Recent Posts:

Is VeraSun the Next to Fold?

Daniel Englander: September 18, 2008, 4:39 PM
And the hits just keep on coming. Pure-play ethanol company VeraSun sent out a press release late Thursday night announcing they retained Morgan Stanley to help "evaluate strategic alternatives." That's pennies-on-the-dollar talk if I've ever heard it. VeraSun's stock price dropped 75 percent on Wednesday on news the company will post losses of $63 million to $103 million dollars this quarter because of its failed corn purchasing strategy. The beleaguered ethanol company exited its short positions after corn jumped from $6 per bushel in May to over $8 per bushel in July, and started buying up contracts at the then-market price. VeraSun got caught with overpriced contracts when corn darted below $5 per bushel in August. In an 8-k filing the company submitted to the SEC on Tuesday VeraSun said "we expect to record average corn prices of between $6.75 and $7.00 per bushel during the third quarter of 2008," well above the prevailing market rate. The same day the company announced it would offer 20,000,000 shares of common stock to gain back some of the money it lost in the botched corn trades. Unfortunately for VeraSun, this was not the week to raise capital. Investors started a bolt for the exit once they learned the company needed to raise money to sustain its substantial losses. Two days later VeraSun has withdrawn its share offering - perhaps a more "strategic" deal is in the offing. However, if neither lenders nor the U.S. Government were willing prop up Lehman Brothers, you can bet Hank Paulson won't give VeraSun even a passing thought as he crunches through his morning meusli. I wouldn't be surprised if VeraSun goes down the strategic alternative road sometime in the next week. Whether that's bankruptcy or acquisition remains to be seen. Morgan Stanley, it's underwriter and advisor, looks headed for the same path tonight as the investment bank reportedly mulls a 49 percent offer from China's CIC. This mess is far from over. And greentech companies in the project development and construction stage, with their large capital requirements and low revenues, will feel the pinch over the next few weeks. Developing...

Warren Buffet Scoops Up an Energy Casualty

Daniel Englander: September 18, 2008, 2:56 PM
The financial crisis has claimed its first major energy casualty. Warren Buffet beat out French energy giant EDF to buy cash-strapped Constellation Energy for a pittance this evening. The utility and power trading company's stock dove 58 percent over three days this week, pushed down by liquidity fears and a downgraded credit rating. Sound familiar? Buffet's MidAmerican Energy will buy Constellation for $4.7 billion after Constellation's board rejected an offer from EDF, which owns 9 percent of the power trader, for a $500 million cash infusion. Though Constellation owned a physical asset base of roughly 9,000 MW they marketed closer to 32,000 MW to commercial and industrial customers. They are also the country's sixth largest wholesale power marketer. However, because their assets under contract far exceeded their physical assets (and because their physical assets were mostly minimally-profitable baseload capacity), the company needed to generate cash for more contracts somewhere. So Constellation sought more and more capital to develop their oversees commodity trading business while taking on more debt to finance these upstream operations. Soon, the company's trading partners were voicing concerns that Constellation wouldn't be able to make good on its supply contracts. Finally, although Constellation was able to secure a $2 billion credit facility from lenders, the potential that a credit downgrade to junk status would cost the company another $1.6 billion in collateral sent investors running for the exits this week. I think I've heard this one before. Didn't these people learn anything from Enron? Energy trading without a physical asset base or easy access to credit is a recipe for failure. With the Libor hitting record highs this week, all was lost for Constellation. I hope Constellation CEO Mayo Shattuck is ready to trade Baltimore crabs for Omaha steak.

Tesla Kills Its Gas-Electric Hybrid

Michael Kanellos: September 18, 2008, 12:27 PM
Well, that didn't take long. Back in Feburary, Tesla Motors CEO Ze'ev Drori and chairman Elon Musk said that the electric-car company would come out with a version of its Model S sedan that would be based around a series hybrid architecture. In a series hybrid or REV (for range-extended electric vehicle), the car runs on an electric motor powered by batteries. The batteries in turn are recharged while driving by an onboard gas generator. It's the secret sauce behind the Chevy Volt, coming in 2010. "It is more than research. We intend to have it as part of the offering," Drori told me then. "The Whitestar (the code-name for the Model S.) can be all-electric or it can be an REV." Those plans have been scrapped. Speaking at the GoingGreen conference yesterday, Musk officially said that Tesla was only pursuing all-electric cars and not hybrids. Why the reversal? During the early part of the summer, Tesla began to more seriously analyze the engineering challenges of making a plug-in series hybrid. In an all-electric car, the battery pack only has to be charged every 250 miles or so. In a series hybrid, the battery needs to be charged every 40 miles before getting recharged by the gas engine. Thus, the battery in a series hybrid goes through a lot more cycles in a year. Lithium-ion battery packs, which Tesla put in its Roadster, do not hold up well under intense cycling like that. "The battery you need for a plug-in (series) hybrid has to have a very high cycle life," said Tesla Chief Marketing Officer Daryl Siry. "You need an entirely different chemistry." Lithium-phosphate batteries, like the kind A123 Systems hopes to sell to GM for the Volt, can endure this kind of cycling. However, they have a lower-energy density than lithium ion. As a result, a lithium-phosphate battery has to be somewhat large, which reduces any cost advantages of the architecture, opined Siry. Combining gas and electric systems in this manner is also a tangled engineering bowl of spaghetti. Series hybrids actually can end up running off the gas generator at times, according to Siry. In the end, Tesla determined that it wouldn't really help them. "We also thought, 'Let's stick to our knitting,' " he said. The company, he added, can always revisit the idea. Musk, by the way, was always a somewhat reluctant supporter of series hybrids. Even in February, he said that the price of an all-electric car and a series hybrid wouldn't be significantly lower. Tesla was pursuing the series option only for customers who were worried about the limited driving range of all-electric cars. (Because the gas generator charges the battery while the car is in motion, these cars in theory can go 400 miles before conking out.). The company has informally been dissing series hybrids for the past several weeks too. The decision, though, will likely once again let the world draw firm lines between GM and Tesla. GM bristles at series hybrids. It likes REV. The money-losing automotive giant says these cars are much cheaper than electric cars and will have the range customers need. Tesla, meanwhile, says that the cost of batteries and electric cars will decline. You might even see a $20,000 electric car in the not-too-distant future. And the practical problems of charge time and finding filling stations will be resolved. But of course, right now electric cars cost over $100,000 and if you want to drive one from San Francisco to Los Angeles, expect to spend some time at the Andersen Split Pea Soup restaurant on Highway 5 while your car charges. Meanwhile, there is option C. Many other large auto makers plan to come out with plug-in hybrids, although most will likely just crank up the amount of batteries they put in their regular parallel hybrids. In these, the gas engine doesn't recharge. It helps run the car. They are probably the cheapest and least advanced option, although in many ways the most practical. It will be fun to watch.

The Next Smart Grid Technology: WiMax

Michael Kanellos: September 18, 2008, 9:03 AM
Utilities have already begun to adopt wireless technologies like WiFi, ZigBee, Z-Wave and some proprietary protocols as a way to curb power consumption. Next, you're going to see WiMax make a bigger splash in greentech, a well-connected source in the electronics world told me. Expect to see companies fleshing out WiMax energy efficiency strategies in the relatively near future and some start-up activity. Grid Net is already touting WiMax and is collaborating with Intel and General Electric. WiMax, for those of you that haven't been in an airport in two years and thus haven't had to relieve your boredom by buying a copy of BusinessWeek, is a long range, high-bandwidth wireless data protocol that can handle large numbers of users at once. It's like having fiber in the sky. Intel, Google, Clearwire, Sprint and others have collectively invested billions into getting WiMax off the ground. Pakistan and a few other countries are rolling out plans for nationwide WiMax coverage. Unfortunately, WiMax is in some ways entering a saturated market. WiFi and broadband links are a lot easier to find in Europe and America than they once were. Enter the energy crisis. Electricity rates are rising and utilities want to invest in technologies that will let them reduce the power going to air conditioners, lights and other devices to avoid brownouts. Consumers in turn get a discount. Utilities have only just begun to go down this road; thus, potentially a greater opportunity exists for smart grid than data services. It has become one of the hottest investment categories in greentech. WiMax is in many ways idea for smart grids. A WiMax station could receive information on electricity, water and gas consumption from several homes or neighborhood network nodes and then relay it to base stations or utitlities. Although utilities have experimented with ways to transmit data over power lines, there seems to be a lot more buzz and experimentation around wireless, particularly in the U.S. You can also start to better see how these technologies layer upon each other. In the home, we will likely see ZigBee or WiFi connecting appliances to a home base station. Technology for wiring the home will come from a lot of vendors: Cisco, Tendril, GainSpan, Threshold, etc. The base stations will then connect to the meters at home and send messages to neighborhood network nodes from companies like SilverSpring Networks. In turn, the SilverSpring nodes may then link up to a WiMax box powered by stuff from Intel.