January 24th, 2024 | 07:15 CET
Nordex, Prospera Energy, RWE - Tomorrow's energy as an opportunity for the portfolio
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"[...] Recovery rates of more than 90% rare earths are another piece of the puzzle on the way to the economic viability of our project. [...]" Craig Taylor, CEO, Defense Metals
Nordex - Light at the end of the tunnel?
Alongside solar energy, wind energy is the great beacon of hope in the renewable energy sector. However, both sectors have recently suffered setbacks. This also applies to Nordex. An analysis by Bankhaus Metzler, which warned of difficult negotiating positions with customers and continuing margin problems, put pressure on the share. The annual results, which are eagerly awaited on February 29, could provide more precise information on the future of the wind turbine manufacturer. Already in the course of January, Nordex was able to announce positive news.
Business in Germany was very successful for Nordex in 2023. Order intake increased by 36% to 1.5 gigawatts (GW), and the Company was awarded 1.8 GW in tenders by the Federal Network Agency. Nordex has thus expanded its position in the German market. In 2023, the Company recorded orders for 7.4 GW, corresponding to an increase of 16%. Germany, Spain and Sweden were the largest customers. Further positive signs are shown by the order intake of 2.5 GW in the fourth quarter, which increased by almost 30%.
The Company was also able to announce several major orders in January. This could explain the new assessment by Goldman Sachs, which has raised the shares of Nordex from "Hold" to "Buy" and issued a price target of EUR 15. The analyst bases his assessment on a positive market environment, improved pricing, and cost savings on the part of the Company. This could bring profitability back up to the 2014 level. The share price, which currently stands at EUR 9.66, would then certainly also recover. This leaves a 55% upside potential to Goldman Sachs' price target.
Prospera Energy - Turnaround achieved
The Canadian oil and gas company Prospera Energy has been in a transformation phase since the summer. The turnaround was initiated with the new CEO, Samuel David. The transformation consists of 3 steps, the first of which has already been completed. The net cash value was increased to CAD 72 million, production costs were significantly reduced, and production was increased to 1,100 barrels of oil equivalent (BOE) in November. In November, the Company started the 2nd step with horizontal drilling. A total of 9 of these wells were drilled last year, with initial production rates of over 100 BOE per well per day.
In December, 1 well was already producing over 500 BOE daily, and a gross daily production record of 1,577 BOE was announced. Even then, the break-even threshold was maintained despite the fall in oil prices. Higher production will reduce fixed costs per BOE and thus improve margins. On January 5, the Company issued an update and the total production capacity was already at 2,200 BOE. In 2023, a total of CAD 16.1 million was raised through various forms of financing. Prospera plans to achieve a year-end production rate of 5,000 BOE in 2024.
To this end, methods to improve oil production are to be implemented and acquisitions made. The focus here is on distressed projects that are to be optimized to strengthen the Company. In this way, internal reserves can be increased, and the valuation of the acquired assets can be improved simultaneously. The Company is currently in talks with five potential acquisition targets. A positive outcome could boost the share price. The share is currently trading at CAD 0.085, giving it a market capitalization of around CAD 38 million.
RWE - Expanding renewable energies
The energy supplier RWE is in the thick of things when it comes to the energy of tomorrow. Nuclear power has been shut down, and coal-fired power plants are on the verge of being phased out in the medium term. The Company still operates some of them. But RWE is already planning to invest EUR 55 billion worldwide in renewable energies, storage technologies, flexible energy generation and hydrogen projects by 2030. The Company is aiming to expand its green portfolio to over 65 gigawatts (GW) and increase adjusted EBITDA and adjusted net income every year. These are things that shareholders like to hear.
According to Manager Magazin, there was recently interest in the Danish company Ørsted, which specializes in wind power. However, there was an initial rejection. In December, the Essen-based company was able to secure two major projects. Together with Mitsui and Osaka Gas, RWE secured the contract for a 684-megawatt offshore wind project off the coast of Japan. Shortly before Christmas, RWE acquired an advanced offshore wind portfolio in the UK from Vattenfall with a planned total capacity of 4.2 GW. This expansion aims to grow RWE's green portfolio to over 65 GW by 2030.
The Company follows strict guidelines when selecting acquisitions. If the return does not meet the requirements, a project is immediately excluded. RWE shares seem to be cheap. This is the opinion of Supervisory Board member Hell Valentin, who bought shares worth EUR 35,477.40 at an average price of EUR 38.77 in mid-January. The share price is currently slightly below this level, at EUR 36.93. Analysts are also positive about the share. Deutsche Bank, Berenberg and Bernstein Research have issued "Buy" recommendations with price targets of between EUR 52.50 and EUR 59.00.
The energy of the future will undoubtedly look different from today, but the transition will not happen as quickly as some countries would like. Wind power is being expanded, which should please Nordex. Shareholders will find out at the end of February whether margins have improved. Prospera Energy has achieved a turnaround. Recently, oil production increased significantly and production costs were reduced. Now, even takeovers are to take place. Things are progressing well operationally. Sooner or later RWE will have to do without its coal-fired power plants, but the Company is actively expanding its renewable energy portfolio. The Company is well-equipped for the future.
Conflict of interest
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