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3 Favorites for Renewable Profits
11/25/2014 10:13 am EST
Jeff Siegel, editor of Energy & Capital, outlines his favorite alternative energy stock picks for the coming year; each offers a high dividend for income investors.
In the world of renewable energy, yieldcos are relatively new. But it is the yieldco, my friend, that will usher in a new wave of opportunity for renewable energy investors in 2015.
Yieldcos essentially allow renewable energy to continue its rapid pace of integration by lifting it out of the slow lane with mountains of capital. Here are three that I believe will win big in 2015.
Pattern Energy Group (PEGI)
Pattern Energy owns and operates 11 wind power projects in the US, Canada, and Chile. Combined, these represent a total owned capacity of 1,434 megawatts.
Pattern has developed, financed, and managed more than $12 billion worth of infrastructure assets.
The off-takers of PEGI's projects boast a weighted average credit rating of "A." These include San Diego Gas & Electric, Credit Suisse Energy, Pacific Gas & Electric, Ontario Power Authority, and Puerto Rico Electric Power Authority.
Roughly 3,000 megawatts of this is in wind power, and the company has more than $300 million of liquidity (as of December 31, 2013). Pattern Energy Group offers a 4.5% yield.
NRG Yield (NYLD)
NRG Yield boasts a contracted generation portfolio that includes three natural gas facilities, eight utility-scale solar and wind generation facilities, and two portfolios of distributed solar facilities. Collectively, these represent 1,324 megawatts of generation capacity.
The diversification with natural gas is nice, but quite frankly, I'm less concerned about diversification with renewable energy assets, as there are no issues of resource depletion or energy shocks.
The distribution of solar and wind doesn't change. Yes, it's intermittent, but the energy source itself can always be counted on and can never be affected by geopolitical events or logistical mishaps.
Still, with natural gas so dirt cheap, certainly NRG's natural gas assets are beneficial to the overall portfolio.
NRG has performed quite well this year, starting off 2014 at $39.95 a share and reaching a recent high of $53.19 a share. That's a 33% gain in about six months. Not bad at all. NRG Yield offers a 3% yield.
TransAlta Renewables (TSX: RNW)
TransAlta is primarily focused on wind. Its portfolio contains 92% wind, with 8% in hydro. With 17 wind facilities and 12 hydro facilities, RNW boasts 1,255 megawatts of installed generating capacity. It also boasts Canada's largest fleet of wind generation.
Management is also focused on aggressive third-party acquisitions, so I suspect it will continue to lead the wind game in Canada.
As well, the company is also looking into expanding into solar, gas, and transmission assets. TransAlta Renewables offers a 6.2% yield.
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