Saturday, 16. December 2017  
17.11.2017 15:23
Author: Nic Wright

STOCK SCREEN: Wind Of Change In The Renewable Energy Sector II – Valuation Upside Check

STOCK SCREEN: Wind Of Change In The Renewable Energy Sector II – Valuation Upside Check

 

A year ago, after the U.S. elections we published the note Wind Of Change In The Renewable Energy highlighting the changing regulatory environment potentially in the U.S. and clearly in Europe, where Germany changed to the new auctioning system. Since then order intake came down and stocks in the sector have de-rated significantly.

 

Growth in the U.S. has in part been spurred by a generous tax credits that allows developers to deduct 30% of the cost of building new solar and wind power plants from their federal tax burden. This measure might change as the government looks for ways to fund a massive tax cut

 

While regulatory uncertainty increases, the wind industry still celebrates record after record: In Texas Wind power surpassed coal last week to become the second-largest electricity source in Texas, yet another milestone in the state's march toward greater reliance on renewable energy.

India’s Ministry of New & Renewable Energy has shared details of the largest wind energy tender ever in the country: The Ministry, through Solar Energy Corporation of India (SECI), is likely to launch the tender for 2000 megawatts of wind energy capacity soon. The development is part of the already ambitious timeline by the Ministry in its attempt to meet the 60 gigawatts of wind energy installed capacity by March 2022.

 

Wind energy supporters claim that wind energy is one of the cheapest forms of new electricity generation, but the cost of wind-generated electricity varies hugely depending on the inclusion subsidies from taxpayers and depending on the inclusion of costs associated with integrating increasing amounts of wind energy into the electricity grid system.

 

Anecdotally, over the past 35 years, wind energy – which supplied just 4.4% of US electricity in 2014 – has received US$30 billion in federal subsidies and grants – subsidies, that might have shielded people from the uncomfortable truth of just how much wind power actually costs, and that might have transferred money from average taxpayers to wealthy wind farm owners, many of which are units of foreign companies.

 

In this context, we screen the wind energy sector and check the stocks for their Margin-Of-Safety according to our AVM’s Intrinsic Stock Value estimates. While most stocks in the wind industry trade at low multiples in a historical context, fair values based on earnings power are still not very attractive in a market characterized by margin pressure.

 

Here is our list of stocks in alphabetical order. Company names in the table below are linked to the ANALYZER, our single stock analysis tool. Intrinsic Value Model assumptions can be adapted to analyse different growth scenarios with our MODELER forecasting tool:

CLICK COMPANY NAME FOR DETAILED STOCK VALUE ANALYSIS

COUNTRY

LAST PRICE

MARKET CAP.

1M PRICE CHNG. %

MEAN MULTIPLE UPSIDE [%]

GRAHAM UPSIDE [%]

GREENBLATT UPSIDE [%]

 ALERION CLEANPOWER

 Italy

2.96

129

-1.9

78.5

-100.0

-100.0

 ARISE AB

 Sweden

12.85

430

-13.5

139.3

-100.0

0.8

 FALCK RENEWABLES SPA

 Italy

1.41

412

-4.7

15.4

-99.7

-95.0

 INFIGEN ENERGY

 Australia

0.66

630

-10.2

19.5

-100.0

-78.0

 K.R. ENERGY SPA

 Italy

0.45

195

-14.7

-100.0

-0.8

-63.7

 NORDEX SE

 Germany

7.37

714

-20.4

101.0

-35.5

-33.6

 PATTERN ENERGY GROUP INC

 United States

21.99

2153

-9.3

59.5

-100.0

-100.0

 PNE WIND AG-REG

 Germany

2.85

218

8.0

-24.5

-6.9

1.0

 SAETA YIELD SA

 Spain

9.86

804

2.0

4.7

-100.0

 TERNA ENERGY SA

 Greece

4.00

437

-4.5

8.4

-67.5

-58.9

 TERRAFORM GLOBAL INC - CL A

 United States

4.80

833

-2.0

178.2

-100.0

 TPI COMPOSITES INC

 United States

20.03

681

-11.9

-1.1

-43.0

 VESTAS WIND SYSTEMS A/S

 Denmark

417.00

12082

-24.1

-5.4

-39.9

-18.1