For some, personal investment in renewable energy is nothing new. Whether driving a hybrid car or installing rooftop solar panels or using wind-generated power from the local utility, millions of people across the globe now rely on green energy sources to help with their various power needs on a daily basis.
Seems to benefit from the growing use of non-conventional power sources, investors may want exposure to renewable energy. While there are many choices, First Solar (NASDAQ: FSLR) Ormat Technologies (NYSE: ORA) and TPI Composites (NASDAQ: TPIC) currently represents compelling opportunities.
Let the sunshine in
Naysayers claim that solar energy is slowing, but recent research suggests otherwise. A report by Wood Mackenzie and the Solar Energy Industries Association indicates that the future of solar power in the utility-scale market is still bright, with the pipeline for projects now at a record level.
This provides a significant opportunity for First Solar, a manufacturer of thin film solar modules, which is ideal for the scale applications. And with the recent start-up of operations at the second plant in the United States, First Solar is proclaiming itself the largest manufacturer of solar modules in the Western Hemisphere.
During the last quarterly income report, it revised the 201[ads1]9 Guidelines upwards. While management had previously projected revenues of $ 290 million to $ 340 million, they now expect $ 320 million to $ 370 million – a notable increase over $ 40.1 million and $ 177.9 million, respectively, in 2018 and 2017, respectively. And in light of the company's success in expanding the pipeline, the future beyond 2019 also looks fortunate, which supports the claim that the solar energy industry is continuing to grow.
For example, during the first nine months of 2019, First Solar booked orders totaling 5.4 gigawatts GW), an increase from the 5.2 GWs it ordered during the same period in 2018. Furthermore, the company states that it has 8.1 GW opportunities in the mid to late stage of the pipeline, representing growth over 7.9 GW that it had at this time in 2018.
Water, Water Everywhere
For those who are not inspired by the power of the sun, perhaps the power generated by water will recharge them. Ormat Technologies is one of the world's only vertically integrated geothermal companies, and owns and operates a portfolio of assets representing 917 megawatts (MW) of power. And management seems confident that the company's portfolio will soon pass the 1 GW threshold, revealing in an investor presentation last summer that the company expects to add 125 MW to 135 MW of organic growth by the end of 2021. More than the company's geothermal solutions, but I think management's interest in expanding into the energy storage market is particularly exciting, for a recent report from Wood Mackenzie Power and Renewables "projects that energy storage installations will grow 13 times over the next six years." Ormat Technologies offers various services related to energy storage, and offers battery storage such as servicing, engineering and integration of energy storage facilities and asset management.
In terms of the company's finances, management over the past five years has proven to be capable of growing both top and bottom lines. For example, from 2014 to 2018, Ormat has grown revenue and EBITDA with compound annual growth rates of 7.5% and 7.9%, respectively. When moving from the income statement to the balance sheet, savvy investors can question the company's financial health, as companies that run large assets like Ormat can be burdened with heavy debt. However, with a net debt / EBITDA ratio below 3, there appear to be no red flags here.
The answer blows in the wind
According to a recent report by the International Energy Agency, wind power is poised for significant growth. The report finds that "global offshore wind capacity can increase 15 times and attract around a billion dollars of cumulative investment by 2040." Take into account the growing number of onshore wind power projects, and it's clear that TPI Composites, a manufacturer of composite wind turbine blades, offers an exciting opportunity – especially since the company estimates that customers today represent 99% of the US onshore wind market. and 55% of the global onshore market.
Since the company is forging long-term delivery agreements, management claims that there is insight into its future revenue. In a recent investor presentation, for example, management noted that based on current agreements, TPI Composites has up to $ 6.2 billion in potential revenue through 2023. Should the company succeed in booking this amount in sales over the next five years, it will represent 71 % growth over the more than $ 3.6 billion in revenue reported by the company from 2014 through 2018. Management also expects this top line growth to lead to increases at the bottom of the income statement. At the company's telephone conference in Q2 2019, CEO Steven C. Lockard stated that the company "remains [s] in a position of profitable growth, significant free cash flow and convincing return on invested capital as the industry matures."
The Renewable Energy Rundown
Forward-looking investors who are eager to invest in green energy businesses may find the choices overwhelming, but First Solar, Ormat Technologies and TPI Composites are three compelling alternatives that can provide a good foothold.
With a history stretching back 20 years, First Solar has proven to be a well-known name in the solar industry, and it seems there are plenty of bright days ahead. However, investors who find themselves more motivated to trade based on the growth trajectory of the wind industry will find that TPI Composites and its extensive reach throughout the industry can put the wind in the sails. Meanwhile, Ormat Technologies, with a focus on expanding into the energy storage market, represents another exciting opportunity.