These 3 Wind Power Companies Might Take Advantage Of IRS Subsidies

On New Years Eve 2012, when most people were gearing up for parties and celebrations, Congress was busy at work trying to prevent the government from falling off the so-called "fiscal cliff."

One of the issues that was addressed at the 11th hour was subsidies for the wind power industry. Lawmakers inserted a provision to again fund production tax credits, or PTC, to the end of 2013. This year, however, in the absence of a law, the executive branch is keeping the subsidies flowing using the IRS as the conduit.

The Congressional end-around might cost taxpayers, but what does it mean for investors of companies such as Broadwind Energy Inc. (NASDAQ: BWEN), Trinity Industries Inc (NYSE: TRN), and General Electric Company (NYSE: GE)?

Broadwind

The Illinois-based Broadwind has used the PTC to its advantage.

After the reauthorization took effect in early 2013, the company resumed production of its wind power towers and has reported steadily increasing revenue since. The PTC hasn't yet translated to profits as the company is not making any money.

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In spite of this, the stock has outperformed the broader market, increasing four-fold even after a recent sell-off.

Trinity And General Electric

Although not entirely dependent on green energy, both Trinity and GE probably also benefited from the PTC.

A well diversified company, Trinity, in addition to manufacturing railcars and inland barges, some of which are used to transport oil, also constructs wind towers. That segment of its business generates about a tenth of its overall revenues.

GE, one of the original members of the Dow Industrials, also hedges its bets and is involved in both traditional energy (by providing oil and gas field services) and wind energy (by manufacturing turbines used to generate electricity).

Final Thoughts

Three wind power companies -- Broadwind, and to a lesser extent Trinity and GE -- are taking advantage of production tax credits, part of a push by the U.S. government to promote alternative forms of energy.

While some taxpayers might not be too happy, the subsidies could benefit investors at the same time.

Disclosure: At the time of this writing, the author had no position in the equities mentioned in this report.

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