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Hedge fund manager Chanos says it’s time to short solar and wind energies

Thursday, May 26, 2011
Opalesque Industry Update – Celebrated short-seller James Chanos, founder of Kynokos Associates, is taking aim at the “greenies” or clean energy companies. Of particular interest to him are solar and wind energies which he said are ripe for shorting.

Arriving at the annual Sohn Conference in New York held on Wednesday, Chanos declared, “We’re gonna upset the greenies. The problem is the companies we are looking at are not capable yet of being baseline power generators. Wind and solar are not efficient.” Chanos has good reason to believe he was right. He said that among the many problems inherent to these green energy technologies are the high cost of maintaining them which discourages demand.

He particularly criticized Vestas, a wind energy firm. Chanos accused Vestas of resorting to questionable accounting practice to make it appear that the firm is financially viable when in truth their cash flow “had turned down dramatically and the company had declining returns on capital.”

But for him, the most exciting sector to short at this time is solar power companies. He described solar companies as inefficient and are more costly compared to gas and coal-powered plants.

Indeed, government policies are pushing people to switch to solar energy rather than genuine demand, Chanos said. Some European countries even reduced their dependence on the use of solar power which has further decreased demand for the technology.

As for the best solar firm to short, Chanos is betting his money on First Solar, which he said is using a questionable old technology and currently experiencing operating problems arising from low-cost competitions.

More bad news for First Solar is that some of its key management officials are leaving the firm. ”They are seeing the same things we are seeing,” Chanos declared. “We advise you to heed their warnings.”

What do you think?

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