MONEY MOVING TO WIND

Wind Farms Set Wall Street Aflutter
Russell Gold, August 31, 2009 (Wall Street Journal)

"After nearly a six-month lull, Wall Street is getting back into the business of financing new wind farms.

"Morgan Stanley and Citigroup Inc. have invested $100 million each…taking advantage of a brand-new federal program that is paying substantial cash grants…Bankers say this is the beginning of an active pipeline of new wind-farm financing, as well as investment in large solar installations and geothermal facilities. Project developers and Wall Street appear to be viewing the federal cash grant program as such a good deal, industry experts say, it may grow much larger than its Washington creators expected…"

3Q 2009 results should be coming soon. More growth is expected. (click to enlarge)

"…[T]he government will give a cash rebate for 30% of the cost…awarded 60 days after an application is approved…[as well as] valuable accelerated depreciation deductions, which help offset taxes…The Energy and Treasury departments…expect to spend $3 billion…through the end of 2010…[as] part of the stimulus bill…[But] requests for $800 million in grants were submitted during the first four weeks…Wall Street bankers say they expect applications to grow to $10 billion…[echoing] the $3 billion cash-for-clunkers program…

"But unlike the popular cash-for-clunkers programs, there is no spending cap on the renewable energy grants, and the government has committed to spending as much as is needed to keep renewable-energy investments flowing...[This is a sharp change from New Energy incentives before this year which] gave companies tax credits over 10 years…attractive as long as financial firms believed they would be generating taxable profits…When Wall Street imploded last year, profits turned to losses…Some of the companies most active in these deals -- including Lehman Brothers Holdings Inc. and American International Group Inc. -- were hobbled or destroyed…[T]he new cash grants...[are expected] to provide an annual return of anywhere from 9% to 15%."

New manufacturing facilities mean new production capacity looking for the financing that is becoming available which means further growth is likely. (click to enlarge)

"Most of the investments are expected to go to wind projects, because the industry is more mature and in a better position to capture limited funds…Even capital-constrained financial giant Citigroup has been drawn to wind power. In August, it made a $120 million investment in [the AES Corp. 105-megawatt, 67-turbine Armenia Mountain] wind farm…

"It's not just Wall Street banks that are attracted. Iberdrola SA, a Spanish [New Energy developer]…expects to tap $500 million in cash grants for U.S. wind projects…Additional financing from the grants would potentially benefit major wind-farm developers such as Florida utility FPL Group Inc. and large-scale solar developer Edison International [and] give a boost to [turbine and solar panel] manufacturers…Morgan Stanley recently made a $120 million investment in a Montana-based wind farm developed by Grupo Naturener SA…"