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Green Companies Find New Home in China

Did Obama Find a New Green Sucker?

Written by Keith Kohl
Posted February 1, 2013 at 7:18PM

Over the last few years, the list of bankrupt or troubled green companies has grown in length to read like a bedtime story.

Except nobody rescues the princess in this fairy tale — and it seems there is no real moral.

I'm not talking about a few defective batteries used in the $120 million Boeing Dreamliner (those lithium-ion batteries were replaced almost a dozen times before any major issues came up). No, I'm referring to the green ventures that have been sprouting up like weeds, many of them funded with taxpayer dollars.

A123 Systems Inc, Abound Solar, Solyndra, First Solar, SunPower — the handouts have added up to a hefty chunk of change.

In just one example, A123 Systems Inc. filed for bankruptcy protection in October 2012 after being awarded $249 million from taxpayers to get their wheels off the ground.

I'm not going to waste with a political rant. Those are best left to the mainstream pundits.

But pouring billions upon billions of dollars into the poor green investments that we have been up until now should upset someone. And that someone should be you.

Make no mistake; greasing the political machine has been a part of American government for over a century, so this isn't a new scandal brought to light.

But if we take a look at the track record, we have a right to be suspicious. After all, some reports have stated up to 80% of green energy loans from the Department of Energy went to Obama's donors.

And we all know the fate that befell some of the prospective saviors of fossil fuels...

China's Energy Showdown, Green or Not

Is there anyone out there willing to buy the green hype?

Well, it seems A123 has found a new believer — and we didn't put up a fight to have them go. In fact, we green-lighted the deal!

Now, before we write the Chinese off as suckers, it's important to recognize there's a bigger takeaway here for China than a poor battery maker. I would argue this deal is simply another step in the Middle Kingdom's energy scramble.

Unlike here in the United States — where we're practically at war with each other over the development of our energy resources — China is willing to buy anything and everything indiscriminately if it has the potential to contribute to the country's energy security.

For the better part of a decade, we've witnessed China's mad rush for energy: the billions they've spent acquiring an interest in the Canadian oil sands, the billions they invested in U.S. shale plays like the Eagle Ford...

They're even willing to loan billions to Venezuela to try and salvage a future for their oil industry (a severe lack of investment by the Venezuelan government will be debilitating in the decades to come).

Repayment a concern? Not for China...

They're allowing Venezuela to pay them back in barrels of oil.

What could China possibly be preparing for?

Well, if they don't keep up this energy buying frenzy, the Chinese will be in tough position come 2035. According to the IEA's 2012 World Energy Outlook, China alone accounts for the largest share of global energy demand growth, increasing as much as 60% by 2035.

Moreover, I have no doubt whatsoever that their latest move to buy A123 Systems won't be the last green company they pick up.

Whether or not they can turn A123 Systems into something of value, well... that ship has already sunk for investors who fell prey to the great green hype here in the U.S.:

A123 Chart 2-1

The simple fact is right now, renewables can't compete with oil and natural gas.

It's a point we've spent much time covering in these pages.

But so long as the United States continues to develop its massive fossil fuel resources, investors needn't look anywhere else to make substantial gains in the energy space.

Until next time,

Keith Kohl Signature

Keith Kohl

follow basic@KeithKohl1 on Twitter

A true insider in the energy markets, Keith is one of few financial reporters to have visited the Alberta oil sands. His research has helped thousands of investors capitalize from the rapidly changing face of energy. Keith connects with hundreds of thousands of readers as the Managing Editor of Energy & Capital as well as Investment Director of Angel Publishing's Energy Investor. For years, Keith has been providing in-depth coverage of the Bakken, the Haynesville Shale, and the Marcellus natural gas formations — all ahead of the mainstream media. For more on Keith, go to his editor's page.


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