Wind Energy ETF

Why Foreign Money is Moving Fast into U.S. Wind

Written by Brian Hicks
Posted July 30, 2009

U.S. wind power investors needed a pick-me-up this July, and they got it from beyond the border.

Early in the month, oil billionaire and newly-styled alternative energy bull T. Boone Pickens balked on an ambitious, multi-billion-dollar wind power project in Texas. Pickens said funding difficulty forced him to fold, but recent action on Capitol Hill leads us to believe that Pickens is shifting his focus to his favorite alternative (but not renewable) energy project: vehicular natural gas.

Whatever his angle was, Pickens's move stung. . .

At least for a few weeks.

First Wind's Financing Breakthrough

In mid-July, the Alberta Investment Management Corporation (AIMCo), a Canadian pension fund worth approximately US$64.7 billion, committed $115 million to Massachusetts-based developer First Wind.

Germany's HSH Nordbank also put up $76 million in financing for First Wind, enabling the company to add capacity at existing wind farms in New England and Hawaii.

So on one hand, there's AIMCo, which will distribute its infusion to First Wind over eight years, coming to just over $14 million per annum.

Nordbank, on the other hand, is taking the short-term approach. Their larger one-year infusion to First Wind combines with AIMCo's long-term vote of confidence to show that solid wind project plans can still get funds for expansion and that new farms can get up and running.

The American Wind Energy Association does say new projects have slowed — from 2,290 megawatts of installation in the first quarter of 2009 to 1,210 MW in Q2.

"The recession is a force that is having an effect on the industry, as it is on most other industries," a spokeswoman told Reuters this week.


But the year-on-year change in U.S. installed wind power capacity is still impressive — new installations in the first half of 2009 surpassed the same period in 2008 by 1,100 MW.

The AWEA now puts total national generating capacity at 29,440 MW. Texas led all states in helping achieve that number, even in spite of the Pickens pullout.

With recovery on everyone's lips, credit market conditions will continue to change, though that transformation will lag behind benchmark economic indicators.

And as in the case of First Wind, the start-to-finish process of wind farm development from here on out will be far more internationally integrated.

Venture Capital Comes off the Bench

National stimulus packages, which some observers thought may be renewable energy's only lifeline through the recession, has actually turned out to be just one part of the financing picture for eager companies.

The Wall Street Journal reports that cleantech venture capital activity is skyrocketing: Deals doubled from Q1 2009 to Q2, and the dollar value of those deals rose by 73%.

Access to VC funding is essential for bringing next-generation renewable energy ideas from the drawing board to grid-readiness. And since venture capitalists are generally "serial entrepreneurs" with defined exit plans, this isn't pity money going to sub-par projects.

Deep-pocketed VCs join big-money institutions like AIMCo and Nordbank, which operates throughout northern Europe and is partly owned by the City of Hamburg, as they search all over the world for well-timed advantage.

First movers are getting in on companies like First Wind now; First Wind already runs New England's largest operating wind farm in Stetson, Maine.

The broader market trough is giving way to a financing upswing and even delivering major gains to wind power ETF investors.

The First Trust Global Wind Energy ETF (NYSE:FAN) has international wind energy titans as its top holdings. Iberdrola Renovables (Spain), EDP Renovaveis (Portugal), and Vestas Wind Systems (Denmark) top the holding list, bringing utility-scale wind success stories into your portfolio in one easy trade.

FAN is trading at just below $15 per share, sitting on 31% upside in the past six months.


Sam Hopkins
Sam Hopkins

P.S. Nick Hodge and I have stayed ahead of the market when it comes to the changes that are driving new renewable energy finance. Talking to bankers and developers from the U.S. and elsewhere, learning about new technologies, and traveling to emerging energy hot spots personally has brought Green Chip International readers the edge, and the advantage continues to bring in double-, even triple-, digit gains! To learn more, check out GCI today.