2010
December 21, 2010
France recently halted its solar subsidy program for 3 months for solar installations under 3 kw as it was deluged with a large number of applications.Solar Feed in Tariffs are quite generous for certain type of solar panel installations like BIPV and greenhouses.This combined with rapidly falling solar panel prices primarly due to low cost Chinese manufacturing has made the business extremely lucrative.Note France is not the first country to see a massive flood of solar applications.Spain,Czech,Germany,Australia have faced problems with solar feed in tariff programs mainly because of poor design by slow moving bureaucrats.However most of these countries have never blamed cheap Chinese panel imports for their badly designed programs.Germany which is the undisputed solar market leader did for a while raise the Chinese bogey but it was for a short while.Anyone with a little understanding of the solar industry would know that almost 50% of the value is created in installation which is all done locally.Also most of the polysilicon raw material is made in the West as also most of the equipment used in producing panels in China.
December 21, 2010
Dongfang Electric Corporation,China's largest power equipment producer has bagged major contracts in India.Dongfang Electric is the 3rd biggest Wind Turbine Producer in China as well and has managed to bag a 276 MW $203 billion WTG supply contract with Abhijeet Group .This is the first major contract wind in the Wind Equipment Sector for a Chinese company and could be start of a major trend.Dongfang has also won a small a massive $2.5 billion contract to supply 6. GW of super critical coal equipment to KSK Energy. Note Chinese companies have become the low cost leaders in the Wind Equipment Industry and sell much below Western competitors.At almost $700,000/MW,the Turbine order is a steal for the Abhijeet Group and cannot be matched by Indian or Western players.Leading WTG companies from the West like Vestas and Gamesa are reeling from Chinese competition and slowdown in Western markets.Suzlon too has been affected as Korean shipbuilders and Chinese wind producers have become major players.Using domestic content requirements and technology transfer,Chinese companies have become top global producers from zero presence just 5 years ago.
December 21, 2010
The Dollar is being relentlessly attacked by Bears due to massive QE program unleashed by the US Fed.However the US Dollar continues to be a safe refuge in many parts of the world.For countries affected by major politicial and economic problems,dollar is looked upon a safe haven for capital preservation.Many of these places have a history of high inflation and major political upheavals.In these places,Gold and Dollar are looked upon as equals for preserving wealth during times of chaos.Vietnam serves as a reminder where even citizens of relatively fast growing stable economies look upon as Dollar as a rock of stability.The South East Asian country has seen high inflation in recent times and numerous devaluations of its currency.The Communist led country has tried to replicate China in many of its policies some of which have backfired.The recent scandal and debt default of a major government owned company has shaken the confidence of investors.With high inflation and depleting foreign reserves
December 21, 2010
India's Agriculture Sector account for only a miniscule percentage of GDP and growth,however most of India's population continues to depend on it.Despite rapid growth of the services and industries sector as globalization leads to assimilation of foreign technology and practises,agriculture continues to live in medieval times. India's Food Supply Chain leads to massive waster and inefficiency with 30% of India's vegetable and fruit produce being wasted.This is criminal in a country where most of the children go hungry.However corporatization has been repelled by vested interests leading to a the sorry situation.Food inflation has seen double digits since last year and despite a better harvest year,some food prices are touching the stratosphere.The inadequate supply chain leads to periodic shortages of key food items used by Indian as part of the daily diet.
December 20, 2010
India's top leaders don't have to suffer from the daily travails of monstrous transport problems as their security convoys have the roads cleared for them.Even a minor functionary has red lights blazing on the top of their security cars and flouting all traffic rules as policemen salute and clear the way.There is no concern about the plight of normal people who on top of the daily traffic jams have to face an additional ordeal due to the stoppage of vehicles for the passage of the VIP entourage.Even ambulances and emergencies are not spared as a person died of a heart attack after getting stuck for 30 mins.Note people dying in traffic jams has become a normal thing in India these days as serpentine traffic jams make it almost impossible for ambulances to transport time critical patients on time.Indian cities have become traffic hells as motorists fail to follow any traffic rule or regulation.Policemen trying to correct errant drivers are frequently beaten up by taxi/auto unions .Red lights are not followed by a lot of the vehicles and traffic rules exist only on paper.Huge numbers of casualties are reported every year which are easily preventable.But for a totally corrupt bureaucracy and police,these problems are not a concern at all.
December 15, 2010
Rare Earth Metals promise to be a continuing geopolitical drama for the coming few years as Chinese monopoly over these crucial raw materials continues.Japan has already been at the receiving end of a Chinese exports embargo once and has its companies scattering to secure rare earth mineral resources in varied places like India,Mongolia, Kazakhstan, Vietnam.Hitachi is looking to increase recycling of rare earth minerals while other companies too are looking to optimize and reuse these metals.USA is currently less susceptible to rare earth disruptions as its requirements are quite low and anyway it imports most of the products using rare earth in finished form.
December 15, 2010
Germany is almost certain to cut the solar feed in tariff in 2011 on top of the regular 13% decrease.Note Germany is the largest solar market in the world by far and installed an astounding 8 GW of solar panels in 2010.With almost 18 GW of total solar installations,the German solar energy capacity is almost half of the world's capacity despite bad conditions for solar energy.Germany had set a target of around 4-5 GW of solar energy this year in the upper case and this has been vastly exceeded as solar module price cuts have made it attractive to install solar panels.
December 15, 2010
USA has opposed India’s Local Content Requirements for the Federal Solar Energy JNNSM program.Note according to the JNNSM rules,solar panels will have to be produced in […]
December 14, 2010
Posco,one of world's largest steel producers has been trying to enter the solar market like its other Korean brethren.Note South Korea has been really pushing the Green Industry in the country giving all sorts of incentives to Wind Energy,Electric Vehicles,Solar Energy etc.Korean conglomerates have responded by making huge investments into all sorts of Green Sectors.LG and Samsung have already established crystalline solar cells lines alongwith Hyundai.Hanwha has made a big bang acquisition of the 4th largest Chinese module producer Solarfun while OCI Polysilicon is on its way to become the 2nd largest producer of polysilicon in the world.Posco made its intention known about entering the solar market when it made a play for the Norwegian poly producer Elkem.This was a surprising decision considering that Posco's core strenght of steel making has little to do with production of polysilicon.
December 14, 2010
India has been plagued with a large number of scams and scandals in recent days.Not that it has made much difference to the functioning of politicians and bureaucrats.India's Agriculture Minister was blatantly defending favored business interests while India's PM seems more interested in Big Business Privacy rather than tackling corruption.The Stock Market after falling for a couple of days due to increasing number of stock market scandals,has returned to normal.However the Indian politicians keep shocking the country with even more and more brazen acts of corruption and nepotism.
December 14, 2010
Marubeni on the other hand is looking to focus its energy on the crucial Water Service Sector be expanding its footprint in emerging markets.Water Service is a great growth sector due to numerous demand drivers like increasing population,larger per capita requirements,decreased supply.There is already a lot of theories floating around that the next big wars in the 21st century will be due to water shortages.Marubeni has plans to spend around $300 million in acquisitions in foreign markets as it looks to increase its customer base to 10 million.Note Marubeni will be helped by the Japanese government which gives considerable aid and soft loan for water infrastructure projects in developing countries.Note French companies Suez and Veolia are the biggest water service companies in the world.
December 14, 2010
Using the same logic,I had questioned the massive amount of USA taxpayer money being given as a cash grant to build almost 4-5 GW of Solar Thermal Plants in California.Most of these solar thermal projects were approved in the last 6 months of 2010 so that they could be eligible for the Treasury Cash Grant under Rule 1603.I seem to have been vindicated quite early with 2 of these giant solar thermal projects being developed by Tessera Solar have run into trouble.The CEO of the company has already left and many of the employees have been fired.Strange for a company that has won multi billion projects in hand.The parent Irish company NTR is reportedly looking to shelve the plants as it does not have enough money for 5% of the total project costs required before 2010 end.
December 14, 2010
Taiwan which had set a cap restricted solar feed in tariff program in 2009 is set to change the subsidies to reflect the decreasing costs of solar energy.Note Taiwan is one of the biggest solar cell producers in the world,next only to China.A number of its world class companies like TSMC and AUO have made major investments into solar energy recently.It already has big pureplay solar cells companies with Gintech and Motech amongst the top 10 world solar cell producing companies.A big domestic market is a good testing ground for new companies and technologies.Taiwan is now set to change renewable energy subsidies for wind and solar energy.Solar Energy subsidy for 2011 will be lowered while for wind energy it will be increased.Renewable Energy in Taiwan - Feed in Tariffs Wind to be strangely Increased while for Solar Sensibly Decreased
December 14, 2010
Asian Development Bank (ADB) may rescue the JNNSM process which seems to be headed for certain problems.The Bank is committing to provide loan guarantees for under 30 MW projects to Indian Banks and upto 25% equity investment into >30 MW projects.Note debt financing is a major issue which was talked about by the biggest Indian utilities for not participating.Note ADB has already committed to setting up 500 MW Renewable Energy Capacity in India in JV with NTPC.This will further increase ADB's exposure to Solar Energy in India.It remains to be seen if ADB give equity and debt to many of these projects which don't seem to be feasible at these prices.Will ADB willing to take losses in these ventures and provide loans to many of these unknown firms with no track record.
December 14, 2010
Note the issue size of the IPO is quite small at around $100 million which means the retail portion is only $30 million.Coal India IPO with a $3 billion issue and $1 billion retail portion got subscribed by almost 2-2.5x.This mean that Punjab and Sind Bank can get subscribed by almost 60x since MOIL IPO got 55-60 times overall subscription with almost 31x retail portion even when the issue size was almost triple that of Punjab and Sind Bank.Note though MOIL IPO in my opinion was more undervalued than PNSB,still I think oversubscription in case of this PSU Bank would be higher than that and could easily cross the 31x retail that MOIL IPO got
December 13, 2010
Japan and China has suffered from perhaps the most tense relationships with the Japanese occupation of Chinese territory during World War 2.China recently embargoed the export of crucial rare earth minerals in which it has a virtual monopoly causing great distress amongst Japanese administrators.China's military has started to become more and more sophisticated with China even now becoming an arms exporter of low tech weapons.With growth in Chinese economy,the technology sophistication of Chinese weapons systems has also grown.Close relations between China and Russia have also led to sale of front-line weapons systems such as the Sukhoi 35 fighters to China.It is no wonder that Japan is started to reorient its Defence towards China from Russia.Greater emphasis is being placed on the Air Force and Navy rather than on the Army.Note Japan is protected by the US Nuclear Umbrella and has US Forces stationed on its soil.However,declining USA military power (bogged down in Iraq and Afghanistan) has made Japan beef up its own defences.Note India too has strengthened its border forces with China stationing new fighter squadrons in the Himalayan region.
December 13, 2010
Note both the Solar Thermal and Solar PV Project bidding have led to grave doubts about how these solar plants will be implemented.Not only are the firms small,unknown with little project experience but they have also bid for feed in tariffs which would definitely lead to losses.According to MNRE,the government also plans to make the local domestic content requirements more stringent.The requirements will be extended to solar inverters as well and the provisions may not stop at 2013 but will go beyond as well.Note the JNNSM mandates that modules for solar energy be made in India in the first year and both cells and panels be made in the 2nd year.This is important for the growth of solar energy equipment manufacturing in India.This has been successfully used by both China and Canada to foster the growth of the green industry in their domestic market.However it has the side effect of raising prices and increasing inefficiency as they would lead to higher costs.They could also lead to the gaming of the system particularly as India is highly corruption prone country.
December 13, 2010
Another Japanese Giant Mitsui gets into Solar Energy through Tunisian Hybrid Gas Solar Thermal Plant
A Number of Japanese Companies have been entering the Solar Energy Market following in the footsteps of Japanese solar leaders like Sharp,Kyocera,Mitsubishi and others.Toshiba was a surprising entrant into the Solar EPC market with a solar plant planned in Easter Europe.Now Mitsui Engineering and Shipping,one of Japan's huge zaibatsus is planning a foray into the solar energy market as well.The Company is being supported in its initiative by METI which will collaborate with the Tunisian government in setting up a combined gas solar hybrid plant.A 5 MW Solar CSP plant will be set up by 2013 to demonstrate the technology.
December 13, 2010
Utilities trying to spinoff their Renewable Energy Subsidiaries have faced a very tough 2011 with many of the plans being scrapped.The Utilities which have managed to list have done so at much reduced valuations and have seen their stock prices erode after listing.Enel Green Power which was the biggest Green Utility to IPO in 2010 managed to to so after massive delays and lowering its stock price 2 times.Orient Green Power in Indian and First Wind Holdings of USA which were pureplay Green Utilities also saw very tough times with First Wind being forced to scrap its capital raising plans.China's Datang and Huaneng Group which were planning to list their Green Subsidiaries in Hong Kong for a long time faced a big question as well.Both these large state owned utilities have huge wind power assets which are forecast to grow at a tremendous rate over the next decade.The prospects are good for both these green utilities as wind turbine prices have been falling as a result of sharp competition amongst WTG companies in China such as Ming Yang Power.
December 9, 2010
Initial Public Offerings in 2010 is going to reach almost $300 billion globally which is a record exceeding the last biggest IPO Funding Year in 2007.The drivers of the huge growth in IPOs in 2010 are a combination of factors which have come together.Going into 2011,the picture may not be as good as interest rates increase in Europe and other emerging markets.The main drivers of Capital Raising for IPOs has been
December 9, 2010
Carbon Emissions Trading has always had profiteering built into it as private companies try to game a government regulated system for reducing GHG emissions.Carbon Trading which came into being after the birth of the Kyoto Protocol has got a lot of consultants and investment banks involved.While many of the schemes to earn carbon credits seem unethical they are not illegal.However a number of frauds have been unearthed in Europe which is the ground zero for Emissions Trading.The number of frauds have only increased since then with Italy suspending trading and 1.6 million carbon credits stolen from a Romanian carbon registry.The complexity and information asymmetry has always put the insiders in an advantageous position.The red tape and bureaucracy associated with the Carbon Trading Scheme ensures that common people and small business cannot take advantage of the carbon reduction scheme.
December 9, 2010
Japan has been desperately looking for Rare Earth Resources after China used its monopolistic position to embargo the supply of REE to Japan.Sojitz has signed a supply deal with new Australian REE developer Lynas while Toshiba is looking to set up a plant in India to mine Rare Metals from the monazite sands of the defunct REE extraction plant in Orissa.Sumitomo the Japanese trading giant too is rumored to be picking up a stake in US REE company Molycorp which expects to soon start its California mine which was shuttered a decade ago after China's low prices bankrupted the REE producers all over the world
December 9, 2010
Indian Small Cap and Mid Cap Stocks got massacred today even as the rest of the global markets were up.There was no specific catalysts for the sharp sell off in the small cap space which was down more than 5% with a large number of stocks hitting circuit filters on their way down.FII and brokerage favorite mid cap stocks were the worst off declining by anywhere between 10-20%.Note India has seen a huge wave of scandals hitting the political and business spheres in the past couple of months.While Corruption is nothing new to India with India's Supreme Court calling "Corruption a Way of Life" ,the rising frequency has unnerved the investors.The Stock Market has also seen a number of scams hitting the news with well regarded stocks tanking by more than 50% in less than a week.Since its hard to explain all the scams that have been hitting India,I am listing out the blog posts explaining the scams here.
December 9, 2010
Solar Energy in India at the Federal Level is facing massive problems but the state level initiatives are pushing ahead.Gujarat has been at the forefront of promoting Solar Energy recently setting aside a 3000 acre site for 500 MW of Solar Power Generation.First Solar,the Cd-Te Leader and Producer of the largest number of Panels in 2009, has got an order from Acme Telepower for 15 MW Plant to be constructed in March 2011.Note First Solar is the also the lowest cost producer of solar panels in the world currently and looks to be so in the foreseen future as well.First Solar is expanding capacity by almost 50% in 2011 after a slow 2010 and looks upon India as one of its most important markets.
December 8, 2010
The biggest problem is that the winners of the Solar PV Projects are mostly unknown small firms who have bid so low that make the returns negative for investors according to the renewable energy ministry officials (MNRE).Bidding has gone as low as 23c/Kwh which is crazily low considering the debt costs in India are as high as 13% annually.Compare that to China where debt is priced as low as 3-4% and the winners are huge utilities.With even India's Tata Power saying that the projects are not bankable as their is confusion how the electricity tariffs will go to developers,its difficult how these unknown firms could manage the financing .While the companies will lose their bid deposits if they don't finish the projects,Indian Solar Energy will be the biggest loser as the failure of the Phase 1 of JNNSM of 1000 MW by 2013 will lead to even further delays.Already JNNSM has been criticized by a parliamentary panel for the tardy progress.Note some states have taken the lead in pushing solar energy on their own,namely Gujarat which aims to put up more than 500 MW in the next year or two.
December 8, 2010
NextEra Energy Resources which was previously known as FPL Energy has bought a number of Solar Energy Generating Assets in the past few months.NextEra is the largest Renewable Energy utility in the USA with around 18 GW of Capacity out of which around 6.5 GW is Gas and 7.5 GW of Wind Powered Capacity plus 2.5 GW of Nuclear Energy.NextEra Energy with its long experience in Green Energy Generation has now decided to expand its Solar Asset Portfolio buying equity stakes in Solar Thermal as well as Solar PV Farms in USA and Canada.NextEra Energy is already the biggest Wind Energy Producer in the United States and on the way to become the biggest Solar Energy Producer as well.While Wind Energy is facing uncertain times in the USA,Solar Energy is growing at a rapid clip driven by the sharp fall in Solar Panel Costs which have more than halved in the last 2 years.
December 8, 2010
Punjab and Sind Bank is a National PSU (Public Sector Undertaking) which is coming with a Rs 480 crore IPO by selling 4 crore shares at around Rs 113-120.The Company is offering 18% of its equity in the offering which would give it a market capitalization of roughly Rs 2500 crore ($550 million) at the upper end of the price band.Note there are a large number of mid cap and large cap PSU banks listed on the Indian markets.Note most of the PSU banks have seen a very good bull run in the last year and a half significantly outperforming the rest of the market.However the last 3-4 months have been tough with a LIC Housing Finance Scandal implicating top PSU Bank Officials for taking Bribes for Loans.The rise in deposit rates and tight liquidity has also hurt the sentiment for PSU Bank stocks.However,Banking remains one of the best ways to play the Indian growth story as financial inclusion remains very low.PSU Banks in general trade at low valuations compared to the private bank peers and mid cap PSU banks at lower multiples than larger ones like SBI,Bank of Baroda and PNB.
Summary
Punjab and Sind Bank seems a no brainer due to its significant discount on its fair valuation.At 5x P/E and around 1.2x P/B ,Punjab and Sind Bank is being sold at a substantial discount to the rest of PSU banks which are lower quality in terms of growth and margins.There are some mitigating factors like the low NIM ratio however the valuation more than covers for that up.The only problem in case of the Punjab and Sind Bank IPO is going to be oversubscription.Like MOIL IPO which saw 55-60 times oversubscription,same thing could happen here also.
December 8, 2010
Now the Investigative Bureau (IB) has said that another stock market operator Rathod was colluding with promoters of agricultural companies like Ruchi Soya,Karuturi Global and KS Oils to rig stock prices.This was being done through various front companies and maverick investor C Shivasankaran was behind these moves.Note these companies have become the darling of brokerages and media being touted as the next big thing with vertical integration and acquisitions of agricultural land in Africa.The media hype that these companies got also makes one suspect that some of these firms were also involved in this scam.The Modus Operandi was again the same as followed by Dangi and Ashika group firms earlier.It remains to be seen if prosecution results in any jail time for any of these offenders.Generally nothing happens in corruption scandals in India as a SC Judge recently note that corruption had become a way of life.
December 8, 2010
The Tata Group in India is known for its high standards of corporate governance and ethics.In an environment where Big Business openly colludes with politicians/bureaucrats to blatantly loot and plunder,the Tata Group has stood out for its success and reputation of honesty.While Stock Market Scandals and other Scams happen with great regularity,Tata have generally stayed away from the mess.The Group's Success in diverse sectors such as Metals (Tata Steel),Automobiles (Tata Motors) ,Software(TCS) have made it the most successful business conglomerate.Audacious acquisitions of overseas companies like Jaguar,Corus,Daewoo have announced the arrival of the Indian MNC.However the recent 2G telecom scam has tarnished this reputation of integrity as Nira Radia tapes reveal the chairman of the group Ratan Tata of hobnobbing with a shady lobbyist.Ratan Tata has gone to court over breach of privacy but has not explained why his group companies has appointed an obviously corrupt lobbyist.His Telecom Companies Tata Teleservices and Tata DocoMo were obvious beneficiaries of the adhoc regulation and policy in the last 10 years.A letter from Rajeev Chandrasekharan has in a succinct and factual manner raised questions about the silence of the Tata Group over the last 10 years as the Telecom Shenanigans were being played out.
December 7, 2010
India has been plagued with numerous corruption scandals being exposed in the last few months.While a number of such scandal like the Adarsh Land Scam,Commonwealth Scams,Stock Market Scam,Stock Market Scam,Housing Finance Scam have been written about in this blog,the spate refuses to stop.With India's Chief Vigilance Officer calling 30% of Indians as utterly corrupt and even the Supreme Corrupt calling corruption in India "mind boggling",it is not a surprise.2G Telecom Scam Prime Suspect Telecom Minister Raja has come into the spotlight again for threatening a High Court Judge in a CBI case related to an eduction scam.The background relates to a High Court Judge of Tamil Nada accusing a Union Minister of influencing a decision of the court.This created a huge ruckus as the said Judge refused to name the Minister.India's Judiciary is one of the more powerful institutions in the country and considered much more trustworthy than the other 2 arms executive and the legislature.The Agriculture Minister brazenly supports favored Business Interest while another Minister was sent packing off after unethically supporting a cricket franchise