Friday, June 03, 2011
Angela Merkel’s coalition government may not have reversed its nuclear power policy for anything more than a “cover your behind” solution. Nonetheless, the wind industry sees the decision to phase out
’s nuclear power generation industry by 2022 as - no pun intended - a windfall. Policy makers say as much as half of the deficit left by the shutdown of nuclear power plants will need to be made up from other power sources, principally wind power. Germany
As noted in the May 31st post “New Wind Blows in Germany,” the German wind power industry will need to maintain its current pace of development in order to meet Merkel’s nuclear replacement goal. This means many new wind turbines will be sprouting up across the German countryside.
The most logical winner in this turn of events is
’s own Siemens AG (SIE: DB; SI: NYSE ADR). Siemens has dedicated considerable investment in developing its line of seven wind turbines models. The company boasts 7,800 turbines installed around the world, producing over 8,800 MW of power a year. For Germany investors Siemen’s ADR has some appeal as it is priced at a multiple of 11.4 times forward earnings and offers a 2.8% dividend yield. However, the stock trades not on its wind power business but on the relative strength of worldwide earnings against currency fluctuations and other macroeconomic factors. U.S.
For small-cap sector purists it will be necessary to consider at PNE Wind (B0QCZ2: DB) and REpower Systems AG (RPW: DB). Both are Germany-based wind technology companies that are likely beneficiaries of domestic wind power policies.
With a knack for developing and installing wind power projects, PNE Wind recently broke into the
U.S. market with the sale to Black Hills Power of a wind farm to near . That might seem like a strangely long sales connection. However, as a native, I can vouch for the fact that there are a lot of Germans in Belle Fourche, South Dakota . By comparison sales in its hometurf will seem like child's play. South Dakota
REpower Systems is another wind turbine producer with a full product portfolio that ranges from wind turbines with an output from 1.8 MW up to 6.15 MW and rotor diameters from 82 up to 126 meters. It boasts the ability to install workable solutions even in areas with weak wind experience.
In scrutinizing these company’s investors will need to take a magnifying glass to cash flows and capital expenditures. Even a whiff of inadequate resources for investment would be a tip to stay away from long positions. Also a good look at product portfolios would be helpful as sites for eventual wind power installations are identified. Not all turbines are created equal and some may not be the right configuration for
’s landscape. Germany
Neither the author of the Small Cap Strategist web log, Crystal Equity Research nor its affiliates have a beneficial interest in the companies mentioned herein. All stocks mentioned in this article are included in Crystal Equity Research’s Earth, Wind and Fire Index in the Wind Group.