[Editor’s note: This story was previously published in January 2019. It has since been updated and republished.]
The 2020 Olympic Summer Games are to be held in Tokyo, Japan. The organizers of the games are planning to power the events with 100% renewable energy, which is great news for renewable energy stocks.
Not only will the facilities where the sporting events are to take place to be powered exclusively by solar and wind power, so too will the athletes’ village, international broadcasting center and press facilities.
It’s an unprecedented undertaking that will highlight the decarbonization of Japan, providing a view into a future fully powered without fossil fuels.
The city of Tokyo plans to generate 30% of its annual power consumption needs through renewable energy sources that include solar roads — already installed on highways in France — across the city by 2030.
The following seven renewable energy stocks to buy will benefit from the publicity generated at the 2020 Olympic Games.
However, that’s nearly two years from now. Here’s why each of them makes very compelling investments today:
NextEra Energy (NEE)
Not only is NextEra Energy (NYSE:NEE) the world’s largest utility, it’s also the largest producer of wind and solar energy anywhere on the planet making it one of the best renewable energy stocks to buy for the long haul.
Many people probably know NextEra because of its Florida Power and Light subsidiary that serves more than 5 million Floridians and is one of the largest rate-regulated electric utilities in the U.S.
However, it is the subsidiary NextEra Energy Resources that is paving the way for future shareholders gains. It owns 120 wind facilities in North America that generate 13,000 megawatts of energy annually.
It also generates more than 2,000 megawatts of solar power from facilities in seven states and Canada along with natural gas-fired and nuclear power plants that deliver additional power generation.
However, it is the company’s views on diversity that makes it an excellent long-term investment. I’m not much of a fan of utilities investments, but NextEra Energy’s definitely got me very intrigued.
Brookfield Renewable Partners (BEP)
Brookfield Renewable Partners (NYSE:BEP) announced that it had increased its ownership (with partners) of TerraForm Power (NASDAQ:TERP) from 51% to 65% by purchasing an additional 61 million shares in a private placement. The investment will add $80 million annually to Brookfield Renewable’s funds from operations.
TerraForm Power generates 3,634 megawatts of solar and wind power around the globe with 65% right here in the U.S., another 26% in Europe, and the remainder from facilities in Canada, Chile and Uruguay.
Brookfield Renewable worldwide has 843 renewable power facilities in North America, Latin America and Europe capable of producing 16,300 megawatts of power annually.
In North America alone its renewable energy facilities generate enough electricity to power 2 million homes.
If I could only own one company’s stock, Brookfield Asset Management would be at the top of my list.
Like Brookfield Renewable, it could be more attractive to U.S. investors to buy TransAlta Corporation (NYSE:TAC) rather than its 64%-owned renewable energy subsidiary TransAlta Renewables (TSE:RNW), which trades on the Toronto Stock Exchange.
TransAlta Renewables pays approximately CAD 150 million in dividends annually to its parent from the free cash flow generated from wind-power facilities in the U.S. and Canada that have the capacity to produce 1,248 megawatts of power and 49% of its annual cash flow along with natural gas-fired power generation that delivers 47% of its annual cash flow with hydroelectric facilities providing the rest.
TransAlta Renewables is in the process of strengthening its balance sheet. Over the past two years, it has cut CAD$900 million of its debt, which should result in the company’s free cash flow doubling over the next three years.
The company currently pays a 1.95% monthly dividend, so by buying the parent, you’re giving yourself a little more safety but a much lower dividend yield. Although there are risks to owning Canada’s largest generator of wind power, if you’re an aggressive investor, I’d go with RNW.
This is probably the least sexy stock you could buy in the renewable energy sector, but Enviva Partners (NYSE:EVA) is a good one nonetheless.
Eviva is the world’s largest producer of wood pellets, producing over three million metric tons each year from seven plants in the Southeastern part of the U.S. The pellets themselves are sold to utilities in the U.K. and Europe that use them in place of coal to produce a cleaner electricity source.
Thanks to wood pellet businesses in the south like Enviva, greenhouse gas emissions have been reduced (PDF), forests are growing and jobs have been created, providing a trio of benefits that are hard to beat.
Enviva has long-term supply contracts that provide stable cash flows. Its current contracted backlog is $6 billion with nine years left on the average supply contract.
In 2019, the company expects to generate at least $79.5 million in distributable cash flow resulting in distributions of 8.6%.
If you’re an income investor, Enviva is a very safe way to meet your annual income requirements.
Renewable Energy Group (REGI)
Renewable Energy Group (NASDAQ:REGI) is another simple yet attractive businesses turning vegetable oils and animal fats into diesel fuel.
Whenever you see one of those trucks sucking out the grease traps at a restaurant, it’s going to one of Renewable Energy’s 13 biomass refineries to be turned in diesel fuel. The company has the capacity to produce 575 million gallons of diesel fuel annually, 70% of which is sold to major travel centers and fuel marketers.
The demand for biodiesel is tremendous. California, Texas, New York and seven other states demand 1.5 billion gallons of the stuff in 2018, up from 1.15 billion in 2016.
In Q4 2018, Renewable Energy sold 163.2 million gallons of biodiesel generating $519.8 million in revenue and $44.5 million in adjusted EBITDA. The company’s adjusted EBITDA in the quarter was the highest in the past five years.
Although its stock had a strong 2018, up 124%, and has struggled so far this year, I believe it has got room to move into the $30s on rising demand.
TPI Composites (TPIC)
What is one of the main ingredients needed for wind power? Wind, of course, but you also need turbine blades to generate that power. TPI Composites (NASDAQ:TPIC) is the largest independent manufacturer of composite wind blades for turbine manufacturers. It has facilities in North America, Europe and Asia.
Although its major business is providing wind blades for turbines, the company is working to diversify its revenue streams. Last year, it announced a joint development agreement with Navistar International (NYSE:NAV) to develop a composite tractor and frame rails for a Class 8 truck. Since then, the stock nearly has added more than 36%.
The project brings the company’s strategic development plans into a fifth area outside of its core market providing investors with promising future growth.
For all of 2019, TPI Composites expects to grow revenues to at least $1 billion for the first time in the company’s history. With margins moving higher, the profits will follow.
This last one gives you exposure to a global industrial player in Siemens (OTCMKTS:SIEGY) which, amongst its many ventures, owns 59% of Siemens Gamesa Renewable Energy (OTCMKTS:GCTAF), the world’s largest producer of wind turbines.
Siemens Gamesa sells its turbines to both onshore and offshore wind farms around the world.
In June, Siemens Games announced that it will supply 70 units of its Onshore OptimaFlex wind turbines to three onshore wind farms in Norway. The turbines will provide approximately 294 megawatts of power and have a 25-year lifetime.
In Norway alone, Siemens Gamesa’s turbines provide more than 500 megawatts of power with another 390 megawatts under installation.
Now multiply that by how many countries around the world and you get a total installed base of 85 gigawatts of power generated from its wind turbines.
This year’s first quarter, Siemens Gamesa reported wind turbine sales of $26 billion and $404 million in earnings before interest and taxes.
As of this writing, Will Ashworth did not hold a position in any of the aforementioned securities.