Tuesday, June 12, 2007

Nuts for Solar

Paramount Farms, Inc., the world’s largest producer of pistachios and almonds, has become the proud owner of one of the largest single-site solar energy power systems in the U.S. The 1.1 Megawatt solar energy system is being built by Solarcraft. It caught my eye because the system will be powered by photovoltaic panels produced by Energy Conversion Devices, Inc. (ENER: Nasdaq), which is perennially on my list of stock to watch.

What really made me sit up straight was a couple of land use details. First, the solar system will cover eight acres on Paramount’s farm. Second, the 1.1 Megawatts that will be produced are enough for 300 average single family homes. I immediately wondered if this is good land use planning or another example of an alternative energy producer promoting its technology at the expense of important economic consequences.

Some might wonder, what eight acres means to Paramount. The farm is located on 200 acres in California’s San Joaquin Valley. Paramount has 52,000 of those acres planted in almond and pistachio orchards. A few other unspecified acres are devoted to processing facilities and equipment storage.

Like Paramount, wineries have land to spare and solar power systems have become popular in the California winery country. Solarcraft has a growing list of installations at wineries and industries sites in California.

Of course, in California it is not just a matter of unused land. The State of California also offers financial incentives to companies investing in solar power. In January 2006, the
California Public Utilities Commission passed a long-term solar energy plan. The plan includes $3.2 billion in solar energy rebates and $2.8 billion in customer incentives for solar at residential buildings.

It appears the solar power sector has passed a meaningful inflection point. Installation of a solar power system is now regarded as good business and not just some quixotic mission for environmentalists. Perhaps this is why Energy Conversion is adding to production capacity. The First Call consensus estimates reflect a profit for the first time in the fiscal year ending June 2008, although the EPS range from $0.20 to $1.05 suggest there is great diversity in views on just how profitable. The forward PE is now 60.2, which could be a bargain if the Company can maintain profitability.

Neither the author of the Small Cap Copy web log, Crystal Equity Research nor its affiliates have a beneficial interest in the companies mentioned herein.

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