May 2011
May 10, 2011
Mongolia has been chosen by the two countries to open a nuclear wastes storage site for their companies radioactive waste.GE-Hitachi and Toshiba-Westinghouse are two of the three largest nuclear equipment suppliers in the world and have big plans to export billions of dollars of reactors to emerging markets.These will generate huge levels of waste which would need disposing of.Mongolia is a convenient dumping ground as it a developing country with lax environmental laws.The country has big plans for uranium extraction and building on nuclear power plants as well.Another case of dumping of toxic waste on developing countries by developed countries.Note the citizens of Japan and USA have made life difficult for those wanting to construct permanent nuclear waste storage facilities.Having failed to dump dangerous waste near their citizens,the government of these countries plan to dump the radioactive waste on poor citizens of Mongolia.
May 10, 2011
Power Finance Corporation (PFC) will raise ~$1 billion through a follow-on-public offer (FPO) which is the first divestment by the Government for FY12.Note the government of India has set a target to raise $9 billion through divestment of public sector (PSU) companies stocks.PTC India Financial Services another company operating in the same segment offering finance to power generation companies came out with an IPO.Despite advantages of growth,a good business model in India’s booming Energy Sector,the valuation of the company had been kept too high leading to 20-30% losses from the IPO price.However PFC does not have a high valuation trading for around 9-10x P/E which is comparable to the competitors like REC.However the valuation is not very low also keeping in mind the rising interest rate environment which is making life tough for the Indian Banks and financial intermediaries.Power Finance Corporation has substantial advantages of growth,a good business model in India’s booming Electricity Sector where the List of Power Companies are growing exponentially.The valuation of the company also has been kept at a reasonable level at a discount of around 5% from the prevailing stock market price.The growth of the company has been impressive but a rising interest rate environment,competition from other power finance government providers like IFCI,IDFC,REC makes the issue neutral.It is always possible to buy the stock later or buy competitors in the same space like REC.The stock is a good buy for the long term given the fundamentals,good business sector,however current short term macro problems does not make it a great buy currently.
May 10, 2011
Solar Power in India is set to be one of the biggest energy industries in the 21st century due to a unique set of favorable converging factors with declining cost the biggest one.The Indian government has recognized this fact and set a 20 GW of solar energy capacity target by 2022 and Indian states are boosting solar energy too through their own set of subsidies and solar supportive policies as well.However a number of problems have cropped up in the initial phases as solar electricity price is still high at Rs 14-16 unit compared to the retail electricity price of around Rs 4-5/unit.Though solar subsidies by the government should provide support till the prices come down.Major Indian solar companies like Moser Baer,Lanco are predicting that the solar electricity costs will fall by 40% or more in the next 3-5 years as technology improves,scale increases and more of the components like glass,solar inverters are manufactured domestically substituting expensive imports from countries like China and Taiwan.
May 10, 2011
The Smart Meter Industry like the rest of the Smart Grid Industry is seeing an astounding pace of consolidation as big industrial conglomerates like Siemens,ABB,Schneider Electric and others gobble up smaller companies at a rapid pace.Smart Meter Manufacturers which were already not many are growing even smaller as the smaller independent companies are acquired by the larger more established giant MNCs.The Energy Efficiency and the Smart Grid industries will see a rapid growth as the demand grows for reducing global greenhouse emissions,increasing amounts of renewable energy integration into the grid and rising prices of fossil fuels.Unlike solar and wind industry,independent companies in the Smart Grid are not as large as they require relationships with utilities,a bigger portfolio of products and longer history to survive.Bigger companies like Cisco,Honeywell,GE have mentioned the importance of Energy Efficiency and are going all out to achieve dominance.Smart Meter Manufacturers which traditionally had a presence in the water and gas metering area have found a huge growth area in the Electricity Smart Metering industry.With the power grid almost a 100 years old,newer smarter meters are needed as essential pieces of infrastructure to implement a smart grid.Here is a list of the major smart meter manufacturers.
May 10, 2011
Ontario Canada has a comprehensive solar subsidy policy which mandate that a large percentage of solar components be manufactured in Ontario in order to receive the Feed in Tariffs.This has led to a mini manufacturing boom in the province with a number of companies like Conergy,MEMC,Enphase,Canadian Solar putting up factories to take advantage of the FIT.Japan which is also a large manufacturer of solar panels with major Japanese solar companies like Sharp,Kyocera has taken Canada to the WTO citing improper competitive practises.India which has one of the largest potential in solar energy installation too has promulgated a law that requires domestic content requirements.Solar Modules must be produced in India to gain FIT under the JNNSM.This law is expected to become stricter with solar cells also to be produced in the country in the future.This has drawn howls of protest from American officials who too tried domestic content in their subsidies under the Stimulus Act.
May 8, 2011
Note the stock fell before it announced the results after the close of the markets which means that insider trading had take n place.The volumes at 10 times certainly seems to hint so as the JP Morgan downgrade of the stock could not have led to such a big fall in which there are a large number of foreign and domestic funds as investors.Besides its problems in Andhra Pradesh are hardly new and Indian brokers hardly that good that their reports cause such big stock price movements.Like other SEBI probes expect this one to fail or result in a small penatly which will not deter more such white collar fraunds in the Indian Stock Market.Insider Trading in India is quite widespread with some of the biggest business groups having been fined by SEBI like ADAG etc.
May 8, 2011
India has a massive potential in Solar Energy with at least 20 GW of Solar Power to be installed by 2022 according to the JNNSM Plan.This […]
May 8, 2011
Gujarat has been leading Indian states in the Solar Energy sector signing PPAs to build more than 900 MW of power capacity in the next couple of years even as the federal subsidy JNNSM flounders.Gujarat is one of the leading industrialized states in the country and has been looking to boost renewable energy sources like Tidal Energy,Offshore Wind Energy,Geothermal Energy as well.Wind Energy has also been in the radar of the state government which is looking to realize the 10 GW potential of Wind Energy in the state.After a strong 2009 when 295 MW of Wind Power was installed that slowed down to 100 MW.The main reason was the unavailability of the power grid to connect wind power plants.Note Gujarat possesses one of the best wind sites in the country in the western part of Saurahstra.
May 7, 2011
HAREDA which is the state renewable energy development agency akin to MNRE at the centre will put these solar farms under a fast track approval process.Note Red Tape in India is quite notorious especially for small project developers who lack the connections and resources to get things done.Note Haryana gives seperate incentives on its own for solar energy,solar water heaters and solar lighting as well.Haryana is desperately deficient in renewable energy despite being one of the most industrialized and fastest growing states in the country.Haryana cities like Gurgaon and Faridabad have benefited hugely from being part of India’s National Capital Region (NCR).However Haryana only generates 0.5% of its 4000 MW of Electricity from Renewable Energy Sources.The state has negligible Wind or Biomass Energy.Despite a Department of Renewable Energy being setup to specifically promote the use of Alternative Energy Sources,the state has not had much success.Haryana is richly endowed with Solar Energy Resources with 320 days sunny days.The State has managed to win some allocation from the centre’s JNNSM scheme.It is also promoting the use of solar energy through disseminating solar kits amongst 2000 schools and providing solar lighting in around 500 villages.
May 7, 2011
India's Shipping Industry has constantly declined despite the Indian economy growing by almost 8-10% in the past 5 years .Indian Flag Vessel marketshare has reduced to under 10% in 2010 from 37%.It is because the Shipping Industry suffers from a lack of good companies . The largest company is the state owned SCI which has been tardy in expanding capacity to take advantage.Recently SCI has given orders to increase fleet capacity by more than 50%.Government policies have also been not too favorable despite shipping being a very strategic industry from the point of view of defense.Note in times of war the country's merchant fleet forms one of the most important weapons in the arsenal needed for logistics and transporation of war materials and personnel.
Note Shipping is a cyclical industry and currently the industry is facing rough weather as the global shipping industry is facing a supply glut.However that's no reason for Indian shipping industry to face a trough as its marketshare remains quite low.Unlike other sectors like autos,steel,oil and gas,the shipping industry has failed to compete and as a result has become a minnow in its own backyard.
May 7, 2011
Renewable Energy in India has seen decent growth in the past mainly driven by Wind Energy which accounts for almsot 65% of the estimated 20 GW of Green Energy capacity installed in the country.However to meet India's 2020 Green Energy Target of 15% of power to be generated from renewable sources set by CERC,at least 40 GW more would need to be installed (that is a conservative estimate as load factors for green energy are lower).This is assuming that India meets its target of raising the power capacity to 400 GW by 2020 from around 175 GW at present.Solar Energy in India has not got off to a good start despite immense potential as the federal subsidy program JNNSM has seen irrational bidding by bit players and debt financing is difficult.Wind Power in India has seen the most growth amongst the green sources of power but it too faces hurdles as good quality wind sites have all been taken.
May 7, 2011
India's environment minister Jairam Ramesh has pleaded helplessness as he is too being forced to go along with these environmental destructive projects.This is a characteristic which is peculiar to India and has allowed the culture of corruption to flourish.If you build a large enough project with enough billions in investment you can get away with the murder of the environment as the government could destroy such a large investment.These ad hoc measures which lead to construction of illegal projects has been leading to the destruction of ecology in a large scale manner.Only a blanket demolition of all structures built illegally irrespective of the cost will lead to the lessening of the corruption in the business sector.
May 7, 2011
India's Power Sector is seeing massive investments with innumerable business groups setting up thermal power plants in the country spurred by the electricity deficit of more than 15% and the GDP growth of more than 8% expected in the next decade.India's private power companies are competing with each other in setting up massive ultra mega thermal power plants of 4 GW capacity.However India's pathetic state of electricity distribution may lead to huge losses for the investors in the power sector.The reason is that the electricity distribution is controlled by the state utilities which have cumulative losses of $13 billion which is expected to double to $26 billion in another 5 years.These "discoms' don't have money to pay the private producers of power even with an electricity deficit.With India's electricity market a tangle of red tape,losses and government control the situation looks bleak for all the business groups deciding to enter the power sector.
May 7, 2011
Investing in the Indian Stock Markets is like navigating your way through a minefield with innumerable instances of fraud,unethical actions and disregarding the interest of the retail investor.The SEBI which is India's stock market regulator remains mostly toothless and a blind spectator to the whole stock market fraud schemes like pump and dump.Most of the IPO's that come in the Indian markets are blatantly manipulated by the market operators,promoters and shady investment bankers.However SEBI has not taken any action so far which would make one speculate that the regulator is itself compromised.The pump and dump schemes continue unabated in the market which remains quite shallow despite the more than one trillion dollar capitalization.Mid cap and small cap corruptions scams happen with alarming regularity and even top MNCs defraud the retail investors using legal loopholes.
May 6, 2011
China has been rewriting its renewable energy plan in the wake of the Fukushima Nuclear Energy Disaster in Japan.Note there has been a strong global backlash against nuclear energy around the world and 7 nuclear plants in Germany have been closed all but in name.Other countries like South Korea,Italy,Switzerland are rethinking of what do about their nuclear reactors giving the massive tail risks with nuclear generation.China had a target of only 20 GW of solar by 2020 has decided to raise the target by 150% to 50 GW according to the country's leading energy planning authority NRDC.Note China installed more than 15 GW of Wind Energy in 2010 alone becoming the world’s largest Wind Energy Market by far.Solar Energy strongly lags Wind in China despite China having the biggest solar panel manufacturing industry in the world.Its Golden Sun and other Solar Subsidy programs have been small in absolute terms compared to its huge electricity capacity.
May 6, 2011
CBI which is India's leading investigate agency controlled by the government at the centre has been known to be a pawn in the ruling party hands.It selectively investigates cases against the opposition and the ruling alliance repeatedly messing up intentionally cases of graft against government ministers at the state and federal level.The Ruling Party has often used CBI as a powerful tool against both alliance parties as well as the opposition parties.This blantant manner of corruption had made the Supreme Court directly take the supervision of CBI in the 2G Telecom Scandal investigation which has thrown top corporate and politicians in jail.Now CBI has started acting tardily in the Adarsh Housing Scandal in which top Congress ministers in Maharashtra,bureaucrats,retired generals and admirals had conspired to usurp real estate land worth crores of ruppees.
May 5, 2011
The Tata Group which is known in India for high standards of corporate governance and doing business ethically in a country steeped in corruption too seems to have fallen.Ratan Tata appeared blemished as tapes of his conversations with the now disreputed corporate lobbyist Nira Radia were published in the media.He was caught at least listening and agreeing the the open manipulation of the Indian ministries in government formation if not the architect.Tata Teleservices which was a major beneficiary of the second round of 2G Telecom Auction during Raja's tenure has now again appeared in the news for the wrong reasons.Despite denials by the Tata Group honchos,the Tata companies seem to be complicit in the billion dollar scam that has shaken the political and business roots of India.
May 3, 2011
Grantham has made a famous call that the rise in commodities is not a cyclical phenomenon but a secular long term one.He says that the rise in commodity prices is different from the past.Note Grantham has done an extensive study of bubbles and is one of the leading minds in the investment community.While every time in the past,the statement "this time is different" has led to a crash,Grantham's call cannot be taken lightly.He says that the rise in population,shortage of resources,the growing consumption power of massive chunks of prosperous citizens in India and China will lead to a continued surge.Note commodity prices have declined secularly in the last century and since 2000 have managed to erase all their losses to form new peaks.Grantham also says there is a possibility of a massive short term decline which will give a historic opportunity to load on commodities.Jim Rogers is the most famous commodity bull and now Grantham has joined him.Note famous hedge fund managers have already made huge bets on gold and are winning currently.Note CIA and German Military are already on the record for calling Peak Oil which would lead to a drastic fall in living conditions worldwide as the global growth fueled by cheap fossil fuels sees an end
May 3, 2011
The Cons of Geothermal Power are winning over the Pros in the last few years due to a number of factors.The main reasons are the long gestation time in building the geothermal energy plants,small developers,financing and regulation problems.Despite geothermal having huge potential these drawbacks have resulted in only 10 GW of geothermal energy being installed worldwide despite almost 30 years of commercial development.Most of the geothermal companies which are small developers have been devastated by the above problems.Canadian companies which are the leaders in consolidating the fragmented industry like Ram Power and Magma Power are facing huge problems.While Ram Power saw its CEO go,Magma is now looking at other renewable energy opportunities.Magma Power has decided to merge with Plutonic Power which is a small hydro and wind company as geothermal energy looks more or less a dead end.
May 3, 2011
Coal M&A is picking up at a feverish pace as the demand and price of coal shoot through the roof.Note Coal is the cheapest fossil fuel and powers most of the world's power plants despite its disadvantages.The abundance and cheapness of coal has managed to hide its deleterious effects.Indian and Chinese companies are gobbling up coal mines and companies globally as they rush to secure raw material for the growing thermal power plant capacity.The Adani Group is one of the leading Indian private power companies setting up gigawatts of new thermal power plant capacity.Mundhra Port the Adani Flagship has been buying up coal plants,ports and building power plants to vertically integrate itself in the whole coal supply chain.It recently bought the Australian Linnc Energy's Gaililee coal project for USD 2.7 billion.It has followed it up by buying Abbot Point Coal Terminal from the Queensland state of Australia for 1.8 billion Australian dollars.
May 3, 2011
India's Central Bank has been steadily raising interest rates in 25 bps increments as inflation has raged at more the double digits for more than a year.However it has not stopped the inflation from coming down as high commodity prices keep the inflation at 9% which is much more than the target of 3-5% inflation rates.With Bernake money printing fueling oil and food prices globally,it looked unlikely that RBI's timid measure would bring the inflation down anytime soon.So this time the Central Bank has thrown the kitchen sink at the problem raising the interest rates by 50 bps to 7.25% which is much more than what the market was expecting.The Central Bank also raised the interest rate on savings rate from 3.25% to 4% which was not expected by anyone.Note the low interest rate on savings bank had been a huge money spinner to top Indian banks which have large deposits of this low interest rate savings deposits.
May 2, 2011
Indian government seems not to have learned much from the Fukushima Nuclear Meltdown which has thrown millions of Japanese lives out of gear and caused massive disruption to the economy.The Jaitapur Nuclear Power Plant to be built by NPCIL using Areva's experimental nuclear reactors has got the federal government's environmental clearance.Note the protests against the plant had got a political color with local opposition parties getting involved.A number of villagers have already been killed by police firing and further protests are expected.Note India's activist environment minister Jairam Ramesh has proven to be selectively biased towards large industrial projects in Congress ruled states.After appearing to be hero stopping the Niyamgiri project from Vedanta,Ramesh has given the go ahead to politically favored projects.Not a surprise given the endemic corruption present in the ruling coalition which has given birth to a number of corruption scams and scandals.Like everything,even a project of this criticality has acquired a political cover with everyone sounding their party positions without worrying about the possibility of a nuclear meltdown in India.
May 2, 2011
Arch Coal is the 3rd largest Coal Company in the USA. During the year ended December 31, 2009, the Company sold approximately 126.1 million tons of coal and operated 19 active mines at 11 mining complexes located in the United States. On October 1, 2009, the Company acquired Rio Tinto’s Jacobs Ranch mine with 345 million tons of coal reserves and integrated it into the Black Thunder mine.International Coal on the other hand is a small producer with a market cap of $2.2 billion previously which has managed a nearly 50% premium.Market Cap of $2.2 Billion is a producer of coal in Northern and Central Appalachia .As of December 31, 2009, the Company operated a total of 11 surface and 11 underground coal mines located in Kentucky, Maryland, Virginia, West Virginia and Illinois.The Company’s mines in Central Appalachia produced 10.1 million tons of coal in 2009, and the mines in Northern Appalachia produced 3.9 million tons of coal in 2009.
May 2, 2011
Solar Panels have grown exponentially in the last few years driven by declining costs and growing energy prices.The advent of the low cost manufacturers of silicon solar panels from China,falling raw material polysilicon costs,subsidies from governements fighting climate change have all contributed to the more than 150% increase in world solar demand in 2010.Solar Panels are not only being used on roofs and giant rooftop ground plants,but also are being integrated in buildings known as BIPV applications.Solar Panels are also available in flexible forms which can be used in backpacks and other innovative ways.Now there is another niche for solar panels that is growing.Note most of these companies are using the Concentrated Photovoltaic Technology (CPV).The traditional CPV suffers from heating problems as high concentration of sun power leads to high temperature.Building the CPV systems on water will help them solve their problems according to these companies.
May 2, 2011
Osama Bin Laden used to live in an area which was populated with affluent retired Pakistani senior military offiicers.The compound had 18 foot walls,barbed wire and internet connections.The compound was built in Abbotabad which is just 35 kms away from the Pakistan capital of Islamabad.Living in such a big compound amongst important military officials it would take a really dumb person to think that Pakistan government did not know or shelter Osama Bin Laden.It is a damning indictment of the Pakistani establisment.Note a number of terrorist incidents have a common origin in Pakistan.The Mumbai terrorist bombing in which the prime accused has said that Pakistani government officials were in the know about the bombings in which Americans and Israelis were targeted in India's financial capital Mumbai.The failed London bombing too had its origin in Pakistan.Now this operation which was conduced in the very heart of Pakistan to kill the most dreaded terrorist the world has seen.
May 2, 2011
Lavasa is a story of corruption,looting of the poor and raping of the surrounding environment by the Indian politician-bureaucrat-businessmen nexus in a beautiful cover of a township built for the rich and well heeled.There is little concern for the law as these powerful developers know that they can get away with murder quite literally.The long term sustainability of the township is in doubt which defeats the entire purpose anyway.Any buyer of property in Lavasa should be aware of these problems and should not buy it as their investment will be eroded in the future anyway besides having the taint of being looted from the poor.However the media too has lost interest as a new scandal emerges everyday.
Lavasa Township being constructed near Pune,Maharashtra has been in the media off and on for creating a environmental disaster in the shape of a beautiful township constructed on the hills.The town which has been constructed for 300,000 residents has violated all building and environmental norms of the state and centre.With powerful politicians and businessmen backing the project,its not as surprise that the state government of Maharashtra actively helped the township in bypassing all the laws and regulations.There is no provision for permanent water supply and it would lead to a clash between the water wants of Lavasa and Pune.Note builders in India are notorious for leaving out water and waste sustainability in their plans.The residents of the buildings,apartments and other shelters have to bear the brunt later on when there is no water and problems like waterlogging.Gurgaon the millenium township suffers from both of these problems quite acutely.Note these problems are common to both million dollar homes as well as slums in India.
May 2, 2011
Osama Bin Laden the architect of the dealiest terrorist attack in human history when the Twin Towers and numerous other targest in US were attacked using airline planes has been killed.10 years after starting the campaign to kill Osama Bin Laden,US today said a military mission in Abbotabad Pakistan managed to kill the dreaded fanatic.Note Al Qaeda is the most dangerous international terrorist organization with roots in the badlands of Pakistan and Afganistan.He has been long been suspected of being sheltered in Pakistan which has become a worse hotbed of terrorism than Afganistan.What was surprising that Osama was hiding near the capital of Pakistan which implies that top officials of the Pakistani government had to be involved in hiding Osama.It is an open secret that Pakistan which is being touted as the "US ally" in fight against terrorism has long been playing a double game.The death of Osama in Pakistan brings irrefutable proof to this fact.
May 2, 2011
Air India which is India's government owned airline is a cesspool of corruption,sloth,mismanagement and inefficiency.Most of the the aircraft are worse than the second class cabins in Indian trains with cobwebs hanging and dirt piled around.The air hostesses are rude and hostile and over aged as well.The airline has one of the highest manpower to aircraft ratio in the world with more than 200 per aircraft.The airline routinely loses thousands of crores each year which is wasted on the employees who seem more like arrogant owners than workers.Government officials and politicians treat the airline as their personal property making passengers wait in case they are late.Note its not uncommon to find that the seats are torn up and dirty.If you are unlucky you might even find rats running on your feet as the dirtiness invites rodents to make Air India their home.While all airlines have faced tough years,even the worse private airline does not have rats running through them.
May 2, 2011
SBI and HDFC Bank which are the 2 of the largest banks in the country have protested against the RBI proposal to free up the interest rate given on savings account in India.Note RBI fixes the rate at which money deposited in saings account earns interest currently for all banks in India.The current rate is 3.5% which is way below the near double digit inflation rate being experienced in India.Most Indians deposit their savings in bank saving and fixed deposit accounts as there is no widespread equity or debt investment culture in the country.This allows banks with a large retail depositer base to earn supernormal profits by paying pathetic interest rates on savings account and lending that money at 12-13%.While the public sector banks have to serve a lot of priority sectors private banks have no such concerns.This leads to high NIM for private banks leading to huge profit growth each year.This has made investing in top banks in India such an attractive proposition.
May 1, 2011
NTPC,India's largest power generating utility with around 35 GW of electricity capacity is set to enter renewable energy in a big way as it has singed 500 MW of PPAs with state distribution companies for supplying green energy.Note India's electricity regulator CERC has mandated a 6% Renewable Purchase Obligation (RPO) in 2011 which will increase by 1% each year to 15% by 2020.A number of states have fallen behind in meeting their RPO and would need to either generate or buy Green Energy to meet the CERC targets for renewable energy.NTPC which is predominantly a thermal power utility has been planning to set up wind and solar power plants but nothing has been done till now.However after signing these PPA with the Madhya Pradesh,Orissa and Karnataka government,the renewable energy projects should get accelerated.