NEW YORK (
hasn't been a winner for green energy investors.
In 2010, the U.S. wind market suffered through its worst year in recent history, and Broadwind shares plummeted. Timing wasn't great for Broadwind shares bottoming out, either, as the company received a big endorsement from JPMorgan's sell side team, a buy call that turned out to be badly timed and burned investors.
Broadwind shares are currently trading at $1.42, vs. a 52-week high of $3.83. It's been more or less straight down for Broadwind shares since the beginning of 2010, when shares were as high as $10.
In its recent investor day presentation, Broadwind noted that revenue had improved year over year, from $21.7 million in the first quarter of 2010 to $43.5 million in the first quarter of 2011. The company's wind tower business saw revenue increase year over year from $12 million to $28.2 million. The company's gearing business, where it is shifting focus to traditional energy and mining, increased revenue year over year in the first quarter from $7.7 million to $13.6 million.
However, it's important for investors to remember that the year-over-year comparisons include the trough year of 2010 in the U.S. wind sector. Any improvement does not necessarily equate to sustianable improvement and share growth.
Peter Duprey, CEO Broadwind Energy
Nevertheless, the energy company's CEO, Peter Duprey, tells
that a recent shift away from being a pure-play wind company focus will help the company turn things around.
TheStreet: Why should an investor believe in Broadwind stock, or any green energy stock, given the recent history and lack of sustained growth in shares?
This industry will ebb and flow with fossil fuel prices, and we are in a low natural gas price cycle now. I think investors need to take a long-term horizon, with demand around the world for energy increasing and energy prices and energy stocks increasing over the mid- to long term, for Broadwind specifically, we are diversifying from 100% wind to a structure closer to 50%/50% wind energy and industrial, servicing the oil and gas and mining sectors.
I think we have a few things in our favor, with the wind industry is improving over 2010 and with a diversification play primarily in oil and gas and mining. Those two factors bode well for Broadwind.
In 2010, when the U.S. wind industry bottomed out, China finally surpassed the U.S. as the world's largest wind power market. If there's been a slight turnaround in the U.S., it's off the trough. Why should any investor believe the U.S. wind market will recover? Is China the only market where the use of wind energy is growing, and are you targeting that opportunity?
There is a place for wind power in the U.S., and most people agree, but we don't have the policies in place. We need energy policy in this country, and that's not just for wind. That's one role the government needs to play. Setting long-term energy policy is the number one challenge right now for the renewable space.
As far China, our focus right now is to diversify our customer base to the industrial sector, not outside of North America. We are growing our industrial base as mining companies and oil and gas companies are growing globally. As they grow internationally we are supplying them and growing right along with them.
For a company that was just a year ago a pure-play wind company focused on the green energy opportunity, won't it upset some "green" investors that you are banking our future on business from mining and oil and gas companies?
I think first and foremost we are an energy company. We do have some industrial customers and we are going to offer products and solutions to industries that demand products. Precision gearing is in demand in oil and gas and we will take advantage of that opportunity. I think investors would like to see more diversification in Broadwind. We can't be too reliant on government policy to drive the wind energy industry.
There's a lot of focus on offshore wind opportunity, even if the terrestrial wind market has slowed. Is this a major opportunity for the U.S. wind market to grow?
There's a lot of talk about offshore, but other than Cape Wind, I don't see lots of projects moving through the permitting process, and that could take a long time. Projects on shore remain fairly challenged by competition with fossil fuels and offshore wind could be two to three times the cost of terrestrial wind projects.
Is the low price of natural gas the biggest challenge wind energy faces?
That is one of the biggest challenges the industry faces. But look at the recent article in
The New York Times
over the weekend, questioning if people understand the cost of natural gas extraction, and how much gas is actually locked up in the shale play. That debate will continue, but fairly low natural gas prices will be challenging.
-- Written by Eric Rosenbaum from New York.
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