Here is the third instalment in our series on selected listed companies operating in the clean and green space, produced as a contribution by research and analyst company Kalkine. The series has been devised in recognition that in the absence of government mandates one of the fastest and most efficient ways to transition to a clean economy is through investments that promote a clean and healthy economy. However, as with any investment there needs to be a solid business case and a critical eye to underwrite success. The Fifth Estate makes no comment on this.
Algae.Tec Ltd (ASX: AEB) is an Australia based algae products company that works on the technology to produce algal oil and algal biomass for use as a feedstock in food and biofuel sectors.
Algae.Tec recently grabbed interest from leading nutraceutical companies with the launch of its Alganics range of products at the Supply Side West 2016 show in Las Vegas. The company’s technology primarily captures solar energy and waste carbon dioxide to produce commercial quantities of algae for use as a feedstock.
In 2016, Algae.Tec signed an agreement to give a California based worldwide supplier of health supplements, Gencor, the exclusive rights to buy all the algae oil and powders produced by Algae.Tec’s plant in Georgia, US, for nutraceutical applications. The company has estimated the market size of algae based nutraceutical products to be 21,000 metric tonnes.
In September, the company announced that with the completion of the US$1 million injection from the Gencor deal, the nutraceutical plant upgrade is progressing well and ahead of schedule. At full production and under the Gencor agreement, Algae.Tec expects the first plant to generate an annual revenue of more than US$2.5 million. The company is also in discussion with other strategic partners in relation to the structure and financing of a larger nutraceutical plant. Algae.Tec stock had moved up about 28 per cent in last one year but lost about 9 per cent in the last three months. The algae play seems to have great upside but it is advisable to watch out for further developments before making any investments.
Algae.Tec Technology Illustration (Source: Company Reports)
8point3 Energy Partners LP
This US based company, 8Point3 Energy Partners LP (NSQ: CAFD) owns, operates and acquires solar energy generation projects. The company is in the business of acquiring and operating solar developments such as utility scale solar farms.
These solar assets have seen buyers of the electricity already signing up long-term contracts. This has enabled 8Point3 Energy to get a steady stream of cash for maintenance purposes and returning value to shareholders. Further, the support comes from two sponsor companies, SunPower and First Solar, which help ensure better rates of return being delivered.
Recently, 8Point3 Energy signed an agreement to acquire a 34 per cent interest in First Solar Inc’s FSLR 300 MW Stateline solar project. The stake is expected to generate about $32 million in average annual pre-tax cash flow.
With environmental regulations on pollution control taking a pivotal role, investment in the alternative energy space seems to be proving profitable; and given such circumstances, 8Point3 Energy has good prospects going forward. The company declared a third quarter 2016 distribution of $0.24, representing an increase of 3.5 per cent over the second quarter 2016 distribution. The stock price fall of about 15 per cent in the past year is indicative of an investment opportunity looking at the prospects and liquidity position of this company.
Liquidity Profile (Source: Company Reports)
Inox Wind Ltd
India based Inox Wind Ltd (NSE: INOXWIND) is an integrated wind energy solutions provider and manufactures Wind Turbine Generators (WTGs). The company also has businesses across industrial gases, engineering plastics, refrigerants, chemicals, cryogenic engineering, and the renewable energy sectors. The recently formulated draft Wind Solar Hybrid Policy by the government of India, is set to optimise transmission infrastructure and land use for wind and solar energy, which can be quite encouraging for players such as Inox.
The company has caught investors’ attention with many new orders won in recent time. Inox recently reported that the state-owned NTPC has partnered with the company for a 50 Mega Watt (MW) wind project to be developed in Gujarat, India. NTPC is India’s largest energy conglomerate with about 47 Giga Watt capacity.
The project is scheduled to be commissioned by the first quarter of 2017-18. Inox also bagged a 50 MW wind power project order from hydroelectric firm, SJVN Ltd in Gujarat, India. The project is scheduled to be commissioned by November 2017. Inox has a repeat order for a 40 MW wind power project to be deployed in Gujarat, from Roha Dyechem Pvt Ltd.
For the September quarter, Inox reported a total income from operations of Indian Rupees 800.17 crore while the consolidated net profit after tax slumped considerably compared to the previous corresponding quarter.
Inox had earlier reported strong growth in annual WTG sales from 120 MW in Financial Year (FY) 2012 to 826 MW in FY 2016. The company has also demonstrated a 100 per cent surge in market share this year while capacity doubled. However, the aggressive bidding strategy for solar projects does not look to be a welcoming one as there have been rising concerns related to costs. The stock has plummeted about 45 per cent in last one year and still looks a bit expensive.