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Author: Mark Henwood


Broad market indices (Emerging Markets, EAFA, S&P500) all rose this week. Camino’s PurePlay™ indices were mixed with Renewable Electricity showing a 0.8% gain. Commodities (DJP) declined 2.6%.


Solar was the story of the week with our 34 member index decreasing 4.2% amid huge volatility.
The market moves this week were evidence of investors valuing companies based on government subsidies packages. On the 28th and 29th we saw reports that reductions in German subsidies might be greater than originally expected. And at the close of business on the 29th our index was down 9.2% for the week. Then on Friday reports came out that feed-in tariff reductions would be roughly in line with previous expectations – Solar rises 5.6% and closes out the week down only 4.2%.

Solar investors are also being influenced to an increasing degree by moves in oil prices. Over the last 365 days Solar and oil (measured by the OIL ETN) have been loosely correlated at .28. Over the last 30 days, however, the correlation coefficient has risen to .39 despite the fact that Solar’s electric market place isn’t driven to any significant degree by oil prices. Remember, only a portion of delivered electric prices are energy, and in most markets only a small portion of that is related to oil. So the data is showing that behavioral factors and regulator policy are important influences on valuations.

Biofuel had a down week dropping 4.5%. I don’t think this was a result of declining oil prices but rather was due to some specific company issues. Biofuel correlation (365 days) with oil has been a low .175 and has not trended upward recently. Schmack Biogas [SB1.DE] led the decline after reporting a very weak quarter and a significant management change. The 54% decline in sales for the company raises some big flags. Pacific Ethanol (PEIX) was also down a significant 15.3% giving up most of the gains associated with its recent operating profit. While the company has been able to close its preferred stock offering, the offering has caused investors to rethink the pricing of PEIX.

Renewable Electric, up 0.8% for the week, continues to be the sustainable success story for 2008. The index is now down 2.3% for the year, outperforming both the S&P and matching EAFA. Of the broad benchmarks, only Emerging Markets, up 0.7% for the year, has performed better.

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 and has positions in Renewable Electricity.

Source: Biofuel and Solar Fall Over 4% (Week Ending 5/30)