Energy Investing 2.0: Siemens Energy, RE Royalties, and RWE - Formulas for stable profits in times of change

Siemens Energy – Between strong winds and gusts

The last few months have been a real success story for Siemens Energy. Recently decried as a problem case, the Company is now in surprisingly good shape. The figures speak for themselves. In the third quarter of 2025, the Company achieved revenue of EUR 9.75 billion, an impressive increase of 11%, enabling the Company to return to profitability. Instead of being in the red, the balance sheet showed a net surplus of EUR 615 million. This operational turnaround and the surprisingly strong results have given investor confidence a powerful boost.

The upturn is primarily driven by a clear focus on the energy transition. Siemens Energy is investing heavily in the future in this area, as demonstrated by its recent investment of EUR 220 million in the transformer plant in Nuremberg. Such large-scale projects impressively demonstrate the high global demand for solutions for the urgently needed expansion of the grid. At the same time, the Company is pushing ahead with digitalization and increasingly relying on artificial intelligence to make energy grids more stable and efficient. With these competencies, Siemens Energy is ideally positioned to benefit in the long term from the megatrends of electrification and exploding demand for electricity, for example, from data centres.

Despite the positive performance, assessments remain mixed. While some analysts see the share as a clear beneficiary of the intact investment cycle and recognize further upside potential, others urge caution. They point to the continuing challenging situation in the wind power business with Gamesa and growth expectations that are lower than some of its peers. For investors, Siemens Energy is therefore a bet on the future. If the Company succeeds in maintaining its operational strength and further improving its margins, the current valuation could still offer upside potential. The next quarterly figures will be an important test in this regard. The share is currently available for EUR 102.70.

RE Royalties – A new financing approach for the energy transition

While the financing of renewable energy is mostly dominated by bank loans and equity, an alternative model from the commodities sector is gaining ground: revenue-sharing financing (royalties). Instead of acquiring shares in project companies or granting traditional loans, RE Royalties offers capital in exchange for a percentage of a plant's future revenue. This approach promises project developers funding without loss of ownership and provides investors long-term cash flows directly linked to earnings. However, transferring this model from mining projects to solar parks and wind farms raises questions. The obvious risk lies in collateralization.

How do you securitize rights to the sun or wind? The answer is a hybrid model that combines elements of a secured loan with a long-term royalty agreement. The focus is also almost exclusively on plants that are already operational and use established technologies. This avoids construction and technology risks. In addition, long-term power purchase agreements support revenue forecasts. Since energy prices are often linked to inflation, this concept offers a certain natural hedge against interest rate rises, as higher costs can tend to be passed on.

The built-in growth engine of this model is capital recycling. Customers are actively incentivized to repay their loans early, often within a few years. The returned capital, enriched by the royalties already received, is immediately reinvested in new projects. Over time, the initial investments have created a self-sustaining cycle that continues to generate new returns. The best part? Investors can fully participate in the energy transition without having to bear the usual risk associated with project development. As the icing on the cake, there is also a quarterly dividend of CAD 0.01 per share. With a current share price of CAD 0.30, that represents a dividend yield of over 12% per year.

RWE – From coal giant to green energy pioneer

RWE has undergone a radical transformation in recent years. The former coal giant has become an international player in renewable energies, investing heavily in wind and solar power as well as battery storage. The group already feeds the majority of its electricity from renewable sources into the grid, and is pursuing the ambitious goal of climate neutrality by 2040, with a focus on emerging technologies such as hydrogen. This is certainly exciting for investors, as it represents a company that is consistently committed to the megatrends of energy transition and decarbonization.

However, the transformation is not always straightforward. The latest quarterly figures showed that fluctuating electricity prices and, above all, weather-related fluctuations, for example in wind power, can certainly have an impact on earnings. Nevertheless, RWE remains keen to expand and is pushing ahead with international projects. A clever move was the recent joint venture with financial investor Apollo for the grid operator Amprion. This not only brings in fresh capital and relieves the balance sheet, but also allows RWE to focus on its core business while still participating in the stable earnings of grid operations.

And what does that mean for shareholders? Analysts remain cautiously optimistic, with price targets between EUR 40.00 and EUR 46.50, leaving room for upside. Added to this is a pleasing dividend policy. The Company has announced an increase in its dividend and is targeting EUR 1.20 per share for 2025. At a current price of around EUR 40.54, this represents a yield of around 3%. For long-term investors committed to the green transformation, RWE remains a solid consideration, even if the journey is not always smooth sailing.

The energy transition offers a wide range of investment opportunities beyond pure project development in 2025. Siemens Energy is mastering its operational turnaround and benefiting as a technology leader in grid expansion and electrification. RE Royalties offers scalable cash flows from operating assets with its innovative royalty model, avoids construction and technology risks, and pays a very attractive dividend. RWE, in turn, has successfully completed its transformation from a coal-fired power generator to a green energy pioneer with a clear growth trajectory and attractive dividends. Together, these companies form a strong portfolio for stable profits amid the ongoing transformation of the energy sector.