iShares Global Clean Energy - Update

This exchange traded fund, launched in 2007, gives investors an opportunity to invest in a range of globally diverse companies involved in renewable energy. The fund joined my portfolio in March 2019 at 433p and has been topped up on a couple of occasions.

It is an index fund and tracks the S&P Global Clean Energy Index which, until recently, held just 30 of the world’s leading companies in the clean energy sector. However, this concentrated portfolio was problematic and liable to significant imbalances. The index has now been expanded to allow up to 100 holdings and a new methodology provides a greater weighting to more liquid stocks.

Hopefully these changes should help to reduce the volatility.

Why Clean Energy?

Last August, the IPCC delivered their ‘Code Red’ warning pointing out how close we are to an irreversible global meltdown caused by the climate crisis.

The IEA have ruled out all new coal, gas and oil exploration/developments if we are to stay on track to limit global warming to 1.5C and get to net zero carbon emissions by 2050. The use of fossil fuels account for three-quarters of greenhouse gas emissions so we need to transition to alternative, cleaner forms of energy asap.

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% in 2015. 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.

The ETF fund holdings include :

Plug Power (4.6%) a leading provider of fuel-cell engines and green hydrogen-based solutions in the US. Some high profile customers include Amazon, BMW, IKEA, Walmart and Carrefour.

Enphase (8.4%) a global energy technology company and the world’s leading supplier of solar microinverters. these connect solar generation, storage and management on one intelligent platform.

Solaredge Technologies (5.7%) another Nasdaq-listed US company providing inverter solutions across all segments of the solar PV market.

Vestas Wind (8.3%) and Orsted (5.9%) both of which I also hold as a stand-alone investments in my portfolio

SSE (3.8%) the UK-based renewable energy company and listed on FTSE 100. It aims to deliver a five-fold increase in renewable energy output and reduce carbon emissions by 80% by 2030.

Returns

The fund had an amazing run...a couple of years back it moved from under £4.00 in March 2020 to reach a high point of £14.00 in mid February 2021 but there has been a significant pull-back over the past year with the share price falling to a low point of 740p last month. At the current price of 925p my total return has been -5.0% for the past year including a dividend yield of 0.8% and subject to exchange fluctuations. Total returns over the three years since purchase is 115%.

INRG 3 Yr Share Price

Ukraine Invasion

Clearly the decision by Putin to invade Ukraine on 24^th February has sent shock waves around the world. It highlights how dependent the West has become on Russia’s oil and gas. We know we need to move away from fossil fuels to address the climate crisis and this just adds more urgency to the need to move to alternative forms of clean energy.

I am hoping the pick up in recent weeks is a sign of some consolidated upward momentum 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.

I have taken a punt on a few individual companies such as Orsted, Ceres Power and Vestas Wind 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 the largest element of my green portfolio currently around 12%.

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!

Ceres Power - Full Year Results

Ceres is currently an AIM-listed company but has plans to move to the main market later this year. It is a world leader in low cost, next generation fuel cell technology which can facilitate the transition to zero-carbon emissions. The technology can be used in a variety of applications - transport, industry, data centres and home heating.

Fuel cell technology is already a core component of energy strategies in Japan, Korea, Germany and the US. Ceres are working with global leaders such as Bosch to embed their technology in mass market products. The stationary global fuel-cell market is estimated to be worth over $40bn by 2030

Ceres Power joined my green portfolio at 427p in February 2020...just before the pandemic.

German engineering giant Bosch hold an 18% stake in Ceres and believe their steel fuel cell technology as potentially the best in the business. Bosch say the market for the fuel-cell power station could be worth €20bn by 2030. They plan to invest €400m in its solid oxide fuel cell business by 2024. Other partners include China's engines giant Weichai Power who hold a 20% equity stake.

The company has licence agreements signed up with four of the world's largest engineering and power companies including Japan's Miura and Doosan of S. Korea who are a global leader in the stationary fuel-cell market. Doosan are preparing the launch of their 10KW SOFC system using Ceres’ technology later this year.

Results

The company has this week released results for the full year to end 2021 (link via Investegate).

Ceres is growing quickly. From just under £1m in 2015, they have increased revenues significantly in the past few years. Over the past 12 months revenues increased by 44% to £31.7m (2020 £21.9m). Just over half of this came from licence fee income which has doubled over the past year. Strong revenue growth is expected for the coming year subject to the timing of a new joint venture with Weichai and Bosch to establish manufacturing facilities in China.

Gross profits increased to £20.3m on a margin of 66% whilst cash has increased to £250m following a successful fundraising of 179m to push ahead with electrolysis for the production of green hydrogen.

Commenting on expanding the business, CEO Phil Caldwell said:

“Globally, industry accounts for 24% of carbon dioxide emissions and electrification is not a credible route to decarbonise many processes. For steel (accounting for 7% of global carbon emissions), ammonia and cement (2% each), hydrogen provides an economic solution to address parts of the energy system that cannot be directly electrified, where we rely on fossil fuels today.  We need to start working on these hard-to-abate areas now as they are significant problems with major infrastructure challenges.  

In early 2021, we took the decision to broaden the addressable market of the Company, moving into the production of green hydrogen using Ceres' technology through electrolysis. To do that we are committing £100 million to develop megawatt-scale, high-efficiency Ceres electrolysers.  Importantly, solid oxide electrolysers such as Ceres' aim to produce hydrogen at efficiencies around 20% greater than other technologies, in the range from mid-80s to 90% efficiency, where it is possible to make use of waste heat in industrial processes to drive this high efficiency.  We believe we have a pathway to produce green hydrogen at $1.5/kg, which is  the point at which electrolysis becomes competitive with blue and grey hydrogen produced using fossil fuels, at a price point that is key to making green hydrogen commercially viable.

Estimates suggest hydrogen could eventually account for 18% of primary energy. That is a big opportunity - according to McKinsey it is a $2.5 trillion opportunity. In March last year, we raised £179m in the public markets to support our growth. I am seeing a change in the capital markets, certainly from when I took over as Chief Executive of Ceres in 2013, with recognition that greater investment is needed to scale companies like Ceres, and others, to meet the climate challenge.  I believe we have a very strong investment case”. 

Huge Potential

The invasion of Ukraine has brought into sharp focus the dangers of the West’s dependence on Russian oil and gas. This crisis has reminded every country that we need to move quickly to build our self-reliance on more sustainable forms of energy and this will mean far more energy sourced from renewables and hydrogen.

Earlier this month, the EU announced its revised energy strategy to reduce reliance on Russian gas by two-thirds by the end of 2022. The EU Commission will be looking at alternative sources for fossil fuels in the short term but medium and longer term will significantly ramp up the roll-out of renewable and aim for a quadrupling of the use of hydrogen by 2030.

Commission President Ursula von der Leyen said: “We must become independent from Russian oil, coal and gas. We simply cannot rely on a supplier who explicitly threatens us. We need to act now to mitigate the impact of rising energy prices, diversify our gas supply for next winter and accelerate the clean energy transition. The quicker we switch to renewables and hydrogen, combined with more energy efficiency, the quicker we will be truly independent and master our energy system. I will be discussing the Commission's ideas with European leaders at Versailles later this week, and then working to swiftly implement them with my team.”

The company doesn't want to focus on fuel cell manufacturing but rather a technology licensing company working closely with a range of partners who are looking to adapt their business' and address the huge challenges posed by climate change.

CWR - 1 Yr Share Price

The share price has been volatile over the past year but I believe the longer term prospects are very positive and I will continue to hold on through the ups and downs. The shares currently make up around 8% 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 smaller companies can be rewarding but is higher risk - always DYOR!

I'm Hedging My Future Energy Costs

In 2019, I flagged up a new project from Ripple Energy which offered an opportunity to buy into a new wind farm co-operative. I looked into it at the time but it went on the back burner and then along came the Covid pandemic and everything was placed on hold.

However, with the current energy crunch, the cost of my electricity almost doubling and the prospect of more to come later in the year, I decided to take another look.

Next month the energy price cap will rise by 54% to £1,971 and some are speculating that it could rise to £3,000 by October. Buying into a wind farm is a way for everyone to protect themselves from rising energy costs.

The Offer

The UK’s first consumer owned wind farm at Graig Fatha in Wales is now fully sold out and now generating clean green electricity for its members. A typical household will save around £275 on their bills in the first full year due to the current high price of wholesale energy.

The next project is the Kirk Hill site in SW Scotland. Planning permission was granted in October 2020 and should become operational in late 2023. In less than 10 minutes, the site will generate enough electricity to power the average home for a whole year.

So basically, you buy shares in the wind farm based on your average annual electricity consumption. When the wind farm starts generating power, your electricity provider – eg Octopus – buys your share from the wind farm and pays the operator a low amount to cover operating costs and passes on the rest to you via a reduction in your bill.

The initial purchase (min £25) is a one-off payment...typically £1,700 which would buy enough electricity for the average house. This can be spread over 12 months. At current high prices, this would mean a saving of around £300 per year and therefore a payback period of under 6 years. Of course, energy prices could go higher which would mean even more saving but could go lower but then energy bills should come down.

Of course only a proportion of our bills are for the actual energy consumed and you still have to pay the daily standing charges, VAT, green levies etc. which can account for over 50% of the average bill.

Environment and Climate Change

In addition to the savings on our energy bills, there are significant benefits to the climate. These are new wind farms which would not otherwise have been built. So the more consumers who join up means Ripple have more confidence they have a good model and can plan ahead with new wind farms in the future.

Onshore wind is one of the lowest CO2 source of power in the UK. The model is much cheaper than individuals installing their own rooftop solar PV. (Reference material)

The Kirk Hill site is estimated to save 12 million Kg of CO2 every year which is equivalent to taking 8,200 petrol/diesel cars off the road.

But also, the invasion of Ukraine has brought into sharp focus the need to reduce our dependence on Russian oil and gas and become far more self reliant.

Conclusion

So, I have taken the plunge and signed up for my small share of the Kirk Hill wind farm (the offer officially closes end March but this could be extended) and will pay by monthly instalments over the coming year. I am already with Co-op Energy via Octopus so will not have to change supplier.

I look forward to getting my regular monthly discount off my bills next year and also following progress of the construction which is due to begin this Summer. It would be good to visit the site when operational...hopefully they will have regular open days for co-op members.

Here's a link to the Ripple website for those interested in this model.

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!

Allianz Technology Trust - Full Year 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 in September 2020 at the price of £2.25 (post 10:1 share split) 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 2021 (link via Investegate).

It's been another positive year with net assets advancing by 19.5% (2020 76%) but underperforming the benchmark Dow Jones World Technology Index of 28.2%. The trust was underweight in some of the very large cap holdings which out-performed the wider tech sector with the likes of Microsoft rising 54% and Google 67%. The Covid pandemic has been a severe challenge for all sections of society around the world these past couple of years however the technology sector has played a key role providing solutions for businesses, governments and individuals.

Some current top ten portfolio holdings include Microsoft (6.2%), Apple (6.3%), Tesla (5.0%), Micron Tech (4.5%), Google (4.5%) and Taiwan Semiconductor (3.2%).

The trust has a good performance record with returns of 19% in the past year, 76% previous year, 29% in 2019, 11% in 2018 and 38% in 2017. It is one of the top performing investment trust over both the past 5 years and also 10 years.

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

“The invasion of Ukraine by Russia has brought geopolitics to the fore after an extended period where the pandemic was front-of-mind. Our thoughts are with all those people affected by the humanitarian impact of this war. As we write, the Ukraine crisis and the related sanctions against the Russian Federation are constantly evolving. The world is certainly more volatile.  The fact that Cyber warfare was used by the Russians demonstrates that they will try to cripple any adversary with tactics to disrupt their governments, and it is possible that there may be countermeasures launched against institutions in response to the Western sanctions imposed on Russia.  This is why cybersecurity is such an essential area of spending for any company and government in our digital world and has to be at the top of company spending priorities”.

“As active investors, we are naturally looking beyond the immediate exposures and operational considerations to some of the longer-term implications and possibilities. In our view, demand for innovative technology solutions remains robust and is actually accelerating in several areas that comprise the digital transformation. While military conflicts have huge humanitarian impact and associated fears cause market volatility, we do not believe this will disrupt long-term growth drivers for various themes across the technology sector. Despite the near-term market volatility, we maintain high conviction that technology can be an attractive investment opportunity for many years ahead”.

Later this year, Mike Seidenberg will take over from Walter Price as lead manager.

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.

ATT share price - past 3 years

Over the past year or two I have been adjusting my portfolio and now prefer just three sectors ... 55% is allocated to green/climate, 10% to technology and the remainder to defensive government bonds/gold. 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.

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 £1.30 at the start of Covid in March 2020 and then climbed above £3.20 in February 2021 before the technology correction. The price is currently £2.54 so just a 13% uplift on my purchase price but happy to continue holding for the longer term. I also hold Google and Microsoft as stand alone investments in my 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!