Stimulus Package – Energy Industry Winners and Losers

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Though we at MetalMiner don’t feel the stimulus package goes far enough to stimulate broad manufacturing activity, it’s probably better than a stick in the eye as the saying goes. Now that we have had a chance to see and review portions of the package in detail (particularly the energy portion) we thought a deeper review will help clarify which sectors of the manufacturing and metals related industries stand to gain the most and in some cases, lose the most. Energy and specifically the alternative and sustainable energy sector gained the most with approximately $60b of loans, tax incentives, grants etc according to law firm Ballard Spahr Andrews & Ingersol LLP.

By all accounts the focus of the bill centers around a few key missions:

  1. Improvements and upgrades to the transmission grid
  2. An increase in energy conservation in both buildings and in homes ( homeowners can qualify for up to a $1500 tax credit by installing energy efficient water heaters, furnaces, boilers, air source heat pumps and central air conditioners in 2009 and 2010)
  3. To generate new investment in technology
  4. The development of advanced battery technology

Some of the initiatives include: extensions and improvements in the tax credits used by the solar, wind and biomass industries; new grants and loans immediately injected into projects; a range of policies to modernize and better manage the transmission grid specifically to bring renewable energy to market. The legislation also calls for a range of state and local governmental interventions for energy efficiency and weatherization. Finally, the legislation modifies various public sector and “private activity” bonds to help unlock credit for state and local governments for these energy efficiency and renewable energy projects.

As for the winners and losers of the energy portion of the stimulus package:

Winners: The real estate industry, specifically contractors and subcontractors will stand to benefit as they will help retrofit buildings and homes. Developers and managers will also benefit from the legislation. From a metals industry perspective, companies that make steel and galvanized steel should see some increased demand as many of the towers used for the grid will require these materials. The lines, or power cables, rely heavily on copper, still the most commonly used material for conductors and to some extent, aluminum would also enjoy a demand boost with this type of stimulus package as we have previously reported. Transformers, with their fabricated steel structures, copper and wires would also experience growth. We would expect to see companies who make and install products which specifically reduce energy consumption such as HVAC manufacturers and manufacturers/suppliers of insulating materials will also benefit. Obviously many firms producing wind turbines, solar panels and related products will also benefit.

Losers: The nuclear power industry appears to be the biggest loser. The industry had hoped for a big increase in loan guarantees but these were removed from the final legislation. Companies in the US who make parts used in the nuclear industry (e.g. forging suppliers) will still benefit from nuclear power growth outside the US but the stimulus package does nothing to foster that supply community here. Also mysteriously absent from the bill – anything having to do with coal – dirty, clean or otherwise. That will likely remain the subject of future legislation related to climate change.

–Lisa Reisman

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