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Times staff writer Edward Silver looks at some of the private companies that could become big players in the search for energy solutions -- and eventually make their way to the public market:
Drill, drill, drill? In California, the slogan is: Conserve, conserve, conserve.
The price of a barrel of oil bullies our state as badly as any other -- or worse. But rather than burrow deeper into the grip of fossil fuels, officials in Sacramento have stepped up a plan to wriggle out.
In late June, the California Air Resources Board roughed out a road map for moving toward the goal, defined by AB 32, of reducing carbon emissions to 1990 levels by 2020. As the right to emit wanes, a marketplace for trading those rights becomes a key feature of the plan. And there are no short cuts -- read: clean but dicey nuclear energy -– on this road map.
There's a vision here: The state’s zeal to spearhead the global climate battle melds with entrepreneurial energies to build a green industrial mecca. In the hoped-for scenario, the resources devoted pay off in triplicate: beating back the warming threat, flouting merciless energy costs and launching a new cycle of economic growth.
The will clearly is there, but the way is filled with obstacles. Investments in sustainability, and penalties for waste and pollution, could raise costs that trickle down to -- or jolt -- consumers. On the level of everyday life, habits are hard to change.
And two other issues are easily overlooked. California already is a conservation-minded place, burning less air-fouling coal than many other states. So gains will be harder to come by. And gasoline -- our state chugged 15.7 billion gallons last year, according to the Board of Equalization -- could get dirtier across the country, with more of it coming from carbon-heavy, "unconventional" sources such as the Alberta tar sands.
That raises the bar for the ingenuity we’ll need to get us to the promised land. California is populated, however, with problem-solvers and technical wizards, many of whom see sustainability as both an emergency and an opportunity. It’s almost as if we are constructing a clean-tech Silicon Valley without a geographic center.
Read on »
Times staff writer Ken Bensinger, who covers the auto industry, filed this post:
A living legend in the auto industry, Bob Lutz has worked for Ford, Chrysler, BMW and, since 2002, General Motors, where he heads product development. The Swiss born, fighter-jet-flying, bespoke-suit-wearing ex-Marine isn’t known to mince words. This spring, he famously referred to global warming as a "crock of sh**." When outcry ensued, Lutz, in his trademark raspy growl, told reporters that those were his personal opinions, not those of the General.
 On Friday, Maximum Bob (as gearheads call him), showed he’s not afraid to mix it up with the rabble as well.
In response to a Times article on the multiple woes of GM and other automakers, a particularly vociferous reader -- known to call electric cars more important that "the so-called immigration issue, falling home values, and man-bites-dog stuff" -- copied Lutz in on a letter to the editor. The gist: GM, after losing $39 billion last year and with its stock at a three-decade low, could save itself by bringing back a 10-year old, two-seat electric car.
"There is one option GM has not considered, which would turn things around, both in image and in reality. GM could resume production of the 1999 EV1, using Panasonic lead-acid batteries," the reader asserted.
Furthermore, he wrote, GM’s plans to produce a four-seat extended-range electric car called the Volt, set for release in 2010, "depends on Lithium batteries which don't yet exist."
Maximum Bob was not about to let that backtalk from a green transportation activist go by without comment:
He shot back in an email: "The EV will not meet any current safety laws. Putting a version into production that meets regulations would put us out to ’11 or ’12. They cost us well over $80,000 to produce, and, being a two-seater, we could only sell 800 in four years. We lost over one billion dollars on that experiment."
 As for the Volt, Lutz had choice words as well:
"I don't know why you insist that lithium-ion doesn't exist. We are getting packs from our suppliers, they test well in both hot and cold, they store the energy as claimed, we are fast-cycling them to make sure they last, we are doing high-temp, high-load testing with the cooling system shut down and are experiencing no thermal problems. Trust me, the battery will not delay the car."
As any outraged activist would, the reader quickly fired back a reply, copying four Times addresses, an additional GM employee and a contact at California’s Air Resources Board, calling for distribution to all members of the body.
Too early to tell if Lutz will call these revealing comments his own personal opinions as well.
Photos: Bob Lutz. Paul Sancya/Associated Press; a funeral for the EV1 in the movie "Who Killed the Electric Car."/Sony Pictures Classics
Times staff writer Edward Silver, who keeps a close eye on green-investing trends, looks at the challenges, opportunities and need for skills in green-collar employment:
Your mission, should you decide to accept it: Direct the design of a carbon capture and storage system at a coal-burning power plant. Make sure it can bury 1 million tons of CO2 in the ground annually.
Here’s a big budget -– use it wisely. Here’s the regulatory manual –- don’t violate it. There’s the aquifer –- steer clear of it.
We don’t know if this is a mission impossible because this complex mode of clearing the air has years of engineering and testing ahead of it. To succeed, however, the project’s managers will require a fusion of skills, some of which haven’t come into play before.
Companies nurturing green operations or shrinking their carbon footprints have to cast a wide net for talent, scouring adjacent industries and mingling diverse skill sets. In the carbon-capture example, there would be slots for geologists from the oil industry and for experts who can channel gas flows, among other positions.
 Clean-tech start-ups in particular are having a bear of a time finding virtuosos who can sing, dance and act. They need top managers who have earned their stripes in an established field but can perform adroitly in an emerging arena while building an organization from seedling to survivor. If you’re an investor sizing up a private company or an IPO in this field, be sure to take a hard look at who’s at the helm.
These leadership gaps are a worrisome issue for the environmental sector across the board. In April, Heidrick & Struggles, a global recruiting firm, found that assembling an army of industry builders ranked as a prime challenge, alongside financing and technology. Practically the entire crowd of executives surveyed called the deficit of technical and managerial talent “very” or “moderately” serious. . . .
Read on »
From Times Staff Writer Edward Silver:
You know there’s an energy crisis when Ferrari pledges to redesign its supercars to get 40% more distance out of a tank of gas. Celebrated for bombastic 12-cylinder engines that assure its place in the annual fuel-hog rankings, the Italian icon is making lighter models that also are molded to reduce aerodynamic drag. It has even built a concept car that swigs 85% ethanol.
In the absence of viable substitutes for gasoline, the reality is that we have to use less of it. Environmental ethics aside, price is the great enforcer of efficiency, and we know what has happened to the price. If the oil squeeze becomes the "new normal," to borrow a phrase from Silicon Valley, companies that ease the passage from the car culture to the culture of conservation will be in a position to prosper.
What follows is a smattering of ideas investors may want to explore:
As the world leader in gas-electric hybrid vehicles, Toyota has garnered plenty of accolades along with market share in the last year. Its stock is down half as much as the S&P 500 this year, and far less than its peers. The market clearly sees Toyota as a survivor in the new era.
 The biggest seller of car batteries, Johnson Controls, is providing lithium-ion power sources for a plug-in demonstration fleet in partnership with Ford, SoCal Edison and others. Johnson already is on many green investing lists, in part for technology that conserves energy in the home.
BorgWarner, another major auto-parts supplier, is ramping up its output of turbochargers and dual-clutch transmissions, which suppress conventional engines’ thirst for gasoline. Robust foreign sales propelled the company’s results past Wall Street estimates last quarter, despite a listless car market.
The flight from oil is the best thing that could happen to Fuel Systems Solutions. The Santa Ana firm outfits engines to run on natural gas and propane, clearly tapping a vibrant new market. In the most recent quarter, sales expanded 73% and earnings soared off a small base. The company, which struggled with accounting issues in recent years, already has become something of a market darling: The stock, at $32.86 on Wednesday, has rocketed from $14.29 at the end of last year.
As Ferrari knows, one way to conserve fuel is to take some of the heft out of your machine. That’s an opportunity for Canada’s Magna International, which is applying its expertise in hybrid materials to fashioning lightweight chassis and drivetrain parts.
Let’s not miss the move to do less driving or even throw away the car keys. Is that a trend Harley-Davidson can ride? This year, at least, it has been slowed by the downshifting economy, and has cut its internal forecasts for earnings and bike shipments.
If the fuel debacle sets off a surge in telecommuting, look for growth in tech service firms such as IBM and Cognizant Technology Solutions, which may be called on to help link home and office. Polycom is a leading player in videoconferencing, the next-best thing to getting on an airplane. And if the masses stay home rather than hit the road, they may spend more screen time with advertisers. That could show up in the bottom lines at Walt Disney, CBS and Google.
Finally, some consumers are voting with their feet for a mode of alternative transportation that burns no crude at all: Nike’s net jumped 32% last quarter to $464 million. The stock’s been on quite a run for about two years, and is up 5% this year in a struggling market.
From Times staff writer Edward Silver:
Bad news about German government subsidies and good news about oil prices conspired to chill solar power stocks Thursday -- at least for a day.
Crude futures slid more than $4 a barrel, and when anxiety about fossil fuel supply eases, alt-energy shares often wilt. The other issue has been less discussed. Despite its gray skies, Germany has used public-sector largesse to become a leader in solar installations. Here's the worry: If lawmakers in Berlin quicken planned subsidy cuts, as they are contemplating, solar's future gets cloudy in a key locale.
 Analyst George Kotzias of Calyon Securities flagged the issue Wednesday but didn't pan the shares. On Thursday, Merrill Lynch's Mark Heller flagged it again, expanding the scope of the risk to other nations. He lowered his ratings in the bargain, and down the stocks went. Evergreen Solar Inc. ended the day lighter by 9.4%. SunPower Corp. gave up 8.4%, and the Market Vectors solar ETF dropped 6.5%.
Today the stocks recovered somewhat. Evergreen edged up 2%, SunPower jumped 7.7%, and industry leader First Solar Inc. rebounded 6.1% after slumping 7.7% on Thursday.
Conservatives in the German government are examining the demands on their tax base as Europe’s economy threatens to go slack. It’s a point well-taken. When money is tight, cheaper is better and muddling through the present can take priority over laying groundwork for the future.
Nevertheless, Kotzias expects only moderate subsidy reductions and called the selling in the stocks overblown. Many countries, he notes, are going the other way and boosting support for solar. France, Italy and the U.S. are in that camp. All the while, the solar module producers are lowering cost per kilowatt. First Solar, which counts many admirers on Wall Street, comes closest to erasing the pricing advantage conventional sources have in generating electricity. That may be the catalyst for widespread adoption.
The German question, however, brings a rarely mentioned risk into view: In 2007, the nation accounted for 91% of First Solar’s $504 million in sales. We’ve all been advised to diversify our portfolios -- shouldn’t that apply to geography as well?
If Germany becomes a tougher place for solar firms to turn a euro, that concentration could put a dent in First Solar's results. It may not be as bad as that, though. The company has a whopping order backlog worth $6.4 billion, demonstrating that it's the Mercedes of the business -- as its $267 stock also attests.
Photo: Andy Newman/Associated Press
From Times staff writer Edward Silver:
With Big Oil pumping out immense profits, you’d think cash would be available to fund renewable-energy programs. It is, and there's plenty of it, yet the majors' outsize earnings may be leading them back to the oil patch instead.
In February, BP said it would regard its impressive solar and wind operations strictly for their equity value and might spin them off. So much for Beyond Petroleum. More recently, Royal Dutch Shell withdrew from a landmark wind project in Britain and in 2006 sold the lion’s share of its solar interests to a German firm.
Exxon Mobil Corp., the giant among giants, remains outspoken in its belief in the enduring primacy of oil -- an issue that activist shareholders challenged at the company's annual meeting today in Dallas. Energy alternatives have gotten a bit more traction at Chevron Corp. and ConocoPhillips, but they still take a far back seat to other priorities at those premier fossil fuel marketers.
Read on »
Times staff writer Edward Silver filed this report on a sudden wave of activity in the wind-power business -- and two stocks in the sector that may be overblown:
Wind power is on a hot streak. First, the Department of Energy last week forecast that the industry might deliver 20% of the nation’s electricity by 2030. It generates less than 1% now. Then famed oilman T. Boone Pickens ordered 667 turbines to outfit the wind empire he envisions on the Texas Panhandle. Pickens may shell out $10 billion or more before all is said and done. Over the weekend, Spain-based Iberdrola Renewables said it planned to invest $8 billion in U.S. wind operations in the next two years.
All the while, oil has continued its ominous ascent, making the renewable-energy proposition all the more compelling.
 It looks like the wallflower is out on the dance floor. Even before this flurry of attention, wind was the nation’s fastest-growing form of sustainable power, with the U.S. pacing the world in adding megawatts.
However, it can be a baffling business for American investors hunting for opportunities. Denmark’s Vestas, and Gamesa of Spain, lead the pack in turbine building, but their shares have much greater liquidity on their home exchanges than in the U.S. (See this previous post.) The same goes for green utilities -- the entrepreneurial Iberdrola, for example. And the U.S. turbine champ, Pickens' partner General Electric Co., is so diversified that its thriving wind interests look small against its fossil fuel operations. (Perhaps not for long, though.)
One strategy would have investors hunt for firms in the wind-power supply chain -- the "arms dealers," so to speak -– where at least a handful of spectacular growth stories are sure to emerge.
But the following two firms may not be among them, according to analyst Stuart Bush of RBC Capital Markets.
Zoltek Cos. sells more super-sturdy carbon fiber for turbine blades than anyone else. With clients like Vestas and Gamesa, it's enviably entrenched as a supplier. Yet it hasn't made the most of its opportunity, and that's largely the fallout of internal failures. This month, Zoltek’s chief financial officer made his exit amid accounting questions that Bush still finds worrisome. The firm also has run into roadblocks trying to get its U.S. plants up to speed, holding back output while demand swells.
Some investors were buoyed by the company's recent quarterly results. Others weren't. Revenue rose 35% year over year, but that fell short of forecasts. Bush, unimpressed, rates the shares "sector perform" with a $28 target, slightly below their current level.
He also advises investors to beware American Superconductor Corp. -- which may be the message of the CEO's avid personal stock sales as well. AMSC hasn't turned a profit since its IPO in the early '90s. Despite that, it boasts a market cap well past $1 billion.
AMSC takes its name from its historical business making cables that promise efficient, high-capacity power transmission. The product line still hasn't caught on, Bush says, and chronically drains cash. Of late, AMSC has been designing electronics for wind turbines in China.
The shares have advanced almost 70% in a year, but the opportunity in AMSC's niche doesn't nearly justify the price surge, Bush says, adding: "Investors are buying without regard to valuation." He has a "sector underperform" tag on the stock, expecting it to settle at $16. That would mean giving back that 70% run-up, and a bit more.
Photo: Wind turbines near Palm Springs. David McNew/Getty Images
Times staff writer Edward Silver filed this report on the burgeoning bull market in the coal sector:
Coal producers are riding high for an industry that a growing throng of Americans wish would just go away.
Year to date, shares of Arch Coal Inc. are up 41%. The biggie of the industry, Peabody Energy Corp., has waxed 24% -- and 94% from its August trough. A broader measure of the sector's stocks, the Market Vectors Coal exchange-traded fund, has advanced 26% since its January launch.
 All this bullishness is based on the dark rock’s own surge in value. Benchmark prices for some grades of electricity-generating steam coal are more than $100 for a metric ton, double September’s price. Metallurgical coal, the type used in steel making, has tripled in some contracts.
Oil attracts the anger and the ink, but coal, mined here in the U.S., has joined the club of rudimentary resources blessed by the energy crisis.
What we are paying up for is the dirtiest fossil fuel in the ground, infamous for wielding a heavy hand in the planet’s warming. In Beijing they wear surgical masks to ward off the soot from coal-fired plants, which drifts across the Pacific to further foul the air over Los Angeles. That’s not all. Black lung disease, mercury and sulfur emissions and the ravaging of Appalachian mountaintops are part of the legacy that keeps our lights on.
Coal provides about half the electricity in the United States, though not in California, where natural gas, another fossil fuel, claims a larger share. Nuclear power contributes 20% of the U.S. power total. Hydroelectric has a small role, while solar and wind -- sorry, environmentalists -- thus far account for less than 1% of the total. These wannabes are doing everything they can, including stalking the halls of Congress, to outmaneuver the out-of-favor incumbent.
Coal’s edge, though, is that it’s still the low bidder when it comes to costs, despite the recent run-up in prices. Also, everything needed to radiate coal-fired power all over the map already is in place, not only the generating stations but storage, transit and integration with the grid. On both accounts, solar and wind have plenty of work to do.
Naturally, few Americans want to see a coal plant built in their backyard. In many cases, politicians want them far away too. Kansas Gov. Kathleen Sebelius, a Democrat, made news when she vetoed two power plants to spare her state 11 million tons of additional carbon dioxide emissions annually. Calls for legislation to bill emitters for their carbon-burning privileges are gaining traction. Even Sen. John McCain of Arizona, the presumed Republican presidential nominee, is on board. Likewise, interest is rising in hoped-for technological fixes, including a complex blueprint known as carbon capture and sequestration.
With so much resistance, coal plant construction has ebbed in the U.S. Be prepared for brownouts.
"Utilities know there will be some kind of legislation and a carbon-capture mandate, but there are no requirements yet or price tag associated with carbon," said Ann Kohler, an energy analyst with Caris & Co. "Regulators are looking at natural gas, renewables, nuclear. There are a lot of unknowns. Utilities that have started construction are moving forward, but otherwise, plans are on hold" for new coal-burning plants.
 There are no such misgivings or hold-ups in nations that are in a hurry to catch up with the West. China and India have especially voracious appetites for coal’s cheap energy, and the supply deficit may persist for years. This winter, that imbalance suddenly became an emergency, partly the effect of Australian floods and Chinese blizzards that shut down mines. Charging into the breach, U.S. coal exporters are finding famished markets, happy to make hay on prices driven skyward by scarcity. The anemic dollar is a bonus for their bottom lines.
Fossil fuel investors, rejoice. But what an opportunity for renewables! Yet solar, wind and other renewables aren’t nearly ready to dethrone Old King Coal, particularly overseas. In fact, if green alternatives do eventually curtail coal’s dominion in the U.S., it’s not hard to imagine the industry thriving on the tobacco model: ostracized at home, welcomed around the world.
As for the stocks, Kohler rates Massey Energy Co. a buy for its concentration in metallurgical coal, the sweet spot of the market. She expects earnings per share to expand from $1.17 last year to $3.05 this year and $4.13 next year. Alpha Natural Resources Inc. and Walter Industries Inc. also are well-positioned in metallurgical coal.
Peabody’s shares, meanwhile, now may be too rich to risk money on, Kohler said, based on past valuation ratios.
The whole group, however, won’t for long be enjoying these lofty prices for their output, Kohler believes, and that may inject volatility into their financial results. Mining is recovering in Asia, and prices per ton are likely to settle back to elevated but not aberrant levels. Any shortages in China tied to this week’s destructive earthquake are expected to be short-lived. Furthermore, Kohler foresees a rebound in the dollar.
Although today the market for the grimy mineral is ablaze, change is coming, so keep your eye on these canaries in the mine: Prices could ease along with the supply crunch. Emitting CO2 may get expensive, likewise the technology to capture it. Consumers are unhappy about their electric bills and foul air, and the political class wants to try out a host of new regulations. Cleaner alternatives are clamoring for their chance.
But for now, coal miners are doing business like there’s no tomorrow.
Photo: A coal mine in Trevorton, Pa./Associated Press
From Times staff writer Edward Silver:
A crowd of solar energy stocks came public in the last two years. So far In 2008, the flow of new shares, solar and otherwise, is all but stopped up. One offering made it through Thursday, however. Real Goods Solar Inc. has been installing and distributing panels and other products in California since 1978, so it must be run by a patient bunch.
Real Goods, a subsidiary of New Age supermarket Gaiam Inc., raised $55 million in its IPO. One of the littler operations to hit the market, it generated net revenue of $6.5 million in the March quarter, its prospectus shows, along with a loss in the vicinity of $325,000.
Noting the deficit and perhaps realizing that Real Goods’ business is fairly hard to scale up and easy to enter, investors have bid the shares down. After being priced at $10, they were going for $8.50 at midday Friday.
“Green” is currently the top theme for new issuance, noted Kathleen Smith of Renaissance Capital in Greenwich, Conn. Per the IPO research firm’s accounting, 17 new stocks displayed an ecological tinge last year, out of 273 total. In a sluggish 2008, the proportion is much higher: five of 29. Said Smith: “We think there will be a lot of opportunity for that group this year.”
Money & Co. blogger Tom Petruno is on vacation this week. He returns Monday.
From Times staff writer Edward Silver:
Energy Conversion Devices Inc. finally proved itself. A cousin of sorts to solar phenom First Solar Inc., the firm conspicuously sat out last year’s stunning rally in the sector’s shares.
But today was the day for earnings show and tell, and the believers were vindicated. Solar product sales rose 193% over the year-earlier quarter, and the company posted a profit of 17 cents a share. Analysts, on average, had expected break-even. The result: ENER stock soared $15.10 to $49.91, or 43%, for Nasdaq’s biggest gain.
Energy Conversion fashions solar power modules based on “thin film” silicon that can be designed into roofs for big-box stores, airplane hangars and other commercial buildings. With the financial success of First Solar, investors have taken a shine to the thin-film concept.
FSLR, however, uses cadmium telluride to convert the sun’s rays into electric power. Both formulas bypass the supply bottleneck and price inflation that bedevil makers of conventional, slab-style silicon solar cells, and that’s key. Part of Energy Conversion’s edge is also the lightness and flexibility of its wares, making them a convenient and cost-effective feature in construction.
With its history rooted in R&D, the company has struggled to get its act together as an efficient manufacturer and sales machine. Now, tributes are being paid to the new chief executive, Mark Morelli, for making the operation jell.
Energy Conversion’s target market is also jelling, and in the quarter that just ended, the company was firing on all cylinders. Instead of the usual gradual slide, the company was able to hold its selling prices firm. Gross margin tells the tale. It blossomed from 19.2% to 30.7% in just one quarter. Analysts had expected an improvement to about 25%.
Management told Wall Street that those pleasing margins would persist. Naturally, the surprise numbers are causing analysts to recalculate their models for the company and most likely for the broader thin-film industry as well.
Rob Stone of Cowen & Co. hadn’t had time to crunch the data but indicated that his forecasts would rise. “Each point of gross margin upside is worth about 10 cents of EPS for the year,” he said.
We’re talking a lot of upside.
Money & Co. blogger Tom Petruno is on vacation this week. He returns May 12.
From Times Staff Writer Edward Silver:
Last year, you didn’t need to sweat to find a winning solar stock. Everything went up, but that’s over now. The sector was taken down mercilessly in the first quarter, then lifted in recent weeks by bargain hunters.
"It’s become so volatile that you can hardly leave your screen for a minute,” said a hedge fund manager who prospects in alternative energy. Tired of the ups and downs, he’s putting more cash into wind shares.
This investor, whose firm looks after about $25 billion -- and who, like many hedgies, is not keen on seeing his name in the media –- laments that the wind industry has built five times the capacity of solar around the globe but sports a punier market cap. Soon the wind will blow the other way, he figures. He’s especially high on the largest players, the turbine makers and utilities, whose growth tends to be strong and steady, and the stocks less like thrill rides.
It doesn’t require vast sums or sprawling production lines to market solar cells. But it can take years, a mint’s worth of cash and a colossal manufacturing operation to set a wind farm in motion, ensuring that the business remains more an oligopoly than a free-for-all.
Owning entrenched turbine makers such as Denmark’s Vestas and Spain’s Gamesa helps this hedgie rest easy. Order books at these two companies are filled well into the future. Likewise, U.S. stalwart General Electric. Turbine sales were a standout in the conglomerate’s generally dismal first-quarter results, bolstering this investor’s view of the trend.
Forecasts for the windmill makers are still too low, he said. This year, “their margins will be better than expected because they’re running at full capacity.”
He also likes Spain-based utility Iberdrola Renewables, the world’s top wind power provider, with 7,800 megawatts installed. A recent choice, Theolia of France, matches up its wind holdings with biogas energy derived from household waste.
These European companies do have U.S.-traded shares -- see the links above -- but volume is thin. Those interested might look into getting those shares on their home exchanges, as this hedge fund investor does. But watch out for currency moves.
Though the fund manager was willing to pay for calm, Britain’s wind sector served up a jolting surprise last week. Royal Dutch Shell decided to opt out of the $4-billion London Array project. Instead, the fossil fuel titan may put a few more shillings into wind deals in the U.S., where the market is playing catch-up and growing swiftly.
Shell offered no excuse for its abrupt exit. The Financial Times, though, observed that the “global rush” has driven up the cost of wind energy as if it were oil.
Money & Co. blogger Tom Petruno is on vacation this week. He returns May 12.
Photo: A wind farm near Palm Springs. Credit: AFP/Getty Images
Times staff writer Edward Silver, who keeps a close eye on green investing trends, filed this report on solar-module maker First Solar Inc.'s earnings report today:
First Solar thinks different, and that’s why its stock is in a class by itself in the renewable-energy field. Though it’s a young company in an emerging industry, it has become a profit machine, a status burnished by its first-quarter results.
Today it reported earnings of 57 cents a share, outdoing consensus estimates by a dime. Revenue of $196.9 million was triple the year-earlier sum. Taking the new numbers into account, analyst John Hardy of American Technology Research believes First Solar is likely to earn $2.82 a share this year.
 With the stock around $300 -- it closed at $291.99 but spiked to $307.80 in early trading -- that still implies a rich price-to-earnings ratio. But the equation loses its outlandish tinge when you consider that First Solar is building plants fast to satisfy demand that may swell next year’s profit up to $7 a share.
First Solar is living large on "thin film," a next-generation method that accounts for perhaps 10% of the industry’s installations. Silicon-based cells claim the rest. Thin-film products are flexible, lighter and above all, dodge the inflated price of silicon, which has been on a tear. But the standard material converts sunlight into energy more efficiently, and the intricacies of thin-film chemistry and manufacturing have been known to hamper companies trying to get off the ground.
Even within the thin-film brigade, however, First Solar goes it alone. Its formula relies on tellurium, one of the rarest elements on the planet. Long-term supply is secure, the firm says, and all else seems to be going right too. Its much-admired manufacturing is said to be so cost-effective that some see it leading the charge to bring solar into coal’s price range. That’s a goal dear to the hearts of both environmentalists and investors.
Enough background? Here’s what’s new. The company is headquartered in Phoenix but its business is anchored in Europe. On today’s conference call with analysts, however, CEO Michael Ahearn spoke of a high sense of urgency among U.S. utilities to meet their renewable-energy mandates. Already, First Solar is developing a 7.5-megawatt pilot project with Southern California Edison. Look homeward, Ahearn?
Hardy, the analyst, calls First Solar the most capable provider for utility-scale projects. Starting in the latter half of 2009, "We see the U.S. utility market as the primary driver of demand, based on the fact, of course, that the U.S. consumes so much of the world’s electricity."
The question is, are the blue skies already priced into the company's $23-billion valuation? First Solar investors know they own a volatile stock, one that has almost doubled from its February depths of $165.60. Wall Street pays well for speedy growth, but at these heights the risks are magnified.
A few to keep in mind: What if silicon prices slide as supply rises, and potential thin-film customers begin to think different about their choice? What if First Solar’s suppliers can’t mine enough tellurium to feed its expanding appetite? And as it becomes known as a stock that must be owned, will there soon be anyone who doesn’t?
Posted April 30, 2008
Times Staff Writer Edward Silver, who keeps a close eye on green investing trends, filed this report on a key player in the alternative-energy food chain:
A big chunk of the revenue rushing into solar energy has found its way into the coffers of MEMC Electronic Materials, a company that does its business entirely indoors. MEMC fashions silicon wafers for computers and solar cells, which need the stuff to push electrons around.
Vibrant demand from solar firms has driven the price of silicon sky-high and made a Wall Street darling out of the St. Louis-based company. But the computer side is interfering with the story.
 Usually a good bet for an upside surprise, MEMC revealed first-quarter results late Thursday that barely made it into the ballpark of forecasts. Operating earnings climbed to 84 cents a share from 71 cents a year earlier. Revenue actually declined more than 6% from the fourth quarter to $501.4 million, which the company attributed to softness in high-tech and to the issue that absorbed analysts on the conference call: production bottlenecks that are preventing it from satisfying its clamoring solar clients.
Looking ahead, that raises questions about MEMC’s ability to keep up with demand, and it could test the patience of customers who may decide to find other sources.
So far, the solar side still is booming and wafer prices aren’t coming down. If alt-energy investors were worried about slackening growth, they can exhale.
More guests are crashing the solar silicon party, however, especially overseas. If rising supply tamps down prices, it helps cell purveyors like Suntech Power Holdings and JA Solar but could slice off some of the wafer makers’ share of the pie.
Those bullish on MEMC are bit warier today but still have reason to be optimistic. It takes time for new entrants to ramp up, and some sales that are on hold will show up in the second half of the year. But analysts will be watching to make sure the company fixes its manufacturing trouble.
Traders, not a wait-and-see bunch, took the stock down $4.85, or 6.4%, to $70.50 today. The shares are off 25% from their record high in December.
Posted April 25, 2008
Times Staff Writer Edward Silver, who keeps a close eye on green investing trends, filed this report from a conference on the green economy held this week at Pasadena’s Langham hotel:
Fortune magazine brought corporations, financiers, activists and scientists together to do some green brainstorming at a conference rich with information and inspiration. Panels and luminaries spoke before a sculptural backdrop of newspaper stacks, crushed soda cans and other symbols of ill-treated resources. Insights, confrontations and deal-making were abundant.
Three scenes from the conference:
Rountable: Is clean coal an oxymoron?
Coal is the least costly, most plentiful and dirtiest fossil fuel. David Hawkins of the Natural Resources Defense Council pointed out that in the last five years, China has built the equivalent of the entire U.S. fleet of coal-based power plants. Along with India, it's firing up at a breakneck pace.
 For foes of coal, it's painful to concede that these fresh investments in Asia may be with us for 50 to 60 years.
That's why Hawkins, though certainly a friend of the Earth, backs carbon capture and sequestration for coal plants, a little-tested approach that aims to bury emissions in the ground before they enter the atmosphere. The technique is full of drawbacks, and many enviros reject it as a marker of renewed commitment to a lethal substance. But its success, or at least its commercialization, could be a boon to the coal business as well as for General Electric and other engineering giants.
It's sure to raise costs, though. Groans went up as one participant delved into the logistics, subterranean infrastructure and monitoring that comes with large-scale sequestration. And if we expect China to follow suit, can we also expect tip-top adherence to the rules?
There are no good answers. But Hawkins recalled that China had adopted the West’s efforts to rein in tailpipe emissions, including catalytic converters and unleaded gasoline. As for proliferating coal, he said, "We have to show China and India that there's a technology to address this, or we will lose this war."
CEO interview: Hugh Grant of Monsanto
Monsanto has been vilified not just for rearranging the genetics of seeds but for its Superfund sites and alleged unsavory dealings with farmers. In 2008, however, the idea of sustainability has to include the reliable supply of food and water. As food prices climb and many go hungry, progressives might soon see Monsanto in a new light.
 Investors already love the company. When Grant took over five years ago the stock traded in single digits. Wednesday it closed at $125.58.
Monsanto is all about improving yields. The human family has more mouths to feed, and new middle classes want protein. Yet much of our stock of arable land is eroding or being turned to other uses, like building megalopolises and planting fuel grains. There's no way around it, Grant said: We will need bigger harvests on less dirt.
Even more crucial, he said, noting the recent "biblical" drought in Australia, is the supply of water to nurture crops. That led him to a fact you're sure to repeat: It takes 700 gallons of water to grow the cotton to make a pair of blue jeans.
Both cotton and water are big businesses for Monsanto, and a line of drought-resistant seeds is in development. Grant exited with a suggestion: "Think water, think food availability. . . . And those of you who wear blue jeans on the weekend, think about those 700 gallons."
Lunch in the garden
Pasadena entrepreneur Bill Gross, whose Idealab "incubator" hatched CitySearch and EToys, is heavy into solar energy now. And he was in a sunny mood on Earth Day. The day before, he announced that another fledgling he helped launch had raised $130 million from Google, venture firm Oak Investment Partners and other parties. The company, ESolar, specializes in "solar thermal" technology that uses mirrors to power generators.
 Through its charitable arm, Google has become a prominent clean-tech financier, spurring research under the slogan Renewable Energy Cheaper Than Coal. Many in the industry believe that crossing that price threshold is the key to widespread adoption of renewable technologies.
Gross told guests enjoying coq au vin and other delicacies that ESolar installations can get up and running faster and at lower cost than standard solar plants. They also require less space, allowing them to set up closer to cities. Another ESolar edge, he said, is that the mirrors are managed by computer, keeping them in the best position relative to the sun.
An exec at the table liked what he heard. The household name company he works for spends $750 million a year to power its services. Get us "off the grid" and cut our costs, he said, and we may have a deal.
For this potential client, who leads his firm’s corporate-responsibility group, looking into solar has something to do with saving the world from fossil fuels but is mainly about saving money.
If Gross can do that, more power to him and to us all.
Top photo: A man cycles past cooling towers of the coal-powered Fuxin Electricity Plant in Fuxin, in northeast China. Greg Baker/Associated Press
Middle photo: Hugh Grant.
Bottom photo: Bill Gross. Bloomberg News
Posted April 24, 2008
The time is right for the green-investing movement, says Russell Read.
That’s why Read, who oversees the $242-billion portfolio of California’s huge state pension fund, is leaving that high-profile job to start his own business devoted to environmental and clean-tech investing, he told me today.
 His plans aren’t fully formed, Read said. He isn’t sure if he’ll try to manage his own investment fund or build a business in some other way. Whatever the model, he said, he wants to help bring together what he views as now "disconnected efforts" worldwide to develop and implement the best green technologies.
"I might have the ability to play a major role in something that I think is of absolute paramount importance," he said by phone from a conference in New Orleans.
Read, 44 and a father of three, joined the Sacramento-based California Public Employees’ Retirement System as chief investment officer just two years ago. His decision to leave surprised CalPERS. Read said he hadn’t planned to depart this soon, but that events in the mushrooming green-investing industry overtook his own timing. "I didn’t anticipate [its] rapid development," he said.
Yet Read, who has a PhD in economics from Stanford University and who earned $958,000 at CalPERS last year, knows plenty about green investing. He has long been a private investor in Maine timberland and is involved in a hardwood reforestation project there. He has a deep knowledge of natural-resources industries.
What’s more, he has won kudos for his efforts to push CalPERS’ traditional stock-and-bond portfolio more toward so-called alternative investments that might generate higher returns in the long run. If they indeed pay off, the ventures would be good for the fund’s beneficiaries and for California taxpayers.
Those alternative investments include a 10-year, $600-million commitment to private-equity funds that are focused on investing in companies developing new energy sources, anti-pollution devices, recycling technologies and other green efforts.
"He knows who the players are" in the green-investing world, says Michael Rosen, head of pension consulting firm Angeles Investment Advisors in Santa Monica.
Which will, of course, help Read in his new business venture, whatever shape it takes.
Photo: Russell Read. Steve Yeater/Los Angeles Times
Posted April 23, 2008
The giant CalPERS pension fund is losing its investment chief to the green movement.
In a surprise, Russell Read -- who has been principal investment officer of the California Public Employees’ Retirement System for just two years -- told the pension system’s board this week that he’s leaving June 30.
 Read, 44, said in a letter to the board that he was quitting "to pursue my long-standing interest in environmental and clean-technology investing."
Pat Macht, a spokeswoman for CalPERS in Sacramento, confirmed that Read was leaving and said the move hadn’t been expected.
Read was attending a conference in New Orleans and wasn’t immediately available for comment. (UPDATE: Go here for an interview I did with Read this afternoon.)
Read has been pushing the $242-billion CalPERS fund -- the nation's largest public pension fund -- to shift a chunk of its assets away from stocks and bonds and into commodities, such as oil and timberlands, as well as into public-private partnerships that build infrastructure projects.
Anne Stausboll, assistant executive officer for investments at CalPERS, will take over as interim investment chief until the board finds a permanent successor, Macht said.
Read came to CalPERS from Deutsche Asset Management, where he was deputy chief investment officer.
Photo: Russell Read. Steve Yeater/Los Angeles Times
Posted April 23, 2008
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