Clean energy stocks ride market rollercoaster
The clean energy sector has endured a torrid ride so far in 2006. The WilderHill New Energy Global Innovation Index (ticker symbol NEX), which tracks a selection of global clean energy stocks, surged 43.8% from its value of 216.25 at the start of the year, hitting a high of 310.96 on 10th May (up 43.8% on the year), before dropping 24.7% in just over a month to close at a low of 234.19 on 14 June. It clawed back some territory at the end of June to finish the second quarter at 258.66. Overall in Q1 2006 it was up 25.1% and in Q2 2006 it was down 4.4%.
So far in Q3 2006 the NEX has been caught between a market troubled by events in the Middle East and oil prices at new records. The NASDAQ was down 3.8% during July, while the AMEX Oil was up 4.4%. The NEX has been hit harder by negative sentiment, closing July down around 2.5% at 252.22.
The drop in the NEX between 11 May and 15 June 2006 had four main causes: the general market correction, which saw the NASDAQ fall 7% over the same period; profit-taking by some clean energy investors after 18 months of strong performance in the sector; concerns that for some companies, particularly in the solar sector, their results did not back up valuations of their shares; and finally, the crash in carbon prices in Europe, which may end up affecting the prospects of a number of NEX constituents.
Only two sectors of the NEX finished in positive territory, likely boosted by the high oil prices and positive sentiment about commercial viability of the technologies: wind, and bioenergy (which encompasses biofuels, biomass and waste-to-energy). Solar was among the worst performers, falling back 11.8%, ending an extraordinary two-year run.
“We were not particularly surprised to see the correction in the NEX in Q2 2006. Our clients had been looking at the valuations of some solar and fuel cell stocks with some trepidation before it occurred. Overall the clean energy industry is in good health. There are a few supply bottlenecks, but we are seeing strong prospects for long-term growth and value creation,” said Michael Liebreich, CEO of New Energy Finance, the company which co-publishes the NEX along with their US partners Robert Wilder of WilderShares and Josh Landess, an experienced clean energy analyst.
The Q2 rebalance of the NEX saw the addition of four companies and the removal of five. This leaves the NEX with 86 constituents with an aggregate market value of $286 billion, an increase of $5.0 billion on Q1. However, this increase was driven by the larger size of the new arrivals. The decline in the value of the NEX would otherwise have seen $ 4.5 billion wiped off its aggregate capitalisation during the quarter.
Three of the new entrants resulted from Initial Public Offerings (IPOs), with an active market in the first part of the quarter raising a record $5.6bn before the market correction began.
A successful IPO from REC of Norway raised $1.2 billion made it the largest pure-play clean energy company, with a market capitalisation of $6.8 billion. It knocked Suzlon, the Indian wind turbine maker, off top spot and extended the NEX’s global presence to Oslo. VeraSun Energy, the US biofuels, biomass and waste-to-energy group, and German silicon wafer supplier Wacker also listed successfully, raising $253m and $1.5 billion respectively. Also welcomed to the index was China’s Tebian Electric Apparatus Stock Company, a Shanghai-listed transformer, foil and solar equipment manufacturer.
Leaving the index were Applied Films Corp, the thin-film deposition company that is being acquired by Applied Materials, NASDAQ-listed fuel cell consultancy, Entegris, GrafTech International, the NYSE-traded synthetic carbon materials manufacturer, Italian Exchangequoted waste-to-energy group Hera, and Toronto-listed project developer Maxim Power.
After these changes, solar and wind are the largest sectors on the index, with 17 and 12 stocks respectively. Companies listed in countries that have signed up to the Kyoto Protocol were down 2%, while groups quoted on the exchanges of non-signatories US and Australia fell 8.1%.
New Energy Finance publishes regular updates on changes in the value of the NEX in its bimonthly New Energy Finance Briefing.
About New Energy Finance:
New Energy Finance is a specialist provider of financial information and analysis on renewable energy and low-carbon technologies. Industry sectors covered are as follows: renewable energy (wind, solar, marine, geothermal, mini-hydro); bioenergy (biomass, biofuels); energy architecture (supply- and demand-side efficiency, smart distribution, power storage, carbon capture & sequestration); hydrogen & fuel cells; carbon markets and associated services. New Energy Finance covers all stages of investment activity, including venture capital, private equity, public markets, asset-based finance and M&A. The company has offices in London, Washington, New York, Beijing, Shanghai, New Delhi and Brisbane, and a staff of fifty. Services include the New Energy Finance Briefing (Global and US versions), the New Energy Finance Desktop, the world’s largest database of investors and investments in clean energy, and the Newswatch service which keeps investors up-to-date with financial developments in the market. New Carbon Finance, a division of New Energy Finance, provides price forecasting services for the European Carbon Markets. New Energy Finance also publishes reports on clean energy sectors and countries, undertakes research and consultancy, and runs seniorlevel
networking and briefing events. In January 2005 New Energy Finance began publishing the world’s first global clean energy stock market index; since January 2006 the Wilderhill New Energy Global Innovation Index (ticker symbol: NEX) has been calculated and distributed by the American Stock Exchange. In September 2005 the company was named Euromoney Ernst & Young Renewable Information Provider of the Year. New Energy Finance counts the leading financial institutions and corporates active in the sector among its clients.
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For more information on the NEX, please visit www.nex-index.com
For more information on New Energy Finance, please visit www.newenergyfinance.com