Tuesday, August 05, 2008

Cleaning Up Industry

Cleaning Up Industry
Green Investor at Investorideas.com, http://www.investorideas.com/gi/ By Paulo Nery

In spite of the notable surge in solar and wind energy recently, the fastest and easiest solution to climate change and expensive energy remains efficiency. New and more efficient motors and pumps, smaller cars and so on, are all starting to add up; and it’s only the beginning. According to Amory Lovins of the Rocky Mountain Institute, exploiting the best available technologies wherever practical could save half of our oil and gas use and three-quarters of our electricity use. Mr. Lovins figures we can save half our consumption at a cost equivalent to adding $12 per barrel of oil – which is less than 10% of what we’re spending today.
So, here are a couple of interesting companies who are adding value by improving the efficiency of power generation and other industrial processes.

Foster Wheeler (FWLT) supplies power equipment to generators. They also have an engineering and construction business. The work they do with generators can include developing new state-of-the-art power plants as well as helping to bring existing facilities up-to-date on environmental standards. Their solutions make power plants more efficient, cleaner and can convert waste streams to energy. For the longer term, they also have a strategic alliance with Praxair (PX) to develop integrated oxy-coal combustion systems into coal-fired power plants to facilitate capture and sequestration of carbon dioxide.
One of Foster Wheeler’s key products is an atmospheric gasifier. When added to an existing power plant it can cut down the use of fossil fuels considerably. It allows for fuels such as biomass, industrial and municipal waste, plastics, waste paper and construction wood waste to be added to the fuel mix.
These fuels are converted into hot, low-calorific-value gas that can be fed into a pulverized coal boiler as a secondary fuel. This makes for a low-cost, low-emission, efficiency improvement to the existing system. This reduces overall emissions of SOx, NOx, particulates, CO2, dioxins, metals and chlorine.
Foster Wheeler as a stock, has not fared well lately. In part, that’s because it had a phenomenal run over the past two years from around 20 to a peak just over 80 (adjusted for the split) at the start of this year. But with a forward price to earnings (P/E) ratio of 13 and forecast growth at over 20% this stock represents excellent value. More so because it has excellent visibility of its future revenues since orders are placed well in advance, and because so much of its business is overseas in growth markets like Latin America and Asia.
Another interesting company in this space is Fuel Tech (FTEK), an environmental technologies company. They have a suite of products and services designed to improve efficiency, optimize boilers and reduce polluting emissions.
Their FUEL CHEM® technology involves the introduction of chemical reagents, like magnesium hydroxide, to combustion units. The process leads to increased overall efficiency. It also cuts down the formation of serious pollutants like sulfur trioxide (SO3), ammonium bisulfate (ABS), particulate matter (PM2.5), carbon dioxide (CO2) and nitrogen oxide (NOx) for all around cleaner emissions.
The reduction in CO2 emissions, for instance from large power plants, are little over 1%. While that may look like a small number, the cumulative reduction is huge given the large quantities being emitted in the first place. The system is currently in place in 100 customer units including 44 coal burning and 56 that burn heavy oil, coke, biomass, wood, olive pits and municipal waste.
Woodward Governor (WGOV) manufactures energy control and optimization solutions for industrial engines, aircraft engines, turbines, and electrical power equipment. Their fluid energy, combustion control, electrical energy, and motion control systems help customers be cleaner, more efficient, more reliable, and more cost-effective.
What’s doubly interesting about Woodward is that they’re also a stealth play on wind since they acquired SEG, a German manufacturer of wind generation products.
Woodward recently reported earnings at 0.47 per share, which beat the Street’s estimates of around 0.43. Sales were reported growing 23% year on year. And the company raised guidance for fiscal 2008, projecting total revenue growth of 20%, compared to the earlier 16%.
Foster Wheeler and Fuel Tech report on the 8th and 11th of August respectively and certainly bear watching closely.
Paulo J. NeryDisclosure: Paulo Nery currently owns shares of Foster Wheeler and Fuel Tech. Disclaimer: Nothing in the above article in no way constitutes a recommendation to buy or invest in these or any other stocks. You should always seek professional financial advice when planning your investments or trading in the stock markets.

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