Solar options jump in volume (SOLF, LDK, TSL, STP, YGE)
Solar stocks were up nicely today and the option volume spiked in many of the names.
The following showed up on my nightly scan for highest % change in option volume above its 10 day average:
SOLF 576%
LDK 346%
TSL 223%
STP 197%
YGE 196%
Most of the volume came from call buying so it will be interesting to see if these bullish bets pay off.
Turning Garbage to Gold – Covanta (CVA)
Barron’s reports that Covanta Holding (CVA) is at the forefront of the waste to energy industry. "With skyrocketing fuel prices, increasing worldwide concern over climate change and overflowing landfills, Covanta is positioned to see strong growth in both domestic and international markets.
This could be a great time to buy the Fairfield, N.J.-based company, which "owns landfills and energy generation plants, the majority of which are waste-to-energy facilities. Covanta incinerates garbage to produce electricity for towns and municipalities.
After paying off a number of capital-intensive plants, Covanta now owns debt-free assets, which, in addition to beefing up the bottom line, will increase its borrowing power. Combined with a 9% free cash flow yield, the company is free to pursue new projects and acquisitions. Despite 23.4% growth in the last year, Covanta shares are down 4.8% in the last three months, as stock sales by company Chairman Sam Zell, the real-estate mogul, have rattled investors."
Electric Bikes Are All The Rage in China
While searching for green stocks its important to follow green trends. The Economist reports that "China’s increasingly affluent citizens may not all be able to afford cars just yet. But they clearly yearn for some motive power beyond that provided by their two legs. The standard bicycle, synonymous with mass transport in China, is not enough for everyone. Over the past few years electric bikes, with small motors that give a little help to the rider, have become more popular, with more than 20 million made last year according to a new report, “China’s Clean Revolution”. The hope of environmentalists, of course, is that mass transport powered by electricity would pump less carbon into the air than transport powered by internal combustion engines."
AP
Ernst & Young on Renewable Energy
The credit crunch has so far had little impact on the attractiveness of renewable energy as an investment, according to Ernst & Young.
From March 2007 to June 2008, the Wilderhill Clean Energy Index [NEX] rose by 17%, compared with an 11% decline for the FTSE index. The solar sector has shown a rise of 56% during the period, while wind companies fell 7% and biomass stocks were down by 34% on average. 
E&Y said the impact of rising oil costs is having a mixed effect on renewables.
On one side, fossil fuel costs are rising, making renewable energy more competitive; with the appeal of ‘free’ energy inputs (wind, solar or marine) gaining greater exposure. Conversely rising energy costs are putting pressure on governments to consider the cost of renewables – and its impact on the fuel poor in particular. The recent rise in oil prices has yet to factor into renewable equity prices.
China has displaced the UK in the top five countries in the Ernst & Young renewable energy country attractiveness indices for Q1 and Q2 2008. This is in spite of the UK’s renewable energy strategy proposals, which are yet to be translated into tangible benefit to the industry.
The US retains the top position despite there being no sign of a long-term support framework for the industry. Germany and India retain their second and third positions.
Solar Calls Heating Up (STP, CSIQ)
Call activity is picking up in the solar names. Suntech Power Holdings (STP) was up over 12% today to $41.75. Almost 5,000 STP Sept 45′s traded today vs and open interest of 5,351. There was also roughly 600 Oct 45′s, 1,000 Oct 50′s, and 500 Oct 55′s vs almost zero open interest before today.
CSIQ saw similar action. The standout strike is the Sept 30 that traded 6,600 contracts today vs an open interest of 4,000.
When there is higher than average buying in the option market it is good to know where the "smart money" is placing their bets.
SunPower (SPWR) Shares Jump On Deal With PG&E (PCG)
According to a press release, Pacific Gas & Electric (PCG) announced two contracts for a combined 800 MW of solar power. The two deals will provide 1.65 billion kilowatt-hours of electricity, enough to serve 239,000 residential homes. PG&E signed a deal for 550 MW of thin-film photovoltaic solar power with Topaz Solar Farms, a unit of OptiSolar, and a second deal for 250 MW with High Plains Ranch II, a unit of SunPower (SPWR).
Both projects are contingent upon the extension of the federal investment tax credit for renewable energy, which is due to expire at the end of the calendar year.
The SunPower project is expected to begin power delivery in 2010, and to be fully operational in 2012. The High Plains project would use SunPower’s crystalline silicon solar cells. The project also will use SunPower’s solar tracking system, which tilts the cells across the sky, increasing energy capture.
After hours, SunPower is up $5.18, or 6.6%, to $83.75.
VeraSun Energy (VSE) – A Standout in a Difficult Time
Morgan Stanley is out with a note today stating that VeraSun Energy (VSE) beat consensus and their Q2 estimates by a wide margin yet they still rate the stock equal weight due to the "tough ethanol market." That being said Morgan Stanley believes VSE has the best risk reward profile among the pure play ethanol producers.
Morgan Stanley also reported, "Given our outlook for increased industry capacity and a challenging cost profile we recommend investors avoid ethanol stocks in the near term. Today’s WASDE release reported better-than-expected weather, lower-than-anticipated corn crop loses from the Midwest flood and a higher-than-anticipated corn yield. We think that investors have already priced this news into ethanol valuations over the past two weeks and there are likely few positive catalysts in the near future."
With a base case price target of $11, implying almost 40% of upside, and a bull case price target of $18, implying 125% of upside, Morgan Stanley sounds pretty bearish on the company they brought public in 2006.
The stock closed up $.41 or 5.3% to $7.56.
Geothermal Picks
A recent article from TheStockAdvisors.com shows the contributing editors from Stephen Leeb’s The Complete Investor focus on three Geothermal energy picks: Chevron (CVX), Calpine (CPN), and Ormat Technologies(ORA).
"Throughout the globe, heat is continually produced in a layer far below the earth’s crust. Large power plants can capture and use this steam to provide electricity on a fairly large scale. In Iceland, by some estimates, 50% of all energy needs are met through an alternative energy source that has been known for a long time, Geothermal is used in many other places as well. The largest system in operation is in California just north of San Francisco, in an area known as the Geysers."
"While oil, of course, is its main focus, Chevron is the world’s largest geothermal energy producer, with facilities that include two plants in Indonesia and two in the Philippines. The company’s huge capital base gives it the wherewithal to fund continued research and installations." Here is more about Chevron’s Geothermal business.
"A riskier play is Calpine Corp., the primary producer of geothermal energy in North America. It’s the operator of the huge geothermal facilities at the Geysers, which meet nearly 70% of the average electrical demand for California’s North Coast region."
"Finally, the pure-play geothermal company with the best-defined growth prospects is Ormat Technologies. It’s the second-largest producer of geothermal electricity in the U.S., which accounts for around 75% of the company’s revenues. Its 11 geothermal power plants produce an average of 32 MW per year per plant, and it has a further 270 MW of capacity in various stages of development. Ormat is a leader not only in geothermal energy but also in ‘recovered energy power generation’, which refers to the capturing of waste heat generated from industrial processes and converting it into electricity."
For more information on Geothermal here are some good links:
-Geothermal Energy Association
-International Geothermal Association
IPO FILING: First Wind Holdings (WNDY)
Check out this new initial public offering from First Wind Holdings Inc. First Wind has applied to take the ticker WNDY on the NASDAQ. As per the company name, the company is involved in wind energy.
For filing purposes it has listed the amount of $450 Million as the amount in shares that it intends to offer. Underwriters are listed as Credit Suisse, Goldman Sachs, and JPMorgan.
Tradingmarkets.com reports that First Wind Holdings revealed that New York-based D. E. Shaw group, Madison Dearborn, and UPC Wind Partners II are its main stockholders, each owning more than a 5% stake.
First Wind Holdings LLC posted net loss of $68.07 million in 2007, $26.01 million in 2006 and $18.62 million in 2005. For the quarter ended March 31, 2008, the company incurred a net loss of $18.52 million, versus a net loss of $13.91 million in the same period last year.
Here is a description of the company:
We are a leading independent North American wind energy company focused exclusively on the development, ownership and operation of wind energy projects. As of June 30, 2008, our portfolio of wind energy projects included approximately 5,564 megawatts ("MW") of capacity, of which 92 MW were operating and 182 MW were under construction. We expect to start construction on a 203 MW project in 2008 and, as a result, to be simultaneously constructing three wind energy projects representing 385 MW of capacity. Our goal is to have approximately 1,100 MW of operating capacity by the end of 2010 and we target the construction and commissioning of approximately 400 MW annually thereafter to achieve approximately 2,300 MW of operating capacity by the end of 2013. We have entered into purchase contracts for turbines with an aggregate generating capacity in excess of 1,300 MW, which are scheduled to be delivered or commissioned between 2008 and 2013. We expect this supply will be sufficient to meet all of our anticipated turbine needs in 2008 and 2009 and approximately 80% of our anticipated turbine needs in 2010.
First Solar (FSLR) Options ‘Cheap’
Adam from The Daily Options Report writes: "FSLR feels particularly enticing. Options are very cheap by FSLR standards. Which makes some degree of sense when you consider that the stock has settled into a range. But some interesting things here. It’s basically moving with the whole energy/ag/mining space right now. And has dribbled right back the to 200 Day MA. Not terribly likely it just settles in peacefully around here this week without some degree of action."
I agree with Adam. If you have an opinion about FSLR it is a good time to use options to make a directional trade. Also notable is that the options market is currently suggesting FSLR will be pegged at 265 by expiration, about 6% above yesterdays close. I would not suggest buying FSLR because the options market suggests it will be pegged higher but I mention it because of the magnet effect expiration week could possibly have.
