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Dave Zgodzinski

Dave Zgodzinski

Dave Zgodzinski is the editor of the Green Miner newsletter and thegreenminer.com web site.  The Green Miner is dedicated to searching out valuable investments in…

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Renewable Energy Companies to Keep an Eye On

Trina Solar Ltd.

Trina Solar is one of the major Chinese solar panel manufacturers that trade in the US. Like the other solar manufacturers, Trina has had problems of late. The company announced earnings last week. Trina shipped 415 Megawatts worth of solar panels in the 4th quarter - a huge number. Revenues were $302.7 million US, a slight increase over the previous quarter.

Trina Solar 2 yr. Chart
Trina Solar 2 yr. Chart: Source - Bigcharts.com

But Trina Solar lost $87.2 million making all these sales. Margins were negative 23.3%.

This is obviously an untenable situation for the company. They can’t keep selling at a loss forever. But Chinese companies appear to have the determination to be the last ones standing in the price war on solar panels

Trina is basing its hopes for the future on the possibility that low prices for solar panels will cause an increase in demand that will eventually lead to stabilization in the market. Like other solar panel manufacturers, Trina is becoming a contractor and building its own utility scale solar power projects, which it will then sell as a turnkey operation.

The company recently announced that it is building a 50 Megawatt solar farm for the Gansu Provincial Development Commission.

Trina’s stock was $4.62 US when I wrote about the company in October. It closed Friday at $4.02, a loss of 13%.

Vestas Wind Systems

Vestas Wind Systems is the premier wind turbine manufacturer. The Danish based company has sales and manufacturing operations around the world. When I wrote about Vestas in February of last year, the depository receipt was trading at $3.30 US. It closed on Friday at $2.33 - a loss of 29%

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Vestas had good revenues in 2012 – 7.2 billion Euros. There was a last minute rush to build wind farms in the US before the Production Tax Credit was slated to expire. The PTC has since been extended by a year. Sales in developing countries also held up well. Vestas’ shipments were up 22% from the previous year – 2765 wind turbines.

 Vestas 3 Megawatt Wind Turbine
Vestas 3 Megawatt Wind Turbine

But like many other renewable energy companies, Vestas is losing money despite the high volumes.  The company had a $359 million shortfall in free cash flow.

So Vestas has been cutting costs. The number of employees has dropped by 22% since 2011. The company’s investments in plants, equipment and R&D are down 62% from the previous year.

The fourth quarter of the year did show big improvements in cash flow and EBITDA, so the company’s efforts to cut costs are showing some signs of success. Vestas is growing in the service business – providing maintenance for wind farms after warranties expire. Vestas is continuing to develop new products for the evolving wind industry. The company is now testing a massive 8 Megawatt turbine for offshore use.

Vestas continues to receive orders from around the world has built a brand and reputation that are the foundation for future business.

Village Farms International

Village Farms is a high tech greenhouse grower –one of the biggest producers in North America. But Village Farms suffered an act of God on May 31, 2012. The company’s greenhouses in Marfa Texas were hit by a major hailstorm. More than 80 acres of greenhouses and the crops in them were destroyed.

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In February, just a couple of months before the hail storm, Village Farms harvested its first crop in a new state-of-the-art greenhouse in Monahans Texas. This 30 acre facility uses proprietary technology to grow tomatoes in a highly productive environment.

The addition of the Monahans greenhouse helped to partially offset the loss from the hail storm. So total volumes for the first 9 months of last year were down about  5%.  Village Farms received insurance money for damages and has replaced about 40 acres of greenhouses and is planting crops in them. An additional  42 acres of destroyed greenhouses won’t be replaced till later this year or next year. Village Farms is still negotiating with the insurance company for more funds.

Another major problem for the company has been a drop in tomato prices. Imports from Mexico have been making severe incursions in the greenhouse grown tomato market in North America. The main crop for Village Farms is tomatoes and the drop in prices for its principal crop has been a blow for the company in the past couple of years. The company has called 2012 a “profoundly difficult” year.

Nevertheless, Village Farms is fighting to get back on track. The company is diversifying – growing a larger percentage of cucumbers, and growing its own proprietary specialty tomatoes. Village Farms is also involved in American industry initiatives to defend against Mexican imports – making sure that labelling as “greenhouse” grown is accurate, and that the Mexican growers aren’t dumping product on the US – selling below cost of production.

The stock was $1.30 Can. when I wrote about the company in March of last year. It closed on Friday at $0.87 – a loss of 33%

Water Furnace Renewable Energy

WaterFurnace Renewable Energy manufactures geothermal heating and cooling systems for commercial and residential customers.  The company’s own 120,000 ft. manufacturing facility in Indiana is heated and cooled using Waterfurnace geothermal heat pumps.

WaterFurnace been in business since 1983, and has gone through a few cycles. Last year, revenues for both commercial and residential sales were down. The business is somewhat tied to the new building cycle, and last year was still a bad year for new construction.

Cash flow for the first 9 months of 2012 decreased by 13% compared to 2011. Still, the company was profitable. WaterFurnace earned 49 cents a share in the first nine months of last year.

Waterfurnace is expanding geographically, having recently begun operations in Australia. The company has about $40 million in working capital and the financial where-with-all to expand or make acquisitions.  WaterFurnace pays a strong dividend.

The stock was $16.98 when I wrote about it in August of last year. It closed on Friday at $16.35 – a loss of 3.7% - less than the annual dividend.

By. Dave Zgodzinski




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