3 Speculative Wind Energy Stocks With the Potential to Soar

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 |  Includes: JUHL, WNDEF
by: Martin Peter Roth

Wind energy stocks are out of favor right now, with investors fearful that last year's slowdown in the growth rate for new US wind infrastructure is set to continue this year and next.

Certainly some wind power companies have been struggling with postponed orders and a reduction in the number of new orders. Yet the fact remains that the 5,100 MW of new wind capacity that the US installed last year was a strong figure, and a bigger amount than any other country except China. And as I have written already, some companies are seeing an excellent recovery in orders.

Some smaller companies, often hidden below the investor radar, are also doing well. Below are three that have the potential to soar. Note that these really are speculative stocks. They are small companies, with all the inherent risks. Just one bad deal -- easily weathered by a larger corporation -- could sink them. Stock prices are likely to be volatile.

Juhl Wind Incorporated (OTCPK:JUHL) is a Minnesota company, led by renowned wind energy pioneer Dan Juhl, which specializes in community-based facilities of 5 MW to 80 MW in capacity. Since 1999 it has developed 18 wind farms with a total capacity of 178 MW. Following a loss in 2010, the company moved strongly into profit in the March 2011 first quarter.

Juhl Wind has developed an attractive development model for its projects that incorporates all members of a community. Ownership of each project is shared by the actual landowners and others in the community. Construction work is carried out by local contractors.

In May 2011, Juhl Wind was engaged in various aspects of the development of 23 wind farms -- mainly in Minnesota and Nebraska -- with a total of 360 MW capacity.

The company has several strategies for growth. Its formation of Juhl Wind Asset Investment in May 2010 was intended to provide supplemental funding to its projects through the issuance of securities, and thus more quickly bring developments to fruition.

The company is also now looking at the acquisition of businesses and wind farm assets that will help it grow. In addition, it is seeking to expand its operations into the provision of maintenance services to existing wind farms.

Western Wind Energy Corporation (OTC:WNDEF), though based in Vancouver, has its key operations in California, where it owns and operates the 30 MW Mesa Wind Power generating facility -- currently being upgraded to 50 MW -- near Palm Springs, and the 4.5 MW Windridge generating facility at Tehachapi. It also has a string of other wind and solar projects, under construction or at the development stage, in Canada, the US and Puerto Rico.

Western Wind has accumulated extensive experience in the development and management of wind farms, and in the March 2011 quarter it derived $0.51 million in revenues from energy sales.

In December 2010, it started work on its major 120 MW Windstar project in California, with operations expected to begin in the 2011 third quarter. It has signed a Power Purchase Agreement with Southern California Edison Company.

Also in December 2010, it began work on a 10.5 MW combined wind and solar development in Kingman, Arizona, with operations scheduled to commence in the 2011 fourth quarter. It has signed a Power Purchase Agreement with UNS Electric.

The company expects 60 cents per share EBITDA from the Windstar and Kingman projects in 2012.

In May 2011, it announced that it had signed a 20-year Power Purchase Agreement with the Puerto Rico Electric Power Authority for its planned 30 MW solar project there.

Looking further ahead, Western Wind has bought or leased some 8,000 acres of prime wind energy sites in California, where there is a target that 33 percent of the state's power needs will derive from renewable sources by 2020. Its power rates are among the highest in the country.

XZERES Corporation (XPWR.OB), lcoated in Oregon, designs, develops and supplies small-scale – 2.5 KW to 100 KW – wind turbine systems for business, residential and agricultural use. The company's April 2011 acquisition of the assets of Rochester Power Saver expands the company's range of offerings into power management and power efficiency products.

The company's February 2011 full-year financial statement, released on May 27, should be read by anyone interested in the speculative end of the stock market (a press release is here).

The company recorded revenues of $1.48 million (zero in the previous year), with new models and sales in 11 states. It achieved MSC (Microgeneration Certification Scheme) status in the UK, opened a sales office in Dublin and received its first European order. It is now developing a new generation of distributed generation small wind power systems, and is also using its technology to improve the Rochester Power Saver product line. In Vietnam, it is actively pursuing some large micro-grid island electrification projects and desalination projects powered by small wind turbines

The company is buoyant about its outlook. It expects to ship to many more states and countries. It is also actively pursuing the federal market, where it sees potential for some relatively large orders, although it does not expect much business before 2012.

It says its goal -- it stresses that this is not a guarantee -- is for revenues to at least quadruple in the year to February 2012. It also expects a steady shift from indirect to higher-margin direct sales.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.