Hydro Power and Wind Power Companies shares are likely to underperform and discourage investors for short to medium term. They will become hot sectors after few years when the prices of traditional sources of energy such as crude oil, natural gas, coal etc skyrocket due to increasing demand and declining supply and production. Also the ROE Return on Energy would decline i.e. more than one dollar would be required to produce 1 dollar worth of crude or coal. At those times the wind power, hydropower, and solar power companies would start attracting investments (in fact they already have). Invention of newer and advanced technology would enable and support use of power generated from solar systems.
We also have recently seen stock prices coming down and capital erosion in wind power suzlon, than a couple of hydro power related counters, while solar power related companies saw a spurt in last bull market but they have till date only remained a seasonal fancy or part of ‘flavour of month’ among market participant community. Some of my investment intellectual friends also contend that hydropower is vulnerable due to dependence on water flows and any disruption in water bodies and streams could damage the projects of make them idle. Also regarding wind power and solar-they contend that if these sources has to become cheaper due to newer technology and traditional energy sources becoming costlier; they would be so cheaper that large-scale and corporate level business scale could become unviable or unprofitable in them.
The point I want to make is to keep a list of companies doing business of renewable energy sources especially wind and hydro where working capital and expenditure requirement is very low or nearly nil. Their real day will come when the traditional sources of energy will become costlier and scarcer and the return on
0 comments:
Post a Comment