Seeking Alpha

Companies That Will Be Leaders Of The Future's New Green Economy

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Includes: AEE, FTS, NRG
by: Lipper Alpha Insight
Lipper Alpha Insight
Research analyst, portfolio strategy, macro
Summary

The world's demand for energy is increasing as populations grow, and hundreds of millions enter the middle class.

We used 3 primary aspects - reducing emissions, developing alternative energy and sustaining profitability - to identify companies trending in the right direction.

The company that showed the most impressive increase in renewables production, both from a relative and absolute standpoint, is NRG.

By Hugh Smith

Last October, the UN Intergovernmental Panel on Climate Change released a report saying we must cut global carbon emissions in half by 2030 to avoid catastrophic consequences.

Policymakers, with some notable exceptions, are starting to mobilize with growing support for a "Green New Deal." Business leaders are also beginning to speak up, talking about the private sector's responsibility to take the lead in driving towards a "new green" or "circular" economy.

However, cutting emissions is only one part of the task at hand. The world's demand for energy is increasing as populations grow, and hundreds of millions enter the middle class. A second part of the problem is the need to develop alternative sources of energy to meet these energy needs in a sustainable way. The third is to make it profitable for businesses because companies can only lead us into a long-term sustainable world if they are also financially sustainable.

We used 3 primary aspects - reducing emissions, developing alternative energy and sustaining profitability - to identify companies trending in the right direction to power the world in a sustainable way and be the leaders of the future.

  • We started with all companies headquartered in Canada or the United States and screen for those whose total CO2 and CO2 equivalent emissions have decreased by at least 1 million tonnes and 20% over the past 3 years;
  • Amongst these we screened for those whose total renewable energy produced has increased by at least 1 million gigajoules and 20% over the same 3-year period;
  • Finally, we looked at the 3-year percent change in EPS (Earnings per Share Growth Percentage) and require at least 20% growth.

Here's what we found

* In local currency. Source: Refinitiv

The screen yields 3 key companies.

The one Canadian firm - Fortis - generates electricity from hydroelectric, biofuel, wind, and solar sources, with solar generation increasing 42% since 2015. Fortis is also an industry leader in renewable natural gas ("RNG"), and they worked with the City of Surrey on its recently commissioned biofuel facility, which is producing RNG for the City's natural gas-fueled vehicle fleets.

The company that showed the most impressive increase in renewables production, both from a relative and absolute standpoint, is NRG (NYSE:NRG). However, they have changed their approach to renewables. In fact, NRG has divested its renewable energy business and now essentially outsources the production of renewable power to meet the clean energy demands of its customer base.

Finally, Ameren (NYSE:AEE) serves 2.4 million electric customers across Missouri and Illinois. Its latest Integrated Resource Plan (IRP) filed with the state of Missouri details clear goals for how it plans to meet future energy demands. These include: the addition of 700 megawatts (MW) of wind generation and 100 MW of solar generation by 2020 and 2027, respectively, retirement of half of its coal-fired capacity over the next 20 years, and CO2 emissions reductions of 35%, 50% and 80% by 2030, 2040 and 2050 from 2005 levels.

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