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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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George W. Bush: The Hero of US Wind Energy

George W. Bush: The Hero of US Wind Energy

George W. Bush will be remembered for a number of things. He was President for eight momentous years, after all. So it’s easy to make a list of items that you think of when you think of him:

War In Iraq
Tax Cuts
Real Estate Boom/Bust
Lehman Brothers crisis

There are many more.

One label that most folks would not think of associating with Mr. Bush is "Friend of Renewable Energy." But that he is.

I attended the American Wind Energy Association (AWEA) conference in Dallas in 2010 and watched Mr. Bush give the keynote speech. He joked about how life was more relaxed after leaving the White House and how he enjoyed giving speeches and could actually make a nice living at it, and how convenient it was for him to be hired to speak at a conference in his home town of Dallas where he could go downtown and shoot the breeze for a couple of hours. Estimates were he was paid $100,000 for the appearance.

It was amusing to watch him talk about the perks of the family business and the easy money on the speaking circuit to a crowd of people who were paying for the privilege of listening to him.

But it’s understandable that AWEA feels a certain debt of gratitude to Mr. Bush. He put wind on the map in Texas. As Pat Wood, his former aide tells the story, he and Mr. Bush were walking through a hallway together and Mr. Bush pulled Wood aside and said "We like wind. Go get smart on it."

Mr. Bush was raised in West Texas. He knew a little about how the wind blows out there. His aides got busy and in 1999 Governor Bush signed into law a Renewables Portfolio Standard (RPS) for Texas. The bill stated the goal of building 2000 Megawatts of installed wind capacity in Texas in 10 years and put in place policies to encourage wind power development. The RPS goal was surpassed in a huge way. Texas has had 9000 Megawatts of wind energy capacity installed in 11 years following Mr. Bush signing the bill.

Texas has more wind power installed than any other state. If it were a country, Texas would be sixth largest in terms of installed wind power. There are so many wind turbines turning in Texas that on Nov. 10, a particularly windy day, wind turbines reached a combined output of 8.52 Gigawatts – 26% of the total system load at the time.

That is a number that should be impressive to all those who think wind power is a passing fad, that the turbines don’t work, that it’s a lot of government money gone for nothing. 26% of Texas’ total electricity needs powered by wind – an industry that has grown basically in one decade, in a place that is synonymous with petroleum.

The Red State Renewable Alliance is a recently launched lobbying group and Republican think tank. The group points out that 75% of the wind power capacity in the US is in Republican congressional districts. Also, 67% of wind power manufacturing facilities in the US are in Republican districts.

The Production Tax Credit - PTC - provides a federal tax credit of 2.2 cents per kilowatt hour of power generated by wind farms. That tax credit has figured into the economic viability of many wind projects throughout the US.  The PTC is set to run out at the end of December unless Congress acts to renew it. If the PTC doesn’t get renewed, by the laws of geography, Republicans will get hurt.

It’s going to be tight – a toss-up. The ship of state is drifting quickly towards the fiscal cliff. Budgets have to be cut. Many oxes will have to be gored. But the PTC has been good for growing businesses. And Republicans don’t want to piss off the large renewable energy constituency in their own districts. So it will be interesting to see if the PTC is extended or falls by the wayside.

Either way, the wind will keep blowing, and the wind energy business will survive. It has proved itself.

Related Article: Bladeless Turbine: The Future of Wind Energy?

After being forward thinking with his wind initiative in Texas, Mr. Bush was somewhat less pro-renewable energy as President. But evidently he has renewable energy in his system.

According to the Dallas Morning News, George W. Bush said that he and Laura are environmentally conscious in their daily life. His ranch in Crawford, Texas, uses geothermal energy, and he collects and reuses rainwater.

"We're not thumping our chest," he said. "We just do it. Not for political purpose; that's just how we want to live our life."

Windy Updates
Broadwind Energy

Broadwind Energy has been working hard to prepare for any eventuality, including the non-renewal of the PTC. The company has three main lines of business. Broadwind manufactures and repairs heavy duty gears – gears for wind turbine gearboxes, oil rigs and other heavy machinery.

Broadwind also does heavy duty welding work. The company is one of the largest manufacturers of large wind turbine towers in North America.

The third business and the most recent endeavour for Broadwind, is wind services – the company does various types of maintenance work for wind farms.

Broadwind has been advancing its non-wind business in recent years.  A year ago the company signed an agreement with Caterpillar to supply welded sub-assemblies for draglines and excavators used in the mining industry.

But the wind business is far from dead. In the last two months.  Broadwind received orders totalling $51 million to supply new wind towers for two separate wind farms.

Broadwind reported third quarter results on Nov. 7. Revenues for the three months of about $55 million were 15% higher than last year . 

The company had earnings before interest, taxes, depreciation, and amortization (EBITDA) of $2.4 million  - 17 cents a share, for three months.

All of the company’s business segments had positive EBITDA. And there are signs that there are increases ahead.  Revenues for the wind services sector in the first 9 months of this year were $16 million – a 60% increase from last year. Maintenance of the many wind farms in North America is a long term growth business.

When I wrote about Broadwind in December of last year, the stock traded much higher - $7.40 (adjusted for a subsequent 1 for 10 reverse split). It closed on Friday at $2.26 This stock price is a good example of the low hopes for the wind industry with the threat of non-renewal of the PTC.

Broadwind’s stock looks like a bargain on paper. Shareholder’s equity as of Sept. 30 was $108.2 million. There are slightly over 14 million shares outstanding so book value per share is $7.67

Vestas Wind Systems

Danish based Vestas is the premier wind turbine manufacturer in the world. The company had revenues of 1.99 billion Euros in the third quarter.  But the stock has been battered in recent months and Vestas’ high debt load (1.29 billion Euros as of Sept. 30) has led to concerns about the viability of the company. What’s more, the emergence of tough new competitors from China and India has forced the pricing for turbines lower at the same time that government subsidies everywhere for wind power are being reduced or withdrawn.

Related Article: Wind Energy: Swapping Turbines for Kites

Vestas has the number one brand worldwide in wind turbines and the company continues to earn lots of contracts even in a tough environment for new wind projects. Vestas had over 400 Megawatts in new turbine orders in the third quarter and the backlog stood at 8.3 billion Euros.

One bright light for Vestas is the service business. The company has installed over 47,000 turbines around the world. Those turbines and turbines from other manufacturers have to be maintained on an ongoing basis. There is plenty of wear and tear.

Vestas has the personnel to do the job. The service contract business is growing.  Vestas expects full year service revenues of 900 million Euros. The margins on the service business are 17% -considerably higher than the margins on manufacturing which were in the neighbourhood of 1% in the third quarter.

In late August, the stock rose substantially when there were rumors about a takeover of the company.  Then Vestas announced that it was in talks with Mitsubishi Heavy Industries of Japan regarding “potential strategic cooperation” That doesn’t spell takeover, and the stock dropped back down.

Last week there was an announcement that the two companies are discussing joint development of a massive eight Megawatt wind turbine for offshore wind farms.  This is a positive development, but doesn’t move the stock like a takeover would.

Also in recent days, Vestas announced that it had obtained a new credit deal from its lenders. The deal for about 1.1 billion Euros of term loans will expire in 2015, and it takes some of the pressure off the company’s finances for the moment.

Vestas will have to continue to strip down its operations to get through the current lean times. But the company has a great tradition, strong brand, lots of sales, and growing service business.

Vestas stock was at $$3.13 when I wrote about it on Feb 20 (Trading OTC under the symbol VWDRY.) It closed Friday at $1.53

Gamesa Corporacion Technologica

Gamesa Corp. is a large Spanish turbine manufacturer that has sales and manufacturing facilities around the world.  Gamesa has been making turbines for 18 years.  The company has more than 25,000 Megawatts of installed wind turbine capacity in forty different countries. Gamesa  is one of the major players in the wind turbine market – fourth in worldwide rankings. And contracts keep coming. In the past three months Gamesa had big orders from India, Finland and Brazil.

Gamesa has expanded its business to include developing and financing wind farms as well as manufacturing turbines. The company does all the ground work for the location, supplies the equipment, oversees the contractors who build the wind farm, and then sells the working wind farm to an operator. It’s a business that arose out of necessity  - to find a way to get Gamesa’s turbines out in the market the company had to create its own demand.

And it has worked. In July Gamesa completed a 74 Megawatt wind farm in the State of Oaxaca in Mexico, which it turned over to a company called Enel Green Power. In March, Gamesa signed a deal to build and sell four wind farms in the US  with a total of 480 Megawatts capacity for $900 million.

But despite the company’s efforts to drum up business and diversify geographically, Gamesa is losing money. According to its third quarter report, “Lower volume of activity, price pressure and regulatory uncertainty in key markets affected the consolidated figures.”

In the first nine months of the year, Gamesa had 2.29 billion Euros in sales – 14% higher than the same period last year. But the company had net losses of 49 million Euros on those sales.  EBITDA of 128 million Euros was down 46% from last year.

Gamesa received orders for 370 Megawatts of turbines in the third quarter, so orders are still fairly strong. The company has a hefty chunk of debt – about 1.19 billion Euros. But Gamesa also has 1.52 billion Euros in working capital.

The credit markets are still positive on the company. Last week Gamesa signed a 260 million Euro loan with the European Investment bank to further the company’s research and development.  Gamesa will use the funds in the development of new 2.5 and 5.5 Megawatt machines.

Gamesa’s stock, trading in the US OTC market under the symbol GCTAF, was $1.80 when I first wrote about it in June. It closed on Friday at $2.15

By. The Green Miner

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