Bloomberg New Energy Finance - Week In Review

This Week In Review was sent on Tuesday 11 November.

Mixed fortunes for clean energy shares as france gets largest PV project

Clean energy shares, which had been outperforming other sectors on stock markets earlier this year, have slipped by 12% since the end of June, reflecting investor caution about business prospects. The latest crop of financial results has, indeed, been mixed.

Last week, Vestas Wind Systems upgraded its margin forecast and reported a stronger-than-expected quarterly profit, reinforcing a turnaround at the world’s largest wind turbine maker. However, Solazyme, a producer of renewable oils from algae, saw its share price decline the most on record after its third-quarter revenue fell short of expectations and it said sales next year will miss estimates by an even larger amount.

The WilderHill New Energy Global Innovation Index, or NEX, which tracks around 106 clean energy stocks worldwide, has risen 1.7% since the beginning of this year. This is a tiny gain in comparison with broader market indexes like the S&P 500, which has advanced 10.2% over the same time period. The NEX fell nearly 18% between 30 June and 15 October, before clawing back a little of that lost ground in the weeks since. 

Among the biggest NEX gainers, Vestas’ share price has increased more than 40% so far this year. The Aarhus, Denmark-based wind-turbine manufacturer ended trading at DKK 224.30 on 10 November.

Vestas reported last week that profit was EUR 102m ($126m) in the three months through 30 September, rebounding from an EUR 87m loss a year earlier. Vestas now expects sales for the year of as much as EUR 7bn, some EUR 1bn more than it previously predicted. The company upgraded its forecast for the operating margin for a second successive quarter, and now expects it to be as much as 8%.

Wind-turbine makers are waiting to see whether the US will renew a tax credit to the industry that expired at the end of 2013. Bloomberg New Energy Finance produced a webinar on what to expect for clean energy in the US – including the production tax credit for the wind industry – following the midterm election on 4 November.

With the Republican capture of the Senate, pressure is intensifying on the Obama administration to push a PTC reinstatement/extension bill through the ‘lame duck’ session beginning 12 November.

While the PTC expired at the end of last year, the benefits are still being felt as any project that started development last year can still claim the benefit so long as it finishes construction by the end of 2015. For Vestas, this means orders have help up. The company announced 1,192MW of orders, specifically in the US, in the first nine months this year. Its total global order intake in Q1, Q2, and Q3 was 4,290MW, according to the company’s website.

One of the biggest NEX losers has been Solazyme. South San Francisco, California-based Solazyme tumbled 58% on 6 November to $3.13 at the close in New York, the most since its May 2011 initial public offering.

Revenue in the third quarter was $17.6m, Solazyme said. Production issues at the company’s plant in Moema, Brazil, led Solazyme to lower its revenue forecast for 2015 to about $75m.

Solazyme originally planned to produce chemicals in the Moema plant that would undercut palm kernel oil, which has been hitting highs of $2,000 per tonne in recent years, according to Bloomberg New Energy Finance. But palm kernel oil prices are now down to $900 per tonne. Therefore, Solazyme announced a reduced utilisation rate at its Moema plant while it turns its attention to producing food oils and fossil fuel drilling lubricants. Bloomberg New Energy Finance says this means Solazyme will put focus more on its ability to produce products with improved quality and technical characteristics compared to market incumbents.

Solazyme is not the only renewable oils company to re-focus its priorities this year.  As Bloomberg New Energy Finance pointed out in its Hydrotreatment Update, Neste Oil, the largest producer of renewable diesel in the world, announced an expansion into the biochemical industry in September. Also this year, Renewable Energy Group bought LS9 and its intellectual property – a technology that turns sugars into fatty acids and alcohols used in detergents, lubricants and solvents. From being solely a biodiesel producer, Renewable Energy Group is now a company with intellectual property to produce high-value renewable products.

Meanwhile, there was exciting news for the solar sector last week as developer Neoen announced that a group, led by French contractor Eiffage, will build and operate Europe’s largest photovoltaic complex in France.

Eiffage, along with Schneider Electric and local installer Krinner, won a EUR 285m ($354m) contract for the 300MW of solar parks and will start construction immediately, they said in a joint statement. The solar complex, which will be built at Cestas near Bordeaux, will begin operating in October at a cost of more than EUR 360m, the Paris-based Neoen, said in a separate press release.

Neoen has secured almost EUR 310m in project finance from banks led by Societe Generale , now syndicating the debt with other lenders, a spokesman for the developer told Bloomberg News. The term of the loan is 18 years.

Based on Neoen's statement, the Cestas project has a cost per MW of just under $1.5m per MW, a competitive figure but only a little below Bloomberg New Energy Finance's latest capex assumption of $1.57m per MW for utility-scale PV in most European countries.

This reinforces how far solar has travelled in recent years in terms of cost reduction, according to Bloomberg New Energy finance. Perhaps more striking is that the debt, at EUR 310m, is equivalent to an unusually high 86% of the project cost, if the latter works out at exactly EUR 360m. Also, the tenor, at 18 years, is unusually long and shows that banks have moved away from insisting on shorter-term "mini-perms", as many were a couple of years ago.

Bloomberg New Energy Finance estimates South Africa's carbon tax would cost Eskom on average ZAR 19.3bn ($1.76bn) a year over 2016-30

BNEF estimates South Africa's carbon tax would cost Eskom on average ZAR 19.3bn ($1.76bn) a year over 2016-30
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Q&A of the week

Corporates seek to own, not just buy, clean energy

An increasing number of companies outside the power sector – from Apple to BT – are investing in their own renewable energy installations as a way to cut carbon emissions and electricity costs, according to UK non-profit CDP.

'From the 2,000 or so listed companies that took part in our climate change [disclosure] program this year, they invested $45.7bn in low-carbon energy installation,' said Paul Simpson, chief executive of CDP, which encourages companies to disclose their climate change work publicly.

Outside of power utilities, the industrial, materials and consumer discretionary sectors are leading in renewable energy investment, data from companies that report to the CDP suggest, Simpson said. Companies in these sectors many times have very energy-intensive operations or reputation concerns for their brands, he said.

Last month, CDP released its Climate Performance Leadership Index 2014, grading companies on their plans for setting and meeting carbon goals and their openness about this work. Out of the 2,000 companies that disclosed this information to the CDP, 187 companies received an 'A' grade. These companies included Apple, Bank of America Merrill Lynch, BMW, Google, Northrop Grumman, Samsung Electronics and Unilever.

Simpson spoke with Clean Energy & Carbon Brief about what is currently the most preferred way for companies to cut emissions and why some large corporations are still not revealing any details on their sustainability strategies.

Q: When considering all the companies that participate in CDP’s disclosure programme, do you see renewable energy playing a more significant part in companies’ carbon reduction strategies in recent years?

A: Overall we see energy efficiency [projects], particularly in buildings and processes, are the most popular approaches for reducing emissions, reducing energy costs. But, low-carbon energy installation is now the third most popular approach in the carbon strategies of the companies we work with. It’s definitely rising up the agenda. More and more companies are investing [directly] in their own renewable energy installations [like solar or wind farms, rather] than purchasing low-carbon electricity from their utilities. There is also a growth in that, but big corporations are focused on installing their own renewables. From the 2,000 or so listed companies that took part in our climate change [disclosure] program this year, they invested $45.7bn in low-carbon energy installation. That’s a big chunk of investment.

Q: Not including power utilities, do you see any particular industries (or maybe individual companies) leading the way in renewable energy investment?

A: We’ll start with industries. From our global leaders report, in terms of low-carbon renewable installation...

This is an excerpt from the Clean Energy & Carbon Brief published weekly. To subscribe to the Clean Energy & Carbon Brief, click here.

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