05 April 2019
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The latest monthly note from managers of the DNB Renewable Energy fund point to rare earth metals and wind power-related products being key ongoing drivers of return from the shift to renewable energy sector.
There is a correlation between the two, in that rare earth metals are required to make more efficient permanent magnets that are used in the turbines generating energy from wind power.
An example noted by portfolio managers Jon Sigurdsen and Christian Rom include the bid by ASX listed Wesfarmers for fellow Australian company Lynas.
Lynas is a rare earth metals miner based in Western Australia, which ships ore to a refining plant based in Malaysia, while Wesfarmers is a Western Australia conglomerate that includes and industrials division active in chemicals, energy and fertilisers. Lynas stated on 27 March that it rejected the "indicative and highly conditional proposal" of A$2.25 per share for a 100% stake. In recent years Lynas was the target of a takeover by a Chinese company, but this was rejected by Australia's Foreign Investment Review Board.
On the wind power side, companies mentioned by Sigurdsen and Rom include Nordex, Siemens Gamesa and Vestas Wind Systems.
"We met company holdings in Copenhagen and in Bilbao this month (hence the delayed release of the monthly report). In Bilbao we met our wind equipment holdings. in addition to a blade factory visit, the sector is now clearly improving with growth and margins picking up as their updated product portfolios are hitting price points which are unlocking additional demand."
Currently Siemens Gamesa is a 4.65% weighting in the portfolio, while Vestas Wind Systems is 3.21%.
Regarding factors driving investors towards renewables, there is suppport seen coming through on the oil price. With Veneuela's output cripled by ongoing political uncertainty, and Saudi Arabia holding production discipline, the fund's managers note that compared to a year ago, the forward expectation for oil prices through to 2023 has been pushed higher.
