Markets

26 renewable energy focus January/February 2008

Solar reveals major rewards and risksRENEWABLE ENERGY STOCKS CONTINUED THEIR RELENTLESS SURGE

UPWARDS TOWARDS THE END OF LAST YEAR BOOSTED BY THE

FAVOURABLE Q3 EARNINGS SEASON AND THE BOOMING SOLAR

SECTOR. Patrick O’Brien

In the period from the end of September to

the end of November 2007, the WilderHill

New Energy Global Innovation Index (ticker:

NEX) – which tracks 88 stocks across all

significant sectors of the low-carbon energy

industry, including renewable energy,

biofuels and emerging low-carbon technolo-

gies – easily outperformed the S&P500,

AMEX Oil and Nasdaq. The NEX ended

November up 6.6%, while the other three

indices all fell, by up to 3%.

However the renewables sector still involves

signifi cant risk of the NEX constituents, more

stocks fell in value (46) than increased (42),

and while some individual stocks off ered

incredible returns (one doubled in value), two

stocks tumbled by over 50%.

Solar was the star of the show during the

period – 7 of the 8 biggest gainers on the NEX

were from this sector. Five of them increased

their market capitalisations by over a billion

dollars.

Thin fi lm cell maker First Solar led the way, up

by 101%. It is often cited as an example of the

irrational exuberance in the solar sector due

to the fact that it has by far the highest valu-

ation multiples, but it delivered an excep-

tional quarter – doubling revenue in Q3

sequentially while reporting an EBIT margin

of 30.4%.

The second highest performer was China-

based cell and module manufacturer Suntech

which gained 98.4% during the period. The

increase was largely due to its increase in

production targets for 2008 during which it

expects revenue of up to US$2.1bn.

While many of the larger solar stocks enjoyed

a stellar earnings season, this was not a uniform

phenomenon, as the two biggest losers on the

index were also major solar players. LDK Solar

and Conergy brought up the rear with falls of

57% and 58% respectively.

Chinese wafer manufacturer LDK suff ered

badly after its former fi nancial controller

made public allegations against the company,

claiming it was overvaluing the inventory of

silicon on its balance sheet. Despite protesting

that the claims “have no merit” and revising

its fi nancial forecasts upwards, investors do

not seem to have been persuaded, looking at

the stock over the period shown by the table

on the opposite page – nb: activity in January

has seen the stock rebound, before falling off

again.

Bottom of the heap for the period – Conergy

– was punished after it issued a profi t warning

just days after telling journalists that it would

not, and its CEO Hans-Martin Rüter resigned in

the aftermath. The German solar giant is

suff ering from a shortage of modules which

had a signifi cant impact on its Q3 results, and

it had to sell new shares and options in order

to avert a liquidity crisis.

Outside of solar, the best performer was

Germany’s Schmack Biogas, up by 66%,

though this represents only a partial recovery

from the collapse it suff ered in July when it

issued a profi t warning due to a slump in

demand for biogas plants from the agricul-

tural sector.

One of the biggest losers of the period was

US-based biofuel company Pacifi c Ethanol

whose bad year was compounded by Bill Gates’

recent announcement that he planned to

offl oad his 21% stake in the company.

What is the NEX?

The NEX index consists of between 80 and

90 constituents, allowing it to cover all

significant sectors of the low-carbon energy

industry, including renewable energy,

biofuels and other low-carbon technologies.

The NEX is a rule-based index and uses an

equal-weighting methodology modifi ed by

sector and market capitalisation. It is carefully

designed to provide diversifi cation across the

diff erent sectors of the clean energy industry

and across the size of company. It has an

extensive global representation including

Europe, Asia-Pacifi c, and the Americas.

Components are limited 5% of the index by

weight at rebalancing.

It is calculated and disseminated by Dow

Jones Indexes. Live price-return information is

available in US Dollars: Euro, Pounds Sterling

and Yen. Total return indexes in all four curren-

cies are also provided once per day. The index

is rebalanced quarterly in March, June,

September and December. It was initially

determined to yield a benchmark value of

100.00 at close of trading on 30 December

2002.

About the authorPatrick O’Brien works for New Energy Finance (www.newenergyfi nance.com).

For more information on the NEX global clean energy stock market index: www.nex-index.com

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Markets

renewable energy focus January/February 2008 27

NEX Constituents Performance (28 September - 30 November 2007)

ID Name Country/Location Primary Sector Main Market Ticker Local Currency

% Change

34 First Solar US Renewable - Solar NASDAQ-GM FSLR USD 101.42%

74 Suntech Power Holdings Co Ltd China Renewable - Solar New York STP USD 98.42%

66 Schmack Biogas AG Germany Renewables - Biofuels, Biomass & Waste-to-Energy

XETRA SB1.DE EUR 66.51%

73 Sunpower Corp US Renewable - Solar NASDAQ-GM SPWR USD 50.25%

33 Evergreen Solar Inc US Renewable - Solar NASDAQ-GM ESLR USD 47.48%

60 Q-Cells AG Germany Renewable - Solar XETRA QCE.DE EUR 34.34%

44 JA Solar Holdings Co. Ltd. (ADS) China Renewable - Solar NASDAQ-GM JASO USD 32.01%

51 MEMC Electronic Materials Inc US Renewable - Solar New York WFR USD 31.80%

75 Suzlon Energy Ltd India Renewable - Wind Mumbai 532667.BO

INR 31.05%

77 Techem Germany Demand-Side Energy Saving XETRA TNH.DE EUR 27.77%

62 REpower Systems Germany Renewable - Wind XETRA RPW.DE EUR 22.11%

2 Acciona SA Spain Renewable - Wind Madrid ANA.MC EUR 21.66%

30 EnerNoc US Generation Effi ciency & Smart Distribution

NASDAQ-GM ENOC USD 19.88%

5 American Superconductor Corp US Generation Effi ciency & Smart Distribution

NASDAQ-GM AMSC USD 17.87%

78 Theolia France Renewable - Wind EN Paris TEO.PA EUR 17.75%

85 Vestas Wind Systems A/S Denmark Renewable - Wind Copenhagen VWS.CO DKK 17.19%

56 Plug Power Inc US Hydrogen & Fuel Cells NASDAQ-GM PLUG USD 16.77%

70 Solaria Energia Spain Renewable - Solar Madrid SLR.MC EUR 16.24%

83 Verbund Austria Renewables - Other Vienna VER.VI EUR 14.30%

35 Fortum Oyj Finland Renewables - Other Helsinki FUM1V.HE

EUR 14.14%

50 Meidensha Corp Japan Generation Effi ciency & Smart Distribution

Tokyo 6508.JP JPY -15.80%

22 Cosan SA Industria e Comercio Brazil Renewables - Biofuels, Biomass & Waste-to-Energy

Sao Paulo CSAN3.SA

BRL -16.04%

43 Itron Inc US Demand-Side Energy Saving NASDAQ-GS ITRI USD -16.68%

1 Abengoa SA Spain Renewables - Biofuels, Biomass & Waste-to-Energy

Madrid ABG.MC EUR -17.15%

3 Actelios SpA Italy Renewables - Biofuels, Biomass & Waste-to-Energy

Milan ACT.MI EUR -17.20%

59 PRAJ Industries Ltd India Renewables - Biofuels, Biomass & Waste-to-Energy

Mumbai 522205.BO

INR -17.88%

6 Anhui BBCA Biochem China Renewables - Biofuels, Biomass & Waste-to-Energy

Shenzhen 000930.SZ

CNY -19.02%

87 Zhejiang Yankon Group China Demand-Side Energy Saving Shanghai 600261.SH

CNY -19.32%

23 Cree Inc US Demand-Side Energy Saving NASDAQ-GS CREE USD -20.80%

25 Ebara Corp Japan Hydrogen & Fuel Cells Tokyo 6361.JP JPY -24.67%

76 Takuma Co. Ltd. Japan Renewables - Biofuels, Biomass & Waste-to-Energy

Tokyo 6013.JP JPY -25.19%

48 Maxwell Technologies Inc US Power Storage NASDAQ-GM MXWL USD -28.29%

40 Gurit Holding AG Switzerland Services & Suppliers Swiss GUR.SW CHF -29.16%

84 Verenium Corp US Renewables - Biofuels, Biomass & Waste-to-Energy

NASDAQ-GM DVSA USD -30.87%

7 Arima Optoelectronics Corp Taiwan Demand-Side Energy Saving Taiwan 6289.TW TWD -32.10%

26 Echelon Corp US Demand-Side Energy Saving NASDAQ-GM ELON USD -32.87%

55 Pacifi c Ethanol Inc US Renewables - Biofuels, Biomass & Waste-to-Energy

NASDAQ-GM PEIX USD -36.49%

13 Brasil Ecodiesel Brazil Renewables - Biofuels, Biomass & Waste-to-Energy

Sao Paulo ECOD3.SA

BRL -42.39%

47 LDK Solar Co. Ltd. (ADS) China Renewable - Solar New York LDK USD -57.11%

20 Conergy AG Germany Renewable - Solar XETRA CGY.DE EUR -57.99%

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