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Answering California’s Legislation with Solar Power Editor’s Note: Today, we have a unique look at how one day in 2006 will turn this Canadian small-cap into a mega energy player. Our Canadian insider, Nick Jones, has the full scoop right here… One Small-Cap About to Make a Killing on California’s Sun
I am referring to the carbon emissions cap passed by the California legislation. Please don’t confuse this article as a coming lecture on global warming either for or against. I’m taking a realist angle on this with the perspective that this is an opportunity to make money. The best traders can take sensitive issues and contort them into opportunities to profit. Here, we can do the same thing. California has always been known as a very “progressive” state, and this legislation is just that, not to mention lofty in its goals. The first major effects of this legislation will begin in 2012. The ultimate goal is to reduce carbon emissions in the state of California by 25% by 2020, or equivalent to 1990 levels…as I said, lofty. The legislation will use emission targets, non-compliance penalties and business incentives to reach its goals. ********************************** A California Energy Site So Secret, You Can't Even See It without a Top-Level U.S. Navy Clearance... But in this special report, a former Navy “insider” will share the names of five “secret” energy companies that could make you $372,340. The Navy has already collected $194 million from this discovery. Learn more! ********************************** So I’ve thrown a few numbers at you, but I would like to compare this to some similar legislations as well as discuss some of the impacts that this has already has on the industry. This will allow us to put everything a bit more into perspective. In 2005, many of the states in the Northeast signed an agreement that would reduce emissions by 24 million tons. The estimates of this new legislation is said to reduce emissions by 174 million tons. After the signing of this agreement, many power plants that were planned for, or in the beginning stages of production in and around the California area, that were set to bring power to the Californian power grid, have been canceled indefinitely. The reason is simple enough. With the new “cost” of carbon emissions, it was just uneconomical to move forward with the power plants. Putting two and two together, you have the state with largest GDP and power consumption that is planned to cut emissions by a whopping 25% in the next 12 years. Energy demand is increasing, while future supply took an IMMEDIATE hit. Californians will have to get their power from somewhere, and we can look obviously look for renewable energy to take center stage. Because of the lack of foresight, the feasibility of renewable energy is a slightly behind schedule in regards to innovation and production capability…especially production capability. In the world we live in today, what the government wants, the government gets. The solution is to simply throw money at the problem. You can bet that prior to the major effects of this legislation going into effect that we will have some newly created government subsidies in order to spur the markets for renewable energy forward. As proven with ethanol, we should NEVER underestimate the power of government money in creating a bull market. ********************************** 99% of the Time, New Government Regulations Cost You Money… Here’s the “1% scenario,” in which you get revenge… On April 2, 2007, a U.S. Supreme Court mandate handed these two $5-per-share stocks a chance to triple in value or more on a new wave of clean air regulation. Check it out here… ********************************** Now, because of the Californian climate and the already constricted supply capabilities, I would like to focus on one specific form of renewable power source: Solar. I really like the solar market because it is very expensive to build additional refining capacity. This means that even without government subsidies, the market for solar grade polysilicon will experience higher prices for a SUSTAINABLE period of time. Throwing billions in eventual government subsidies in the mix as well, I don’t think I need to spell it out for you. Now, we have identified the bull market. And, there is one company that I think has the potential to truly benefit from it… Timminco, Ltd. (TIM: TSX). In playing the solar market, I strongly prefer polysilicon producers over solar cell manufacturers because the silicon producers benefit from the higher silicon price due to supply shortages, where the solar cell manufacturers are hurt by the higher silicon prices as they cut into their margins. Timminco is already a producer of polysilicon and has already signed long-term contracts to deliver solar-grade polysilicon. The most recent was a massive contract signed in Dec. 2007 to deliver 4,400 metric tons of polysilicon over a five-year period to a solar-cell manufacturer. Timminco has a total of four long-term contracts totaling approximately 6,000 metric tons of polysilicon for delivery. Analysts have predicted earnings per share of $0.45 in 2008, $1.50 in 2009 and $2.50 in 2010. Timminco will have to expand their current production in order to meet their goals. This is where the risk lies, but I believe the risk-reward scenario to be very positive for investors. There are some very good near term catalysts in 2008 that makes me believe Timminco is worth taking a serious look at. Until next time, P.S.: I’m not the only touting solar energy’s bright future. Fellow Penny Sleuth contributor, Byron King, recently wrapped up a report detailing the seven “super-boom” indicators that confirms this idea. On top of that, he’s even outlined one company that will benefit the greatest. He calls it the “Single Largest Money-Making Opportunity of the 21st Century.” Get your copy, right here… Editor’s Note: Remember to send your comments and concerns to us at jim@pennysleuth.com. |
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