Solar Stocks Boom in 2005 -- But It Is Just the Beginning

By Peter Lynch
From RenewableEnergyAccess.com
2006

For the most part, 2005 was a mediocre year for the stock market. The market mostly went sideways to nowhere and was generally a boring year for most stock market investors. The Dow Jones was down 0.61%, the S&P 500 was up 3% and the NASDAQ was up 1.37% for the year.

But quietly in the background, 2005 may also have been the beginning of a "bright," new and very promising trend. More solar-related companies became public companies both in the U.S. and in Germany and as a result the renewable/solar industry sector gained a much needed higher profile with the American investing public. This is an important trend, because for many years the solar industry has been very much of a cottage industry, with little attention being paid to it and money invested in it. However, as we all know, once people start to invest their hard earned money into an industry, they pay much more serious attention to that industry and what it is doing. All of which is good for the industry and good for the future of our planet.

There are not many companies that are public, whose primary business is in one of the renewable energy areas: biomass (ethanol, bio-diesel), hydropower, solar electric (photovoltaics), solar thermal, wind power, geothermal, fuel cells and other "green" areas. But more and more of these companies are starting to show up on investors' "radar" screens and they are beginning to get a following on Wall Street.

Below is a comparison of the 2005 performance of seven solar related public companies and one "clean energy" exchange-traded fund (ETF) that trade on major U.S. markets and whose primary business is renewable energy verses a number of indices that are commonly used in the financial press. These companies and the ETF are listed in alphabetical order, followed by their stock market trading symbol and their percentage gain in 2005:

Distributed Energy Systems Corporation (DESC) + 160%
DayStar Technologies, Inc. (DSTI) + 336%
Energy Conversion Devices, Inc. (ENER) + 160%
Evergreen Solar Inc. (ESLR) + 213%
Powershares Wilderhill Clean Energy Fund (PBW) + 19.5%
Spire Corporation (SPIR) + 120%
Sunpower Corporation (SPWR) +34%
Suntech Power Holdings (STP) +32%

Average Gain for U.S. solar stocks in 2005 = 134%
Average Gain for three Indexes in 2005 = 1.25%

As you can see from the numbers, there was nothing "lackluster" about solar related stocks in 2005. They clearly and substantially outperformed all the comparative indices. Admittedly, there are only a small number of stocks and they are almost totally focused in the Photovoltaics sector of the industry, but it is certainly a beginning and a "stellar" beginning at that. Their growth has slowed down in the first half of 2006 and they are currently in the midst of a corrective stage, but they are still substantially outperforming the major indices since the beginning of 2005.

There are two things that are important to understand regarding investing in the current renewable energy industry:

Just the Beginning
This is "just the beginning" of the birth of the renewable energy industry. The renewable energy industry is at the same stage now as the automobile industry was in 1900. We are seeing the first few companies becoming public and we will see hundreds more over the next decades. It will be an exciting time for investors and there will be plenty of opportunity for investors to make money and also help the environment, which is a welcome change from fossil fuel dominated energy sector of today.

High Volatility
At this early stage of development there will be plenty of volatility in this sector until it becomes a more mature industry. Investors must carefully select their entry points and be patient. This sector is NOT for the faint of heart. An investor has to be careful to only invest a portion of their portfolio, which they have designated for "higher risk" investments. These will be the stocks that you can make the most money on, but also the ones you could lose the most on. Risk and reward have always been intrinsically linked and this is no exception.

With this increased profile for the renewable energy industry, hopefully will come a greater knowledge and awareness on the part of the American public and thereafter more positive action and attention directed at the most critical topics of our lifetime - Global Warming, our insane and growing dependence on foreign oil and a range of other related problems that can, in the long term, only be addressed by a massive scale up of renewable energy technologies of all forms.

About the author...
J. Peter Lynch has worked for 29 years as a Wall Street analyst, an independent equity analyst and private investor, and a merchant banker to small emerging technology companies. He has been actively involved in following developments in the renewable energy sector since 1977 and is regarded as an expert in this area. He is currently an investment banker and financial/technology consultant to a number of companies. He can be reached via e-mail at Solarjpl@aol.com.




Are Canadians Contravening the Global Ban on Anti-Personnel Landmines?

By Richard Sanders
From Open Concept

Because of its investments in corporations linked to the manufacture of anti-personnel landmines, the Canada Pension Plan Investment Board (CPPIB) may be contravening the global treaty to ban these weapons. Despite this, Liberal MP and chair of the Parliamentary Committee for Defence and Veterans Affairs, David Pratt, defended CPP investments in war industries saying that critics are opening themselves to ridicule.

The community paper Nepean This Week (circulation 43,000) ran a front-page article on November 21, 2003, about CPP investments in military contractors. The article was based on research recently published by the Coalition to Oppose the Arms Trade (COAT). COAT’s report, “Operation Embedded Complicity: Canada, Playing its Part in the Business of War” reveals that Canadians are unwittingly being forced to invest their retirement savings in many of the world's leading producers of major weapons systems.

Included among CPP investments are corporations making a variety of anti-personnel cluster munitions, incendiary bombs, field artillery weapons and cruise missiles, as well the prime contractors that build dozens of U.S. fighter, attack and bomber aircraft, warships, armoured vehicles, missile launchers and battle tanks. All of these weapons and “delivery systems,” were used in the latest U.S.-led war against Iraq, a war that Canadians generally opposed and the Canadian government is supposed to have boycotted.

CPP investments even include the world’s highest-ranking weapons manufacturer, Lockheed Martin, which still produces components for CBU-89 “Gator” anti-personnel landmines. This weapon, and other anti-personnel landmines, has been banned by 100 countries, thanks in part to well-publicised, highly-praised efforts by Mr. Pratt’s Liberal Party.

In the Nepean This Week article, Nepean-Carleton's Liberal MP, David Pratt, defended CPP investments in the world's biggest war-related industries. Mr. Pratt, chair of the Parliamentary standing committee on National Defence and Veterans Affairs was reported to have "said these defence firms are legitimate corporations as worthy of investment as any other.

'Is anybody suggesting that we not have an army?' he said. 'If so then fine, but they’re leaving themselves open to ridicule.'
Recent events have proven that North America needs a military, and 'people who think otherwise are completely irresponsible.'”

Pratt's comments are a facile attempt to create a "red herring" to deflect attention away from the embarrassing fact that millions of Canadians are being coerced by their government to invest in the world’s top weapons industries, and profit from a war that they did not support. Contrary to Mr. Pratt’s comments this, of course, has nothing whatsoever to do with whether or not Canada should have an army. Investing the retirement savings of Canadians in U.S. corporations that build dozens of the world’s deadliest war machines for exclusive use by the U.S. military has rather more to do with providing the Pentagon with the high-tech tools it needs to wage U.S. wars abroad.

There Oughta be a Law! Investing in Anti-Personnel Landmines, and worse.
Current CPP investments in Lockheed Martin -- the world's biggest weapons manufacturer -- have a market value of about $5.5 million. Lockheed Martin sold almost US$100 billion worth of military equipment to the U.S. Department of Defense (DoD) between 1996 and 2002. It has been the number one contractor to the U.S. DoD every year since 1996.

Lockheed Martin currently has contracts with the U.S. Air Force to produce Wind Corrected Munitions Dispensers (WCMD) for CBU-89 "Gator" anti-personnel landmines. These WCMDs are specifically designed to enhance the accurate emplacement of anti-personnel minefields by “free-fall” cluster bombs dropped from U.S. fighter/attack and bomber aircraft.

Each of these 1000-pound “Gator” Cluster Bomb Units (CBUs) contains 72 anti-tank and 22 anti-personnel landmines. According to a military think tank website (www.globalsecurity.org) this weapon uses a “fragmenting case warhead triggered by trip wires.” Each CBU-89 quickly scatters its 94 landmines over a 200 by 650 metre area.

These bombs are dropped from at least six different kinds of U.S. warplanes: A-10 “Warthog,” B-52 “Stratofortress,” B-1B “Lancer,” B-2 “Spirit,” F-15 “Eagle” and the F-16 “Fighting Falcon.” These are among the deadliest weapons delivery systems ever produced. They "deliver" a bewildering variety of weapons with far greater destructive capabilities than this one landmine.

We should not be surprised to learn that the Canada Pension Plan has invested in the U.S. prime contractors that are responsible for producing five of the six warplanes that “deliver” CBU-89 anti-personnel landmines: Rockwell (B-1B), Northrop Grumman (B-2), Boeing (B-52 and F-15) and Lockheed Martin (F-16). (The sixth warplane, the A-10 “Warthog,” was built by Fairchild Republic, a company that cannot receive CPP investments because it no longer exists.)

Lockheed Martin is also known to have helped produce three other types of anti-personnel landmines, including the:
(1) Area Denial Anti-personnel Mine (ADAM) (“delivered” by 155mm howitzers),
(2) M74 (delivered by a Ground Emplaced Mine Scattering System, which is simply a trailer pulled by a truck or Armoured Personnel Carrier) and
(3) CBU-78 (like the CBU-89, this “dumb bomb” is airdropped from U.S. warplanes).
For more data on landmine producers see Human Rights Watch website.
For more on weapons delivery systems and their prime contractors see the Federation of American Scientists’ website.

The fact that Canadians are being induced to invest in Lockheed Martin may mean that the Canada Pension Plan Investment Board, and even Canada’s Liberal government, are contravening the Global Landmines Treaty. By forcing Canadians to invest in and profit from Lockheed Martin, the Liberal government is breaking the spirit, if not the letter, of this highly-acclaimed international treaty which is now part of Canadian law.

The general obligation of the landmine treaty states:
"(1) Each State Party undertakes never under any circumstances
a) To use anti-personnel mines;
b) To develop, produce, otherwise acquire, stockpile, retain or transfer to anyone, directly or indirectly, anti-personnel mines;
c) To assist, encourage or induce, in any way, anyone to engage in any activity prohibited to a State Party under this Convention."

The Liberal Party gained tremendous public admiration and respect for its promotion of this treaty. It is therefore extremely hypocritical that the Liberal government is forcibly collecting money from Canadians to invest in a company that is still involved in the production of technology designed specifically for these abhorrent weapons.

A search of the daily listing of U.S. government contracts shows that about $340 has been awarded to Lockheed Martin, since mid-2000, for production of the WCMD system. The most recent contract, for $40,952,447, announced June 7, 2003, can be viewed here.

“Solicitation notices” for these contracts are also listed in the FedBizOpps (FBO) archives. A solicitation notice to produce $63 million worth of "Extended Range-WCMDs" was posted on October 4, 2002. In April 2003, this contract was awarded to Lockheed Martin. It was estimated that this particular contract would last 36 months, i.e., until October 2005.

CPP investments also included other companies linked to the production of anti-personnel landmines. In fact, in 2003 the CPPIB held shares -- with a combined market value of $160 million -- in four other top U.S. weapons manufacturers that are known to have produced anti-personnel (AP) landmines. These corporations are General Electric, Raytheon, Texas Instruments and Rockwell.

Here are some details about these companies, the types of AP landmines they have produced and the market value of CPP investments in these companies this year:
General Electric Company (Fairfield, CT)
AP landmine types: TS-50 and VAR-40
CPP public equity investments listed by CPPIB (as of Sept. 30, 2003):
General Electric Company $137,326,000

Raytheon (Lexington, MA)
AP landmine types: Gator BLU-92/B
CPP public equity investments listed by CPPIB (as of Sept. 30, 2003):
Raytheon $2,940,000

Texas Instruments, through its subsidiary Unitrode (Merrimack, NH)
AP landmine types: Volcano M87, BLU-92/B Gator
CPP public equity investments listed by CPPIB (as of Sept. 30, 2003):
Texas Instruments $17,059,000

Rockwell, through its subsidiary Allen-Bradley (El Paso, TX)
AP landmine types: Volcano M87, Gator BLU-92/B
CPP public equity investments listed by CPPIB (as of June 30, 2003):
Rockwell Automation $1,154,000
Rockwell Collins $1,176,000
(A listing of the market values of CPP investments in foreign corporations, as of Sept. 30, 2003, can be seen the CPPIB website.

Isn't this a Conflict of Interest?
Mr. Pratt, as the Liberal MP responsible for chairing the Parliamentary standing committee on National Defence and Veterans Affairs is required to perform his duties without even the appearance of a conflict of interest. Mr. Pratt's riding of Nepean-Carleton -- now part of the amalgamated City of Ottawa -- is home to dozens of high-tech military exporters. It appears that Mr. Pratt, and his political party, may be beholden to a special interest group known as military manufacturers.

Perhaps the largest of the military industries in Mr. Pratt’s riding is located in Bells Corners, namely General Dynamics Canada, formerly known as Computing Devices Canada.

In 2002, General Dynamics Canada is documented by Elections Canada as having donated at least $1,000 to the Liberal Party. Between 1993 and 2001, the Liberal Party received at least $66,991 from General Dynamics Canada’s precursor, Computing Devices Canada (CDC). To be fair it should be noted that CDC is also known to have donated at least $30,000 to the Progressive Conservatives, Reform and Alliance Parties combined. It is not known whether the actual total of these corporate donations was higher than these amounts that are publicly disclosed by Elections Canada. Unfortunately, we may never know the real value of these donations because there are several significant loopholes that allow legally permit secret donations to political parties.
(Source: http://www.elections.ca)

General Dynamics Canada produces hardware that is largely destined for export to U.S. military markets. For instance, it has made various high-tech, electronic components for U.S. battle tanks (M1, M2/M3), armoured vehicles (LAV III), field artillery weapons (M109), warplanes (MRA4) and other major weapons delivery systems. Computing Devices Canada had similar weapons contracts and is known to have also manufactured components for U.S. cruise missiles.

General Dynamics Canada is a subsidiary of U.S. weapons giant General Dynamics, which sold about US$30 billion dollars worth of hardware to the U.S. Department of Defense between 1996 and 2002. (See U.S. Department of Defense, Washington Headquarters Services, Directorate for Information Operations and Reports, http://www.dior.whs.mil)

Thanks to the Canada Pension Plan, Canadians are compelled to invest more than $4 million of their retirement savings in this top U.S. military corporation, which is the world’s sixth largest military contractor.

Not surprisingly, the flow of money between this Nepean-based military company and the Liberal government goes both ways. Industry Canada gave about $29.5 million in corporate handouts to Computing Devices Canada between 1982 and 1997, before it was acquired by General Dynamics Canada.

On the surface at least, this all constitutes the appearance of a conflict of interest. Canadian politicians are receiving vast amounts of money for their election campaign war chests from military corporations that later receive even greater amounts of money through government grants. Military industries in Mr. Pratt’s riding have contributed tens of thousands of dollars to the governing party and receive not only large government grants but also investments from millions of Canadians through compulsory government-linked pension funds. When questioned about these funds, Mr. Pratt sidestepped the issue and belittled those who have the temerity to raise such unsettling questions about why his government allows the CPPIB to invest their money in war-related industries, like anti-personnel landmine manufacturers, that are widely perceived as immoral and perhaps even illegal.