Indian mega industrial groups led by Ambani brothers decided to rescind their non-compete agreement which allows oil and petrochemical giant Reliance  to enter the financial,telecom and power sectors.This deal is much more beneficial to Mukesh Ambani led Reliance Group then Anil Ambani’s led ADAG Group.This deal came about after ADAG lost a gas supply dispute with Reliance in India’s Supreme Court recently.

Power companies in India may face a formidable competitor

Reliance is a massive free cash flow machine as its oil and petrochemicals businesses are one of the most profitable around the world.Its  project execution abilities are also well known.I don’t think that Reliance would like to enter the Hyper Competitive Telecom market but it would make sense to enter the Power Sector where India faces a huge shortfall.It already has a some presence in power installing Solar panels for India’s Commonwealth Games and it would be logical to enter this field as power sector requires large capital outlays and project execution capabilities.Reliance also may want to enter the Financial Services field which  is growing rapidly.It could enter through acquisitions of india Infoline,Edelweiss or any of the myriad  private players to jumpstart their entry.

ADAG Group could be a Loser

ADAG has less to gain from this deal as entering the oil and gas sector might not be that profitable given the large amounts of capital and long gestation periods required .Note the ADAG Group is strapped for cash and facing headwinds in its telecom and power companies I think it has more to lose from competition in the power and financial sectors where it is quite dominant.However the full deal is not known and Anil Ambani might have received a big monetary settlement to free Reliance from the non-compete agreement

Mukesh-Anil Ambani scrap ‘non-compete’ agreement of 2006 – ANI

In a significant development, Reliance Industries Ltd. (RIL) and Reliance ADA Group companies on Sunday formally agreed to cancel all existing non-compete arrangements which the two groups entered in January 2006.The two groups have entered into a new simpler, non-compete agreement with respect to only gas based power generation.The new agreement has been approved by the board of directors of RIL and the respective Reliance ADA Group companies.

However, RIL has agreed not to enter into Gas Based Power Generation Business for the period upto March 31, 2022. An appropriate exception has been made in respect of RIL’s captive gas based power plants.It is believed that these developments will eliminate any room for further disputes between the two groups, on matters relating to the scope and interpretation of the non-compete obligations.

The United States could fall behind China and other countries in clean energy technology unless Congress passes energy legislation, U.S. Commerce Secretary Gary Locke said on Saturday– Reuters

While the Commerce Secretary is “only thinking” that the US could fall far behind ,The Reality is that US is already far behind in the Solar and Wind and is at risk of falling behind in the other newer sectors of the Green Industry as well.

USA is far behind China in Solar

USA has fallen far behind China in solar manufacturing despite Silicon Valley being the hotbed for technology innovation in solar . If it was not for First Solar, no US company would figure in the top 10 rankings by 2011 as the Chinese and Taiwanese use their low cost and processing skills to tighten their grip on the world market. Numerous startups like Miasole,Nanosolar,eSolar are in the process of moving from pilot to commercial production but the support from the government does not measure up . Evergreen Solar has  given up on the US and shifted its manufacturing base to China  while other technology innovators like Energy Conversion Devices are on their “deathbed”.Sunpower and First Solar the other major companies are trying to compete by expanding their facilities in Asia, retaining only a  token presence  in the US (less than 10% of their future capacity will be located in the US). Technology giant Applied Materials has shifted its manufacturing and R&D base  to China as well. While all this is going on, US continues its petty politicking over the climate bill which ironically has support for “offshore drilling”

In Wind US is in a more pathetic condition

Except for GE , US does not have a single company in the top 10 turbine makers for wind. There does not exist a single large pure play wind turbine maker in the US. Despite US being the world’s largest wind market in 2009 , US hardly manufactures even 10% of the world’s wind turbines.In contrast Chinese wind makers like Sinovel,Goldwind ,APower are planning big foreign expansions making the dominant European companies like Vestas  go into the red.

Energy Efficiency,Storage and other forms of Renewable Energy a  Saving Grace

In the still nascent markets of Energy Efficiency ,Energy Storage and other forms of renewable energy like geothermal ,tidal ,biomass and nuclear energy the US still leads along with Europe, but the Chinese government has been proactively seeking investment in these areas as well. Its a matter of time that once these technologies cross the early adopter curve, companies in Asia will actively look to attain leadership here as well.Innovative companies like Ormat, Comverge,EnerNoc , Johnson Controls,A123 systems still give the leadership to the US in these areas.But unless they are given more government support and subsidies , you can see them moving off to Asia like the solar and semi companies like Evergreen,Applied Materials.

Summary

US is still the leader in technology innovation and R&D in the green technology area,however it is way behind in the manufacturing area.Its only a matter of time that the Asian countries develop the technology once they move further along the experience curve.Companies in the US like IBM,Applied and others have already shifted a large part of R&D to these countries.Unless US soon implements on  a coherent long term policy to mitigate climate change and develop clean energy , it would fall too far behind to matter at all

What is Green Investing?

Green Investing has become quite prominent these days because of the concerns with climate change,energy security,peak oil and the deleterious effect of fossil fuels on our environment .The  BP Oil Spill is a stark reminder of the devastation that can be caused by our fossil fuel dependence.Green investing s a broad term which is generally divided into 2 categories

  1. Socially Responsible Investing (SRI)
  2. Clean Technology Investing

Socially Responsible Investing (SRI)

These type of investments involve investing in companies that are socially,culturally,ethically and environmentally responsible .Organizations with a track  record of charity,non discriminatory and equal treatment of employees and fair treatment of suppliers and customers are the focus of SRI. This form of investing excludes companies which are considered to have a bad influence on society.Companies involved in tobacco,alcohol,exploitation of indigenous people,firearms etc are a strict no-no.Note Shariah Investing has a strong overlap with this type of investing as well.Some big funds like the Sovereign Fund of Norway also practice this form of investment.

Clean Technology Investing

This form of investment involves investing in companies that benefit the environment and help in preventing global warming,climate change promoting efficiency,productivity and cleanliness.Clean Technology can be defined both broadly and narrowly.Broadly it can be divided into categories like

  1. Water
  2. Agriculture
  3. Renewable Energy
  4. Environment
  5. Clean Transportation
  6. Efficiency

On a more narrow level Clean Technology investing is focused on investing in sectors like

  1. Solar Energy
  2. Wind Energy
  3. Geothermal Energy
  4. Nuclear Energy
  5. Energy Efficiency
  6. Smart Grid
  7. LEDs
  8. Energy Storage
  9. Electric Vehicles

How to Invest

The Green Industry is a relatively new industry and involves a lot of risk/volatility.Investing in individual companies involves a lot of risk.There are 3 different ways you can invest in this industry

ETFs

There are a number of sector specific and broad ETFs which target this form of investing and involves relatively less risk . Some of the better broad ETFs which invest in all of the above sectors are PBW and PBD.More risk taking investors can consider investing in sector specific ETFs like TAN (solar ETF) ,FAN(Wind ETF),NLR (Nuclear Energy ETF),PHO (Water ETF) , PTRP (Clean Transporation).

Initial Public Offering

Investing in IPOs of green companies can be highly risky as a number of these companies are cash strapped , loss making and have a high probability of going bankrupt.Note green IPOs are being offered not only in the US but across the world in emerging countries like China and India

Individual Companies

For the risk averse investor,you can consider  investments in large established companies which are making a strong entry into the green industries . There are also some good pure play companies in Solar (Trina Solar,First Solar ),Wind (AMSC) and Energy Efficiency(Johnson Controls) but these involve more risk.