The good thing about investing in ASX Cleantech companies is that you can invest with a clean conscience, and for this reason, many are looking more closely at ethical investing opportunities.

The Chinese government has announced its intention to introduce its national carbon trading scheme in 2016. It involves augmenting the existing local trading schemes in seven different cities and provinces in China.  The Chinese entry would supplant the EU carbon trading scheme as the world’s largest.  South Korea, Thailand, Indonesia, and Vietnam are reportedly planning to introduce carbon trading schemes as well. 

The argument that renewables like solar and wind power cannot be cost effective without government subsidies  appears to falling by the wayside.  The cost of both forms of renewable energy has dropped dramatically and is rapidly approaching the point where subsidies will not be needed.  

US Financial Advisory and Asset Management Firm Lazard, published an annual report on the Levelised Cost of Energy Analysis in traditional and alternative energy sources in the US.  The latest report from 22 September 2014 states that wind and solar power are set to be cost competitive with coal-fired stations, even without subsidies.

Much of the rest of the world is expanding its use of renewable energy sources, particularly solar power.  Russia plans to build six new solar powered generators by 2016.  Japanese company Kyocera Electronics is building a “floating” solar generating installation, the first of its kind.  The biggest coal producer in India, Coal India Ltd, is in talks with the government regarding the construction of approximately US$1.2 billion in solar projects.  

In reality what is happening in the rest of the world matters little to Australian investors looking at our own Clean Tech Index.  However, it would seem among the alternative renewable technologies available, wind and solar stocks have a clear edge over the myriad of technologies like geothermal and biofuels that have yet to demonstrate cost efficiencies.  The following table lists five ASX stocks of interest to contrarian investors willing to ignore the warnings about our struggling renewable energy sector.

 

Company

(CODE)

Market Cap

Share Price

52 Week % Change

Gearing

 

Total Debt

(MRQ)

 

Total Cash

 (MRQ)

AGL Energy

(AGK)

$7.7b

$13.72

-13%

49.9%

$3.79b

$457m

Infigen Energy

(IFN)

$191.3m

$0.25

-17%

245%

$1.2b

$80.7m

Silex Systems

(SLX)

$115m

$0.25

-33%

9.45%

$1.25m

$7.38m

Dyesol Ltd

(DYE)

$75.8m

$0.26

-75%

0

0

$639m

EnviroMission  Ltd

(EVM)

$33.1m

$0.06

+161%

75%

$268.3

$972.5

 

AGL Energy (AGK) gives investors a natural hedge in that the company generates electricity from both traditional and renewable resources. AGL claims to be the largest “owner, operator, and developer” of renewable energy generation on the ASX, with more than $3 billion already invested in renewable sources.  In addition, AGL is now constructing two solar projects capable of large scale utility generation in conjunction with US based First Solar Inc. (NASDAQ: FSLR).  However, these projects receive subsidies from both the federal and the state government.

AGL also has five wind farms with three under development and two in operation.  The company has a two year earnings growth forecast of 9.5% and a full franked dividend yield of 4.6%.  The stock price is up about 6% over the last five years and is highly volatile.  Here is a five year price movement chart for AGK.

Analyst opinion on AGK is moderate with seven at Hold, two at Buy, and one at Strong Buy.

Infigen Energy (IFN) has six operating wind farms in Australia, seven more under development and 18 wind farms operating in the US with an additional four under construction.  In addition, the company has a demonstration solar farm underway in New South Wales. 

Infigen has a massive debt load but a massive asset base as well, with a book value per share of $0.64 and a price to tangible book ratio of 0.86.  Although the company has a substantial presence in the US market where there appears to be no immediate regulatory threat to its operations, the as yet unresolved proposed changes here in Australia create some uncertainty. Here is a price movement chart for Infigen stock since its listing on the ASX.

Dyesol Limited (DYE) is working on commercialising dye solar cells in applications that would be “disruptive.”  Imagine a world where commercial and residential buildings derived energy from materials that cover the structure.  Steel roofs, cement, exterior ceramic tile, glass, and even paint coated with dye solar cells would do just that.  

The technology here is complex but think of a dye solar cell as a vehicle to artificially photosynthesise sunlight into energy.  Although Dyesol has substantial intellectual property in the field, Dye Solar Cell technology has been around for a while and is not exclusively proprietary to Dyesol.  However, the company has so far been successful in addressing two major obstacles to the use of dye solar cells – energy conversion efficiency and durability.  If this sounds like the stuff of science fiction, Dyesol’s industrial partners give reason to believe it can become science fact.  

Dyesol is working with:

•    Tata Steel Europe (UK) to develop DSC enabled steel roofing products

•    Pilkington North America (USA) to develop DSC enabled glass building facades

•    Timo Technologies (South Korea) to develop DSC enabled glass products and windows

•    Nesli DC (Turkey) on DSC enabled glass

In addition, the company has secured funding from numerous foreign sources, including Saudi Arabian chemical conglomerate Tasnee.  The CEO of Dyesol in a recent speech highlighted the foreign investment and cautioned against the possibility “that international leaders pull out of their multi-million dollar R&D projects in Australia due to the uncertainty and lack of support for renewable energy by this Government who will single-handedly kill off an entire industry sector…”

Dyesol began trading on the ASX in August 2005.  Here is a price chart for DYE since it began trading.  

Silex Systems’ (SLX) technological prowess extends to four application targets – uranium processing, solar power, semi-conductors, and instrumentation.  The principal focus had been on its SILEX (Separation of Isotopes by Laser Excitation) uranium enrichment technology, a cost effective laser based process for preparing uranium for use in nuclear reactors.  Silex had licensed this potentially “ground-breaking” technology to a consortium named Global Laser Enrichment or GLE.  Partners in the consortium are General Electric, Hitachi, and Cameco.  

Silex management conducted a corporate strategic review and announced on 30 June it would seek to divest its other divisions to focus exclusively on SILEX and GLE.  This despite the fact the company had successfully completed a demonstration solar project in Saudi Arabia using another of its revolutionary technologies, a ‘Dense Array’ dish concentrator system using Concentrated Photovoltaics.  

The bottom dropped out from under Silex on 24 July when GLE made an unexpected announcement that it would “slow the pace of commercialisation” of the project due to adverse market conditions.  The share price fell about 40% after emerging from a trading halt requested prior to the GLE announcement.  Here is a six month chart for SLX.

Then on 18 August shareholders took another body blow as the company announced it was dropping its proposed Solar Power Station following a joint review by the Australian Renewable Energy Agency (ARENA) and the Silex subsididary (SolarSystems) responsible for its development.  Uncertainty over the fate of the Renewable Energy Target was cited as a contributing factor.

Technology has staying power.  Given the market hype prior to its troubles, Silex at worst deserves a spot on any contrarian investor’s watch list.

EnviroMission Limited (EVM) is the only renewable energy stock in our table whose share price is up year over year.  The company has exclusive rights everywhere except China for yet another revolutionary application of solar power, this one using a large scale tower.  The company began looking for a site in Australia back in 2001 but is now concentrating first on the US market, with a project in Arizona.   A Solar Tower power plant looks like a giant Solar Chimney with a canopy solar collector and internal turbines to generate electricity.  

A small scale tower of its sort successfully operated in Spain between 1982 and 1989.  Back in 2002 EnviroMission’s proposed Solar Tower in New South Wales was voted among the Best Inventions of the Year by Time Magazine in the US.  

Although the company is pursuing opportunities in the Middle East and India and has licensed its technology to a Texas based solar power developer, it is the project in La Paz Arizona that is generating the attention of investors.

Initially proposed and permitted in 2009 the project ran into funding difficulty, causing the Southern California Utility buyer of the electricity generated to cancel the agreement in 2012.  EVM management was unable to provide a firm delivery date without funding.  On 14 October 2013 the company assured local Arizona governmental bodies the project was “back on track” but almost one year later it appears the project is still in the feasibility and planning stages with no construction target dates announced.  The promise of the Arizona project and the preliminary agreements for potential projects in the Middle East and India have been enough to see EVM’s stock price rise about 150% over two years.  Here is the chart.

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