Macquarie 3rd Alternative Energy Conference - Key takeaways

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Macquarie 3rd Alternative Energy Conference 
Key takeaways  
Event
ƒ Last week Macquarie hosted its third Alternative Energy: Powering Change
conference. We hosted representatives from 46 different companies in
London and New York.


Impact
ƒ Four wind themes emerged. 1) The turbine industry is likely to see ongoing
price deflation in 2011. Overcapacity persists, and leading Chinese wind
turbine manufacturers (WTMs) are close to entering the US market. WTMs
are now also starting sharp price competition for O&M contracts. 2) Against
this bleak investment background, however, several players thought that a
period of consolidation was drawing nearer, perhaps led by diversified power
multinationals acquiring independent WTMs. 3) Wind farmers are set to
benefit from ongoing turbine price deflation and falling O&M costs. 4)
Securing PPAs in the US market remains very difficult and thus many players
thought the US market was ex-growth in the current policy environment, at ~5-
6GW per annum.

ƒ Three key solar themes emerged. 1) Demand growth will moderate next year
and tip the market back into oversupply. Thus downward pricing pressure will
resume, re-emphasizing the importance of having low costs and/or a high
quality, differentiated product. 2) Speakers believed that poly and wafer
capacity will remain tight, at least in 1H11, which will keep upstream pricing
more resilient than downstream. Into the mid-term however, we are
concerned about excessive poly and wafer supply additions. 3) None of the
companies expects near-term clarity on the German incentive situation, and
thus concerns for overall demand are likely to linger.

ƒ Project financing for wind and solar could overall be summarised as
improving but still far from buoyant.

ƒ Our US smart grid panellists were upbeat on demand from utilities and
general support from regulators (despite one or two recent regulatory
‘pushbacks’). All agreed that investment in automation technology was crucial.

Outlook
ƒ We remain generally negative on the wind turbine space, but we do see some
undervalued assets and cashflows in the wind farmer space. EDF Energies
Nouvelles and Iberdrola Renovables are our favoured plays.

ƒ We continue to prefer the solar companies with the lowest cost structures
and/or differentiated product, especially in an oversupply situation. Our top
solar picks are ReneSola and Trina Solar in China, SunPower in the US and
Wacker Chemie in Europe.

ƒ EnerNOC remains our top pick in the smart grid space; a proven leader in
demand response with a strong track record and balance sheet.