Vonovia: Between Expropriation and Defence Industry Fantasies - Verbio and RE Royalties Ride the Energy Boom

RE Royalties: Beneficiary of the AI Boom

Data centres, electrification, and rising industrial energy demand are increasing the need for renewable energy in North America. One beneficiary is RE Royalties. The Canadian company provides secured loans to renewable energy project developers and, in return, receives not only interest but also long-term revenue shares, known as royalties. Once the loans are repaid, the company can reinvest the capital in new projects. At the same time, the existing revenue shares continue to generate income, thereby enabling the creation of growing, recurring cash flows.

The market in North America alone is huge. There, the clean energy financing market reached a volume of USD 120 billion in 2025. This represented a 5.8% increase over the previous year. Small and medium-sized project developers, in particular, are increasingly contributing to this expansion but are often underserved by traditional financing providers. For RE Royalties, this financing gap opens up attractive business opportunities.

RE Royalties' home market of Canada offers a promising starting point. Installed capacity for wind power, solar energy, and storage systems rose 56% to 25 gigawatts between 2020 and 2025. Further growth of 32% is expected by 2029, with capacity set to double by 2035. Demand from large corporations promises additional momentum. According to RE Royalties, the 100 largest Canadian companies alone will require an additional 7.7 gigawatts of renewable energy capacity by 2040. For a specialized financier, this expansion creates numerous potential opportunities for new transactions.

In recent years, RE Royalties has built a strong track record. The company has over USD 82 million in invested capital and has completed 27 transactions. Its portfolio comprises more than 130 projects and spans various technologies. In addition to 83 solar and 18 wind projects, the portfolio includes 22 energy storage projects, 4 hydropower projects, 2 energy efficiency projects, and 1 biogas project. This broad portfolio provides a solid foundation for participating in various areas of the energy transition.

In addition to Canada, the US is the second major market for RE Royalties. There, the company is expanding its collaboration with the US solar developer Solaris Energy. Most recently, it announced additional investments of USD 1 million. This brings the total capital provided to date to USD 4.8 million. In return, the company receives revenue shares from a portfolio of 16 solar projects with a total capacity of approximately 15.24 MW. The agreement provides for royalty payments initially over 25 years and beyond for the remaining operational life of the plants. At the same time, both companies signed a non-binding letter of intent for a potential financing volume totalling USD 67.5 million, including the funds already invested. This potential expansion could unlock significant additional long-term revenue for RE Royalties.

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Vonovia: Defence Sector Speculation?

Vonovia shares have lost about 28% so far this year. For a supposedly conservative investment like a real estate company, this is painful. The main reason for the downward trend is rising interest rates. They are noticeably increasing Vonovia's interest expenses. And then there is the risk of expropriation in Berlin. Following the Left Party's election success, this risk has grown. Even though there are still many question marks regarding its implementation—this applies to both the legal basis and the financing. But the stock market dislikes uncertainty, and Vonovia currently has plenty of it.

Last week, even Berenberg's "Buy" recommendation failed to provide any positive momentum. The company reaffirmed its assessment that an expropriation would be unconstitutional. Analysts believe Vonovia shares could rise to EUR 34.50. They are currently trading just above EUR 17.

Even indirect speculation about defence-related opportunities is currently failing to provide any momentum for the stock. Vonovia CEO Luka Mucic told "dpa" that the company is prepared to build additional housing for soldiers and their families as part of the Bundeswehr's planned expansion. The demand for such housing is particularly high in cities like Berlin. Vonovia could add capacity relatively quickly through large-scale new construction and rent these units directly to Bundeswehr personnel. According to Mucic, discussions have already taken place with military representatives. The next steps must now be initiated by the Bundeswehr or the Ministry of Defense.

Verbio: Analysts Recommend Buy

NuWays sees a clear operational recovery at Verbio. The company is benefiting, in particular, from higher ethanol margins in Europe, significantly higher prices for GHG allowances, and improved capacity utilization at its US facilities. Against this backdrop, a dividend of EUR 0.20 per share is to be paid out for the first time in a while.

For the 2026/27 fiscal year, Verbio expects EBITDA of between EUR 210 and 250 million. According to NuWays, the midpoint of this range largely corresponds to its own forecast. Growth drivers are expected to include higher production volumes in the US, rising biomethane volumes, and a larger earnings contribution from GHG allowances. Adjusted for a positive one-time effect of EUR 19 million in the prior year, the forecast implies, according to analysts' estimates, underlying EBITDA growth of approximately 20 to 43%. In addition, GHG allowances with a book value of EUR 131 million are on the balance sheet. Their realization is expected primarily in 2027/28.

Beyond that, NuWays anticipates a significant improvement in earnings. For 2026/27, analysts expect EBITDA of approximately EUR 230.7 million. In 2027/28, growth is projected to continue to EUR 310.7 million, and for 2028/29, experts anticipate EBITDA of approximately EUR 323.9 million. At the same time, Verbio is expected to increase revenue to approximately EUR 2.14 billion by 2028/29. NuWays forecasts net income rising to EUR 102.5 million in 2026/27 and EUR 174.1 million in 2028/29.

NuWays expects further momentum from the Capital Markets Day on October 8, particularly from details regarding renewable chemicals, CO₂ capture in Zörbig, potential additional projects, and US tax credits. Analysts confirm their "Buy" recommendation with a price target of EUR 41. The stock is currently trading at around EUR 30.

The stock market dislikes uncertainty, which is why buying Vonovia shares does not currently appear particularly compelling. Especially as higher interest rates are likely to remain with us for some time. RE Royalties is expected to benefit from the energy boom across North America, and the stock could benefit again as well. Verbio, meanwhile, is currently riding a wave of success.