Clean Energy: Sustainable Opportunities
October 25, 2007
We are initiating coverage of the US clean energy industry with an Attractive view. We believe our E4 growth drivers (emergence, economics, energy security, and environment) will generate significant investment in clean energy solutions by governments, businesses, and consumers worldwide.
The global risks posed by climate change are driving spending and investment in clean energy solutions, which (unlike the oil shock that spawned the first wave of alternative energy solutions in the 1970s) is durable and accelerating. In our upside scenario, we believe the annual clean energy revenue opportunity could reach $500 billion in 2020 and $1 trillion in 2030.
We recommend investors be selective and invest in only the highest quality companies that should benefit the most from the strong tailwinds driving the clean energy sector. We use four criteria to screen investment opportunities: scalable, low cost, low carbon, and secure. Using these criteria, we have rated four stocks Overweight-V in the US: First Solar, Fuel Tech, SunPower, and VeraSun.
Since clean energy is a global opportunity, we recommend a portfolio approach (to help minimize risk in this highly volatile sector) across multiple segments and regions and have launched the Morgan Stanley Global Clean Energy Model Portfolio today representing our global analysts' best ideas worldwide.
Despite our long-term optimism, we advise investors to be agile in the face of intense volatility and wary of near-term risks as markets right-size and experience growing pains.
We believe the pipeline of innovations will provide new clean energy solutions for many years to come. We believe we have just entered the second of four waves of clean energy innovation that will span the first two or three decades of the 21st century.
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Important US Regulatory Disclosures on Subject Companies
As of September 28, 2007, Morgan Stanley beneficially owned 1% or more of a class of common equity securities of the following companies covered in Morgan Stanley Research: Aventine Renewable Energy Inc., ReneSola.
Within the last 12 months, Morgan Stanley managed or co-managed a public offering of securities of EnerNOC, First Solar Inc., SunPower Corp, VeraSun Energy.
Within the last 12 months, Morgan Stanley has received compensation for investment banking services from EnerNOC, First Solar Inc., Motech, SunPower Corp, VeraSun Energy.
In the next 3 months, Morgan Stanley expects to receive or intends to seek compensation for investment banking services from EnerNOC, First Solar Inc., Fuel Tech Inc., Gamesa, Motech, Pacific Ethanol Inc., SunPower Corp, VeraSun Energy.
Within the last 12 months, Morgan Stanley & Co. Incorporated has received compensation for products and services other than investment banking services from Aventine Renewable Energy Inc.
Within the last 12 months, Morgan Stanley has provided or is providing investment banking services to, or has an investment banking client relationship with, the following company: EnerNOC, First Solar Inc., Fuel Tech Inc., Gamesa, Motech, Pacific Ethanol Inc., SunPower Corp, VeraSun Energy.
Within the last 12 months, Morgan Stanley has either provided or is providing non-investment banking, securities-related services to and/or in the past has entered into an agreement to provide services or has a client relationship with the following company: Aventine Renewable Energy Inc.
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Morgan Stanley & Co. Incorporated makes a market in the securities of EnerNOC, Evergreen Solar Inc, First Solar Inc., Pacific Ethanol Inc., SunPower Corp.
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