COLUMN-"Green" energy hasn't bloomed for investors - yet

Wed Jun 26, 2013 12:35pm EDT
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By Conrad de Aenlle

LONG BEACH, Calif., June 25(REUTERS) - The term "green energy" refers to the benign environmental impact of fuel sources, such as wind and solar, that President Barack Obama promoted in a speech on Tuesday. It does not refer to that industry's investment returns, which have been awful over the long haul.

The three U.S. domestic mutual funds that focus on green energy gained more than 20 percent in the 12 months through Tuesday. That still left them with five-year losses ranging from about 50 percent to 80 percent, compared to a decline of just over 10 percent in Energy Select Sector SPDR, an exchange-traded fund that holds traditional energy stocks.

But investors continue to be drawn to the niche, sometimes through private investment vehicles that can be less than legitimate. The North American Securities Administrators Association, a financial regulators' organization, recently warned of a proliferation in "green energy" investment scams.

"In some cases, the promoters may be operating a fraudulent shell company and not producing anything," the warning said.

Over the last few months, the organization reported, fraudsters were convicted and in some cases sent to prison for selling stakes in nonexistent oil and gas projects in North Dakota to two elderly Texas women; stealing more than $10 million in Missouri from thousands of investors in a bogus energy company and peddling unregistered securities, including oil futures contracts, in Ohio.

Even when everything is legit and companies do produce something, it has seldom been profitable. Renewable energy advocates expect that to change. Hurdles like intense price competition and comparatively high production costs are being cleared or dropping away, they contend, and that makes the stocks promising, albeit risky, assets.