The movement to divest pension funds, universities and colleges, faith organizations and foundations from fossil fuels, and invest in climate solutions, has reached new heights in the fight for meaningful, ambitious climate action. 

In the lead up to COP26, join a global coalition of organizations to announce a historic slate of groundbreaking divest/invest commitments, unveil a new “state of the D/I movement” report, including an update of assets under management committed to divestment, and celebrate major victories.  Join us on Tuesday October 26th at 11am EST for this monumental event. 

RSVP Here to join the Invest-Divest 2021: A Decade of Progress Towards a Just Climate Future event on October 26th 2021 at 11am EST

High-profile speakers will unveil a suite of new announcements. Movement leaders working on divest/invest and climate finance will issue calls for enhanced investments in just climate solutions and further action to shift money away from coal, oil and gas. 

We will be making some of the biggest announcements of new divestment commitments around the world at this event, you don’t want to miss it! RSVP today! 

Supporting organizations currently include: Stand.earth, C40, Laudato Si Movement, GreenFaith, Operation Noah, World Council of Churches, IEEFA, DivestInvest, 350.org, Fossil Free Media, Sunrise Project, Future Coalition, DivestEd, Stop The Money Pipeline, Wallace Global Fund, Climate Defense Project, As You Sow, Market Forces, Just Share, Climate Change Collaboration/Sainsbury, Both Ends, People and Planet, RAN, GreenFaith

The post Invest-Divest 2021: A Decade of Progress Towards a Just Climate Future appeared first on Alternative Energy Stocks.

The following interview with RE Royalties (RE.V, RROYF) CEO Bernard Tan was conducted in September by AltEnergyStocks.com Editor Tom Konrad.  Links and ticker symbols were not included in his original responses, but added by AltEnergyStocks.com as a resource for readers.

Q: What exactly is a renewable energy royalty?

A renewable energy royalty is a stream of cash flows generated by a renewable energy project. When the project generates electricity and sells its electricity, we receive a percentage of the revenues from the electricity sales, otherwise known as a gross revenue royalty. We receive that gross revenue royalty, on average, for about 15 to 20 years, on the electricity produced by the renewable energy project.

Q: Are there any other renewable energy financiers who use the royalty model?

There are only a small handful of renewable energy financiers that use the royalty model. Altius Minerals (ALS.TO, ATUSF), a mining royalty company, has a small portfolio focused on wind projects.

Q: What other industries use royalties as part of their financing?  How do those royalties compare to renewable energy royalties?

Oddly enough, almost every industry has a form of royalty financing. There are some very large royalty companies in the mining sector like Franco Nevada (FNV) or Wheaton Precious Metals (WPM), or in the oil and gas sector like Prairie Sky (PSK.TO). Royalty Pharma (RPRX) and DRI Capital are very large pharmaceutical royalty companies. Even consumer services and products have royalty companies like Alaris Royalties(AD-T.TO), A&W Royalties (AW-UN.TO) and Diversified Royalties (DIV.TO).

The difference between some of the other royalties compared to renewable energy royalties is that these royalties tend to have pricing and production volatility compared to a renewable energy royalty. For instance, the price of a metal could fluctuate depending on the spot prices, an oil and gas well could be depleted due to water encroachment or a restaurant could be shut down due to the current pandemic. This would affect the price or production of the product which is being sold, and would affect the royalties being paid. For a renewable energy royalty, while there is also production variability due to changing wind patterns or less sun on any given day, that variability tends to be much smaller over the course of a year. In addition, most of the electricity being sold is usually sold at fixed contract prices, so that also avoids the pricing volatility. As one of our investors told us, as long as the sun shines, the wind blows and the water flows, those royalties will continue to be paid!

Q: Why start a company to invest in renewable energy royalties?

We recognized the opportunity to apply a well-proven royalty business model to the renewables sector, where royalty financing did not exist. We saw similar parallels to the exponential growth of royalty financing in the mining and oil and gas sectors in the mid-2000s, which established the mining royalty giants of today like Franco-Nevada and Wheaton Precious Metals.

Royalty companies present a unique investment value proposition because they embody certain characteristics which we believe investors find appealing. For instance: 

• Compared to a renewable energy producer, developer or supplier, we can maintain very low overheads; 
• We don’t need significant construction or sustaining capital to get an asset operational in order to generate cash flow; 
• We can achieve cash flow diversification much quicker; 
• Our economic interest is top-line generated as it is based on a percentage of revenues, as opposed to bottom-line; and
• We are a first mover in a large and fast growing renewable energy industry and that puts RE Royalties in a unique and enviable position to take advantage of the systemic changes in the energy industry in the coming decades.

Q: How long do the royalties you invest in last/ What is the duration of the contracts?

We typically acquire royalties that range between 15 to 20 years. This usually matches the power purchase agreements (PPAs) that underlying projects have signed to sell the renewable energy generated.

Q: How many of the wind and solar farms you have helped finance have PPAs, and what is the average term?

Currently, 82 of the 84 solar and wind projects we have financed have PPAs in place. Those projects have a generating capacity of 243MW and on a portfolio basis, an average term remaining of about 17 years.

Q: What types of renewable energy have you helped finance? What percentage of your investments are in each type?

Most of our investments have been made on wind and solar, with a portion on hydro. Our portfolio allocation is currently about 35% wind, 63% solar, and 2% hydro.

Q: In terms of IRR, where do royalties stand in terms of cost of capital compared to other types of financing for wind and solar such as tax equity and debt?

The IRRs that we target are typically in the 12-15% range. Cost of capital for debt can range 4-7% depending on the project, location, operator and electricity buyer. Cost of equity can be significantly higher and more likely in the high teens; commensurate for the risk taken.

Q: What conditions make a renewable energy developer or owner a particularly good fit for a renewable energy royalty?

Our ideal client is a renewable energy operator who has existing projects that they don’t want to sell in order to fund their growth. One of the additional benefits of royalty financing is the flexibility of the structure. To provide some examples,

• One client sold us a royalty and utilized the proceeds to invest in their next development project allowing them to retain a much larger equity stake thru construction, and avoid dilution by the majority partner. This allowed our client to establish a higher percentage ownership and rights to the cash flow of the project.  The project is now operating.
• Another client utilized royalty financing to acquire an additional operating wind farm to add to their portfolio. They effectively utilized the future cash flow streams of the project to help fund the acquisition.
• Another client sold us a royalty on a portfolio of solar projects in order to fund the growth and development of their distributed solar business in Africa.
• A community based client entered into a royalty financing with us in order to pay down some expensive short term debt.

As you can see, there are a variety of reasons our clients enter into a royalty financing transaction with us and the key benefits include the flexibility and the non-dilutive nature of the financing.

Q: Do you have any competitors in the RE royalty space?  What barriers exist to keep someone from setting up a direct competitor tomorrow?

While we don’t have any direct competition to what we currently do, we do have indirect competition in the form of mezzanine debt. The key difference is that royalty financing tends to be much more flexible and can be tailored depending on each client’s needs.  Most mezzanine debt also has a number of one time hidden costs such as commitment fees and drawdown fees that degrade the overall economics.

While there are no barriers to entry in setting up a direct competitor, there are some unique ingredients that have to be in place. For instance, you would need an executive team that has experience in both royalty financing and also in the renewable energy sector to be able to transact with potential clients. Further, even though electricity is fundamentally a commodity, electricity markets are very regional and each jurisdiction has its own set of rules.

We do see the growth of royalty financing in the renewable energy sector and would welcome more direct competition. If you look at the mining industry as a comparable, companies like Franco Nevada and Wheaton Precious started off small, similar to where we are, in the early to mid 2000s. Once the mining industry saw the tremendous benefit royalty financing provided, these royalty companies eventually grew to the multi-billion dollar behemoths that they are today.

Q: What is currently the biggest constraint on your growth: finding new opportunities to invest, or your ability to quickly raise additional capital?

Currently, we have far more opportunities to invest in than the capital on our balance sheet. Without spending any money on business development, we see 2 to 3 new opportunities approach us each week. While not all of these deals are suitable given our investment screening, there are many which we have had to turn down mainly because they would have skewed our portfolio too much given our current portfolio size.

While capital is available, we have to ensure that the capital is also the right type of capital. As such, we are constantly monitoring new capital opportunities to ensure we can continue to grow and to also be fair and accretive to our shareholders.

Q: How quickly do you expect to grow RE Royalties’ investments over the next few years?

One of the unique aspects of the royalty financing structures utilized is that it allows for a fairly quick payback of our original investment capital. To give you an example, without raising any money, we will have approximately $11 million in capital returning to treasury due to maturity of the loan portion in our investments. The royalties will continue to pay for another 18 years, despite getting our original investment back. This structure and “returning capital” allows us to grow our investments organically by re-investing into new deals, without having to dilute our shareholders.

I believe that in the next few years, we would be able to double or triple our existing portfolio of investments.

Q: How much of this growth do you expect to come from recycled capital, and how much from new debt or equity?

We expect this growth to be funded 50% by recycled capital and 50% by our green bond raise. 

Q: Do you have a target leverage ratio for your company?  Where do you currently stand compared to this target?  Do you have any covenants that would limit your ability to increase debt financing in the future?

Our board and management team takes a fairly conservative view of leverage. We would prefer not to over-leverage and believe a 50/50 debt equity ratio is a reasonable leverage level. We have actually built this as a covenant into our recent green bond offering to ensure we remain strongly capitalized for both our shareholders and debtholders.

If you compare us to a renewable energy operator, their debt equity ratios tend to be much higher. These companies, on average, have a 60/40 to 80/20 debt equity mix. If you compare us to a financial institution, the leverage by a financial institution is even much higher, approaching a 90/10 debt equity mix.

Q: You recently launched a green bond. Why did you choose to offer these bonds to the public rather than using more traditional bank financing?

For two primary reasons. Traditional bank financing is generally quite restrictive and/or expensive for smaller organizations like us. Further, even though we have had revenues since day 1 and positive cash flow from operations and earnings, many traditional banks struggle in understanding our business model given that as a first mover, we are “outside the box” or a “box does not exist (yet)”.

The second reason is that we have had a lot of prospective investors that wanted a fixed income product that offers a reasonable yield, and did not necessarily want the equity exposure. If you look at 5-year bonds, many corporate bonds are in the 2-4% range, and if you are buying a bank GIC, the yield is even lower at 1-2%. Our green bonds will pay a coupon of 6%, and we have structured it as senior secured, which offers a high degree of protection to the bond investor. For our shareholders, this is very accretive and beneficial because of the high IRRs that we are able to achieve in our investments.

https://www.reroyalties.com/green-bonds 

Q: Do you have a target payout ratio? 

For our shareholders, the current dividend yield is about 3%, based on a $1.40 share price. We haven’t set a target payout ratio and monitor with our Board on a quarterly basis to set our payout.

Q: What is your current payout ratio?

Our current payout ratio is approximately 1. We have been growing our revenues by about 70% year-over-year and expect this ratio to decrease over time.

Q: What else should I be asking?

Prospective investors always ask what keeps me up at night.

One of the advantages (which can also be seen as a disadvantage) is our relatively small team size. While the advantage is that we can keep cost low, the flip side risk is that there is a concentration of human capital. 

While we always joked internally about not taking the same elevator or the same plane, one of the side effects of the pandemic is that we have all been working from home and not been on a plane for quite some time!

The other nice thing about the royalty business model is that once a transaction is consummated with our clients, it goes on cruise control and the royalties will continue to pay for 15 to 20 years. So even if something does happen to our management team, shareholders and debt holders can take comfort that the royalties will continue to be paid as long as the sun shines and the wind blows.

About RE Royalties

RE Royalties Ltd. is a specialty finance company created in 2016 that creates stable long-term cash flow streams by utilizing a royalty financing model to provide loans to, and acquires revenue-based royalties from, renewable and clean energy projects and companies globally. The company’s mission is to provide innovative financing for climate change solutions. RE Royalties is a publicly traded company on the TSX Venture Exchange under the symbol “RE”, and the first to pioneer the royalty-financing model for renewable energy projects. 

Bernard Tan, Chief Executive Officer and Co-founder, RE Royalties

Bernard Tan is Founder and CEO of RE Royalties Ltd., a royalty financing company focused on providing alternative capital solutions to small to mid-size renewable energy companies. RE Royalties is building a new innovative platform to “Uber-ize” the ability for investors to invest in renewable energy projects. 

The royalty platform provides a non-dilutive financing solution for companies to develop their renewable energy portfolios while providing investors with an impact investment that offers a growing long-term yield and strong capital protection. RE Royalties’ is changing how renewable energy projects are financed and accelerating the growth of the clean energy economy. 

Bernard started his career with KPMG in the technology practice and for 10 years prior to RE Royalties, was the CFO of Hunter Dickinson Inc., a globally recognized resource private equity group based in Vancouver.

Bernard is a CPA, CA and has a BComm from UBC and an MBA from McGill. He is also a volunteer with Futurpreneur Canada, and has advised CPA Canada and the BC Securities Commission on various policy matters.

Learn more on RERoyalties.com  

Social Media Links

https://www.facebook.com/RERoyalties
https://twitter.com/RERoyalties
https://www.linkedin.com/company/re-royalties-ltd
https://www.instagram.com/reroyalties

DISCLOSURE: AltEnergyStocks.com and interviewer Tom Konrad were paid to conduct and publish this interview.  Neither AltEnergyStocks.com or Tom Konrad held positions in RE Royalties stock or its bonds at the time this article was published, but they may acquire such positions at a future date without notice.

The post Royalties: a Financial Innovation for Renewable Energy appeared first on Alternative Energy Stocks.

I will be attending, and reporting on the Solar & Storage Finance, USA at the Harmonie Club, NY City for AltEnergyStocks.com in November.  For any readers also planning to attend, I would look forward to an opportunity to meet, feel free to contact me so we can connect at the conference.

Here are links to the list of Speakers and the Program Brochure – Presentation Topics if you are considering attending.

Daryl Roberts

The post Solar & Storage Finance Conference, NYC 10/29-30 appeared first on Alternative Energy Stocks.

Michael Smele

Solar Home with sunflower photo via Bigstock

The Ontario microFIT program was launched in 2009 as part of Ontario’s provincial government’s efforts to increase the production of renewable energy. The program provides participants with the opportunity to develop a “micro” renewable electricity generation project on their privately owned property that uses solar photovoltaic (PV), wind, waterpower, or bioenergy (biogas, biomass, landfill gas). I have asked three families who navigated the process of microFIT solar installations to share their experience by answering some questions.

Industry has seized the opportunity to capitalize on the revenue generated by the fixed return of twenty year contracts with the government’s power regulator. Individuals have also participated although the hurdle of coming up with thirty to forty thousand for purchase and finding the right service provider for the components and installation has created some unique challenges and opportunities.

The efforts put forth by individual investors in these projects have a story all their own. Those who have had success utilized several methods with varying degrees of difficulty. The questions posed to the three Ontario families who used solar installations to participate in the MicroFIT program were as follows:

1) What attracted you to the Ontario microFIT program?

Family 1: Our initial interest was environmental and quickly turned to see if it there was a reasonable profitability and if the math/projections would prove true.

Family 2: It started years ago with alternative energy awareness. When the MicroFIT program started a friend had participated and our interest was piqued. Then the project itself caught our attention and we became quite excited about the potential.

Family 3: To save the environment – any financial considerations were secondary. If the project were revenue neutral I would have still moved ahead.

2) What was your capital investment for the project? What was your expected payback period of the investment? Did your actual payback period match your expected payback?

Family 1: Thirty Three Thousand however it is notable that the provincial taxes are rebated within the first year. Our expected payback period was five to six years however with the adjusted annualized distributions from the power authority – it will be well below the five year mark.

Family 2: Forty Thousand. The expected payback period is six to seven years. We believe we are on track to meet that timeline.

Family 3: Thirty Three Thousand. From my calculations, the expected payback period is going to be seven years however with the directional placement of the panels and the winter months it may take between seven to eight years to recoup our initial outlay.

3) How did you finance the project?

Family 1: A personal line of credit that carries at a very low interest rate as it is secured against the property on which the MicroFIT project is operating on. The interest charged on the capital that was borrowed to invest is a tax write off as well.

Family 2: We cashed in some non-registered liquid assets to finance our project.

Family 3: We secured a home equity line of credit.

4) Are there any cautions to be made aware of or advice/tips to make the process smoother?

Family 1: In hindsight – the greatest concern would be to make sure you are comfortable with the service provider whether a full service company that provides the components and installation or otherwise. Another tip would be to ensure if you are completing a rooftop installation – that you consider the quality and duration of the roofing that will lie under the panels as the cost to replace doubles with a remounting of the system already installed.

Family 2: My best advice is to beware of the misinformation that is being shared. I have heard some tall tales from not being able to get insurance on your home to the fire department not being able to service the home in an emergency. Doing your own homework and getting a lot of questions answered will make the process much smoother.

Family 3: I would have to say that involvement in every aspect of the project is key. Work with your service provider/installer to ensure that they are completing the work to your satisfaction. Also, gathering as much information as possible beforehand was very helpful so as to understand what will happen once you commit to your project.

5) Would you suggest this method to others looking at this avenue and why?

Family 1: Yes, I am an advocate and have suggested the program to neighbor and family. The benefits are many fold from gaining a positive revenue stream, the tax write offs, to getting paid as an energy producer. I like to think of it like have the income of a tenant that doesn’t exist.

Family 2: Absolutely, this is a great investment in your home, your future, and your finances.

Family 3: Yes, we have a responsibility to those who will come after us to ensure that there is a healthy environment and everyone should be doing their part to help out.

Conclusion

As the Ontario MicroFIT program evolves over time, what will remain the same is that there are those who are committed to making a contribution to the future health of the planet by becoming part of the answer to our energy needs. From profitability to being a good steward of the planet – these families have clearly shown that there are many great reasons to investigate and participate in initiatives that will lead to a better future for everyone.

Michael Smele is an Ontario resident who provides finance and mortgage options for those looking to participate in the MicroFIT program. You can find him at Mortgage Truth.

The post Residential Solar in the Ontario microFIT Project: Three Families’ Experiences appeared first on Alternative Energy Stocks.

There are Always Buyers – even for Clean-tech deals. An Update from the Street.

In the movie Wall Street, Michael Douglas plays a greedy, ruthless banker who hangs everyone out to dry in order to win. His motto is “greed is good”. Well, his character’s antics have turned out to be more reality than fiction as we uncover more real life blunders of Wall Street bankers. What does this have to do with our current markets? Everything, really. Since 2008, only select stocks have performed well in the overall market and the clean tech sector has been obliterated. It seems the big banks have been playing roulette with client money every chance they get. This has affected investor confidence and is reflected in lower stock prices and trading volumes across the board. Added onto world economic woes, fear and doubt have been instilled into the markets.

While many may be saying this is not the time to get into the markets others, like Warren Buffett are licking their chops. They see opportunities everywhere and at bargain prices compared to just a few years ago. Where does an investor like Warren Buffett get his confidence to buy when everyone else is stuffing their mattresses? From what I have read, he believes in market cycles and through his experience believes that the markets will recover and still be the best place to put his money for the long term.

Before you get too depressed, think about this. Because of the greed factor, many Wall Street types have historically created all kinds of products to make money in the stock market, such as, Mutual Funds, Junk Bonds, Derivatives, and ETF’s just to name a few. All of these are products that were “invented” by some Wall Street guru or mathematician who figured out a new way to make money in the market. Trust me, they will think of something else to get money to come back to the market and it will turn around again. Eventually, investors will pour back in and look for new ways to invest because they want to make big bucks too. They want a return on their investment not just cash under the mattress. It is just a matter of time.

So how does a new venture find the capital it needs, and how do existing companies find investors to move their stock prices up? The answer is complicated. “Show me the Money” – another famous movie quote rings true today – finding those pockets of money is harder than ever before. But not impossible. Here is what we are hearing: Best sources of funding are now from private equity groups, family offices, and corporations with innovation funds looking for smaller companies to invest in. Keep your rolodex fresh with all your contacts and utilize them all when looking for capital. Money is much harder to come by these days for junior and start-up companies, but for the right venture, the money will come forward eventually if you are persistent and on top of your game.

To learn more about investment ideas and companies, check out our upcoming program, the Modern Energy Forum, September 5-7, in Denver Colorado. For more details on how you can succeed in these markets, contact michele@minellc.com.

The post There are Always Buyers appeared first on Alternative Energy Stocks.

We are happy to have The Modern Energy Forum as an advertiser on AltEnergyStocks.com once again. The 2012 Modern Energy Conference will be held in Denver from September 5 to September 7, 2012. Details of the the conference will be posted on AltEnergyStocks.com soon – for now, we encourage you to visit their site and have a look.

The post 2012 Modern Energy Forum appeared first on Alternative Energy Stocks.

The fifth annual Modern Energy Forum is the premier conference in 2011 for investors who want to have one-on-one conversations with some of the brightest stars and leading investors and experts in emerging clean tech companies. Please consider this your invitation to attend.

Some of this year’s highlights include:

• Keynote speaker Dick Rutan, on the 25th anniversary of his pioneering Voyager non-stop flight around the world.
• Test drives for registered attendees of a Tesla roadster on the streets of downtown Denver.
• Experts and investors will share wisdoms about batteries, electric vehicles, PV, wind, water, nuclear, biomass, biofuels, geothermal, and energy.

The Modern Energy Forum is a private, exclusive event that showcases premier modern energy companies presenting their stories to an elite list of institutional, private and buy-side investors and customers. We take the time to match all attendees for private one-on-one meetings that are pre-arranged to optimize the conference experience and create a foundation for continuing successful business relationships. If your company is interesting at presenting at the conference, please visit this link.

For 25 years, we have specialized in putting investors and businesses together in a comfortable, personalized atmosphere. Attendees keep coming back year after year because of these three reasons:

1. We accept only the most qualified companies that meet certain criteria designed to make them attractive to investors.
2. We maintain a pre-specified ratio of investors to businesses, which allows investors to spend their time getting to know executives from good companies.
3. We make time for 1:1 meetings.

For more information on this year’s conference, or to register to attend, please visit our website or contact Alexis Bogart at 303-377-6463 or alexis@minellc.com.

Michele Ashby
CEO, MiNE LLC

The preceding post is a Special Information Supplement by our Featured Company MiNELLC.

The post Modern Energy Forum: Denver, CO – Sep. 13-15, 2011 appeared first on Alternative Energy Stocks.

John Petersen

Last Friday I breathed a sigh of relief as my core position in Axion Power International (AXPW.OB) regained the price level it established in the first quarter of 2010. The last 12 months have been a stockholder’s worst nightmare as supply and demand dynamics pushed Axion’s stock price down into the $0.50 range and kept it there. Since it looks like new buyers have finally eaten their way through the excess supply, now seems like an opportune time to unwrap my crystal ball and lay out an elephant hunter’s thesis for Axion’s stock price outlook over the next few months.

Axion went public through a reverse merger in December 2003. Like many reverse merger companies, its market was illiquid in the early years and the stock traded by appointment. The following table summarizes the reported annual trading volume during Axion’s first seven years as a public company. It shows the total reported volume for each year and the percentage derived by dividing the reported volume by the fully diluted common shares outstanding at year-end.

So far this year, Axion’s cumulative trading volume is 18.4 million shares. That means 2011 is likely to be the first time in its history that annual trading volume will exceed 50% of the issued and outstanding shares, a level of activity that most investment professionals believe is required for a healthy liquid market.

In December 2009 Axion closed a $26 million private placement that is properly classified as a venture capital investment in public equity, or VIPE, transaction. Four purchasers including Blackrock, the Special Situations Funds, Manatuck Hill Partners and one individual, bought 31.4 million shares in blocks of 7.2 to 8.8 million shares each. In addition, 47 small funds and individuals bought 14.4 million shares in smaller blocks. The offering was priced at $0.57 per share and the 45.7 million shares that were sold in the offering represented about 55% of the company.

In a September 2010 study of 1,655 VIPE transactions between 1995 and 2008, the authors reported that VIPE investors typically buy at a 47% discount to market, which meshes well with my experience that large private placements are typically priced at a 50% discount to market. The reasons for the deep discount are obvious. In a market transaction, an investor will buy a few hundred to a few thousand shares with the expectation that he can change his mind, liquidate and move on whenever he feels like it. In a VIPE transaction, an investor cannot have any reasonable liquidity expectations for months or even years. In cases where several large investors participate in a VIPE transaction, the liquidity assessment is performed at the transaction level, rather than the investor level. In cases where there’s a big gap between historical trading volumes and the size of the VIPE transaction, the discount will usually be more than 50% to offset the liquidity deficiencies.

If one assumes that 50% was a proper discount for Axion’s VIPE transaction where the investors bought shares that represented six and one-half years of historical trading volume, the transaction should have put a $1.15 baseline trading value on Axion’s stock. If one assumes that a 60% discount would be more appropriate in light of the liquidity deficiencies, a baseline trading value of $1.50 per share would have been more reasonable. Those two numbers bracket the range – $1.15 on the low end and $1.50 on the high end – that I believed Axion’s stock would trade in when I wrote a December 2009 article titled “Why I’m Thrilled by Axion’s Financing Transaction.”

While I believed in December 2009 that Axion’s stock price would stabilize in the $1.15 to $1.50 range, and it did exactly that during the first quarter of 2010, liquidations that were unrelated to business fundamentals began in the second quarter and continued into the summer. As a result, the price was beaten down to an all time low of $0.46 before stabilizing in the $0.60 range by year-end. Since then, the stock price has doubled.

I’ve always believed the plateau from February through April 2010 represented fair value and the slump that began in late April was based on supply and demand dynamics instead of business fundamentals. While Axion’s stock price was swooning, the following key corporate and regulatory events were unfolding.

A couple of these events were nothing short of extraordinary.

Many small companies in the battery and power electronics space decide to develop their own battery management system expertise, but I’m not aware of another situation where a transportation giant like Norfolk Southern hired a micro-cap company like Axion to develop a battery management system as the first step in a project geared toward the potential retrofit of a portion of its diesel electric locomotive fleet to hybrid diesel electrics.

Many small companies in the battery space are engaged in development projects with automakers, but the identities of the automakers are closely guarded secrets until the automa
kers announce a production decision. Several recent reports that other battery manufacturers have won production contracts from automakers but declined to publicly identify their customers are prime examples of the normal course of business. I’ve spent several months searching for a comparable example of a joint technical presentation by an automaker and a battery developer at a major industry conference. So far my effort has been unsuccessful.

Axion was not dealing with a normal market in 2010 and is just now getting back to the baseline trading value it established in the first quarter of 2010. While it’s hard to say what the 2010 developments would have been worth in the in the context of a more normal trading market, I think most people who invest in small company stocks would have expected at least a double from the Norfolk Southern and BMW relationships and perhaps a good deal more.

I don’t know what the fair value of Axion’s stock is or where the price will go from here. However my experience with small companies in the valley of death has taught me that over the long-term market prices tend to oscillate around a fair value line, but only touch fair value as they transition from one extreme to the other. In cases where the market price has been undervalued for an extended period of time, the next stage is a roughly equivalent overvaluation for a similar period of time. If you want to assume that $2.40 would have been a reasonable fair value in December 2010, you can pretty well count on an eventual peak in the $4.20 range. If you believe $2.40 would have been low in a normal market then your outlook for the next peak should probably be higher.

Over the last year I’ve been frank in expressing my opinion that Axion was undervalued. As long as the market price was within spitting distance of the price paid in the 2009 VIPE transaction, it was easy to take that position. Now that Axion’s market price has returned to a level that represents reasonable parity with the 2009 VIPE pricing, we should begin to see how the market values the events that have transpired over the last year. Axion’s year-end earning call is scheduled for Thursday of this week and I’m hoping management will add color to their recent disclosures and better explain their outlook for the coming year.

I wrote this article because several readers have asked me what my expectations are for Axion’s future stock price. While I don’t usually make price predictions, I thought a detailed explanation of my opinions and outlook would be more valuable than stony silence. I will probably be more restrained in my future discussions of Axion’s market price, but the elephant hunter in me thinks the fun is just beginning.

Disclosure: Author is a former director of Axion Power International (AXPW.OB) and holds a subtantial long position in its common stock.

The post An Elephant Hunter’s Thesis for Axion Power appeared first on Alternative Energy Stocks.

John Petersen

After months of planning, I’m pleased to announce the launch of EV Insights, an Internet site dedicated to in-depth analysis of the challenges and opportunities in vehicle electrification and other cleantech sectors. My partners in this project are Jack Lifton, a highly regarded expert in the fields of rare earth metals, mining and extractive industries, and Dr. Gareth Hatch, a thought leader in the field of permanent magnet materials, components and their end uses in motors and power generation systems.

In coming months we will offer a series of wide-ranging and probing interviews, conversations and debates with experts, industry professionals and executives from a variety of industrial sectors and companies that will play key roles in vehicle electrification and other emerging cleantech sectors. Our goal is to go beyond happy-talk headlines and advocacy and drill down into the more difficult issues of supply chains, technical maturity, sustainability and end-user value. We hope our discussions will give serious investors an edge by increasing their understanding of how these issues will shape and ultimately dominate the sixth industrial revolution, the age of cleantech.

We don’t know all the answers, but we have a pretty good feel for the important questions. We hope to learn by listening to people who know more than we do and asking hard questions that never make it into press releases, company presentations and the mainstream media. We’re certain that our conversations will have more balanced, informative and probing content than we could ever squeeze into a blog.

Our kickoff conversation is one Jack and I recorded in October that discusses the challenges and opportunities in the battery sector. The recording and transcript are available without charge to visitors who are willing to part with their name and e-mail address.

EV Insights may eventually become a subscription service if initial user feedback is positive, but for now it’s just an experiment. We truly hope you’ll volunteer as a lab rat by visiting us at www.evinsights.com and taking our first conversation on the battery sector for spin around the block.

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In more than 20 years of brokering relationships between investors and the natural resources industry, I’ve never had as many investors tell me in the last year that they’re having a difficult time identifying and engaging with high-quality companies in clean technology. Why is this? Some complain that the industry is too new and unsettled to differentiate between top-grade businesses and pretenders. Others have told me that too few companies have strong business plans and can account for the uncertainty in the markets or in federal legislation. They go to conferences and are inundated with pitches from companies that may or not be real players. In response, I tell them that the Modern Energy Investor Forum, held in Denver from Sep. 22-25, is designed to address their concerns. The Modern Energy Investor Forum is guided by a 1:1 philosophy. For 25 years, we have specialized in putting investors and businesses together in a comfortable, personalized atmosphere. We go beyond prescreening businesses and investors – we work with attendees to identify the types of investors or companies they want to meet, and then facilitate 1:1 conversations to the benefit of both parties. Specifically, this means that: 1. We accept only the most qualified companies that meet certain criteria designed to make them attractive to investors. 2. We maintain a pre-specified ratio of investors to businesses, which allows investors to spend their time getting to know executives from good companies. 3. We make time for 1:1 meetings. To qualify for attendance, click here. To view the invitation for the conference, click here. This year’s conference will feature:

• Presentations from some of the highest-potential modern energy companies in the world.
• Engaging, informative panel discussions, including on the topic of “Green Economics and the 21st Century Challenge.”
• Sessions dedicated to:
  • Power Generation: Base Load and Renewables
  • Power Management: Smart Grid and Infrastructure
  • Transportation and Fuels
• Keynote speakers including:
• Jigar Shah, CEO, Carbon War Room
• Richard Ashby, CFO and Treasurer, RES Americas
• Robert Glennon, Author, Unquenchable
• Robert Dixon, Leader, Climate and Chemical Investments, The World Bank Group

For more information on this year’s conference, or to register to attend, please visit the Meetings International Natural Resources Enterprise Website or contact Alexis Bogart at 303-377-6463 or alexis@minellc.com. Michele Ashby CEO, MiNE LLC The preceding post is a Special Information Supplement by our Featured Company MiNELLC.

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