Will the Credit Crisis Ruin This Canadian Wind Energy Company’s ‘Milestone’ Agreement?
Submitted by EnergyTechStocks.com
AAER Inc. is a small Canadian wind turbine manufacturer that trades on the TSX Venture Exchange. Last month it signed what the company called a “milestone” agreement to sell 61 of its patented wind turbines to Mont Louis Wind L.P. in a deal AAER valued at more than $115 million. The transaction is by far the biggest in AAER’s eight-year history, one that could elevate the company into green energy’s upper leagues. But it comes with a catch, the sort of catch every green investor needs to be mindful of as long as the world is stuck in a recession.
As first noted by Canadian Business Online columnist Joe Castaldo, the deal is dependent on whether the developer of the giant wind farm where AAER’s turbines are scheduled to go is able to secure funding. “The project’s developer, Northland Power, has until the end of next year to secure funding for the project,” Castaldo wrote, adding, “Given today’s volatile markets and tight credit conditions, that could be a difficult task.”
The good news for AAER is that the green power to be produced by this proposed wind farm already has a buyer, Hydro-Quebec, which reportedly has agreed to purchase the output for 20 years. Normally with these so-called “independent power projects” (IPPs, as they’re called in the utility industry), having a “power purchase agreement” (PPA) would make financing easy.
But nothing is easy in today’s economic environment.
As things stand, AAER appears to have little choice but to cross its fingers and wait, its prospects beyond its own control. Given that, as Castaldo noted, AAER had no sales and lost $4 million last year, everything would seem to ride on this transaction.
The takeaway here for investors is that the world is full of AAERs – small companies in a position to supply the green power the world desperately wants and needs, credit markets permitting. With renewable energy now being counted on to provide roughly 10% to 20% of global generation capacity within 20 years, projects like the one AAER is involved with need to proceed on time, lest the world soon face what several experts already are warning about, namely: a global power shortage that short circuits all economic activity.
Starting tomorrow, November 25, EnergyTechStocks.com looks at six small energy technology companies, each with good long-term prospects, all facing short-term problems that appear to make them expendable in a green portfolio.
