Energy Diversification

19 Comments

    • Vinod Khosla: Time to Get Practical on Energy Solutions [view article]
      Khosla has been arguing that his companies can produce cellulosic ethanol for a buck a gallon. Great, if so, he doesn't need one dime of taxpayer money and he deserves to make his next billion. If not, he'll be revealed for the huckster I think he is.

      If he didn't rip on solar so unreasonably, people may have noticed that he has a good point about putting solar panels in the desert.       Sep 18 12:26 PM
    • Analyst: Oil Prices Inflated by 50% [view article]
      Why is it that none of the oil Bears, who claim that this is all "speculation"... seem to be able to offer any substantive, fundamental arguments either? Come on -- Is a boat analogy supposed to be a compelling argument about oil supply and demand?

      This is all testament to the rarely-discussed fact that we know very little about oil reserves and production, particularly in Saudi Arabia. We can listen to Hard Assets Investor and Jim Cramer tell us every day that its "not about supply disruptions, its about demand"... but the 1970s proved that supply disruptions can cause HUGE problems.

      To deny that we face the same risks in the oil supply chain - or worse risks - as we did in the 1970s, is simply ignoring reality.

      One terrorist attack on Saudi oil production will show the world how much at-risk our oil supplies are.

      In this environment, as long as nothing goes wrong - a huge assumption - sure, oil prices may moderate. But then when a "surprise" event occurs - an act of war, terrorism, or God - all the oil Bears will say "well, no one could have predicted THAT!" But of course, its funny how unpredictable things always seem to happen.

      And when those things do happen - Democrats will lament their opposition to coal and nuclear, Republicans will lament their opposition to longer-term alternative energy sources, and the country will lament its fixation on electric cars without any concern for how that electricity can be produced over the next ten years. And Vinod Khosla's utterly fraudulent claims about "cellulosic ethanol for $1 a gallon" will be revealed for the self-serving hype that they are.       Sep 18 12:19 PM
    • Analyst: Oil Prices Inflated by 50% [view article]
      Why is it that none of the oil Bears, who claim that this is all "speculation"... seem to be able to offer any substantive, fundamental arguments either? Come on -- Is a boat analogy supposed to be a compelling argument about oil supply and demand?

      This is all testament to the rarely-discussed fact that we know very little about oil reserves and production, particularly in Saudi Arabia. We can listen to Hard Assets Investor and Jim Cramer tell us every day that its "not about supply disruptions, its about demand"... but the 1970s proved that supply disruptions can cause HUGE problems.

      To deny that we face the same risks in the oil supply chain - or worse risks - as we did in the 1970s, is simply ignoring reality.

      One terrorist attack on Saudi oil production will show the world how much at-risk our oil supplies are.

      In this environment, as long as nothing goes wrong - a huge assumption - sure, oil prices may moderate. But then when a "surprise" event occurs - an act of war, terrorism, or God - all the oil Bears will say "well, no one could have predicted THAT!" But of course, its funny how unpredictable things always seem to happen.

      And when those things do happen - Democrats will lament their opposition to coal and nuclear, Republicans will lament their opposition to longer-term alternative energy sources, and the country will lament its fixation on electric cars without any concern for how that electricity can be produced over the next ten years. And Vinod Khosla's utterly fraudulent claims about "cellulosic ethanol for $1 a gallon" will be revealed for the self-serving hype that they are.       Sep 18 12:19 PM
    • Foster Wheeler: Best-of-Breed Stock in a Beaten Down Industry [view article]
      Good discussion of the fundamentals, but not enough discussion of the financials and valuation metrics. A few ratios are tossed in at the end as an afterthough - and look like they were copied from some other source. If you've got a real projections model, you should discuss it and break it out. Not everyone on SA is inept at math.

      Also, get rid of the photo taken in Mom's basement.       Sep 13 09:40 AM
    • The New Energy Cold War: The Warsaw-Tehran Connection [view article]
      Europe is the real mystery here. For a continent supposedly scarred by World War II, it seems oblivious to the Russian situation. Poland and the Baltics realize quite well that, as the author points out, only America has the determination and capability of defending democracies in Europe.

      Many argue that Obama will have greater clout in Europe, but has shown no interest in using that prestige to get the Europeans to step up to defend themselves proactively.

      After so much time and effort in building the "European Union", its surprising how quickly Europe is ready to define itself down, & let countries on the Eastern periphery fend for themselves.

      This is quite serious - more serious than Iraq, in fact. Unfortunately neither Europeans nor Americans seem to agree on any of the lessons of the events leading to World War II. We are going to pay the price for the uncritical glorification of "multilateralism&... as we eventually realize that Putin doesn't factor global disapproval (even if it existed) in to his plans.

      A long range energy plan promoting natural gas, oil drilling, nuclear and solar power -- which would have an impact chronologically in the order I listed them -- would help America, Europe and the world resist the influence of the Russia - Iran - Venezuela axis. We seem to be moving very slowly in that direction. But quite frankly, as long as Western academics continue to ignore the need for reliable energy sources and a strong military alliance with Europe, we will become progressively more vulnerable.       Aug 31 01:23 PM
    • The New Energy Cold War: The Warsaw-Tehran Connection [view article]
      Europe is the real mystery here. For a continent supposedly scarred by World War II, it seems oblivious to the Russian situation. Poland and the Baltics realize quite well that, as the author points out, only America has the determination and capability of defending democracies in Europe.

      Many argue that Obama will have greater clout in Europe, but has shown no interest in using that prestige to get the Europeans to step up to defend themselves proactively.

      After so much time and effort in building the "European Union", its surprising how quickly Europe is ready to define itself down, & let countries on the Eastern periphery fend for themselves.

      This is quite serious - more serious than Iraq, in fact. Unfortunately neither Europeans nor Americans seem to agree on any of the lessons of the events leading to World War II. We are going to pay the price for the uncritical glorification of "multilateralism&... as we eventually realize that Putin doesn't factor global disapproval (even if it existed) in to his plans.

      A long range energy plan promoting natural gas, oil drilling, nuclear and solar power -- which would have an impact chronologically in the order I listed them -- would help America, Europe and the world resist the influence of the Russia - Iran - Venezuela axis. We seem to be moving very slowly in that direction. But quite frankly, as long as Western academics continue to ignore the need for reliable energy sources and a strong military alliance with Europe, we will become progressively more vulnerable.       Aug 31 01:23 PM
    • Stay Away From Charter Communications: Bankruptcy Filing Looming? [view article]
      Charter has high leverage levels and high interest payments. If there are near term dangers of Charter not making debt service requirements, they should be discussed.

      Short of that, the author is correct to point out the risk of refinancing in this market environment. However, to put this in perspective, we also need to discuss the strong asset values of cable operators - both physical assets and relatively permanent customer lists.

      The history of the cable television industry over the past 15 years is rich in examples of highly leveraged companies. In a few cases, bankruptcies have occurred. We should also point out that as growth has occurred and markets recovered, some cable stocks have realized massive returns. In the 1990s, firms like Cablevision Systems, Adelphia, Charter and others incurred high levels of debt, drew the wrath of conservative equity analysts - and proceeded to deliver multiple 100% returns for investors.

      Adelphia and Charter were victims of overly aggressive financing strategies. CVC however did well.

      Mediacom Communications (MCCC) currently had high levels of debt - but also trades at a single digit EBITDA multiple (trailing) and has very high levels of insider ownership (50%). This company has been buying back stock and has no near term liquidity risk.

      A relatively small increase in cable asset values could yield a huge return on the current stock price. If there is a near term risk at Charter, MCCC would trade down as a reaction - at which point I would be buying more.

      Moreover, Mediacom operates in areas with no fiber competition from Verizon and AT&T. Its only high speed internet competition is DSL - and we believe DSL prices will trend higher in the wake of FCC decisions deregulating the pricing of network elements by phone companies, resulting in a more expensive operating enviroment for DSL resellers. This will result in higher DSL pricing, making cable's internet offering more attractive in areas where they compete.       Jul 16 12:11 PM
    • Stay Away From Charter Communications: Bankruptcy Filing Looming? [view article]
      Charter has high leverage levels and high interest payments. If there are near term dangers of Charter not making debt service requirements, they should be discussed.

      Short of that, the author is correct to point out the risk of refinancing in this market environment. However, to put this in perspective, we also need to discuss the strong asset values of cable operators - both physical assets and relatively permanent customer lists.

      The history of the cable television industry over the past 15 years is rich in examples of highly leveraged companies. In a few cases, bankruptcies have occurred. We should also point out that as growth has occurred and markets recovered, some cable stocks have realized massive returns. In the 1990s, firms like Cablevision Systems, Adelphia, Charter and others incurred high levels of debt, drew the wrath of conservative equity analysts - and proceeded to deliver multiple 100% returns for investors.

      Adelphia and Charter were victims of overly aggressive financing strategies. CVC however did well.

      Mediacom Communications (MCCC) currently had high levels of debt - but also trades at a single digit EBITDA multiple (trailing) and has very high levels of insider ownership (50%). This company has been buying back stock and has no near term liquidity risk.

      A relatively small increase in cable asset values could yield a huge return on the current stock price. If there is a near term risk at Charter, MCCC would trade down as a reaction - at which point I would be buying more.

      Moreover, Mediacom operates in areas with no fiber competition from Verizon and AT&T. Its only high speed internet competition is DSL - and we believe DSL prices will trend higher in the wake of FCC decisions deregulating the pricing of network elements by phone companies, resulting in a more expensive operating enviroment for DSL resellers. This will result in higher DSL pricing, making cable's internet offering more attractive in areas where they compete.       Jul 16 12:11 PM
    • Nuclear Power Is in Demand [view article]
      Its important that we are finally highlighting that nuclear power is clearly not an emission-free, or CO2-free energy source. The plant construction and uranium mining produce various pollutants and leave mine tailings.

      This does not invalidate the nuclear energy proposition, but its clearly an issue worth evaluating in light of the climate change arguments.

      From an investment standpoint, the single largest exposure to all aspects of the value chain from uranium exploration and production to nuclear plant construction and management is Areva (CEI.PA / ARVCF.PK). For a more diversified energy and infrastructure play, but with clear exposure to nuclear plant development, Shaw Group (SGR) is a good opportunity. Energy Solutions (ES) is a back-end play on the management of nuclear sites & waste.

      Its important not to buy a basket of any old equities with nuclear attached to them. The utilities mentioned above are going to be the ones paying to develop nuclear plants, so its a capital drain for them for a long time. And with the latest estimates of plants costs at $5 billion to $12 (twelve!) billion, even with loan guarantees, this is a distant way to play nuclear.

      Denison Mines (DML.TO / DNN) should clearly have been mentioned alongside Cameco and Uranium One. The point I would focus on here is a very strategic one: CHINA is likely to be both the nearest-term AND largest nuclear developer. Why? It can make it happen faster (for better or worse) because NIMBY concerns can be ignored. More importantly, remember that the Chinese lose 5,000 coal miners every year! These direct deaths coupled with the indirect health issues are a clear concern in China -- the government is aware and cares about these issues.

      Many uranium-watchers claim China will try to tie up strategic uranium reserves by buying public explorers and producers. China has no reason to publicly announce this, but it has recently confirmed that its nuclear development is much further along that was expected. China also reportedly met with Cameco recently.

      If China were to buy uranium companies, it would go for geographically accessible nations -- and ones without the finger-wagging they get from Australia (for example) about weapons proliferation. India is also going to have the same issues, given that even America will not sign a nuclear agreement with the largest democracy in the world!

      Uranium One has operations in Kazhakstan -- very accessible to China and India. Despite its recent logistics challenges operating there, UUU.TO is a logical target, if you like this strategic reserve argument. The American and Canadian producers are not logical targets. Africa is a logical choice, although it a true energy crisis, the Chinese may feel safer having a source closer to home.

      I'd steer clear of USEC -- the growth opportunity here has never been clear, and US uranium demand is years away from a significant increase. In fact, the biggest risk to US uranium supply is the Russia agreement being cut back -- but down-blending Russian HEU is a major revenue source for USEC, so it could even negatively affect them.

      Finally, hedge funds enjoyed a huge run-up in both physical uranium and uranium explorers. They have reportedly been running from this sector, so the bubble in these shares could still be deflating for a while. Remember there are over 500 public uranium explorers -- clear indication of a bubble within this small sector of the market.       May 16 01:34 PM
    • Shaw's Earnings Miss not Surprising [view article]
      Chicago Bridge & Iron's (CBI) weak quarter and massive sell-off seems to fit in the pattern you have outlined. These guys may all take hits if global recession becomes clearer, but they may also be the ones to hold up well as energy & resource plays. Today's damage looks excessive to me. Apr 30 12:35 PM
    • Uranium Miners Expected to Benefit from Falling Inventories [view article]
      If there is any renewed interest in uranium in 2008, would we not expect Uranium One and Dennison to be more leveraged to this development?

      These are both pure play uranium producers, with fewer hedging issues than CCJ has had. Uranium One has been hammered for other good, fundamental reasons. Perhaps CCJ is the "safe" play, but if you are looking to take a strong view, I would think there are better ways to go.

      I don't own any of these but am interested in the logic of going with CCJ.       Apr 14 12:19 PM
    • Water Industry Spending Still Up - But Clouds Loom [view article]
      This commentary was valuable, because it highlights how macro predictions of how many billions of dollars we need to spend on water infrastructure may not materialize in the near term. We have been hearing about water and general infrastructure upgrades for years.

      There are a few overseas water plays -- difficult to gather good information and insight on, so this is an opportunity for any analysts with a deeper focus on water.

      I would look at Epure (China based, Singapore traded) and Doosan (Korea).       Apr 14 12:11 PM
    • Jim Rogers' Picks and Pans - Barron's Interview [view article]
      I'm sure even Jim Rogers would advise others to be careful about doing what he does. His books on the subject - as I think you point out - have glaringly omitted any discussion of the downside case for commodities. His view about commodity cycles is not a subject of complete agreement, even by commodities investors.

      I am watching "nontraditional&q... commodities -- water (esp in Asia), rare earths, and possibly uranium.       Apr 14 11:37 AM
    • Investing in Commodities: Is the Fear Factor Justified? [view article]
      You're one of the few writers to even mention Lynas Corp. I would be interested in hearing why you own LYC.AX and your views on REEs in general. Lynas seems to be the only near term producer of REEs outside of China, and the few other public securities touted as REE plays are only at the exploration stage. Its unclear what the future of the Mountain Pass, CA mine holds, and if it will become a consistent, meaningful competitor.

      Despite the apparent promise of Mt. Weld, I find it curious that BHP Billiton would have optioned this property to anyone, rather than develop the site itself.       Apr 13 03:27 PM
    • Water ETFs: Commodity or Infrastructure Investments? [view article]
      There is a big difference between a water utility, and an equipment or chemicals company that sells to utilities. GE may be the largest water sector player, but water is a miniscule portion of its value.

      ETFs seem to be a marketing-driven product, tapping investor interest in water while avoiding the discussion of key issues.

      Higher infrastructure spending may negatively impact utilities, who are unable to pass higher costs on to customers.

      From an environmental standpoint, these funds can be misleading. Utilities are huge users of groundwater. PICO is actually a water hoarding play in the Nevada desert.

      Lumping all these companies together in an ETF shows a lack of focus.       Mar 27 07:02 PM
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