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The global economy is rapidly shifting to new energy sources. Due to concerns about climate change, the world is moving away from carbon-based fossil fuels to cleaner alternative energy sources. The production and consumption of renewable energy is expanding and is steadily increasing. Decarbonizing the global economy will require an estimated investment of over $21 trillion through 2050. Renewable energy will play a crucial role in this energy transition.
Renewable energy sources, such as wind, solar and hydroelectric power, provide about a quarter of the electricity needed. Despite rapid growth and in light of growing concerns about climate change, the pace has picked up in recent years to help decarbonize the economy. Climate change is forcing companies and other institutions to focus on how they can contribute to decarbonization. Many businesses are signing power purchase agreements with utilities and other power producers to specifically purchase electricity generated from renewable sources.
Others invest directly in renewable energy development projects. With democratization and adaptation to the means of production, renewable energies are becoming almost more economical than ecological with a decrease in the costs of solar panels, wind turbines and batteries for energy storage. In addition, governments are calling for an acceleration of the global decarbonization process with the adoption of legislation and increased investment in the sector. To illustrate this point, the US Senate passed a $1.2 billion infrastructure package in August 2021 to increase investment in clean energy.
Investors should therefore take a look at the analysis of the 5 companies in the renewable energy sector presented below:
Clearway Energy is one of the largest owners of renewable energy in the U.S. and is an energy infrastructure investor and owner of long-term contracted assets across North America. The company's operations are separated into conventional power generation and renewable activities. It generates steady cash flow for the company from natural gas-fired power plants. Clearway Energy has a strong financial profile and expects to grow its dividend by 5 to 8 percent annually in the coming years.
Market capitalization: Almost doubled in the space of 3 years, from 2,232 million in 2019 to nearly 4,205 million in 2022.
Free Cash-Flow: Tripled within 3 years from 249 million in 2019 to 735 million in 2022.
ROE: Positive with full growth and tripled between 2021 and 2022
Net debt: Stable at around six billion since 2019
SolarEdge Technologies develops and manufactures an inverter system optimized for a solar photovoltaic (PV) system. This component maximizes the power produced by the solar panels, helping to reduce the cost of the energy generated by the system. SolarEdge has had a 1354% rise since its IPO in March 2015. This meteoric rise has allowed it to become the market leader in solar inverters in 2020, up from 10th in 2014. With solar power expected to account for 38% of the world's supply by 2050, SolarEdge should benefit from this and thus increase its revenue.
Market capitalization: Almost quadrupled in 3 years, from 4622 million in 2019 to 16,972 million in 2022.
Free Cash-Flow : Slightly down but stabilizing at around 100 million.
ROE : Stabilization at around 22%.
Net Cash Flow: Down in 2021 to 76.3 million but forecast to rise to 1,094 million in 2022.
Canadian Solar Inc. is a solar energy and battery company. The company is a provider of solar energy products, services and system solutions. It is active in various aspects with the design, development and manufacturing of ingots, wafers, cells, modules and solar energy products. The company's profit outlook over the next few years is a strong asset.
Market capitalization: Almost doubled in three years from 1'323 million in 2019 to 2'255 million in 2022.
EBITDA: 418 million in 2019, 473 million in 2021 and forecast to 533 million in 2022.
ROE: 10.1% in 2019, 5.65% in 2021 and expected at 7.73% in 2022
Net Debt: 1,471 million in 2021 and forecast at 1,926 million in 2022
Enphase Energy is an energy technology company. The company is a provider of microinverter-based solar and battery systems that allow people to harness the sun to generate, use, save and sell their own energy, and control it all with a smart mobile app. Emphase Energy is no longer a small-cap at all after a 2744% rise over the past 5 years, but its strong financial profile and results point to a bright future. At the same time, the energy sector is on the rise, allowing the giants of the sector to benefit more from the boom.
Market capitalization: Multiplied by 9 since 2019 from 3'198 million to 28'306 million in 2022
Free Cash Flow: 124 million in 2019, 300 million in 2021 and forecast at 432 million in 2022
ROE: 88.7% in 2019, 8.87% in 2021 and expected stabilization at 52.4% in 2022
Net Cash Flow: 349 million in 2020 and forecast to reach 80.6 million in 2022
Tidewater Renewables is a Canadian energy transition company. The company focuses on the production of carbon-based fuels, which includes renewable diesel, hydrogen and natural gas. Its renewable diesel is produced from biomass sources, including various forms of lipid-rich feedstocks such as used cooking oil, fish oil, animal fats, corn oil and soybeans. A strategic partnership with Rimrock, one of the largest livestock feed operations in North America, ensured a supply of raw materials. And, the first quarter ended with a profit.
Market capitalization: 510 million in 2021 and 495 million in 2022
Free Cash-Flow: Negative outlook for 2022 but positive at 85.9 million for 2023.
ROE: Forecast at 6.65% in 2022 and 14.5% in 2023
Net Debt: 80.8 million in 2022 and forecast at 146 million for 2022.
