I included two “Clean Energy Speculations” along with my annual model portfolio of ten clean energy stocks this year. It's been a tough year for clean energy stocks in general, with my industry benchmark (Powershares Wilderhill Clean Energy ETF (PBW)) down about 15% since I initiated the portfolios on December 27th 2013. Despite this, both the main portfolio and the speculations look likely to end the year with small gains.
The two speculations were Ram Power Corp (TSX:RPG, OTC:RAMPF) and Finavera Wind Energy (TSX-V:FVR, OTC:FNVRF). Both are clean energy project developers trading for a tiny fraction of the amount of money they'd invested in their projects. My speculative thesis was that most investors had given up hope that the projects would amount to anything, and so were willing to sell the stocks for considerably less than the remaining underlying value. Both trade in Toronto, and the prices discussed below will also be Canadian dollars unless otherwise specified.
Ram Power is a geothermal developer. Like many geothermal developers before it (Remember Nevada Geothermal?), the company had been overly optimistic about the potential of its geothermal resources. In particular, the company had been unable to produce enough geothermal steam at its San Jacinto-Tizate project in Nicaragua to produce enough electricity and sales to meet the covenants its lenders had required to finance the project. At the end of 2013, Ram had negotiated one last chance to remediate the site's wells in the hope of increasing output. The stock's recovery from its 8¢ level at the time of inclusion rested on the success of the remediation project.
To make a long story short, Ram Power reported the results of the remediation program on May 27th. The results were insufficient to satisfy the loan agreements, putting the project back in default. Since most of Ram's value lay in San Jacinto-Tizate, I told readers to sell on June 3rd in my monthly update. Ram continued to trade in the 3¢ to 4¢ range for the month of June, so readers should have been able to sell their shares for a loss of between 50% and 60%; I have been using a loss of 57% for performance tracking purposes. The stock has since fallen to 1¢.
