Daniel Cullinane CPA
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Copyright © Daniel Cullinane CPA.
In 2016, the U.S. solar energy market installed 14,762 megawatts, up from 7,501 megawatts installed in 2015. More new solar generation capacity came online in 2016 than capacity from any other fuel source.
Growth in installation of residential solar slowed down year over year from record growth in 2015. The decline was attributed to lower installations in the second half of the year in several established state markets. The downturn was partly offset by growth in several new state markets.
The data were recently published by GTM Research in its 2016 Year in Review issue of its quarterly U.S. Solar Market Insight. GTM Research partners with energy industry consulting firm Wood Mackenzie in producing the quarterly publications.
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Solar energy accounted for 39% of all new electricity generating capacity installed in 2016, up from 30% in 2015. The big change last year was the decline in new wind generation capacity, from 39% in 2015 to 26% in 2016. New natural gas generating capacity remained unchanged at 29% year over year, but that represents a decline from 43% of all new capacity in 2014. No new coal capacity came online in 2015 or 2016.
The top 10 states based on new installed capacity were:
California: 5,096 megawatts
Utah: 1,241 megawatts
Georgia: 1,023 megawatts
Nevada: 984 megawatts
North Carolina: 923 megawatts
Texas: 672 megawatts
Arizona: 657 megawatts
Massachusetts: 406 megawatts
Florida: 404 megawatts
Colorado: 382 megawatts
Utility-scale solar PV projects installed 10,593 megawatts in 2016, up nearly 150% year over year, and nonresidential solar PV projects added 1,586 megawatts, more than in any previous year.
System pricing for residential solar dropped from around $3.50 per watt to below $3.00 per watt. Nonresidential prices dropped from about $2.00 per watt to about $1.25 and fixed-tilt utility-scale installation costs dropped from around $1.25 per watt to about $1.00 per watt.
General Electric Co. (NYSE: GE) shares have fallen off a little in 2017, but this could be changing in the near future. Although the stock has only dropped just under 6% in this time, one key analyst sees significant upside in this iconic industrial driven by its Power segment.
Credit Suisse reiterated an Outperform rating with a $34 price target, implying an upside of 14% from Wednesday’s closing price of $29.80.
After a weak fourth quarter, the Power business is poised for a recovery, despite the weak heavy duty gas turbine environment, as GE is taking advantage of its broader suite of products post-Alstom. The company is now selling more Power Island systems, rather than gas turbines on their own, in addition to the Services business, which continues to grow in the mid-single digits (Alstom increased the installed base by roughly 50%).
The brokerage firm commented in its report:
The Power segment continues to be the main driver behind GE’s cash conversion improvement, and Mr. Steve Bolze laid out a plan to improve his segment’s conversion by 15% this year. Renewables continues to grow healthily, with double digit organic revenue and operating profit growth (as a reminder, Power & Renewables comprise 32% / 31% of Industrial Revenues / EBIT). The company also announced the sale of its Water & Process Tech business to Suez for a higher multiple / price than our initial expectations. The stock has been very weak for the last 12 months, but we think the pro-cyclical cross-sector rotation has largely run its course, and GE is running out of shoes to drop.
The company also gave a quick update to its Baker Hughes Inc. (NYSE: BHI) merger. GE Chief Financial Officer Jeff Bornstein presented an update to Baker Hughes, maintaining the 2017 guidance as reported at the December Analyst Day and the fourth-quarter earnings, including commentary that the additional $1 billion of cost-out is seeing very rapid progress. As regards the Baker Hughes merger, GE continues to expect the deal to close by midyear.
Shares of GE were last seen at $29.80 on Thursday, with a consensus analyst price target of $33.73 and a 52-week trading range of $28.19 to $33.00.
Baker Hughes traded down 1.3% to $56.95, with a consensus price target of $69.88 and a 52-week range of $38.16 to $68.59.
WHAT DOES $50 A BARREL MEAN
RADIO SHACK DECLARES BANKRUPTCY
As expected, RadioShack parent General Wireless Operations filed for Chapter 11. The company will shutter 200 stores immediately. It does not have plans yet for another 1,300. The once proud electronics retailer has been in decline for years.
The company’s announcement:
General Wireless Operations Inc. (“RadioShack” or “the Company”), doing business as RadioShack, the neighborhood electronics convenience store, today announced that the Company filed voluntary petitions under Chapter 11 in the United States Bankruptcy Court for the District of Delaware (“the Court”).
RadioShack.com, stores and dealer locations across the country are still currently open for business and serving customers. The Company is closing approximately 200 stores and evaluating options on the remaining 1,300. The Company and its advisors are currently exploring all available strategic alternatives to maximize value for creditors, including the possibility of keeping stores open on an ongoing basis.
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Dene Rogers, RadioShack’s President and Chief Executive Officer commented
“For nearly 100 years, RadioShack has proudly served local communities across the United States, offering consumers unique, high-quality products at a great value. Over the course of the past two years, our talented, dedicated team has worked relentlessly in an effort to revitalize the Company and the RadioShack brand, while providing outstanding service to our customers. We greatly appreciate their hard work and dedication.”
“Since emerging from bankruptcy two years ago as a privately owned company, our team has made progress in stabilizing operations and achieving profitability in the retail business, while our partner Sprint managed the mobility business. In 2016, we reduced operating expenses by 23%, while at the same time saw gross profit dollars increase 8%. Over the same time, we integrated FedEx pickup / drop-off into 140 RadioShack locations, delivered to customers over 700,000 Hulu login pins and sold more than a million RadioShack private brand headphones and speakers delivering high quality, value-based audio products to consumers across the country. However, for a number of reasons, most notably the surprisingly poor performance of mobility sales, especially over recent months, we have concluded that the Chapter 11 process represents the best path forward for the Company. We will continue to work with our advisors and stakeholders to preserve as many jobs as possible while maximizing value for our creditors.”
About 1,200 stores are joint locations with Sprint Corp. (NYSE: S).
RadioShack was founded in 1921, and was at one time among the largest retailers in the U.S. based on locations. As recently as 1998, the company had as many as 5,000 stores
Among the milestones in its history was the introduction of its own PC line–the TRS-80 Model I in 1977. RadioShack previously filed for Chapter 11 on February 5, 2015
The company often credited with fundamentally disrupting the book-selling business is taking a step back in time. Amazon.com Inc. (NASDAQ: AMZN) is planning to open its 10th brick-and-mortar bookstore later this year in Bellevue, Washington.While it’s highly unlikely that Amazon is going to open hundreds of such stores, it is a reasonable question to ask why the company is opening any at all.One explanation that appears to be especially sensible is that the stores are a showroom for Amazon’s growing number of hardware devices. Not sure if you want to purchase an Amazon Echo? Here’s a place where you can go and kick the tires. Been wondering if a Kindle or a Fire tablet is the product for you? Go on in and check them out.
It’s kind of a 180-degree turn from the shopping experience called “showrooming,” where a customer visits a retail store to test a product and then orders either from a mobile device or later from a home PC. Maybe Amazon isn’t satisfied with having disrupted just the book-selling business and has now cast its eye on retailers in general.The company’s chief financial officer had this to say on last month’s conference call:
We think the bookstores, for instance, are a really great way for customers to engage with our devices and see them, touch them, play with them and become fans. So we see a lot of value in that as well.A report at Recode also noted that the stores function as an indirect showcase for Amazon Prime, the $99-a-year membership program that includes free two-day shipping and a plethora of additional benefits like streaming video.Amazon may even expand the walk-out technology the company has introduced in its Amazon Go convenience stores. That seems like a slam dunk option to us.
Amazon opened its first brick-and-mortar bookstore in late 2015.
US TRADE GAP WIDENS TO 5 YEAR HIGH
SOLAR PANEL INSTALLATION DOUBLES
MARCH NEWSLETTER 4
The US posted its biggest monthly trade deficit in nearly 5 years in January, a potential short term drag on growth that highlights broadeer economic forces working against the Trump administration's plans to reshape the international economic agenda. The foreign trade gap for goods and services increased 9.6% from the prior month to a seasonally adjusted $48.49 billion in January, the Commerce Department said tuesday. That was the highest monthly level since March 2012. Falling exports and rising imports weighed on overall economic output in the final three months of 2016. That pattern shifted slightly in January with exports growing but not as quickly as imports. Trade deficits were a prominent issue during the 2016 Presidential campaign, and President Trump has pledged to make US commercial relationships more balanced. The White House must contend with an already strong dollar that rallied in response to Mr Trump's election, along with domestic demand that shows signs of strengthening, especially business investment.Both are good signs for economic growth but would also tend to widen the trade deficit.
On Thursday morning, Royal Dutch Shell PLC (NYSE: RDS-A) announced the sale of all its in-situ and undeveloped oil sands interests in Canada for $7.25 billion. Less than a month ago, Exxon Mobil Corp. (NYSE: XOM) wrote down 3.3 billion barrels of oil sands assets because they could no longer be produced profitably at current crude prices. If these energy giants can’t make a profit, why do TransCanada Corp. (NYSE: TRP), the Canadian government and the Trump administration want to revisit former President Obama’s decision to kill the Keystone XL pipeline project?
Figuring out how much it costs to produce a barrel from the Alberta oil sands is largely a matter of educated guesswork because the companies working the region are pretty close-mouthed about costs. In February of 2016, IHS Markit estimated full-cycle costs of a new mining project required a West Texas Intermediate (WTI) price of $85 to $95 a barrel in order to break even. Full-cycle costs include the capital cost of constructing a facility, operation costs for that facility, maintenance costs and a return on investment of 10%.
Full-cycle costs for an in-situ (steam-assisted, gravity drainage) project would require a WTI price of $55 to $65 a barrel to break even, and expansion of an existing in-situ project would require a price of $50 to $55 a barrel.
The costs don’t include transporting the oil to where it will either be used or exported. There are currently two pipeline projects that have received Canadian government approval. An expansion of Kinder Morgan Inc.’s (NYSE: KMI) Trans Mountain system to the west coast of British Columbia and the Enbridge Inc. (NYSE: ENB) Line 3 replacement that will move oil sands production east to Superior, Wisconsin. Combined, the total takeaway capacity, including the Keystone XL pipeline, will be on the order of 2.48 million barrels a day.Total oil sands production in 2016 came in at around 2.4 million barrels a day. Capital investment dropped by a third year over year to around $20 billion, although that number is expected to increase a bit in 2017 because the WTI price is now higher. Still, no large, new, expensive projects are planned to raise production totals.
Expanding existing pipelines like the Trans Mountain and Line 3 will add significantly to the takeaway capacity of oil sands production. Why, then, is the Keystone XL pipeline still holding on? The main reason is that delivering oil sands crude to the Gulf Coast by pipeline stands to raise the price, and there are still well over a trillion barrels of the stuff that could be extracted if the price climbs high enough.
Opposition to the Keystone XL from environmental groups on both sides of the border is focused on persuading the national governments to keep the resource in the ground. Extracting and upgrading the bitumen uses large amounts of water and energy, amplifying the effect of the final use of the oil as an emitter of carbon.
But building the Keystone XL pipeline gives oil sands producers an incentive to invest and expand, and ultimately boost both revenues and profits for the companies and tax revenues for Alberta and Canada. Several thousand short-term construction jobs and a relative handful of maintenance jobs once the pipeline is built, plus some storage and tax revenues, appear to be the main benefits to the United States from the pipeline.
And given President Trump’s demonstrated support of the Keystone XL, there is a very good chance that the pipeline will be built. Whether it’s a good solution to supplying the global demand for energy really depends on what angle you take when looking at it. In that regard, it’s similar to the way people look at a wall along the U.S.-Mexico border
GE POWER SECTOR
AMAZON TO OPEN MORE BRICK & MORTAR STORES