Solar Power Industry Report: Major Solar Thermal Players

Today, we published a research report on the solar power industry. The report provides an overview of the solar energy market, various solar thermal technologies, and the current status of some of the major players in the industry.

Within the solar market, it is widely believed that tomorrow's solutions will be a combination of photovoltaic (PV) and solar thermal (Concentrated Solar Power or CSP) technologies. While PV technologies are suitable where direct sunlight is scarce and where small-scale rooftop or scattered power generation is required, CSP clearly is more efficient for larger scale generation in desert environments with strong direct sunlight.

A US Department of Energy study cites that the cost of solar energy from PV panels could be anywhere from 20 to 40 cents per kWh depending on the size of the panel. In contrast, the cost of energy from a CSP plant could be as low as 18 cents per kWh over the plant's lifetime. Recent innovations in the industry have brought the cost from CSP plants even lower.

To read the complete report , please go to: http://www.floyd-associates.com/solar2.pdf. To read more about Floyd Associates please visit www.floyd-associates.com or contact us by email at info@floyd-associates.com or by phone at: +1 (310) 300-0890.

Energy Crisis and Its Consequences

The global energy crisis is one of the few topics that cross my mind on a daily basis. The actions that we take today and our energy policies will have profound effects not just on the way we live tomorrow but also on whether or not we will Be a leading nation in an increasingly competitive world.

One quote I read recently in a Thomas Friedman book caught my attention. I would like to invite others to comment on this.

There are "five key problems that a hot, flat, and crowded world is dramatically intensifying. They are: the growing demand for ever scarcer energy supplies and natural resources; a massive transfer of wealth to oil-rich countries and their petrodictators; disruptive climate change; energy poverty, which is sharply dividing the world into electricity haves and electricity have-nots; and rapidly accelerating biodiversity loss, as plants and animals go extinct at record rates." (Hot, Flat, and Crowded, 26)

The Race for the Green Vehicle

We would like to invite you to share your insights and ideas with us about the following topic. How do you think the green-mobility industry will evolve? Please feel free to comment on this article or to contact us directly at info@floyd-associates.com.

A revolution has begun. A revolution that will transform personal and public mobility the way we know it. Reliance on fossil fuels as a source of energy and on the internal combustion engine for mobility is simply too risky and the public is finally understanding that the only way to obtain energy independence is to migrate from our addiction to fossil fuels to a reliance on renewable energy sources. Meanwhile, governments and companies from around the world are scrambling to stay ahead of the game and to emerge as winners in tomorrow’s green mobility industry.

No one knows who the big players in tomorrow’s automotive market will be but there is plenty of room for speculation. What we do know is that during such times of rapid change, it is inevitable that new players will emerge and old ones are forced to either restructure or downsize - if not close shop altogether. Nowhere is this more evident than in the present condition of the automotive industry in both in the United States and Europe.

China, however, has been swift to observe and act upon these trends. During the past few years, Chinese car companies have unveiled various models of electric vehicles from neighborhood electric cars to roomy sedans. BYD Auto, the Chinese auto maker, with only five years of experience in car manufacturing, now supplies more than 6 models and has plans to sell hybrids in the US. Founded in 1997, Chery Automobile Company is another example of a Chinese manufacturer that has been quick to build a successful Chinese brand of clean vehicles.

Aside from the manufacturing of vehicles, radically new approaches are also being taken by states and cities to integrate these technologies into our everyday lives. In the United States there is a continued move towards the creation of sustainable cities that minimize the negative effects of transportation and in turn enhance the livability of cities. For example, the mayors of both Portland and San Francisco are in fierce competition to make their respective cities the greenest on earth, with both cities battling to be the first to develop the infrastructure to support full-scale electric vehicle deployment. Of course, in Europe, many cities already have this infrastructure in place and it is used with varying degrees of success.

The question therefore becomes: given the pressures of the market to go green and the current economic climate, what is the ability for these types of innovative technologies to support the development of new modes of transportation and the infrastructure to support it? Are cities really becoming greener? Who will be the next big players in this industry? And is the market ready to adopt such changes?

We welcome your comments and thoughts.

Global Diversification: Key to Profitable Investments

Despite the global crisis in the financial and real sectors of almost all economies around the world, and while most businesses have nothing on their agendas but downsizing, diversification is still the only safe bet. Prudent and cash rich investors have the most to gain from investing in undervalued assets during the current turbulent economic times. As a recent example, Deyaar Development recently announced that it is moving ahead with plans to expand internationally.

One of the largest developers in Dubai, Deyaar’s real estate ventures span across major growth corridors and prime locations in the UAE. According to its Chief Executive Officer, Markus Giebel, “we can take excess cash and buy land internationally. There is no better time to start international expansion.”

Advantages of Plug-in Hybrids

With a recent mandate that effectively requires major automakers to put at least 58,000 gas-electric vehicles on California roads by 2014, California has become a pioneer in new technology developments. After years of research and development the auto industry giants and startup companies are investing, researching and building prototype vehicles that can be fueled either with gas or electricity from a wall socket. General Motors and Toyota plan to launch PHEV versions by late 2010, while Honda and some smaller manufacturers are expected to follow.

"Plug-in hybrids are going to be the vehicle story of the next few years," said Joseph Romm, an energy policy expert with the Center for American Progress, a think tank in Washington, D.C. Plug-in hybrid electric vehicles (PHEV) have the potential to revolutionize the auto industry over the next decade. This is because PHEVs could provide a cost-effective, practical solution to improving automotive fuel-economy and emissions. In short, Plug-in hybrids are vehicles that are powered by an on-board engine and a battery/electric motor that can be charged by plugging into the electric grid. This gives PHEVs an extended 20-40 mile all-electric driving range vs. current hybrids plus the ability to drive long-distances like a regular car.

To read the full report please go to http://www.floyd-associates.com/phev.pdf.

US Welcomes Foreign Direct Investments

Following the recent global financial turmoil and the collapse of several US financial institutions, the United States Government is encouraging foreign investments in US companies and institutions. Specifically, funds in the Gulf Cooperation Council countries are aggressively being encouraged to invest in the United States.

According to the Gulf News Agency, Robert Kimmitt, deputy secretary of the US Department of the Treasury, praised sovereign wealth funds (SWFs) such as the Abu Dhabi Investment Authority (ADIA) in sharp contrast to a debate in the West early this year that sought to put protectionist barriers against investments made by these organizations. Kimmitt said the US favors "the free flow of capital, both from sovereign wealth funds and all other overseas investors." He is meeting officials and business leaders in Saudi Arabia, Kuwait, Qatar, Iraq and the UAE, trying to encourage Arab funds to invest in the US.

The economic downturn and the ensuing panic has already created unprecedented investment opportunities in the US both in real estate and in science and technology. Lack of liquidity has caused some assets to be sold at significant discounts to the fundamental values of such assets. In this environment, prudent investors from around the world have started to take a closer look at the US market. As an example, Mohammad Ali Al-Hashimi, the Executive Chairman of Zabeel Investments, recently announced that his company is keen to invest in the US, but not willing to "overpay" for deals.

The question in the mind of many institutions is where the bottom of the market may be. However, for fundamental investors catching the bottom of the market must not be the sole objective. Acquisition of assets that are trading at discounts to intrinsic valuations shall translate into economic gains in the long term. Waiting for the market to bottom out might lead to realization of higher gains on investments but carries the risk of missing the bottom and ending up trying to make investments in a rising market, where quality assets will be harder to come by.

For sovereign wealth funds and other GCC pools of capital, it is prudent to continually evaluate opportunities and to make investments as the markets gradually stabilize. Investments in fundamentally sound and strong companies with proven cash flows and a clear growth path is a great diversification tool for GCC funds and right now the time is great for accessing unprecedented opportunities.

Emerging Markets and Global Inflation

Despite the rising “decoupling” discussion of the U.S. economy and the emerging markets, it is irrefutable that the sub-prime mortgage crisis and rising global inflation are due partly to large capital flows from Asian economies and oil-rich Middle Eastern sates to US assets. Such capital flows are designed to prevent the currencies of such Asian and Middle Eastern countries from rising and create demand for US bonds, regarded by those economies as a safe asset, increasing prices of those bonds and depressing the yields. Lower rates translate into cheap money and, with the Federal Reserve more concerned about recession than it is about inflation, the result is a loose monetary policy that is responsible for the melt down of the US credit markets. Cheap imports from China and other Asian countries have granted the central banks in rich countries the luxury to worry less about inflation while keeping rates low.

Now that the US economy has entered a downturn, the direction of these capital flows has reversed and those countries that have linked their currencies to the US Dollar are being subject to the loose monetary policy of the Federal Reserve, despite their overheating economies. This in-turn causes price rises in those economies due to low interest rates that might be suitable for the US economy at its current state but not for the overheating Asian and Middle Eastern economies. Add the high prices of oil and other commodities to the equation and the result is an inevitable global inflation that is poised to threaten growth globally.

The overvaluation of currencies has sparked talks in many Middle Eastern circles of re-valuation of local currencies. An alternative scenario would be changing their currency pegs from the US Dollar to Euro. While the latter is less likely, it cannot be ruled out entirely. Only time will tell how ultimately the capital flow to and from the emerging economies will affect global inflation. What’s known is that so far it has been partially, if not significantly, responsible for it.

Another Consequence of High Priced Oil: Large Sums of US Assets Purchased by Arab Gulf States Flush with Petroleum Dollars

In September 2007 in a complex set of transactions, Dubai proposed to acquire 19.9 percent of the NASDAQ, placing the Arab nation in an ownership position of a key US stock exchange. Earlier in the year through the state owned holding company for Dubai Financial Market (DFM) and Dubai International Financial Exchange (DIFX), Borse Dubai, the country announced a public all-cash offer to the shareholders of OMX AB, the Nordic Stock Exchange, headquartered in Stockholm Sweden.

This recent acquisitions of ownership in US and European entities by private and state-owned Middle Eastern entities are just part of the flood of oil wealth spilling from the region. Middle Eastern investments in the United States have been on the rise since mid 2006 and have been showing constant gains since the tense period following September 11, 2001. While some of these takeovers are triggering alarm, most famously the purchase by Dubai Ports World of a seaports management firm, others are evoking warm welcomes.

One of the most prominent figures behind the recent wave of expansions and acquisitions is the ruler of Dubai and the Prime Minister and Vice President of the United Arab Emirates, Sheikh Mohammed bin Rashid Al-Maktoum. A visionary and an entrepreneur, he has spent decades carefully shaping Dubai as a hub for trade and investments in the Middle East. Dubai has been transformed from a small city-state to one of the world's premier business center and tourist destination. Incentives like establishment of free trade zones have resulted in exponential growth of business activity in the Emirate.

It is noteworthy, however, that Dubai is only one of the states in the region with a success story. While Dubai owes most of its growth to Sheikh Mohammed's vision and not to a great extent to its oil wealth, other states in the region have great amounts of accumulated petroleum wealth. The rush of these petro dollars is creating enormous private and public wealth and reshaping regional businesses and society. A small portion of this wealth is being invested regionally but a great majority of it is being funneled back to the US in form of investments and joint ventures with Western entities.

Some notable acquisitions in 2006 include a $1 billion portfolio of 21,000 apartments in the US Sun Belt cities; a 2.2 percent stake in the automotive giant DaimlerChrysler AG; and a Manhattan landmark building. In March of 2006, we witnessed news of another Dubai acquisition of plants in Georgia and Connecticut that make precision components used in engines for military aircraft and tanks that drew scrutiny from the Bush administration because of national security risks.

As recently as July of 2007, Dubai International Capital, the private equity firm of Sheikh Mohammed announced plans to open an office in the United States as it seeks to add American companies to its European-focused portfolio. Speaking to the New York Times, Dubai International's CEO, Sameer al-Ansari, said, “it is very important for us to find and execute deals in the US, as we're trying to create a diversified portfolio.” Dubai International has acquired minority stakes this year in European Aeronautic Defense and Space, the parent company of Airbus; HSBC Holdings; and the Icici Bank of India. Five Fortune 500 companies are on a short list for possible investments and about 15 are on a close watch list, Mr. Ansari added.

Not all of such acquisition proposals are dealt with skepticism. The disclosure, several months ago, that Dubai Investment Group had acquired the Essex House hotel in Manhattan and promised to spend $50 million into renovating it, prompted New York City Mayor, Michael Bloomberg to exult: “Another iconic hotel overlooking Central Park will be preserved and its unionized workforce protected. This is excellent news for New York's tourism and hospitality.”

So what does all this mean for US businesses? Besides the obvious opportunities in raising capital through Middle Eastern funds, it is important to understand the forces behind the emerging interest in US businesses. Behind such transactions are two powerful forces. One, of course, is the high price of energy, which has left several oil-producing Arab countries swimming in cash. The other is the burgeoning U.S. trade deficit, $726 billion last year, which means that the United States needs foreign capital; a country that imports more than it exports must cover the gap with money from abroad.

Until now, investments in the United States from Europe and other parts of Asia have dwarfed those from the Middle East. But an increasing share of the foreign money required to fuel the U.S. economy is likely to come from places that, like Dubai, trigger visceral reactions among Americans seared by memories of the Sept. 11 attacks.

"The price of oil is going only one way, up, for the next five years, because it is going to take at least that long for alternatives to kick in," said Youssef M. Ibrahim, managing director of the Strategic Energy Investment Group, a consulting firm based in Dubai. "So there is no question in my mind that billions of dollars will continue flowing this way, and people cannot handle all of that kind of money here. You've got to circulate the money, and the United States is still the biggest market."

Already, the list of U.S. businesses owned by Arab investors, not just from Dubai, includes some well-known names. Among them are Caribou Coffee Co., the fast-growing rival to Starbucks Corp.; Church's Chicken, a fast-food concern; Loehmann's, a specialty retailer; TLC Health Care Services Inc., a provider of home nursing and hospice care; and even several financial publications, including the American Banker.

Such "direct" investment in hard assets (companies, factories and real estate) is generally preferable for the U.S. economy, in the view of most economists, to foreign investment in bonds, stocks and other financial assets. One advantage of direct investments is that they cannot be dumped in a panic the way that a Treasury bond can. Moreover, they often involve high-wage jobs. Average annual compensation per worker at U.S. subsidiaries of foreign companies is about $60,500, 34 percent higher than the rate at all U.S. companies, according to the Organization for International Investment.

Author: Nima Montazeri
Managing Director
Floyd Associates