FOCUS: Clean Tech Stocks Seen Weathering 2008 Uncertainty
Thursday January 31st, 2008 / 17h55
By Selina Williams Of DOW JONES NEWSWIRES LONDON -(Dow Jones)- Clean technology stocks are likely to weather this year's global economic storm bolstered by greater government support and subsidies, high oil prices and worries over the security of energy supplies, say sector specialists. ABN Amro's (ABNAF.YY) clean tech fund, raised in October 2007, is one of many such funds springing up to take advantage of the growing interest in companies that produce renewable energy, supply the components and machinery for it or invest in the new technology needed to advance the sector. "Of course if the market decreases 20% to 30% the clean tech market will also drop because it's all linked," senior portfolio manager of ABN Amro's clean technology fund Dominique Pouliquen told Dow Jones Newswires. "But we believe that despite the difficulties in the stock market in 2008 they (clean tech stocks) can outperform classic stocks even when the market's down," Pouliquen added. The ABN Amro fund is a clone of the Luxembourg domiciled version of the fund set up in May 2007 and currently has 74 stocks in its portfolio. Together the two funds are worth more than EUR80 million. In December, ABN Amro's clean tech fund gained 4.9% versus the MSCI World Index's 0.9% decline. ABN AMRO declined to give a specific target for this year, but said the aim is to continue outperforming the MSCI World Index. Although the ABN Amro fund is relatively small, it is indicative of a growing trend as investors start to flock into the sector. Several high street asset management companies such as HSBC (HSBA.LN), F&C (FCAM.LN), Schroeders (SDR.LN), Virgin (VGN.YY) and DWS Investments, a member of Deutsche Bank Group (DB) have launched clean energy funds in the past year, said New Energy Finance - an independent provider of research to investors in renewable energy. Other funds include the United Arab Emirates Masdar Clean Tech Fund - a $250 million private equity fund, created with Credit Suisse (CS) and Consensus Business Group to acquire stakes in clean energy, water and environmental companies. In 2007, new investment in the clean energy sector exceeded expectations by growing to $117 billion - a 35% increase on the previous year, a report from New Energy Finance said. "The wave of liquidity washing through the sector shows no signs of abating and despite the dark clouds still massed over the world's credit markets, 2008 looks set to be another banner year," said Michael Liebreich, Chairman and CEO of New Energy Finance. In Europe, clean technology attracted EUR712 million in venture capital in 2007 - almost double the EUR317 million invested the previous year, according to data company Library House. "There's definitely been an increase in interest in the clean tech sector and we're seeing that investors are anxious to get in there and make returns," said Ed Hugo, analyst at Library House, adding that they were seeing at least one new clean tech fund being raised every week. Analysts also cite the sector's weathering of last summer's credit crunch as a positive sign that it is likely to survive another blast, particularly in the context of higher oil prices and worries over energy security. And unlike previous booms in new sectors, such as the internet bubble, this area is heavily supported by government - both financially in the form of subsidies as well as in a friendlier regulatory sphere that promotes and encourages the growth of green energy. The European Union, which is leading the way in this sector, is where the bulk of ABN Amro's investments are by region - around 35%. "For the moment, Europe is the main region where companies are because it's less expensive than the U.S. and Asia and also because it's supported by strong government regulations and support," Pouliquen said. Last week the European Commission set out a package of draft laws and measures to implement the European Union's goal of producing 20% of the bloc's energy from renewable sources from 8.5% now while cutting global warming emissions 20% by 2020. Individual targets, which are binding, have been allocated for each member state. Countries that fail to reach the required goals will be penalized with sanctions and fines - giving E.U. governments strong incentives to encourage investment. Most member states have some form of subsidies to prod spending in green energy. "This huge gap between 8.5% and 20% has made things very interesting," Pouliquen added. Energy security has also moved up the global agenda after oil prices hit $100 a barrel earlier this month and highlighted countries' fears about relying on oil supplies from volatile countries in the Middle East and West Africa and gas from increasingly unpredictable Russia. "We're focusing on clean energy because the main driver is the high price of energy and the scarcity of it - a lot of companies want to reduce their dependence on Russian gas and are worried about global warming," Pouliquen said. The investment focus for ABN Amro is primarily on companies in the solar and wind power sector - both of which are heavily subsidized and fast growing sectors. Fuel cell technology, waste management and biofuels are also in ABN Amro's mix. -By Selina Williams, Dow Jones Newswires +44 207 842 9262; selina.williams@dowjones.com
