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How You Can Invest in the Pickens Plan

by: Tom Konrad August 21, 2008 | about stocks: ABB / CLNE / CPTC.OB / FAN / GE / IRET / ITC / NGG / OC / PWND / PWR / SI / WFIFF.PK / ZOLT    
Tom Konrad

Tom Konrad

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A friend recently asked me how to invest in the Pickens Plan.  I named a stock (see below).

He then surprised me by saying "You are the fifth person I've asked, and no one else knew how.  Several said it could not be done."

You can invest in T. Boone Pickens's plan.  Here's how:

The Plan

T. Boone's plan is both simple and audacious.  

  1. We will build wind farms all over the Great Plains.
  2. Build the necessary transmission to get that electricity to cities, displacing natural gas used in electricity generation for the use in automobiles.  
  3. This will give us an alternative, clean transportation fuel, to replace oil, which has peaked.  
  4. It will also cause an economic revival for rural America.

There are investments available for you to profit from all of these steps (so long as they are more successful than is currently expected by the market).  Most of the links below are to articles about how the company fits into the clean energy picture.

1. Wind Farm Investments

To profit from the massive build out of wind farms, look no further than wind turbine manufacturers, and other wind related stocks. 

2. Transmission Investments

We've been pushing transmission investments at this blog for a long time.  It's nice to have an oilman hop on our bandwagon.  Here are some of our top picks.

3. Natural Gas

  • The most direct investment in the Plan is natural gas fueling stations.  Clean Energy Fuels (CLNE), operates fueling stations for natural gas fleets, as well as providing fueling stations to the public.  T. Boone owns about 37% of the company personally, serves on the board, and founded the predecessor company in 1997.   His wife owns another 7%.  Although he just recently hit the media with it, T. Boone has been thinking about peak oil for a long time. (This is the stock I told my friend about.)

4. Rural Resurgence

  • Massive wind investment should be good for real estate values in rural towns in windy areas, mainly the great plains.  You don't have to buy the land that the wind farm is on to benefit; the economic revival should help land values in towns nearby, too.  The workers have to live, eat, shop, and sleep somewhere, and county tax rolls will benefit, leading to improved public services.
  • Another way to play the same trend would be to invest in a Midwestern REIT, such as Investors Real Estate Trust (IRET).  While this should profit by an improving Midwestern economy, I'd prefer a REIT with a rural focus, but have been unable to find one.

Quibbles

DISCLOSURE: Tom Konrad and/or his clients own ZOLT, GE, ABB, SI, CPTC.OB, ITC, NGG, PWR, CLNE, OC, WFIFF.PK.

 

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This article has 37 comments:

  •  
    Aug 21 09:11 AM
    Pickens' plan to use nat gas to power automobiles is audacious to say the least!! The supply of nat gas is and has always been very tight, and once people begin using them for everyday transportation use, the price of nat gas will skyrocket. Just ask all the nat gas fired power plants who came online in the 90's... Once they began using nat gas, they generated too much demand themselves.

    Most of the nat gas power generators in the US today are operating at a loss due to their own demand for the fuel.

    If the Pickens plan were to initialize, the best way to invest in it would be nat gas producers like CHK, DVN, UPL, ect...
    Reply
  •  
    Aug 21 09:24 AM
    Another stock is Trinity Industires, symbol TRN. They make the wind towers. I own them all, TSN, GE, CLNE, ABB, CHK, APC, DVN, and they are all doing well. I consider them long term investments, and won't try to time the market by getting in and out on 'breaking news'.
    Reply
  •  
    Aug 21 09:25 AM
    Mis-typed...........TR... not TSN

    Trinity Industries, TRN
    Reply
  •  
    Aug 21 09:26 AM
    If you are a real speculative risk taker, buy my company, AOAG for under a penny a share today. It has speculative Claims over hundreds of trillions of cubic feet of natural gas. You can buy a million shares today for $9,000.
    Reply
  •  
    Aug 21 09:33 AM
    Another way to combine water with wind is to use windmills to pump water.

    You need two lakes, one above another.

    When the wind is blowing, you use the turbines as pumps and shift the water up hill to a higher lake and when the wind stops the pumps become generators and the water flows down hill again.

    The Swiss have been secretly doing this with cheap nuke power from France which they quietly use at night, when the France electricity demand is low, they pump Swiss lake water uphill. and let it run turbines during the day. smooths out the electricity flow.... Maybe this is what Boone is planning.
    Reply
  •  
    Aug 21 11:16 AM
    I like a lot of Picken's plan. Still, I can't forget that he helped fund the scurrilous Swift Boat attacks that resulted in our country being amBushed again.
    Reply
  •  
    Aug 21 12:49 PM
    Buyer beware. Pickens is in it for Picken
    Reply
  •  
    Aug 21 02:48 PM
    The key to Pickens' plan is what our nation does with coal. If we continue to build coal-fired power plants (with all the carbon emissions) then the lower cost of electricity will not support the building of wind farms. If we restrict or prohibit new coal-fired power plants then long term marginal electric costs will be based on the cost of natural gas-fired power plants. In this scenario, wind power is cost effective and will displace natural gas as Pickens envisions. That will free up natural gas for other uses like displacing more expensive petroleum to power our automobiles.

    I don't believe many more coal-fired plants will be built because environmentalists have been successful in challenging them on economic grounds:
    Global Warming will cause restrictions on future carbon emissions so coal plant operators may not be able to recover their capital costs over the long operating life of these plants. If built the shareholders will loose money because the public utility commissions that regulate these plants will not allow the cost to be passed to the consumers and without that guarantee the utility companies will not build the plants.

    Natural Gas fired electric production costs have now become the base cost for electric production in this country.

    (Clean coal has too much carbon emissions and sequestering coal plant emissions has not be shown to work yet and may never work at an acceptable cost for large scale plants.)
    Reply
  •  
    Aug 21 04:27 PM
    What about Wind Turbine Syndrome? www.windturbinesyndrom.../

    Is it legit?
    Reply
  •  
    Aug 21 05:10 PM
    This plan is a fascinating combination of existing technology.

    While, I agree with the sentiments of "mertenfam" and "user 199792", I must respond to one comment by "Breadnight"...

    Pickens is very clear about the initial thrust of natural gas usage and vehicle conversion. If you read the full plan, he takes the Port of Long Beach model for converting heavy equipment and eventually the highway trucking system as the most reasonable, short-term (10 year) solution to converting electricity generation from natural gas and shifting that supply to the heavy equipment users. Unless there is a rush by auto manufacturers or passenger engine re-tooling and scads of refueling stations (neither very likely within this frame), there should be a modest uptick in nat gas demand, but the shift in power generation usage to wind would more than likely offset extremes in the gas market.
    Reply
  •  
    Aug 21 07:19 PM
    eminent domain
    Reply
  •  
    Aug 21 10:33 PM
    Good piece. We just drove I-90 across MN and saw dozens of wind mills. At a motel, talked to a maintenance crew chief for a maker of the windmills. He's building a 30-man maintenance crew. His firm has just installed 100 and will have 360 in the area by yearend. $2.5 mill per windmill. Power companies are taking advantage of tax credits to build the things, which pay for themselves in 4 years, the guy said. A farmer told me farmers get $4k for allowing an installation, plus, I guess royalties. I plan to look into it for my farm. Wondering about windmill syndrome, which was reported last week. People, especially kids, find it hard to sleep and reportedly have other problems if they live too close to a wind mill.

    Why some wind mills are operating and others aren't: Broken. Down for maintenance. Not commissioned, yet.
    Reply
  •  
    Aug 21 10:38 PM
    ? What no mention of SATC....this Alternative Energy Company, just received a hugh commercial contract to provide commercial rooftop solar technology, for Boston's Atlantic City Convention & Visitor's Authority....
    boston.bizjournals.com...
    Reply
  •  
    Aug 21 10:58 PM
    ITC Holding (ITC) has the best charts:
    stockcharts.com/charts...
    Reply
  •  
    Aug 22 12:04 AM
    Another angle to the wind play will be the increased need for frequency regulation to keep the power grid stable. Wind's intermittent nature will cause fluctuations between supply and demand which frequency regulation balances. Beacon Power builds utility scale (up to 20 MWs) flywheel energy storage plants which act as electric "shock absorbers" to soak up excess power or add power to the grid as needed.

    In addition, Beacon Power is exploring energy storage as a way to integrate wind power in California where transmission capacity is limited. Further details are in the link:
    www.reuters.com/articl...
    Reply
  •  
    Aug 22 12:54 AM
    tom, you have been writing great articles and great blog entries for a long time. from a longtime fan, thanks for ur insight to alternative energy investing, because not many people do what you do in a quality way.
    Reply
  •  
    Aug 22 08:45 AM
    great potential market for superconducting DC transmission.
    > jack
    Reply
  •  
    Aug 22 09:13 AM
    BNS,

    Thanks for the note about wind energy storage. As Pickens himself acknowledges, it is the key to making wind farms work.
    Reply
  •  
    Aug 22 09:18 AM
    Informative post, thank you.

    Howver, LNG heavy vehicles have been omitted from this discussion. They are why Boone is building wind farms in the first place. Some companies involved are Kenworth, Cummins, and Westport Innovations.
    Reply
  •  
    Aug 22 10:09 AM
    Excellent co.listings and great posting. Natural Gas is plentiful and too hot for these plays to be really profitable for an extended time, as is Coal. So that is the competition in the US. It will take large tax breaks to get anything moving- so the companies become dependent on the whims of govt. laws and who is in "power." There will be opportunites, sure, but US/CN coal/NG will be the focus for years to come. Amazing how NG comes down to $8 or less range when any hint of demand destruction is evident. Western PA/ WV small towns flourishing with all the gas/coal activity-- EQT, Atlas Cos., LINE, Consol/ CNX etc. booming. So it will be interesting to see this all play out for sure. Trucks/SUV's flying off the lots again, the consumer has a very short term memory and is very spoiled. Heating Oil/Coal cust. switching in droves to NG. Solar is just too expensive w/o tax breaks/subsidies. Who wants to put solar into an older home that may decline further in value or be flat in value for years. . Once GE cleans up their financial crap more, they should be hungry for some of these alt. energy plays so the good opportunites in the industries may have a floor under them from a takeover perspective. Witness Headwaters (HW.)
    A lot to think about for a long-term investor for sure, short term probably money to made in a volatile market.
    Reply
  •  
    Aug 22 01:14 PM
    All of these articles on wind power, yet I have never seen a mention or consideration of the "butterfly effect". (Any Jurassic Park fans out there?) Use of worldwide wind power could be more harmful to our enviornment than carbon emissions from coal.
    Reply
  •  
    Aug 22 07:43 PM
    Whenever you are considering the pros and cons of the Pickens Plan
    one "pro" that should be considered but rarely is, is the cost of defending a difficult to find and increasingly expensive substance called crude oil", or perhaps more appropriately, "cruel oil".

    If everyone factors in the requisite defense and war costs of God awful escapades like Iraq (estimated to be in the 3-5 trillion dollar range overall) coupled with economic servitude to the likes of OPEC nations
    the "pros" should take on additional weight.

    How many wars, lives lost and national treasure squandered will it take to make us wake up to the fact that reliance on foreigners for a central element in our economy (transportation of goods, services and ourselves) is a dead end indeed?

    If our national net economic loss is 700 billion dollars as Pickens suggests, adding in Professor Joseph Stiglitz' 3-5 trillion dollars makes the cost absolutely prohibitive and a minor thing like the human cost increases that figure beyond an imaginable level.

    With the discovery of the recent massive reserves of natural gas there is no sane reason to do whatever is necessary to break up our dependence on the most un-American fuel of all, crude oil.

    Reply
  •  
    Aug 22 07:43 PM
    Whenever you are considering the pros and cons of the Pickens Plan
    one "pro" that should be considered but rarely is, is the cost of defending a difficult to find and increasingly expensive substance called crude oil", or perhaps more appropriately, "cruel oil".

    If everyone factors in the requisite defense and war costs of God awful escapades like Iraq (estimated to be in the 3-5 trillion dollar range overall) coupled with economic servitude to the likes of OPEC nations
    the "pros" should take on additional weight.

    How many wars, lives lost and national treasure squandered will it take to make us wake up to the fact that reliance on foreigners for a central element in our economy (transportation of goods, services and ourselves) is a dead end indeed?

    If our national net economic loss is 700 billion dollars as Pickens suggests, adding in Professor Joseph Stiglitz' 3-5 trillion dollars makes the cost absolutely prohibitive and a minor thing like the human cost increases that figure beyond an imaginable level.

    With the discovery of the recent massive reserves of natural gas there is no sane reason to do whatever is necessary to break up our dependence on the most un-American fuel of all, crude oil.

    Reply
  •  
    Aug 22 07:46 PM
    To the John Kerry Lover:

    There was nothing scurilous about the Swift Boat program to demolish a politician that needed to be demolished since he laid claim to heroics that apparently most of his own sailors chose to dispute. All Pickens did was spend a little of his own money to support the effort and let it happen. "Scurilous" indeed, the attack was out in the open, nothing secret, names named, books written and NOBODY SUED FOR SLANDER OR ANYTHING ELSE. That ought to tell you something about Senator Kerry.
    Reply
  •  
    Aug 22 10:53 PM
    With regard to all the Pickens Plan bashing (too costly, doesn't address the whole scenario, he's in it for personal profit (of course he is; what successful businessman wouldn't figure in profit, and besides, isn't profit the basis for Capitalism?)), at least he proposing some type of solution for our problem. Maybe he's right, maybe he's wrong, but at least he's doing more than our useless, impotent Congress and President. Nobody else seems to be getting off their butt to fix IT.
    Reply
  •  
    Aug 23 01:26 PM
    The Pickens Scam is really a joke for anyone aside from Pickens and his investors. Not because windmills are bad -- they're fine, and we could probably use a few more of them -- but because he is boldly lying when he claims that paying more for his windmills will do anything to make the US energy independent.

    Even in the best case scenario, it's a drop in the bucket. It is simply impossible to generate enough wind power that it could meaningfully reduce US usage of natural gas for electricity generation and to divert that to powering motor vehicles.

    Anyone who spends ten minutes with the numbers can see this. Most electricity in the US is generated from coal, and most natural gas is not used to create electricity. Even if you could reduce electricity generation from natural gas by 10% (a totally unrealistic assumption, by the way), you would only reduce demand for natural gas by about 3%. The math does not compute.

    Ultimately, the Pickens Scam would make the US even **more** dependent upon imported energy, because the US lower 48 is depleting what is left.

    Over time, the US is destined to import more of its gas from foreign sources, which means more money for the countries that have it, such as Russia and Iran. In other words, the usual suspects.

    The Pickens Scam ultimately appeals to the greed and stupidity of the American voter, who doesn't want to accept the reality that the quickest route to using less imported energy is to consume less energy.

    That means downgrading your lifestyle and figuring out how to use less energy, even if it means walking, using public transit or just staying home. Americans apparently lost their rationing gene sometime around 1945, and they are bound and determined to never, ever get it back.

    (None of this is a criticism of the article, by the way. I'm watching GE, too, but I doubt that Pickens can buy enough windmills to do much for their fundamentals.)
    Reply
  •  
    Aug 23 03:05 PM
    I have no clue what or where the Great Plains are, but we have tens of thousands of wind towers over here in Germany. They are ugly, deface the landscape, are noisy as hell and throw shadows that are half a mile long. House prices plummet whenever there is a wind farm developed nearby. Moreover, wind is an unreliable energy source. People will come to realize that wind power is only a pretty epensive fad and does nothing to relieve us from our dependence on oil and nuclear power. I would not bet my money on wind power stocks. Nonetheless I own GE stock, but for other reasons than wind power turbines.
    Reply
  •  
    Aug 24 02:52 PM
    Pickens like him or not is offering an actual plan which has been devoid in washington for ever
    Reply
  •  
    Aug 25 10:49 AM
    Pch101, if you think the US, with a growing population, is going to significantly cut it's energy usage without utterly destroying the economy, then the joke is on you. Conservation is an element in any good plan, but only one of many important facets. To rely on that above all else, is utterly ridiculous.

    Pennystocks2, you're right. No one in their right mind would want to live within sight of a windfarm. I've seen them up close and personal for an extended period of time, and they are akin to chinese water torture. Fortunately, there are places on the Great Plains, where no one lives and no one would want to.
    Reply
  •  
    Aug 25 12:52 PM
    Power poles, gonna need a lot of those
    Reply
  •  
    Aug 25 04:06 PM
    Just traveled up interstate 580 to San Francisco. Windmill farms everywhere. Boy are they ugly and if we are to replace coal fired electrical plants they'll be everywhere and we'll regret it. I say nuclear!!
    Reply
  •  
    Aug 25 11:51 PM
    McSpin, you miss the point.

    Pickens is selling a pipe dream that the US is going to become energy independent. The US has a snowball's chance in Hades of achieving energy independence.

    Energy independence cannot possibly be achieved in the United States without major lifestyle changes and reductions in commerce that Americans will simply not make, under any circumstances.

    The Pickens Scam is simply a corporate welfare scheme that will produce no bang for the buck for anyone, except for Pickens and his cronies. It's a pork barrel project that appeals to our base instincts and to those who can't do a bit of research or use a spreadsheet.
    Reply
  •  
    Aug 26 03:09 PM
    You're right on target Pch101. Once again, we need to go nuclear for electrical power, and pursue plug in hybrids for our cars. This will help us get us through the transition period until possibly hydrogen becomes feasible.
    Reply
  •  
    Aug 26 03:58 PM
    Plug in hybrids for cars, ok, but there are 200 mil cars in this country, how long do you think it would take to make a significant change using plug in hybrids. Ordinary hybrids are a fraud, must be plug in. With NG we can do conversions; sitting here on my street is a pickup truck that runs on NG or Propane.. As far as hydrogen, it appears to be only useful for things like a city bus or similar, not even likely economical for taxi cabs.


    On Aug 26 03:09 PM jtsymbo wrote:

    > You're right on target Pch101. Once again, we need to go nuclear
    > for electrical power, and pursue plug in hybrids for our cars. This
    > will help us get us through the transition period until possibly
    > hydrogen becomes feasible.
    Reply
  •  
    Aug 26 04:24 PM
    Mouse - what are you afraid of, do you think that windmills will slow down the earth's rotation, or what?
    Yes, I know about the "butterfly effect" and did know long before "Jurassic Partk).


    On Aug 22 01:14 PM mouse85 wrote:

    > All of these articles on wind power, yet I have never seen a mention
    > or consideration of the "butterfly effect". (Any Jurassic Park fans
    > out there?) Use of worldwide wind power could be more harmful to
    > our enviornment than carbon emissions from coal.
    Reply
  •  
    Aug 26 10:04 PM
    Pch101, the point is, conservation is not the answer. Any significant amount would be the death of our economy. Extreme conservation would cause far more harm than good. It's last on my list of things to put into an energy plan. It's great for short term relief, but is a real drag for a long term energy strategy.

    And certainly energy independence is possible, just not for 30 years or more. It would take a plan and some advances in technology. If you think those are not likely to happen, then you haven't studied history and noticed what people do when pressed. Now, for the first time this country is starting to see some real pressure on our wallets in regards to energy purchases. If this keeps up, we'll find the workable replacements.

    I am anything but a Pickens supporter. Like I said, I've seen the wind farms up close and personal - they suck. But there is a place for some of the different energy technologies.Competiti... between the