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April 4th, 2024 | 07:45 CEST

Ballard Power, Saturn Oil + Gas, and Siemens Energy - Three energy companies on course for growth. Who offers the greatest potential return?

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Fuel cells, oil and gas, grid technologies and onshore wind power - there are many opportunities for investors to invest in energy companies. But which segment offers significant return potential? Berkshire Hathaway is focusing on oil and gas companies such as Occidental Petroleum. A Canadian company in the same segment is Saturn Oil & Gas. The Company made it into the top 20 fastest-growing companies in Canada last year and pursues a transparent growth strategy focusing on value creation for its shareholders. Ballard Power Systems creates fuel cells, relies heavily on government support and has raised USD 94 million for the construction of its new fuel cell plant in Texas. Siemens Energy, in turn, released its financial figures for the first quarter of this year. Until now, the spectre of Siemens Gamesa has been haunting the ranks, but the latest results are surprising...

time to read: 5 minutes | Author: Juliane Zielonka
ISIN: BALLARD PWR SYS | CA0585861085 , Saturn Oil + Gas Inc. | CA80412L8832 , SIEMENS ENERGY AG NA O.N. | DE000ENER6Y0

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    Dr. Thomas Gutschlag, CEO, Deutsche Rohstoff AG
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    Fuel cell boom: Ballard Power secures USD 54 million for factory in Texas

    Canadian fuel cell manufacturer Ballard Power Systems has received a $54 million investment tax credit to support the construction of its fuel cell plant in Texas. This federal cash injection brings the total funding for Ballard Power's project to $94 million. The Company has received USD 40 million in government grants to date. This news delighted investors: the share price rose by up to 15% in trading.

    The investment tax credit used by Ballard Power is part of the US Inflation Reduction Act (IRA), which aims to decarbonize the US electricity sector and promote the development of clean energy projects. The IRA initiative provides tax credits for electric vehicles (EVs) and selected clean energy manufacturing projects. Ballard Power's fuel cell factory called "Ballard Rockwall Giga 1" is a part of it.

    CEO Randy MacEwen explains: "The grants represent significant investment leverage as we plan to bring upscaled, advanced manufacturing of next-generation fuel cells online by the end of 2027 - precisely when we anticipate capacity constraints in our existing North American manufacturing facilities due to our projected growth and production volumes."

    Ballard plans to invest approximately USD 110 million in the commissioning of a new production facility between 2024 and the end of 2027. In addition, Ballard announced that it had received an order for 1,000 hydrogen fuel cell engines from the European bus manufacturer "Solaris Bus and Coach". This order also includes a new supply agreement for an additional 700 engines until 2027. The full order books are a good sign for investors. However, the technology is still in its infancy, which is also associated with risks. Analysts at UBS Bank take a similar view and have lowered their price target for Ballard Power shares from USD 4.00 to USD 3.75. The share is currently trading at USD 3.18.

    Saturn Oil & Gas: Focus on sustainable growth and debt reduction to maximize shareholder value

    Based in Calgary, the Canadian oil and gas production company Saturn Oil & Gas stands out for the remarkable growth of its oil and gas projects. The latest financial results, presented by VP Corporate Development Kevin Smith, clearly demonstrate why Saturn Oil & Gas won the award for Canada's fastest growing oil and gas company last year. Saturn landed in 18th place. With a focus on light oils and liquefied petroleum gases, the Company is generating solid cash flows and has reported EBITDA of over CAD 100 million for two consecutive quarters. The global oil and gas market is estimated to reach USD 6,585.54 billion in 2022 and is expected to grow to USD 8,568.72 billion by 2030, at a CAGR of 3.80% from 2023 to 2030, according to King's Research.

    Saturn Oil & Gas is currently focusing on optimizing its balance sheet and reducing its debt structure. The plan is to be debt-free by the beginning of 2026. By aggressively reducing debt and efficiently allocating capital, the Company aims to sustainably increase shareholder value. It also aims to reduce its carbon footprint in order to keep pace with political requirements.

    The Company's growth strategy includes an active drilling and development agenda, particularly in the oil reservoirs of Alberta and Saskatchewan. New techniques, such as open-hole multilateral drilling, have the potential to further enhance well profitability and increase production capacity. Saturn plans to use the free cash flows to drive expansion and carry out share buybacks or pay dividends.

    Siemens Energy records a successful start to the year and forecasts 3 to 7% growth in 2024

    Siemens Energy reports a positive start to the fiscal year with record order intake and strong revenue growth. CEO Christian Bruch emphasizes the ongoing efforts to resolve quality issues in Siemens Gamesa's onshore wind business, which is still a burden for the Company. According to the Annual Report Q1/24, Siemens Energy is currently recording a slight increase in order intake compared to the same quarter last year. However, there has been a slight decline in the onshore business due to temporary interruptions in the Siemens Gamesa platforms. Growth in Asia, Australia and EMEA slightly offset the decline in the US. Despite a negative free cash flow before taxes, the Company recorded a Net income of EUR 1.582 billion thanks to special items. In the 'Gas Services' division, incoming orders increased compared to the previous year, with sales revenue rising significantly due to the service business.

    The Company recorded a strong increase in the 'Transformation of Industry' division. This was mainly due to two major orders in the areas of Compression and Industrial Steam Turbines & Generators. Various factors will dominate the market for power transmission in the coming years: the trend towards renewable energy, the expansion and networking of the grid infrastructure, and the need to gradually replace and modernize outdated grid infrastructure. As a result, Siemens Energy also recorded growth in its 'Grid Technologies' segment. Revenue increased mainly due to the product and solutions business.

    Siemens Energy is optimistic for the current fiscal year 2024, with an estimated revenue growth of 3% to 7%. The forecast profit after tax is up to EUR 1 billion, including divestitures and the accelerated portfolio restructuring. Siemens Energy makes the following assumptions for the individual business areas:

    • 'Gas Services' expects sales growth of minus 4% to 0% and a profit margin before special items of 9% to 11%.
    • 'Grid Technologies' is planning growth of 18% to 22% and an earnings margin of 7% to 9%.
    • 'Transformation of Industry' forecasts growth of 8% to 12% and a profit margin of 5% to 7%.
    • Siemens Gamesa is forecasting sales growth of 0% to plus 4% and a negative result before special items of around EUR 2 billion.

    Three energy companies, three different strategies. Ballard Power Systems receives an investment tax credit of USD 54 million for the construction of a fuel cell factory in Texas. The financing increases the total investment to USD 94 million through tax money. Saturn Oil & Gas reports solid financial results and aims to be debt-free by 2026. This strategy aims to increase shareholder value sustainably. Saturn is committed to an expansive drilling and development agenda, particularly in the oil reservoirs in Alberta and Saskatchewan, Canada. Innovative technologies such as open-hole multilateral drilling are designed to maximize the potential of wells to increase profitability and boost production capacity. Siemens Energy is off to a positive start in 2024 and expects revenue growth of 3% to 7%. Despite challenges in Siemens Gamesa's onshore wind business, the Company is confident and is relying on a diversified growth strategy to achieve its goals.

    Conflict of interest

    Pursuant to §85 of the German Securities Trading Act (WpHG), we point out that Apaton Finance GmbH as well as partners, authors or employees of Apaton Finance GmbH (hereinafter referred to as "Relevant Persons") may hold shares or other financial instruments of the aforementioned companies in the future or may bet on rising or falling prices and thus a conflict of interest may arise in the future. The Relevant Persons reserve the right to buy or sell shares or other financial instruments of the Company at any time (hereinafter each a "Transaction"). Transactions may, under certain circumstances, influence the respective price of the shares or other financial instruments of the Company.

    In addition, Apaton Finance GmbH is active in the context of the preparation and publication of the reporting in paid contractual relationships.

    For this reason, there is a concrete conflict of interest.

    The above information on existing conflicts of interest applies to all types and forms of publication used by Apaton Finance GmbH for publications on companies.

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    Der Autor

    Juliane Zielonka

    Born in Bielefeld, she studied German, English and psychology. The emergence of the Internet in the early '90s led her from university to training in graphic design and marketing communications. After years of agency work in corporate branding, she switched to publishing and learned her editorial craft at Hubert Burda Media.

    About the author

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