Page 36 - Forbes - USA (February 2018)

Strategies ENERGY

would see its long-term cost of making power rise ists passed, with 62% of the vote, a resolution call- BY THE
from 6 cents per kwh to 8 cents. Th at’s borderline ing on the company to disclose its plan for coping NUMBERS
economical, especially if Congress enacts a carbon with rising temperatures and to assess the “viability
tax or an oil company wants to buy the CO2 to in- of its assets as a result of the transition to a low-car-

ject into old oil fields to goose out more crude. bon economy.” Scary thoughts when you pump the
Despite these advances, it’s easy to be cynical. equivalent of 4 million barrels of oil per day.
Exxon has a long, sad track record of knowing the Woods chose not to ignore the nonbinding
“right thing” to do—and then not doing it. In 1978 resolution lest he ignite the ire of stock-index-
Exxon climate researcher James Black wrote a report ing giants BlackRock, Vanguard Group and Fi-
titled “The Greenhouse Effect,” warning that carbon delity Investments, all of which supported the

emissions could spur a two-degree rise in global tem- vote. “They used to be dismissive, arrogant,” CHARGED UP
peratures and suggesting that the world had ten years says Tim Smith, a director at Walden Asset

to figure out what to do. “It is premature to limit use Management who has prodded Exxon for a dec- As seats get narrower,
airlines get fatter off bag
of fossil fuels but they should not be encouraged,” he ade. “Their tone is changing.” Last year’s biggest

fees, meals and other
wrote. Also in the 1970s, Exxon scientists invented shocker: naming Susan Avery, an atmospher- extras. Airlines globally
the lithium-ion battery, but the company didn’t both- ic scientist and former head of the Woods Hole were projected to pull
er to commercialize it, investing instead in coal and Oceanographic Institution, to Exxon’s board. in a record $82 billion
in ancillary revenue

uranium. Then came the Exxon Valdez spill. “It’s a start,” says Andrew Logan at invest-
last year, up nearly
Just last year a federal judge imposed $20 mil- ment consultant Ceres, “but the world is chang- fourfold from 2010.
ing even faster than Passengers grumble,
Exxon.” Logan ranks but such additional
HOW TO PLAY IT BY TAESIK YOON revenue is a boost to
the company well be- carrier profi tability—and
ExxonMobil’s strides toward sustainable energy are admirable, but hind Royal Dutch in turn gets invested
why not invest in a pure play? As the only independent producer in new planes, in-fl ight
Shell, Statoil and
of composite blades for the wind-energy market, TPI Composites, entertainment and
Total (but ahead of
in Scottsdale, Arizona, has a global manufacturing footprint and airport waiting areas.
the likes of PetroChi-
has enjoyed strong sales growth since going public in July 2016. The top extra-charge
The newly passed tax bill preserves valuable alternative-energy na and Saudi Aram- highfl iers:
tax credits, so this growth is likely to continue, though earnings will probably lag co) on climate and
Spirit
for now: Costs have increased to support the sizable amount of new business won governance issues. ANCILLARY REVENUE
over the past year. But with $4.4 billion in contracts through 2023 and forays into PER PASSENGER, 2016
Woods denies
other alternative-energy markets (such as composite bus bodies for heavy-duty $49.89
that activists pushed
electric-vehicle maker Proterra), it’s only a matter of time before TPIC’s profi tabil- INCREASE SINCE 2011
him to act. “I would 19.5%
ity catches up. Its shares, down 20% since the end of October 2017, are a bargain.
separate out the cli-
Taesik Yoon, CFA, is editor of Forbes Investor and Forbes Special Situation Survey. Allegiant
mate resolution,” he ANCILLARY REVENUE
says. “We’d be having PER PASSENGER, 2016
$48.93
lion in fines on Exxon’s Baytown refi nery complex this conversation with or without it, quite frank- INCREASE SINCE 2011

near Houston for excessive emissions. Plus there ly. We’ve been engaged with this stuff for many, 43.9%
are those plasticizers: chemicals that Exxon adds many years—long before those proxy proposals.” Frontier
to plastics to make them more malleable. In re- Exxon isn’t bending to activists’ desires; this isn’t ANCILLARY REVENUE
cent years plasticizers have been found to disrupt shameless greenwashing à la BP’s 2006 rebrand- PER PASSENGER, 2016
$48.60
the endocrine systems of toddlers who chew on ing as Beyond Petroleum. Nor will we see a willy- INCREASE SINCE 2011
rubber toys. What other toxins are they not tell- nilly smorgasbord of alternative-energy boondog- 434.1%
ing us about? “That’s not helpful. We’re the exact gles. Wind? Solar? No. “We don’t have a lot to off er

United
opposite,” says Swarup. “We are in the commu- in that space,” Woods says. ANCILLARY REVENUE
nity. Our kids go to school, our kids drink water, But Woods is also clear. Any “real solutions” PER PASSENGER, 2016
$43.46
our kids play with toys.” will require imposition of that elusive carbon tax. INCREASE SINCE 2011
That won’t placate New York attorney gener- “If society wants to address this issue, you’ve got 19.2%

al Eric Schneiderman, who has been investigat- to have a price on carbon,” he says. “Th at’s what’s BY THE NUMBERS BY JEREMY BOGAISKY. PHOTO - JASON HETHERINGTON/IMAGE BANK/GETTY IMAGES
ing ExxonMobil since 2015 for conspiring to de- going to be required. Government has to take that Jet2.com
ANCILLARY REVENUE
fraud shareholders by concealing the risks of global action, and society has to be willing to pay that PER PASSENGER, 2016
$42.46
warming. Company attorneys call it “a fi shing expe- price in order to align the motives and solve this.” INCREASE SINCE 2011
dition.” And then there are the shareholder activists. Be careful what you wish for. It just might end up 18.9%
Last year’s annual meeting was a wakeup call; activ- being called the Exxon tax. Source: IdeaWorks.
FINAL THOUGHT
“Man masters nature not by force but by understanding.” —ROBERT BRIDGES
34 | FORBES FEBRUARY 28, 2018