GE Vernova, RE Royalties, Canadian Solar – Billions Are Flowing Into Energy Infrastructure

GE Vernova: Major Contract for the Power Grid of the Future

Without high-performance power grids, even the largest expansion of renewable energy will be ineffective. On Thursday, GE Vernova announced another contract for the expansion of the British transmission grid. On behalf of Laing O'Rourke, the US corporation is supplying a new 400-kV GIS substation in Chesterfield for National Grid projects. It is intended to increase transmission capacity, improve supply reliability, and enable the integration of additional renewable energy sources.

The project is part of the "Great Grid Upgrade", the largest overhaul of the British power grid in generations. For GE Vernova, this surge in investment comes at a time when the market is already booming. The company is present at several critical junctures in the global energy supply with gas turbines, wind power technology, and grid solutions.

The grid business, in particular, could become a long-term growth driver. Wind and solar farms are often built far from major consumption centers, while data centers and increasing electrification demand additional grid capacity. This makes transformers, high-voltage technology, and substations critical infrastructure.

The new contract from the UK exemplifies this trend. While investors often think first of electricity producers when considering the energy boom, GE Vernova profits from the infrastructure behind it. This position makes the stock one of the most exciting "shovel sellers" in the global electricity boom.

RE Royalties: USD 67.5 Million Could Open Up New Possibilities

RE Royalties is on the verge of a potential growth spurt. In early August, the Canadian specialty financier invested another USD 1 million in Solaris Energy's solar portfolio, increasing its exposure to USD 4.8 million. More significant, however, is the non-binding letter of intent agreed upon at the same time, as the partnership could grow to a royalty financing volume of USD 67.5 million. In addition to the 16 plants already financed, the outlook includes another 96 US solar projects totaling approximately 190 megawatts of direct current (MWDC).

RE Royalties does not build its own power plants but instead finances developers of solar, wind, storage, and other energy projects. In return, the company receives revenue-based royalties. In the case of Solaris, the payments are structured to ensure an agreed-upon minimum return over an initial 25-year period; thereafter, the royalties continue for the remainder of the project's operational life.

This positions RE Royalties to capitalize on the explosive growth in capital demand driven by the energy transition, electrification, and the electricity hunger of data centers. At the same time, developers do not have to surrender any equity stakes to secure this financing. RE Royalties, in turn, participates in the projects' revenue without being their operational operator.

The figures to date demonstrate how well the model can scale. More than CAD 83 million has been invested, resulting in a diversified portfolio of 135 projects. According to the company, the investments generated an average return of approximately 19%.

The valuation offers additional upside potential. In early August, the market capitalization stood at just CAD 16.5 million. At the same time, the company was evaluating investment opportunities totaling approximately CAD 200 million. The board of directors is also working with PwC to explore strategic options, ranging from new partnerships and financing structures to a potential sale.

If the company succeeds in converting even a portion of its pipeline into long-term royalty cash flows, its current market capitalization could quickly become outdated. It is precisely this discrepancy between market capitalization and growth prospects that makes RE Royalties particularly exciting right now.

Canadian Solar: Battery Storage Becomes a Growth Engine

At Canadian Solar, the business is shifting increasingly toward battery storage. The quarterly results released on Thursday provide evidence of this. In the second quarter, 3.7 GWh of storage solutions were shipped, 82% more than in the previous quarter and 73% more than a year earlier. Canadian Solar even exceeded its own forecast of 2.8 to 3.2 GWh.

Even more important for the coming years is the order backlog. As of the end of June, the subsidiary e-STORAGE had a contractually secured backlog, including long-term service agreements, of USD 3.5 billion. At the same time, the global development pipeline now comprises approximately 84 GWh of battery storage.

As a result, Canadian Solar is increasingly evolving from a traditional module manufacturer into an integrated energy company. In addition to solar modules, its business model includes storage solutions and the development, operation, and sale of large-scale energy projects.

However, not everything is running smoothly just yet. Quarterly revenue fell 29% year-over-year to USD 1.2 billion, resulting in a net loss of USD 77 million. This makes the storage segment all the more crucial. While the traditional solar business is suffering from intense price pressure, a second pillar is emerging here with a backlog of orders worth billions. Should Canadian Solar translate this growth into rising profitability, this very segment could drive a revaluation of the stock.

The next phase of the energy transition will not be decided solely by wind turbines and solar modules. GE Vernova is benefiting from the multi-billion-dollar expansion of power grids, while Canadian Solar is capturing a rapidly growing future market with a USD 3.5 billion order backlog in energy storage. The most speculative stock of the trio is RE Royalties. If the financed project portfolio grows as planned, it will generate additional long-term cash flows. This small specialist could become an increasingly significant financier of the energy transition.