Offshore Wind Power Industry Getting Boost from Obama Administration

Photo courtesy of treehugger.com

Photo courtesy of treehugger.com

President Obama has always been a champion of offshore wind energy, as his administration’s comprehensive National Offshore Wind Strategy demonstrates. This month, the fledgling U.S. offshore wind energy industry got a boost with the announcement that the Obama administration would help finance seven offshore wind projects in Maine, New Jersey, Ohio, Oregon, Texas and Virginia.  The money, about $4 million initially for each project and $47 million over four years (subject to Congressional approval), will be used to launch these projects by financing the engineering, design and permitting efforts as the initial steps to eventual offshore installations.

According to a recent report commissioned by the U.S. Department of Energy, offshore wind is a viable, sustainable, abundant and largely untapped clean energy resource. The report notes that the investment in the offshore wind industry could generate and support up to 200,000 jobs in areas such as construction, manufacturing, operations and supply chain services throughout the country.

The report suggests that offshore wind could be as successful at generating jobs and clean energy as the onshore wind energy industry has proven to be.  During 2011, 32 percent of the additional electric capacity in the U.S. was generated by land-based wind power. In addition, the wind power industry is generating jobs at home for U.S. companies, based on the fact that 70 percent of the equipment installed at U.S. wind farms – things like wind turbines, gears, blades and generators.

Large cap companies like GE, Honeywell and United Technologies are investing in the wind industry, but, so far at least, the number of publicly-traded small cap companies focused on wind power is limited. We have been following several small caps, including

Newbury Park, CA-based Sauer Energy (OTC: SENY, http://www.sauerenergy.com/) is a development stage company developing vertical axis wind turbines for commercial and residential uses. Formerly BCO Hydrocarbon Ltd., the company disposed of its oil and gas interests and in July 2010 purchased Sauer Energy and in May 2012 purchased Helix Wind Corp. Its stock is languishing. In late August SENY was trading at $0.26 with a 52-week trading range of $0.10-$0.95. In late October is was trading at $0.25. It closed Dec. 24 at $0.24, no change for the day.

China-based China Ming Yang Wind Power Group (NYSE: MY, http://www.mywind.com.cn/) is a wind turbine manufacturer focused on designing, manufacturing, selling and servicing megawatt-class wind turbines. In July, MY announced it was considering a joint venture with China-based Huaneng Renewables Corp. to develop wind power and solar power projects in China and overseas markets. MY stock is also stuck in a narrow range. It was trading for $1.21 in late August,  $1.32 in late October. It closed Dec. 24 at $1.21, down 2 cents for the short trading day.

Chatsworth, CA-based Capstone Turbine Co. (Nasdaq: CPST, http://www.capstoneturbine.com/) develops and markets microturbine technologies, including technologies used to provide on-site power generation for wind power. The stock continues to trade very well, about 700,000 shares a day but is stuck around $1.00. On Aug. 23, CPST shares crossed their 50-day moving average and closed the day at $1.05 with 2.8 million shares sold. By late August it was trading at $1.01, by Oct. 31 it had moved down slightly to $0.96. It closed Dec. 24 at $0.91 with a market cap of $278 million.

Naperville, IL-based Broadwind Energy (Nasdaq: BWEN, http://www.bwen.com/) announced Aug. 23 that it was reducing its manufacturing footprint and shifting its “capacity and marketing focus to non-wind sectors.”  BWEN closed Aug. 27 at $2, Oct. 31 at $2.30 and Dec. 24 at $2.11 with a market cap of $30 million.

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Global Wind Power Market Growing at 25 Percent Annual Rate

The good news in the recent Siemens AG announcement that the sprawling, 165-year-old global company was abandoning the solar business was that it was sticking with its wind power business, at least for the time being. Siemens CEO Peter Loscher, who came to Siemens in 2007 and has spent much of his time revamping the entire business, is scheduled to unveil his new strategy on November 8 and wind power (as well as hydro power) is expected to be part of his plans.

The wind power market has been growing steadily at about a 25 percent compound annual growth rate for the past five

Photo courtesy of Howstuffworks.com

years, according to a market research report by Transparency Market Research (http://www.transparencymarketresearch.com/wind-energy-wind-turbine-market.html). In recent history Europe has been the leading market, followed by Asia-Pacific and North America, but China is gaining ground quickly and is expected to soon be the leader, according to the report. About 95 percent of all wind power is generated onshore, with offshore wind power installations still at a “nascent stage,” the report notes.

We’ve covered a variety of wind power and wind turbine small caps in recent months. Most of them are very small, even development stage.

Newbury Park, CA-based Sauer Energy (OTC: SENY, http://www.sauerenergy.com/) is a development stage company developing vertical axis wind turbines for commercial and residential uses. Formerly BCO Hydrocarbon Ltd., the company disposed of its oil and gas interests and in July 2010 purchased Sauer Energy and in May 2012 purchased Helix Wind Corp. When we last checked in late August SENY was trading at $0.26 with a 52-week trading range o $0.10-$0.95. It was trading at $0.25 at the opening of the market Oct. 31.

China-based China Ming Yang Wind Power Group (NYSE: MY, http://www.mywind.com.cn/) is a wind turbine manufacturer focused on designing, manufacturing, selling and servicing megawatt-class wind turbines. In July, MY announced it was considering a joint venture with China-based Huaneng Renewables Corp. to develop wind power and solar power projects in China and overseas markets. MY closed Aug. 27 at $1.21 with a market cap of $147.5 million. It opened for trading on Oct. 31 at $1.32 with a market cap of $165 million.

Chatsworth, CA-based Capstone Turbine Co. (Nasdaq: CPST, http://www.capstoneturbine.com/) develops and markets microturbine technologies, including technologies used to provide on-site power generation for wind power. On Aug. 23, CPST shares crossed their 50-day moving average and closed the day at $1.05 with 2.8 million shares sold. Back on Aug. 27, CPST closed trading at $1.01. It opened the market Oct. 31 at $0.96 with a market cap of $288 million.

Naperville, IL-based Broadwind Energy (Nasdaq: BWEN, http://www.bwen.com/) announced Aug. 23 that it was reducing its manufacturing footprint and shifting its “capacity and marketing focus to non-wind sectors.”  BWEN closed Aug. 27 at $2. It opened Oct. 31 at $2.30 with a market cap of $32 million.

Bipartisan Support in Senate Points to Bull Market for Wind Power

Thanks to high-profile bankruptcies like Solyndra and Evergreen Solar, good news has been in short supply this year for companies in alternative energy. But the wind energy industry bucked that tide earlier this month.

On Aug. 2, the Senate Finance Committee voted to renew a tax credit for wind power for one more year, according to

Photo courtesy of Knowledge-Allianz.com

the New York Times (http://www.nytimes.com/2012/08/03/business/wind-industry-wins-senate-panels-support-for-a-tax-break.html). The provision to renew the tax break is part of a $200 billion package that still must be passed by Congress when it returns from summer break. Furthermore, the vote was bipartisan (19-5) with several Republicans from key wind power states joining the Democrats in favor.

While still not a done deal, it is clear that “the wind industry convinced a key Senate committee that green can be good politics in red states as well as blue states,” the Times noted.

A week after the vote, the American Wind Energy Association announced that the U.S. “hit 50 gigawatts of wind-powered electric capacity in the second quarter of this year.” Energy and Capital noted that so far in 2012, “the nation has had 2,800 megawatts and 1,400 wind turbines installed countrywide, chiefly across Nevada, Idaho, Iowa, Hawaii, Oklahoma and California.” A total of 39 states now have “utility-scale wind facilities” with most of the growth in the industry is coming from domestically manufactured turbines and materials, according to Energy and Capital.

Let’s take a look at a few randomly chosen small cap companies that are involved in wind turbines and wind power.

Newbury Park, CA-based Sauer Energy (OTC: SENY, http://www.sauerenergy.com/) is a development stage company developing vertical axis wind turbines for commercial and residential uses. Formerly BCO Hydrocarbon Ltd., the company disposed of its oil and gas interests and in July 2010 purchased Sauer Energy and in May 2012 purchased Helix Wind Corp. SENY currently has a market cap of $20.6 million and a 52-week trading range o $0.10-$0.95. It closed trading Aug. 27 at $0.26, up 2 cents on the day.

China-based China Ming Yang Wind Power Group (NYSE: MY, http://www.mywind.com.cn/) is a wind turbine manufacturer focused on designing, manufacturing, selling and servicing megawatt-class wind turbines. In July, MY announced it was considering a joint venture with China-based Huaneng Renewables Corp. to develop wind power and solar power projects in China and overseas markets. MY’s market cap is $147.5 million and 52-week trading range is $1.10-$3.73. It closed Aug. 27 at $1.21, down 4 cents for the day.

Chatsworth, CA-based Capstone Turbine Co. (Nasdaq: CPST, http://www.capstoneturbine.com/) develops and markets microturbine technologies, including technologies used to provide on-site power generation for wind power. On Aug. 23, CPST shares crossed their 50-day moving average and closed the day at $1.05 with 2.8 million shares sold. Its market cap is $302.6 million and 52-week trading range is $0.85-$1.53. It closed Aug. 27 at $1.01, down 1 cent for the day.

One company in the news lately is Italy-based Enel Green Power, which trades on the Milan Exchange (EGPW.MI) and is Italy’s biggest renewable energy company (http://www.enelgreenpower.com/) . EGPW announced in early August that it will partner with GE Capital to build the Prairie Rose wind farm in Minnesota, expected to have a total installed capacity of 200 megawatts. The farm is scheduled to commercially operational  in this year’s fourth quarter. This follows earlier announcements of other investments in wind farms in Oklahoma, Mexico, Denmark and Croatia.

Finally, Naperville, IL-based Broadwind Energy (Nasdaq: BWEN, http://www.bwen.com/) announced Aug. 23 that it was reducing its manufacturing footprint and shifting its “capacity and marketing focus to non-wind sectors.” In early August the company reported a $4.2 million loss for the fourth quarter. It also made a 1-10 reverse split of its common stock. BWEN closed Aug. 27 at $2, down 26 cents for the day.

If Cape Wind Flies, Small Caps Could Follow

Late Breaking Comment

Andrew Tarsy and Mitch Tyson wrote an interesting cost-benefit analysis commentary on the Cape Wind project. http://www.boston.com/bostonglobe/editorial_opinion/letters/articles/2010/05/12/our_energy_use_calls_for_a_transformation/

After nine years of regulatory review, the nation’s first offshore wind farm, known as Cape Wind, won approval from the federal government (http://www.nytimes.com/2010/04/27/business/energyenvironment/27wind.html?ref=earth). While challenges remain to be heard, there’s little doubt that the announcement that Cape Wind will fly will be a tremendous boon to the burgeoning wind power industry. Indeed, Interior Secretary Ken Salazar told the media throng at a news conference that “this will be the first of many projects up and down the Atlantic Coast.”

Cape Wind CEO Jim Gordon told CNN that his company has spent more than $45 million–most of it from his own pockets–to get this far since 2001 when he first sought a permit (http://www.cnn.com/2010/TECH/04/29/cape.wind.ceo.profile/index/html). Gordon has refused to disclose potential earnings for his company; critics say Cape Wind stands to gain hundreds of millions in tax credits and subsidies. Among the hurdles still to clear is a final purchase power agreement with a utility. However, Tom King, the president of National Grid, the utility company that covers the area, said in a statement that negotiations with Cape Wind were “going very well…”

Some of the Cape Wind statistics are intriguing:

–Developers claim the wind farm will produce about 75 percent of the power for Cape Cod, Nantucket and Martha’s Vineyard.

–Cape Wind will stretch across 25 square miles of Nantucket Sound, like about 5 miles from the nearest shore on the mainland and about 14 miles from Nantucket.

–The tip of the highest blade of each of the 130 turbines would reach 440 feet above the water.

–Carbon dioxide emissions will be reduced by the equivalent of taking 175,000 cars off the road.

–1,000 construction jobs will be provided.

–Outside the U.S. there are more than 800 giant wind turbines off the coasts of Denmark, Great Britain and seven other European countries. China’s first offshore wind farm goes online this month with more in the pipeline.

Several large household names have jumped into the windpower business including Siemens, General Electric and Vestas, a Danish company that has the largest installed base. But there are small caps involved, too, and privately held companies that should benefit from the progress in Cape Cod.

Kaydon (NYSE:KDN, http://www.kaydon.com) is a fair sized ($1.3 billion market cap) Ann Arbor, MI-based company that makes parts such as custom bearings for windmills. In 2008 they built a manufacturing facility in Monterrey, Mexico devoted to servicing the wind energy industry. Investors seem to be connecting them to the Cape Cod news. The stock is now trading at more than $45, well over its 52-week high of $42.56.

Otter Tail Corp. (Nasdaq: OTTR, http://www.ottertail.com) is a Fergus Falls, Minn.-based electric utility ($807 million market cap) that manufactures and markets wind towers and also distributes electricity in Minnesota, North Dakota and South Dakota. Nearly a week after the Cape Wind announcement their stock was trading at $22.50. Its 52-week range is $18.63–$25.40.

Western Wind Energy (TSX:WND, http://www.westernwindenergy.com) is a Canadian company ($75 million market cap) with more than 500 wind turbines in California. Shortly following the announcement shares were trading at $1.52, up $.06, and headed toward their 52-week high of $1.99.

Two other non-U.S. companies might deserve a look. In Japan, an interesting windmill company is Loopwing (www.loopwing.co.jp). It’s unusal design is said to greatly reduce vibration an noise as compared to more traditional designs. And across the pond, privately-held, Suffolk-based Wind Power Ltd. (www.windpower.ltd.uk) develops large scale vertical axis wind turbine technology. The company began as a small research group but now offers a range of products and services.

Time to Jump Aboard the ‘Smart Grid’ Bandwagon

Talk of a “Smart Grid” is everywhere, even the Super Bowl (http://earth2tech.com/2009/01/31/ge-ups-smart-grid-ante-with-super-bowl-ad-campaign/). It’s easy to see why, with President Obama poised to spend a healthy portion of his $900 billion-plus stimulus package on the creation of a Smart Grid, the common term for a revamped electrical grid that is much more efficient and uses alternative energy whenever and wherever possible. The city of Boulder, CO is turning itself into a “Smart City” (http://smartgridcity.xcelenergy.com/story/index.html), the entire island of Malta, with the help of IBM (NYSE: IBM, http://www.IBM.com), is vying to become the first “Smart Island” (http://earth2tech.com/2009/02/04/ibm-welcome-to-smart-grid-island/).

For entrepreneurs, startups and smallcaps everywhere, this is the time to jump on a bandwagon typically reserved for the big guys like IBM and GE (NYSE: GE, http://www.ge.com). A small company like Tyngsboro, MA-based Beacon Power (Nasdaq: BCON, http://www.beaconpower.com) is focused on energy storage through the development of a flywheel technology that “uses spinning disks to help stablize electricity grids, allowing the grids to run more efficiently,” according to earth2tech.com (http://earth2tech.com/2009/02/04/flywheel-energy-storage-hits-the-high-seas/).

On the topic of grids and energy, there is promise in the use of advanced lead-acid batteries supplied by New Castle, PA-based Axion Power International (EBB: AXPW, http://www.axionpower.com). These batteries are currently being tested for their grid buffering and storage capabilities in a demonstration project directed by privately-held, NY City-based Gaia Power Technologies (http://www.gaiapowertechnologies.com) for NYSERDA. Axion Power, which is trading at 95 cents (off its 52-week high of $2.75) just received two grants, including an $800,000 grant from the state of Pennsylvania to demonstrate the effectiveness of their battery technology in electric vehicles and HEVs.

The Smart Grid and the power distribution industry is the focus of the DistribuTECH conference this week in San Diego. Smallcaps attending include Pittsburgh, PA-based Tollgrade Communications (Nasdaq: TLGD, http://www.tollgrade.com), which is displaying its new centralized remote monitoring system to improve service delivery for power utlility operations and efficiency of grid systems. The company’s stock is trading at $5.82 and has been on a nice uptick since hitting a $3 bottom last fall. Also attending DistribuTECH is Devens, MA-based American Superconductor Corp. (Nasdaq: AMSC, http://www.AMSC.com), which develops technologies to increase electrical grid capacity and reliability and supplies electrical systems used in wind turbines, among other things. The company hosted a program called “Power Delivery Solutions for the Smart Grid” at the show. The company now has a $719 million market cap and is trading at $16.61, well above its low of $8.22 only a few weeks ago.

There are literally hundreds of other smallcaps jumping into this market, such as Manitowoc, WI-based Orion Energy Systems (Nasdaq: OESX), http://www.oriones.com), which manufactures energy efficient lighting systems and controls. Perhaps its connection to the smart grid movement has allowed it to bounce nicely off its 52-week low of $2.76 and is now trading at $4.53. Of the many solar companies vying for the expected increase in business, one, Montreal-based ICP Solar (EBB: ICPR, http://www.icpsolar.com) just announced an agreement with Largo, FL-based Integrated Metering Systems to market what they call a GreenMeter in North America designed to allow a more precise reading of electricity consumption and production. ICP CEO Sass Peress says the GreenMeter will “monitor energy usage data…and instantaneously provide this information to the web–where clients can access the analysis anywhere in the world.”