Global warming - Best Companies

Hi Guys,
With the increased awareness of global warming in the last couple of years and the acknoledgement by governments that it actually exist i thought it would be interesting to have a discussion on the companies that may benefit the most due to possible changes in the climate and carbon legislation. Any ideas?

Billhill

billhill said:

Hi Guys,
With the increased awareness of global warming in the last couple of years and the acknoledgement by governments that it actually exist i thought it would be interesting to have a discussion on the companies that may benefit the most due to possible changes in the climate and carbon legislation. Any ideas?

Billhill

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Uranium producing companies maybe?

The fact that what they sell produces hardly any pollution when it is being used up is definately an advantage.

I’ve been thinking the same thing. Not only is governments changing their tunes, Insurance Companies have been investing big, and people like Richard Branson who has pledged $3 billion to tackle global warming goes to strengthen the cause. My favorite renewable energy stock would have been Pacific Hydro, but they were brought out by super fund, IFM and delisted. Even the super funds want a piece of the action.

The Federal Government is also due to announce the first round of LETDF (Lower Emissions Technology Development Fund) funding any day now . .

Here are just some potentials ASX listed companies (in no real order) :

Hot Fractured/Dry Rock :

GDY : Geodynamics (http://www.geodynamics.com.au)
PTR: Petratherm (http://www.petratherm.com.au/)
GRK: Green Rock Energy (http://www.greenrock.com.au/)
GHT: Geothermal Resources (http://www.geothermal-resources.com.au/)
EDE: Eden Energy (http://www.edenenergy.com.au/)

The government is looking for a technology which produces the least greenhouse gas emissions while at the same time will not be detrimental to the economy, i.e. increase wholesale power prices too much. HDR has a huge potential in that it can produce zero emissions, base load electricity at costs modeled to be close to coal. The technology works, just the economics need to be proven.

Eden energy is slightly different to the above five companies. While they hold Geothermal exploration licenses, they are also making big waves in Hythane technology. It’s a blend of CNG Compressed Natural Gas and Hydrogen for use as a transport fuel. They have recently won the backing of the US department of energy for some tests, and I also believe there was talk at some stage about converting many (1000’s) of the buses over ready for the Beijing Olympics.

EVM: Enviromission (http://www.enviromission.com.au)

Enviromission is working on building solar towers.

QTM: Quantum Energy (http://www.quantum-energy.com.au)

Quantum Energy build Heat Pump Hot water systems. They use reverse cycle refrigerant technology like your reverse cycle air conditioner to heat water. The idea is much more efficient than traditional thermal hot water systems. The Government also loves these things. I could be wrong, But I think the Australian Government is the only government I know of that gives REC (Renewable Energy Certificates – a sort of Carbon Credit) away for a Hot Water System that runs on Electricity (Coal, Gas etc)

CFU: Ceramic Fuel Cell Limited (http://www.cfcl.com.au/)

Ceramic Fuel Cells as it’s name suggests makes Solid Oxide Fuel Cells than run on Natural Gas. Like Quantum Energy, the idea is better efficiency. The unit can generate electricity more efficient than most efficient Combined Cycle Gas Turbine technology and on top of this will heat your water for free. Ceramic Fuel Cells is building a manufacturing plant in the UK. The UK and Europe fancy the technology which instead of heading water, can heat the home and generate electricity too.

ZBB: ZBB Energy Corporation

ZBB makes big (~1 Megawatt) Zinc Bromine Batteries. They can be used in areas like storage for intermittent renewable energy sources (Wind, Solar etc)

DYE : Dyesol Ltd
Dyesol makes Dye based solar cells.

CNM : Carnegie Corporation.
Carnegie is a small venture capitalist which has developed devices like CETO. CETO is a pump that sits under the water level and uses the wave action to pump highly pressurized water to shore. On the shore it can be converted to electricity more cheaply than marine qualified plant, but the highly pressurized water is idea for reverse osmosis desalination. The best thing is you don’t need capital costs of electric pumps or ongoing costs such as electricity. CETO was developed between Pacific Hydro and CNM, but has since been sold to UK based Renewable Energy Holdings (REH). In return CNM now owns shares in REH.

Carnegie are now working on a smallish low emissions coal technology.

ASX: BBW Babcock & Brown Wind Partners
As the name suggests, they invest in various wind farms and other renewable energy.

ASX:ENE (http://www.energydevelopments.com.au)
Has a portfolio of landfill gas power generation facilities.


Many are speculative. My money is on GDY.

It's a complex issue but as far as investment is concerned it seems to be limited to energy and possibly biotech if someone can come up with a viable means of reducing agricultural (methane from animals and rice growing, oxides of nitrogen from fertilizer use) emissions.

I'll stick to energy for this post since I don't have much knowledge in the area of biotech.

One problem is that to a significant extent the companies concerned are either a minor part of a bigger company or are government owned.

The dominant (presently over half of the entire industry) generator of renewable electricity in Australia is the Hydro-Electric Corporation (branded as Hydro Tasmania (HT)). It also has operations in China (wind power) and a global consulting business in power, water, civil engineering, cloud seeding etc. A $10 billion+ business in terms of what its assets would cost to replace with 2006 dollars. But it's 100% owned by the Tasmanian Government so it's not an option for investment.

The second largest renewable energy generator, Snowy Hydro, is also 100% owned by 3 governments so again it's not an option for investment. That said, the actual business focus of Snowy Hydro is more to do with financial trading than actual power generation (though it does generate power too).

So investing in renewable energy supplied to the grid means either investing in companies that are presently relatively small producers or have no production at all. They have a viable future for expansion ONLY with either a change in Australian government policy or by setting up overseas operations (hence HT's move into China).

That's not to say there aren't opportunities, there are, but you can't just go and by the shares of the dominant renewable electricity generators and hope they go up because they aren't listed companies. Another post on this thread has given a reasonable list of the relevant companies so I won't repeat that.

Then there are the non-grid renewables - eg solar hot water systems manufactured by SolaHart and competitors. But again, to a significant extent the companies are also involved in other activies. The world's largest manufactuer of solar panels (for electricity, not hot water) is BP, as in the oil company.

It's much the same with energy conservation too. CSR is a major manufacturer of insulation for buildings but that is by no means it's main line of business.

There are certainly quite a few companies that are listed and have a promising future. But in general you're buying into juniors which may or may not deliver on their promises

Even Uranium is much the same. Either it's a small part of a bigger company or it's a junior that is yet to go into production and may never do so. With only 3 mines operating there isn't a lot of choice amongst the existing producers.

So basically it's a case of getting in at the ground floor and trying to pick the right stocks. Just like buying computer stocks in the 1980's - if you chose Microsoft and held it long enough then you did pretty well but many others simply disappeared altogether.

Carbon capture and underground storage is another one. But it's only a tiny part of Rio Tinto's activities and you can't buy stock at all in some of those involved (Queensland Government).

One area which stands out is natural gas. I disagree strongly with the popular notion that using more gas is a real solution to global warming (it still pollutes and there simply isn't enough to replace more than a relatively small portion of coal use over the long term).

But gas companies are here and now and for the next few years at least stand to benefit from a shift towards gas, particularly for power generation. Major transmission pipeline owners and upstream gas producers are well placed in this regard. The upstream industry also stands to benefit as gas replaces some oil use in the coming years.

All that said, if I were going to buy a "hold and hope" stock in this sector then I would be looking very seriously at geothermal energy (hot dry rocks). If they can get the cost down then it's the only serious alternative to coal/nuclear over the next few decades and would logically be a major beneficiary of any real move away from coal (unless political considerations lead to nuclear being the winner regardless of cost).

YChromozome said:

QTM: Quantum Energy (http://www.quantum-energy.com.au)

Quantum Energy build Heat Pump Hot water systems. They use reverse cycle refrigerant technology like your reverse cycle air conditioner to heat water. The idea is much more efficient than traditional thermal hot water systems. The Government also loves these things. I could be wrong, But I think the Australian Government is the only government I know of that gives REC (Renewable Energy Certificates – a sort of Carbon Credit) away for a Hot Water System that runs on Electricity (Coal, Gas etc)

ASX:ENE (http://www.energydevelopments.com.au)
Has a portfolio of landfill gas power generation facilities.

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Quantum - the efficiency of the units is so high (typically 300 - 500% from electricity in to hot water out) that they use less energy than a solar hot water heater in cooler climates (eg Vic, Tas). That's because they don't depend on sunshine but on heat from the air. These things will even heat up (without any kind of booster) in the middle of the night when it's zero degrees outside.

Energy Developments - the case for landfill gas capture and use is in many cases environmental rather than economic. So if there is serious concern in the community then it's quite likely that local government will start PAYING the likes of ENE to get rid of gas from their landfills. Unburnt methane from landfills is a potent greenhouse gas - using it to generate electricity having the dual benefit of converting the gas to carbon dioxide (still a greenhouse gas but far less potent than methane) whilst also reducing the use of coal etc for power generation.

What about the timber companies like gunns and great southern plantations. If a price is put on carbon just owning large areas of forest that suck it up could provide huge revenue streams to a company.

I agree with the comments above that at the moment the biggest potential is in alternative energy but if governments deem it necessary to reverse the effects of global warming via carbon credits we could see a whole new industry dedicated simply to caputring and storing carbon dioxide.

Billhill

billhill said:

What about the timber companies like gunns and great southern plantations. If a price is put on carbon just owning large areas of forest that suck it up could provide huge revenue streams to a company.

I agree with the comments above that at the moment the biggest potential is in alternative energy but if governments deem it necessary to reverse the effects of global warming via carbon credits we could see a whole new industry dedicated simply to caputring and storing carbon dioxide.

Billhill

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There are practical limits to storing carbon in forests but agreed that it could turn out to be a profitable investment opportunity if the required policies were to be implemented by governments.

As for the practical limit bit, I'll put it this way. 250 years ago virtually all the coal and all the oil and gas was in the ground and most of the now cleared areas were covered by forest. To reverse the effects of global warming we would not only have to put trees back where they used to be but also plant enough extra trees to take up all the carbon we've taken from the ground (coal, oil, gas). That would mean an incredible number of trees and necessarily a major downturn in agriculture globally. If we continued to burn fossil fuels then we'd have to keep increasing the number of trees and before long we'd run out of land to put them on.

I'm not saying that planting trees isn't a good idea, it is, but I just wanted to point out that doing so is by no means a total solution to global warming.

All that said, if you build with timber (instead of steel) then you've effectively locked up carbon in that timber for the life of the building (assuming that more trees are planted to replace the ones cut down for timber). Given that making steel is a major polluter, there's a lot in favour of building with wood.

On the other hand, it's hard to meet high energy efficiency standards with timber construction, especially when it's used for more than just the frame. One of the many complexities surrounding global warming which makes many aparent "solutions" not as effective as they may seem.

That air-conditioning cuts emissions when installed in Victoria or Tasmania by a huge amount (generally the single most important thing a householder can do to cut emissions in a cool climate) but increases emissions if installed in Queensland (due to the different way it will likely be used due to climate) being another example.

Another one is that catching an already running bus to work will save emissions. True. But then if nobody used buses and we stopped running them, using small cars instead, that would actually reduce emissions (since on average most buses run with very few passengers over the total length of the route).

Another one is that using electronic mail and similar technologies will cut transport emissions. Absolutely true. But then add in the power to run the computer and all the extra paper use they tend to create (you would never have typed out, on a manual typewriter, most of the stuff that gets printed in the average office) and it's not so clear if they are really winners at all. And of course manual typewriters generally weren't replaced every 3 years creating a mountain of landfill.

Then there's the efficiency paradox. Make it more efficient and consumption tends to rise rather than fall. For example, I'm told that houses with continuous flow gas water heaters (themselves far more efficient than other types except solar) tend to use about 45% more hot water than houses with less efficient water heaters. They still save a bit, but not as much as a simple evaluation of competing technologies would suggest.

Another one is lighting - each 2x36 watt fluoro in the office is putting out the same light as 10 x 60 watt bulbs. You may have 20 of these fluoros in the office but I very much doubt that you would have installed 200 bulbs in the same room if fluoro's didn't exist. For that matter, each of those halogen downlights at home is using about 60 watts (50 watts for the bulb, the rest for the transformer). You put 6 of them in the kitchen and have some nice bright lighting but I doubt you would have had 6 ordinary bulbs there before the downlights went in.

Things get more efficient and consumption goes up rather than down. Just something I've observed in the electrical industry for quite some time. A bigger problem however is when appliances get cheap - we all survived perfectly well with one fridge per house or office. Now they're cheap and we end up with two fridges at home, another one at work plus another one in the boss' office and a water cooler or two as well. All adding more emissions.

I could also point out that per head of population we're using just as much petrol as we ever did despite all the improvements in engine technology. The net effect of fuel injection was... basically nothing. A more efficient engine so we put it in a less efficient vehicle and have more of them.

Hence my belief that alternative energy production is the only thing that can really solve the greenhouse problem. Conservation and efficiency could help slow emissions growth a bit but in practice I just can't see total energy demand going down in a world with an economic system based on constant growth.

Smurf1976,
Totally agree that energy consumption is going to continue to grow at an exponetial rate and that alternative energy sources are the best bet to solve the problem. Also acknowledge that effeciency is only a small part of the solution if any.

There are however more options then meet the eye. For example if it becomes viable for a company to capture and store carbon, as they say there is more then one way to skin a cat. You don't need trees to capture carbon. You could build huge algae ponds that suck up the carbon from the air then store the organic matter underground where it cannot escape. This would require much less land then planting forests and although a theory at the moment could have significant potential.

Another theory put forward sounds pretty far fetched but bare with me because if the climate changes dramatically it wouldn't sound so stupid. Basically it involves flying planes into the stratoshpere and releasing sulfur particles that reflect heat from passing into the lower atmosphere and heating the earth (actually after september 11 the average temp in america raised a few degrees while all planes were grounded. Studies showed that the polution from the exhausts did exactly what is proposed above). Companies will be required to carry out these services for governments and being such a massive opperation will be worth millions (whats the bet Haliburton gets all the contracts ).

Gobal warming poses more problems and hence opportunities then just the warming of the earth or alternate energy supplies. We need to think out of the box on this one which is why i started this thread.

It's worth noting that if you compare sulphur emissions (SO2, SO3) and temperature in the industrialised world then there is an inverse correlation. Temperature fell as sulphur emissions rose but since the mid-1970's when serious efforts were made to reduce sulphur emissions (since it causes acid rain both locally and further away) temperature has reversed trend and is now rising.

Also interesting that the observed "effects of global warming" generally seem to date back to the mid-1970's too.

Just adding to the discussion, water is already presenting as a large problem for governments and global warming is likely to exacerbate this.

Currently water infrastructure and services are by and large owned by the government but i have found these two companies serving water storage and treatment solutions. Both are very small companies and do not have websites.

Envirozel limited (EVZ) - Development and commercialisation of water treatment and recycling, instalation of water siphoning for buildings and production of storage tanks for water and petrochemicals. Company is actually making a profit.

Environmental solutions international limited (ESI) - Water and waste water treatment and services. Currently making a loss.

Not a hell of a lot of information on these companies so hard to say what the potential is but probably worth keeping an eye on them. EVZ looks the better of the two at the moment.

Water


Envirozel limited (EVZ) - Development and commercialisation of water treatment and recycling, instalation of water siphoning for buildings and production of storage tanks for water and petrochemicals. Company is actually making a profit.

Thanks for the heads up on those two companies Bill.

I have just got back from a trip to Oz. Water seems to be bigger problem in parts of Oz than I realized. Water recycling companies I imagine will do well in the future. What are your thoughts?

Web Site Link.
http://www.envirozel.com/

I will watch this stock and the water indusrty also.

Great thread.

EZL

Good to see a company where the directors actually pay cash on-market for accumulating their shares.

Even better seeing them all tucking them into the superfunds for the expected capital gains.


A profitable business, current PE of 17, with a cap of only $36m - expecting to double revenue next year to $32m looks attractive to me.

Anyone hold this one with more insights?

SilverDollar said:

I have just got back from a trip to Oz. Water seems to be bigger problem in parts of Oz than I realized. Water recycling companies I imagine will do well in the future. What are your thoughts?

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Yeah i like the company. The only thing i would be wary of in terms of water is the public resistance to corporate control of water. As long as companies do not add costs to water then they should do very well and those that provide effeciency improvements and solutions are an even better bet.

They continue to predict falling rainfall in the zones where all our major cities are. Its unlikely they will move the cities so that leaves companies like EVZ with a huge customer base and likely favourable legislature changes.

cummins corp would be flying if their directors didnt leave.

seriously disappointing float.

any danger of some updates!!!

LKO & VPE have each taken a 33% interest in Green Earth Energy Ltd. A company formed to investigate thermal drilling in Victoria.They have applied for leases. Something I have put on the back burner for future reference. Could be interesting.

At some point I think we're going to see quite a lot of investment in water. Recycling probably. Major new supply sources probably (conservation only goes so far when the supply from existing sources is falling and population rising).

Whilst this is likely to be either directly publicly funded (especially recycling) or indirectly via contracts for public utilities to purchase the water, I think much of the physical work is likely to be undertaken by the private sector.

Public utilities just don't have huge construction workforces anymore and they also lack the equipment to do the work. Even in Tasmania, the Hydro no longer has a construction workforce of any significance (apart from maintenance) and sold off virtually all construction machinery over a decade ago. They simply don't have the internal resouces to build even a small new dam.

Even on the design / engineering side it's much the same. Tasmania kept the engineers by going into the international consulting business but to my understanding they are long gone practically everywhere else (I think Snowy Hydro might still have some capabilities in this area too?). We just haven't been building large scale supply infrastructure in recent years and thus the people who know how to do it are in most cases no longer employed by the water utilities. Those that are still there would already be doing work on maintaining existing infrastructure, extending reticulation to new areas etc and wouldn't have time to be designing new dams or treatment plants.

Public utilities are basically operation and maintenance these days - they just don't do, CAN NOT do, large scale construction without a massive rebuilding of skills and equipment. Given the political climate and likely urgency of the situation when a decision on major new water supplies is finally made, odds are that it goes either largely or completely to the private sector to actually build whatever project is being built. Possibly to finance it as well.

In the case of desalination, the state and local utilities never had knowledge in this area to start with so that's near certain to be private sector work. Desalination is, of course, the easiest and in some cases only realistic option for major new bulk water supplies. Either that or ship the stuff in from northern Australia or Tasmania. Which one comes down to politics and cost but either way it's likely to be done by private enterprise rather than government I think. I just can't see a fleet of government owned tankers when the customers, Vic and NSW, are keen on private enterprise doing most things and the likely supplier, Tasmania, just doesn't have the $ to invest in such a business beyond the upstream supply.

Someone is going to do quite a bit of work at some point, on an ongoing basis if it's shipping water around, and presumably they'll make a decent profit doing so. Question is who and are they listed on the ASX?

Good point Smurf. I agree infrastructure is definately going to be one for the private sector. What will be interesting is if it is run and owned by the governments or the private sector. Supply of water is a touchy issue and for most people a god given right. Should private buisness be responsible for that i think there will be heavy regulation.

Smurf1976 said:

Desalination is, of course, the easiest and in some cases only realistic option for major new bulk water supplies. Either that or ship the stuff in from northern Australia or Tasmania. Which one comes down to politics and cost but either way it's likely to be done by private enterprise rather than government I think.

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Yes, I think desalination is the way to go. No different to the renewable power (Electricity) market, the key is to find a way to reduce cost and increase the economics.

One of the problems with reverse osmosis desalination is the electricity it uses to pump highly pressurized sea water though the membrains. This extra electricity use is what everyone is kicking up a fuss about.

There has been some talk of using Wind power, but really by the time you put in the capital cost of wind turbines, power grids etc the costs blow out.

This is what I liked Carnegie Corporation so much for when they developed and owned Seapower Pacific (http://www.seapowerpacific.com/).

Seapower had developed CETO which is a simple membrain pump that sits under sea level and uses wave power to pump highly pressurized sea water to shore. On shore it can be used to power cheaper non marine qualified turbines to generate electricity without the biofouling issues other players have. But better still the pressurized sea water can be injected into reverse osmosis membrains without the need of extra capital and operational costs such as electric pumps. What more the energy used is renewable.

This is running now at Rous Head harbour in Fremantle. There is photos on the seapowerpacific website if anyone is interested.

The disappointing thing now is Renewable Energy Holdings (http://www.reh-plc.com/) owns Sea Power Pacific. While they are listed on the AIM (AIM:REH), just wish they were still owned by Australian Listed Company ASX:CNM.

Carnegie Corp (ASX:CNM) indicates at http://www.carnegiecorp.com.au/technology/ceto.php
"Carnegie sold down its interest in Seapower Pacific to the UK listed Renewable Energy Holdings (AIM: REH) but remains a significant shareholder. Carnegie also retains a right of participation in future technology platform developments."

Carnegie has previously spun off technology it has invented, i.e. Pursuit Dynamics Plc (AIMDX) but had royalty entitlements. When Pacific Hydro and Carnegie owned Seapower Pacific, each party had entitlements on commercial plants, but there is no mention of this since the REH ownership.

Does anyone know why Enviromission's price jumped so dramatically this morning. Is it simple a reaction to Howards announcement of the $400mil solar plant. As far as I can tell his announcment for a photovoltic based plant, not the solar tower. Don't know if they got a goverment grant or something but they havn't released any announcment themselves.

I've been holding evm for a while