Investment opportunities in alternative energy providers
After making subsidies available for the development of alternative energy opportunities for more than a decade now, it has finally became main-street compatible and somewhat reliable. Yet the bifurcation in the European market (low quality vs. high quality producers) which took place between 2008 and 2010 has damaged the overall industry sector considerably.
Assuming that a further cost erosion takes place; alternative energy opportunities could finally become financially viable which could lead to a number of compelling opportunities. Such opportunities exist in wind projects (land and offshore), which have a relatively short project execution time of 3 to 5 years as well as relatively good load factor of 30% to 40%.
In comparison, the advantage of solar projects is that they have a relatively short execution time (just about one year), however, the load factor is well below 20%; which make these projects in the northern hemisphere of the globe economically unfeasible most of the time. While projects located in regions such as North Africa with end-consumers in Europe are condemned from a political point of view.
Renewable energy sources have their role in the future energy landscape, especially as and when smart grids and smart meters, which will constantly exchange information about the status of supply and demand, are implemented. Yet, as the industry sector is not mature, it could well be the case that other industries sectors will compete for market share and will possibly come along with lower cost technologies that achieve better results than those available today.
| Company | Ticker | Sector | Upside Potential | Sharpe (FY01) |
| Abengoa | ABG | Solar Termal | -5 % | 2.11 |
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Investment case: Abengoa, S.A. owns, manages and acquires renewable energy, conventional power and electric transmission lines. The company’s operating margins are well above its peer group. Investors keen to participate in Abengoa, can buy the Abengoa Yield Plc which serves as a financing vehicle to the company. |
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| Company | Ticker | Sector | Upside Potential | Sharpe (FY01) |
| Enel Green Power | EGPW | Renewable | 0 % | 4.62 |
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Investment case: Enel Green Power S.p.A. develops and manages renewable energy plants. It operates a global portfolio of wind, solar, geothermal, hydroelectric water flow, and biomass energy sources in Italy, Spain, France, Greece, eastern Europe, US and Canada. Given its experience in various products and markets, it could become an opportune vehicle for investors seeking global exposure. |
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| Company | Ticker | Sector | Upside Potential | Sharpe (FY01) |
| EDP Renovaeis | EDPR | Renewable | 1 % | 4.63 |
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Investment case: EDP Renovaveis, S.A. is engaged in activities related to the electrical sector, construction, maintenance and management of electricity production facilities. Given its experience in various products and markets, it could become an opportune vehicle for investors seeking global exposure. |
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| Company | Ticker | Sector | Upside Potential | Sharpe (FY01) |
| First Solar | FSLR | Photovoltaic | -2 % | 2.1 |
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Investment case: First Solar, Inc. designs, manufactures and sells solar electric power modules using a proprietary thin film semiconductor technology. Its business includes project development, engineering, procurement and construction, operating, and maintenance services. Solar energy is expensive to produce, especially as load factors remain at just around 15%; therefore, the market take-up is relatively slow, and further major ramifications throughout the photovoltaic sector can be expected. |
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| Company | Ticker | Sector | Upside Potential | Sharpe (FY01) |
| Vestas Wind Systems | VWS | Wind | – 9 % | 2.05 |
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Investment case: Vestas Wind Systems A/S is a Danish power company. It produces and maintains wind farms in 35 countries. Its products include wind power project planning, turbine options, constructions and installation and plant optimization. Vestas is a key player in the sub-sector and its key competitors are majors like Siemens, ABB, GE, and Honeywell. The investment opportunity in Vestas has an excellent long-term risk/reward ratio as the technology is highly developed and relatively well accepted. |
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| Company | Ticker | Sector | Upside Potential | Sharpe (FY01) |
| Meyer Burger | MBTN | Photovoltaic | 9 % | 2.07 |
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Investment case: Meyer Burger Technology AG provides systems and production lines for photovoltaics in the solar, semiconductor and optics industries. It operates in three business areas namely Solar, Semiconductor and Sapphire & Optics. The company went through a number of capital operations with the aim of reinforcing its capital structure. As the market for photovoltaics is still weak, MBTN does not offer the best risk-reward opportunity. |
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| Company | Ticker | Sector | Upside Potential | Sharpe (FY01) |
| Gurit | GRU | Special Chemicals | -1 % | 3.26 |
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Investment case: Gurit Holding AG is engaged in the development and manufacture of composite materials and related technologies featuring bespoke physical and chemical characteristics. Its products play an important role in the construction of efficient wind turbines. |
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