My #1 idea to profit from renewable electricity
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My #1 idea to profit from
renewable electricity
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— A Beyond oil RepoRt —
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Important Risk Warnings:
Advice in Exponential Energy Fortunes does not constitute a personal recommendation. Any advice should be considered in relation to your own circumstances. Before investing you should consider carefully the risks involved, including those described below. If you have any doubt as to suitability or taxation implications, seek independent financial advice.
General – Your capital is at risk when you invest, never risk more than you can afford to lose. Past performance and forecasts are not reliable indicators of future results. Bid/offer spreads, commissions, fees and other charges can reduce returns from investments. There is no guarantee dividends will be paid.
Small cap shares - Shares recommended may be small company shares. These can be relatively illiquid meaning they are hard to trade and can have a large bid/offer spread. If you need to sell soon after you bought, you might get back less that you paid. This makes them riskier than other investments.
Overseas investments - Some shares may be denominated in a currency other than sterling. The return from these may increase or decrease as a result of currency fluctuations. Any dividends will be taxed at source in the country of issue.
Cryptocurrencies – Some recommendations may be cryptocurrencies. Cryptocurrency investing and investing in Initial Coin Offerings (ICOs) is a highly speculative investment. The cryptocurrency market can be extremely volatile. Digital currency coins are encrypted to keep them secure. The encryption identifies the currency itself, but not its owner. This means that if a coin is stolen, you have very little recourse in getting it back. The Financial Conduct Authority (FCA) does not regulate the Cryptocurrency market. This means that you will not have the protection of the Financial Ombudsman Service or the Financial Services Compensation Scheme.
Taxation – Profits from share dealing are a form of income and subject to taxation. Profits from converting cryptocurrency back into fiat currency is subject to capital gains tax. Tax treatment depends on individual circumstances and may be subject to change.
Managing Editor: James Allen. Editors or contributors may have an interest in shares recommended. Information and opinions expressed do not necessarily reflect the views of other editors/contributors of Southbank Investment Research Limited. Full details of our complaints procedure and terms and conditions can be found at, www.southbankresearch.com.
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— A Beyond oil RepoRt —
My #1 idea to profit from renewable electricity
Encavis
Encavis AG is a German renewables conglomerate.
It is one of the best-established managers of a portfolio of solar and wind plants.
It is involved at every stage of the project, from financing and partnership through construction and then operation.
Its USP is its experience and intense focus on the risk management involved in managing renewable power assets. It runs a portfolio like any investor, the difference is just that it actively manages the production of its investments.
Its focus is on the best-established and lowest risk forms of renewable power generation – onshore wind, and ground-based solar panel farms.
The financial model of a solar or a wind farm is very high capital inputs in the first few years – almost entirely focused on construction. From that point on though, very few costs are incurred, meaning that revenues come in with very high margins.
What I’m saying is that once the plants are built, renewable power plants deliver consistent, predictable, high-margin returns.
That’s the core reason why Encavis has been able to almost double revenues and gross profits in just the last three years, while almost tripling net profits in the same period. In the renewables space, such consistency and profitability can be hard to find, and reflects very well on the business model and management capabilities of Encavis.
In my view, as the renewable industry moves into the investment mainstream, the predictability of the returns from these kind of assets will make them perfect assets for pension funds and income investors the world over.
Encavis has shown itself capable of consistent and sustainable dividend growth (dividend per share is up 160% since 2013), which is again unusual and impressive for a company in this sector.
Not only that, but during lockdown and the pandemic we had what I’ve been calling a “postcard from the future”. We caught a glimpse of the power system of the future, where coal generation fell to zero in some developed nations, while solar and wind generation broke records everywhere – here in the UK as well as in Germany (where Encavis is based).
— A Beyond oil RepoRt —
In fact, Encavis reported no impact from Covid-19 on its business model over the first half of this year. Its solar and wind farms can be operated remotely, and in the meantime the sun is still shining and the wind is still blowing. That helps protect the business from any second wave effects.
Its European focus will also be boosted by an increasingly friendly political environment for these schemes. Encavis is fast approaching “national champion” status in Germany, which has otherwise largely failed in its national energy transition so far. This should give it extra political support as Germany fights back to regain its European and global leadership in the clean energy space.
Not only do they boost the “green” credentials of the fund and manager, but they can also offer bond-like predictability of returns and lifespans of 20 years and up.
With such a tsunami of investment capital ready to flood into the best-run businesses in this sector over the coming decades, I expect Encavis to benefit greatly.
I am not the first person to realise this and the share has performed very well over the years, but that’s why this stock is top of my watchlist, and one all investors could turn to if a good buying opportunity presents itself.
Now I must state clearly, this is not a new recommendation and we will not be following it, including it in the portfolio or providing updates on it. The report is an idea of a company which will benefit from one particular trend, and is provided for interest and research purposes only.
Until next time,
James Allen Editor, Exponential Energy Fortunes
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