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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.

Morgan Stanley does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. Customers of Morgan Stanley in the United States can receive independent, third-party research on the company or companies covered in this report, at no cost to them, where such research is available. Customers may access this independent research at www.morganstanley.com/equityresearch or by calling 800-624-2063.

Disclosure Section

The information and opinions in Morgan Stanley Research were prepared by Morgan Stanley & Co. Incorporated, and/or Morgan Stanley Dean Witter C.T.V.M. S.A. and their affiliates (collectively, "Morgan Stanley").

Analyst Certification

The following analysts hereby certify that their views about the companies and their securities discussed in this report are accurately expressed and that they have not received and will not receive direct or indirect compensation in exchange for expressing specific recommendations or views in this report: David Edwards, David Wilson.

Unless otherwise stated, the individuals listed on the cover page of this report are research analysts.

Global Research Conflict Management Policy

Morgan Stanley Research has been published in accordance with our conflict management policy, which is available at www.morganstanley.com/institutional/research/conflictpolicies.

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.

The research analysts, strategists, or research associates principally responsible for the preparation of Morgan Stanley Research have received compensation based upon various factors, including quality of research, investor client feedback, stock picking, competitive factors, firm revenues and overall investment banking revenues.

Morgan Stanley & Co. Incorporated makes a market in the securities of EnerNOC, Evergreen Solar Inc, First Solar Inc., Pacific Ethanol Inc., SunPower Corp.

Certain disclosures listed above are also for compliance with applicable regulations in non-US jurisdictions.

STOCK RATINGS

Different securities firms use a variety of rating terms as well as different rating systems to describe their recommendations. For example, Morgan Stanley uses a relative rating system including terms such as Overweight, Equal-weight or Underweight (see definitions below). A rating system using terms such as buy, hold and sell is not equivalent to our rating system. Investors should carefully read the definitions of all ratings used in Morgan Stanley Research. In addition, since Morgan Stanley Research contains more complete information concerning the analyst's views, investors should carefully read Morgan Stanley Research, in its entirety, and not infer the contents from the rating alone. In any case, ratings (or research) should not be used or relied upon as investment advice. An investor's decision to buy or sell a stock should depend on individual circumstances (such as the investor's existing holdings) and other considerations.

Global Stock Ratings Distribution

(as of September 30, 2007)

For disclosure purposes only (in accordance with NASD and NYSE requirements), we include the category headings of Buy, Hold, and Sell alongside our ratings of Overweight, Equal-weight and Underweight. Morgan Stanley does not assign ratings of Buy, Hold or Sell to the stocks we cover. Overweight, Equal-weight, and Underweight are not the equivalent of buy, hold, and sell but represent recommended relative weightings (see definitions below). To satisfy regulatory requirements, we correspond Overweight, our most positive stock rating, with a buy recommendation; we correspond Equal-weight and Underweight to hold and sell recommendations, respectively.

Data include common stock and ADRs currently assigned ratings. An investor's decision to buy or sell a stock should depend on individual circumstances (such as the investor's existing holdings) and other considerations. Investment Banking Clients are companies from whom Morgan Stanley or an affiliate received investment banking compensation in the last 12 months.

Analyst Stock Ratings

Overweight (O). The stock's total return is expected to exceed the average total return of the analyst's industry (or industry team's) coverage universe, on a risk-adjusted basis, over the next 12-18 months.

Equal-weight (E). The stock's total return is expected to be in line with the average total return of the analyst's industry (or industry team's) coverage universe, on a risk-adjusted basis, over the next 12-18 months.

Underweight (U). The stock's total return is expected to be below the average total return of the analyst's industry (or industry team's) coverage universe, on a risk-adjusted basis, over the next 12-18 months.

More volatile (V). We estimate that this stock has more than a 25% chance of a price move (up or down) of more than 25% in a month, based on a quantitative assessment of historical data, or in the analyst's view, it is likely to become materially more volatile over the next 1-12 months compared with the past three years. Stocks with less than one year of trading history are automatically rated as more volatile (unless otherwise noted). We note that securities that we do not currently consider "more volatile" can still perform in that manner.

Unless otherwise specified, the time frame for price targets included in Morgan Stanley Research is 12 to 18 months.

Analyst Industry Views

Attractive (A): The analyst expects the performance of his or her industry coverage universe over the next 12-18 months to be attractive vs. the relevant broad market benchmark, as indicated below.

In-Line (I): The analyst expects the performance of his or her industry coverage universe over the next 12-18 months to be in line with the relevant broad market benchmark, as indicated below.

Cautious (C): The analyst views the performance of his or her industry coverage universe over the next 12-18 months with caution vs. the relevant broad market benchmark, as indicated below.

Benchmarks for each region are as follows: North America - S&P 500; Latin America - relevant MSCI country index or MSCI Latin America Index; Europe - MSCI Europe; Japan - TOPIX; Asia - relevant MSCI country index.

Stock price charts and rating histories for companies discussed in Morgan Stanley Research are available at www.morganstanley.com/companycharts or from your local investment representative. You may also request this information by writing to Morgan Stanley at 1585 Broadway, (Attention: Equity Research Management), New York, NY, 10036 USA.

Other Important Disclosures

For a discussion, if applicable, of the valuation methods used to determine the price targets included in Morgan Stanley Research, and the risks related to achieving these targets, please refer to the latest relevant published research on these stocks. Research is available through your sales representative or on Client Link at www.morganstanley.com and other electronic systems.

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