RWE, GoviEx Uranium, Plug Power - Profits with tomorrow's energy

RWE - Expansion of wind power

RWE is one of the leading energy suppliers in Germany and looks back on a long history. Nuclear power in Germany is now history, and the exit from coal-fired power generation is also set to be achieved by 2038 at the latest. The Essen-based company is, therefore, stepping up its investments in the field of renewable energies. The Group is active both in Germany and internationally. In Spain, with its partners Saitec Offshore Technologies and KEPCO, the first floating wind turbine was recently connected to the grid. The turbine has an output of 2 megawatts and can supply up to 2,000 households.

Due to the problems of Siemens Energy or Ørsted in the wind power sector, there were uncertainties regarding the profitability of RWE wind farms. However, there is no reason for concern here because the Group prefers to forego unprofitable projects in case of doubt. Here, the management shows a clear edge and has recently also made it clear on the subject of hydrogen that it will only invest if there are subsidies from the state, and the projects prove to be profitable. Otherwise, the Company will not make any major investments. Nevertheless, the Company wants to achieve a capacity of 2 gigawatts of hydrogen by 2030 using electrolysers.

In the Netherlands, the Company is investing EUR 24 million in a battery storage project. A plant with a storage capacity of 41 megawatt hours is to be built there on 3,000 sqm. In November, the Group plans to buy back shares with an equivalent value of EUR 25 million to make these shares available to its employee share program. Analysts are all bullish on the stock and issued 4 buy recommendations in September with price targets between EUR 48.50 and EUR 58.50. The share currently trades around EUR 36.52, giving it a dividend yield of around 2.5%.

GoviEx Uranium - Uranium projects in Africa

How hot the uranium market is at the moment can be seen in the example of Sprott Uranium Trust. The high from last year of CAD 20.19 was broken without much resistance and is now higher than it has been in 15 years. The increased uranium price is also helping prospective uranium producers like GoviEx Uranium. The Canadians own 2 prospective uranium projects in Africa for which mining permits are already in place. A feasibility study is currently underway for the Muntanga project in Zambia. The conditions for a positive study have increased significantly with the August 31 announcement that mineral resources have increased significantly. Measured and indicated resources have nearly tripled to 33.7 million pounds of uranium, with the inferred resource contributing another 10.9 million pounds.

The flagship Madaouela project is located in Niger and has a mineral resource measured and indicated of 96.9 million pounds of uranium plus inferred resources of 19.6 million pounds. In addition, a feasibility study has also been available since late last year, indicating that the Company can operate self-sufficiently with its own processing plant and renewable energy. After-tax net present value (NPV) at an 8% interest rate is USD 140 million, and the internal rate of return (IRR) is 13.3%. Uranium production over the life of mine (LOM) is 50.8 million pounds of uranium, an average of 2.60 million pounds per year over 19 years. Following the coup in Niger, there was great concern that GoviEx's project would be affected.

Fortunately, those fears did not materialize. On July 31, the Company announced that operations would continue as usual. All employees are well and able to go about their work. The country has always been friendly to mining for decades, despite changes in government. In addition, the government of Niger holds a 20% stake in the project and would otherwise cut its own flesh. In addition to the pure uranium projects, there is also a deposit in Mali where uranium, silver and copper can be found. However, further exploration is needed here. Since the draw-down after the Niger coup, the share price has risen by more than 50%. The share is currently trading at CAD 0.145.

Plug Power - How can the turnaround be achieved?

The FED did not raise interest rates last week but did not announce the end of increases either. This is not good news for growth-oriented companies like Plug Power, as it becomes more challenging to raise fresh capital. The management has recently repeatedly disappointed shareholders regarding its revenue forecasts and promises of margin improvement, leading to a significant loss of trust.. Sales are expected to be between USD 1.2 billion and 1.4 billion this year, with only USD 470 million realized in the first half of the year. On top of that, the Company had to pay USD 1.25 million in penalties to the SEC for accounting problems from 2018 to 2020.

The group has set a goal of producing 500 tons of green hydrogen per day by the end of 2025, but there are always delays in the construction of the plants. This could also jeopardize the goal of being able to achieve positive EBITDA in 2024. So far, gross margins have been negative. At the same time, the Company is burning money, so investors should always keep an eye on liquidity. No major order has been reported since mid-July, possibly due to the summer slump. The next quarterly figures have been announced for November 8.

If a turnaround with better margins does not succeed soon, the Company could face payment difficulties. Refinancing would then only be available at high interest rates, which would negatively impact earnings. In the meantime, there are 10 Wall Street analysts who have downgraded the stock to Hold, and the average price target continues to fall. Since the beginning of February, the share has lost more than 60% of its value and reached a critical support level of USD 7.39. This is the low from May. If a double bottom can be formed here, a countermovement could be initiated.

All three companies could positively contribute to the energy transition and save CO2. RWE is consistently expanding renewable energies and could thus become important for Germany, which has already shut down its nuclear power plants. Nuclear power plants, some of which are under construction and in planning, require uranium. This is what GoviEx Uranium wants to supply from Africa starting in 2026. France is already sourcing uranium from Africa, and demand is increasing. Plug Power intends to store the surplus energy from alternative energies in green hydrogen. Here, the operating business must grow in all areas to achieve its goals.