Foster Wheeler, Comverge: Two Clean Energy Stocks Worth Noting

Includes: AMFW, COMV
by: Terence Chan

Everybody is talking about how "clean energy" stocks are going to make a lot of money for your portfolio. Political, social and economic pressures are forcing corporates globally to adopt "green" initiatives in the way they do business. The bottom-line is greenhouse gas [GHG] emissions have to be cut down, or there will be both climatic and economic ramifications.

I will detail two clean energy plays that people haven't talked much here. In the end I will also mention the names frequently discussed that I think will also be your money's worth.

Foster Wheeler (FWLT) provides construction and engineering services to various industries worldwide. What interests us is the clean coal technologies [CCTs] its Global Power Group provides to its clients. Here is an excerpt from a US Department of Energy document, detailing the type of project to be performed by FWLT. It provides a glimpse into the company's circulating fluidized bed boiler technology:

Foster Wheeler Development Corporation is working under DOE contract No. DE-FC26-00NT40972 to develop a partial gasification module (NYSEARCA:PGM) that represents a critical element of several potential coal-fired Vision 21 plants. When utilized for electrical power generation, these plants will operate with efficiencies greater than 60% while producing near zero emissions of traditional stack gas pollutants.The new process partially gasifies coal at elevated pressure producing a coal-derived syngas and a char residue. The syngas can be used to fuel the most advanced power producing equipment such as solid oxide fuel cells or gas turbines or processed to produce clean liquid fuels or chemicals for industrial users. The char residue is not wasted; it can also be used to generate electricity by fueling boilers that drive the most advanced ultra-supercritical pressure steam turbines


Foster Wheeler's process operates at much lower temperatures that control/minimize the release of contaminants; this eliminates/ minimizes the need for the expensive, complicated syngas heat exchangers and chemical cleanup systems typical of high temperature gasification. By performing the gasification in a circulating bed, a significant amount of syngas can still be produced despite the reduced temperature and the circulating bed allows easy scale up to large size plants. Rather than air, it can also operate with oxygen to facilitate sequestration of stack gas carbon dioxide gases for a 100% reduction in greenhouse gas emissions.

Basically FWLT's boilers reduce the sulfur content from coal or biomass, which increases heat transfer efficiency, which also reduce nitrogen oxide emmissions. It's a cool technology that power utilities should have. Looking at FWLT's numbers, analysts expect it to grow 16% and 20% in '07 and '08, with revenues growing over 20% for both years! That is a great growth rate for a company with already close to $4 Bil in revenues. At only 18x P/E and industry momentum on its side, the stock is a bargain.

FWLT 1-yr chart

FWLT 1-yr chart

Comverge Inc. (NASDAQ:COMV) is what one may call an electric utility efficiency specialist. The company provides demand-management solutions to utilities in so-called "hours”, which decrease energy consumption and thus increases available capacity. This is achieved totally emission-free and is 40% more cost-efficient than building additional peaking generators or transmission lines. Utilities can run the demand-management program on their own (and pay based on the number of devices installed), or outsource the process to Comverge, with the latter being paid on a pay-for-performance (per kilowatthour-saved) basis. Due to the blackout period, analysts currently do not have earnings estimates for the company.

The company has a good track record so far. It has won 100% of the 5 contracts it has bid on. Sales however have grown by 96% during the past two years, while loss per share has been reduced by 41%. Outsourcing revenues in fact have grown by more than double in 4Q06, which is the very first quarterly comparison available. At the rate the clean energy and demand response market is growing, it shouldn’t be hard to imagine the company being profitable in due time.

COMV 10-day chart

COMV 10-day chart

Other stocks I like are solar stocks JA Solar Holdings Co., Ltd. (NASDAQ:JASO) and Trina Solar Limited (NYSE:TSL), waste-to-energy company Waste Management, Inc. (WMI), cellulostic ethanol producer SunOpta, Inc. (NASDAQ:STKL), power plant contractor The Shaw Group Inc. (SGR), and uranium companies like Cameco Corp. (NYSE:CCJ), Energy Metals Corp. (EMU), USEC Inc. (USU) and Uranerz Energy Corp. (NYSEMKT:URZ).

Disclosure: none