Can Subsidies Save T. Boone Pickens' Plan?

• By the tickerspy.com Staff
• On 10:21 am EDT, Monday August 31, 2009

Subsidies are stimulating investment in wind energy - hopefully some dollars are directed to infrastructure.

According to The Wall Street Journal, U.S. taxpayers are financing a clean energy initiative that will provide cash rebates equal to 30% of the building costs associated with the production of renewable energy facilities. The program is sending some big money to the largely cash-strapped wind energy sector. Morgan Stanley (NYSE: MS - News) and Citigroup (NYSE: C - News) have both sunk $100 million into wind farms this month, according to The Journal.

The subsidies will most likely need to support some upgrades to existing energy transmission lines or else the benefits of the program will be limited to the wind-rich Midwest. T. Boone Pickens hit the brakes on his massive multibillion dollar wind farm, not because of capital strains (according to his explanation), but because the ability to transmit energy from the wind farms to major population centers just isn't there.

Experts quoted in The Journal seemed to be optimistic about the program. Kevin Walsh, director of General Electric's (NYSE: GE - News) GE Energy Financial Services division, said, "We see opportunities and we are pursuing them pretty actively." Liz Salerno, director of industry analysis at the American Wind Energy Association, "would not be surprised if the program is ridiculously successful and spurs a huge development." If she's right, now may be a good time to take another look at the Wind Energy Stocks Index.

Pros were adding to a number of wind energy positions during the second quarter. Quanta Services (NYSE: PWR - News), the Index's largest component, is also its most popular among Pro investors. At the start of the third quarter, 16 Pros held Quanta among their top-15 U.S.-listed equity positions. Owens Corning (NYSE: OC - News), Trinity Industries (NYSE: TRN - News), and Woodward Governor (NASDAQ: WGOV - News) are also popular among Pros.

Pickens, despite his massive push for wind energy over the last year, still doesn't hold any of the Wind Energy Stocks Index components among BP Capital Management's top-15 U.S.-listed holdings.

A number of wind energy stocks dropped in value over the last week, some by more than -3%. Investors can now buy shares of A-Power Energy Generation Systems (NASDAQ: APWR - News) at a -16% discount from their week ago prices thanks to weaker-than-expected second-quarter profits. Broadwind Energy (NASDAQ: BWEN - News), Tetra Tech (NASDAQ: TTEK - News), and MasTec (NYSE: MTZ - News) have all dropped by -5% or more in the last five trading days.

The Wind Energy Stocks Index is one of the 25 worst performing tickerspy Indexes over the last month, down by -3.2%. Investors can follow the Index and more than 250 others at tickerspy.com.

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