Clean Energy play through ICLN 2 WSJ full articles
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Chris Kuntarich
Feb 12, 2012, 11:12:11 AM2/12/12
to Sanguine Strategy
Hey everyone,
I know our original approach for trades on Monday was to get a pulse
on the market, but as far as clean energy goes we might wanna go ahead
and make the trade at the bell. Here is one article on First Solar (a
4% holding of ICLN) that dropped 10% on Friday:
Wall Street Journal
A $1.36 billion government-backed deal for a Southern California solar
farm has hit a snag and could be days from unraveling, all due to a
local construction permit.
First Solar Inc., one of the world's largest solar-panel
manufacturers, warned Thursday that it might have to buy back the 230-
megawatt plant it sold to Exelon Corp. if the Department of Energy
doesn't begin funding a loan made to finance the deal later this
month.
The project has yet to receive any payments from a $646 million
federal-government loan finalized in September because of an issue
with a construction permit that First Solar obtained from Los Angeles
County.
The offices of the Los Angeles County Regional Department of Planning,
which issued the permit for the solar farm, were closed Friday and
telephone calls were not returned.
Exelon, which bought the project for about $1.36 billion, can walk
away from the deal and force First Solar to return $75 million that
Exelon had already paid should the loan payments not flow by a Feb. 24
deadline.
"Exelon remains committed to Antelope Valley Solar Ranch One and
expects to receive the initial loan advance upon resolution of the
construction-permit issue," said Exelon spokesman Paul Elsberg.
First Solar spokesman Alan Bernheimer said the company is proceeding
with the construction of the project, which has 185 workers on site,
but declined to comment further.
Energy Department spokesman Damien LaVera said the agency "continues
to support this project" but also that its loan guarantees "have
strict conditions in place to protect taxpayers."
The department can only disburse such funds "after all applicable
permitting issues are resolved," Mr. LaVera said.
Should the deal fall apart, First Solar would sustain a blow to its
developing emphasis on designing, building and selling large solar
projects to developers—a strategy that was supposed to keep the
company on an even keel amid squeezed margins affecting its solar-
manufacturing business, which has seen industry-wide head winds.
First Solar's stock fell 10% to $43.91 in Friday trading on the Nasdaq
Stock Market.
Large power companies such as NRG Energy Inc. and Mid American Energy
Holdings Co. have been buying solar projects because the low prices of
panels are improving the return on investment of such projects.
First Solar used loan guarantees from the Department of Energy to
construct another project in the Southern California desert, called
Desert Sunlight, which it sold in September to NextEra Energy
Resources LLC, a subsidiary of NextEra Energy Inc., and GE Energy
Financial Services, a unit of General Electric Co.
In August, the company also sold its Agua Caliente project, located in
Yuma County, Ariz., to NRG Energy. Agua Caliente has been getting
disbursals from the federal government, having received $181.2 million
out of a $967 million loan, as of Dec. 31, according to government
data.
"It was hoped that the [First Solar] projects would be going
smoothly," said Daniel Ries, managing director of alternative energy
equity research at Collins Stewart LLC. "They are the key driver of
earnings for the next two-and-a-half to three years and probably long
term."
Should First Solar be forced to repay the $75 million in the Antelope
Valley deal, it would eat into its free cash flow, said Mr. Ries. The
company would also have to keep the project, continue funding its
construction and start looking for buyers—a significant expense.
It would also probably have to sell the project at a lower price than
under its deal with Exelon, because the loan-guarantee program may be
abandoned and that would increase the financing costs, said Mr. Ries.
He estimates that the sale price for the project without the loan
guarantee would be about $130 million lower than with the loan
guarantee.
Antelope Valley is one of several clean-technology projects that
haven't yet received any payments from the federal government under a
loan-guarantee program that closed all deals more than four months
ago.
NRG Energy and its partner SunPower Corp. are still waiting for
capital to be issued under their $1.19 billion loan for a solar power
plant, according to government data.
SunPower referred questions to NRG, which wasn't available to comment.
Two solar manufacturers backed by venture capital investors, 1366
Technologies and Solopower Inc., also haven't seen money yet for their
new factories. Representatives of these companies said that the
conditions of the loans are such that they have to first build
demonstration production lines, meet certain requirements, and only
then tap the federal funds for additional construction.
At least two other companies, car maker Fisker Automotive and solar
panel manufacturer Abound Solar, have seen the government stop issuing
loans. Fisker didn't meet certain milestones. Abound representatives
weren't available for comment.
***** Here is another article in the WSJ this morning that positively
relates to our position on clean energy through offering a tax-equity
program that will promote corporate renewable energy programs.
The Obama administration is attempting to persuade U.S. corporations
about the benefits of investing in renewable energy, in an effort to
help the industry after a government grant program expired.
The Energy Department-led effort includes a planned March 13 meeting
at which senior financial-firm executives and Energy Secretary Steven
Chu would speak, documents viewed by The Wall Street Journal show. The
79 invitees include some of the largest companies in the U.S., from
Exxon Mobil Corp. to Walt Disney Co., according to the documents.
The idea is to tell companies with big tax bills about the "attractive
rates of return and brand benefits" that come with entering the so-
called tax-equity markets in renewable energy, according to a Feb. 6
letter to invitees from Richard Kauffman, a senior adviser to Mr. Chu.
But the effort to help renewable-energy companies claim more subsidies
could draw criticism. The administration has taken flack for its clean-
energy programs since the high-profile bankruptcy filing of solar-
panel maker Solyndra LLC, which received $527 million in federal loan
guarantees funded by the 2009 economic-stimulus package.
"As part of this administration's all-of-the-above energy agenda, we
are working to identify ways to promote private-sector investment in
industries that will create the clean-energy jobs of tomorrow," the
Energy Department said in a statement. "We have invited financial
executives from major U.S. companies to participate in a conversation
about investment opportunities in the renewable energy tax-equity
market."
Rep. Jim Sensenbrenner (R., Wisc.) said the Obama administration was
"strong-arming corporations into supporting its political darlings."
He added, "The administration needs to get out of the way and let
markets work freely,"
Republican presidential candidate Mitt Romney on Friday cited Solyndra
as a case study in how government scares off innovation. Mr. Romney,
speaking at a technology trade-association breakfast, said the federal
loan guarantees made it tougher for the nation's other solar-energy
entrepreneurs to compete. "When the government chooses to put in $500
million, who wants to put $2 million in some idea from this person in
Montana? No one,'' he said.
The White House has defended the renewable-energy programs, countering
that many of the subsidies were put in place as part of legislation
signed by President George W. Bush.
The federal government offers solar developers a tax credit equal to
30% of the cost of new installations, available to them until 2016.
Since most renewable-energy developers are small companies that can't
take advantage of the tax credit, they must find a so-called "tax-
equity partner," usually a bank or other large company with a hefty
tax bill, that can take advantage of the tax credits and either
provide a loan for the project or buy it. Bank of America, U.S.
Bancorp and other banks, and corporations like Google Inc. have used
the tax-equity structure to invest in solar power and other renewable-
energy projects
After the financial crisis, activity in the tax-equity markets slowed,
making it harder for energy firms to claim tax credits needed to build
projects. The stimulus package provided a stopgap with a program that
allowed solar developers and others to convert tax credits into a
grant from the government. Renewable firms took advantage to the tune
of about $10.3 billion in grants.
But the grant program expired at the end of 2011, and Congress hasn't
extended it, despite pleas from the solar industry and other interest
groups. That leaves renewable firms turning to the tax-equity markets
again, and the supply of capital is expected to be far less than the
companies would need to keep growing at the pace they have in recent
years.
The Energy Department appears to be trying to fill the void by getting
more large companies to form partnerships with renewable firms. In his
letter, Mr. Kauffman said, "our session will highlight how companies
like yours can invest in tax equity in renewable energy projects" and
feature "current tax-equity investors and leading industry experts."
A list of potential expert attendees includes officials from Goldman
Sachs Group Inc., J.P. Morgan Chase & Co. and Google.Mr. Kauffman,
hired in September, is a former executive at Goldman and most recently
ran the clean-energy-investment firm Good Energies.
I know our original approach for trades on Monday was to get a pulse
on the market, but as far as clean energy goes we might wanna go ahead
and make the trade at the bell. Here is one article on First Solar (a
4% holding of ICLN) that dropped 10% on Friday:
Wall Street Journal
A $1.36 billion government-backed deal for a Southern California solar
farm has hit a snag and could be days from unraveling, all due to a
local construction permit.
First Solar Inc., one of the world's largest solar-panel
manufacturers, warned Thursday that it might have to buy back the 230-
megawatt plant it sold to Exelon Corp. if the Department of Energy
doesn't begin funding a loan made to finance the deal later this
month.
The project has yet to receive any payments from a $646 million
federal-government loan finalized in September because of an issue
with a construction permit that First Solar obtained from Los Angeles
County.
The offices of the Los Angeles County Regional Department of Planning,
which issued the permit for the solar farm, were closed Friday and
telephone calls were not returned.
Exelon, which bought the project for about $1.36 billion, can walk
away from the deal and force First Solar to return $75 million that
Exelon had already paid should the loan payments not flow by a Feb. 24
deadline.
"Exelon remains committed to Antelope Valley Solar Ranch One and
expects to receive the initial loan advance upon resolution of the
construction-permit issue," said Exelon spokesman Paul Elsberg.
First Solar spokesman Alan Bernheimer said the company is proceeding
with the construction of the project, which has 185 workers on site,
but declined to comment further.
Energy Department spokesman Damien LaVera said the agency "continues
to support this project" but also that its loan guarantees "have
strict conditions in place to protect taxpayers."
The department can only disburse such funds "after all applicable
permitting issues are resolved," Mr. LaVera said.
Should the deal fall apart, First Solar would sustain a blow to its
developing emphasis on designing, building and selling large solar
projects to developers—a strategy that was supposed to keep the
company on an even keel amid squeezed margins affecting its solar-
manufacturing business, which has seen industry-wide head winds.
First Solar's stock fell 10% to $43.91 in Friday trading on the Nasdaq
Stock Market.
Large power companies such as NRG Energy Inc. and Mid American Energy
Holdings Co. have been buying solar projects because the low prices of
panels are improving the return on investment of such projects.
First Solar used loan guarantees from the Department of Energy to
construct another project in the Southern California desert, called
Desert Sunlight, which it sold in September to NextEra Energy
Resources LLC, a subsidiary of NextEra Energy Inc., and GE Energy
Financial Services, a unit of General Electric Co.
In August, the company also sold its Agua Caliente project, located in
Yuma County, Ariz., to NRG Energy. Agua Caliente has been getting
disbursals from the federal government, having received $181.2 million
out of a $967 million loan, as of Dec. 31, according to government
data.
"It was hoped that the [First Solar] projects would be going
smoothly," said Daniel Ries, managing director of alternative energy
equity research at Collins Stewart LLC. "They are the key driver of
earnings for the next two-and-a-half to three years and probably long
term."
Should First Solar be forced to repay the $75 million in the Antelope
Valley deal, it would eat into its free cash flow, said Mr. Ries. The
company would also have to keep the project, continue funding its
construction and start looking for buyers—a significant expense.
It would also probably have to sell the project at a lower price than
under its deal with Exelon, because the loan-guarantee program may be
abandoned and that would increase the financing costs, said Mr. Ries.
He estimates that the sale price for the project without the loan
guarantee would be about $130 million lower than with the loan
guarantee.
Antelope Valley is one of several clean-technology projects that
haven't yet received any payments from the federal government under a
loan-guarantee program that closed all deals more than four months
ago.
NRG Energy and its partner SunPower Corp. are still waiting for
capital to be issued under their $1.19 billion loan for a solar power
plant, according to government data.
SunPower referred questions to NRG, which wasn't available to comment.
Two solar manufacturers backed by venture capital investors, 1366
Technologies and Solopower Inc., also haven't seen money yet for their
new factories. Representatives of these companies said that the
conditions of the loans are such that they have to first build
demonstration production lines, meet certain requirements, and only
then tap the federal funds for additional construction.
At least two other companies, car maker Fisker Automotive and solar
panel manufacturer Abound Solar, have seen the government stop issuing
loans. Fisker didn't meet certain milestones. Abound representatives
weren't available for comment.
***** Here is another article in the WSJ this morning that positively
relates to our position on clean energy through offering a tax-equity
program that will promote corporate renewable energy programs.
The Obama administration is attempting to persuade U.S. corporations
about the benefits of investing in renewable energy, in an effort to
help the industry after a government grant program expired.
The Energy Department-led effort includes a planned March 13 meeting
at which senior financial-firm executives and Energy Secretary Steven
Chu would speak, documents viewed by The Wall Street Journal show. The
79 invitees include some of the largest companies in the U.S., from
Exxon Mobil Corp. to Walt Disney Co., according to the documents.
The idea is to tell companies with big tax bills about the "attractive
rates of return and brand benefits" that come with entering the so-
called tax-equity markets in renewable energy, according to a Feb. 6
letter to invitees from Richard Kauffman, a senior adviser to Mr. Chu.
But the effort to help renewable-energy companies claim more subsidies
could draw criticism. The administration has taken flack for its clean-
energy programs since the high-profile bankruptcy filing of solar-
panel maker Solyndra LLC, which received $527 million in federal loan
guarantees funded by the 2009 economic-stimulus package.
"As part of this administration's all-of-the-above energy agenda, we
are working to identify ways to promote private-sector investment in
industries that will create the clean-energy jobs of tomorrow," the
Energy Department said in a statement. "We have invited financial
executives from major U.S. companies to participate in a conversation
about investment opportunities in the renewable energy tax-equity
market."
Rep. Jim Sensenbrenner (R., Wisc.) said the Obama administration was
"strong-arming corporations into supporting its political darlings."
He added, "The administration needs to get out of the way and let
markets work freely,"
Republican presidential candidate Mitt Romney on Friday cited Solyndra
as a case study in how government scares off innovation. Mr. Romney,
speaking at a technology trade-association breakfast, said the federal
loan guarantees made it tougher for the nation's other solar-energy
entrepreneurs to compete. "When the government chooses to put in $500
million, who wants to put $2 million in some idea from this person in
Montana? No one,'' he said.
The White House has defended the renewable-energy programs, countering
that many of the subsidies were put in place as part of legislation
signed by President George W. Bush.
The federal government offers solar developers a tax credit equal to
30% of the cost of new installations, available to them until 2016.
Since most renewable-energy developers are small companies that can't
take advantage of the tax credit, they must find a so-called "tax-
equity partner," usually a bank or other large company with a hefty
tax bill, that can take advantage of the tax credits and either
provide a loan for the project or buy it. Bank of America, U.S.
Bancorp and other banks, and corporations like Google Inc. have used
the tax-equity structure to invest in solar power and other renewable-
energy projects
After the financial crisis, activity in the tax-equity markets slowed,
making it harder for energy firms to claim tax credits needed to build
projects. The stimulus package provided a stopgap with a program that
allowed solar developers and others to convert tax credits into a
grant from the government. Renewable firms took advantage to the tune
of about $10.3 billion in grants.
But the grant program expired at the end of 2011, and Congress hasn't
extended it, despite pleas from the solar industry and other interest
groups. That leaves renewable firms turning to the tax-equity markets
again, and the supply of capital is expected to be far less than the
companies would need to keep growing at the pace they have in recent
years.
The Energy Department appears to be trying to fill the void by getting
more large companies to form partnerships with renewable firms. In his
letter, Mr. Kauffman said, "our session will highlight how companies
like yours can invest in tax equity in renewable energy projects" and
feature "current tax-equity investors and leading industry experts."
A list of potential expert attendees includes officials from Goldman
Sachs Group Inc., J.P. Morgan Chase & Co. and Google.Mr. Kauffman,
hired in September, is a former executive at Goldman and most recently
ran the clean-energy-investment firm Good Energies.
Rebecca Sheppard
Feb 12, 2012, 1:10:07 PM2/12/12
to Sanguine Strategy
I agree I think we should get out unless anyone has a reason to expect
it bouncing back, because I don't currently know of anything.
it bouncing back, because I don't currently know of anything.
Jamie Isetts
Feb 12, 2012, 10:19:54 PM2/12/12
to Sanguine Strategy
Thanks, Chris, I really appreciate all of this research. However,
though ICLN is 18% Domestic, it is also 18% Chinese and 12% Brazilian.
Only one of our top holdings in that ETF is an American company that
is not based completely in China (GT Technologies). In our other play
in EMIF, we won by betting on Brazilian infrastructure growth, and
energy technology definitely benefits from that. My feeling is that
the negative outlook on domestic clean energy, particularly solar,
will encourage investors who are willing to invest in the "niche"
market of green tech to divert to foreign companies.
I agree that we should factor this into our trading tomorrow. Let's
get a read on the market and see what the outcome of the push-pull
between Chinese and Domestic price movements does to this ETF.
though ICLN is 18% Domestic, it is also 18% Chinese and 12% Brazilian.
Only one of our top holdings in that ETF is an American company that
is not based completely in China (GT Technologies). In our other play
in EMIF, we won by betting on Brazilian infrastructure growth, and
energy technology definitely benefits from that. My feeling is that
the negative outlook on domestic clean energy, particularly solar,
will encourage investors who are willing to invest in the "niche"
market of green tech to divert to foreign companies.
I agree that we should factor this into our trading tomorrow. Let's
get a read on the market and see what the outcome of the push-pull
between Chinese and Domestic price movements does to this ETF.
Joachim Bersztel
Feb 13, 2012, 11:07:28 AM2/13/12
to Sanguine Strategy
I agree with Jamie on this one. While this specific event is bad for
First Solar, the issue in the first article only involves one project
that does not currently meet federal requirements to receive the loan.
This could still be resolved, and if it doesn't it is still not
negative news for the entire clean energy sector. Today FSLR is down
around 4%, probably mostly due to this event, but the ETF is
relatively unaffected at -.12%. I think there is still a lot of room
for improvement in this ETF, and I think we should hold on to it and
even increase our holdings
First Solar, the issue in the first article only involves one project
that does not currently meet federal requirements to receive the loan.
This could still be resolved, and if it doesn't it is still not
negative news for the entire clean energy sector. Today FSLR is down
around 4%, probably mostly due to this event, but the ETF is
relatively unaffected at -.12%. I think there is still a lot of room
for improvement in this ETF, and I think we should hold on to it and
even increase our holdings
Chris Kuntarich
Feb 13, 2012, 12:02:15 PM2/13/12
to Sanguine Strategy
Yea I agree on remaining in ICLN and even increasing our position. I
just wanted to give yall those articles to spin. Plus any bad news
provides good opportunities to buy, which is why I said we might want
to make that trade right away.
just wanted to give yall those articles to spin. Plus any bad news
provides good opportunities to buy, which is why I said we might want
to make that trade right away.
Nayab Khan
Feb 13, 2012, 1:45:50 PM2/13/12
to Sanguine Strategy
Good debate. I'm on the let's-see-if-we-can-increase-our-exposure-to-
ICLN in the coming weeks boat. Let's keep watching ICLN.
ICLN in the coming weeks boat. Let's keep watching ICLN.
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