Wednesday, 11 November 2020

Enphase Energy - Portfolio Addition


Following on from the recent election of Joe Biden as president and in anticipation of the acceleration of the US towards net zero, I have decided to add to my green portfolio.

Enphase Energy is a NASDAQ-listed energy tech company with HQ in California. It provides clean home energy solutions which includes solar generation, storage and web-based monitor and control. The core of the business is the manufacture and supply of microinverters which convert energy from the solar panel into the AC power used in the house. This technology has revolutionised the solar industry and provides the home owner with a simple solar+storage solution. This provides the potential for every home to become a mini power plant and reduce dependence on the national grid. To date, Enphase systems have been deployed in more than 130 countries worldwide.


They are the most well established and reliable brand and come with a 20 year warranty and have been rigorously tested to last over 100 years. The whole system can be monitored on a smart phone or tablet via their "Enlighten" app.

The Case for Solar PV

We need to decarbonise our global energy and transition away from fossil fuels and get to net zero emissions by 2050. Two thirds of the global community are now signed up to this transition - UK, Europe, China, Japan and now the US after Trump lost the election. Reducing energy-related CO2 is at the heart of this transition.

The deployment of renewable energy has been growing rapidly in recent years and particularly wind and solar. Solar capacity is expected to reach 120 GW by the end of this year as costs continue to fall. In many of the sunnier regions of the world it is now the cheapest form of energy generation. Capacity is expected to increase by 15% each year for at least the next decade and could be responsible for up to 50% of total energy requirements in many countries by 2050.

According to the latest report from the International Energy Association, 90% of all new electricity generation this year will be from renewables. This means green electricity will become the largest global power source by 2025 and will provide one third of the world's electricity.

Credit : Carbon Brief  (click to enlarge)

Solar power capacity has increased by 18 times since 2010 and wind power by four times, according to IEA data. In October, Fatih
Birol said: “I see solar becoming the new king of the world’s electricity markets.”

Results

It's been a testing few months due to Covid however Q3 revenues increased by 42% on the previous quarter at $178.5m and diluted earnings per share at $0.28 compared with $0.23 in Q3 2019 so moving in the right direction. Revenues have been helped by the new Encharge storage system which boosted sales by 10% over the quarter. Revenue growth inEurope has been strong with a 67% above the previous quarter due to new installers and distributors in several EU countries.

Storage Solutions Provide Flexibility

Obviously it's hard to predict whether this growth will continue with the second wave of Covid causing more disruption however, with a vaccine now on the horizon and the Election of Biden and the introduction of a huge green stimulus for renewable energy, I am sure the longer term future will be positive for solar.

Conclusion

Enphase is a top ten holding in my iShares Global Clean Energy ETF along with SolarEdge but I wanted to increase my portfolio allocation with more solar-focused companies to balance out my higher allocation to wind with the likes of Orsted.

The shares have had a really good run this year rising from $30 in January to a recent high of $125 so I am expecting some pull back over the coming weeks. Timing is not my strong point but in the words of George Soros, "better to be roughly right than precisely wrong". My initial purchase was at $115 earlier this week and I may well be looking to top up should there be a significant share price retraction.

This now makes 17 individual companies in my green portfolio plus several collective investment trust, ETFs and funds.

As ever, this article is merely a record of my personal investment decisions and should not be regarded as an endorsement or recommendation... investing in individual companies can be rewarding but is higher risk compared to collective investments - always DYOR!

4 comments:

  1. Out of interest, would you consider sharing whether fx rates for your usd investments play a part in your platform choice?

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    1. Hi anthony,

      I mainly use AJ Bell Youinvest - SIPP and ISA however as I have been with them for over a decade, I would not say fx rates play a big part in me using them for my overseas acquisitions. Having said that I imagine they give a reasonably competitive exchange rate on the day of purchase/sale and levy a 1% charge which I can live with when the investments are gaining 50%+ each year. Of course, there is no 0.5% stamp duty so that help to offset the fx charges.

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    2. Thanks for the speedy reply... great site - thanks for all your thoughts and insight over the years.. Definitely helped me ‘break free’!

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    3. Good to hear it anthony. Good luck for the future!

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