'Investing in Wind Energy' Report
For over a decade, wind has been the world's fastest growing energy source on a percentage basis. The industry has been growing at 28% a year for the past five years, and if growth trends continue at this pace as is expected, wind capacity will double about every three or four years.
A special report, "Investing in Wind Energy" was released today by Progressive Investor, an investment group interested in greening the economy, one investment at a time.
Rona Fried, the editor said "In the three years since we produced our first report, Investing in Wind, we've seen the complexion of the industry change from a blossoming, mostly regional industry based in Europe, to a worldwide industry that is becoming increasingly corporate, and experiencing growing pains in the process."
Whereas the industry used to be centered in Europe, and mostly in Germany, now 50 countries are actively installing turbines, employing 100,000 people. Wind turbine manfacturers have become truly global companies, operating worldwide.
The drivers for growth are government support, the advent of renewable energy certificates (RECs) and most notably, the influx of deep pocket, mainstream financial investors and wind park developers, from Goldman Sachs to Babcock & Brown, which are taking the industry to a completely new level.
Renewable energy project finance is rising dramatically, from US$10.8 billion in 2004 to $18.2 billion last year. The preponderance of deals are in wind (72%), with the U.S. leading the world with $3.9 billion invested in 2005.
With the heavy hitters moving in and buying up properties, wind park ownership is rapidly consolidating. A third of the world's wind capacity is now under the aegis of the top 20 wind farm owners.
Spanish utility Iberdrola and U.S.-based FPL Energy ended 2005 tied as the world leaders in wind farm ownership with 3400 MW in service, followed by Spanish Acciona Energia.
Even though the wind industry is growing significantly, the research shows it's not as straightforward an investment as it may seem from the surface. Is the wind industry a good place to park your money? And if so, do you invest in the turbine manufacturers or the wind farm developers? Which ones?
"Wind is more mature than other renewable energy sectors - it has a longer history and track record. Publicly traded wind companies have been growing very quickly and are feeling the growing pains now," says Paul Klegg, an equity analyst with Natexis Bleichroeder.
Commenting on the turbine shortage, currently a major problem for the industry, Mark Cox, Managing Director of New Energy Fund, says, "Wind has accelerated faster than the wildest dreams of the turbine makers. Because it requires such a huge capital investment, management hasn't added enough capacity in advance and now has to catch up."
The world wind turbine market is dominated by 10 major companies which control almost 100% of the market: Vestas (34%), Gamesa (18%), Enercon (15%), GE Wind (11%), Siemens (6%), Suzlon (4%), REpower (3%), Mitsubishi (2%), Ecotècnia (2%) and Nordex (2%).
Our analysts continue to believe the two largest wind turbine companies, Vestas (VWS.CO) and Gamesa (GAM.MC) remain good long term investments, along with the smaller companies that have room to grow: REpower (RPW.BE), Nordex (NDX.DE), and Clipper (CWP.L). On the wind farm developer side, they like such companies as Acciona (ANA.MC), Novera (NVE.L) and Boralex (BLX-A.TO).
Says David Shoenwald, President, New Alternatives Fund, "The companies I like best are independent utilities; they develop and own the wind farms and then, rather than selling them, they market the electricity. Canadian Hydro Developers (KHD.TO) is an example."
What does the future hold for wind? Offshore wind will be huge, but there will also be a place for small turbines. "I think we'll see a breakthough in the ability to store wind energy for later use over the next decade." predicts Gerard Reid, Portfolio Manager, Hornet RE Fund. "My vision is that everyone will have a small turbine on the roof of their house the way we used to have TV antennas."
This report is a succinct overview of the industry, the investing landscape, and the main players.
The sections are:
The contributing analysts are:Paul Klegg, Equity Analyst, Natexis Bleichroeder
Mark Cox, Managing Director, New Energy Fund LP
David Shoenwald, President, New Alternatives Fund
Gerard Reid, Portfolio Manager, Hornet RE Fund
Progressive Investor is a monthly newsletter that guides investors and advisors toward sustainable investments. It covers all the renewable energy sectors, healthy lifestyle, green building, sustainable forest investing and much more. http://www.sustainablebusiness.com/progressiveinvestor/index.cfm
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