Friday, May 16, 2008

Fluor (FLR) as a Play on Wind? $1.8 Billion says Yes

I get a lot of questions on why I don't invest in wind; frankly there are very few opportunities. Most major players are (a) in Europe (b) part of much larger conglomerates (GE/Siemens) or (c) smallish US companies with skittish histories.

But maybe we already own a wind play. Fluor announced a massive $1.8 billion contract with Scottish and Southern Energy to build a 500 MW wind farm in the ocean off of the UK.
  • Fluor said the project would be the world's largest offshore wind farm. Construction work on the offshore site is expected to begin in summer 2009. Work to prepare for an onshore substation has already started. Construction is expected to be completed in 2011.
  • The wind farm, which will be off the Suffolk coast of the United Kingdom, will provide carbon neutral, renewable electricity for more than 415,000 homes.
  • Siemens AG also signed an 800 million euro deal to supply 140 wind turbines for the project.
  • Fluor had been developing the wind project, called the Greater Gabbard Offshore Wind Farm, with Scottish and Southern Energy and had owned a 50 percent stake in the project. It sold its stake to Scottish and Southern Energy for $80 million and will record a one-time gain of 50 cents per share in the second quarter from the sale.
Aside from great news for Fluor (FLR), these are exactly the type of projects the world needs in my "World of Shortages" scenario... unfortunately American leadership is too busy working on corn ethanol initiatives while fighting (every year) over paltry solar initiatives or wind credits. Sigh. Even our nearest cousin, the Brits, have ambitious plans.
  • The British government has plans to create 33 gigawatts of offshore wind capacity by 2020, and has welcomed the decision to go ahead with the project.
Even without any vision or assistance from government for things that will pay off over the next 5, 10, 15, 20 years (as opposed to rebate checks that do nothing), the "free market" is trying its best here to struggle through.... but again, I cannot stress enough how the rest of the world forges ahead while we look like an aging running back on it's last legs averaging 2.1 yards per carry with our stupid policies and lack of vision past 1 election cycle. We give more incentives to corporate farmers to not grow crops, and to oil corporations at $125 crude than we do to wind or solar. Smart. Very smart. (and it's not even a green issue, its a we are bankrupting ourselves and/or a national defense issue if you'd prefer!) We really need a money back guarantee on these people in D.C. When a flipping OILMAN is leading your green movement, you know you have problems of economic incentives and vision by government.
  • Maverick oilman T. Boone Pickens has placed a $2 billion bet on wind power in just the first of a four-phase project to build the world's largest wind farm in Texas.
  • Pickens said the total cost of the deal will grow considerably after the initial investment in General Electric Co. turbine technology.
  • Pickens' Mesa Power said the Pampa Wind Project in the Texas Panhandle will eventually cover 400,000 acres and generate enough power for more than 1.3 million homes.
  • Power from the project will begin coming on line in early 2011, he said. GE is expected to deliver 667, 1.5-megawatt wind turbines in 2010 and 2011.
  • But the industry has relied on federal tax credits to survive, a point Pickens underscored Thursday. "I believe that Congress will recognize that it is critical not only to this project, but to renewable energy in this country, that they enact a long-term extension of the Production Tax Credits," Pickens said. (not at $80 oil, but maybe at $120 they'll do it... i.e. when their constituents raise hell over $4 gas)
Long Fluor in fund; no personal position

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