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NEE and IFN generate green energy returns

Published 04-SEP-2018 15:07 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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In late July, a ranch fire broke out in California’s Mendocino County, and by mid-August the out-of-control blaze had become the largest wildfire in California’s history. That fire charred approximately one thousand square kilometres. As this New Yorker article points out, that’s twice the size of NYC.

The article goes on to add that Canada’s British Columbia declared a state of emergency in response to over 500 active blazes (with the pollution affecting air quality in Seattle, where residents have been advised to stay inside).

As a species, our weather and our climate have never been more on the radar.

A rapidly growing body of scientific research is finding that it’s possible to directly link the impact of carbon emissions and climate change to specific extreme weather events such as droughts, fires, heatwaves and floods.

The above-linked Scientific American article suggests that this burgeoning field could have real legal ramifications for companies, industries or governments responsible for emissions... we are talking about potential future lawsuits.

While you could argue some of the world’s major governments are overlooking all this, it’s pretty clear that scientists, investors and those in the world of business are taking more interest in climate-conscious tech and stocks than ever before.

Below is a look at two very different green energy stocks: a Fortune 200 NYSE-listed green energy giant, and an ASX-listed mid-cap operating in wind power.

Nextera Energy takes it to the next level

The US$80 billion capped Nextera Energy (NYSE:NEE) seems to have a strategy that’s paying off.

In the last 12 months, its share price is up a respectable 13%; yet, if you got in five years ago you’d be up 112%, and over the last 10 years NEE has seen a 238% share price rise.

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.

NEE operates ~46,790 megawatts of ‘net generating capacity’ and employs some 14,000 people across the US and Canada. Its main subsidiaries are Florida Power & Light Company (about five million customers) and NextEra Energy Resources, LLC — the latter, along with its affiliated entities, is the world's largest generator of renewable energy from the wind and sun.

NEE also ranked #1 in the electric and gas utilities industry in Fortune's 2018 list of ‘World's Most Admired Companies’.

However, it’s not all sunshine (despite, ahem, its solar focus), given that NEE generates emissions-free electricity from eight commercial nuclear power units in the US.

The use of nuclear power in the fight against climate change has long been a divisive issue. But for investors who can stomach nuclear power, NEE could be an investment game-changer.

Infigen’s wind power is fan-ing the green stock flame

The A$596 million capped Infigen (ASX:IFN) has been looking fairly promising for some time now.

While IFN is down 16.5% over the last 12 months, its performance has been solid over the past five years, gaining 147%.

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.

The Australian wind power play has grabbed a few headlines lately by virtue of the fact it has been hinting at a future bonus for shareholders; the likely resumption of the almighty dividend.

Another tick for the ‘Pros’ column — depending on how you look at it.

The company is currently considering its proposed 50 megawatt Cherry Tree wind farm near Seymour, Victoria, and continuing to develop its Flyers Creek wind project near Orange, NSW — all while keeping a discerning eye on the government’s leadership changes and the current moving feast that is climate change policy in Australia.

The company has confirmed its entry into the Victorian market, however, through a five-year contract to buy power from the Kiata wind farm being developed by Windlab at a location near Horsham.

IFN posted a 41% increase in full-year net profit at the same time it flagged the likely resumption of dividends, giving investors a good deal to feel good about. Yet not everyone thinks it’s a great idea to be handing out cash to shareholders instead of using it to pay off debt (when IFN is still a growing company).

Whether it will resume paying dividends or not, and whether that gives a decent bump to its share price, remains to be seen. Either way, IFN could be one for ASX investors to keep an eye on.

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.

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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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