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The Year of Hope

PAUL SULLIVAN

Oprah, who doesn't turn up in this column too often, is calling 2009 the Year of Hope.

As I understand it, Oprah's main hope is to lose a lot of weight — she's crept back up to 200 pounds.

For the rest of us, 2009 is the Year of Hope because the alternative is, well, let's not go there. And now that the credit bubble has popped, it is a good time for us to scan the horizon for the next opportunity. As luck would have it, I've figured it out:

Go green, young woman.

Don't misunderstand me. I'm not talking about some high-minded project that requires giving up your over-priced condo or suburban estate and trekking off into the bushes and living off the grid on solar power; I'm talking about getting your portfolio out of the red and into the green for the foreseeable future.

That's my kind of sustainability. Here's my thinking:

Everywhere you look, green is in the air. And it has the potential to be the vehicle to kick the economy back to life, and then keep it going for years to come. Green industry does not at this point require the West to try and take anything back from China — or India, for that matter. The planet is a mess, and we better clean it up before it gets any worse. Fortunately, we have the technology. And now that all the bubbles have burst and China and India have taken over the manufacturing and service economies, we have time on our hands. And money: Barack Obama has a trillion dollars burning a hole in his pocket.

Start with the auto industry: electric cars are all the rage. Not just hybrids, electrics. In an attempt to pick itself up from its fall from grace, GM is banking heavily on the Chevrolet Volt to rebuild its business. Toyota, also smarting, is also feverishly working on an electric car. The twin drivers of global warming and peak oil shocked consumers out of their SUV trance and now everyone wants a car that runs on nothing.

Unfortunately, that's not possible, but electricity is as close to nothing as we get. And no matter how efficient battery storage ultimately gets, we'll have to plug these vehicles into something. Obama, the saviour of the free world, is not going to allow electricity to be generated solely by coal. He's going to get behind the development of alternative forms of energy to create electricity, and for investors that means a whole new world of opportunity in hydro, geothermal, wind, solar, nuclear, etc. Make no mistake: it's not easy being green: weaning ourselves off petroleum is going to be a huge undertaking, which means that new fortunes are going to be made.

Once you start thinking green, a whole new world of investment appears, as there is quite the array of companies poised to take advantage of the shift. As many of them are unknowns working on the bleeding edge, you'll need to be pretty careful going in. The fundamentals still apply.

One of the most intriguing green energy stocks is right in my back yard, almost literally. Plutonic Power Corp., (TSX: PCC) based in Vancouver, is a run-of-river based hydroelectric company that is partnering with GE Energy Financial Services, a unit of GE (NYSE:GE) to bid on hydroelectric projects on the Sunshine Coast worth $4 billion. If approved by BC Hydro, it would be Canada's largest single private hydroelectric investment, generating 1200 MW of power, which the company says is enough to power 330,000 homes.

Right now, Plutonic is trading slightly above $2.50. If the project is approved — likely this April or May — Plutonic stock will be a license to print money. But all is not sunshine. Run of river sounds good—the flow of the river is altered, and then restored, unlike a hydroelectric dam, which dramatically reduces the flow of the river, and Plutonic maintains it the least environmentally harmful energy generation system in play. But politics are also in play here. The BC Hydro union is not happy that the government is allowing private enterprise to poach the public utility's territory, and if Gordon Campbell's Liberals are defeated by the NDP in May, the new government will be under enormous pressure from its supporters to kill the deal. (Full disclosure: in the past, I've done some consulting work for Plutonic Power.)

Not all green stocks are shrouded in mystery. IBM (NYSE:IBM), Big Blue, that old blue chip off the block, is rated as one of the world's foremost "sustainable" business stocks. According to Seeking Alpha, the world's largest stock market blog, IBM will be ideally placed to provide software and consulting services for businesses and institutions gearing up to control their CO2 output under new government mandates. The BC government, for example, will require all public institutions to be carbon neutral by 2010. IBM will also provide the software for making the power grid more efficient and effective. Energy software and consulting could become the single largest contributor to IBM's bottom line within the next three to five years.

Meanwhile, while you're waiting to figure out what's going on with the oil sands, you might want to consider a few Canadian companies that have been working under the radar to produce alternative energy and make a profit at the same time.

Canadian Hydro Developers Inc. is tagged as one of the World's Top 20 sustainable business stocks by sustainablebusiness.com. It has owned and operated small hydro, solar and wind power plants since the late 80s, and was profitable as late as 2007. Last year was not a great year, but 2009 is the Year of Hope. Canadian Hydro is affordable, trading at $3.40 a share (TSX: KHD) and already knows how to navigate the regulatory requirements of establishing wind, hydro and solar plants.

You might also like to watch Canadian Solar, Inc., which combines North American green tech know-how with Chinese manufacturing savvy. Canadian Solar Inc. designs, develops, manufacture sand sells solar cell and module products that convert sunlight into electricity for a variety of uses. Also affordable, (NASDAQ:CSIQ, trading at $6.79) Canadian Solar has been on the move lately after the Great Stock Ice Age. The stock's price has nearly doubled in the last 30 days, causing Piper Jaffrey to downgrade it from neutral to sell. But the long-term upside is good, especially as solar becomes an alternative.

Which it will, thanks to companies such as First Solar Inc., NASDAQ:FSLR, which designs and manufactures solar modules using a thin film semiconductor technology. The Holy Grail for First Solar is to become competitive with conventional power sources and to date it has reached the lowest cost per watt in the solar industry, at $1.08, which is pretty close to the magic $1.00, when it becomes competitive with coal.

If you think this last year was bad for the economy, the solar economy went into a complete eclipse — First Solar fared better than most: it only lost nearly half its value. A number of analysts are betting 2009 will be solar's time to shine. Here's Ernst & Young's Joseph Muscat:

"Right now the challenges in the economy are weighing more heavily than those incentive programs to try to keep the industry moving along at a good pace I do believe that the cleantech renewable energy sector will be the first to emerge when the market stabilizes."

First Solar is a lot more expensive that Canadian Solar, trading at $158.95, but all that sunshine comes at a price.

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