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April 06, 2004
Nuke Producer GE Energy Buys Solar Producer AstroPower
    by William Baue

The GE Energy buyout of AstroPower represents a Catch 22 for social investors, who generally seek to support renewable energy but screen GE for its nuclear production.


GE Energy last week finalized a $15 million buyout of AstroPower, the solar photovoltaic (PV) cell producer that filed Chapter 11 bankruptcy on February 1. The purchase presents a potential Catch 22 for socially responsible investing (SRI).

On the one hand, it provides a much-needed financial boost for one of the best-known names in renewable energy, a field social investors typically like for its environmental benefits. On the other hand, parent company General Electric (GE) is no white knight in the eyes of many social investors, with its attendant environmental, social, and governance concerns. GE's involvement in nuclear power may preclude social investors from supporting its growing renewable energy portfolio.

"One of the things that's attractive about AstroPower is that it really rounds out our portfolio," said Dennis Murphy, GE Energy's head of public relations. "What we want to have is an arsenal of products and services so that customers don't need to go anywhere else--if they're interested in wind they can come to us, and now if they're interested in solar, they'll be able to come to us as well."

GE Energy bought out Enron Wind in 2002. GE's wind energy operations, which represent the bulk of GE Energy's renewable energy portfolio, now account for $1.3 billion of GE Energy's $18.5 billion in yearly revenues. GE Energy also has nuclear energy operations in its portfolio.

"It's not a significant portion--it's probably a little more than wind," Mr. Murphy told SocialFunds.com.

However, any nuclear energy is too much for SRI firms with negative screens that exclude nukes.

"Nuclear power is an exclusionary screen for us, so GE would have to be out of that business altogether," said Joanne Dowdell, director of corporate responsibility at Citizens Funds, a New Hampshire-based SRI firm with 11 fund offerings. "The broader question is, does GE's commitment to renewables mean that they are phasing out of nuclear power--is there a strategic plan in place with a timeline that is measurable?"

The answer is a resounding "no."

"We certainly don't see that nuclear is going to be phased out--there are still a lot of nuclear power plants all over the world that need fuel and services that we supply," said Mr. Murphy.

Many social investors screen out nuclear power because they believe the potential of another Chernobyl overshadows any benefit of cheap electricity. As well, they have concerns about the environmental implications of radioactive waste generated by nuclear energy.

"Implicit in that stance is the belief that nuclear can't possibly be a safe power source, and we obviously don't think that's true," countered Mr. Murphy.

However, nuclear power is not the only beef social investors have with GE.

"In addition to the exclusionary part of our screening process, we also have a qualitative aspect, which raises still other concerns," Ms. Dowdell told SocialFunds.com. "GE was found to have been leaking PCBs into the Hudson River for over a 30-year period."

Shareowner resolutions up for vote at GE's May 23 Annual General Meeting ask the company to review and report on the cost of delaying PCB cleanup, ties to state sponsors of terrorism, reducing greenhouse gas emissions, and executive compensation.

However, GE is not the only large company with solar energy operations that are significantly sized in the renewable energy field but are dwarfed by their other diversified operations, which often include areas of concern for social investors.

"The largest producers of solar PV are Japanese companies--the largest is Sharp, followed by others such as Sanyo [SANYY] and Kyocera [KYO]," said David Schoenwald, portfolio manager of the New Alternatives Fund (NALFX). Launched in 1982, New Alternatives is the first socially responsible investment mutual fund that focuses specifically on environmental sustainability. The fund holds all three of these companies. BP (BP) is another large company with a significant solar portfolio.

Mr. Schoenwald also mentioned a number of smaller companies in the solar industry, including Canada-based ATS Automation Tooling (ATA) and Arise Technologies (APV.V), Switzerland-based STMicroelectronics (STM), and California-based Cypress Semiconductor (CY).

However, the fate of AstroPower may also have implications for these smaller companies.

"The demise of AstroPower has hurt the potentials of other smaller solar companies because people aren't sure what happened to AstroPower and whether the same thing could happen to someone else who didn't have the muscle and money of GE," Mr. Schoenwald told SocialFunds.com. " I think GE's buyout of AstroPower is negative for smaller companies."

 

 
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