April 6th, 2023 | 09:44 CEST
Energy turnaround for your portfolio: RWE, GoviEx Uranium, Nordex
Table of contents:
RWE: Despite wind power, it has not arrived in the future
China, India, the USA and even Japan - all the countries mentioned are planning to build new nuclear power plants. In Germany, on the other hand, functional and safe reactors are being shut down. This is doubly paradoxical when, on the other side of the border, only a medium-distance cycle ride away, much older power plants in neighbouring countries continue to operate. Companies such as RWE stood for nuclear energy just a few years ago. Then came Fukushima and the nuclear phase-out. Today, companies like RWE are trying to give themselves as green an image as possible. Just a few months ago, RWE bought a lease off the coast of New York to build a wind power plant with a capacity of 3 GW. RWE is also active on the German coast and wants to realize a wind power plant with a capacity of 1.3 GW off Juist. In addition, RWE has a stake in the Brunsbüttel LNG terminal. So the Company got its act together pretty quickly after the outbreak of the war in Ukraine. However, RWE was partly caught on the wrong foot. Although it hedged against price fluctuations before the war and is sitting on futures contracts that have clearly gone into the money, the deliveries cannot be implemented because of the sanctions against Russia.
Experts continue to assess RWE's future business as uncertain. The share of fossil fuels at RWE is still high. Although the nuclear phase-out has long been mastered except for a few legacy issues, the next construction site is now open. The share is not very interesting at the moment, and the dividend is no longer what it used to be. The former power plant operator now primarily trades in energy. Since countries are increasingly entering the market, this business is not a foregone conclusion either.
GoviEX Uranium: Three promising projects - one share at the bottom
The shares of GoviEx Uranium were anything but a sure-fire winner last year. The Company is pushing ahead with three projects in Zambia, Niger and Mali. Africa has always been a hot spot for uranium mining. For many years, French state-owned Areva mined uranium in Niger, among other places. The Madaouela project in Niger and the Muntanga project in Zambia are fully licensed for uranium mining, according to GoviEx. The former property also already has a feasibility study. GoviEx plans to start mining uranium in 2025 and emphasizes that it wants to become a producer in the current uranium cycle. Many smaller uranium companies will likely need much longer to reach this goal.
The fact that it sometimes takes a very long time to bring uranium projects into production also creates a supply deficit that analysts expect to grow even larger in the coming years. Africa has a unique role to play in this context: the continent promises short routes to many regions of the world and is currently experiencing a charm offensive from Europe, the USA, and even China and Russia. The GoviEx Uranium share cannot be compared with large caps such as RWE - among other things, the market capitalization is significantly lower at around CAD 120 million. However, the three promising projects and the production planned for 2025 could make for an interesting mix for speculative investors. The share price has been falling for about a year and has stabilized recently. Those who believe in uranium and want to get their foot in the door can keep GoviEx Uranium in mind. However, entering in limited tranches and having an active risk management strategy is recommended.
Nordex: Not putting the horsepower on the road
Those who hedged profits from Nordex in the past half-year may have been stopped out on the stock recently. The wind turbine manufacturer from Germany is still posting losses and is struggling to monetize what should be a flourishing business, which Nordex does mainly abroad. Inflation and the general state of emergency have also caused costs to explode - until a Nordex wind turbine is delivered and installed, high costs are still being incurred. Looking at the Nordex share price over the long term, one can still see a downward trend. Those who believe in the turnaround can position themselves cautiously. However, the stock will only look really rosy if it can take the recent high of EUR 15 with momentum.
Investments in energy are challenging. At first glance, companies like Nordex have everything they need to be successful. But then the costs really hit home. The situation is similar for old heavyweights like RWE: The transformation is difficult, and RWE still relies on fossil fuels. It is unlikely that stakes in LNG terminals will be the last word. And what about uranium? New power plants are being built all over the world. Many sources lie deep in the East. A supply shortfall is imminent. GoviEx Uranium is a small cap but has three promising projects with an ESG focus in three African countries. The stock is speculative but holds opportunities. If only one of the three projects comes into production, this alone should justify rising prices.
Conflict of interest
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