Correction to This Article
This article incorrectly said that uranium prices were at $136 per ton in mid-July and had fallen to $105 per ton. Those prices are per pound, not per ton.

Renewable Power Plays

By Steven Mufson
Washington Post Staff Writer
Sunday, August 26, 2007

The planet isn't the only thing heating up because of climate change. Some renewable-energy stocks have been pretty hot, too.

Shares of Vestas Wind Systems, the world's biggest maker of wind turbines, have doubled in the past year despite the market's latest turmoil. The Danish company is ramping up production in its two biggest markets, China and the United States, and expects sales to rise 17 percent this year. Last week its shares got a boost after it reported that profit had jumped fivefold in the most recent quarter.

Vestas, which is listed on the Copenhagen stock exchange, might seem a perfect place to invest for an era of global climate change. The fortunes of many firms are tied to changes in the Earth's temperatures and to the evolving legislative climate, and that can present an array of investment opportunities -- as well as pitfalls. There are builders of nuclear power plants, traditional utilities, wind turbine manufacturers, solar companies, biofuel firms and light bulb makers.

"This is not a social or moral issue only. It's an investment issue," said Edward Kerschner, chief investment strategist at Citigroup. "Whether or not you believe in climate change is not germane to how you invest your money."

But before jumping in, investors would be wise to carefully study the companies involved. As attractive as Vestas might seem, it has already had a strong run, lifting its price to a lofty level. Its future profit would have to keep rising to justify its share price. And Vestas faces hurdles. Wind turbines use hundreds of parts that are in limited supply, raising the specter of bottlenecks despite strong demand. The company also depends in large measure on continued government subsidies. What's more, it faces stiff competition as companies like General Electric and Siemens expand and take aim at Vestas's market-leading position.

Investors also need to pay close attention to action in Congress. The final details of climate change legislation, such as whether to auction or distribute carbon-dioxide emission allowances, could turn some companies from losers to winners, or vice versa.

One thing a lot of analysts agree on: Some kind of regulation or tax for emissions is coming. Though not the most potent greenhouse gas, carbon dioxide is the most common, accounting for 77 percent of the gases. And since carbon dioxide is produced by the most common forms of energy use -- coal, oil and natural gas -- that could alter a wide range of behavior and investments.

� A look at renewable energy sectors. {vbar} F4


© 2007 The Washington Post Company