, a German company — has a strong position in the growing offshore markets (out in oceans).
  2. Suzlon Energy, an Indian company – has a a considerable home advantage on its turf. 

How to invest in these companies: 

  1. Siemens — which is not a “pure play” as it has many different business operations — trades on the New York Stock Exchange (NYSE) under the ticker symbol SI. So, US investors can easily purchase this stock.
  2. Suzlon — doesn’t trade on a US exchange. It trades on the Indian exchange (NSE), as SUZLON.

Wish I could hook you up with the entire Merrill report, but I’d imagine it’s pricey. You may want to check out my source below as it contains some great articles pertaining to wind and solar energy companies.

Source: Energytechstocks.com

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SunPower’s ‘Power Purchase Agreements’ Biz Model

No upfront cost -- ahh, the American Dream!

By Beth McKenna  
December 14, 2007 – 11:30 pm

Bavaria Solarpark, Germany - 10 MW

The pic above is of one of SunPower’s largest solar installations — it’s in Bavaria, Germany. Looks like we’re about to land in beautiful country, doesn’t it? Germany is a hot spot for the solar power industry because of the very generous government subsidiaries. Onto the business at hand while I’ve got a captive audience “aboard”…

SunPower in a Snapshot

SunPower Corp. (Nasdaq: SPWR) is involved in the design and manufacturer of solar power products primarily in the US, Germany, and Asia.

The company, which is a subsidiary of Cypress Semiconductor (NYSE: CY), is not an upstart like many in this industry – it’s been around since 1985. It’s based in San Jose, the heart (or shall we say, “sol”) of California’s Silicon Valley.

The company’s product lines include: solar cells, solar panels, and inverters; imagining detectors (based on solar power tech) for medical apps; and infrared detectors for computing and mobile phone apps.

The company’s subsidiary, PowerLight Corp, offers a wide range of full solar power systems for commercial, industrial and residential markets. Systems include roof-mounted, roof-integrated, day lighting systems with translucent solar panels (these sound cool), among others.  

PowerLight also provides various services such construction management, maintenance and monitoring, etc. 

Two Ways to Invest

You can buy stock in either SunPower or its parent company. SunPower’s stock trades on the Nasdaq under the ticker symbol SPWR. Cypress’s stock trades on the NYSE under the ticker CY.

Power Purchase Agreement (PPA) Business Model

This model should be called PPPA — with that first “P” for “powerful!” 

This model involves no upfront cost for the customer (commercial and public agencies only, so Harry and Harriet Homeowner can’t get in on this one). And we’re not talking pay nothing now, but pay through the nose later, ala credit cards and other high-interest rate gimmicks.

Here’s how it works:

  • The funding: In late Nov, SunPower secured $190 million from Morgan Stanley to fund this program. 
  • SunPower & Morgan Stanley will jointly own a holding company that will finance solar power projects.
  • The holding company will buy SunPower’s systems and lease them to the customer at no upfront costs.
  • The customer will have to purchase its electricity (generated from the solar system) from the holding company for a specified number of years.

So, essentially, this program puts SunPower in the energy sales business. The program appears win-win: SunPower makes money and, reportedly, the customer saves money (per my Dec. 1 piece, Hewlett-Packard, which is getting a solar array at one of its facilities under this program, expects to save $750,00 in energy costs over 15 years — and that’s at just one site.)

A PPA program eliminates what has been THE major impediment for the growth of the solar power industry — the high upfront cost.

So, investors should consider investing in companies that have PPAs.

Some Financial Stats 

  • Stock return of 238% over the past 1-year period (to Dec 14) vs. the S&P 500’s (a proxy for the overall market) return just shy of 3 %. 
  • Operating margin of almost 3.9% (over 1-year period) — this is a bit too thin for my comfort level and should be watched to see if it grows. 
  • Return on Equity (ROE) of 2.4% — same comment as above, especially considering the company’s debt/equity ratio (0.5) (debt increases ROE).
  • Most recent quarter’s revenue was up over 258% (compared to same quarter of last year)
  • Most recent quarter’s earnings (Net Income) down almost 12% — a negative and should be investigated further by anyone considering investing.
  • Financial liquidity is good with a current ratio of 4.0.  
  • P/E (price/earnings) of 647 (trailing 1-year period) and 62 (based on projected earnings over forward 1-year period) — this is a very pricey stock based upon P/E valuations. 
  • Beta of 2.0 (means the stock is 2x as risky — in the stock price fluctuation sense — as the overall stock market). 

The Bottom-line

The two big pluses for this company’s stock: the torrid revenue growth and the PPA program. However, margins need to expand so that revenue growth translates into better earnings growth. The PPA program should help the company’s bottom-line going forward, but “should” is the key word at this point.

Investors may want to check out my piece on Suntech Power (NYSE: STP). Suntech has much better operating margin (12.9), ROE (21.3), and quarterly earnings growth (85%); its P/Es are more reasonable (89 trailing, 40 forward); and has an incredibly low beta (0.2). Suntech’s stock has returned 153% over the past year — not SunPower’s 238%, but a heck of a great return at much lower risk (compare the two betas — a 10-fold difference).

Time to fasten your seat-belt — we’ll be landing in Bavaria (pic) soon. Make that sunny Bavaria.   

This article not a recommendation to buy or sell any securities.

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‘Iberdrola Renewables’ Goes Public

Largest clean-energy IPO ever!

By Beth McKenna  
December 14, 2007 – 11:25 pm

 

Iberdrola SA is a Spanish mega-utility, as it’s one of the world’s five largest utilities. It’s also a clean-energy powerhouse as it’s the world’s top producer of wind power. My fellow green money writer Tim and I have mentioned Iberdrola a few times on this site.

Iberdrola has been building its wind-energy business through a series of acquisitions over the past few years. But it became the wind-powerhouse when it acquired Scottish Power last year for $23 billion and, in the deal, whisked up a huge wind-energy portfolio, including Portland, Oregon-based PPM Energy, the No. 2 US wind-energy producer after Florida-based FPL (NYSE:FPL). (Check out my recent piece on FPL.)

The Big Green IPO

The company sold 20% of its clean-energy unit Iberenova in a pricey IPO this past week. The new public company is called ‘Iberdrola Renewables’ and trades on the Madrid stock exchange. Based on the IPO price, the total market value of the unit is $32.3 billion. As 20% of the unit was floated as the IPO, the company now has an additional $6.5 billion (4.5 billlion euros) in green.

Let’s put some perspective on the size of this big green monster: 

  • It’s the largest clean-energy stock market IPO ever! 
  • It’s also the second largest IPO this year — behind Russia’s VTB Bank.

Where’s the IPO Green Going To Go?

By all reports, the US figures predominently in the company’s expansion plans. PPM Energy already has extensive operations in the Pacific Northwest and California, and has wind farms under construction in Pennsylvania, Minnesota, and Colorado.

Iberdrola also is expanding rapidly in France, Greece, Eastern Europe, and Spain.

How Can I Invest?

The stock trades on the Madrid exchange (MCE) under the ticker IBR (MCE:IBR). It does not trade on any US exchanges — I’d imagine this is just a matter of time.

Given the massive size of this one, it’s almost a sure thing that at least a couple of the major clean-tech ETFs (a subject Tim and I’ve written about) will likely include Iberdrola Renewables in their holdings in the near future — and perhaps they even picked up some shares at the IPO this past Thursday. Stay tuned as we’ll keep on top of this one. 

How Did the IPO Go?

The stock offering was priced at 5.30 euros per share. Below is the chart for the two days the stock has traded. It closed at 5.50 on Friday Dec 14, for a two-day gain of 3.8%.  

IBERDROLA RENOVABLE (IBR.MC)

This article is not a recommendation to buy or sell any securities.

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Consumers Say They’d Pay More Green for Things Green

How do Americans stack up in this international survey?

By Beth McKenna  
December 14, 2007 – 11:20 pm

Go to fullsize imageGo to fullsize imageI’d like to think people will do what they say they’d do – but I think there’s generally a difference between the two. So, with that caveat in mind, let’s discuss this survey.

The survey involved almost 2,000 people in the US, Britain, Germany, the Netherlands, Australia, and Japan.

The results:

  • Almost 70% of the sample said they’d pay a premium for clean or “green” energy such as wind or solar.
  • Australians were the most willing to pay more for renewable energy.
  • Americans were the most willing to pay the highest premium – 20% or more – for cleaner energy.
  • Germans appeared the most environmentally-conscious – one in three said they had evaluated how their everyday choices affect the environment, compared to one in seven Americans.
  • Nearly half of the total sample said they’d pay more for other green products such as cleaning supplies and hybrid cars.

The implications? Even if there is a gap between what people say they’d do and what they’d actually do, these are still pretty decent numbers and indicate that green products and services can likely do well even if they are priced a bit higher than non-green alternatives.

Source: Reuters

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Space based solar power goes terrestrial!

By Tim Plaehn  
December 14, 2007 – 10:15 am

Emcore Corp, a leading supplier of space based solar power and communication systems has signed a contract to supply 60MW of solar power systems to Pod Generating Group in Ontario, Canada. From their space-based experience, Emcore has formed a Solar Power division to bring advanced technology to terrestrial applications.

On the ground, Emcore provides multi-junction solar cells that are combined into concentrator photovoltiac (CPV) arrays. CPV technology uses lens and mirrors to concentrate the solar power onto the multi-junction cell. The concentrator allow a cell 1 cm square to generate the same power as a 500 sq. cm of solar cells would without concentration. The use of low cost materials to manufacturer the concentrators make the arrays more cost effective than conventional silicon modules.

Emcore developed the first generation of CPV in 2006 and is working on gen II. It appears this sale to Pod Generating Group will be the first large scale application of their technology. Their different approach to solar power generation may make them a company to keep an eye on.

Emcore is a company with several lines of products in broadband, fiber optic, space and terrestrial solar power. The company’s stock trades on the NASDAQ with the symbol EMKR.

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Good news and bad about renewable energy growth

By Tim Plaehn  
December 12, 2007 – 1:44 pm

A pair of recent reports on the growth of renewable energy show how renewable sources are growing rapidly in response to global energy needs. They also show we have a long way to go to replace traditional energy sources.

First, Exxon Mobil has released its annual Outlook for Energy which forecasts energy demand until 2030. Here are some of the highlights:

  • Global energy demand is forecast to grow at an annual rate of 1.3% per year, with the developing world growing a a 2% rate, and the developed at 0.5% per year.
  • Hydrocarbons will make up 80% of energy use through 2030. Oil and gas will be 60% of the total energy use.
  • Wind, solar and biofuels will have excellent growth of 9% per year. However, these sources now only provide 0.5% of world energy use and will be only 2% in 2030.

The U.S. Department of Energy; Energy Efficiency and Renewable Energy program (EERE) has released a preliminary report on the growth of renewable energy sources. This report has some good news on the growth of renewable energy. Renewable energy use is growing at greater than 10% per year world wide:

  • Excluding large hydro-power, renewable electricity production grew 15% last year and now makes up 5.5% (237 gigawatts) of global energy production.
  • Breaking down renewable sources, first the percentage of renewable power the source provides, and second the growth of production last year (if provided):
    • Wind power: 40% of renewable with 25% growth
    • Small hydro-power: 31%
    • Biomass fueled electricity: 18.5%
    • Geothermal: 4.2%
    • Grid connected PV systems: 3.2% with 56% growth
  • Ethanol production increased 15% to 11.6 billion gallons and biodiesel increased 33% to 2 billion gallons.

These reports show how renewable energy is and will provide outstanding growth in investment potential, jobs and global weather benefits. However, projections show well over 90% of energy will still come from hydrocarbon sources, so there is a long way to go.

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Investing in the future of portable power

Five micro fuel cell companies that could change the world

By Tim Plaehn  
December 10, 2007 – 9:13 am

With over 1 billion portable electronic devices being sold world wide annually, freedom from the recharging cable will make some company’s investors rich. The idea of a refuelable or disposable fuel cell that will power cell phones, PDAs, ipods and laptop computers for extended periods of time without recharging is the goal of several companies. The development of tiny fuel cells that are safe, reliable and cost effective is on the horizon. Here is a list of publicly traded companies hard a work to develop the product that is battery of the future for small electronic devices.

  • Neah Power Systems: This company has taken the direct methane fuel cell (DMFC) in a different direction by replacing the typical polymer membrane with a porous silicon wafer that is claimed to be generate a higher level of power in a smaller format. Neah Power trades on the OTC symbol: NPWS.
  • Medis Technology: Here they have developed what they call Direct Liquid Fuel Cell (DLFC) technology using liquid borohydride. The DLFC is claimed to be passive technology without the internal fluid transfer mechanics required in the methane powered fuel cells. The stock is listed on the NASDAQ: MDTL.
  • VIASPACE Inc.: The VIASPACE Energy subsidiary is working on disposable DMFC technology. VIASPACE uses technology licensed from NASA’s Jet Propulsion Laboratory. The stock trades on the OTC bulletin board: VSPC.
  • MTI Micro: This subsidiary of Mechanical Technology Inc. (MTI) has their version of DMFC’s called Mobion. With 80 patents that improve the technology, MTI has licensing agreements with Samsung and Duracell to help get their technology into the market. MTI stock is NASDAQ traded: MKTY.
  • Power Air Corporation: Power Air has developed a technology called the Zinc-Air Fuel Cell (ZAFC). Obviously, they use zinc vs. methane as fuel for their products. The company was covered by this site here, and are aiming to have products commercially available by next fall. Stock is OTC BB: PWAC.

So pick your technology: DMFC, DLFC or ZAFC. One or several of these companies have the possibility to radically change how we power our small electronics. And with billions of these devices throughout the planet, that could be a very profitable change.

Picture: MTI Micro Mobion

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Study shows higher ethanol blends may improve fuel economy

By Tim Plaehn  
December 7, 2007 – 3:40 pm

One of the criticisms of ethanol as a vehicle fuel is that fuel economy is reduced due to the lower BTU content of a gallon of ethanol vs. gasoline. However, a recent research study has shown ethanol blends of up to E30 may actually improve fuel economy for cars on the road today!

The research was performed by the University of North Dakota Energy and Environmental Research Center and the Minnesota Center for Automotive Research. Their report is titled Optimal Ethanol Blend Level Investigation.

The testing was performed using four cars, all 2007 models, a Toyota Camry, a Ford Fusion, a regular fuel Chevrolet Impala and a flex-fuel Chevrolet Impala. The vehicles were tested using the U.S. EPA fuel economy test procedures and they were also tested using the EPA standard emission tests for pollutants. The vehicles were each tested using regular gasoline, ethanol blends at 10% intervals up to E70 and E85. Here are some of the more interesting findings:

  • Three of the four cars had better fuel economy at either E20 or E30 than with regular gas. The best was the flex-fuel Impala, which had an improvement of 15% on E20. The others has a small improvement on E30.
  • All of the cars has significantly reduced emissions on higher ethanol blends.
  • The non-flex-fuel cars were able to run and perform without problems on blends of up to E45.

What I take from this is that cars on the road today could run on ethanol blends up to around E30 without a loss of fuel economy or performance and flex-fuel designed vehicles may even have improved fuel economy. The U.S. currently consumes 400 million gallons of gas per day. Replacing 25% of gasoline with ethanol would reduce annual gasoline consumption by 40 billion gallons, and probably send the Saudis to the poor house!

The report said the government should do further testing to confirm the results of this relatively small sample. If the results are verified it could be very good news for the ethanol industry.

Source: Alternative Energy News

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Efegy or Kill A WATT?

By Doris Lo  
December 4, 2007 – 2:37 pm

This is the season for giving, the season for savings, the season for giving savings. This means, you can do your shopping painlessly because of two energy monitoring gadgets.

The Kill A WATT by P3 International has basic features for monitoring your electrical bill, er, energy consumption. The LCD displays your power consumption by Kilowalt-hour. You can monitor the quality of your power by Voltage, Line Frequency, and Power Factor. It’s affordable too. You can snatch one of these for under $20.


More advanced is the efergy meter. This wireless, “smart” electricity meter looks great. The meter functions in real time, refreshing every 6 seconds to tell you power you’re consuming, what it’s costing you, and an estimate of your contribution to climate change. The smart meter also stores data daily so you can track your changing habit towards energy. Think about that while you’re making New Year’s Resolutions.

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