We are very bullish on energy and alternative energy stocks in particular. Oil has held stubbornly around $60 per barrel after more than doubling from $30 per barrel during the past few years. Higher energy prices have created increased interest in alternative energy stocks and significant inflows of capital to the sector. While it is extremely difficult to differentiate hype from substance in this sector, the potential returns are too huge to ignore. Successfully picking tomorrow’s leading alternative energy stocks will create massive amounts of wealth for those able to find the needles in the proverbial haystack.
Wind energy is a no-brainer, offering a completely renewable, completely clean energy source. Denmark is already drawing 20 percent of its energy needs from wind power. In fact, scientists at Stanford University have said that wind power could generate more than enough sustainable electricity to meet global energy needs. They say that harnessing even 20 percent of that energy would produce eight times more electricity than the world consumed last year. On a percentage basis, wind is already the fastest growing source of energy in the world.
Despite the promises of wind energy, there are very few investment options available today. The easiest way to play wind energy is through the global leader in wind turbine production, Vestas Energy (VSYWF.OB). We view Vestas as a great way to play the coming boom in wind energy, but there is another option that, if it hits, could be a homerun play.
But we have been tracking an emerging wind energy company named Welwind Energy (WWEI.OB). While this is a speculative play, the pieces are beginning to fall into place and the upside potential is enormous. We wrote an article about Welwind in October of 2006, shortly after they changed their company focus from health foods to wind energy and their company name from Vitasti to Welwind Energy. Although it was a sharp turn in business focus, what caught our attention was the fact that Welwind already had an agreement to build wind farms on the South China Sea. China had laid out aggressive plans (and large amounts of capital) for renewable, domestic energy production, so we like the chances of the project coming to fruition. The idea of taking an early position in an alternative energy company that the market has yet to notice is alluring.
After skyrocketing from $0.01 to $0.16 during the start of 2006, Welwind’s stock price has since been consolidating in the $0.05 – $0.12 range. But recently, the stock price moved into a higher/tighter trading range, finding support at $0.08 and trading mostly between $0.09 and $0.13. As installation begins on the wind farm, we could see the stock price establish yet a higher trading range and take out resistance around $0.18.
In addition, a few significant milestones have been realized in Welwind’s path toward wind energy production:
- The first wind turbine produced by Guangzhou Engga Wind Energy Co. Ltd. for WWEI rolled off of the production line for Phase I of the Zhanjiang wind farm project. The company is currently constructing the base for the turbine and will be installing the 750 KW ENGGA turbine after the Chinese spring festival. Further, the company also announced a cooperative agreement between Welwind and ENGGA to work together on the technology and future supply of all Welwind turbines. The agreement gives Welwind priority for all turbines to be manufactured by ENGGA.
- Welwind announced two new members to the board of directors: Mr. Junyi Feng and Mr. Zhao. For 10 years Mr. Feng was a finance officer for the GuangZhao Port Authority before he became a Director for the Economic Development Department of Guangdong Provincial Government. His focus in the wind energy sector will assist Welwind in its future development projects. Mr. Zhao was employed for 15 years as a Logistics and Economic Development Director for Yanjaing Bureau of Import Export before co-founding Welwind Energy International in Calgary, Alberta. He currently acts as Managing Director for Welwind — China.
- New York-based Ludlow China Fund upgrades Welwind Energy International Corporation, a leading developer of renewable wind energy projects in China, to a B- rating. Gerry Salazar, the Managing Partner of the Ludlow China Fund commented, “Ludlow China is upgrading Welwind Energy to a B- rating as the company moves into the installation and execution phase of their business model. The growing demand for energy in China, let alone clean renewable energy makes Welwind Energy International Corp. an attractive ‘speculative’ investment within this sector.”
But some nagging questions persist. Most obviously, how does a company go from selling low-carb foods and acai to being competent at building wind farms in China? The information on their website was a bit vague, so we contacted them directly to sort out our concerns. The following transcript relates a conversation that GoldStockBull.com had with Tammy McNabb, CEO of Welwind Energy.
GoldStockBull: How does a company go from selling low-carb foods and acai to being competent at building wind farms in China? I think this is a huge question for investors and I haven´t seen it explained anywhere.
Tammy McNabb: When our company began the process of going public mid 2004, Low carb was a huge business opportunity. Out of just one of our retail locations we had done over $750,000 in sales in a 6 month period. At the time we were a very high profile company and we were expanding rapidly. Every major media source was covering our company including Time Magazine. Because of this, we were also being courted by financiers and public companies to go public. This was attractive to my husband and I as we both have substantial public market experience ( I had my own investor relations company for several years).
So we went public at the end of 2004 and by mid 2005 the whole low carb market took a HUGE hit. We diversified, closed retail stores and expanded into the Acai market.
As a private company, this would have been fine, but the public market is not so receptive to health and wellness companies (hence the stock trading at 0.01 per share at that time). It was impossible to raise capital for the company and keep things a float.
At the time, my husband had been working on a wind farm project and raised $5M privately for one of their projects. He did so quite easily as alternative energy is attractive to many investors.
It was at that time that we decided to change our business model and began looking for an acquisition. The following news releases talk about the Welwind acquisition:
If you look at our 10Q on June 30, 2006 everything filed clearly states our plan to move away from health and wellness and focus on wind energy. All of the news releases give this impression as well. You’ll see that once the news releases begin talking about Welwind, we no longer talk about granola.
GoldStockBull: What was your plan of operation during 2005-2006 and for the next twelve months?
Tammy McNabb: During 2005 and 2006, we successfully completed several important milestones that we believe were fundamental to our being able to achieve growth from our business model for project developments in the alternative energy market and continued growth in our health and wellness operations. These milestones include:
Development of several private label products currently being sold under the brand name “Carb Craver Alternatives”
Successfully launched our line of Amazon Acai Berry Granolas currently for sale in various retail chains including Whole Foods Markets
Completed significant research and development paving the way for future leading edge products including the development of a line of nutrition bars
Developed a business model to pursue development of wind energy projects in China
As a result of the achievements of these milestone and our ongoing marketing and business development efforts, we have set the ground work for promising results for the organization. While the company works toward building out its wind energy project, our efforts are still aimed toward promoting our products and services that we offer presently. A portion of the capital currently available to us will be used to provide the marketing and business development resources needed to achieve wider distribution and recognition of our products in the global market.
Our current focus in the alternative energy market will be a primary focus in our business moving forward. A significant portion of the capital currently available to us and future financings will be for the development and operation of wind farms in China. The company sees additional growth via acquisitions of additional wind farm projects.
If anything, our shareholders at that time were ecstatic that we were making this change. Who wouldn’t be seeing the stock steadily climb from .01 to .18 within a 4 month period.
GoldStockBull: What are the details of the wind farm project in China? How did you get this contract, having no prior experience? A big part of the value of your company is having a contract in place to build wind farms. Yet, I can´t find details of this contract.
Also, the details about how Vitasti became Welwind seem vague? Can you provide more details and clarity on this change of business focus?
Tammy McNabb: The whole reason why we acquired Welwind was because of their agreements, relationships and the value they had already establish 2 years earlier in China. We had an independent valuation on the company and agreed to the acquisition based on this report. We also did a due diligence trip and met with all of their contacts. Here is the release outlining that, along with the value of the acquisition:
Here is the rest of the history of how the deal unfolded:
And here is the balance of the releases regarding Fund managers adding us to their funds along with the capital we have raised and the new board members along with the announcement that our turbine is complete, the site ready and the turbine being erected in 2 weeks:
And you will also see the launch of a fantastic new website in the next 2 weeks.
GoldStockBull: Great Tammy, thanks for the information and for your time.
Disclosure: The author does not currently own shares of Welwind, but will be looking to buy on a breakout or news of construction commencing on the wind farm. OTC stocks carry additional investment risk and are often thinly traded. Please perform your own due dillegence before making investments and remember that any investments, trades, and/or speculations made in light of the ideas, opinions, and/or forecasts, expressed or implied herein, are committed at your own risk, financial or otherwise.