Íslensk verkalýðsforysta náði líklega sögulegum lágpunkti sínum undanfarnar vikur í fáránlegri herferð sinni fyrir stórfyrirtækið Century Aluminum og álverið í Helguvík. Það er niðurlægjandi að heyra fullorða menn tala um að eitt fyrirtæki sé forsenda fjárlaga, forsenda stöðugleika og forsenda framtíðarinnar á Íslandi. Í raun snýst barátta þeirra um að stórauka skuldir íslenskra orkufyrirtækja, bæta á þau skuldum sem nemur rúmri Kárahnjúkavirkjun, klára helstu orkukostina á suðvesturhorninu og djöflast sem fyrst í illa undirbúnar framkvæmdir.

Það er erfitt að skilja hverju ASÍ var að hóta – átti að verða sjúkraliðaverkfall, stopp hjá hlaðmönnum og skólaliðum, löndunarbann á Ísafirði ef Century fengi ekki vilja sínum framgengt í Helguvík? Eða eins og þeir orðuðu svo smekklega fasískt í sáttmálanum: ,,Öllum hindrunum rutt úr vegi“. Það er magnað að þegar Ísland er farið á hliðina út af fúski og skorti á heildarsýn að þá á bara að spýta í lófana. Helst að tvöfalda skuldir ofurskuldsettra orkufyrirtækja. Það liggur ekki fyrir nein heildarsýn – ekkert skipulag. Century Aluminum er hernaðarlegt í aðgerðum sínum, það byrjar að byggja án þess að vera komið með nokkuð í höfn, meira að segja án þess að vera komið með höfn. Margir starfsmenn hjá Norðuráli voru ósáttir við að kynna 250.000 tonna verksmiðju á sínum tíma – vegna þess að þeir vissu að hún þyrfti að verða stærri og öll plönin byggðu á stærri tölunni. ASÍ virðist skítsama um orkuverð, einkavæðingu orkulinda, mengunarkvóta, heildarsýn í orkumálum, umhverfismál eða þá staðreynd að öll álverin geta auðveldlega komist á eina hendi eftir góðan snúning á Wall Street. Þá erum við að selja einum hákarli 90% orkunnar. Þá er gott að sjá hvernig hákarlar hugsa: Hér á eftir er fjárfestabréf frá fyrirtæki sem er að mæla með kaupum í Century Aluminum – hvernig þeir sjá samningsaðstöðuna sem fyrirtækin komast í gagnvart Íslandi með sitt ,,dirt cheap energy“: 

,,Century never has to worry that its energy cost will get too high as a percentage of what it sells. If Century’s sales are great, then pays more for power, but it’s happy to. If the price of aluminum crashes, Century’s power cost goes way down.

It works out great for Iceland, too… It is very cheap for Iceland to deliver power to Century. The Icelandic power companies will make extraordinary profits on that power if aluminum prices stay strong. And if aluminum prices weaken, Iceland is not biting the hand that feeds it.“

Í bréfinu til fjárfesta er talað um hvernig fyrirtækin spila ,,hardball“ við verkalýðsfélög. En fyrir þá sem ekki vita þá spila stákar hardball í baseball en stelpur spila softball: 

,,For example: Playing hardball, Century announced plans to close its West Virginia facility in the wake of a 72-hour strike notice from its labor union (they didn’t close the factory). „

Já þarna er alþjóðleg samstaða verkalýðsins í hnotskurn – hótun um að flytja til Íslands er notuð sem grýla á Gylfa Arnbjörnssyni þeirra Ameríkana. Hér á eftir fer þessi grein úr True Wealth – gefið út af Stansberry and Assosiates Investment Research.

EVEN MORE FREE POWER

Iceland is incredibly lucky…

Not only does it have nearly free hot water, heating, and power from below the earth’s surface, it is just as lucky above the earth’s surface, in the form of nearly free hydro-electric power.

Iceland is mountainous, with glaciers. Here, water flows relentlessly from the mountains to the sea, with natural and manmade waterfalls along the way.

Harness that energy, and Iceland has more almost-free power, indefinitely. According to Iceland’s government, only one-fifth of the country’s hydropower and only a fraction of the geothermal potential available have been harnessed for electricity production.

Almost free energy everywhere… courtesy of the earth. This, obviously, makes Iceland an ideal place to locate energy-intensive projects.

For about a generation now, big companies haven’t cared too much about the cost of energy. Now that the price of oil has skyrocketed (along with other commodities) the cost of energy has soared. It caught a lot of people off guard.

The aluminum sector in particular is feeling it. Energy is the single biggest cost in producing aluminum. Aluminum producers that rely on “traditional” sources of power are shutting down. We’re seeing closures across the U.S., Europe, and even China. It’s simply too darn inefficient to produce aluminum at these high energy prices.

So we’re going to capitalize on it. This month’s recommendation is a U.S.-traded aluminum company that is expanding rapidly in Iceland. It has long-term contracts in Iceland to use cheap hydroelectric and geothermal power exclusively.

If you’re not in Iceland, you’re not going to be competitive in aluminum. Three companies are there now… giants Alcoa and Alcan, and little known Century Aluminum (Nasdaq: CENX).

NEVER WORRY ABOUT THE PRICE OF POWER AGAIN

Century Aluminum is our new recommendation this month. This company never has to worry about its power bill…

The deal Century struck with Iceland’s power companies is smart… Century’s power bill is simply a percentage of the price of aluminum on the London Metals Exchange. This arrangement works out great for both sides…

Century never has to worry that its energy cost will get too high as a percentage of what it sells. If Century’s sales are great, then pays more for power, but it’s happy to. If the price of aluminum crashes, Century’s power cost goes way down.

It works out great for Iceland, too… It is very cheap for Iceland to deliver power to Century. The Icelandic power companies will make extraordinary profits on that power if aluminum prices stay strong. And if aluminum prices weaken, Iceland is not biting the hand that feeds it.

To give you an idea of how cheap power is in Iceland, consider this: Australian mining giant BHP Billiton actually ships over a hundred thousand tons of alumina from the Southern Hemisphere all the way to Iceland each year, simply to have Century Aluminum turn it into aluminum for them. Then BHP turns around and exports all that aluminum to wherever it’s needed on the globe.

It sounds crazy that all that travel could be the most cost-efficient way to produce aluminum, but it is, thanks to Iceland’s incredibly cheap power.

As of the end of 2005, Century’s production capacity in Iceland was 90,000 metric tons of aluminum per year. Within a year’s time, that capacity should be up to 220,000 metric tons. And a year later, capacity will be up to 260,000 metric tons in Iceland. Nearly three times what it was at the end of ’05.

CENTURY’S NOT JUST AN ICELAND STORY

While Century has been expanding in Iceland, Iceland will only make up just over one-third of Century’s production capacity once its expansion is completed. The other two-thirds of its production is in the U.S.

Century’s U.S. production facilities are, as you might imagine, high cost. The biggest costs in aluminum are power, alumina, and labor. None of these come cheaply in the U.S. Century appears to be willing to walk away if necessary.

For example: Playing hardball, Century announced plans to close its West Virginia facility in the wake of a 72-hour strike notice from its labor union (they didn’t close the factory). Century believes it has certain advantages in the U.S. (quality and proximity to customers), however, the West Virginia incident shows that Century isn’t afraid to close its U.S. operations when it needs to.

Iceland is the future for Century. But nearly two-thirds of its operations will still be in the States for now.

WHY CENTURY’S STOCK IS SO EXTRAORDINARILY CHEAP

Shares of Century are cheap… If we buy now, the earnings the company makes could pay off our investment in less than five years’ time. Let me explain…

A year from now, the company will have more capacity in Iceland. And even more capacity will come online a year after that. So if the price of aluminum stays flat, the company should bring home even more in profits going forward.

However, Wall Street analysts are predicting lower earnings for Century in the coming years, primarily based on a prediction that the price of aluminum will fall. So instead of seeing Century’s earnings grow, Wall Street analysts expect Century’s earnings to fall starting a year from now.

Wall Street analysts are concerned about how much Century is tied to the price of aluminum. Analysts say that a one-cent change in the price of aluminum translates into about a 15-cent change in a year’s earnings per share for Century. This tells us that Century’s performance is extremely leveraged to the price of aluminum.

Yes, this is a concern. But it’s also an opportunity… particularly if the price of aluminum actually goes up.

Goldman Sachs, for example, is forecasting an aluminum price of $0.85 for 2007. The current price is around $1.10. If the price of aluminum simply stays the same, instead of crashes as predicted, then we should make a heck of a lot of money in Century shares.

If you’ve been a reader of True Wealth for a while, you know that I believe we’re in a secular bull market in commodities that could last for many more years. Sure, if the price of aluminum stays flat, Century Aluminum will make a heck of a lot of money. And so will you, as a shareholder buying when the company sells for 4.5 times earnings. But if the price of aluminum goes up, Century will do very well.

Also, if the price of power keeps going up, the only aluminum producers left standing will be the ones with dirt-cheap energy costs… like the three in Iceland.

For years now, True Wealth readers have made a fortune in commodity-related trades. We’ve made our money on a very simple premise… you can’t know the future. Every year since commodity prices started rising, Wall Street analysts have predicted the price of commodities will fall. And every year, we say “we can’t know the future… the best guess of tomorrow’s price is today’s price.” On this little premise, we’ve made a fortune in commodity-related plays.

We have a great opportunity to buy a stock when the market thinks the price of that commodity (aluminum in this case) will fall. If the market price of aluminum simply stays where it is, I think we could double our money here. If aluminum goes up in price, Century could do much better.

I personally think Century could make ridiculous profits in the next few years, and use those profits to pay down its debt. Then it can survive future bad times (aluminum prices are cyclical), and make a fortune in good times.

Buy Century Aluminum (Nasdaq: CENX) up to $36 a share. Use a 25% trailing stop. I expect to hold this one approximately two years, and I will consider selling some (possibly all) if we get a double here.