Renewable Electricity Stocks Advance (Week Ending 4/11)

Author: Mark Henwood
Sustainable energy stocks followed the broader markets down this week with only Renewable Electricity able to show a gain.

The Solar index followed last week's 14.5% advance with a 4.7% decline. The retreat was broad-based with only 4 stocks increasing and 30 stocks declining. Aloe Solar SG [AS1.DE] led the declines falling 13.1% for the week despite positive news on April 3 that its production expansion was on track and it had received orders in 2008 for EUR 150 million.

With First Solar (FSLR) also falling 3.5%, the decline was not limited to the silicon world, as some commentary alluded to. Without extraordinary news to push the sector down the relatively modest change for this highly volatile group seems to be primarily driven by broader market movements.

In the Renewable Electricity sector the index advanced 0.3% with 14 stocks climbing and 9 retreating. German wind farm developer Planbeck Neue Energien Ag [PNE3.DE] led all increases with a 13.1% gain. On March 31 the company reported on 2007 results and conducted a press and analyst conference. The company reported a solid pipeline and positive news about its wind blade subsidiary SSP Technology. While the stock price didn’t react for a few days it looks like this week’s price gain is a reaction to the recent news.
Biofuels reversed last week’s small gain with a 7.5% decline culminating in a YTD decline of 32.4%. There were 3 advancing stocks to 12 stocks falling. Aventine (AVR) led the way down lowering 23.1 % for the week. 9.5 % of the decline occurred Friday after a USB analyst lower their target price due to concerns over corn prices and shrinking margins. Aventine is now valued at USD 0.97 per gallon of production capacity. This compares favorably with VeraSun’s (VSE) value of USD 0.67 per gallon of production capacity (after this year’s 5 new plants start-up). If it is possible to make any money producing ethanol, the company valuations have to be getting low enough to be attractive.

Fuel Cells also reversed last week's gain with the index falling 2.2% on 1 stock advancing and 6 stocks declining. Ceramic Fuel Cells LTD [CFU.L] kept the index from falling further with its 13.6% gain for the week. We found no public news that would explain Ceramic’s being able to move counter to the market unless these are second reaction to the company’s Feb 28 order announcement. ITM Power [ITM.L], on the other hand, continued to lose ground with a 12.4% decline. I share the market’s skepticism about the impact of the company’s recent electrolyzer development.

Solar continues to move with the broader markets, all of which were down for the week. With its high beta over any period during the last 500 days the index’s performance this week is to be expected. Biofuels continue to be plagued by questions regarding profitability. Clearly, getting bigger, like VeraSun did with its acquisition of US Bioenergy, isn’t perceived as materially helping the basic operating cost issue. At some point stock prices for Biofuel companies will get low enough to present a compelling price / cash flow return and investors will start taking positions.

Disclosure: Mark has a position in PNE3.DE.

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.