May 2nd, 2023 | 09:10 CEST
Electricity for 2 cents? Here's how! Vonovia, JinkoSolar, Manuka Resources
Table of contents:
"[...] Internally we expect the resource to significantly grow the deeper we mine. [...]" Dennis Karp, Executive Chairman, Manuka Resources
Vonovia: Price shock weighs on the real estate industry
Last week, Germany's largest residential real estate group Vonovia announced the sale of its stake in the Südewo portfolio for EUR 1 billion. The transaction price values the property package at a 5% discount compared to the end of 2022. Vonovia receives an option to buy back, but this does not have to be exercised. With the transaction, Vonovia has already achieved around half of the sales proceeds planned for 2023. In the long term, however, Vonovia intends to shrink even more significantly: 66,000 flats with a total value of EUR 13 billion are up for sale. Shareholders should be particularly interested in the extent to which Vonovia will be able to achieve its targets and, above all, how high the markdowns are that Vonovia will have to accept. Although Vonovia wants to complete existing construction projects, further construction projects are on hold: under current conditions, building properties at reasonable rents is impossible.
Vonovia's statements should make private investors sit up and take notice. Anyone thinking of building should reconsider the project. Anyone not a craftsman or without access to the necessary resources is paying record prices for almost every trade. Added to this is the energy transition, which makes it difficult to calculate the renovation needs of existing buildings. Potential buyers ask themselves whether a heat pump makes sense in older buildings and what measures are necessary. Although there are numerous encouraging examples from practice, real estate investors are rightly skeptical - in the current environment, costs quickly get out of hand.
JinkoSolar: Exit when the going gets good?
Many property owners have opted for a photovoltaic system to cope with escalating costs in recent years. Only recently, the Chinese company JinkoSolar reported record figures in the form of earnings per share of USD 2.18 in the first quarter. That is more than four times as much as analysts had previously expected. Nevertheless, there was a short sell-off after the figures. The reason: the shares of First Solar and the inverter specialist Enphase were also volatile. There is concern in the market that the PV boom will end despite the political will to promote renewable energy. In view of the high costs, small systems in particular, which many private individuals are having installed on their roofs these days, are likely to be too uneconomical.
Huge solar parks are the future: electricity for less than 2 cents per kWh
When talking to industry representatives, one can also hear a lot of skepticism. There is talk of a euphoria that could be the beginning of the end of the boom. This is also supported by the fact that electricity prices are already falling again - the argument that a PV system is a hedge against sharply rising prices is at least beginning to waver. In addition, large wind and solar parks are more efficient than home power plants in private houses. At the best locations for PV parks, production costs of 2 US cents per kWh are not uncommon. Since there are now also solutions for storing this electricity, there is much to be said for the triumph of renewable energies in huge parks. So-called vanadium redox batteries are capable of storing huge amounts of energy. For example, the largest battery in the world, with a capacity of 800 MW, is a redox flow battery with vanadium electrolyte. In the coming years, the technology will likely be used in many more projects and thus ensure that solar parks can also deliver their energy when the sun is not shining. That would again significantly increase their profitability. But where does vanadium come from?
Manuka Resources: Potential for 15% of global vanadium supply
Currently, the vanadium market is strongly dominated by China and Russia. Economies like the US and the EU want to break this dominance and have therefore declared vanadium a critical raw material. The Canadian company Manuka Resources is pushing ahead with a gigantic vanadium project in New Zealand that has the potential to produce 15% of the world's supply alone. At the same time, some analysts expect vanadium demand to double in the coming years. "We believe the size of the project, its minimal environmental footprint and impact, and the vanadium it contains make it a truly unique opportunity for the Company with tremendous potential," Dennis Karp, executive chairman of Manuka Resources, said in an interview some time ago.
Since then, Manuka Resources' shares have fallen significantly. This is all the more surprising given that the Company also mines precious metals and has its own mill for processing. About a month ago, Manuka Resources announced plans to produce between 15,000 and 25,000 ounces of gold annually from its Mt Boppy mine over the next three years. Manuka Resources offers a speculative entry into the two investment stories of battery metals and precious metals and currently appears cheap. Nevertheless, investors should only buy the speculative stock after a thorough analysis.
While shares of housing companies such as Vonovia are currently suffering from the market environment, and nervousness is growing even among high-flyers such as JinkoSolar, the shares of promising commodity companies are at the bottom. Given the potential of Manuka's vanadium project in New Zealand, it makes sense to see this as an anticyclical opportunity. In addition, there is the very short-term prospect of cash flows from precious metal production. The largely unknown company could become a beneficiary of the current situation.
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