China Energy: In the Eye of the Hurricane

There’s lots of peripheral stuff to cover related to CGYV which is certainly worth a read. According the media, major shareholder Steve Westly did not get the nod as Secretary of Energy. However, Obama has chosen Nobel Prize Winner Steven Chu as the man to get the job.

Chu happens to be Chinese, which may or may not help. However, his views on the future of the “Green” Movement fit right into the CGYV theme. Here’s a quote:

“If I were emperor of the world, I would put the pedal to the floor on energy efficiency and conservation for the next decade,” Chu said.Tackling energy waste in residential and commercial buildings is a high priority for Chu. He said new designs and technologies in that area could go a long way toward improving heating, ventilation and lighting systems and reducing energy consumption. “Get rid of the wasteful habits and inefficiency and that by far and away will show the biggest gains in the short term,” he said.Chu lists examples of “hybrid thinking” to deliver more energy efficiencies such as cogeneration plants that capture waste heat while producing electricity, but says the dominance of coal-fired electricity is a big obstacle to progress.”

There’s another fantastic article on the future of Energy Efficiency as it relates to China that is a must read:Here’s a quote from the article:“Emission reduction and energy saving is not only an issue of environmental protection, but important to a company’s profitability, especially when the financial crisis deteriorates the economic situation,” said Gu Zhanggen, the Party secretary of the company.

Here’s a link to the entire article. It states inefficient manfucturers are closing down in China. Energy efficient and low pollution manufacturers are experiencing a boom.

The stock traded sideways this week on lighter volume. At some point, this company is going to end up in the eye of the Hurricane, and the market will find out about it and come for it in a big way.

I wish I knew when it was going to be. The chart shows the stock has drifted back down near its support level:

We’re getting close to the end of the tax selling season, so I would expect the supply side on this one to become almost non existant pretty soon.

With their strong balance sheet, growth, and profitability, it is inevitable someone is going to come for this stock sooner or later, and when they do it will be very hard to buy.

Comments and questions are welcome.

eFood- Finding a Bid and Conserving Cash

EFSF filed its 10Q quarterly financial statement on Friday, and the stock basically reflects the trailing numbers.

The top line was an anemic $200k, about half the same quarter a year ago. It’s clear the market has been telling us what the company has not- that there move to direct marketing for its flagship products has been a total failure.

I don’t know if they abandoned the whole thing early in the game, or if they pursued it into the fall. The last we heard, they were going to pursue radio as a direct marketing strategy. In short, it’s evident the program failed.

We have also heard nothing of the DR campaign for PurEffect to have been launched by CK41. Another major disappointment for long suffering shareholders.

There are two pluses- 1. They are still holding on to their valuable cash in a climate where cash has become a very scarce commodity. They are burning about $150,000 per quarter- with $1.2 million in cash, they can survive another 8 quarters without a capital injection.

The other positive is the stock. It has started behaving as if there could be a change in the wind. Here’s the chart:

For the second time in as many months, the stock is trying to get through the $.05 level. I don’t know if this means anything, but it is behaving as if someone wants to start buying, and no one is selling. I anyone who wanted to sell this stock for a tax loss has done so.

I am still rating the stock a hold simply because their cash gives them some time and flexibility to figure out a way to move things forward. I’ll have it when they do.

Comments and questions are welcome.

Platina Energy Shareholders- Victims of Forces

Platina Energy has filed for protection from its creditors through Chapter 11 bankruptcy.

As I pointed out in the last BLOG entry, the most recent 10Q provided more questions than answers, and today the answers have come.

This is not a complicated situation. The company has been victimized by a combination of mismanagement and circumstances that are out of its control.

Here’s the formula for disaster. Obtain the rights to some oil and gas properties. Go out and borrow a bunch of money from a fund with a conversion feature into the common stock as a back up in the event you can’t make the monthly cash payment.

Take the money and go drill your wells. Now- two things happen- your wells start producing, but not to the level you had anticipated, and you have some problems bringing all your wells online.

Next, have the price of the commodity you are producing get cut to 1/3 of the price it was at the high.

So, you have lower production than you planned on, and lower prices than you planned on. Guess what- you can’t make your cash payment since you are underfunded and have no cash resources.

So- what do you do? you have to give the shares underlying the debt to the creditor in huge quantities, and the creditor destroys the market for your stock.

And, that’s today’s bedtime story for Platina Energy. The circumstances?- the plummeting price of oil and gas. The mismanagement? Borrowing money with an underlying equity conversion feature, and not getting your wells to produce as promised.

So, what next? Your stock is destroyed, and you can’t make the monthly payments out of cash flow, so you file for Chapter 11 bankruptcy, which provides you protection from the creditor while you figure out how to work this out.

So, in a sort of twisted way, this move is probably the best thing for the shareholders. It allows the company to stop issuing stock to cover their debt obligations, and gives them some breathing room.

It seems like the company does have some value in the form of hydrocarbon reserves. The CEO claims he has $25 million in reserves and the data to back it up. The accounts won’t let them book it that way.

What to do now if you’re a shareholder? My thoughts are the same as the last BLOG. Hold it and see how it comes out, or sell it for the tax loss. Don’t buy it. You never know how the common shareholders are going to be effected by a reorganization bankruptcy. I have seen them come out quite favorably for shareholders, and go the other way as well.

However, with the bankruptcy filing and only one major creditor, the common stock holders have a better shot today than they did yesterday.

Comments and questions are welcome.