All Ships Floated (Week Ending 4/18)

Author: Mark Henwood

All broad market indices rose this week. All of Camino’s PurePlay™ indices rose also.

The Solar index followed last week’s 4.7% decline with a solid 7.0% increase. The advance was broad-based with 28 stocks increasing and 6 stocks declining. ReneSola Ltd (SOLA.L) led all gains increasing 32.1% for the week. On April 17 the company announced it was increasing its 2008 guidance for revenue and production. It now expects wafer production to be between 310 – 320 MW and sales to be between USD 530 – 550 million. With silicon at about 75% of the COGS for panels, ReneSola’s sales/production numbers translate into a panel cost to installers of over USD 3,000 /kW. This doesn’t represent any improvement in the grid-parity equation and signals continuing industry dependence on regulatory incentives and “friendly” tariffs. I’ll talk more about what I mean by “friendly” tariffs in another post.

In the Renewable Electricity sector Camino’s index advanced 2.0% with 15 stocks climbing and 8 retreating. Most notable in the group was the 17.0% decline suffered by Energy Developments (ENE.AX). On April 14 the company announced it had difficulty with a capacity test for its Broome plant and that, in combination with some other adjustments, cause it to lower its EBITDA guidance AUD 7 million to between AUD 100 – 105 million. The market reaction to this 7% lowering was an immediate 30% price reduction wiping out AUD 100 million of market cap. Some traders saw this as a significant over-correction and bid the stock back up 18% by the end of the week.

Biofuels reversed last week’s 7.5% decline with a 1.5% gain. There were 9 advancing stocks to 6 stocks falling. In the US ethanol group, Pacific Ethanol (PEIX) continued its downward trend with a 9.5% decline. With 100 MGY of operational capacity and 100 MGY coming on line this year the company is valued at USD 0.74 per gallon of production capacity, in line with VersSun (VSE). These stock prices are very sensitive to margins and are being valued on earnings, not growth.

Fuel Cells also reversed last weeks decline with the index rising 3.2% on 4 stocks advancing and 2 stocks declining.

Why are so many of the companies mentioned in these posts traded outside the United States? First, the sustainable energy business is global. With the US a declining percentage of world market cap investors need to be looking at all markets. Every advisor that I know recommends investors put at least a portion of their equity holdings in international markets. Sustainable energy is no exception and the Camino database covers all markets.

The companies selected for the PurePlay™ indices have to meet a series of screens ranging from minimum sustainable energy activity, market cap, liquidity, exhange, and several others. So the companies in the indices are real businesses pursuing real strategies consistent with the definition of sustainable energy. Of the 79 companies currently in our four indices, 31 are traded on US exchanges representing 39% of the index market cap. With 61% of the index outside the US it’s no surprise that many of our comments are about companies from other countries.

Mark is the founder of Camino Energy, an information provider specializing in globally traded sustainable energy stocks. He also is an investor in sustainable energy stocks. Mark has a position in ENE.AX

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