Sunday, 16 May 2021

A Fossil-Free Option from Vanguard...At Last!


Vanguard are one of the world's largest fund managers with assets under management of $7 trillion, however they have been late to the ESG party. But better late than never I suppose, Vanguard UK have finally come around to offering funds which should be more acceptable to investors who prefer to avoid fossil fuel companies...something I have been pressing them to do for some time now.

The ESG Global All Cap (V3AM) is a passive index exchange traded fund (ETF) launched on the UK market in March 2021. The fund tracks the FTSE Global All Cap Choice Index which is basically the Global All Cap index which is then screened to exclude those companies which do not meet certain environmental, social or governance criteria (ESG). The index will therefore exclude:

1. Companies which do not meet standards on human rights, the environment and anti-corruption;

2. Non-renewable energy - basically companies involved in coal, oil and gas;

3. Vice products such as adult entertainment, alcohol, tobacco and gambling;

4. Weapons and landmines

Fund charges are 0.24% and platform charges to hold with Vanguard Investor are an additional 0.15%.

The fund has just under 5,000 holdings - large, medium and small from all around the globe. Unsurprisingly, US-listed companies account for 60% of the fund, Japan 7%, China 6% and the whole UK-listed shares less than Apple... just 3.2%.

Some top holdings include Apple (3.4%), Microsoft (3.1%), Amazon (2.4%), Google (2.3%), Facebook (1.3%), Tesla (0.9%) and JP Morgan Chase (0.8%).

Dividends will be paid quarterly.

I disposed of my Vanguard Lifestrategy funds in 2019 as I started to expand my green portfolio. In 2020 I added the iShares World SRI ETF as a partial replacement for the global equity element provided by the Lifestrategy funds. So I am pleased to see Vanguard introducing this climate-friendlier option for investors who are concerned about climate change and wish to avoid fossil fuel companies.

Having said that, ESG funds are a drop in the ocean compared to Vanguards massive traditional index funds. Current assets for this ETF fund are just $31m compared to $8bn for their All World ETF (VWRL). Vanguard therefore remain under fire from environmental organisations... they are the world's largest investor in the coal industry for example with holdings in over 200 coal operations worth a combined $86bn according to Reclaim Finance.

Last year CEO of Blackrock, Larry Fink said "Climate change has become a defining factor in companies' long-term prospects … But awareness is rapidly changing, and I believe we are on the edge of a fundamental reshaping of finance. In the near future — and sooner than most anticipate — there will be a significant reallocation of capital"

The large pension funds, local authorities and institutional investors are increasingly realising that they can no longer remain passive when it comes to addressing the existential threat of climate change. They demand the choice of avoiding fossil fuel companies and it looks like Vanguard have finally got the message.

I will consider adding this Vanguard fund to my list of future possibilities to sit alongside my iShares fund. Now we just need an ESG version of the Lifestrategy fund...I'm not holding my breath!

It will be interesting to see how these ESG funds attract investors money compared to the more traditional index funds. Would you consider exchanging your VWRL for V3AM?

Wednesday, 28 April 2021

Gresham House Energy Storage - Full Yr Results


Since its launch in December 2018, Gresham House Energy Storage (GRID) has developed the largest energy storage portfolio in the country. It operates 16 utility-scale energy storage systems with a total combined capacity of 425MW.

As we transition from fossil fuel generation to renewables such as wind and solar, we will increasingly need energy storage solutions due to the intermittent nature of renewable energy - the wind doesn't always blow and there's not much solar in the Winter months. Currently we use gas fired generation to fill the gap but we have legislated for net zero carbon emissions by 2050 (78% reduction by 2035) so the ability to store excess energy from an ever increasing renewables sector will be essential. As renewable capacity expands, gas-fired power stations will be required less frequently and so they become less profitable to run. This means that renewables are forcing fossil fuels off the grid.

As recently as 2014, coal was our main source of electricity generation. It is still used in the winter months but currently accounts for just 2% of  generation and is due to be completely retired by 2024.

GRID has several streams of revenue which include the wholesale market and National Grid balancing mechanism, Firm Frequency Response based on small-scale changes to the grid's electrical frequency, fixed fees for being on call to deliver power at times of extreme need and Triad payments from National Grid when there is peak demand. 

50MW Thurcroft Facility

Results

The company have this week released results for the full year to end December 2020 (link via Investegate). Net Assets have increased by 8.4% over the year on a total return basis to 102.9p and share price return is up 10.8% compared to FTSE All Share Index fall of -9.8%.

Over the year, the company has acquired three more storage projects with a total capacity of 141MW. This additional capacity has boosted annual revenues from £10m in 2019 to 19m. In recent months, these revenues have increased due to the introduction of National Grid's Dynamic Containment (DC) service last October. This aims to provide more resilience to the grid supply and reduce volatility to provide a better balancing mechanism. Despite only starting in October, DC has accounted for 33% of GRID's revenues for this year.

National Grid are starting to appreciate the value of battery storage to balance the national system and in January 2021 announced an increase in DC to 1.4GW by May 2021 compared to just 500MW in December 2020. Recent trials with batteries have shown that they can provide back-up in the same way as gas turbines are used to balance the system and reduce the curtailment of renewable energy. If National Grid decide to make this a permanent feature following further trials, it is likely to lead to significant revenue opportunities for GRID.

Construction is due to start soon on a further 275MW of storage capacity and looking further ahead, the manager has identified a further 527MW of additional pipeline projects.

Commenting on the results, lead investment manager Ben Guest said:

"The UK's global leadership in renewable generation and in its setting of ambitious decarbonisation targets, continues to make it one of the world's most attractive markets for deployment of utility-scale battery storage technology. We are encouraged by the system operator, National Grid, continuing to test and facilitate new ways for battery storage to contribute to system balancing.

"More renewable energy on the system will inevitably lead to more intraday power price volatility, driving the improved revenues and profit from trading which GRID is best positioned to capture. We are intent on driving shareholder value by maximising project returns through our portfolio scale as well as operational and cost leadership, while striving to reduce our cost of capital, including through a potential new debt facility."

The company has paid a total dividend of 7.0p over the past year as promised and has maintained this target for 2021. This gives an attractive yield of 6.1% to those investors looking for income.

GRID 1 Yr Share Price
(click to enlarge)

I added this trust to my green portfolio in December 2019 at the price of 105p...its currently 115p and continues to trade at a significant premium to net assets.

Obviously this is still early days for this relatively new venture. The UK only has around 1.5GW of storage but this is expected increase to 10GW over the next 4 years so there should be plenty of opportunities for GRID to expand it's business. The focus so far has been batteries but I am wondering whether they have considered other energy storage solutions such as flow batteries or green hydrogen as these also has lots of potential.

The reality is that fossil fuel generation will gradually be replaced by renewables as we move towards our net zero target by 2050. This means increasing intermittency which will require ways to store energy to bridge the gaps and provide a constant supply.

In the past few months I have been scaling back my exposure to the UK renewable infrastructure sector but will retain my holding in GRID as it does not appear to be so affected by power prices. So, one to put back in the bottom drawer pending further developments.

The shares account for 3% of my green portfolio.

As ever, this article is merely a record of my personal investment decisions and should not be regarded as an endorsement or recommendation - always DYOR!

Thursday, 1 April 2021

Portfolio Review - End March 2021


Well, what a dramatic year. We went into a global lockdown last March, eased up during the summer months and then we were hit by a deeper second wave during the winter months as new cases rose exponentially, hospitals were severely stretched and deaths here in the UK rose to over 125,000. Clearly we have experienced a global pandemic crisis which has a social impact not seen since the second world war. This experience will remain long in our memory banks.

Naturally there has been volatility on the markets, especially the initial shock. In March last year the FTSE saw its largest one-day fall - 10.8% - since 1987 with a similar pull-back in the US where the Dow Jones recorded its biggest one day points fall of over 3,000. Then, a week later, the FTSE records its biggest one-day points jump of 452 and the Dow Jones climbs a record 2,100 points and the biggest gain for 90 years...remarkable...the global markets don't get any more dramatic than this. However, despite the pandemic, the markets turned out to be remarkably resilient and have weathered the storm well...so far.

Portfolio Changes

The turbulence last year provided an opportunity to pick up a few bargains and the likes of Google, Microsoft, McPhy, Ceres Power, Nibe and Tesla were added to my portfolio. Later in the year following the election of Joe Biden I added Plug Power, Enphase and SolarEdge as well as the more eco-friendly global index fund, iShares World SRI ETF.

In the past few months I have sold down my government bonds and Tesla and also reduced my renewable infrastructure sector. The proceeds have been used to top up several of my clean energy holdings including Vestas Wind, Orsted, Enphase and SolarEdge and also add the likes of the new L&G Hydrogen ETF.

Portfolio Returns

By the end of 2020, the FTSE 100 had lost 11% for the year and stood at 6,460. It has since risen to currently 6,750 or 4.5% plus dividends. Looking more widely, my iShares World SRI fund is up 5.4% over the first quarter.

Although no longer a part of my portfolio due to fossil fuel holdings, the Vanguard Lifestrategy 60 fund is a diverse mix of global equities and bonds and provides a good benchmark for a balanced global portfolio. The fund is up 0.9% over the past 3 months.

I had my best ever year in 2020 with a total return of 44% and over 50% from my green portfolio holdings so I have been expecting some correction or pull-back in the new year. The past couple of months have seen quite a bit of volatility in the technology sector and my clean energy holdings seem to have been caught up as well. As a whole my portfolio is down 7.2% over the quarter.

Green Funds

These holdings now make up around 85% of the total portfolio. They mostly had a stellar 2020 but have fallen back around 10% to 15% over the past couple of months. 

However, over the full year since last March many are showing remarkable gains - 

ITM Power share price was 110p last year and currently 470p, a gain of 325%, 

Ceres Power was 325p and now 1250p, gain 280%, 

McPhy was €4.60 and now €32.60 a gain of 590%, 

Enphase was $29.77 and now $162 gain 444% and 

Plug Power $3.30 a year back and now $35.80 gain 980%. 

Past 12m for Ceres and ITM Power
(click image to enlarge)

However over the past 3 months most of these shares are down...ITM  -9%, Ceres down 5%, McPhy down 11%, Enphase down 11% and only Plug gaining 8%.

So I am hoping this is a short-term correction and these holdings can get back on the rising escalator over the rest of this year and beyond.

Conclusion

It is getting on for 30 months since I started to move my portfolio towards more climate-friendly investments and it is reassuring to see they have held up reasonably well during this past year. I certainly feel much better investing in the likes of Orsted, a global leader in offshore wind, rather index funds with their fossil fuel companies and the big banks that finance their operations.

Our attention has been very much focused on Covid this past year but with a vaccine roll-out now underway I am hoping we can move on to tackle the far bigger crisis of climate change. There are encouraging signs that the global leaders are starting to sing from the same hymn sheet and work out how to cooperate to reduce emissions and meet the goals of the Paris Agreement to limit warming well below 2.0C. The transition from fossil fuels to clean energy is well underway. Huge amounts of financial support is being directed into this area as governments move to decarbonise their economies and this along with policy shifts should support the growth of those companies trying to provide some of the solutions to this climate emergency. 

Let's see how the rest of the year unfolds..."Survival as an investor over that famous long course depends from the very first on recognition that we do not know what is going to happen. We can speculate or calculate or estimate, but we can never be certain". (Peter Bernstein)

Take it easy...have a lovely Easter!

As always, if you keep track of portfolio returns, feel free to leave a comment and share with others how your investments have fared over recent months.

Monday, 22 March 2021

iShares Global Clean Energy ETF - Update


This exchange traded fund gives investors an opportunity to invest in a range of globally diverse companies involved in renewable energy.

It is an index fund and tracks the S&P Global Clean Energy Index which is made up of 30 of the worlds leading companies in the clean energy sector.

Why Clean Energy?

It is estimated that at least 50% of the world's energy will come from renewables such as solar and wind by 2050. This compares to around 7% just 6 years ago. In order to implement the Paris Agreement and limit global warming to well below 2C, governments around the world will need to invest huge amounts of capital - estimated over $3 trillion - over the coming decade and this obviously provides significant opportunities for the renewables industries.

Climate change and scarcity of resources is one of 5 megatrends identified by Blackrock which will shape the future.

The fund was added to my green portfolio in March 2019, shortly after I put my index funds under the spotlight and decided to move my portfolio away from fossil fuels. My initial purchase price was 433p and I topped up my holding during the Covid sell-off last March at 435p. The shares are held in my SIPP drawdown and also my ISA with AJ Bell Youinvest.

Fund Holdings

The ETF fund holdings include :

Plug Power (8.5%) a leading provider of fuel-cell engines and hydrogen-based solutions in the US. Some high profile customers include Amazon, BMW, IKEA, Walmart and Carrefour. The share price has grown rapidly over the past 12 months - under $4 last March to currently $39.

Enphase (5.8%) a global energy technology company and the worlds leading supplier of solar microinverters. these connect solar generation, storage and management on one intelligent platform. 

Solaredge Technologies (3.7%) another Nasdaq-listed US company providing inverter solutions across all segments of the solar PV market.

Vestas Wind (4.1%) and Orsted (4.1%) both of which I also hold as stand-alone holdings in my green portfolio.

Siemens Gamesa (4.6%) a Spanish-based renewable engineering company involved in the manufacturing of wind turbines and related servicing. Their products have been installed in over 90 countries all around the world with a current combined capacity of 100GW.

Returns

The fund had an amazing run over the past year moving from £4.00 last March and reaching a high point of £14.00 in mid February 2021 but there has been a significant pull-back over recent weeks with the share price falling back around 30%. At the current price of 985p my total return has been 127% for the year including dividends of 5.7p which gives a yield of 0.6% and subject to exchange fluctuations.

One Year Share Price INRG v RDSB
(click to enlarge)

I am hoping the set back in recent weeks is a temporary correction after such a good run but this is an emerging sector and I am prepared for some further volatility. However, over the longer term, my view is that the global renewable energy sector is likely to see continued growth as the world attempts to address the climate crisis and move to curb carbon emissions. We are weaning our economies off fossil fuels and the transition to clean energy such as wind, solar and wave power is well underway and likely to accelerate. As can be seen from the chart above, the global renewables represented by INRG has performed much better than the oil sector represented by RDSB.

I have taken a punt on a few individual companies such as Orsted, Ceres Power and Vestas Wind, Enphase and Plug Power for example but a diversified approach with the likes of this ETF probably makes more sense so I am very happy to continue holding these shares which currently make up around 10% of my green portfolio.

As ever, this article is merely a record of my personal investment decisions and should not be regarded as an endorsement or recommendation - always DYOR!

Tuesday, 16 March 2021

Allianz Technology Trust - 2020 Results


This trust was established in 1995 to give investors a chance to gain exposure to the technology sector. Although the trust is UK-listed, since 2007 it has been managed by a team based in San Francisco and close to Silicon Valley which is home to many of the world's biggest tech companies. The trust was added to my portfolio last September at the price of £22.50 when I decided to increase my technology weighting. 

The strategy is to identify a number of themes such as cloud computing, security, e-commerce and electric vehicles for example and hold some of the best companies within these sectors over the longer term.

Results

The trust has this week published results for the full year to Dec 2020 (link via Investegate).

It's been an excellent year with net assets increased by 76%...outperforming the benchmark Dow Jones World Technology Index by 34% and share price up 80%. By contrast, the FTSE All Share Index fell by 10% over the year. The Covid pandemic has been a severe challenge for all sections of society around the world however the technology sector has played a key role providing solutions for businesses, governments and individuals.

Some current top ten portfolio holdings include Google (6.0%), Micron Tech (3.9%), Amazon (3.8%), Samsung (3.1%), Apple (2.3%), Microsoft (3.6%) and Crowdstrike (3.0%).

The trust has a good performance record with returns of 80% in the past year, 25% last year, 41% in 2018, 42% in 2017 and just 15.8% in 2016. It is one of the top performing investment trust over both the past 5 years and also 10 years - just behind Scottish Mortgage and ahead of Monks, Biotech Growth and Linsell Train.


Commenting on the past year's results, investment manager Walter Price said:

"Global stock markets were volatile in 2020. There was a savage sell-off in March when it became clear that the virus would spread from Asia into Europe and the United States. The S&P 500, for example, dropped over 30% in a matter of days. While markets subsequently recovered, it proved to be a bifurcated market, with the winners and losers from the pandemic driving in opposite directions.

Technology remained at the top of the heap. Lockdowns forced individuals and businesses to rely on technology more than ever before. If companies didn't have the infrastructure for remote working, they needed to act quickly to ensure it was in place. They came to rely on communication tools such as Zoom and Microsoft Teams to keep in touch with clients and staff. In other words, technology kept the economic wheels turning at a time of crisis. 

This was reflected in share prices. The tech-heavy Nasdaq outpaced the S&P 500 and Dow Jones Industrial indices, rising 42.9%, compared to 16% for the S&P 500 and 6.9% for the Dow Jones Industrial Average. Our benchmark index, the Dow Jones World Technology Index, delivered 41.7%. Investors sought comfort from companies with reliable earnings and a well-established growth story".

ATT One Year Performance
(click to enlarge)

Post year-end results, the past few weeks have seen a significant correction for the technology sector. One of my former holdings, Tesla was down over 30% in a matter of weeks but luckily I sold out in early February before the drop when they decided to buy $1.5 billion of Bitcoin with reserves.

Over the past year or two I have been adjusting my portfolio and now prefer just two sectors - 75% is allocated to green/climate and the remaining 25% to technology. Holding individual tech shares can be lucrative but is also higher risk as well as more volatile. Obviously gaining exposure to a diversified basket of shares via a specialist fund or investment trust is probably the better option for the diy investor.

My Tech Portfolio March 2021
(click to enlarge)

Obviously it helps that I no longer require income from my investments as this trust is all about growth and does not pay a dividend. However, as I have pointed out in the past, it is possible to take 'income' from capital appreciation. For example, selling down shares to provide 4% 'income' from a trust which is growing at an average of over 20% each year should not be too difficult.

The shares dipped as low as £13 at the start of Covid last March and then climbed above £32 in February before the technology correction. The price is currently £28.75 so a handy 27% uplift on my purchase price last September and happy with progress so far. 

I have recently topped up my Polar Capital Technology trust and will be looking to top up this holding at some point this year.

As ever, this article is merely a record of my personal investment decisions and should not be regarded as an endorsement or recommendation - always DYOR!

Monday, 22 February 2021

TRIG - Results for 2020


The investment trust was launched in 2013 and gives investors an opportunity to tap into the UK and European renewable energy sector - wind, solar and battery storage. They aim to generate sustainable returns from a diversified portfolio of renewables infrastructure that contribute towards a zero-carbon future.

It has grown steadily over the past seven years, from £300m at launch to become one of the largest funds in the renewable infrastructure sector with assets of £2.2bn. The shares were first purchased for my portfolio in 2019 and topped up with discounted shares from the share issue last March at the price of 114p.

The trusts works closely with InfraRed Capital who have extensive expertise in the renewable energy market and flag up opportunities for expansion and also with Renewable Energy Systems who manage the assets after acquisition and ensure they are operated safely whilst delivering maximum efficiency.


Since launch in 2013, TRIG has outperformed the FTSE All Share Index with total returns averaging 8% p.a. plus lower volatility. The shares are increasingly in demand from institutional investors wanting to respond to the demand from their clients for more climate-friendly ESG investments.

Results

Last week the company released results for full year 2020 (link via Investegate).

Profits came in at £100m (2019 £162m) with earning per share of 5.9p (11.4p).

Net assets per share for the period was 115.3p compared to 115p a year earlier.

The board have announced a final dividend of 1.69p for the end of March making a total of 6.76p for the year which provides a yield of 5.3% based on the current share price of 127p. However no increase is planned for the coming year which is not really a surprise.

The shares still trade at a 13% premium to net assets having reached 20% last year.

Conclude

The demand for more renewable electricity both in the UK and Europe will only be moving in one direction as governments come under increasing pressure to decarbonise their economies and meet their carbon emission reduction targets. The UK government have brought forward the date for all new cars to be emission free from 2035 to 2030. In a decade we could see 35 million pure electric cars on our roads which will require lots of clean energy.

One year share price (click to enlarge)

In addition, gas which heats 90% of our homes is due to be phased out for all new house build from 2025 so there will be increased demand for alternatives for space heating. Hydrogen from renewable energy will be part of the mix as well as electric heat pumps.

However, as we have seen this past year, this does not necessarily translate into higher power prices which is an important aspect of valuing these renewable energy infrastructure trusts. TRIG have been caught out this past year having failed to accurately forecast wholesale prices. As a result NAV has decreased and the trust has taken a hit to the tune of £137m. Power prices are one of the key risks faced by the trust. This post by Finumus last May outlines some of the potential downside to renewable infrastructure investments and inflated long-term power prices.

The higher weighting in my green portfolio proved to be a drag on returns in 2020. Sure they provide a nice dividend which is relatively secure (unlike the oil companies) but as I no longer require an income from my portfolio I decided to slim down my holdings this year and focus more on green growth. Therefore my holding in TRIG has been reduced from 10% to currently just 2%.

As ever, this article is merely a record of my personal investment decisions and should not be regarded as an endorsement or recommendation - always DYOR!

Wednesday, 17 February 2021

NIBE - 2020 Full Year Results


NIBE is a heating technology company based in Sweden. It has three basic business areas - Element, Climate Solutions and Stoves. Climate is the fastest growing segment and over the past year accounted for around 2/3rds of sales and 74% of the groups profits. Clearly climate change is rising to the top of the political agenda on a global basis and I believe the company are well positioned to take advantage of the opportunities this provides - especially in the field of heat pumps which will become an option for heating our homes as an alternative to fossil fuels such as natural gas. It is one of the leading companies in Europe and North America in the area of sustainable solutions for domestic heating.

The company has been trading for over 70 years and has a long-standing ethos of working on sustainable solutions and energy efficiency. It was floated on the stockmarket in 1997 and has grown sales at an average of 18% p.a. over this period with an ever increasing global presence.

Heat pumps and related technology are tried and tested solutions for space heating in Scandinavian countries but relatively unknown in many parts of the world. Many countries, including the UK are actively looking at ways to decarbonise the domestic heating sector which accounts for around 40% of carbon emissions.

Climate

Climate change is the greatest challenge of our time. We need to reduce greenhouse gas emissions by at least 60% by 2030 compared to 2010 levels to keep on track for net zero by 2050. All of the products offered by the company are designed to make a significant contribution to tackle climate change. They offer sustainable, energy-efficient solutions such as heat pumps that reduce energy consumption by up to 80% and reduce GHG emissions in all types of buildings both domestic and commercial.

Last year, the EU announced their 'Green Deal' and proposals to target net zero carbon emissions by 2050. A central part of the strategy will be the goal to decarbonise the energy sector and prioritise energy efficiency and transition to a power sector based on renewable energy.

Heat Pumps

The largest sector for the group is climate solutions and within this sector, the largest element is heat pumps. These pumps extract the stored energy from the sun contained in the soil or air and transfer this energy indoors to provide indoor heat as well as hot water. The two main types of heat pump are ground source where pipes are laid under the soil and air source where heat is extracted directly from the air.

Air Source Heat Pump

In the UK (and much of Europe) around 90% of our homes are heated by gas central heating. However we have legislated for net zero emissions by 2050 and will need to find alternative ways to heat the nations homes as gas (fossil fuel) will not be an option. We have already ruled out gas central heating for all new homes built after 2024 so electric heat pumps (as well as green hydrogen and battery storage) should play a big part in the huge transition of our energy use over the coming decade and beyond.

The UK still offers financial incentives to install heat pumps via its Renewable Heat Incentive. This covers a period of 7 years from installation and will provide payments for a typical home of £1,300 p.a for air source heat pump and a higher figure of £3,300 p.a. for a ground source heat pump. In addition there will be a significant saving on heating bills. There is also the Green Homes Grant which offers two thirds of the cost towards installation of heat pumps and these incentives will go a long way towards the costs of installing a heat pump system which range between £6,000 for air source and maybe up to £20,000 for a ground source heat pump. The schemes currently runs until March 2022 but it is hoped this will be extended.

Results for 2020

Despite a disruptive and stressful 12 months due to Covid, the decentralised management structure has coped well with fluctuating demand which has translated to relatively stable growth. There have also been several acquisitions which have contributed to profitability.

Combined sales increased by 7.1% to SEK 27.1bn (2019 25.3bn) and profits of SEK 3.6bn (2.8bn) an increase of 28%. The company pays dividends which increased by 7.7% this year to SEK 1.55 per share (obviously subject to FX considerations for UK shareholders!).

Here's a link to the results pdf from the company website


NIBE 1 Yr Share Price

The share price has been a little choppy due to Covid over the past few months but recovered momentum from a low point of SEK 120 last March to hit an all-time high of SEK 295 last month.

Obviously the demand for solutions which support the switch from fossil fuels to renewables will grow and grow. As the market grows so prices fall which in turn creates greater demand. Companies like NIBE who have a clear commitment to sustainable solutions will be the likely beneficiaries of the transition to a new way of doing things. This is why I decided to add this company to my green portfolio last June.

The shares were added to my green portfolio at the price of SEK 201 last year and I have just topped up in my ISA at SEK 288 after digesting these results. The combined holding now accounts for around 7% of my green portfolio holdings.

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!

Sunday, 14 February 2021

L&G Hydrogen Economy ETF


It's around 18 months since I purchased my first small hydrogen play - ITM Power after reading about a joint project with Orsted. I put together a few thoughts on the potential for hydrogen in this article from January 2020.

I guess many will know that almost any company involved in hydrogen had a stellar year in 2020 and I am hoping this will continue for many years to come. Last July the EU announced its plans for 40GW of renewable hydrogen by 2030. I will be interested to see what the plans are in the US under the new Biden administration but certainly hydrogen will play a big part in the transition.

Decarbonising the global economy as it moves away from oil & gas will mean a lot of electrolysers to make the green hydrogen and also a lot of solar and wind to provide  the energy to make it work.

Many Applications for Green Hydrogen

That is why I have rejigged my portfolio into the companies working in these areas.

Clean hydrogen - Nel Hydrogen, McPhy, Ceres Power, ITM Power, Ballard Power, Plug Power, Orsted and Powercell.

Solar - Enphase, Sunrun and SolarEdge.

Wind - Orsted, Vestas Wind as well as my iShares Clean Energy ETF

The New Hydrogen Fund

Legal & General offer several thematic funds such as clean water and clean energy. I am pleased to see that they have now expanded the offering with a new ETF which focuses on the emerging new hydrogen economy - an area I have been looking at for the past year or so with my green portfolio.


The L&G Hydrogen Economy ETF (HTWO) and (HTWG) launched last week and is listed on all the main European exchanges including London. It has charges of 0.49%.

This is an index fund which will track the Solactive Hydrogen Economy Index (latest factsheet) which currently holds 28 companies from around the globe which derive a significant proportion of revenues from hydrogen. The areas covered include clean hydrogen producers, fuel cell technology, transport, industrial and utility companies and others in the hydrogen supply chain.

"At LGIM, we believe in giving investors targeted, specific exposure to the full value chain of low-carbon solutions across the power production, storage and distribution energy cycles. The launch of the L&G Hydrogen Economy UCITS ETF expands on our market-leading thematic range and underscores our commitment to equipping investors with the portfolio tools they need to gain access to the key themes that will help us transition to a more sustainable world".

James Crossley, Head of UK Retail Sales at LGIM

Naturally most of my hydrogen holdings are included but I will be adding this new fund to my green portfolio in the coming week as a benchmark. Obviously it offers a useful collective investment vehicle for those who want to add the emerging hydrogen focus to their portfolio.

18/2/21 Update - Shares purchased in my ISA this morning @ 707p ($9.75)

As ever, this article is merely a record of my personal investment decisions and should not be regarded as an endorsement or recommendation - always DYOR!

Wednesday, 10 February 2021

Vestas Wind - 2020 Full Year Results


Vestas is one of the world's leading players in wind turbines - it designs, makes, installs and services both onshore and offshore turbines and holds the record of providing more turbines throughout 80 countries than any other company. The core of the business is providing sustainable, clean and affordable energy to people all around the world.

The company's aim is to become carbon neutral by 2030 and to produce zero-waste wind turbines by 2040.

Clean energy has been the fastest growing sector of the energy market in 2020 with a record 200GW of renewables coming onstream according to the IEA.

Vestas are the global leader in onshore wind - over 120 GW installed and also onshore servicing. They are #2 in offshore wind (behind Orsted) with 5 GW installed and plans to double this by 2022. It's market cap. is currently 250bn DKK (approx £30bn).

The shares were added to my ISA portfolio in October 2019 at the price of 535 DKK.

Results

The company have this week released results for the full year to end December 2020 (link via company website pdf).

It's been a tough year due to Covid so it's an achievement to have increased annual revenues by 22% to €14.8bn. However profits were down 25% to €750m due to supply chain challenges resulting from the global pandemic.

The combined order backlog increased from €34bn to €43bn which includes €4bn of offshore turbines and €24bn of servicing contracts. The company anticipates revenues of €16 to 17bn for the coming year with increased profit margin of 6 - 8%.

The company are moving into project development and in December they agreed a deal with Copenhagen Infrastructure and will invest €500m with a view to developing new projects and new markets across the world over the coming decade. As the wind sector becomes more competitive and margins fall, they see this as a way of capturing more value from future projects. CIP has over €14bn of assets under management and is a leading investor in clean energy.


Vestas is also moving to scale up its offshore operations and agreed to acquire the share of its joint venture with Mitsubishi Heavy Industries in the belief that offshore is likely to quadruple over the coming decade.

They propose a 6.6% hike in the dividend to 8.45 DKK which equates to just over 0.7% at current share price.

Group CEO, Henrik Andersen said : “Renewable energy took another large step forward in 2020 by improving its competitiveness, showing great resilience during a global pandemic, and proving renewables can serve as the backbone of our societies in the future. In 2020, Vestas continued to play a key role in the fight against climate crisis, and we met our revised guidance on all parameters, leading the industry on revenue, order intake, and profitability despite COVID-19 affecting all parts of our value chain.

In this environment, we achieved more than 17 GW of deliveries and bolstered our total order backlog to an all-time high of EUR 43bn through strong order intake, service growth, and the re-integration of offshore wind. Service performance was once again very strong with a 10 percent increase in revenue year-over-year and record EBIT margin of 28 percent. Group profitability was negatively impacted by warranty provisions and increased execution costs. In addition to acquiring MHI Vestas Offshore Wind, Vestas also made strategic strides to increase our presence across the value chain, including establishing a dedicated development business unit, launching the largest turbine in offshore wind and underlining our leading position within sustainability by reducing our own carbon emissions by 33 percent and reaching 186m tonnes of CO2 avoided on a yearly basis through our installed base. To position Vestas strongly for future growth and profitability, our focus in 2021 will be to fully integrate offshore and address executional challenges.”

One Year Share Price

The results have received a mixed response with the share price falling 3% to 1228 DKK on Wednesday.

In the US, the new Biden administration has pledged a $2 trillion clean energy transition with the promise of "tens of thousands of wind turbines". In Europe there's the €1 trillion Green Deal and the ambition of a 55% reduction of carbon emissions by 2030.  It is my opinion that we are at the beginning of a renewable energy megatrend which will build over the coming 20 to 30 years as we transition from fossil fuels to renewable energy. I fully expect Vestas to continue to benefit over the long term

As with Orsted, I am more than happy with my acquisition. In August last year I needed to sell some of my shares to fund my house purchase which completed later in the year but have recently repurchased to top up my holding which currently stands at 7% of my green portfolio.

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!

Wednesday, 3 February 2021

Orsted - 2020 Full Year Results


This energy company based in Denmark is a global leader in offshore wind with around 30% of global capacity. It also operates onshore wind, solar, energy storage and bioenergy plants. It has ambitions to become the world's first green energy supermajor to rival the traditional oil & gas giants such as Exxon, Shell and BP and now has operations in Denmark, UK, Germany, Holland, US, Japan and also Taiwan.

The company's vision is to see a world run entirely on renewable energy.

Orsted were ranked the top most sustainable energy company in the Corporate Knights 2021 Global 100 Index. The company has pledged to become carbon neutral by 2025 making it the first major energy company to reach net zero emissions in energy generation.

The shares were added to my portfolio in April 2019 at 495 DKK and have advanced nicely over the past 21 months to currently 1,175 DKK - an increase of 130% plus dividends.

Renewable energy is very much in the ascendancy due to concerns about our climate emergency. It is estimated the global wind energy sector will attract investment of $1 trillion over the next 10 years as the world makes the transition from fossil fuels to low-carbon clean energy.

Results

The company has today announced results for the year to Dec 2020 (pdf link via Company website). Operating earnings increased to DKK 18.1bn, an increase of 4% on 2019 and ahead of expectations and despite all the challenges posed by Covid. Net profits of 16.7bn were boosted by DKK 10bn profits from the disposal of its power distribution, residential and city lights business.

Several new onshore and offshore wind farms have been commissioned over the past year including Hornsea 1 in the North Sea and Borssele 1&2 off the Dutch coast. The 1.4GW Hornsea 2 is due for completion in 2022 and Hornsea 3 has just been given the green light by the UK government.

There has been a move into onshore wind and solar PV in the US. Also there has been significant progress on green hydrogen projects with funding secured for projects in the UK, EU and Germany. The most recent is a partnership with BP for a 50MW electrolyser at their Lingen refinery with a long-term ambition of building capacity to over 500MW. This would entirely convert  production from fossil fuels to clean hydrogen.


For the coming year, new investment into renewable projects is expected to be DKK 32 to 34bn with more focus on solar PV and onshore developments and will no doubt receive a boost from the new climate-friendly Biden administration in the US.

The company propose a dividend for the year of DKK 11.5, an increase of 9% on 2019 which provides a yield of around 1.0% based on the current price.

The company is on track to be carbon-free by 2025 and have plans for the sale of the remaining gas and fossil-based power operations which make up around 10% of the business. They have announced plans to phase out petrol/diesel cars and replace them will fully electric by 2025. The company has a strong commitment to the Paris Agreement and the UN Sustainable Development Goals.

Orsted One Year Share Price
(click to enlarge)

Obviously I am happy with progress so far and I am hoping for much more. Many governments throughout the world have embraced the need to move to net zero emissions including China, Japan and the US under Biden. Whether we pass on a habitable planet to our children and grandchildren will be determined by our action or lack of it over the coming decade. Climate science suggests limiting warming to 1.5C to reduce the risks of triggering irreversible tipping points in our global ecosystem.

Orsted is one of the large companies that is leading the way in the transition to a more sustainable world. Hopefully some of the oil majors will follow their lead...sooner rather than later would be good.

I have today decided to top up my holding and Orsted now accounts for around 10% of my green portfolio.

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!

Friday, 29 January 2021

Tesla - 2020 Results


Tesla is the global market leader in the electric car market with around 75% of the US EV market and 25% in China. Over the past year the share price has increased by 700% giving a market cap. of $825 billion which makes it the largest global car maker. The stock has now joined the S&P 500 which means it will now be held in all the major index funds/ETFs.

Tesla's lead in battery technology should help it to maintain this position as it continues to make improvements and new models and also looks to reduces prices as it scales up production. It has its main plant in California but has expanded into China and is expanding with new production factories in Berlin and Texas.

The shares were added to my portfolio at $282 last July however after a rapid surge, I sold half my holding a month or so later to release some funds for my house purchase which completed in November.

Results

The company have released Q4 results (pdf via Tesla website). It's been a good year on most fronts with their target of half a million EVs delivered over the year combined with increased profits and cash-flow. They expect to increase production/deliveries by over 50% in the coming 12 months.

Vehicle revenues increased 31% to $27.2bn with gross profits up 58% to $6.98bn. After operating expenses, this is the first full year of net profitability for the company.

Tesla made $400m from the sale of regulatory carbon credits to other motor companies which they need to meet carbon emissions legislation. This bonus has grown significantly over the past year or two but is likely to become less valuable as other manufacturers increase their own EV roll-out. For example Renault/Nissan and Volkswagen are moving quickly to step up production of their EVs and they currently have a combined 40% share of the EU electric vehicle market compared to around 15% for Tesla.

Tesla remains the top holding in the £17 billion Scottish Mortgage trust and accounts for just over £1.8bn or 10.7% of the SMT portfolio.

Clean Energy

In addition to cars, it offers solar+battery storage solutions for domestic and commercial customers. This has the potential to become larger and more profitable than the auto division.

In 2019, the company declared an ambition to become a global energy distributor. Battery storage capacity is transforming the traditional electricity grid and will be a crucially important part of the global transition from fossil fuels to clean energy. Tesla have designed and manufactured a utility-scale storage system called "Megapack". These can be installed in as little as three months to provide 250MW of clean energy at a fraction of the cost of a traditional gas-fired power station.

Indeed, they have now obtained a license to generate electricity in the UK. Obviously the battery technology used in cars can be used to store energy from renewable energy such as solar and wind. The firms software called "Autobidder" enables the company to trade renewable energy more efficiently.

Growth in Energy Deployments (click to enlarge)

Over the past year, energy storage deployed has grown by 83% to over 3GW whilst solar PV increased by 18% compared to 2019.

It is this part of the business that persuaded me to add the shares to my portfolio last year despite the significant increase in the share price since the start of last year.


The shares have obviously had had a good run in recent months touching a high point of $890 last week so I am prepared for some volatility and pull-backs but I am hoping the longer term prospects remain positive. When a share price is rising very rapidly over a relatively short period it is very tempting to sell and bank the profit before the 'bubble bursts' so I am pleased that I have managed to resist this temptation so far.

Currently the shares are $835.

Update 9/2/21:  Shares sold today on news that $1.5bn of reserves to be held in Bitcoin...sale price $854 and return since purchase last year is 201%.

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!