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Offshore Wind Stocks

Here are some nice clean energy stocks for the environmentally inclined.

Offshore Wind Developers

Orsted (CPH: ORSTED)

Orsted is the biggest stock in offshore wind. Orsted develops, constructs, operates and services offshore wind farms (98% of cash flows), and also has an onshore wind and biomass business. Orsted is one of the most prominent green / clean energy companies in the world. Orsted is the leader in offshore wind development.

Previously DONG Energy – the Danish state’s national oil company, Orsted has since divested all carbon intensive assets and is a pure play clean energy company. Orsted is aiming for carbon neutral energy generation and operations by 2025.

Major activity in 2019 include:

  • Hornsea 1 (1,218 MW) commissioned
  • FID of Greater Changhua 1 & 2a (900MW)
  • Winning bids for the US
  • Advancing market entry in new offshore wind markets Poland and Japan

It is the leader in offshore wind production with 3.9TWh of generation in 4Q 2019. Expected 15-16 billion DKK of EBITDA in 2020 excluding new partnerships. Orsted has a strong balance sheet (well positioned to fund its own offshore wind projects) with credit ratings of Baa1/BBB+ (Moody’s/S&P).

Offshore Wind Value Chain

Titan Wind Energy (Suzhou) (SZSE: 002531)

  • Revenue of RMB6.3 billion in 2020 and EBITDA of 1.5bn
    • Trading at approx. 9x forward EBITDA
  • Largest wind tower specialist in China
    • Produces turbines, blades, and other power generation equipment
  • Tower supplier for Vestas and GE

Xinjiang Goldwind Science and Technology (SZSE: 002202 / SEHK: 2208)

  • Largest wind OEM in Mainland China with global operations
    • By far the largest domestic wind turbine manufacturer with a 23.5GW backlog as of September 30, 2019
      • Over 1 GW of backlog is international
  • Has wind turbine manufacturing (turbine generators, components) , wind power services, wind farm investment and wind farm development
    • 1.5 MW, 2.5 MW, 3MW, 2 and 6 XMW permanent magnet direct-drive wind turbine generators
    • Water treatment, photovoltaics, smart energy storage centres
  • Estimated RMB49 billion of revenues in 2020 and EBITDA of 7.3 billion
    • Trading at 9x EV / 2020 EBITDA
  • Goldwind is poised to benefit from growing wind capacity needs through large size (economies of scale) and relatively large R&D budget
    • Competes with Shanghai Electric in domestic market due to Shanghai Electrics rights to Siemens Gamesa technology
  • Major investors include China Three Gorges Corporation

Vestas (CPH: VWS)

Similar to Orsted, Vestas is the first mover in Wind Energy, having installed turbines 40 years ago and having installed over 100GW of capacity since then around the world. Vestas’ offshore joint venture is MHI Vestas.

  • Vestas is the number 1 wind turbine manufacturer in the world with roughly 20% of 2018 installation
    • 17.9GW of new orders in 2019, a 26% increase on 2018
    • Order backlog of EUR34bn
    • Growing services business with 26% EBIT margin (services are attractive as they are not capital intensive and high margin)
      • Services backlog even higher than wind turbine order backlog
  • 2019 Revenue of EUR12.1 bn, EBIT margin of 8.3%

MHI Vestas Offshore Wind has installed 4.8GW of capacity via over 1,200 turbines across 34 projects. MHI Vestas also has the largest number of installation orders.

Current projects include Deutsche Bucht, Moray East, Northwester and Borsselle. Installations to 2023 are expected to grow at a 10-15% compound annual growth rate to 2023.

General Electric Renewable Energy and GE Wind (NYSE: GE)

GE – somewhat of a special situations stock at the moment as everyone knows. They make very large wind turbines though.

  • GE is currently on the Haliade-X 12 MW, the most powerful wind turbine to date
    • Turbines are getting bigger and bigger and offshore wind farms are scaling up
    • The Haliade-X 12 MW has a 220-meter rotor, 107-meter blade and a capacity factor of 63%
  • GE Wind also offers services and digital solutions (wind data and analytics)

Siemens Gamesa Renewable Energy (BME: SGRE)

  • Developer and wind farm construction company
  • Also involved in engineering, design and production of wind turbines
    • Operations in Wind Turbines and O&M (operations & maintenance)
    • Operates in over 90 countries with total capacity base exceeding 90GW
  • The SG 10.0-193 wind turbine competes with the GE Halaide-X and MHI-Vestas V164
  • Current backlog of EUR28.1  billion, primarily in EMEA but with major growth in APAC and the Americas

SBM Offshore

SBM is a major offshore oilfield services company but many of its engineering and project management services are also applicable for offshore wind installations.

As offshore wind becomes a developed market, floating solutions for moorings and other designs in lowering the costs of construction will offer profitable opportunities for SBM

SBM is currently focusing on offshore wind turbines and wave energy converters. This work may actually be paired with offshore oil production (powering operations).

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