Posted: For the Week of November 15 – 21, 2009

Part 2 of 3

I suspect that it won’t be long before Wall Street realizes there are a number of small-sized, alternative-energy pure plays that make tempting takeover targets for the corporate behemoths that are going to dominate in a carbon-constrained world – outfits such as General Electric (Symbol GE) and Siemens (Symbol SIE).

Last week in Part 1, I looked at three such possibilities: Itron Inc., (Symbol ITRI), EnerNOC Inc. (Symbol ENOC), and MYR Group Inc. (Symbol MYRG). (For more see: Thinking of Itron, EnerNOC and MYR Group as Possible Takeover Candidates)

Here are three more: Ocean Power Technologies Inc. (Symbol OPTT); WaterFurnace Renewable Energy Inc. (Symbol WFI); and Energy Recovery Inc. (Symbol ERII).

Keep in mind this is all speculation.

Each of these three companies is a standout in a specific green energy sector starting to see rapid growth. Each has standout technology. Unlike many other small green energy firms, WaterFurnace and Energy Recovery are in the black, and Ocean Power Technologies looks like it will get there.

Ocean Power Technologies’ equipment generates electricity from ocean waves, a green power source that has the advantage over wind and solar of tending to be a more predictable energy source. The company just won a contract from the Australian government for a 19 megawatt installation.

WaterFurnace is an extremely cost-conscious provider of small-scale geothermal energy systems. Its business has held up during the wicked housing slump, and its prospects are buttressed by government tax credits for green energy installations.

Energy Recovery’s equipment effectively makes water desalination cost effective by significantly reducing the amount of energy required. The company just told Reuters that it sees its industry growing as much as 25% annually. The company also told Reuters that it plans to expand its operations.

Next week: Three more logical takeover candidates.