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Mark is the Editor for Eco Investor Guide - Eco Investor Guideā€™s mission is to advance public awareness and provide the information for making informed investment decisions in the Eco sector. Our aim is to be the number one source for market news, research, opinion, analysis and investment... More
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  • Tesla IPO Not for the Faint of Heart

    Tesla Motors (NASDAQ:TSLA) announced this week its highly anticipated plan to sell 11.1 million shares at between $14 and $16 a share in an initial public offering scheduled for June 29.  But for investors thinking of buying in, optimists for the stock are hard to find.

    Why the pessimism for this electric car stock? First, Tesla has yet to turn a profit. In the first quarter 2010, sales were $21 million, showing virtually no gain over the first quarter of 2009, while operating expenses doubled to $30 million.

    Tesla RoadsterThe company has sold only 1,063 of its Roadster models as of March 31, since production began in 2008. Even for a car that costs over $100,000, that’s not much penetration into the market.

    With these less than stellar sales, long term IPO investors will be pinning their hopes on the new Model S, a $50,000 sedan due to begin production in 2012.  However, as Tesla reports in its prospectus:

    We have no operating history with respect to the Model S electric vehicle and have only recently begun the component procurement process for the Model S, which limits our ability to accurately forecast the cost of the vehicle. In addition, we have not yet completed the site selection process for the location of our manufacturing facility to produce such vehicles, finalized the design or completed our engineering, manufacturing or component supply plans for the Model S.

    All this in two years. Electric car enthusiasts who have waited breathlessly for other new designs know that this timetable is hopeful at best. The Aptera electric car, designed in southern California was originally due out in 2009, and buyers with deposits down are still waiting.

    Even if Tesla is able to finish the design and start production by 2012, Nissan’s Leaf and Chevy’s Volt will have been selling for nearly two years. And more competition is on the way from big automakers, with Audi, Volkswagen, Ford and others designing electric and hybrid cars. With Tesla’s distribution coming only from online sales and a handful of stores, competing with traditional car companies may prove impossible.

    So what is driving the Tesla hype? What are the positives to the story? One answer is that founder Elon Musk, of Paypal fame and Silicon Valley insider, has done a good job to promote his sexy Roadster into the best known brand of the electric cars. It’s also been widely reported that Musk himself is out of cash, fueling speculation on the timing and need for an IPO.Musk will sell about 2.2 million of the shares and could make about  $21 million assuming the shares sell at the midpoint target range of $15.

    But Musk also has an array of big name investors including Google, Daimler, and now Toyota (NYSE:TM) backing his venture. Even the US government is behind the company with a $465 million Department of Energy loan to retool the new factory and build the Model S.

    After the IPO Tesla will sell $50 million shares at the offering price to Toyota as part of a recent agreement. The companies have announced that they will work together on an electric car, although no official announcements have been made. The agreement also included a manufacturing factory in Fremont, California, which Tesla bought for $42 million, which it will use to build the Model S.

    And with 2,200 people who have made refundable deposits of at least $5,000 to reserve an S, the car may find buyers. The question is: will Tesla and its investors survive the bridgeModel S between now and the S rolling off the production line?

    Finally, as far as playing the IPO for a quick ride, consider the last automotive IPO in the sector that debuted with this kind of hype and no profits – lithium battery company A123 Systems (AONE). With an IPO price of $13.50 it reached just over $25 in the days to follow – but has since plummeted to under $10. Such a ride for Tesla doesn’t seem implausible, and investors should play this stock accordingly.

    Disclosure: None

    Disclosure: None
    Jun 17 2:58 PM | Link | Comment!
  • Energy Storage: Is the Sector Gaining Momentum?

    Energy storage has been called the holy grail, lynchpin and the deciding factor to the cleantech revolution, and for good reason. The transition to a clean and sustainable energy system for our homes, businesses and transport will depend on developing safe, low-cost and reliable energy storage systems. Many companies are now competing to successfully bring to market a host of new generation batteries that will do everything from power a new breed of electric vehicles to large scale systems that will store solar energy for use at night or cloudy days. While the outlook remains strong, and policy and legislation seems poised to strengthen the sector, significant hurdles remain in the industry.

    Green Battery - Green Energy StorageKey Companies are Commercializing
    Last September, A123Systems (AONE) went public and saw its shares jump over 50% its first few days of trading, indicating to many that energy storage had arrived for investors. Today however, it is off nearly 60% from its high. Other companies are struggling as well – in March Valence Technology (VLNC) received a delisting notice from NASDAQ for its low stock price, and has only recently regained compliance.

    At the same time, announcements from these companies indicate that they are moving in the right direction commercially. Warren Buffett announced his interest in the sector by purchasing a 10% share in Chinese battery and electric car company BYD last year. Valence signed a multi-year supply agreement with BJ Technologie, a division of Bénéteau Group, the world’s largest sailing yacht manufacturer to be the exclusive battery supplier for all new Bénéteau Group hybrid-electric vessels. Order estimates by Bénéteau Group forecast up to $9 million in revenue to Valence. And Altair Nanotechnologies (NASDAQ:ALTI) announced an $850,000 order for its lithium-ion battery modules for Proterra, Inc. new all electric and hybrid electric transit buses.

    Era of the Electric Car in Full Production
    With all the major automakers releasing electric or hybrid electric vehicles in the next one to two years, battery technology is about to hit the ground running. The Nissan Leaf, Nissan Leaf - Electric Carwhose price was recently announced at $32,780 before a federal tax credit of $7,500, is due out in December, one month after Chevy’s Volt. Toyota Motor (NYSE:TM) has surpassed 1 million sales of its Prius. Other companies positioning to capture first place in the move to electric cars include Tesla, Fisker and BYD. In all, Accenture forecasts 1.5 million electric vehicles in the United States by 2015. Over 10 million electric vehicles are easily possible by 2020.

    Large Scale Systems and the Smart Grid
    Energy storage will be an important factor as the transition to renewable energy sources like wind and solar grow exponentially, because these sources are intermittent in nature (night and cloudy days for solar and calm days for wind) and our grid requires a constant level of energy. The creation of a smart grid, which will be able to handle these requirements is gaining momentum.

    Battery companies are turning their technology to applications for grid power. A123Systems installed its first Hybrid Ancillary Power Unit at a power plant owned by AES in Southern California, and Southern California Edison wants A123 to build the world’s biggest lithium-ion grid storage battery.

    Political Stars Nearing Alignment
    Last year the stimulus package gave a boost to the energy storage sector – with $2 billion put to use for advanced batteries manufacturing, including lithium ion batteries, hybrid electrical systems, component manufacturers and software designers, and up to $25 billion in loans for advanced vehicles, including related energy-storage technologies. Large scale storage received money with $11 billion set aside for the creation of a smart grid.

    Additionally, the Obama Administration’s decision to accelerate the effective date of federal economy standards should help to accelerate hybrid vehicle technologies. The new standards call for increased fuel efficiency by 40% over the next 7 years, and the elimination of fleet-wide averaging and the acceleration CAFE (Corporate Average Fuel Economy) standards by 5 years. They require an average mileage standard of 39 miles per gallon for cars and 30 mpg for trucks by 2016 – an increase from the current average for all vehicles of 25 miles per gallon. Car companies are planning to use hybrid and electric technology to help meet these standards.

    And while we are still in the midst of crisis mode, the oil spill in the Gulf may mark a political turning point in the coming months. Our increasingly dangerous quest for new oil resources has finally hit us at home. And the costs, while unknown, will certainly be in the billions. Photos of oil-covered birds in Louisiana and negligent oil companies may finally empower politicians to enact serious energy related programs that will move us away from our oil addiction and into green technologies that include energy storage.

    Hurdles Still Remain
    While this forward movement seems promising for the energy storage sector, significant questions still remain for the industry.

    In the technology realm, batteries have not undergone the same type of leaps that other technologies, such as the computing industry, have seen, plugging along at historically 5-10% annual price-performance improvements. And there is no single answer for batteries, as end use applications dictate technology selection. In general though, new users in automotive markets are asking for batteries that are lighter, safer, denser (the ability to hold more power), long lasting and are of course, cheaper.

    Another issue facing the sector is the concern over raw material. The rare metals that are being used, especially with Lithium batteries will see price pressure as demand increases over the next few years. 50% of lithium is found in one country – Bolivia, which according to Juan Carlos Zuneta has no strategy for its exploitation.

    Disclosure: none
    May 11 4:08 PM | Link | Comment!
  • Green Investing: 10 Risks You Should Know

    There are many opportunities in green investing, and I believe those outweigh the risks. But investors also need to be aware of the potential pitfalls associated with their investments, especially in a volatile and evolving sector. The following are some of the risks involved with putting your money in the Eco sector:

    1. Effects of a Cap and Trade system or other legislation on carbon remains unknown – If and when a carbon accounting system is put in place, whether as a tax or cap and trade, it may unfairly favor one sector or another. Credits may be given away to favored industries, which happened in the European system. Other polluters may be grandfathered in, given tax breaks, or a host of other unknowns, leaving the competitiveness and promise of various green companies and industries in question. It is certain that any legislation that passes will be complex and riddled with giveaways and other freebies, making investment calculations difficult.

    2. Dependence on erratic government tax incentives and other support may continue – Although President Obama’s recent stimulus package increases investment in renewable energy and green companies, it is a one-time investment. The wind and solar sector have been plagued over the years both in the United States and abroad with government price support in the form of rebates, tax incentives and other programs that have come and gone. Long term, reliable and consistent support may remain elusive, a necessity for some of the large capital intensive projects that take years to recoup investments, and for new technologies that need time to mature.

    3. Government support may favor one technology over another – The good example of this is ethanol. Due to various political factors, rather than cleantech superiority, ethanol has received preferential treatment in the form of mandates for production and investment dollars over other biofuel alternatives from the US government. As long as government support for various companies and technologies remains political, choosing which ones will be profitable in the short term will remain a challenge.

    4. A prolonged recession may dampen new regulation, investment and public support – A severe recession and high unemployment in the last two years has caused public support to wane for various environmental regulations and programs. While some stimulus dollars and private investment have continued, the broad public, media and government support for climate change issues that was building two years ago has taken a back seat to healthcare, employment and other economic concerns.

    5. Dependence on social movements and consumer demand may hold back green companies – The growth of many companies in the sector will depend on the consumer to choose green over traditional products and services, often times at perceived higher prices. In the past ten years Organic foods and textiles have grown into a billion dollar industry as some consumers have chosen to go green. However, negative perception and cultural acceptance may hamper growth in these sectors.

    6. Disruptive technology may cause volatility – A new technology in one area may suddenly overtake previous leaders. For example, a sudden breakthrough in solar or battery technology that is cheap and easily scalable could have sudden and severe price effects on competitors. In this rapidly evolving sector, with ongoing private and governmental research and development, it is nearly impossible to predict winners and losers in the space.

    7. Promising technologies may fail to scale-up – Almost daily we hear of new research and developments – new types of more efficient solar panels, or most recently, the Bloom Box fuel cell in development by Bloom Energy. However, the ability to scale up these technologies to offer a product that competes megawatt for megawatt in cost and reliability with traditional energy sources is a much harder task. Many companies with revolutionary technology are volatile and ultimately fail because they are unable to make this transition.

    8. Green today may not be green tomorrow
    – Technologies that enjoy the support and investment of green dollars now may turn out to be not as green in the future. Ethanol again is a good example. Initially thought to be a promising renewable source of fuel, concern of its effects on food prices and the carbon savings it provided caused it to fall out of favor among environmentalists and investors. Currently, the lithium used in many new battery technologies is being questioned as to its availability and green credentials, and whether it is trading one scarce, non-renewable resource for another.

    9. Oil and fossil fuel energy prices may remain low – Much debate exists over the long term price and availability of oil and other fossil fuels. Although it remains a certainty that availability will decrease and cost will increase in the long term, the time frame in which this will happen is unclear. Because of this, the direct cost competitiveness and demand of other renewable energies will remain unknown and volatile in tandem with traditional energies. In 2008 as oil prices reached $150 a barrel, consumer demand for more efficient vehicles including hybrid and electric cars began to surge, dropping off as oil prices decreased dramatically over the next year.

    10. Climate Change “debate” may continue to plague the sector
    - The effects of climate change may remain incremental in the short term and its validity may continue to be challenged. Recent incidents have spurred a renewed media-fueled effort to deny the overwhelming science behind climate change. A resurgent effort to deny the need to reduce carbon emissions may delay the governmental policies and support that will drive new business and investment. While many other reasons exist for greening the economy, acceptance of climate change remains the overriding call for action, so its perception may continue to effect support and investment.

    Conclusion: Balance your portfolio according to your risk tolerance, research your investments carefully, diversify your holdings with mutual funds and ETFs in volatile sectors, and seek professional guidance if you need more information about investing green.

    Disclosure: None
    Apr 13 8:02 PM | Link | Comment!
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