Global Power

01/26/2007 12:00 am EST


Yiannis Mostrous

Editor, The Capitalist Times

Analyzing worldwide trends keeps Yiannis Mostrous hopping around the globe to find companies--large and small--with the potential to rake in the profits for his subscribers. Here, he zeroes in on two power companies, with great prospects...

"We've had exposure to the multi-year Asian infrastructure/construction theme in our portfolio for some time. In an effort to gain more coverage, particularly as it relates to China and India, I am adding a couple of new stocks.

"Switzerland-based ABB (ABB NSYE) is an addition to the long-term holdings. The company is a global provider of power and automation technologies, operating five divisions: Power products, power systems, automation products, process automation, and robotics. ABB offers direct exposure in India through its subsidiary ABB India, a leading player in the Indian power and automation technology sectors. As India increases its energy generation capacity, it will also invest substantially in transmission and distribution (T&D) infrastructure. ABB is the world leader in transmission grids, and it will benefit tremendously from changes taking place in India. The country now loses 32% of its energy during T&D and must improve.

"Process automation has been one of ABB's fastest-growing sectors and offers significant opportunity in India. ABB's expertise gives it a competitive edge and the company can service a variety of industries - from cement to oil and gas, metal and mining to pulp and paper. Its products include low- and medium-voltage products and systems, electric controls, motors, power electronics and more. ABB also offers automation solutions such as integrated process control and information services and management systems.

"I am adding Datang International Power Generation (DIPGY OTC) to the Alternative Holdings. The company is one of the largest publicly-listed independent power producers in China. Although it's essentially a utility, Datang's growth potential shouldn't be underestimated.

"Datang has steadily increased capacity and is expected to grow organically to 23,000 megawatts (MW) in 2007 based on newly announced and approved projects. With construction costs around RMB3.35 million/MW, Datang is one of the lowest-cost developers in China.

"Datang has two promising projects under planning. It's been diversifying to hydropower and has invested in stations that will collectively generate 3,400 MW, which is expected to increase Datang's hydro exposure from 1% of revenue to around 14%. The company has also taken a minority but significant 49% stake in the 2,000 MW Ningde Nuclear Power Plant. This is a key strategic development, as under current government regulation power companies can't control nuclear stations unless they have prior operational experience. By participating in Ningde, Datang should be able to control its next investment in nuclear power, a critical infrastructure area in China."

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