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A clean investment guarantee?


Published 11-AUG-2018 17:00 P.M.


4 minute read

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In 2019 the original founding team returned to run Next Investors, we changed our business model to only write about stocks we carefully research and are invested in for the long term.

The below articles were written under our previous business model. We have kept these articles online here for your reference.

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It has become a veritable runaway train (that is, a solar-powered train made entirely out of cornstarch and hemp — or something) hurtling into another bumper year in 2018-19.

Last month, the Advisory Australian CleanTech released a report claiming that ‘cleantech’ companies outperformed the ASX200 for the fifth year running.

Cleantech refers to the index of 90 ASX stocks currently operating. These stocks get more than half their revenue from output that contributes positively to both the communities and ecologies in which the company operates. In the mix are water, renewable energy, low emission vehicle technologies, waste, sustainable miners and energy storage businesses.

The index returned 13.9% in the year to June 2018, and 13.1% for the prior year.

Perhaps most impressively, 17 of those companies saw gains of over 30% in the year to June.

That makes it sound like the index had a big year, but in fact the 13.1% figure is down on the astonishing 21.3% return the index achieved in FY2016.

The past performance of this product is not and should not be taken as an indication of future performance. Caution should be exercised in assessing past performance. This product, like all other financial products, is subject to market forces and unpredictable events that may adversely affect future performance.

Green is the new black, as NEG reality sets in

With the National Energy Guarantee (NEG) making headlines, Australia’s energy industry continues to learn a hard lesson: for companies to stay in the black long-term, they’ll have to green up, and fast.

The long-awaited National Energy Guarantee was deliberated on August 10 — this is a policy that is, at least to some degree, about avoiding another colossal power outage like South Australia saw in late 2016, with hundreds of thousands of residents left quite literally in the dark.

For those still in the dark about NEG itself, the Guarantee would require retailers in gas, solar and wind to sign contracts agreeing to supply a minimum amount of energy to be available at all times. Added to this, the electricity sold must have an average emissions level that meets the country's carbon emissions reduction targets.

No doubt that’s an admirable agenda, yet there’s a debate underway with several green-focused companies and climate change groups saying the emissions reduction target — 26% reduction on 2005 figures by 2030 — is not high enough.

The argument goes that by not setting a low enough target, the Australian industry will experience a slowdown and lose the competitive edge it has gained in recent years.

It remains to be seen what final policy will actually come of the current NEG discussions, but at yesterday’s meeting of energy ministers they did agree to release draft legislation for public consultation to implement the policy — that is, if it makes it through a coalition party room meeting next week.

Construction aplenty for renewable energy projects, GNX leading way

Also in July, the Clean Energy Council released figures showing that A$9.8 billion of large-scale renewable energy projects are under construction around the country.

Surprisingly, a large proportion of that comes out of QLD, where around 2445 megawatts of renewable energy capacity are being built for $3.86 billion.

Speaking of QLD, that’s where Genex Power (ASX:GNX) is focusing all its (green) energies right now.

It is developing an ambitious renewable energy hub in north Queensland, integrating large-scale solar with pumped storage hydro.

The hub, labelled a world first, is an integration of intermittent solar energy with low-cost energy storage creating ‘Renewable Energy On Tap’.

Genex recently impressed shareholders by raising more than $500 million from the Northern Australia Infrastructure Fund towards the Hub. GNX’s announcement added that, pursuant to the terms of the Solar 150 Financial Support Deed, it had “now has guaranteed revenue for the next 20 years to July 2038”.

This is of course speculative at this stage, so investors should seek professional financial advice if considering this stock for their portfolio.

It seems this one isn’t flying under the radar, with the stock up some ~92% in the last two years.

For all of that action going on, this is a company that is still, more or less, a small cap, having not yet surpassed A$100 million in market capitalisation.

This article is General Information and contains only some information about some elements of one or more financial products. It may contain; (1) broker projections and price targets that are only estimates and may not be met, (2) historical data in terms of earnings performance and/or share trading patterns that should not be used as the basis for an investment as they may or may not be replicated. Those considering engaging with any financial product mentioned in this article should always seek independent financial advice from a licensed financial advisor before making any financial decisions.

General Information Only

S3 Consortium Pty Ltd (S3, ‘we’, ‘us’, ‘our’) (CAR No. 433913) is a corporate authorised representative of LeMessurier Securities Pty Ltd (AFSL No. 296877). The information contained in this article is general information and is for informational purposes only. Any advice is general advice only. Any advice contained in this article does not constitute personal advice and S3 has not taken into consideration your personal objectives, financial situation or needs. Please seek your own independent professional advice before making any financial investment decision. Those persons acting upon information contained in this article do so entirely at their own risk.

Conflicts of Interest Notice

S3 and its associated entities may hold investments in companies featured in its articles, including through being paid in the securities of the companies we provide commentary on. We disclose the securities held in relation to a particular company that we provide commentary on. Refer to our Disclosure Policy for information on our self-imposed trading blackouts, hold conditions and de-risking (sell conditions) which seek to mitigate against any potential conflicts of interest.

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The information contained in this article is current as at the publication date. At the time of publishing, the information contained in this article is based on sources which are available in the public domain that we consider to be reliable, and our own analysis of those sources. The views of the author may not reflect the views of the AFSL holder. Any decision by you to purchase securities in the companies featured in this article should be done so after you have sought your own independent professional advice regarding this information and made your own inquiries as to the validity of any information in this article.

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