Expert: Paul Henneman - 12/18/2007

Question
G'day Paul,

Im an Australian and would like to know if you have much experience with the
Australian Securities Exchange (ASX). I am wondering whether you think it
may be too soon to invest in 'green' companies who provide green energy
such as Jackgreen Limted or Bocock and Brown Wind Partners. I am
environmentally conscious but do not want to take unnecessary risks.

Thanks for your assistance.

Nicholas

Answer
Nicholas,
  Thank you for your question! While I am not familiar with the Australian markets, your question is a good one and I thought that I could provide my thoughts regarding this on the US market, and leave it up to you to decide if that translates well to Australian alternative energy companies.
  The main problem with this sector is that these types of companies are generally dwarfed by the larger, more traditional energy companies. For example, BP now stands for "Beyond Petroleum" and is marketing heavily their research into alternative energy. They are also one of the largest solar panel producers in the world. Even though this accounts for a tiny portion of their overall operations, hardly worth even a footnote in the general financial statements, it is a much larger effort than even the bigger firms that are dedicated solely to alternative energy.  Here is a link to the BP corporate page they have dedicated to their solar products and services:
http://www.bp.com/modularhome.do?categoryId=4260
   I believe that the world is increasingly aware that energy sources will change.  2007 may have very well been the tipping point in this regard, with the majority of investors, heads of corporations, and government officials now recognizing the importance of this. But, it will take decades to accomplish anything significant. And, the most likely scenario is that the large oil companies that now dominate the energy sector will apply their huge resources towards other energy sources. These are savvy companies, they will not simply wither and die in the coming generation as oil supplies dwindle, and increasing legislation hampers the burning of fossil fuels.  The world will always need energy in some form, and the large oil companies are already showing signs of adjustment.
   Of course small alternative energy companies may contribute as well through innovation. Technology is a good analogy, much of the new technology in past years has been developed by small start ups funded by venture capital, to be bought out by much larger companies.
  These are just broad generalizations of course. The companies you mention may very well be wonderful investments. But, in my opinion, will be increasingly having to compete with some of the largest, and wealthiest, energy corporations in the world.

I hope that is helpful, and at least gives you something to consider.  Please do not hesitate to follow up with me if I can be of any additional service,

Sincerely,
Paul Henneman
President
ValuEngine Inc
www.ValuEngine.com