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The Really BIG Next Big Thing

Written By Brian Hicks

Posted July 10, 2007

If you could’ve bought Amazon at $3 in 1997, you would have. Hindsight is 20/20, if not entirely honest. Buying a LOT of it in 1997 at $3 would have required a certain amount of vision and commitment to your instincts to risk so much on an emerging sector with no financial performance history. But Amazon was the forerunner of that decade’s Next Big Thing, which was the Internet.

If you got out at the top, which would put you in the top percentile of investors both professional and otherwise, you’re thinking (if you’re even active as an investor anymore) “Where is it? Where is the NBT?”

Now, in the present decade, where no truly Big Thing has yet made itself apparent, there are ample indicators to suggest what the Next Big Thing might be.

The Alternative Wave

It’s alternative energy. Meaning non-hydrocarbon energy. And for this discussion, we will temporarily ignore uranium, for its use has grown sufficiently that it really can’t at this point be considered “alternative.”

Our investments at Venture Insider have already returned substantial value appreciation in short order. We bought NaiKun Wind Energy (TSX.V:NKW) at $0.27; it has since established a nice level for itself in the $3.00 to $3.10 range. NaiKun plans to sell the entire production capacity from its 550 square kilometer offshore wind farm within the Hecate Strait’s Energy Field, also known as the Haida Energy Field, to B.C. Hydro. (British Columbia’s number-one electricity provider.)

At yearly output rates of 6,750 gigawatt hours at an estimated average price of $7,400 per GWh, that could mean $50 million annually in revenue. What that ultimately means in terms of earnings per share remains to be seen as we wait for construction, maintenance and operation costs to firm up. Rumour has it that the government will actually end up paying substantially higher rates for the power produced.

With only 16.2 million shares outstanding, you will forgive me if I pat myself on the back for such foresight.

Oh, all right. I confess. The reason I bought this deal is because somebody to whom I listen said “buy.” So I did.

But the point is served. It’s an alternative energy company poised for a double after 30 days.

The Run of the River

Another runaway winner was Plutonic Power Corp. (TSX.V:PCC), which in eight months has increased in value over sevenfold, from $0.90 in May of 2006 to over $7 now.

These guys employ a green form of the hydroelectric power plant to generate power with a minimum of environmental disruptions. It’s called “run-of-river.”

Run-of-river technology harnesses the natural gravity of a river’s flow to produce electricity. Controlled volumes of water are taken from the river upstream of the powerhouse. Water from the river is channeled through a settling basin, which removes sediment that could harm the turbine. The water then flows through a pipe called a penstock. When the water reaches the bottom, it drives a turbine to produce electricity. It then flows back into the river, meaning that the flow in the river downstream is always exactly the same as the flow in the river above the project. Niagara Falls is an example of “run-of-river” technology.

Plutonic’s proposed 22 run-of-river projects have a design capacity of approximately 1100 MW and the potential to generate an estimated 3500 GWh per annum of green energy, enough to meet the annual energy needs of about 300,000 homes. Included in the 22 projects is the creation of the Green Power Corridor, a series of non-storage hydroelectric projects in southwestern B.C. that hold the potential to catapult British Columbia to the forefront of green energy generation in North America.

This company’s share structure remains tight as well, at 28.7 million shares out, 37.5 million fully diluted.

Storage Solutions

Another interesting alternative energy company is VRB Power Systems (TSX.V:VRB), also operating out of Vancouver, B.C.

VRB Power Systems Inc. is an energy storage technology developer that is manufacturing, marketing, and selling products utilizing the patented VRB Energy Storage System (VRB-ESS). The VRB-ESS can economically store and supply large amounts of electricity on demand and is focused on stationary applications. It is a long-life, cost-effective, low-maintenance, efficient technology that allows for the scalability of power and storage capacity independently.

The VRB-ESS is characterized by having the lowest ecological impact of all energy storage technologies and is unlike most conventional energy storage systems that rely on substances such as lead or cadmium.

The company is currently trading in the $.60 range, and is very liquid, with some big names in Canadian funds growing their holdings steadily. The big question for VRB is, can they penetrate the market sufficiently to generate significant sales?

The answer will largely be determined by the recent appointment of Brian Beck, who has over 30 years of experience in the electrical industry in Europe and North America and has been actively involved in the restructuring of electricity supply on both continents.

Most recently Mr Beck was General Manager of Caterpillar Energy Solutions, where he was responsible for initiatives in power quality and distributed generation.

Together with its management team, which includes Gary Lepp, formerly head of product development for Ballard Power Systems (TSX:BLD), the company has a unique product that is finding traction slowly but surely with various applications.

Caveat Emptor

In Forbes Magazine’s most recent issue, the comment was made that investors need to be leery of the scams that proliferate when a previously fringe sector becomes front and center. I would make the comment that this is the case at all times, in all sectors. In terms of dollar value losses to investors, the problem is best to be seen and avoided in large-cap, seemingly blue chip companies.

Can you say “Enron”?