Ten years ago, Chart Industries Inc was on the
verge of bankruptcy after taking on too much debt during a spree
of acquisitions that included an equipment maker for storing
cryogenic liquids like liquefied natural gas.

Today, those products, as well as others that are used to
make, transport and store LNG, have made Chart a winner in the
U.S. shale gas boom and transformed the company into a darling
of those seeking to cash in on the push to use natural gas as a
fuel for transportation and industry.

Over the last few years, investment firms including Artisan
Partners Asset Management Inc, Vanguard and BlackRock
have acquired stakes of more than 5 percent in Chart,
and they have enjoyed quite a ride. The stock has doubled in the
last two years, including a 43 percent gain in 2013 alone. Some
on the Street have signaled that it may be time to take profits,
but big hitters in the stock are sticking with it.

“We think this is really just beginning,” said Jim Canty, a
portfolio manager with Clough Capital Partners in Boston,
calling Chart “close to a pure play on the natural gas boom.”

The rapid growth in shale gas output thanks to hydraulic
fracturing has brought new investment in plants to produce LNG
for both domestic and overseas consumption. But to move natural
gas, it first must be supercooled into liquid form.

Enter Chart, which makes heat exchangers and tanks used in
making and storing LNG. The company’s products are also used in
LNG fueling stations, which companies like Clean Energy Fuels
, ENN Group and Royal Dutch Shell Plc are
building in the United States for the small but growing number
of natural gas-fueled trucks. Chart also make tanks that are
used on those vehicles, rounding out its unique presence all
along the LNG-for-transport supply chain.

Chart, which has a market capitalization of more than $2.8
billion, is the No. 1 or 2 supplier in all of its main product
lines and has little direct competition among publicly traded
companies, according to analysts.

Sumitomo, Linde, Air Liquide,
Air Products & Chemicals, Fuel Systems Solutions Inc
and Westport Technologies compete with Chart
in some areas, but many are also Chart customers.

Each of those stocks has gained this year, most in the
double digits. But still those increases pale before Chart’s
more than 40 percent rise.

Many of its competitors are larger and have more financial
resources than Chart. But barriers to entry are high in the LNG
equipment industry, analysts said, because of the complexity of
cooling gas to 260 degrees below zero Fahrenheit and then
storing it. As a result, Chart is sometimes raised as a
potential takeover target for General Electric, in
particular, as the conglomerate has bulked up its oil and gas
equipment division, most recently with its deal to buy oilfield
pump maker Lufkin Industries.

Chart is also becoming a major player in China, which is
farther along in its adoption of natural gas as a transportation
fuel. The company earlier this year landed two contracts worth a
combined $85 million to provide equipment to PetroChina Co Ltd
.

“You are sitting on a relatively small company that is right
at the center of one of the primary trends in world energy,”
said Jonathan Compton, managing director of London-based Bedlam
Asset Management, which has more than $700 million under
management and began buying Chart stock more than a year ago.

“You can’t deny that the stock price is pretty fully valued,
but you have got a huge number of imperatives behind this
stock.”

ROOM TO RUN?

Chart shares, which trade at more than 20 times analysts’
expectations for 2014 earnings, are relatively expensive. The
average multiple for companies in the industrial machinery
industry is about 13.5, according to Thomson Reuters data.

And some investors, such as Wells Fargo, have decreased
sizeable positions in the past year.

The stock should be trading at $57.80, far below Thursday’s
closing price of $95.04, according to Thomson Reuters StarMine’s
intrinsic value model, which considers analysts’ growth
estimates for five years and then projects that growth
trajectory over a longer period of time.

Bedlam’s Compton said analysts are underestimating the
company’s earnings potential over the next three years, though
he added that quarterly numbers could be “lumpy” given that
revenue from big projects will vary from quarter to quarter.

Longdley Zephirin, an analyst at the The Zephirin Group,
estimates Chart is overvalued by about 30 percent and recommends
investors take profits. A slowdown in orders from PetroChina
after this year’s build out of fuel stations, storage tanks and
trailers for LNG could trigger a selloff, he said.

Chart expects additional orders from PetroChina and said the
company would increase its market share in China, Chief
Executive Sam Thomas told analysts in an April conference call.
He added, though, that the Chinese market is competitive.

There are other risks as well.

More than a dozen companies are seeking permission from the
U.S. Energy Department to send LNG abroad, but some lawmakers
have warned the nation risks trading away the economic advantage
of its abundant natural gas reserves if it approves unlimited
exports.

If there are delays in permitting liquefaction plants or the
rollout of LNG-fueled trucks slows, Chart could start to look
like less of a sure bet.

The adoption of natural gas as a transportation fuel “may
not happen in the accelerated timeframe that the stock may be
anticipating,” said Colin Rusch, an analyst with Northland
Securities.

Yet many on Wall Street believe Chart is still a good buy.
Of sixteen analysts surveyed by Thomson Reuters I/B/E/S, 11 have
“buy” or “strong buy” recommendations, while the remaining five
rate the stock a “hold.” Zephirin, who has a “sell” rating, is
not included in that data.

Analysts’ mean price target is $93.21, slightly below its
current level. The highest target price is $114 by Raymond James
analyst Pavel Molchanov, who initiated coverage of the stock
last month with an “outperform” rating.

Clough Capital, which has about $4.2 billion under
management, bought Chart stock a little more than a year ago and
had 130,800 shares at the end of the first quarter. The firm has
no plans to back out now, according to Canty.

“We think we can hold it for multiple years,” he said.

(Reuters) – MidAmerican Energy Holdings Co, a core part of Warren Buffett’s sprawling business empire, is becoming a favorite way for the “Oracle of Omaha” to invest the billions of dollars of cash on Berkshire Hathaway Inc’s (BRKa.N: Quote, Profile, Research, Stock Buzz) balance sheet.

The unit’s $5.6 billion acquisition of Nevada’s NV Energy (NVE.N: Quote, Profile, Research, Stock Buzz), announced last week, vaulted MidAmerican to ninth place in terms of U.S. electric utility customers from fourteenth, according to data compiled by Reuters, and fits right into Buffett’s strategy of owning businesses with large, predictable cash flows.

But some on Wall Street say there is another, less obvious reason for such a deal: The 82-year-old Buffett is beginning to tie up the nearly $50 billion of cash on Berkshire’s balance sheet to assuage concerns about a leadership transition when he dies or becomes too infirm to run the conglomerate.

Though investors trust that Buffett will put an appropriate successor in place, they acknowledge that, as the world’s most successful value investor, he is a special case.

Berkshire Vice Chairman Charles Munger last year said MidAmerican could deploy as much as $100 billion over the next 10 to 15 years.

“The energy sector looks to be a pathway for (Buffett) to invest a lot of money,” said David Rolfe, chief investment officer of St. Louis-based Wedgewood Partners, which has about $300 million invested in Berkshire Hathaway stock. “There is a very good chance that 10 years from now it’s the largest part of Berkshire, easily.”

Including the NV Energy deal, which is the largest in the global energy and power sector so far this year, MidAmerican makes up only about 10 percent of Berkshire’s pre-tax earnings, dwarfed by the company’s vast insurance holdings. But that is expected to change.

“What (MidAmerican and railroad Burlington Northern Santa Fe) have done is guaranteed the cash flows get reinvested back into those businesses,” said Morningstar analyst Greggory Warren. “It eliminates some of the risk to whoever succeeds him of having too much cash on the balance sheet and not enough good ideas.”

BNSF has been investing in the expansion of rail infrastructure in the United States and in new technologies such as powering locomotives with natural gas in a bid to increase profitability.

MidAmerican, which will own two Western utilities after the NV Energy deal, could seek out other power companies in that region, though analysts said the company would be more driven by valuation than geography.

“AN ESSENTIAL SERVICE”

In his most recent letter to shareholders, Buffett called MidAmerican’s earnings “recession-resistant” because the company offers “an essential service.”

Once the NV Energy deal closes, MidAmerican will have $66 billion in assets. Those include the Kern River natural gas pipeline, a newly formed renewables division that oversees unregulated solar, wind, hydropower and geothermal projects, and even a real estate brokerage firm, HomeServices of America.

Buffett has also figured out how to generate stable returns in renewable energy by investing in projects that come with long-term contracts to sell their output to utilities.

The regulated utilities are MidAmerican’s primary focus, however, and include Oregon-based PacifiCorp, Iowa’s MidAmerican Energy Co and Northern Powergrid in England. Together, those utilities will serve 8.4 million customers once NV Energy is folded into the mix.

In MidAmerican’s leadership, Buffett also has one of his most trusted lieutenants: Greg Abel, the unit’s chief executive.

Abel, who has been instrumental in MidAmerican’s many acquisitions over the last decade, is widely considered to be among the internal candidates that could succeed Buffett, who has sung Abel’s praises repeatedly over the years.

Abel declined an interview request.

Berkshire has long exerted little day-to-day influence over its subsidiaries, and thus Abel operates MidAmerican – and overseas acquisitions – with a lot of freedom.

MidAmerican’s former chairman and one-time Buffett heir apparent, David Sokol, resigned after trading stock in a company Berkshire was trying to buy.

That scandal enveloped Berkshire two years ago. Since then Abel and other internal candidates, including Ajit Jain, Buffett’s top insurance executive and Matthew Rose of BNSF, have emerged as possible future chief executives.

Deals like NV Energy allow Berkshire to deploy capital into riskier ventures, such as his rescue investment in Goldman Sachs (GS.N: Quote, Profile, Research, Stock Buzz) at the height of the credit crisis in 2008, said Michael Yoshikami, CEO of Destination Wealth Management in Walnut Creek, California.

For his next mega-deal, many on Wall Street suspect Buffett may look to the industrial sector, where valuations are low compared with utilities.

But once utility valuations pull back a bit, Yoshikami said, “he will be all over it.”

(Reporting by Nichola Groom in Los Angeles; Additional reporting by Scott DiSavino in New York; Editing by Patricia Kranz and Tim Dobbyn)

The unit’s $5.6 billion acquisition of Nevada’s NV Energy
, announced last week, vaulted MidAmerican to ninth place
in terms of U.S. electric utility customers from fourteenth,
according to data compiled by Reuters, and fits right into
Buffett’s strategy of owning businesses with large, predictable
cash flows.

(For a table of U.S. power company rankings see:
)

But some on Wall Street say there is another, less obvious
reason for such a deal: The 82-year-old Buffett is beginning to
tie up the nearly $50 billion of cash on Berkshire’s balance
sheet to assuage concerns about a leadership transition when he
dies or becomes too infirm to run the conglomerate.

Though investors trust that Buffett will put an appropriate
successor in place, they acknowledge that, as the world’s most
successful value investor, he is a special case.

Berkshire Vice Chairman Charles Munger last year said
MidAmerican could deploy as much as $100 billion over the next
10 to 15 years.

“The energy sector looks to be a pathway for (Buffett) to
invest a lot of money,” said David Rolfe, chief investment
officer of St. Louis-based Wedgewood Partners, which has about
$300 million invested in Berkshire Hathaway stock. “There is a
very good chance that 10 years from now it’s the largest part of
Berkshire, easily.”

Including the NV Energy deal, which is the largest in the
global energy and power sector so far this year, MidAmerican
makes up only about 10 percent of Berkshire’s pre-tax earnings,
dwarfed by the company’s vast insurance holdings. But that is
expected to change.

“What (MidAmerican and railroad Burlington Northern Santa
Fe) have done is guaranteed the cash flows get reinvested back
into those businesses,” said Morningstar analyst Greggory
Warren. “It eliminates some of the risk to whoever succeeds him
of having too much cash on the balance sheet and not enough good
ideas.”

BNSF has been investing in the expansion of rail
infrastructure in the United States and in new technologies such
as powering locomotives with natural gas in a bid to increase
profitability.

MidAmerican, which will own two Western utilities after the
NV Energy deal, could seek out other power companies in that
region, though analysts said the company would be more driven by
valuation than geography.

“AN ESSENTIAL SERVICE”

In his most recent letter to shareholders, Buffett called
MidAmerican’s earnings “recession-resistant” because the company
offers “an essential service.”

Once the NV Energy deal closes, MidAmerican will have $66
billion in assets. Those include the Kern River natural gas
pipeline, a newly formed renewables division that oversees
unregulated solar, wind, hydropower and geothermal projects, and
even a real estate brokerage firm, HomeServices of America.

Buffett has also figured out how to generate stable returns
in renewable energy by investing in projects that come with
long-term contracts to sell their output to utilities.

The regulated utilities are MidAmerican’s primary focus,
however, and include Oregon-based PacifiCorp, Iowa’s MidAmerican
Energy Co and Northern Powergrid in England. Together, those
utilities will serve 8.4 million customers once NV Energy is
folded into the mix.

In MidAmerican’s leadership, Buffett also has one of his
most trusted lieutenants: Greg Abel, the unit’s chief executive.

Abel, who has been instrumental in MidAmerican’s many
acquisitions over the last decade, is widely considered to be
among the internal candidates that could succeed Buffett, who
has sung Abel’s praises repeatedly over the years.

Abel declined an interview request.

Berkshire has long exerted little day-to-day influence over
its subsidiaries, and thus Abel operates MidAmerican – and
overseas acquisitions – with a lot of freedom.

MidAmerican’s former chairman and one-time Buffett heir
apparent, David Sokol, resigned after trading stock in a company
Berkshire was trying to buy.

That scandal enveloped Berkshire two years ago. Since then
Abel and other internal candidates, including Ajit Jain,
Buffett’s top insurance executive and Matthew Rose of BNSF, have
emerged as possible future chief executives.

Deals like NV Energy allow Berkshire to deploy capital into
riskier ventures, such as his rescue investment in Goldman Sachs
at the height of the credit crisis in 2008, said Michael
Yoshikami, CEO of Destination Wealth Management in Walnut Creek,
California.

For his next mega-deal, many on Wall Street suspect Buffett
may look to the industrial sector, where valuations are low
compared with utilities.

But once utility valuations pull back a bit, Yoshikami said,
“he will be all over it.”

(Reporting by Nichola Groom in Los Angeles; Additional
reporting by Scott DiSavino in New York; Editing by Patricia
Kranz and Tim Dobbyn)

The “California Hydrogen Highway,” Schwarzenegger’s vision to ensure that every Californian would have access to a hydrogen fueling station by the end of 2010, called for the state to spend more than $50 million to help deploy up to 100 hydrogen fuel stations that would serve 2,000 fuel cell vehicles. “We got 200 stakeholders around a table, literally, and mapped out who could get stations where,” said Terry Tamminen, a top adviser to Schwarzenegger.

But nearly nine years later, California has just nine hydrogen stations open for the public, and only about 200 fuel cell cars that can use them.

The global financial crisis helped slam the breaks on dreams of a Hydrogen Highway, but the roots of green energy’s mid-life crisis – marked by a rash of recent corporate collapses in everything from electric cars to solar panels – run far deeper.

Other factors have contributed to the shakeout, which has happened as climate change has dropped down the list of Americans’ top concerns. Many new companies were far too optimistic about their prospects and were selling products that could not compete on price against traditional transport and energy sources, not to mention increasingly cheap imports from China. Many were – and are – very reliant on fickle government support, and some were simply mismanaged.

Whether it’s survival of the fittest or survival of the subsidized, there have been success stories, and there’s even a little froth in the stock market. But as the sector moves beyond its youthful phase, it faces many of the same problems and nobody will be surprised by more failures.

“The general economic thesis of the renewable energy sector hasn’t changed,” said Karl Miller, chairman of Newco Energy Acquisition Holdings, LLC, which acquires energy-related assets. “It’s still a heavily subsidized industry. It requires a major federal tax credit to make it work.” It still doesn’t appeal as “a capital market investment,” he said.

ELECTRIC DREAMS

Apart from the relative success of Tesla Motors Inc in putting nearly 10,000 of its pricey luxury electric cars on the road, the electric vehicle sector has been among the biggest duds in clean tech.

Major automakers like Nissan Motor Ltd, with its all-electric Leaf, and GM, with the Chevrolet Volt, bet heavily on electric vehicles (EVs). But they are struggling to get over the high cost and lack of charging infrastructure, as well as questions about the short driving range of some models. Both Leaf and Volt sales have lagged well behind company expectations, and vehicles from startups like Fisker Automotive and Coda Holdings Inc barely made it off the assembly line before the companies ran out of cash.

Nissan Chief Carlos Ghosn, who plowed $5 billion into battery-electric technology, has backed down from an earlier forecast of 10 percent market share for electric cars by 2020. Ghosn’s company sold 9,819 Leafs last year in the United States, well under its target of 20,000.

The Obama administration has pulled back from its aggressive goal of putting 1 million electric cars on U.S. roads by 2015. Total plug-in car sales last year were only around 50,000 in the United States.

“EVs are a really difficult sell today,” the CEO of Toyota’s North American business, Jim Lentz, said in an interview. “Until we see substantial change in battery technology it’s going to be difficult to see EVs really take off.”

Even as electric car technology has proved disappointing, the clean-tech movement has helped make traditional combustion engines less polluting, with new models showing fuel efficiency gains that are popular with consumers both for environmental and economic reasons. A push to run more vehicles, especially trucks, on cleaner-burning natural gas is also gaining momentum.

Automakers are also heading back toward Schwarzenegger’s old friend: hydrogen fuel cells.

Daimler AG, Ford and Nissan plan to launch affordable fuel-cell cars within five years, while Toyota and BMW aim to do so by 2020. Cars powered by hydrogen fuel cells, which emit only water vapor, can cover much longer distances and refuel more quickly than electric cars.

Toyota’s Lentz even used Schwarzenegger’s term “hydrogen highway” to describe a network of fueling stations he expected to see between Los Angeles and San Francisco in the next few years. The Golden State last year unveiled a revamped goal that envisions 68 hydrogen stations by 2016 that will serve 10,000 to 30,000 vehicles. The stations, some of which are already in the works, are expected to cost about $160 million. California has awarded nearly $28 million for stations under development and allocated an additional $29.9 million for future stations.

BOOM, BOOM

Development of renewable energy technology has been undermined by an explosion in fossil fuel production in the United States, particularly cleaner-burning natural gas – a development that wasn’t expected when many green energy projects were being dreamt up.

Cheap natural gas “clearly has an impact on how much renewables we’ll do,” said Alex Urquhart, CEO of GE Energy Financial Services, the unit of General Electric Co that invests in energy projects.

The shale oil and gas boom in the United States has also provided opportunities for companies that had been more focused on pure green tech.

Take OriginOil, a U.S. startup that developed a process to convert algae into renewable crude oil. It now markets technology to oil and gas producers for the cleanup of water that is contaminated in the fracking process used to extract shale oil and gas.

Other water-focused startups, too – like Houston-based 212 Resources Corp and Everett, Washington-based WaterTectonics – are counting on the oil and gas industry’s need to clean and recycle the millions of gallons of water that is mixed with chemicals and sand and injected into the ground to “frack” wells.

GE is one of the world’s top two makers of wind turbines, but it isn’t just banking on renewables. It is making significant bets on shale, scooping up oilfield pump maker Lufkin Industries Inc for $2.98 billion to add to the well services business it bought from John Wood Group Plc in 2011.

WALKING ON SUNSHINE

Some of the biggest failures in the green-tech sector have been in the solar energy sector – notably Solyndra, the maker of next-generation solar panels that collapsed in 2011 after receiving a $535 million loan guarantee from the U.S. Department of Energy. Its failure sparked an 18-month investigation by Republicans who faulted President Barack Obama’s administration for failing to cut the government’s losses, and suggested the loan was made in part as a favor to a Democratic donor. The White House said the decision to make the loan was “merit-based.”

More than 18 months after Solyndra’s fall, there’s a lot more road-kill in the green energy sector. China’s Suntech Power Holdings, once the world’s largest solar company, filed for insolvency in the last few weeks, following the path of battery maker A123. And tiny SoloPower, which was awarded a $197 million DOE loan guarantee and opened a factory in Portland in September to much fanfare, has said it will suspend operations.

Clean-tech initial public offerings in the last year have either been canceled, as in the case of BrightSource Energy Inc, or priced below targets, like SolarCity and Enphase Energy. With investment “exits” a challenge, venture capital funding for clean-tech startups slid 29 percent last year to $3.33 billion after peaking at $4.6 billion in 2011, according to the National Venture Capital Association.

The U.S. solar market has suffered because top market Europe pared back its price guarantees to generators of solar power just as China built hundreds of panel factories that flooded the market with cheap products. In 2012 alone, the price of solar panels slid 50 percent, hammering industry profits and scaring investors away from clean-tech stocks.

But in the bigger picture, solar energy is still making strides.

Cheaper solar panels have made the clean energy source more affordable to many. Worldwide, photovoltaic solar installations are expected to increase 12 percent this year to 35 GW as growth in the Middle East, Africa, the U.S. and Asia will offset declines in Europe.

Wal-Mart Stores Inc, which began installing solar on its big box stores in 2007, plans to put panels on at least 1,000 of its buildings by 2020, up from about 200 currently.

“We really feel comfortable with where the prices and the technology are going,” said Wal-Mart’s vice president of energy, Kim Saylors-Laster.

The retailer initially focused its solar program on California and Hawaii, where high power prices make solar more competitive with electricity from the grid, but cheaper solar has helped it expand to new markets. Wal-Mart has saved $2 million since 2007 by using the renewable power generated on its rooftops.

Companies that install those panels are growing rapidly. SolarCity Corp, which put up many of Wal-Mart’s solar systems, has seen its share price soar to $45 since December, when it struggled to get its IPO done at $8 a share. The company, which is backed by Tesla’s Elon Musk, offers homeowners the chance to pay a monthly fee for solar, eliminating the large upfront investment.

Further signs of life in the sector: Swiss industrial group ABB made a $1 billion bet on solar with plans to buy U.S. solar inverter maker Power-One Inc at a premium of 57 percent; and First Solar Inc’s shares rallied by 45 percent on April 9 after forecasting better-than-expected results for the next three years.

MONEY, MONEY, MONEY

That kind of outsize stock move is a trademark of green tech. Tesla stock has soared 64 percent since May 8, when it reported its first ever quarterly profit after selling more battery-powered luxury cars than expected, and SolarCity stock jumped 40 percent in two days after announcing on Thursday it had secured $500 million in financing from Goldman Sachs.

The overall direction of the market, however, has been down. You can get a sense of the amount of money that has been lost by investors from the WilderHill Clean Energy Index, which tracks the performance of publicly traded green energy stocks ranging from solar and wind to rare earth minerals and water companies. The market value of the companies in the index has fallen from a peak level of $231 billion in late December 2007 to about $108 billion today, a decline of 53 percent, according to Reuters data. The S&P 500 over that period is up around 9 percent to an all-time high. And while the number of components in the WilderHill index has risen to 51 from 42 since 2007, the average market value of those companies has tumbled to $2.1 billion from $5.5 billion.

Moreover, the index only reflects publicly traded companies. More has been lost by venture capital firms and other early investors in companies that never got much past the start-up phase. Fisker and Solyndra, for instance, each raised close to $1 billion in venture capital money.

Some advocates for green investing say that thanks to a more realistic assessment of risk, a period of relative stability is setting in for green companies and their investors. The WilderHill Clean Energy index may be much lower than it was in 2004, but it is up 31 percent this year.

“The industry has become much more efficient, much more purposeful. There’s not this sort of green hype,” said Vinod Khosla, the co-founder of Sun Microsystems who later joined Kleiner Perkins. In 2004, he launched Khosla Ventures, which is known for investing in next-generation energy companies such as biofuels maker KiOR. “What has changed is we make fewer bets and we plan on investing more in them and take more time.”

But investors like Shawn Kravetz, who manages several funds for Boston-based Esplanade Capital, including one focused on the solar industry, compares investing in the sector to “a long and bumpy flight.”

“It will remain turbulent because policies change, companies will have issues,” Kravetz said. “It’s wise to keep your seatbelt fastened.”

WIND BENEATH MY WINGS

Government support has been a double-edged sword. It’s hard for businesses and investors alike to make plans for the future in an environment of tight budgets and opposition from conservative lawmakers to taxpayer money being spent to favor one sector over another.

In the solar sector, for example, a 30 percent tax credit for solar system owners is set to fall to 10 percent at the end of 2016. Solar proponents want a more gradual decline and point to the experience of the U.S. wind industry, which is struggling with a dependency on a tax credit that keeps being extended by Congress in one-year increments.

GE has seen the impact of that directly. Wind turbine sales slowed in 2012 because a key tax credit had been expected to expire. It was renewed at the eleventh hour shortly after the new year, and that has helped GE sell 1 GW of wind turbines since January.

“The economics associated with the tax credits are how these projects get done,” said GE’s Urquhart. “Without those credits, investments would be far less attractive.”

U.S. President Barack Obama’s 2009 economic stimulus program allotted $90 billion to various clean energy programs, but those funds have been tapped. Big European players like Germany have slashed their generous green subsidies. And U.S. states that are requiring utilities to buy more renewable energy are close to fulfilling their goals.

U.S. green energy companies face a somewhat chaotic environment at the state level, with efforts underway in 16 states to weaken renewable energy mandates that have been key support mechanisms for solar and wind power. At the same time, 18 states have moved to strengthen those mandates.

That patchwork of policies in countries like the United States and India – which also has policies that vary from state to state – is a major concern.

“There is no way any reasonable management team of a company can do meaningful corporate planning without an understanding of what the rules of the road are,” said Jonathan Silver, who oversaw the Department of Energy loan guarantee program from 2009 to 2011. “We’ve made it incredibly difficult for people in the energy industry.”

(Additional reporting by Braden Reddall in San Francisco, Paul Lienert in Detroit and Dan Burns in New York; Editing by Ed Tobin, Martin Howell and Claudia Parsons)

The “California Hydrogen Highway,” Schwarzenegger’s vision
to ensure that every Californian would have access to a hydrogen
fueling station by the end of 2010, called for the state to
spend more than $50 million to help deploy up to 100 hydrogen
fuel stations that would serve 2,000 fuel cell vehicles. “We got
200 stakeholders around a table, literally, and mapped out who
could get stations where,” said Terry Tamminen, a top adviser to
Schwarzenegger.

But nearly nine years later, California has just nine
hydrogen stations open for the public, and only about 200 fuel
cell cars that can use them.

The global financial crisis helped slam the breaks on dreams
of a Hydrogen Highway, but the roots of green energy’s mid-life
crisis – marked by a rash of recent corporate collapses in
everything from electric cars to solar panels – run far deeper.

Other factors have contributed to the shakeout, which has
happened as climate change has dropped down the list of
Americans’ top concerns. Many new companies were far too
optimistic about their prospects and were selling products that
could not compete on price against traditional transport and
energy sources, not to mention increasingly cheap imports from
China. Many were – and are – very reliant on fickle government
support, and some were simply mismanaged.

Whether it’s survival of the fittest or survival of the
subsidized, there have been success stories, and there’s even a
little froth in the stock market. But as the sector moves beyond
its youthful phase, it faces many of the same problems and
nobody will be surprised by more failures.

“The general economic thesis of the renewable energy sector
hasn’t changed,” said Karl Miller, chairman of Newco Energy
Acquisition Holdings, LLC, which acquires energy-related assets.
“It’s still a heavily subsidized industry. It requires a major
federal tax credit to make it work.” It still doesn’t appeal as
“a capital market investment,” he said.

ELECTRIC DREAMS

Apart from the relative success of Tesla Motors Inc
in putting nearly 10,000 of its pricey luxury electric cars on
the road, the electric vehicle sector has been among the biggest
duds in clean tech.

Major automakers like Nissan Motor Ltd, with its
all-electric Leaf, and GM, with the Chevrolet Volt, bet heavily
on electric vehicles (EVs). But they are struggling to get over
the high cost and lack of charging infrastructure, as well as
questions about the short driving range of some models. Both
Leaf and Volt sales have lagged well behind company
expectations, and vehicles from startups like Fisker Automotive
and Coda Holdings Inc barely made it off the assembly line
before the companies ran out of cash.

Nissan Chief Carlos Ghosn, who plowed $5 billion into
battery-electric technology, has backed down from an earlier
forecast of 10 percent market share for electric cars by
2020. Ghosn’s company sold 9,819 Leafs last year in the United
States, well under its target of 20,000.

The Obama administration has pulled back from its aggressive
goal of putting 1 million electric cars on U.S. roads by 2015.
Total plug-in car sales last year were only around 50,000 in the
United States.

“EVs are a really difficult sell today,” the CEO of Toyota’s
North American business, Jim Lentz, said in an interview. “Until
we see substantial change in battery technology it’s going to be
difficult to see EVs really take off.”

Even as electric car technology has proved disappointing,
the clean-tech movement has helped make traditional combustion
engines less polluting, with new models showing fuel efficiency
gains that are popular with consumers both for environmental and
economic reasons. A push to run more vehicles, especially
trucks, on cleaner-burning natural gas is also gaining momentum.

Automakers are also heading back toward Schwarzenegger’s old
friend: hydrogen fuel cells.

Daimler AG, Ford and Nissan plan to launch
affordable fuel-cell cars within five years, while Toyota and
BMW aim to do so by 2020. Cars powered by hydrogen
fuel cells, which emit only water vapor, can cover much longer
distances and refuel more quickly than electric cars.

Toyota’s Lentz even used Schwarzenegger’s term “hydrogen
highway” to describe a network of fueling stations he expected
to see between Los Angeles and San Francisco in the next few
years. The Golden State last year unveiled a revamped goal that
envisions 68 hydrogen stations by 2016 that will serve 10,000 to
30,000 vehicles. The stations, some of which are already in the
works, are expected to cost about $160 million. California has
awarded nearly $28 million for stations under development and
allocated an additional $29.9 million for future stations.

BOOM, BOOM

Development of renewable energy technology has been
undermined by an explosion in fossil fuel production in the
United States, particularly cleaner-burning natural gas – a
development that wasn’t expected when many green energy projects
were being dreamt up.

Cheap natural gas “clearly has an impact on how much
renewables we’ll do,” said Alex Urquhart, CEO of GE Energy
Financial Services, the unit of General Electric Co that
invests in energy projects.

The shale oil and gas boom in the United States has also
provided opportunities for companies that had been more focused
on pure green tech.

Take OriginOil, a U.S. startup that developed a process to
convert algae into renewable crude oil. It now markets
technology to oil and gas producers for the cleanup of water
that is contaminated in the fracking process used to extract
shale oil and gas.

Other water-focused startups, too – like Houston-based 212
Resources Corp and Everett, Washington-based WaterTectonics –
are counting on the oil and gas industry’s need to clean and
recycle the millions of gallons of water that is mixed with
chemicals and sand and injected into the ground to “frack”
wells.

GE is one of the world’s top two makers of wind turbines,
but it isn’t just banking on renewables. It is making
significant bets on shale, scooping up oilfield pump maker
Lufkin Industries Inc for $2.98 billion to add
to the well services business it bought from John Wood Group Plc
in 2011.

WALKING ON SUNSHINE

Some of the biggest failures in the green-tech sector have
been in the solar energy sector – notably Solyndra, the maker of
next-generation solar panels that collapsed in 2011 after
receiving a $535 million loan guarantee from the U.S. Department
of Energy. Its failure sparked an 18-month investigation by
Republicans who faulted President Barack Obama’s administration
for failing to cut the government’s losses, and suggested the
loan was made in part as a favor to a Democratic donor. The
White House said the decision to make the loan was
“merit-based.”

More than 18 months after Solyndra’s fall, there’s a lot
more road-kill in the green energy sector. China’s Suntech Power
Holdings, once the world’s largest solar company, filed for
insolvency in the last few weeks, following the path of battery
maker A123. And tiny SoloPower, which was awarded a $197 million
DOE loan guarantee and opened a factory in Portland in September
to much fanfare, has said it will suspend operations.

Clean-tech initial public offerings in the last year have
either been canceled, as in the case of BrightSource Energy Inc,
or priced below targets, like SolarCity and Enphase Energy. With
investment “exits” a challenge, venture capital funding for
clean-tech startups slid 29 percent last year to $3.33 billion
after peaking at $4.6 billion in 2011, according to the National
Venture Capital Association.

The U.S. solar market has suffered because top market Europe
pared back its price guarantees to generators of solar power
just as China built hundreds of panel factories that flooded the
market with cheap products. In 2012 alone, the price of solar
panels slid 50 percent, hammering industry profits and scaring
investors away from clean-tech stocks.

But in the bigger picture, solar energy is still making
strides.

Cheaper solar panels have made the clean energy source more
affordable to many. Worldwide, photovoltaic solar installations
are expected to increase 12 percent this year to 35 GW as growth
in the Middle East, Africa, the U.S. and Asia will offset
declines in Europe.

Wal-Mart Stores Inc, which began installing solar on
its big box stores in 2007, plans to put panels on at least
1,000 of its buildings by 2020, up from about 200 currently.

“We really feel comfortable with where the prices and the
technology are going,” said Wal-Mart’s vice president of energy,
Kim Saylors-Laster.

The retailer initially focused its solar program on
California and Hawaii, where high power prices make solar more
competitive with electricity from the grid, but cheaper solar
has helped it expand to new markets. Wal-Mart has saved $2
million since 2007 by using the renewable power generated on its
rooftops.

Companies that install those panels are growing rapidly.
SolarCity Corp, which put up many of Wal-Mart’s solar
systems, has seen its share price soar to $45 since December,
when it struggled to get its IPO done at $8 a share. The
company, which is backed by Tesla’s Elon Musk, offers homeowners
the chance to pay a monthly fee for solar, eliminating the large
upfront investment.

Further signs of life in the sector: Swiss industrial group
ABB made a $1 billion bet on solar with plans to buy U.S. solar
inverter maker Power-One Inc at a premium of 57
percent; and First Solar Inc’s shares rallied by 45
percent on April 9 after forecasting better-than-expected
results for the next three years.

MONEY, MONEY, MONEY

That kind of outsize stock move is a trademark of green
tech. Tesla stock has soared 64 percent since May 8, when it
reported its first ever quarterly profit after selling more
battery-powered luxury cars than expected, and SolarCity stock
jumped 40 percent in two days after announcing on Thursday it
had secured $500 million in financing from Goldman Sachs.

The overall direction of the market, however, has been down.
You can get a sense of the amount of money that has been lost by
investors from the WilderHill Clean Energy Index, which
tracks the performance of publicly traded green energy stocks
ranging from solar and wind to rare earth minerals and water
companies. The market value of the companies in the index has
fallen from a peak level of $231 billion in late December 2007
to about $108 billion today, a decline of 53 percent, according
to Reuters data. The S&P 500 over that period is up around 9
percent to an all-time high. And while the number of components
in the WilderHill index has risen to 51 from 42 since 2007, the
average market value of those companies has tumbled to $2.1
billion from $5.5 billion.

Moreover, the index only reflects publicly traded companies.
More has been lost by venture capital firms and other early
investors in companies that never got much past the start-up
phase. Fisker and Solyndra, for instance, each raised close to
$1 billion in venture capital money.

Some advocates for green investing say that thanks to a more
realistic assessment of risk, a period of relative stability is
setting in for green companies and their investors. The
WilderHill Clean Energy index may be much lower than it was in
2004, but it is up 31 percent this year.

“The industry has become much more efficient, much more
purposeful. There’s not this sort of green hype,” said Vinod
Khosla, the co-founder of Sun Microsystems who later joined
Kleiner Perkins. In 2004, he launched Khosla Ventures, which is
known for investing in next-generation energy companies such as
biofuels maker KiOR. “What has changed is we make fewer
bets and we plan on investing more in them and take more time.”

But investors like Shawn Kravetz, who manages several funds
for Boston-based Esplanade Capital, including one focused on the
solar industry, compares investing in the sector to “a long and
bumpy flight.”

“It will remain turbulent because policies change, companies
will have issues,” Kravetz said. “It’s wise to keep your
seatbelt fastened.”

WIND BENEATH MY WINGS

Government support has been a double-edged sword. It’s hard
for businesses and investors alike to make plans for the future
in an environment of tight budgets and opposition from
conservative lawmakers to taxpayer money being spent to favor
one sector over another.

In the solar sector, for example, a 30 percent tax credit
for solar system owners is set to fall to 10 percent at the end
of 2016. Solar proponents want a more gradual decline and point
to the experience of the U.S. wind industry, which is struggling
with a dependency on a tax credit that keeps being extended by
Congress in one-year increments.

GE has seen the impact of that directly. Wind turbine sales
slowed in 2012 because a key tax credit had been expected to
expire. It was renewed at the eleventh hour shortly after the
new year, and that has helped GE sell 1 GW of wind turbines
since January.

“The economics associated with the tax credits are how these
projects get done,” said GE’s Urquhart. “Without those credits,
investments would be far less attractive.”

U.S. President Barack Obama’s 2009 economic stimulus program
allotted $90 billion to various clean energy programs, but those
funds have been tapped. Big European players like Germany have
slashed their generous green subsidies. And U.S. states that are
requiring utilities to buy more renewable energy are close to
fulfilling their goals.

U.S. green energy companies face a somewhat chaotic
environment at the state level, with efforts underway in 16
states to weaken renewable energy mandates that have been key
support mechanisms for solar and wind power. At the same time,
18 states have moved to strengthen those mandates.

That patchwork of policies in countries like the United
States and India – which also has policies that vary from state
to state – is a major concern.

“There is no way any reasonable management team of a company
can do meaningful corporate planning without an understanding of
what the rules of the road are,” said Jonathan Silver, who
oversaw the Department of Energy loan guarantee program from
2009 to 2011. “We’ve made it incredibly difficult for people in
the energy industry.”

(Reuters) – SunPower Corp (SPWR.O: Quote, Profile, Research, Stock Buzz), which makes solar panels and builds power plants with them, on Wednesday said revenue and profits for the rest of the year would be above most analysts’ estimates, sending its shares up 12 percent.

The news was the latest bright spot in the solar manufacturing industry, which has struggled mightily with a dramatic slide in prices over the last few years.

On April 9, SunPower rival, First Solar, said revenue and earnings for the next three years would be well above estimates, and its stock logged its biggest ever one-day gain.

Since then, solar stocks have been on a tear, with the MAC Global Solar Energy index rising more than 46 percent. Shares of SunPower, which is majority owned by France’s Total SA (TOTF.PA: Quote, Profile, Research, Stock Buzz), have more than doubled.

SunPower has slashed costs in recent years as the global glut of solar panels erased profit margins for manufacturers. The company makes the most efficient panels in the industry and charges a premium for them.

But it has moved away from a reliance on manufacturing by expanding its project development business. Earlier this year, SunPower sold two massive projects in California to a company controlled by Warren Buffett’s Berkshire Hathaway Inc (BRKa.N: Quote, Profile, Research, Stock Buzz). It is also benefiting from the expansion of solar lease arrangements with homeowners, a business in which it competes with others, including SolarCity (SCTY.O: Quote, Profile, Research, Stock Buzz) and SunRun.

SunPower is also chasing more business overseas thanks to its relationship with Total, which is investing in some of SunPower’s projects, the company’s president of regions, Howard Wenger, said during a presentation to analysts in New York.

The company has a 6 gigawatt global pipeline, Wenger said, and expects to realize about a quarter of those projects.

“Our pipeline has really grown fast, in large part due to the collaboration with Total,” Wenger said.

SunPower will also be expanding its rooftop solar business in overseas markets.

SunPower said it expects to report net income of between 5 cents and 15 cents per share on an adjusted basis for the second quarter. Analysts on average have been expecting a loss of 2 cents per share.

The company said it expects revenue of $540 million to $590 million for the second quarter, easily beating the average analyst estimate of $513.3 million, according to Thomson Reuters I/B/E/S.

SunPower forecast 2013 revenue of $2.6 billion to $2.7 billion and income before items of 60 cents to 80 cents a share.

Including items, SunPower expects 2013 results to fall between a loss of 5 cents per share and a profit of 20 cents.

Analysts were expecting revenue of $2.551 billion and earnings before items of 64 cents a share.

The company said it would cut operating expenses by 10 percent from 2012 levels.

SunPower shares were up $2.82 at $21.85 at midday.

(Reporting By Thyagaraju Adinarayan; Editing by Sriraj Kalluvila and Kenneth Barry)

(Reuters) – Green car startup Coda Holdings Inc filed for Chapter 11 bankruptcy protection on Wednesday after selling just 100 of its all-electric sedans, another example of battery-powered vehicles’ failure to break into the mass market.

The filing with U.S. Bankruptcy Court in Delaware will allow the Los Angeles company to exit the auto sector and refocus on energy storage, a far less capital-intensive business. The company uses the same technology it used in cars to build systems for utilities and building operators to store power.

Coda raised over $300 million in private funding during its brief history from high profile names like former Treasury Secretary Henry Paulson and Limited Brands (LTD.N: Quote, Profile, Research, Stock Buzz) Chief Executive Les Wexner. Now, a group of lenders led by Fortress Investment Group LLC (FIG.N: Quote, Profile, Research, Stock Buzz) will seek to acquire the company for just $25 million through the bankruptcy process.

The company launched its five-passenger electric car in California a year ago, delivering a range of 125 miles on a single charge. The $37,250 vehicle was criticized for its no-frills styling and low crash safety rating, and its short lifespan also included a recall due to faulty airbags.

Consumers have been slow to gravitate toward electric vehicles due to their high cost, and fears about their driving range.

Just three years ago, Coda was one of an emerging crop of California startups including Fisker Automotive and Tesla Motors Inc (TSLA.O: Quote, Profile, Research, Stock Buzz) seeking to build emission-free electric cars to appeal to mass-market consumers.

Tesla has put thousands of cars on the road, but Fisker is considering a bankruptcy filing. Fisker’s lithium-ion battery maker, A123 Systems Inc, filed for bankruptcy late last year.

General Motors (GM.N: Quote, Profile, Research, Stock Buzz) and Nissan Motor Co (7201.T: Quote, Profile, Research, Stock Buzz) also invested heavily in electric vehicles, but sales have lagged hopes.

Coda raised far less money than the more than $1 billion Fisker attracted from private investors, securing $344 million in equity, according to court documents. The company in 2012 withdrew its request for $334 million in federal loans like the ones Fisker and Tesla received.

Coda’s largest investor is Aeris Capital, an investment firm that manages the wealth of SAP (SAPG.DE: Quote, Profile, Research, Stock Buzz) founder Klaus Tschira. Aeris, Harbinger Capital, the hedge fund run by Philip Falcone, and Coda founder Miles Rubin each own more than 10 percent of the company’s equity, according to court documents.

Coda also attracted several wealthy individuals as investors, including Wexner, Paulson, billionaire asset manager-turned environmental activist Tom Steyer, Mack McLarty, who for a time was President Bill Clinton’s chief of staff, and former Commerce Secretary and Edison International (EIX.N: Quote, Profile, Research, Stock Buzz) Chief Executive John Bryson.

None of Coda’s investors were immediately available for comment.

Fortress, Aeris, Rubin and other investors have extended $5 million in debtor-in-possession financing to keep the company going. The same investors are involved in the bid for Coda.

Paulson, who was chairman and CEO of Goldman Sachs (GS.N: Quote, Profile, Research, Stock Buzz) before becoming Treasury secretary, was reportedly brought into the company by former Goldman colleagues Kevin Czinger and Steve “Mac” Heller. Czinger was Coda’s first CEO before his resignation in 2010 and Heller is Coda’s executive chairman.

Coda was founded in 2009 by Rubin, an attorney who in 2004 had started selling Chinese-made low-speed electric vehicles in the United States. The company hired Phil Murtaugh, a former General Motors China and Chrysler executive, as its CEO in 2011.

As the allure of electric vehicles faded, Coda struggled to secure new private funding. Last year, Coda sought to raise $150 million but clinched just $22 million, according to a filing with the U.S. Securities and Exchange Commission.

Coda has about 40 active employees and expects to recall 50 furloughed workers. Emerald Capital Advisors is advising Coda on its restructuring, and Houlihan Lokey is its investment banker.

(Reporting by Nichola Groom in Los Angeles; Additional reporting by Tom Hals in Wilmington; Editing by Daniel Magnowski and Tim Dobbyn)

The filing with U.S. Bankruptcy Court in Delaware will allow
the Los Angeles company to exit the auto sector and refocus on
energy storage, a far less capital-intensive business. The
company uses the same technology it used in cars to build
systems for utilities and building operators to store power.

Coda raised over $300 million in private funding during its
brief history from high profile names like former Treasury
Secretary Henry Paulson and Limited Brands Chief
Executive Les Wexner. Now, a group of lenders led by Fortress
Investment Group LLC will seek to acquire the company
for just $25 million through the bankruptcy process.

The company launched its five-passenger electric car in
California a year ago, delivering a range of 125 miles (201 km)
on a single charge. The $37,250 vehicle was criticized for its
no-frills styling and low crash safety rating, and its short
lifespan also included a recall due to faulty airbags.

Consumers have been slow to gravitate toward electric
vehicles due to their high cost, and fears about their driving
range.

Just three years ago, Coda was one of an emerging crop of
California startups including Fisker Automotive and Tesla Motors
Inc seeking to build emission-free electric cars to
appeal to mass-market consumers.

Tesla has put thousands of cars on the road, but Fisker is
considering a bankruptcy filing. Fisker’s lithium-ion battery
maker, A123 Systems Inc, filed for bankruptcy late last year.

General Motors and Nissan Motor Co also
invested heavily in electric vehicles, but sales have lagged
hopes.

Coda raised far less money than the more than $1 billion
Fisker attracted from private investors, securing $344 million
in equity, according to court documents. The company in 2012
withdrew its request for $334 million in federal loans like the
ones Fisker and Tesla received.

Coda’s largest investor is Aeris Capital, an investment firm
that manages the wealth of SAP founder Klaus Tschira.
Aeris, Harbinger Capital, the hedge fund run by Philip Falcone,
and Coda founder Miles Rubin each own more than 10 percent of
the company’s equity, according to court documents.

Coda also attracted several wealthy individuals as
investors, including Wexner, Paulson, billionaire asset
manager-turned environmental activist Tom Steyer, Mack McLarty,
who for a time was President Bill Clinton’s chief of staff, and
former Commerce Secretary and Edison International Chief
Executive John Bryson.

None of Coda’s investors were immediately available for
comment.

Fortress, Aeris, Rubin and other investors have extended $5
million in debtor-in-possession financing to keep the company
going. The same investors are involved in the bid for Coda.

Paulson, who was chairman and CEO of Goldman Sachs
before becoming Treasury secretary, was reportedly brought into
the company by former Goldman colleagues Kevin Czinger and Steve
“Mac” Heller. Czinger was Coda’s first CEO before his
resignation in 2010 and Heller is Coda’s executive chairman.

Coda was founded in 2009 by Rubin, an attorney who in 2004
had started selling Chinese-made low-speed electric vehicles in
the United States. The company hired Phil Murtaugh, a former
General Motors China and Chrysler executive, as its CEO in 2011.

As the allure of electric vehicles faded, Coda struggled to
secure new private funding. Last year, Coda sought to raise $150
million but clinched just $22 million, according to a filing
with the U.S. Securities and Exchange Commission.

Coda has about 40 active employees and expects to recall 50
furloughed workers. Emerald Capital Advisors is advising Coda on
its restructuring, and Houlihan Lokey is its investment banker.

Investors drove the company’s stock down 7.7 percent on
Wednesday as many cashed in on a staggering 45 percent rally the
day before. During a lengthy meeting with analysts, First Solar
on Tuesday forecast profit and revenue far in excess of most
analysts’ expectations.

The company said it would reduce manufacturing costs and
improve the efficiency of its solar panels dramatically over the
next four years. That, along with its strong balance sheet,
would enable the company to compete well in the market against
cheap panels made by debt-laden Chinese competitors, its
management said at the meeting.

But some investors raised concerns about the company’s
expectations for bookings beyond 2013. Most of First Solar’s
expected 2013 shipments are under contract, but only 40 percent
and 20 percent of forecast 2014 and 2015 volumes, respectively,
are contracted. In addition, First Solar is planning to spend
the next few years entering new, unsubsidized markets like the
Middle East, India and Chile – and said it will have to price
aggressively as it does so.

“A lot has to happen for it all to fall into place,” said
Cowen and Co analyst Rob Stone, who has a “neutral” rating on
First Solar shares.

In recent months, many in the market had worried that First
Solar’s pipeline of utility-scale solar projects would dwindle
as U.S. utilities meet state mandates to source a percentage of
their power from renewable sources.

“Demand has been more robust than I think a lot of people
anticipated,” First Solar Chief Executive Jim Hughes said in an
interview on Tuesday.

But the company’s presentation didn’t eliminate those
worries entirely. Shawn Kravetz, whose hedge fund Esplanade
Capital sold calls on First Solar shares on Tuesday and shorted
the stock late in the day, said he was concerns that the
company’s 550 megawatt Desert Sunlight project in California
would account for an outsized portion of earnings in 2014.

“Unless you have equally lucrative projects with which to
replace this in future years, it just means that earnings once
these juicy projects are over are going to fall,” Kravetz said.

The solar manufacturing industry has suffered greatly in the
last few years as cheap Chinese panels flooded the market at the
same time key European markets were slashing subsidies. The
result was a dramatic and rapid drop in the price of solar
panels that has hurt industry profits and driven many players
out of business.

That turmoil is far from over. On Wednesday, Chinese solar
company JinkoSolar Holding Co Ltd reported its sixth
straight quarterly loss.

First Solar has benefited from generating about two-thirds
of its revenue from selling power plants to utilities, and one
analyst said he was optimistic that the company would meet its
targets given its track record of achieving cost reduction and
efficiency goals over the last five years.

“It’s easy to be down on things when they are three years
away,” said Ben Kallo, an analyst with Baird Equity Research. I
lean more towards them getting it done.”

(Additional reporting by Swetha Gopinath in Bangalore; Editing
by Joyjeet Das and Steve Orlofsky)

Shares were up $12.51, or 46.2 percent, at $39.55 in afternoon trade on the New York Stock Exchange. They hit a high of $41 earlier in the session, a level unseen in more than a year.

The U.S. solar panel maker surprised investors by announcing at an analyst meeting in New York that it would acquire Silicon Valley startup TetraSun for an undisclosed amount from JX Nippon Oil Energy Corp and other investors. It will begin commercial manufacturing of the high-efficiency crystalline silicon technology in the middle of 2014.

The move marks a big shift for First Solar, whose cadmium telluride panels have long been the cheapest in the market but are not as efficient at turning sunlight into electricity as traditional silicon-based products. As prices on silicon panels plummeted in the last few years, First Solar’s cost advantage eroded, and so did its cache with investors.

The former Wall Street darling traded for over $300 in 2008.

The company made the TetraSun announcement at the end of its lengthy analyst day, during which it said 2013 results would be higher than the market expected because it would begin recognizing revenue from a massive California power plant in the second half of this year. First Solar also said its low-cost solar panels would help it clinch contracts beyond its current pipeline in the coming years.

“The company is ascribing a lot of credit for project wins in the future,” said Raymond James solar industry analyst Alex Morris. “It’s debatable how realistic that is, but they are obviously pretty optimistic.”

“CLASSIC SHORT SQUEEZE”

Morris called the stock rally “a classic short squeeze.” About 20 percent of First Solar shares were held in short positions as of March 15.

Short-sellers borrow shares and sell them, seeking to profit by returning them after buying them back at a lower price. A short squeeze occurs when the share price rises instead, forcing the borrowers to try to buy them back at a higher price, thus pushing the share price even higher.

First Solar expects 2013 net sales of $3.8 billion to $4 billion and earnings per share of $4 to $4.50, excluding one-time items. About 90 percent of its sales for this year are already contracted.

Wall Street analysts, on average, had been expecting revenue of $3.122 billion and earnings per share of $3.51, according to Thomson Reuters I/B/E/S.

First Solar said it would recognize about one third of the revenue from its 550 megawatt Desert Sunlight project in Riverside county, California, this year. That project is being built by First Solar but is owned by NextEra Energy Inc, General Electric and Japan’s Sumitomo.

Earlier in the day, the Tempe, Arizona, company said at a meeting with analysts in New York that it would reduce its manufacturing costs per watt by nearly 40 percent over the next four years.

First Solar expects its cost per watt to be between 63 cents and 66 cents in 2013, dropping to 53 to 54 cents next year, its senior vice president of global operations, Tymen De Jong, said. That is expected to fall to 40 cents by 2017, he added.

The price of solar panels has been falling dramatically in recent years due to a massive increase in global manufacturing capacity, mostly in China. Four years ago, First Solar’s cost per watt was slightly below $1.

For 2014, the company expects earnings of $2.50 to $4 per share on net sales of $3.5 billion to $4 billion. The company in 2015 expects earnings per share of $4 to $6 and revenue of $4.2 billion to $4.8 billion.

Analysts had been expecting 2014 earnings per share of $3.27 on revenue of $3.349 billion, according to Thomson Reuters I/B/E/S, and 2015 revenue of $3.653 billion and earnings per share of $3.36.

(Additional reporting by Swetha Gopinath in Bangalore; editing by Andrew Hay and Alden Bentley)