Wilderhill New Energy Global Innovation Index reacts badly to global economy

Tom Greenwood

Times of global economic gloom have proved tricky for the perceived riskier stocks, as the Wilderhill New Energy Global Innovation Index (NEX) demonstrated clearly in June and July.

During the months of June and July 2008 the NEX fell by 10.2%, a steeper decline than either the S&P 500, which fell by around 8.8%, or the Nasdaq, which fell by around 7.3%. The high price of oil fell slightly during the period, from US$127 per barrel to US$124 for West Texas Intermediate, which may have eased some of the pressure on buying into new energy stocks.

Additionally the persisting global credit crunch and the possibility of recession in the USA and Europe most likely contributed to a sell off of clean energy shares, which are normally viewed as high risk investments.

All of the NEX sectors were hit, with not one sector recording a gain for the period. Energy efficiency, hydrogen and fuel cells, power storage, solar and wind, all fell by between 9% and 15%, with only biomass and biofuels recording a more modest fall of just 0.7%. Sixteen out of the 88 companies in the index rose — or stayed constant during the period — while 72 fell.

The worst hit company was Roth & Rau, a German provider of PV solar manufacturing equipment, which fell a massive 81% between 1 June and 31 July. While the company announced no bad news during either June or July, it is likely that the German Government's decision to reduce its tariffs for solar power on 6 June had a negative effect.

Other German solar companies that suffered heavy falls were Conergy, Centrotherm PV and Q-Cells, falling 30.8%, 25.2% and 19.4% respectively.

The NEX's second worst performer was Brasil Ecodiesel which fell 58.5%. On 11 July the company announced it was looking into suing Petrobras for failing to purchase its biodiesel which, according to Ecodiesel, it was contractually obliged to do. Additionally, the company made a loss of BRL 13m for the first quarter of 2008.

Solaria Energia, the third worst performer, fell 51.2%. The company is still in difficulties after it was alleged that its strong results announced in February contained accounting errors, a claim the company denied.

US based Medis Technologies, a fuel cell developer, fell by 45.1%, despite raising US$29m of new money on 20 June. The company, which is listed on the Nasdaq, raised the money as part of a larger US$35m shelf-offering, but plummeted on the news, falling 26.4% in one day, immediately following the share issue.

However, some companies did manage to buck the trend and still make gains despite the troubled market conditions. German Ersol Solar, the star performer for the period, rocketed 63.4%. The company announced strong results on 5 June showing EBIT for the year of around €75m. And on 4 July German engineering company Bosch, which had already been buying Ersol shares from the market, made an offer of €101 per share to the company's shareholders, boosting its valuation further. Additionally, Ersol signed an agreement to supply crystalline solar cells to IBC Solar, in a deal reportedly worth more than half a billion Euros.

he next best performer was well behind with a gain of just under 29%. Japanese battery manufacturer GS Yuasa rose on the back of news that Japanese battery manufacturers would team up to standardise lithium-ion batteries, a key Yuasa product. The move is aimed at speeding up the commercialisation of the ultra-efficient batteries which are used in hybrid and electric cars.

Envitec, a German representative of the two months' most resilient clean energy sector, biomass and biofuels, gained an impressive 26%, largely on the back of a €60m order for its modules from an unnamed customer. According to New Energy Finance analysts, the order equates to around 30MW of capacity. The order is the largest ever for Envitec.

US ethanol producer Aventine rose 21%, raising US$97m in a sale of auction rate securities, however the company is still more than 80% below its 2006 high of US$40 per share.

Finally, Brasilian ethanol producer Cosan rose around 20%, keeping investors interested with a flurry of announcements concerning possible acquisitions, aiming to take the company's share in Brasil's fuel distribution network to 10%.

However, just after the close of the period the company announced results showing a net loss of US$30.6m for FY2008, compared to a net profit of US$228m in the previous year.

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