Posted by Michael Hainsworth on January 30, 2009

Don Vialoux of Timing the Market tells us investors need to use fundamental, technical and seasonal analysis in three equal parts before making an investment.

Are you thinking about jumping into a specific sector? If I can make out my chicken-scratch notes taken during today's Market Call, here’s Don's take on the months of seasonal strength for several key areas of the markets.

Agriculture & Fertilizer companies: End of June to the end of December.

Oil: End of January to the end of May.

Gold: November to the end of January.

Platinum: End of December to the end of May.

Base Metals: End of June to the end of May.

Canadian Banks: End of February to the end of May.

U.S. Banks: November to May.

Coal: End of January to May.

If you missed any part of today’s program, you can catch the replay HERE.

 

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Posted by Howard Green on January 28, 2009

So much for the old saw about insider buying.  If you've forgotten, it says that if executives, officers or directors are buying, it can be a good indicator of a company's prospects.  After all, if the insiders don't know, who does?

Well, you can give that one a rest.  Take a look at recent filings by top executives at Nortel, a company that filed for creditor protection earlier this month.  CEO Mike Zafirovski and chief strategy officer George Riedel were buyers of the comatose stock in the past year.  

Zafirovski bought as recently as Sept. 30, 2008.  Regulatory filings indicate the CEO of the penny stock company that was once the mightiest on the TSX, bought stock on three occasions in 2008.  On March 31, 2008, he bought 445 shares at a price of $6.91.  At the end of June 2008, he bought more Nortel common stock, 2,341 shares at $8.53 per share.

At the end of September, just days after the radical realignment of Wall Street with the bailout of AIG, the fire sale of Merrill Lynch and the failure of Lehman Brothers, Zafirovski bought another 1,361 shares at $2.56.  The filing for all of these purchases was Jan. 19, 2009.  
 
Since his last purchase, shares of Nortel continued their journey to oblivion.  On Jan. 14 of this year, the day Nortel announced it was seeking creditor protection in Canada and the U.S., a move that would have been unthinkable in the go-go years of the tech bubble, the stock closed at a mere 12 cents.  It fell as low as nine cents on Jan. 20. 

Investors will recall that in recent years, the company consolidated its stock 10 for one to puff up the shares. All for naught, it seems. 
 
After adding 4,147 shares in the past year, Bloomberg reports, Zafirovski has a grand total of 253,476 shares in the fallen giant.  Nortel would not confirm that total figure.  Nonetheless, as insolvency lawyers will tell you, common shareholders can expect to get a grand total of nothing after a court restructuring.  

Filings show Zafirovski wasn't the only Nortel executive with high hopes.  Chief strategy officer George Riedel was loading up on stock, as well.  On March 31, 2008, he bought 1,204 shares at $6.76 U.S. and another 1,995 shares on June 30, 2008, at $8.45 U.S.

 

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Posted by Michael Hainsworth on January 28, 2009

A moment now to reflect on the silent victims of the financial crisis: the girlfriends of the Wall Street bankers who have been emasculated by slashed bonuses and cut up credit cards.

London's Daily Mail reports a support group has been started in New York called "Dating a Banker Anonymous." The group's website invites women to join if "your monthly Bergdorf's allowance has been halved and bottle service has all but disappeared from your life."

Co-founder Megan Petrus set up the group after her stock jock boyfriend was more concerned about a colleague being fired than her father suffering a heart attack. Her partner Laney Crowel admits it's very tongue-in-cheek but stems out of serious and heartfelt situations. Situations like this one:

“Thanks to the recession, I now have a completely devoted boyfriend, which is exactly what I wanted. So I should be happy, right? Wrong. I’m bored and can't stop thinking about my perpetually unattainable Euro ex-boyfriend who is recession-proof courtesy of an offshore trust account."

The paper claims the meetings are generally attended by about 30 women in their 20s.

Unlike the 12-step program for alcoholics, this support group has three steps to ease the economic and emotional crisis: step one? Slip into a dress and heels. Step two: sip a cocktail. Step three: pour your heart out.

Basically the same approach I took when I found out Bill Gates was leaving Microsoft.

If you're looking to pour your heart out, Dating a Banker Anonymous is waiting.

 

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Posted by Linda Nazareth on January 28, 2009

As these things go, it was a shopaholic budget and it was presented with no apologies.

The 2009 federal budget had a little bit of everything in it as far as spending goes – housing, training, aid to farmers – even something called marquee festivals.

Sure, there will be lots of commentary from groups saying they didn't get enough, but honestly, the whack of spending this time around was something few of us would have dreamed of even a few months ago.

Then again, a few months is like a lifetime ago in economic years.

When the government came out with the November fiscal statement, the R word was only starting to be whispered on this side of the border. Since then, the U.S. situation has deteriorated further. And the Canadian economy has toppled precipitously:  exports have fallen, tons of full-time jobs have been lost and retail sales are down, too.

Like most governments around the world, it was literally go for broke in terms of fiscal stimulus. So in-your-face spending is suddenly the new black.

The last few years it has been fashionable to run surpluses and maybe try to hide any really crazy program expenditures. Not so anymore. Spending is all the rage. Tax cuts are good, too, and we got some of those as well, although they were a bit second-tier to the expenditures. 

Is it all going to be enough to turn around the Canadian recession? Well, at a bit less than 2 percent of GDP (ballpark estimate) the fiscal stimulus is pretty modest compared to other parts of the world. By the time the U.S. is done, their stimulus measures will probably be closer to 3.5 percent or 4 percent of their economy.

And that is as it should be: this is not a made-in-Canada recession, and throwing an infinite amount of money at the problem is unlikely to make a huge difference. The real healing has to come from the U.S., where every day seems to bring a new, grim economic indicator and commentators are getting increasingly comfortable using the word depression.

Given the depression scenario, you probably will not even hear many economists criticizing the government for projecting five – yes five – years of deficits at a total cost, so far, of $85 billion. 

Sure, we would all have preferred that Canada not get into debt again, but at this point the alternatives are worse. And, even if the deficits end up being a little deeper than in these projections, Canada is in a decent position to deal with it. In the early 1990s, Canada's debt to GDP ratio was in the high 60 percent range. Now, it's under 30 percent, and even with the new spending it's unlikely to go up by more than a few percentage points.

Chances are, there is enough stimulus coming out of this budget to cause some kind of recovery in Canada by 2010. If that sounds like a fairly imprecise bit of analysis, it should be pointed out that these are imprecise times.

Last week the Bank of Canada told us that the Canadian economy would grow by 3.8 percent in 2010; yesterday the Department of Finance said it would be 2.4 percent; today the International Monetary Fund says Canadian growth will be 1.6 percent. 

Consumers are not shopping till they drop anymore, so let's just be happy that somebody still is.

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Posted by Mark Bunting on January 26, 2009

I had a phone conversation recently with David Butters at Thomson Reuters, who is based in Boston. Or, more accurately, he expertly reeled off numbers while I frantically wrote them down.

He gave me an update on first-quarter earnings numbers for S&P 500 companies. Yes, they're bad and not expected to get much better. It's only by the fourth quarter of 2009 that analysts think the gloom will lift somewhat.

But, analysts are usually more optimistic when taking the long view.

Tell that to Nouriel Roubini, the New York University economics professor who made his name by predicting much of the damage we currently see in financials markets and economies.

He's giving no indication that he'll stop being a gloom merchant anytime soon.

Roubini says China is in recession. He's saying, in so many words, pay no attention to the GDP numbers behind the curtain. Roubini is convinced that China massages its economic numbers and the real depth of the contraction is not being revealed.

He believes that demand out of China will continue to decline, which will help to send the S&P 40% lower from current levels. That's right. To 500!

Although, strategists, on average, are forecasting the index will rise 29% by the end of the year to 1,066.

But, back to Butters and Thomson Reuters’ data for Q1 earnings so far. Here are the highlights:

- 78 S&P companies have released earnings

- 58% have beat analysts' estimates

- 10% have met estimates

- 32% have missed estimates

That last number is in line with the past 4-6 quarters, where missed estimates by percentage have ranged between the low 20s and low 30s. The long-term average for companies missing forecasts is 21%.

Q1 will be the sixth straight quarter in which earnings have fallen, the longest streak in the 10 years that Thomson Reuters has been collecting the data.

The earnings damage has spread from financials and consumer discretionary to most sectors with the exception of health care, utilities and consumer staples.

Financials are expected to take an overall loss in Q1 (or profit down over 100%) vs. profit of $5B US in Q1 of 2008, and about $50B US in Q1 of 2007.

Materials are expected to be the next worst performing sector with Q1 profit dropping 72%.

Earnings releases will peak next week with 137 S&P 500 companies reporting.

Grim reading, to be sure.

 

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Posted by Linda Nazareth on January 20, 2009

Really, it is nice to see the optimism.  It's fabulous to see Americans happy, and the world celebrating along with them.  And how great if the inauguration of Barack Obama makes kids all around the world think they can achieve anything they want.

It almost seems wrong to ask the question, but what does any of it really have to do with the economy?

Will the enthusiasm about the new president make Americans feel so upbeat that they head out to buy new flat screen television sets? And if they do, is that a good idea in a country sliding into bankruptcy? Surely we are not hoping that banks and mortgage companies, in a buoyant mood themselves, start stamping "approved" on a bunch more bad loans.

Those are tough considerations, but these are tough economic times. It will be a beautiful party on inauguration day, but the economy that brand-new President Obama is inheriting is an ugly one.

The U.S. economy is in recession –  and it's a deep one. Pick your definition of the word and current conditions meet it.  Gross domestic product is sinking, jobs are in decline, retail sales are falling, industrial production is contracting.  At least in some markets, U.S. housing is in something approaching a depression. 

True, there are already measures in place to kick-start the economy. The Federal Reserve has lowered its overnight rate to basically zero and is using something it calls "credit easing" to get some liquidity going.

On the fiscal side, the U.S. is already headed for a budget deficit of a trillion dollars and counting as policymakers throw money at the problem in every way they can think of. 

With the problem being "fixed" from both the monetary and fiscal side of things, some kind of recovery is going to take shape. 

Trouble is, the bounce is only going to come after the U.S. and global economies hit the depth of things, and that might be a ways off.

The unemployment rate in the U.S. – currently 7.2 percent – could go past 10 percent in the next year or so.  Bankruptcies, among both companies and individuals, will almost certainly mount.  Inevitably Mr. Obama will take some blame even as he argues, with some validity, that no one could have turned things around any faster.
 
Worse still, the remedies for the economic malaise are likely to cause their own problems. 

No one is going to want to talk about it for a while, but deficits inevitably have to be paid for by higher taxes or lower spending. Or maybe they get paid for by just floating a ton of debt – which eventually pushes up interest rates to everyone.

And speaking of interest rates, what is the price of zero rates? It could be credit bubbles, runaway inflation or something else entirely. Not one of the policymakers or analysts watching the situation has had any real experience with zero rates in the U.S., so it's all more or less a learning experience.

Of course, Mr. Obama gets all of this, or at least understands that the economy is not going be a quick-fix problem. Speaking of solving the problems he inherited, on election night he was careful to say that "we may not get there in one year, or even in one term." 

And that might actually be the best way for the situation to evolve. Let the improvements in the economy be slow and steady and lasting, based on real gains in incomes and output.  A little boring maybe given the buildup, but the wild rides in the markets and the economy seem to have ended rather badly.

So let's enjoy the party, be inspired by the speech and celebrate the history of the moment.

Let's also remember, though, that they sometimes call the new president "No Drama Obama" for his ability to continuously keep his cool, no matter what.

With a lot of "no matter what" ahead, that might be the best reason of all to celebrate.

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Posted by Michael Kane on January 20, 2009

After asking BNN viewers to send in their blog topics, I must say I've been impressed with the depth of thought some have expressed.

Pete in London, Ont., wrote to say he's become wary when he hears that a company has "deep pockets."

One analyst used that expression to describe a resource company, prompting Pete to plunk down a chunk of change, buying 1,000 shares at an average price of $3.84 a share.

He's added that now, a few months later, they're creeping up from their low of 20 cents, but he's settling in for a long wait.

He finishes by saying "So beware of 'Deep Pockets' unless you want your own to become considerably shallower."

I hear you, Pete. To me, if a company is known to have a lot of cash on hand, it also means they can survive as a going concern without necessarily doing the right things to keep the share price up.

Look at poor ol' Nortel. I don't hold any Nortel stock but with the share price sitting at 9 cents as I write this, it sure is tempting. The company is still a leader in its space, it has some of the brightest minds in the business and it's a Canadian icon. And it has more than $2 billion in cash. Hmmmmm.

But the investment world is not a sentimental place. I get the shakes when I watch Kevin O’Leary. I love the guy, but that is one cold, dark place he comes from. And he's made a fortune from a very intelligent investing strategy.

But the problem with guys like you and me, Pete, is that we’re optimistic we can sow pennies and harvest dollars.

I think cash is cool. Penny jars look nice when they're full.

 

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Posted by Paul Bagnell on January 14, 2009

There will be lots more said and written about Nortel Networks in the weeks ahead, but today – the day Nortel has filed for creditor protection – is a day when anyone interested in the Canadian business scene has got to stand back and take stock.

It's really no surprise that Nortel has filed for protection. It was clear when the company issued third-quarter results on Nov. 4 that it was running dangerously low on cash.

But for those of us who followed Nortel – or invested in it – during its heyday (I, sadly, am part of both groups) it's still a dramatic development.

There was a day when Nortel strode across the global corporate landscape like a colossus, buying up smaller telco gear companies the way a hungry bear devours blueberries. It used its own shares to make most of those purchases so often that Nortel stock became known as a separate currency.

It recorded eye-popping profits and its stock soared to unthinkable valuations. A decade ago, with telecommunications companies frantically gearing up for the age of high-speed Internet service, Nortel's future seemed as bright as its present.

Even in the early days of the tech wreck, it seemed that Nortel would endure. The Nasdaq Composite Index began its destructive meltdown in March of 2000. Nortel stock, meanwhile, climbed a further 29% between early March and late July that year.

But reality soon set in. It was no more sensible to assume the world's demand for telecommunications gear was bottomless than it was for stocks of dot-com companies with no earnings prospects to soar to the heavens.

Nortel stock crashed in the summer and fall of 2000. Things were never the same.

Demand for telco gear was very slow to resume again. When it did, other companies did a better job than Nortel at competing for the business that was available.

Accounting scandals hit. When new management arrived, it found itself consumed with straightening out the books, rather than finding new ways to compete and win in the high-stakes world of telecommunications.

The company that had been a great source of Canadian pride has become an embarrassment.

Today's announcement poses several questions:

- Can Nortel really emerge from the creditor protection process a leaner, more focused company? Most experts we spoke to today at BNN say it's more likely to sell its assets, one by one. Nortel is desperate for cash.

- What kind of prices can Nortel command for businesses it must sell? Its Metro Ethernet division was put up for sale months ago. So far, no buyer has emerged. With the global economy seizing up, the timing couldn't be worse.

- And how much blame does Nortel CEO Mike Zafirovski deserve for this? Zafirovski took the top job in late 2005, speaking bullishly of making Nortel more focused, more competitive, and turning persistent losses into profits. It hasn't happened. Even before the global economy went sour in 2008, Nortel was badly underperforming its peers.

Zafirovski’s defenders will argue that the job of resurrecting Nortel may simply have been impossible. But that's going too easy. After 3 years on the job (and a $1.2 million US salary), Zafirovski should have been able to deliver more.

There's lots of blame to go around in the sad saga of Nortel Networks, and plenty of time for angry shareholders to portion it out. "Mike Z" will get his share.

 

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Posted by Andrew Bell on January 14, 2009

Looks like alternative power producers in British Columbia aren't getting their plug pulled by monopoly generator BC Hydro after all.

Versant analyst Massimo Fiore says today that in a letter submitted to the B.C. Utilities Commission, the utility sought to "overturn a recent proposal to limit its call for green power to 3,000 GWh/year (gigawatt hours per year)." 

BC Hydro had sought to curb its so-called 2008 Clean Power Call by 40%, citing slowing economic conditions, but now thinks "the original 5,000 GWh/year would be closer to its potential energy needs," Fiore says.

He says the U-turn is a long-term boost for hydro developer Innergex Renewable Energy Inc.  (INE- T), which he calls a buy with a target of $6. The stock's down more than 60% in a year, trading at $3.95 today.

The Versant analyst also has a buy on another hydro player, Plutonic Power Corp. (PCC- T), with a target of $8.00. That one's down more than 70% in a year, trading at $2.21 today. 

The B.C. move also sounds like welcome news for other new power contenders such as Run of River Power Inc. (ROR – Venture) and NaiKun Wind Energy (NKW – Venture).  

 

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Posted by Mark Bunting on January 14, 2009

Let's get the pleasantries out of the way: having empathy for the estimated 26,000 workers at Nortel Networks whose jobs are at stake and the thousands of shareholders who've lost millions of dollars is a given.

I play hockey with a guy who's still hanging on to his Nortel shares, not because he thinks they're eventually going to at least break even but because he gave up on them a long time ago. And, he's far from alone.

Nortel's bankruptcy filing is a solid news story and BNN is all over it, as you'd expect us to be. It's a chance for a retrospective on a once great Canadian company with a long, storied history. An opportunity to ask what went wrong.

But the reality is that, as a company and as an investment, Nortel Networks stopped being relevant years ago. The company's bankruptcy protection filing is nothing more than the ceremonial act of throwing dirt on the coffin.

I'm a big believer in the expression "listen to the market." What has the market been telling us about Nortel for at least 5 years? That it doesn't care. Nortel has been dead money for a long time.

Sure, one could have traded Nortel and perhaps made some money. Or maybe there were some profits to be made shorting it or playing the options. But as a long-term investment case, Nortel has been a basket case.

Accounting scandals and progressively weakening demand for its products have guaranteed near complete indifference from investors.

The tech bubble started showing stress lines in 2000 and, since then, all that we've been witnessing at Nortel has been a long, slow, painful demise.

Now, let's move on to more pressing matters.

 

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Posted by Andrew Bell on January 13, 2009

Media conglomerates Astral Media (ACM.A – T) and Corus Entertainment (CJR.B – T) report their Q1 numbers Wednesday and analysts aren't expecting much showbiz adrenaline. 

The Street sees profit edging up 6% to 50 cents a share at Corus and just 1%, to 69 cents, at Astral. Still, that's better than the earnings collapse threatening lots of more cyclical companies.

Primetime television is vulnerable to a recession-driven ad slump but Astral and Corus are big in specialty channels, which have been attracting "eyeballs and advertising dollars" according to RBC analyst Drew McReynolds. 

Specialty channel ads supply 13% of Astral's sales and a more than one-fifth of revenue at Corus.  Both also dominate pay-TV, which supplies 25% of revenue at Astral and 12% at Corus.

"Specialty television should remain relatively stable," in the latest quarter, McReynolds says, adding that "growth in pay television in F2009 is still achievable."

Still, both stocks have slid more than 40% in a year, with Astral trading at $23.29 today and Corus at $12.25.

The RBC analyst has a buy on both companies, with a one-year target of $30 for Astral and $17.50 for Corus.  

His overall take on Canadian media stocks is that "it’s still too early buy." He says investors should look out for a stabilization in U.S. retail sales, which in the past have tended to rise and fall in line with the Canadian media names.

That may be because the Canadian economy tends to lag the U.S. by 6 months and equity investors like to look at earnings half a year away. 

There's not much joy in U.S. malls right now. And data from ChangeWave Research on consumer spending intentions turned firmly negative in November 2007, with no improvement since.

Sounds like media stock investors might be better off curled up on the couch with a giant tub of popcorn and a juicy HBO show.

 

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Posted by Michael Hainsworth on January 12, 2009

U.S. president-elect Barack Obama says he's a BlackBerry addict. It's an endorsement that money literally can't buy. But if it could, it would cost Research In Motion $25 million.

Prominent ad agency "Arnold Worldwide" tells the New York Times you couldn't find a better spokesperson. But Obama's days of whipping out his BlackBerry may soon be over. Come inauguration day, Jan. 20, Obama may have to hand over his handheld.

U.S. presidents don't have personal government email accounts to avoid the potential legal issues, which is exactly why outgoing president George W. Bush doesn't own one.

In various reports Obama has said bureaucrats will have to pry his BlackBerry from his hands. Once they do, RIM will have to rely on other famous faces for endorsements.

Celebrityblackberrysightings.com offers a massive gallery –  but with Britney Spears, Lindsay Lohan and Paris Hilton cropping up the most often, it may not be the kind of endorsement RIM is hoping for.

 

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Posted by Michael Hainsworth on January 8, 2009

An economist with the St. Louis Federal Reserve reports police hand out more tickets in a recession.

Thomas Garrett started investigating the link after getting a traffic ticket himself -- and says the data shows that every time local tax revenue falls 1 percentage point, traffic citations go up a third of a percent the following year. For his report titled: Red Ink in the Rearview Mirror: Local Fiscal Conditions and the Issuance of Traffic Tickets, Garrett examined 14 years worth of data from 96 North Carolina counties.

But the problem may not be limited to that state. Forty-four U.S. states are facing budget shortfalls this year. California has been hit hard -- with tax revenues expected to fall 13 percent -- leading to a possible 4-percent spike in traffic tickets. But the recession has hit Wall Street the hardest -- and New York state as a result. Expect an 8-percent spike in traffic tickets if the research is accurate. The state's budget shortfall this year will be 24.3-percent.

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Posted by Andrew Bell on January 6, 2009

Hope springs eternal -- especially when it comes to small-cap stocks.

Here are the 2009 Top Picks from Fraser Mackenzie Ltd.

In case you’re wondering… this is the first year the broker has produced a top picks list.

Says one Fraser analyst, with a sigh of relief, "2008 would have been a very humbling year in which to have started."

5N Plus Inc. (VNP – TSX) Supplier of cadmium telluride to the solar industry

Aeroquest International Ltd. (AQL – TSX)  Provider of airborne surveys for mining

Alamos Gold Inc. (AGI – TSX)  Mexican gold producer

ARISE Technologies Corp. (APV – TSX)  Producer of photovoltaic cells for solar modules.

Axia NetMedia Inc. (AXX – TSX)  Provider of next generation broadband networks

Bio-Extraction Inc. (BXI – Venture)  Cold solvent technology for extracting proteins from oilseeds

Canplats Resources Corp. (CPQ – Venture) Mexican gold and silver exploration company

Eveready Inc. (EIS.UN – TSX)  Industrial and oilfield services

MacDonald, Dettwiler & Associates Inc. (MDA- TSX)  Land, property and earth   information 

Niko Resources Ltd. (NKO – TSX)  Natural gas in India and Bangladesh.

Petrobank Energy and Resources Ltd. (PBG – TSX)  Oilsands developer in Canada, oil production in Colombia.

Questerre Energy (QEC – TSX)  Oil and gas in Quebec, British Columbia, Saskatchewan and Alberta.

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Posted by Frances Horodelski on January 6, 2009

It's traditional at the beginning of the year for analysts, market strategists and economists to come forward with their expectations for capital markets.

In all my time watching markets, I've noticed that there's a tendency for these projections to focus on the phrase "first half weakness followed by second half strength."  Perhaps not surprisingly after a year like 2008, this view underscores the current forecasts for 2009, especially with respect to the economy.

We've gathered the consensus expectations for some of the more important categories for investors – oil, the Canadian dollar, the euro, interest rates, economic growth, inflation and unemployment – as calculated by Bloomberg. 

Click here to continue...

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Posted by Andrew Bell on January 5, 2009

As if frozen financing and an oil price under 50 bucks weren't  bad enough, independent power producers in British Columbia just got a couple of snowballs down the back of their hemp-and-bark jackets.

The mean bully? Monopoly generator BC Hydro, which said just before Christmas that due to the weak economic and power-demand outlook, it's slashing the amount of clean energy it may buy by 40 percent.

The move was a "key surprise" and points to "rising risk" for new power players, PI Financial analyst Philip Tulk says in a report today. B.C. is scheduled for an election in May and the analyst says buying power at high prices from the new players, even if they're clean, might not play well with voters.

He cut his target for hydroelectric player Plutonic Power Corp. (PCC – T), a developer of dam-free "run-of-river" hydroelectric projects to $6.75 from $9. The stock is down more than 60% in a year, trading at $2.60 today.  Tulk calls it a Buy.

The analyst also cut his target on small fry Run of River Power Inc. (ROR – Venture) to 12 cents from 35 cents, warning that the company may be short of "friends in government or at BC Hydro." The stock trades at 9 cents – as of this morning it was down 87% in a year. Tulk also lowered his rating to Neutral – and a speculative neutral at that.

The analyst also reduced his NaiKun Wind Energy (NKW – Venture) target to $1.75 from $3. NaiKun stock has dropped more than 80% in a year, trading at just over 40 cents today – PI's Tulk says it's changing hands at just a few cents above its cash per share holdings and he calls it a speculative Buy.

NaiKun wants to build a giant wind project off the B.C. coast but the project has run into delays. In late November, the company announced a letter of intent with Siemens Wind power to buy up to 110 wind turbines and warned that installing the equipment will take three years longer than hoped. The turbines are now to be installed in 2013 and 2014.

NaiKun said last year that it was trying to find a new partner for the project, which would reduce its stake to just 15%, but Northern Securities analyst Philip Dale warned that the company still needed to find financing of $200 million.

 

RESPONSE from Peter Murray, Manager, Investor Relations, NaiKun Wind Energy Group Inc.

There are some points I would like to make regarding the blog posting Twisting in the wind in B.C.

First, NaiKun has not "warned" of a three-year delay to our project – far from it.  The BC Hydro power call process that would originally have awarded contracts to successful bidders in 2007 has become the Clean Power Call, with award dates now set between April and June of 2009.  The market is well aware of the Call dates, thus our announcement of plans to have turbines feeding power into the provincial grid by 2013 does not constitute a "warning" by our company.

Second, the comment with regard to our bringing a second strategic partner into the fold makes it sound as if we are scrambling to find a partner to take over a portion of the project that we cannot handle.  In fact, a reduction in our share of Phase 1 has been our plan from the outset, as there is a higher return on capital to be made as a developer of projects than there is as an outright owner.  Our project structure enables NaiKun to enjoy multiple cash flow streams from each phase while owning moderate pieces of them.

Finally, financing for project construction will be raised as one group with ENMAX Corporation and our second strategic partner for Phase 1.  A NaiKun subsidiary will build and own the wind farm, and it is into this entity that the project financing will go.

Thank you,

Peter Murray

Manager, Investor Relations

NaiKun Wind Energy Group Inc.

 

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