Jul 26, 2022 17:04
Given how reliant Europe is on Russia for producing fossil fuels, the conflict between Russia and Ukraine has once more highlighted the need for renewable energy sources.
In response, the European Union released a new plan in early March to hasten the near-term deployment of renewable energy sources by 20%. According to BofA Securities strategists, this step improves the outlook for wind stocks and other investments in green energy.
No one can dispute the rapid and massive expansion of wind power worldwide, which has become an essential tool in the fight against climate change. Furthermore, given offshore wind energy has already started to proliferate swiftly. That wind power offers "the largest decarbonization potential per" megawatt, wind energy is likely to continue to expand quickly for the foreseeable future. Investors should seek exposure to wind energy equities as a result.
Despite the coronavirus epidemic, a record 93 gigawatts of additional wind energy capacity were added in 2020. Additionally, according to the Global World Generating Council, 743 gigawatts of wind energy capacity have been installed globally as of November 2021. (GWEC). The International Energy Agency (IEA) forecasts that by 2050, wind energy will generate 35 percent of the world's electricity.
Electrification of transportation, warmth and air conditioning is predicted to considerably boost the worldwide demand for energy over the next several decades. Together, these arguments show that wind power companies will have exceptional long-term growth.
Even though supply chain concerns, increased component costs, and uncertainty around U.S. tax policy caused most wind energy companies to suffer last year, these issues should become significantly less of a problem in 2022.
Businesses in the wind sector often fit into one of the following categories:
Manufacturers of wind turbines and related components: As the wind energy market grows, so make their sales. They might be under pressure from demand, competitors, and costs.
These businesses own and run wind turbines that generate electricity, which they then sell to end consumers. Most wind energy producers sell electricity under long-term, fixed-rate contracts that generate consistent income or under government-regulated pricing structures.
Even though wind energy is becoming more significant, few businesses are dedicated to making wind turbines and their parts or creating wind energy. Only a few of those who do trade do so on significant U.S. stock exchanges. There are thus limited domestic pure-play wind energy investment options available to investors.
The wind energy sector is still relatively new compared to other energy businesses. The United States now produces more than 3,382 billion kWh of wind energy annually, up from about 6 billion kWh in 2000.
Some of the most significant wind energy stocks in the world are included in the ETF. Since the ETF bottomed out at just over $10 per share in March 2020, it has increased by more than 100% and is presently trading at a little over $22 per share.
Investors should be encouraged by U.S. Vice President Biden's support for the wind energy sector. The president has stressed his desire to support the industry and provide employment possibilities.
Here are some best wind power stocks to invest in if you want to participate in the fast-expanding renewable energy sector.
A significant provider of renewable energy is NextEra Energy, which runs a sizable energy resources company and Florida's most significant electric utility. One of the world's biggest wind energy producers is NextEra Energy Resources. It ran 119 wind projects with a total generation capacity of 18 gigawatts (GW) throughout the United States and Canada as of early 2022, which is enough to power 13.5 million households. Wind energy makes for 69 percent of the subsidiary's total generation capacity.
The business actively creates new wind energy projects. By 2024, it intends to add up to 7.9 GW of additional wind generating capacity. Additionally, it is developing wind repowering projects totaling more than 1.4 GW. These investments replace smaller, older wind turbines with larger, more powerful ones that can produce more electricity. In addition, NextEra Energy is a pioneer in using battery storage to lessen the erratic nature of its wind and solar energy resources. Despite not being a pure wind energy investment, NextEra is a leader in the industry and an excellent choice to consider.
A publicly traded, pure-play platform for renewable energy is run by Brookfield Renewable Partners (BEP). It is one of Brookfield Asset Management's flagship companies for renewable energy (BAM). Hydroelectric, wind, solar, and storage facilities are included in the company's portfolio and are located in North America, South America, Europe, and Asia. Around 21,000 megawatts (MW) of existing capacity and a 62,000 MW pipeline for development make up BEP's sizable asset portfolio.
In 2021, the firm achieved its highest-ever normalized funds from operations (FFO) of $1.45 per share, a crucial operating performance metric for the limited partnership. Total funds from operations were $934 million, up 10% from the previous year (YoY). According to BEP, FFO is defined as "earnings before interest, taxes, depreciation, and amortization" (adjusted EBITDA) less the effects of particular non-recurring cash and non-cash items.
Although BEP's hydroelectric assets produce most of its cash flows, its wind and solar assets also expand significantly. This is demonstrated by the fact that 42.4 percent of BEP's total FFO—or $396 million—was earned by the company's wind energy assets in 2021, up 67 percent yearly.
In 2021, the company also purchased more than 300 MW of wind power in Asia, significantly increasing its operational capacity. Additionally, the analyst notes that "decarbonization deals may bring additional upside, not within our basic scenario" and that "an acceleration of the development pipeline is important to supporting underlying value generation."
General Electric is a well-known industrial business in the energy, healthcare, and aviation industries. The company is currently splitting into three subsidiaries, each of which will focus on one of the areas mentioned above. In order to focus on aviation, it intends to spin off its healthcare company in early 2023 and its renewable energy, electricity, and digital businesses in early 2024.
One of the industry leaders in the world for producing, setting up, and maintaining wind turbines is GE's renewable energy division. More than 49,000 units have been deployed, and the installed base generates recurring service income. Additionally, GE has a sizable and expanding backlog of onshore and offshore wind development projects, which could result in consistent growth over the next few years. Although GE is not a pure play on wind energy, it does provide investors access to the market in the short term, with a more targeted alternative to follow when it separates.
Denmark-based In the field of wind energy, Vestas is a world leader. It creates, produces, installs, develops, and maintains wind energy and hybrid projects worldwide. Over 145 GW of wind turbines has been deployed in 85 different nations.
Like GE, Vestas derives some recurrent income from repairing wind turbines after installation in addition to selling and installing them. Service agreements with the firm have an average duration of 10 years, and at least 124 GW of wind power is covered. These agreements aid in reducing the fluctuation in wind turbine sales. Vestas is one of the only significant pure plays on wind energy due to its emphasis on wind turbines.
TPI Composites (TPIC, $14.12) is a company established in Arizona that produces composite wind blades for the wind energy industry. On an MW basis, the company's wind blade sales in 2020, excluding sales in China, accounted for around 32% of total onshore sales worldwide.
Macro headwinds continued for TPI Composites in the fourth quarter and will probably endure until 2022, just like they did for its fellow wind energy equities. The firm had record net sales of $1.73 billion in 2021 compared to $1.67 billion in 2020.
It is interesting to note that three main wind blade clients—GE Wind, Vestas (VWDRY), a member of the Kiplinger ESG 20, and Nordex—accounted for most of TPI Composites' sales in 2021. (NRDXF). These three contributed, in that order, 24.7 percent, 40.4 percent, and 22.4 percent of TPIC's total net sales in 2021.
Another significant accomplishment for the business in Q4 was signing a contract for composite component supply for an electric passenger vehicle (EV) platform of a "meaningful" scale.
The company's forecast for this year, though, is still unclear. According to Bill Siwek, president, and CEO of TPI Composites, in the company's news statement announcing its fourth-quarter financial results, the operating climate will likely continue to be complicated. Despite this, "the long-term drivers for wind both domestically and globally remain robust," and "we are well positioned to exploit that growth in the future," the company stated.
Macro forces' lack of 2022 visibility has kept Stifel analyst Stephen Gengaro (Hold) away from the company. The analyst acknowledges that "several encouraging events during the fourth quarter" occurred, such as the company's addition of four new production lines in China for its top client Vestas and the continuation of its robust worldwide service expansion. Additionally, he has a $27 price objective on TPIC, which is an expected upside of 91.2 percent.
Leading wind energy firm Siemens Gamesa is headquartered in Spain. With more than 99 GW of installed capacity globally, it builds, erects, and provides maintenance for onshore and offshore wind turbines. The business is collaborating on green hydrogen innovations utilizing wind power with Siemens Energy, which owns most of the firm (OTC: SMEG.F).
GE's patent fight, rising steel prices (a necessary component of wind turbines), and problems with its onshore wind platform have all contributed to Siemens Gamesa's recent struggles, despite the expansion of wind energy. However, the manufacturer of wind turbines could soon experience brighter times. At the beginning of 2022, the International Trade Commission dismissed almost all of GE's complaints against the business. The stock price may increase if some of its other disadvantages disappear. The upside potential of Siemens Gamesa makes it an exciting wind energy stock to think about.
With a concentration on yield, hybrid, and equity, New York-based Apollo Global Management Inc. provides asset management services and gives its customers excess return at every position along the risk-reward spectrum, from investment grade to private equity.
Why is Apollo included here? The business acquired U.S. Wind, an offshore wind developer operating on federally-leased property off the coast of Maryland.
For the fourth quarter of 2021, Apollo Global Management announced a cash dividend of $0.40 per share of its ordinary stock. Apollo Asset Management Inc. issued a cash dividend of $0.398438 for each share of its Series A and Series B preferred stock.
At the end of December 31, 2021, net income was $612.5 million, and net income attributable to Apollo Global Management Inc. Class A common shareholders was $234.4 million. The end-of-quarter expenses include the $0.9 billion one-time non-cash charge for Apollo's previously disclosed reorganization of its pay structure.
The rise of retirement services customers and robust third-party fundraising drove the quarter's increase in total assets under management to $497.6 billion. Gross Inflows totaled $23.6 billion for the three months and $67.5 billion for the entire year ending December 31, 2021.
An exchange-traded fund (ETF) devoted to wind energy equities is the Global X Wind Energy ETF. Companies that produce wind technologies incorporate wind into energy systems and create wind turbines are included in the ETF. In order to promote good change, the ETF also uses environmental, social, and governance (ESG) screening and adheres to ESG proxy voting criteria.
As of early 2022, the ETF, which debuted in late 2021, owned almost 30 wind energy equities. More than half of its interests are utilities with sizable wind operations, followed by industrial firms making wind turbines at a rate of roughly 40% and producers of basic materials at a rate of 7%. Nearly 43% of the equities in this ETF are Chinese-listed, which is a significant concentration. Overall, it provides extensive exposure to the world's wind energy industry.
The Danish corporation is the market leader in the brand-new, explosively expanding offshore wind industry. Despite the epidemic, 6.1 gigawatts of offshore wind power were added globally in 2020, making it the second-highest year, according to the Global Wind Energy Council (GWEC). Given that the yearly record was attained in 2019, I predict another record will be broken in 2022 when the epidemic and supply chain problems subside.
GWEC said that "of all renewable energy technologies, offshore wind has the largest development potential." Offshore wind does appear to have much space to develop, given that governments only have a certain amount of land to spare and that real estate in some places may be pricey.
WideAlpha, a Seeking Alpha blogger, stated in September 2021, "Orsted is the undeniable global leader in offshore wind energy." Out of Orsted's overall EBITDA of 13.1 billion Danish kroner in 2020, its offshore wind farms contributed 10.6 billion Danish kroner in EBITDA (one Danish krone is now worth 15 cents). As of November 2021, the firm anticipated that its EBITDA from offshore wind would amount to 12.8 billion Danish krones, which would be a portion of its overall EBITDA of 16 billion Danish krones.
In November, Orsted was constructing "two of the largest offshore wind farms in the world...which are both on pace to be commissioned in 2022," proving that it is not resting on its laurels. The U.S. government started an environmental study of the business's Sunrise Wind project in New York in August 2021, signaling that the company is beginning to tap into the potentially enormous offshore U.S. wind market. To be "completely commissioned by 2025," Sunrise and two additional sizable offshore wind projects in the United States are planned. November saw a report from Orsted.
The first nine months of 2021 saw Orsted's "Earnings from wind and solar assets in operation" drop from 13 billion Danish krones to 10.3 billion. The corporation attributed the drop to lower than anticipated "wind velocity."
As a result, the company's operating profit for the first three quarters of last year climbed by 2.9 billion Danish krones year over year to 16 billion Danish krones, thanks to its biomass and gas operations, which filled the gap.
Another ETF that only invests in wind energy equities is First Trust Global Wind Energy. The ETF invests in diverse firms active in some areas of the wind energy industry and pure-play wind enterprises that generate at least 50% of their income from wind-related activities (40 percent of the fund). It owns almost 50 wind energy equities as of the beginning of 2022.
Also heavily weighted toward foreign-listed wind energy firms is this ETF, and Siemens Gamesa Renewable Energy and Vestas Wind Systems were among its top 10 holdings. It is substantially more geographically diverse than the Global X Wind Energy ETF, with Spain-listed wind firms accounting for about 15% of its portfolio. The ETF is an excellent alternative for investors who want to wager on the long-term global expansion of wind energy but do not want to choose specific wind energy equities due to its broad concentration throughout the whole wind energy industry.
To invest in some of these wind energy stocks, create an account with an online broker or platform.
Contrasting stock trading platforms By fees and bonuses, utilize our comparison table to select the top brokers.
Create and add money to your brokerage account. You will require financial and personal information, including your contact and banking data.
Look up the stock you want to invest in. Look up the stock using its name or tickers, such as TPIC or ALE.
Choose how many to purchase. While some brokers enable you to buy fractional shares, others only let you buy complete ones.
Pick a style of order. Buy stocks in the wind energy industry immediately with a market order, or wait for the stock to reach a specific price with a limit order.
Acquire the shares. The Buy button on your brokerage account may be tapped or clicked. Track your stock's performance after investing in the wind power sector to determine when it is time to exit.
Wind energy is crucial in lowering carbon emissions and the long-term effects of climate change. As a result, the future should see an increase in wind capacity expansions, which will be suitable for the wind industry.
It will not, however, probably be an easy ride. In the upcoming years, the wind industry may face challenges from rising steel prices, sluggish economic development, and shifting government incentives. Investors want to consider using a basket strategy and purchasing best wind stocks. They might invest in several wind-focused firms or buy an ETF to obtain exposure to the more significant industry. This approach would assist in lower risk and better position investors from future gains in wind power stock prices.