There's a saying that goes, when you lose the Internet it's like 1979 but when you lose power it's like 1879.
For a while, we actually lived through it when a big swath of the mid-Atlantic lost power in July. Let me tell you, it was ugly.
I've lived in Northern Virginia for most of my life. I remember dill pickles in a barrel at the grocery store, Quisp and Quake cereal, and Frank Howard was my hero on the Washington Senators, if that gives you an idea of old I am. In all of those years I have never seen anything like it.
The power went out on Friday night and by mid-morning Saturday, there wasn't a hotel room with air conditioning to be found in a 50 mile radius.
So many street lights were out that it was up to the drivers to figure who went next, and you're talking a metropolitan area of about 12 million people cycling through. That doesn't even account for the fact that I-95 cuts through the whole area with trucks, tourists, etc.
It was completely nuts.
Now imagine what it was like in India where nearly 700 million lost power. Yes, that's 700 million suddenly without power.
That's like the entire U.S. going down and then adding another 200+ million on top of that.
The lesson in both instances though is the same: It's necessary to build a "smart" grid.
Will the US Build a Smart Grid Before It's Too Late?
Of course, it's not likely that either massive blackout will spur much debate over a giant new smart grid project in the U.S.—especially in an election year when the economy is barely scratching by.
Even still, the U.S. does have a few plans in place for implementing smart grids, real time interfaces between power suppliers and consumers and more efficient transmission technologies. And there are growing Homeland Security issues with the grid surrounding its reliability and security.
What's more there is an ongoing shift from a centralized distribution model (power plant to substations to customers) to a decentralized model (power can come from various places on the grid if there's a power surge instead of drawing from the central plant).
Many of these programs are working through private industry because the producers and consumers understand that the more efficiently power can be generated, distributed and consumed, the better the margins are for everyone involved.
To that end, there are a pair of companies that are involved in one of the most ambitious aspects of developing a new smart grid.
Investing in Smart Grid Technology
Both make high temperature superconducting (HTSC) wire. This is to the traditional powerline like fiber optic cable is to a telephone wire.
The capacity is so great you could literally back up a small city on one buried HTSC cable. And because they have so much capacity, you can build in other smart systems to help keep the grid functioning and receive real time feedback, chart consumption trends, etc.
One of the pioneers in this field is American Superconductor (Nasdaq: AMSC).
The stock has been slammed in recent years because of its wind division. It had a deal with Sinovel, one of China's largest wind companies and then Sinovel walked, leaving AMSC short one gigantic client.
Now the company is going back to its roots and the HTSC side of the business until the global economy gets back on its feet.
The company's revenues for the first quarter of fiscal 2012 were $28.7 million, which compares with $9.1 million for the first quarter of fiscal 2011. The year-over-year increase was driven by strong growth in the company's Wind and Grid reporting segments.
For the first quarter of fiscal 2012, AMSC reported a net loss of $10.3 million, or $0.20 per share. This figure includes a non-cash benefit of approximately $7.3 million for the settlement of adverse purchase commitments with certain vendors (Sinovel more than likely) as well as a $2.4 million non-cash "mark-to-market" charge driven by the re-valuation of the derivative liability and warrants associated with the company's recently completed debt financings.
For the first quarter of fiscal 2011, AMSC's net loss was $37.7 million, or $0.74 per share.
The company is paring its losses significantly and is making money again as well. Revenue for the first quarter of fiscal 2012 were $28.7 million, which compares with $9.1 million for the first quarter of fiscal 2011. The year-over-year increase was driven by strong growth in the company's Wind and Grid reporting segments.
This is by no means a quick turnaround story, but if you have some long-term money that you aren't counting on for your grandchildren, AMSC is a good buy under $7/share.
The second firm is Bruker Corp (Nasdaq: BRKR) a 50-year-old firm that's a leading provider of high-performance scientific instruments and solutions for molecular and materials research, as well as for industrial and applied analysis.
While its instrumentation division is a compelling story unto itself, this company also has a HTSC division and is also a global player in this sector. Bruker Energy and SuperCon Division (BEST) is a leading manufacturer and developer of HTSC wire products and devices.
In May, BEST announced a large-scale technology transfer contract for its Bruker HTS GmbH subsidiary to license and transfer know-how for second generation (2G) YBCO ceramic tape high temperature superconductors (HTS) to a subsidiary of the Russian state atomic energy corporation, Rosatom. The contract is valued at $25 million.
In addition to providing a license, BEST will also provide training and education services as well as a complete 2G HTS pilot production line to Rosatom, with expected deliveries commencing in 2013. BEST is also very active in the UK, Germany and South Korea.
The recent turmoil in Europe has hurt Bruker's recent earnings and the company has lowered guidance for the rest of the year, so the stock is at reasonable levels.
Bear in mind, this isn't a stock where you wait for its quarterly results. This is a long-term growth play that could return orders of magnitudes on your investment or leave you with a few pennies in your brokerage account.
A high-risk/high-reward high-tech proposition, Bruker is a buy below $15.50.
- G.S. Early