“SB-1 Energy Dividend: Play the Solar Bull Market”

By Travis Johnson, Stock Gumshoe, April 29, 2008

This is a sleuthing job that I first posted about six months ago, but it appears to be making a comeback. I’ve gotten dozens of emails about this one, so I thought I’d put it out there for all the new(ish) readers. The price of this stock spiked dramatically at the end of last year, right when seemingly all the solar stocks went nuts, but has since come down by 50% or so from the highs and is trading quite near where it was when the teaser first started circulating.

Now, with the teaser circulating again and all of the solar stocks getting hurt by Suntech Power’s miss, is this one you want to check out? It’s probably not where I’d go for a solar investment, but I’m sure we’d like to hear your thoughts, too.

Here’s the original writeup — I haven’t updated anything:

“All across America, homeowners and businesses alike are slashing their energy costs by switching to a power system and running their meters backwards.”

That’s the promise of this teaser stock, from Green Chip Stocks — it’s supposed to be the best publicly traded way to benefit from the SB-1 law in California (and similar laws in other states).

What is this law, you say? I’m glad you asked. It’s the one that requires utilities to purchase power for the grid from their customers — so, if you decide to install a solar panel on your roof, and it produces more power than you use in any given hour, your eletricity meter will run backwards and the utility will have to pay you for your surplus electricity. This is a fairly common way, along with direct subsidies and tax breaks, of subsidizing solar power.

And in California, apparently, they’ve gone a bit further (as they are wont to do), adding a requirement that new homes built after 2011 include a standard option of installed solar panels. Perhaps they’ll even have worked off the unsold inventory of speculative homes in the state by then.

The colorful teaser language about the utility companies gnashing their teeth and going broke is, perhaps, a bit of an overstatement — most of California, especially Southern California, is desperate for new power supplies but unable, due to strict local regulation, to add more natural gas power plants (or, God forbid, coal). So really, the utilities probably breathe a sigh of relief that here’s one bit of power they don’t have to buy on the wholesale spot market at usurious rates. That’s just my conjecture, I’m no expert on the wholesale power market, unfortunately.

We hear and see teasers and touts for solar companies all the time — mostly solar panel manufacturers like Suntech or Sunpower, but also polysilicon suppliers like LDK and MEMC Electronics, and specialty names like World Water and Power. The list is extremely long, particularly among Chinese manufacturers who are all trying to ride on Suntech Power’s coattails.

But this teaser is a little different — it’s for an installation company, what Jeff Siegel at Green Chip Stocks calls the only publicly traded solar power installation company.

Is that true? Hard to say, what with all the different companies that provide this service as at least part of their business, and the large number of publicly traded but unlisted companies trying to get investors’ attention. But we’ll take him at his word for now.

So what clues do we get for this one, aside from the fact that they’re a publicly traded installer of solar power systems?

Got a Nasdaq listing on September 24.

Under $10 a share.

Insiders own about half the shares, and institutions own almost none.

Market cap somewhere around $220 million.

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“they control the largest solar markets in America–California, New York, Connecticut and New Jersey–and you get the picture. This stock is a Roman candle about to be lit.”

OK, so that last part wasn’t a clue — but I thought you might need a juicy reminder of how exciting they think this one is, to keep you reading.

He essentially argues that this company should boom because of institutional buying in the months ahead, largely because this stock provides a “new angle” on solar investments — we’ve seen polysilicon manufacturers and panel makers boom, now it’s apparently time for the installers to ride the wave. Or something like that.

So what is this little company, that Jeff Siegel says he recommended as an OTC stock at $3 a share?

The Thinkolator spits and sputters a bit as we discover that this firm is …

Akeena Solar (AKNS)

All the clues fit, and they are a publicly traded solar installer — though the shares have come down slightly from their highs of a few days ago, so now at $8.50 a share the market cap is nearer an even $200 million.

They do specialize in just what Jeff was teasing, primarily building largish grid-conected solar installations for wealthy people and businesses (including farms and wineries, which have been big customers for this kind of work in California). I wouldn’t expect to see them working on the panels for your three bedroom ranch in the suburbs, but perhaps they take all kinds.

This actually intrigues me a little bit, because if they can build up their capacity quickly enough and establish a national brand, it seem to me that they may have a chance to be the Sears/Maytag of solar installations … I have no idea whether or not that will work, of course, and I don’t know whether other folks are aiming at the same market with equal branding and breadth, which is certainly possible. But it’s a thought.

My favorite part of the email, though, is this:

“Now, I was taught at Agora that the time to invest in a stock or industry is when nobody is talking about it. You sell it when everybody is talking about it … And that’s why I’m writing to you today.”

Seriously? I guess there’s some possible argument to be made that no one is talking about this company, or that it doesn’t get the attention it deserves — but it did double in the past month thanks to the new Nasdaq listing, and, as regards the broader industry, if you’re investing in solar power and want to say that you’re going against the herd, you really need a time machine. The time to buy these stocks if you wanted to be a contrarian was 2004, before anyone was comfortable with $50 oil, let alone $80 oil, and before massive subsidies for civilian solar power started to catch investors’ attention.

This is an interesting company — the insiders really do control it, with nearing 50% of the shares, most of them in the hands of co-founder and CEO Barry Cinnamon. Lots of those shares appear to be a result of stock grants or other similar compensation — I didn’t note any big open market insider buying (meaning, they own a lot of shares but they’re not necessarily buying shares with their own money at the moment).

But of course, it’s also no slam dunk — the firm is far from profitable. They’re trading at a price/sales ratio of about 8, which may or may not be significant at the moment depending on what their sustainable sales growth rate is. More importantly to me, they can’t make a profit at their current level of sales — so I’d want to look into this a bit more and understand when a profit might be likely, and what kind of profit margins the company might have when it does turn profitable (right now, it’s losing about 20 cents on every dollar of sales, which obviously doesn’t keep a company going for very long).

It’s obviously a growth business, and their sales did grow at well over 100% in the last year, but my impression is that this kind of business (installation work, often competitively bid) also tends to often be competitive and low margin, even when it is profitable, so I’d want to have a fairly good understanding of the landscape — I know these guys are the major publicly traded players in installation, but are they fighting with a dozen smaller or local installers in every market to get each sale? Or are there other big installation companies that aren’t publicly traded?

Bottom line on this one? Interesting, and kudos to Jeff Siegel at Green Chip for coming up with a stock I’d never heard of … but I’m not completely convinced, and I’m not thrilled about the fact that the shares are twice as expensive as they were a month ago. Feel free to convince me, either way, by sharing a comment below.

full disclosure: I do own shares of MEMC Electronic Materials as of this writing, but not of any other company mentioned here.

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43 Comments on "“SB-1 Energy Dividend: Play the Solar Bull Market”"

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Anonymous
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Anonymous
October 15, 2007 6:21 pm

I owned it at 5 and sold it at 7 when it listed on NASDAQ. I believe price is to high now. I don’t see how they can leverage themselves to grow at high enouogh rate to sustain higher share price.
They are basically a service company doing installations.
Growth would be conservative but not enough currently to warrant an
$8.50 dollar share price.

Anonymous
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Anonymous
October 15, 2007 10:05 pm

This is clearly a hot area in the market, and SPWR is the top listing in the IBD stock checkup, with an A+ rating. AKNS is rated D+

I own a few shares of LDK, which I purchased when it corrected recently. I also like WFR and CY as related trades.

Be very careful in buying this speculative sector of the market. I am sure that part of the rise in these stocks is due to short covering.

pt49
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pt49
February 21, 2008 1:13 am

Sunseeker Energy (Hong Kong) are worth watching. Due to list on Deutsche Borse in Germany in 4 weeks. I think they will cause a stir, it’s a pity about the timing of the listing though.

Wayne
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Wayne
February 21, 2008 10:48 am
I wonder where Solar is going. I think it would be great if a/most big electric utilities had solar arrays on the roofs of most customer’s houses that were maintained by utility services people. All big company parts, standardized in a region, qualified installation and maintenance services. The arrays would shade the roofs reducing heat gain on long summer days while providing power to the house and feeding excess power to the grid in a consistent and effective manner. Big investments in Solar instead of new fossil fuel or atomic power plants. For the investor: buy utilities and parts suppliers.
tony karmen
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tony karmen
February 21, 2008 10:59 am
trouble with the stock market toooo many brokers,day trader stocks, pump and dump clubs corruptness,decievers,liar’s from the top to the bottom . it is no place for a beginner.regulation needs to set in i’m a used tk dealer i buy a vehicle and a title for a thousand dollars i have substance a chance to make a profit or get my original cost with a stock you have vultures unless you live behind your computer P.S. I was home sick for a few days and joined green chip and purch ased 1000 shares of akeena with in 24 hrs I… Read more »
Steve Hara
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Steve Hara
February 21, 2008 11:00 am

Not keen on AKNS – currently playing China’s SOLF and SOL.

What is your insight on Chris Weber and his investment strategies?

G IMBURG
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G IMBURG
February 21, 2008 12:30 pm

I think oegy has the greatest upside gain in the long run.

Brian
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Brian
February 21, 2008 12:49 pm

Who would of thought First Solar would be trading around 200 per share this year? A better question is what company will First Solar buy this year or next?

Dividends4Life
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February 21, 2008 1:52 pm

I’ve never had anything good come from buying a “fad” type stock (solar). Until it becomes mainstream it will be highly volatile. If you are into playing the volatility, then you could possibly make some money on it.

Best Wishes,
D4L

haskell
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haskell
February 21, 2008 3:50 pm
Hi i first bought AKNS last July at just under $5 and sold it at 13.50; i bought it again at 11 and am still holding it because i do think Jeff is right about it being the first publicly traded solar installation company and it has the potential to be the Cisco of Solar. It may have to wait until the solar tax credit is extended or a more solar friendly regime change occurs, but it will be a leader in the field especially with the new Andalay panels. When this stock gets picked up by the institutional investors,… Read more »
Redbull
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Redbull
February 21, 2008 4:03 pm

The share price is down to 6 bucks as of this listing. I think it is a buy with oil at 97 a barrel. I only own it in a virtual portfolio though as it is high risk.

Redbull
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Redbull
February 21, 2008 4:06 pm

Brian, the question to ask for solar is what solar technology will prove to be the best and most inexpensive. FSLR and STP are battling it out currently. The only solar stocks I would own now are wfr, fslr and stp, because they are making money. HOKU is similar to wfr, but much much smaller.

ray penrod
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ray penrod
February 21, 2008 4:36 pm

right now oegy is my play. i have bought and sold it two or three times. i am tracking xsnx and soen which i bought some time ago and sold on acouple of nice spikes. i dont know why they aare just hanging, the solar market, the housing market or just the stock market.

Steven
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Steven
February 21, 2008 8:24 pm
I bought at 8.10 and sold at 16.20, following Siegel. I figured out the stock, without buying his newletter. I doubled my money, by this, in one week. I feel good about getting out, as the day I sold, it plummetted and has not seen the light of day since. I guess I caught the over-enthusiasm after they got the European contract. My electrical engineer friend, who specializes in matters of electrical rates, said that the per watt efficacy is nowhere near where it needs to be competitive; oil would have to be 500 bucks a barrel for the currect… Read more »
suzanne
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suzanne
February 22, 2008 12:21 am
Hi, Was I a fool to believe everything that was said about Xsun…I bought when I first heard about it as there was alot of ranting and raving about this solar company…they have recently acquired a few contracts and the stock is starting to rise, but it still is a ways before I break even! Does anyone feel like this company is going somewhere? It seems like it rises then most take there money off the table and the stocks plummets and then rises again…sheesh it is enough to make one a little sea sick..any advice on this company would… Read more »
Brian
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Brian
February 22, 2008 10:48 am

Redbull, I agree with you to buy into companies that are showing profits. I believe the next ten years ,,solar and wind co.’s are to gain. Back to the question of which little company looks good for FSLR, or etc.. to acquire? HOKU?

G IMBURG
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G IMBURG
February 22, 2008 2:19 pm
IF you consider the oil crisis we are in, every countries electricity needs, the global future demand increase on the oil industry, its an easy conclusion that alternative energies will become the energies of choice. The competition between solar companies is intense, and the future improvements in the industry may alter competive advantages between the players.Do your homework well. I think the BIPV industry is exciting because as our utilities rise, they have the ability to retrofit your home with building integrated products such as roof tiles and side panels to capture sunlight. YOU have a one time set up… Read more »
lee
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lee
February 22, 2008 2:24 pm

THE BIGGEST PROBLEM WITH SOLAR IS IT BEING TAKEN OVER BY ELECTRIC COMPANIES WHICH HAVE DETERRED THE ADVANCEMENT OF SOLAR DUE TO THEIR FEAR OR GREED OF LOSING BUSINESS. I THINK IT IS A CONFLICT OF INTEREST, AND WE SHOULD CONTACTING AGENCIES TO PUT A STOP TO THIS PRACTICE. SOLAR WOULD BE MORE ADVANCED IF THIS HAPPENS. IT IS NOT IN THE INTEREST OF ELECTRIC COMPANIES TO CUT THEIR OWN THROATS, HOWEVER THEY NEVER MIND CUTTING OURS!

Renauld
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Renauld
February 23, 2008 1:31 pm
Hi Gumshoe..great job your doing! I seldom do this but had to post a comment to your readers… I own XSNX myself. I know the future is solar hands down…but your readers are forgeting the basics of stock investing.Be patient, and think long term!! If you get in and get out, you will get burned!! think long term, 2 yrs at least!! Be a student of Warren Buffett..when he bought BNI, a week later it lost $7 share to $75…was he losing any sleep..Hardly..its somewhere around $84 and will be getting better!! Do your homework…study balance sheets,cash surplus,assets & liabilities…Mr… Read more »
marty
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marty
February 24, 2008 9:41 am

The thought of selling electricity back to the electric company is appealing, but the fact of the matter is the electric company changed their pricing, and the portion labeled “transportation” is growing relative to the portion labeled “generation”,,, check out your last electric bill,,,

Brian B.
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Brian B.
February 24, 2008 10:46 am

Well XSNX looks a little risky to me, 2 yrs hold or not.

pt49
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pt49
February 26, 2008 4:42 am

Sunseeker Energy (Hong Kong) due to list on the Deutsche Bourse in 3 weeks now.

Benny
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Benny
February 28, 2008 9:58 am
One solarstock that has come down a lot maybe worth take a look at , Norways REC : REC is the world’s largest producer of silicon materials for photovoltaic (PV) applications and multicrystalline wafers, as well as a significant producer of cells and modules. http://www.recgroup.no One safer alternative is Norways Orkla who own a big chunk of REC and other intresting things : Orkla is one of the largest listed companies in Norway. The core businesses are Orkla Brands, Orkla Aluminium Solutions, Orkla Materials, Orkla Associates and Orkla Financial Investments. Orkla has 35,000 employees in more than 40 countries. The… Read more »
Leer
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Leer
April 29, 2008 10:06 am

Does anyone have an opinion on Ascent Solar (ASTI)?

Shoeless
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April 29, 2008 10:32 am
I sell solar to non residential customers. To be a reasonable deal the client needs 30-60% subsidies. Calif,Ct, and MA are the markets that have cumulative subsities to make returns on investment of 5-20 years. There are also federal tax incentives which I am including in the numbers. The installed cost per watt ,which is the standard the industry measures installations at, is in a range of $5.50 to %7.50. The major consumers are Germany and Spain based on their costs of electricity per KWH. Most companies are stuffed with orders and only constrained by silicon,WFR. The real deal is… Read more »
Solarfool
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Solarfool
April 29, 2008 12:26 pm
I too own XSNX. And I owned it far too long. I wanted to get into solar and i selected this crap because of something I read. Now i’m paying dearly for it. My fault for not putting a stop loss on it or selling when i was ahead. I will be more careful this time. Props to the poster who sold AKNS at the high. Check out CSIQ and SOL, they seem to be doing better than FSLR right now. However, TAN would probably be your safest bet to make a play on the whole sector.
Solarfool
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Solarfool
April 29, 2008 12:26 pm
I too own XSNX. And I owned it far too long. I wanted to get into solar and i selected this crap because of something I read. Now i’m paying dearly for it. My fault for not putting a stop loss on it or selling when i was ahead. I will be more careful this time. Props to the poster who sold AKNS at the high. Check out CSIQ and SOL, they seem to be doing better than FSLR right now. However, TAN would probably be your safest bet to make a play on the whole sector.
Ole Berentson
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Ole Berentson
April 29, 2008 1:14 pm

Does anyone familair with AETE please comment. Am I
stuck with it? OR? Ole

Hawki
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Hawki
April 29, 2008 2:15 pm

Nice site gumshoe, got a question about a “new” source of solar panels going on line in Colorado.
Actually the technology was developed by the Colorado State University and for a buck a watt, according to the site anyway. http://www.avasolar.com/news/pressDisplay.php?i=12
The Company is called AVA Solar and they do sound interesting however I have not been able to find a stock code for them. Any comments as to the technology or company itself?

Gravity Switch
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April 29, 2008 2:53 pm
Hi Hawki — AVA is still private, though they’ve had two rounds of venture funding so perhaps they’ll go public soon, it sounds like they are getting closer to production. Don’t know much about them or how their technology is supposed to be better — but the Cadmium Telluride think film solar technology that appears to be what they use is the same basic stuff made by First Solar. It means they don’t have to deal with the polysilicon shortage, though there could end up being sourcing problems for other reasons: Cadmium is very nasty, toxic stuff, and Tellurium may… Read more »
Hawki
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Hawki
April 29, 2008 3:04 pm

Got it, and thanks, I guess it’s the production technology they are touting then. It certainly sounds impressive from their site. I work at a company that did lots of welding and used Cadmium plated products as well and we dropped that whole process several years ago. I’ll just keep an eye on them for a bit.
Thanks Gumshoe

Red68
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Red68
April 29, 2008 6:49 pm

Hey GumShoe, Any thoughts on the ” Gusher behind the Montana millionaires” Pimped by Brian Hicks who is releasing a book (supposedly)entitled “Profit from the peak” Angel publishing.
The tease looked alot like Agora but I could find no connection. Thanks Bob

Brian B.
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Brian B.
April 30, 2008 9:17 am

Check of FSLR today above 300/share. profits increased nine fold. Have they cornered the market or what?

Gravity Switch
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April 30, 2008 9:29 am

Brian B., I certainly hope so — at 25X projected sales, they need to corner it and keep it cornered. Right now their profit margin is about the same as Suntech Power’s — I think that really needs to go up for them to grow into their valuation (and it might — they’re definitely bigger and growing faster than their competitors).

Brian B.
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Brian B.
April 30, 2008 10:31 am

Redbull: The price is still alittle above 6 bucks for AKNS and oil is closing in on 120 vs 97. So lets say over a 20% rise in oil since this posting. So am having trouble believing oil prices are a having any relationship with the price of this stock.

Brian B.
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Brian B.
April 30, 2008 10:31 am

Redbull: The price is still alittle above 6 bucks for AKNS and oil is closing in on 120 vs 97. So lets say over a 20% rise in oil since this posting. So am having trouble believing oil prices are having any relationship with the price of this stock.

DenverDave
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DenverDave
April 30, 2008 12:07 pm

Good info here. Keep it up GUMSHOE!

JJaco
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JJaco
April 30, 2008 2:59 pm

REd68: NOG and BEXP are two of the three.

Ogolden1
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Ogolden1
April 30, 2008 5:52 pm
I’m a Swing Trader and have been “trading” AKNS for about 8 weeks since it started it’s rally off around $5 to it’s $8.90 high, then I shorted it down to the $6.50 range. I’ve banked over $42,000 in 2 months day-trading and swing-trading AKNS. The volume has slowed in the last 2 weeks. By closely watching the Nasdaq TotalView Level II(http://www.nasdaqtrader.com/Trader.aspx?id=TotalView)everyday for 2 months now, I can tell you that the Market Makers and their Big Money “partners in crime” are MANIPULATING the price everyday! I can place an order for 10,000 shares only 2 cents away from the… Read more »
Robert
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Robert
May 1, 2008 9:30 pm

Would like to talk with you some time as I just got my plow cleaned by Doubling Stock and Michael Cohen. So far no one help anyone and its tough when I have gotten my self hung in something like VDTI. Is this going to golden1 or to the site I just signed up Robert5-2-08

Gerald
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May 2, 2008 12:02 am

The Gusher behind the “Montana Millionaires”

It’s a formation known as the Williston Basin, but is more commonly referred to as the “Bakken.” And it stretches from Northern Montana, through North Dakota and into Canada.

Can you name the companies he is touting? Thanks

pt49
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pt49
May 2, 2009 10:48 pm

Sunseeker Energy Holding AG has listed in Frankfurt and last week entered an agreement with a major US roofing company… http://www.prweb.com/releases/solarenergy/photovoltaic/prweb2354644.htm

frick frack
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frick frack
November 10, 2009 8:17 pm

Sunseeker Energy is also know as Sunsucker Energy. It is a complete fraud, and just an investment scheme with a shoddy contraption.

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