World's Richest Dive into Carbon Market
World's Richest Dive into Carbon Market
By Nick Hodge
The rich don't get and stay that way by being foolish with money. So it's probably a good rule of thumb to pay attention to how they invest and try to incorporate those strategies into your own investment plan.
If Warren Buffet says buy Company X, you'd better at least seriously consider doing so.
Beyond taking just their advice, following their actions can also be beneficial to your bottom line.
Even the hype surrounding a billionaire's move can be enough to score some pretty nice gains.
Just take a look at what happened after it was announced that Bill Gates's investment company, Cascade Investment, agreed to invest $84 million in Pacific Ethanol (NASDAQ: PEIX) late in 2005.
In the six months following Gates's announcement, the stock shot up over 345%. It also helped that there was incredible hype surrounding the ethanol industry at the time.
The stock slowly sold off, but still remains higher than it was before Gates came along.
Gates's Next Endeavor
If that stuff is true about the rich getting richer, then Bill Gates is certainly one to follow.
His latest venture comes in a sector I've been touting for some time now. From what I read this morning, Gates has thrown his hat into a carbon fund being run by Peony Capital Ltd. He's contributed $138 million to the $552 million fund.
The fund works by investing in carbon emission reduction projects in China under the Kyoto Protocol's Clean Development Mechanism (CDM).
According to Reuters, "The CDM projects allow companies or governments in countries with Kyoto targets to fund emission-cutting projects in developing countries to get carbon credits to offset their own pollution or to sell to others."
In this case, the credits are being sold to utilities in the European Union and Japan for about $22 per ton. The cost of acquiring carbon credits in China by investing in wind power and other green projects is about $11 per ton.
So every time the fund sells a credit, it doubles its investment. Pretty sweet, huh?
Seems like there's finally some validation coming into the carbon market.
And It Gets Better
The market slipped pretty hard today, due mostly to the freezing of $2.2 billion in funds by France's largest bank. The bank, BNP Paribas, cited the U.S. sub-prime mortgage problems and associated fallout for freeze, which they said "has made it impossible to value certain assets fairly, regardless of their quality or credit rating."
The holdings of those funds included bonds backed by U.S. mortgages and securities backed by U.S. sub-prime mortgages and risky U.K. home loans. Other holdings included debt backed by commercial properties in Singapore and the U.K.
But there's always a bull somewhere. And BNP Paribas seemed to find one in the carbon market.
Late yesterday afternoon they announced the signing of a letter of intent with Mexican state-owned oil giant Petroleos Mexicanos (Pemex). The deal would create carbon bonds based on reduced emissions from two Pemex oil refineries.
No word was given about financial data or how many bonds would be created, but it was divulged that they would start with a base of 130,000 tons per year.
All the heavy hitters are trying to get a piece of this thing.
In fact, I came across another press release today announcing a collaborative agreement between BP Alternative Energy and Powerspan Corp. to develop and commercialize Powerspan's carbon dioxide (CO2) capture technology.
And while Powerspan is privately held, a quick look at their "Investment Partners" page will reveal that they have some 800-pound gorillas in their corner.
The four that stuck out the most were Fluor Corporation (NYSE: FLR), American Electric Power Co. (NYSE: AEP), Firstenergy Corp. (NYSE: FE), and Epcor Power (EP-UN.TO).
These are solid performers that constantly yield good returns. It says something that they're champing at the bit to get into this industry.
The carbon trading and emissions reduction industries are on the cusp of exploding. And Green Chip has caught it early.
To make sure you get all the current information and emerging carbon plays, become a member of Green Chip today.
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posted by Victor Lloyd Smith @ 9:12 PM
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