Why Carnegie Wave Energy Stock Went Up Today

Carnegie Wave Energy [ASX:CWE] is a wave energy developer. They’re responsible for some incredible looking wave energy designs, like the CETO 6.

ASX CWE Ceto 6
Source: Carnegie Wave Energy
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Today, they announced they’ve secured a £2 million grant from the Scottish government. That’s nearly $4.3 million. The money is coming from the Scottish government’s dedicated initiative, Wave Energy Scotland.

Wave Energy Scotland provides grants for the development of components and subsystems. The aim is to get the best possible overall systems, to form the basis of a budding (and cost-effective) wave energy industry in Scotland. This grant for Carnegie is the first one that Wave Energy Scotland has given out.

Fergus Ewing is Scotland’s minister for energy. In announcing the grant, he said:

This is a hugely significant day for Wave Energy Scotland. The Scottish government is committed to supporting this important sector and we are confident that Scotland will continue to hold its world class status as a thriving country for wave energy technology development.

This particular grant is for a hydraulic power take off system prototype called a WavePOD. A power take off system is the part at the bottom of the system that uses hydraulics to convert the pull of the wave on the buoyant unit, into electricity. They’ll work with Scottish company Aquamarine Power, and manufacturer Bosch Rexroth. The whole project will take about 18 months.

Johnathan Fiévez is the chief tech officer at Carnegie.

The ultimate goal of WavePOD is to have a power take off with manufacturer-guaranteed [Bosch Rexroth] performance delivered to Carnegie ready to load directly into our CETO Unit. The WavePOD project complements Carnegie’s existing power take off development for the CETO 6 Garden Island project … It will provide a system that can be integrated into Carnegie’s first UK projects.’

Johnathan Fiévez

In other words, it’s free money for a project that they already needed to do. And it will provide useful, location-specific insight to help Carnegie expand in the UK.

The Scottish government may retain the basic intellectual property rights to the finished design. But Carnegie will have first dibs on commercialising it. And it’s just a small part of the overall wave power system. The Scottish government couldn’t really commercialise it without them. Even if Carnegie has to pay royalties or a license fee, they still have an opportunity to make a lot of money.

It seems as though investors agree. At the time of publication, Carnegie stock was trading at $0.052, up nearly 2% from yesterday’s close of $0.051.

ASX CWE 03082015
Source: Google Finance
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If you’re not familiar with the science and technology behind wave energy, it can be difficult to see whether investing in Carnegie is a good idea or not. With any small-cap like Carnegie, it’s important to take into account a range of different factors and inputs.

In ‘The At-Home Investors’ Guide to Profiting from Australian Small-Caps’ — available here for free — small-cap analyst Sam Volkering explains what you need to find out about a company before investing. Read this report and you’ll discover his simple four step guide to small cap success. You’ll also find out why legendary investor Warren Buffett wishes he had less money to invest. Hint: it’s the same reason why you may have a strategic advantage over the big institutional investors.

Renewable energy investors will have to wait for Carnegie’s annual report, due out around the end of the month, to see how the grant affects their bottom line. In the meantime don’t forget to find out how to download your free copy of Sam’s report.

Eva Mellors,
Contributor, Money Morning

Money Morning Australia