Tuesday, September 4, 2007

An investors' guide to the best bets in the changing energy industry

From the Washington Post via the Austin American-Statesman:

The planet isn't the only thing heating up because of climate change. Some renewable-energy stocks have been pretty hot, too.

Shares of Vestas Wind Systems, the world's biggest maker of wind turbines, have doubled in the past year on the Copenhagen exchange. The Danish company is ramping up production in China and the United States. It expects sales to rise 17 percent this year.

The fortunes of many firms are tied to changes in the Earth's temperatures and to the evolving legislative climate, and that can present an array of investment opportunities as well as pitfalls. There are builders of nuclear power plants, traditional utilities, wind turbine manufacturers, solar companies, biofuel firms and light bulb makers.

"This is not a social or moral issue only. It's an investment issue," said Edward Kerschner, chief investment strategist at Citigroup. "Whether or not you believe in climate change is not germane to how you invest your money."

But investors would be wise to carefully study the companies involved. As attractive as Vestas might seem, it has already had a strong run, lifting its price to a lofty level. Its future profit would have to keep rising to justify its share price. And Vestas faces hurdles. Wind turbines use hundreds of parts that are in limited supply, raising the specter of bottlenecks.

Investors also need to pay close attention to action in Congress. The final details of climate change legislation, such as whether to auction or distribute carbon dioxide emission allowances, could turn some companies from losers to winners, or vice versa.

One thing a lot of analysts agree on: Some kind of regulation or tax for emissions is coming. Though not the most potent greenhouse gas, carbon dioxide is the most common, accounting for 77 percent of the gases. And because carbon dioxide is produced by the most common forms of energy use — coal, oil and natural gas — that could alter a wide range of behavior and investments....MORE

Here's another version, should the A A-S go behind a subscription wall.
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