How the political storm over energy is impacting ASX renewable stocks
Link copied to
Global warming may have put renewables front of mind for those concerned about our energy future — but for sharemarket investors it has been a mixed blessing.
There are three principle listed renewable energy groups: Windlab (ASX:WND), Genex Power (ASX:GNX) and the largest, Infigen (ASX:IFN).
But hanging over investor sentiment towards the sector is the bitter political debate over the National Energy Guarantee as some politicians demand that coal power stations receive political and financial backing, which has supporters of green energy concerned.
For Windlab, a developer of wind-powered projects, the clouded outlook for the sector hasn’t helped as investors wait for progress on some of its projects.
It went public about two years ago, issuing shares at $2 which are now trading at around $1.50.
“The industry is waiting for regulatory certainty given that investment in power is for 30 year assets. So there is the need for Federal government clarity,” said one analyst who covers the sector.
Moelis, which took the company public, reckons Windlab shares are worth $2.80.
But achieving that share price may hinge on the company reaching financial close on some projects it is developing.
“Achieving financial close, or moving closer to fruition, will see a re-rating for the shares,” the analyst said.
Windlab has a portfolio of projects which are being developed not only in Australia but also abroad, particularly in southern Africa, which are aimed at taking advantage of rising demand for power which is not being met.
The same thematic is behind Tlou Energy (ASX:TOU), a coal seam energy developer which is seeking to use this source of gas to supply power stations in that part of the world as well.
For Windlab, however, in the near term, investor focus is on its Australian assets, given the limited progress to date with its offshore assets.
Genex (ASX:GNX) has been in the headlines recently thanks to access to government funding for its ambitious Kidston project in northern Queensland, which encompasses hydro-pumped storage, solar and wind.
It recently raised more than $500 million from the Northern Australia Infrastructure Fund, news which was received warmly by sharemarket investors.
But until the political debate is resolved, backing for its shares will remain muted.
“Policy uncertainty plays a big part in investor confidence,” Simon Kidston, executive director at Genex told Stockhead.
“The risk is that [the national energy guarantee] won’t be resolved, with continued uncertainty.”
The Federal government is hoping to finalise the new energy framework by August 10, and until then, sentiment towards the sector may remain fragile.
For investors in Genex, its shares are trading at around 30c, up from its IPO nearly three years ago at 20c:
Several brokers have ‘buy’ recommendations, with Euroz perhaps the most ambitious, with an 80c price target.
Windlab and Genex are valued in the sharemarket at around $100 million, while Infigen, which has a number of projects up and running, is worth more than $600 million.
Even with the size of its Kidston project, Genex is unlikely to tap sharemarket investors for additional funds, since it is looking to sell down its stake in the project to around 50 per cent from the present full control, with the new partner, to put in much of the additional funds that will be needed to get the project off the ground.