February 23, 2006
Evergreen Solar and Energy Conversion Devices Rated Outperformers in Piper Jaffray Solar Report
by Bill Baue
The report continues a trend of mainstream equity research using socially responsible investing
strategies, and SRI funds confirm this assessment through wide exposure to these two companies.
The march of mainstream investment banks into the socially responsible investing (SRI) space
continues, with Piper Jaffray (ticker: PJC) joining the likes of Goldman
Sachs (GS) and
Merrill Lynch (MER) by extending its coverage to
the solar power industry. Earlier this week, Piper Jaffray hosted a symposium in New York City on "Opportunities in
Solar & Clean Tech" featuring
presentations from more than 20 companies in these sectors. This followed up on a sell-side
report issued late last year by the firm's equity research division that initiated coverage of
Evergreen Solar (ESLR) and Energy Conversion Devices
"It's an exciting time for the solar industry, and last
from the California Public Utilities Commission could potentially launch the sector to the next
level," said Tom Van Dyck, senior vice president of investments with Philanthropic & Social
Investment (PSI) Consulting division, Piper's SRI arm on the buy side. "The CPUC has just approved a statewide initiative to install
3,000 megawatts of rooftop solar and provide for $2.9 billion in consumer incentives over the
course of 11 years."
"Our SRI team is certainly excited to see that Piper Jaffray's equity
research division is taking an interest in renewable energy and finding ways to leverage our
current strengths to produce 'mainstream' research for this sector," Mr. Van Dyck told
The report advances Piper's belief that solar stocks represent a "growth
play" due in part to multiplying environmental concerns about global warming and pollution, as well
as increasing government subsidies for alternatives worldwide and spiking oil costs and production.
Report authors Jesse Pichel, a senior research analyst, and Ming Yang, an associate research
analyst, see tremendous opportunity in the solar sector, which has proven technology and profitable
business models as well as increasing demand. The pair projects market growth to more than double
by the end of the decade, from $5.3 billion in 2005 to $12 billion in 2010.
Messrs. Pichel and Yang note that there is currently a severe shortage of polysilicon, the primary
raw material for 94 percent of all solar modules.
"We recommend caution for investors
with exposure to polysilicon-dependent solar investments as growth may be thwarted in 2006," they
state in the report, and then explain why Evergreen and Energy Conversion Devices avoid the problem
of polysilicon shortages. "What distinguishes ESLR is proprietary solar-wafer manufacturing
technology--'string ribbon'--unique to the industry that could substantially lower the cost of
solar cells by primarily reducing polysilicon usage."
"ENER's UniSolar produces thin-film
solar modules using a unique and proprietary deposition process that uses abundant silane gas as
raw material and does not require costly silicon wafers," write Messrs. Pichel and Yang in the
They forecast that both Evergreen Solar and Energy Conversion Devices will grow
faster than the 24 percent expected growth rate for the solar industry.
products are well exposed to these companies. For example, both are constituents in the KLD Global Climate 100, an
index comprised of 100 companies actively working to mitigate climate change, as well as the
WilderHill Clean Energy Index (ECO), a
benchmark consisting of 37 US companies that ply in green energy. While the former is not yet
investable (though KLD is currently in negotiation with a fund sponsor), the latter serves as the
basis for the PowerShares WilderHill Clean Energy Portfolio Exchange Traded Fund (PBW).
SRI mutual funds have exposure to these companies through the ETF.
"We have held
Evergreen Solar for a while--both before and after being in the ETF--and it has done incredibly
well," said Matt Patsky, a partner of Winslow Management Company and portfolio manager of the
Winslow Green Growth Fund (WGGFX), after which he
positively appraised the Piper Jaffray analysis. "They're focusing on the right issues."
The Green Century Balanced Fund (GCBLX) gains exposure to
Evergreen and Energy Conversion Devices through the ETF, and so do the Sierra Club Stock Fund (SCFSX) and
the Sierra Club Equity Income Fund (SCFLX).
exposure to these companies right now is through the PowerShares WilderHill ETF, but we are
performing environmental due diligence to review them as distinct approved equity holdings," said
Neil Stallings, director of Sierra Club Mutual Funds. "We hope and expect that both those
companies will be part of our environmentally qualified investment universe."
Solar is a constituent in the New Alternatives Fund (NALFX), the first
environmental fund, and in UK-based Henderson Global Investors' Industries
of the Future Fund, a global sustainability fund. Energy Conversion Devices is in Portfolio 21
US-based global sustainability fund.
"While the benefits of [Energy Conversion Device's]
products are clear, Portfolio 21 would like to see the company invest in an environmental
management system such as ISO 14001 and begin comprehensive environmental reporting," states the
Portfolio 21 website.