Clarus Securities looks at Copenhagen impact on clean tech stocks

I’ve got to hand it to the research team at Clarus Securities. They’ve ruminated on the upcoming Copenhagen Climate Agreement meetings and have found a bunch of angles of relevance to public market securities in the broad Clean Tech space:

Copenhagen Climate Agreement Likely to Be Delayed into Next Year

The next few weeks are likely to remain newsy for clean energy stocks leading up to the international climate negotiations in Copenhagen (December 7-18). We believe it is unlikely that a new legally-binding global treaty on GHG missions will materialize before
2010; however, government sentiment and commitment announcements will likely determine investor sentiment on clean energy stocks heading into the New Year.

• Sentiment is Positive Albeit Agreement on Targets Remains Difficult

Some 16 nations including the U.S., the U.K., France, China, Brazil, Mexico and India have agreed on domestic guidelines to reduce carbon emissions even if the Copenhagen meeting does not translate into a binding treaty. However, while China and India have announced proposals to increase renewable energy contribution, they remain reluctant to accept the limits on emissions that the developed countries have proposed. China has adopted targets on renewable electricity and emission intensity, but firm targets remain unclear. Recently, China also announced a US$454 billion
environmental protection budget to be deployed over the next five years. The U.S. has been enthusiastic about climate discussions but is moving slowly. Elsewhere, European countries are making several changes to feed-in-tariff programmes, which could impact demand.

• Legal Treaty Not Likely Before 2010

We remain relatively cautious ahead of Copenhagen. We note that two key issues remain outstanding from the last climate meeting (Barcelona): the lack of firm reduction targets and definition of sources of funding to develop the plan. We expect countries to reach an agreement on a strategic plan with a legally binding treaty in 2010 and not during the Copenhagen meeting.

• Impact on Companies in Our Coverage Universe

We believe the market has already factored a delay into the development of a legally binding agreement for GHG emission reduction. We believe continued signs of support from goverments should be favourable for the overall clean technoloy sector. The
potential impact on our universe of favourable developments:

• Significant Impact: U.S. Geothermal (BUY, $3.00), Nevada

Geothermal Power (SPEC BUY, $1.40), Boralex (BUY, $14.00), Algonquin Power (RESTRICTED), Brookfield Renewable Power (HOLD, $19.25).

These companies operate a number of renewable power plants with low-to-zero emissions. We believe a global agreement on emissions would underpin demand for low emission technologies over the medium term. Renewable energy credits (RECs) are also likely to become more valuable.

• Positive Impact: Timminco (SELL, $1.00), 5N Plus (BUY, $8.00),
Arise Technologies (SELL, $0.30) via its customers.

• Neutral to Moderately Positive: Carmanah (BUY, $1.15) (off-grid market applications), and RuggedCom (BUY, $22.00) and Tonbridge (RESTRICTED) given incremental demand for transmission infrastructure for additional sources of clean/renewable power.

MRM