Tom Konrad, Ph.D., CFA
June was another good month (and capped a strong first half of the year) for my Ten Clean Energy Stocks for 2016 model portfolio.
This update’s going to be a short one, but here are the basic stats:
| June Total Return | June Benchmark Return | YTD Total Return | YTD Benchmark Return | |
| 10 Clean Energy Stocks | 3.3% | 0.6% | 6.8% | -2.8% |
| 7 Clean Energy Income Stocks | 7.1% | 1.9% | 12.3% | 5.7% |
| 3 Clean Energy Growth Stocks | -5.7% | -2.3% | -5.8% | -19.2% |
| GGEIP | 3.0% | 0.6% | 12.1% | 5.7% |
See the previous update for a description of the benchmarks.
The strong performance of the portfolio was driven mostly by the flight to quality and lower interest rate expectations caused by the Brexit vote and weaker than expected growth indicators in the US. Lower growth expectations and the more uncertain global economy mean that the Federal Reserve will be raising US interest rates later than previously expected, or even begin to reduce rates again if another recession is on the horizon.
Lower bond interest rates make my high yield clean energy stock much more attractive, hence the great performance for the income stocks, while the growth stocks, which are sensitive to a slowing economy fared relatively badly.
The chart above (larger version here) gives detailed performance for the individual stocks. Selected news driving individual stocks is discussed below.
Income Stocks
Pattern Energy Group (NASD:PEGI)
12/31/15 Price: $20.91. Dec 31st Annual Dividend: $1.488 (7.1%). Beta: 1.22. Low Target: $18. High Target: $35.
6/30/16 Price: $22.97. YTD Dividend: $0.671. Expected 2016 Dividend:$1.56 (6.8%) YTD Total Return: 16.0%
Wind Yieldco Pattern Energy paid its first $0.39 quarterly dividend. On June 30, it agreed to buy another 324 MW wind farm from its sponsor, an accretive deal which can be financed using available cash and borrowing. That said, the recent stock price strength makes me believe that at least part of this deal will be financed by selling some stock as well.
Enviva Partners, LP (NYSE:EVA)
12/31/15 Price: $18.15. Dec 31st Annual Dividend: $1.76 (9.7%). Low Target: $13. High Target: $26.
6/30/16 Price: $22.76. YTD Dividend: $0.97 Expected 2016 Dividend: $2.10 (9.2%) YTD Total Return: 31.2%
Wood pellet focused Master Limited Partnership (MLP) and Yieldco Enviva Partners sold off sharply but then recovered on the Brexit vote. Traders were probably worried because most of Enviva’s pellet sales are to European and British utilities. The stock then recovered when they realized that that most of these sales are under long term contracts and wood pellet demand is growing rapidly. Both of these facts should significantly insulate Enviva from any European turmoil.
Green Plains Partners, LP (NYSE:GPP)
12/31/15 Price: $16.25. Dec 31st Annual Dividend: $1.60 (9.8%). Low Target: $12. High Target: $22.
6/30/16 Price: $15.55. YTD Dividend: $0.8075. Expected 2016 Dividend: $1.62 (10.4%) YTD Total Return: 5.0%
Ethanol production Yieldco Green Plains Partners entered a joint venture to build an import/export terminal on the Gulf coast.
NRG Yield, A shares (NYSE:NYLD/A)
12/31/15 Price: $13.91. Dec 31st Annual Dividend: $0.86 (6.2%). Beta: 1.02. Low Target: $11. High Target: $25.
6/30/16 Price: $15.22. YTD Dividend: $0.455. Expected 2016 Dividend: $0.94 (6.2%) YTD Total Return: 13.2%
Yieldco NRG Yield (NYLD and NYLD/A) did not report significant news.
Terraform Global (NASD: GLBL)
12/31/15 Price: $5.59. Dec 31st Annual Dividend: $1.10 (19.7%). Beta: 1.22. Low Target: $4. High Target: $15.
6/30/16 Price: $3.26. YTD Dividend: $0.275. Expected 2016 Dividend: $0.60 (18.4%). YTD Total Return: -34.9%
Yieldco Terraform Global got a boost when it was reported that Brookfield Asset Management (NYSE: BAM) had taken a 12% stake in its sister Yieldco, Terraform Power (NASD:TERP) and had been in talks with bankrupt parent SunEdison (SUNEQ) about possibly buying its controlling class B shares.
This vote of confidence boosted Global because it implies that Brookfield sees value in their assets, despite all the uncertainty around the Terraforms. If BAM were to buy TERP, many of the assets would likely be sold to Brookfield Renewable Partners (NYSE:BEP.)
Hannon Armstrong Sustainable Infrastructure (NYSE:HASI).
12/31/15 Price: $18.92. Dec 31st Annual Dividend: $1.20 (6.3%). Beta: 1.22. Low Target: $17. High Target: $27.
6/30/16 Price: $21.60. YTD Dividend: $0.30. Expected 2016 Dividend: $1.25 (5.8%). YTD Total Return: 15.9%
Clean energy financier and REIT Hannon Armstrong returned to the equity markets with a well-received secondary equity offering of 4.6 million shares priced at $21 a share. Investors were clearly eager for this offering: The initial press release mentioned only 3.85 million shares on June 15th, with an additional underwriters purchase option of 577 thousand shares, for potentially only 4.427 million shares. Later that same day, the number of shares was revised up to 4.6 million, including the underwriter’s option. When the sale closed a week later, the underwriters had already exercised their 30 day option.
TransAlta Renewables Inc. (TSX:RNW, OTC:TRSWF)
12/31/15 Price: C$10.37. Dec 31st Annual Dividend: C$0.84 (8.1%). Low Target: C$10. High Target: C$15.
6/30/16 Price: C$13.36. YTD Dividend: C$0.545 Expected 2016 Dividend: C$0.88 (6.6%) YTD Total Return (US$): 43.0%
Canadian listed Yieldco TransAlta Renewables hit a new 52-week high, and the stock was also helped by the strengthening Canadian dollar.
Growth Stocks
Renewable Energy Group (NASD:REGI)
12/31/15 Price: $9.29. Annual Dividend: $0. Beta: 1.01. Low Target: $7. High Target: $25.
6/30/16 Price: $8.83. YTD Total Return: -5.0%
Advanced biofuel producer Renewable Energy Group fell a little amid the global uncertainty, but the lower price only served to make me more enthusiastic about this leading firm is the strongest biofuel markets.
MiX Telematics Limited (NASD:MIXT; JSE:MIX).
12/31/15 Price: $4.22 / R2.80. Dec 31st Annual Dividend: R0.08 (2.9%). Beta: -0.13. Low Target: $4. High Target: $15.
6/30/16 Price: $4.68 / R2.68. YTD Dividend: R0.04/$0.076 Expected 2016 Dividend: R0.08 (3.0%) YTD Total Return: 12.7%
Software as a service fleet management provider MiX Telematics received a well deserved upgrade to Overweight from First Analysis, but the global uncertainty dragged the stock down anyway.
Ameresco, Inc. (NASD:AMRC).
Current Price: $6.25. Annual Dividend: $0. Beta: 1.1. Low Target: $5. High Target: $15.
6/30/16 Price: $4.37. YTD Total Return: -25.2%
Energy service contractor Ameresco did not disclose significant news, but the stock was also dragged down by market trends. Given that the company operates mostly in North America on contracts with government entities and other large domestic institutions, the decline has little if anything to do with the company’s prospects.
Final Thoughts
The first half of 2016 has been a great start to a strong year, despite the generally unsettled nature of the stock market. While broad clean energy ETFs like PBW have fallen sharply, I hope the performance of my opportunistic income investing approach shows that investing in clean energy does not have to be risky.
Disclosure: Long HASI, AMRC, MIXT,, RNW/TRSWF, PEGI, EVA, GPP, NYLD/A, REGI, GLBL, BEP, TERP
DISCLAIMER: Past performance is not a guarantee or a reliable indicator of future results. This article contains the current opinions of the author and such opinions are subject to change without notice. This article has been distributed for informational purposes only. Forecasts, estimates, and certain information contained herein should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. Information contained herein has been obtained from sources believed to be reliable, but not guaranteed.
