Investing in renewable energy sources – Thought

Gaining energy independence will cost Europe billions of dollars. Despite the vagaries, in particular due to the shortage of raw materials and the sharp rise in energy prices, the sector is actively developing. Now is the time for the long-term investor to reap the benefits of the secular trend of growing renewable energy; because movement is undoubtedly inevitable.

The war in Ukraine is forcing Europe to be much more interested in climate and energy than before. Its dependence on Russian gas has made the Old Continent extremely vulnerable. That is why the Commission has launched REPowerEU, a plan that will allow the region to get rid of Russian gas for the benefit, in the long run, of renewable energy and stored energy. During this process, which will last for several decades, the transitional source will be liquefied gas.

The war in Ukraine is forcing Europe to be much more interested in climate and energy than before. Its dependence on Russian gas has made the Old Continent extremely vulnerable. That is why the Commission has launched REPowerEU, a plan that will allow the region to get rid of Russian gas for the benefit, in the long run, of renewable energy and stored energy. During this process, which will last for several decades, liquefied natural gas will become a source of transition at the end of 2020 to 136 GW. To achieve net zero emissions by 2050, Europe will have to invest $ 5.3 trillion in soft energy production. To this will be added 300 billion by 2030, most of which will be spent on production and the rest on energy efficiency, such as insulation and heat pumps. Energy To achieve carbon neutrality in the world in 2050, we will have to double the share of renewable energy in the coming years than in the last decade. More than 60% of this acceleration will have to provide wind and sun. The world’s solar power generated 820 terawatt-hours (TWh) in 2020, a figure that needs to be increased to 7,000 TWh in 2030. The same applies to wind energy, the production of which should increase from 1,500 TWh at the end of 2020 to 8,000 in 2030. According to Goldman Sachs, achieving carbon neutrality will require a threefold increase compared to 2019 in total electricity production. In 2050, everything (transport, heating, industrial processes, etc.) should be electric. Hence the explosion in demand for clean electricity, but all this does not prevent most green indices more or less seriously suffer for several months. EQM Global Solar Energy fell 40% from its peak in early 2021; S&P Global Clean Energy is also going through a difficult period. The Solactive Wind Energy Index fell 30%. Now is the time for a long-term investor to take advantage of the secular trend of growing renewable energy. Because movement is, without a doubt, inevitable. Among ETFs, iShares Global Clean Energy (IE00B1XNHC34) is the most important of those following S&P Clean Energy. In comparison, Lyxor MSCI New Energy ESG (FR0010524777) repeats the evolution of MSCI ACWI IMI New Energy ESG Filtered. At the solar level we will mention HANetf Solar Energy (IE00BMFNWC33) and Invesco Solar Energy (IE00BM8QRZ79). Finally, Global X Wind Energy reproduces the evolution of the wind sector (IE000JNHCBM6). It should be noted that not all of these trackers rely solely on renewable energy sources: some are monitoring energy companies in the midst of the transition period, which can still make extensive use of fossil fuels. Another way to bet on this topic are park operators. . Danish Orsted is one of the biggest net players in this sector. He builds and operates onshore and offshore wind and solar farms. He installed 13 GW of renewable capacity, which will double in time. He also intends to invest in new technologies such as hydrogen and batteries. Orsted intends to reach 50 GW of capacity by 2030. However, this promising growth will affect its profits and cash flows – analysts forecast revenue growth from low to zero by 2025. Its scale makes Orsted a great tool for investing in soft energy in the long run. Its price has almost halved since its peak in January 2021. Shares can be purchased at this price, but for a long period; because in the medium term, profits will stagnate and debt will grow. Canadian Boralex operates wind and hydropower plants. Half of its revenue comes from North America, the other half from Europe, mainly in France, where it is the main operator of onshore wind farms. Supply contracts signed over the years for most of these parks guarantee its future cash flows. The group has an installed wind and solar power capacity of 2.5 GW, which it wants to double by 2025 and then double again in five years. He also intends to compensate for the relative lack of solar energy. Currently, 3.6 MW of projects have been identified at various stages of their development. Like Orsted, its investment in capacity expansion will be detrimental to its profits and cash flows. However, Boralex is growing faster than Orsted, and is taking on a little more debt to finance its growth. For the investor who is not afraid of this increased risk, the Norwegian holding company Aker Horizons is dedicated to the development of climate solutions and renewable technologies. It is a branch of the investment company Aker ASA, which, among others, owns the oil and energy companies Aker BP and Aker Energy. Half of Aker Horizons’ net assets are Mainstream, which develops and operates wind and solar farms around the world. Mainstream still has only 1 GW of operating capacity, and another 16 GW are under construction and under development. The company’s portfolio also includes specialists in hydrogen production and carbon capture, so Aker Horizons has a larger profile of beginners who invest in renewable energy than a manufacturer, which makes its actions more risky. He has enough to finance his investment, and can count on the seemingly inexhaustible resources of Kjell Inge Rocke, the main shareholder of Aker ASA, whose value under his leadership has more than tripled in two decades – especially due to investment in traditional species. fuel. It seems that Kjell Inge Rocke intends to repeat this strategy with renewable energy sources. Aker Horizons, a growing company, relies more on venture capital than other players in the sector. In early 2021, it went public for more than NOK 40, in the midst of a passion for clean energy; its price has now more than halved. For a risk-averse investor who is willing to actively monitor this component of growth Wind turbine manufacturers are another channel for investing in renewable energy … but later. Names like Vestas, Nordex or Siemens-Gamesa have been facing rapid prices for energy and raw materials for some time, which they cannot fully pass on to their customers. Their profit margins are under a lot of pressure, and it’s probably not over. Vestas and Nordex have issued earnings warnings for the year. Prices in the region have halved since the peaks; although profits have fallen by the same amount, estimates are currently unattractive. Wait for signs of a return to profitability NIBE Industrier is a global specialist in ground-based heat pumps, boilers and other environmentally friendly heating solutions for businesses and households. Its turnover and operating profit for several years increase by 10-15% per year. Its return on invested capital also shows continuous growth. NIBE, with a solid balance sheet and low debt, is one of those quality companies whose rating is usually high. However, since the beginning of the year, its price has fallen by 40%, in part due to a shortage of materials, including semiconductors. The problem may persist for some time, but it does not slow down either profits or growth, which remained unchanged in the first quarter. However, the price pulled the mark down. An investor who wants to emphasize the quality of his portfolio may consider positioning.

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