Whether the Baltic Eagle wind farm off the Baltic Sea island of Rügen, the Lappfjärd project on the west coast of Finland or the Sumita Tono wind farm in the mountains of Japan's Iwate prefecture, Vestas has been reporting a steady stream of orders over the last few months. In the first semester the order book of the world's largest manufacturer of wind turbines grew by EURbn 6.1. That meant new orders, which include maintenance contracts as well as new installations, had almost doubled on the same period the previous year. Even so, the industry giant went through a slump on the stock market, as the Vestas share price turned downwards after reaching an all-time high in January (see chart). The correction experienced by the Danish wind-power specialist is a perfect example of the recent trend for securities from the green energy sector. The euphoria that still prevailed at the start of the year has vanished, with few shares escaping unscathed in the last few months. Alongside profit-taking, two basic disruptive factors are running through the sector like a red thread: firstly, the climb in yields is heightening concerns that the investment boom for "renewables" could have come to an end. Secondly, the companies are struggling with problems in their supply chains.
The orders received by Vestas indicate that the increased financing costs have so far not put a damper on the global energy transition. On the other hand, the increasing expenses for transport and raw materials are definitely causing problems for the Danes. With that in mind, CEO Henrik Andersen recently revised the outlook for 2021 downwards. Nonetheless, the Vestas share is setting out to complete the latest consolidation. The new tracker certificate on the Swissquote Green Energy Index allows investors to bank on the sector as a whole heading upwards again. The underlying of the new participation product focuses on companies which profit from growing demand for renewable energy. In addition to photovoltaics, wind and geothermal power, the benchmark's spectrum extends to bio-fuels and other up-and-coming renewable sources. The composition is the responsibility of the experienced team of experts at Swissquote. A range of factors are applied alongside minimum requirements on share liquidity and capitalisation. Swissquote also supports the selection process with quantitative calculations. These include mean value variance portfolio optimisation.
The selection is reviewed regularly every quarter and adjusted where necessary. The index sponsor can also modify the composition ad hoc in the event of stock market listings or major news developments. The Swissquote Green Energy Index currently includes just under 30 companies (see table). It goes without saying that the fore-mentioned Vestas is one of them. As well as the Danes, their direct competitors Siemens Gamesa and Nordex have also made it through the selection process. While wind power is represented by European groups, the specialists for solar electricity are primarily based in North America. Take First Solar as an example: at the end of July, the thin-layer technology-focused module manufacturer exceeded expectations when presenting its quarterly results. Although the management had to adjust the outlook for 2021 down as a result of higher costs, the First Solar share price has risen sharply since the figures were released. The industry giant received support from Washington: according to an energy ministry analysis, photovoltaic technology could be contributing more than 40% of the US power supply by 2035. Its share at present is only just 3%. If this proportion is to be ramped up, Congress would have to give the nod to tax reliefs for renewable energy projects and the corresponding production infrastructure.
Management Fee: 1.10% p.a.
Index Sponsor: Swissquote Bank SA
Issuer: Leonteq Securities AG, Guernsey
Guarantor: PostFinance AG, Bern, Switzerland
The Swissquote Green Energy Index also reflects the growing importance of hydroelectric technology. The well-known US specialists Ballard Power Systems and Plug Power are as much a part of the starting line-up as Doosan Fuel Cell. The fuel cell of the Korean company was already being used in NASA's Apollo missions. Back on earth, almost 760 stationary Doosan plants are in operation today, most of them on the domestic market. Suppliers naturally play a key role in the global energy transition, so it is no surprise that the index contains sector representatives from across the world. They include China Longyuan Power as well as Verbund AG from Austria, which is particularly active in hydroelectric power generation, and NextEra – the Palm Beach-based US company reckons it is the world's biggest producer of wind and solar electricity. One order for the Tracker Certificate on the Swissquote Green Energy Index is sufficient to bring the both geographically and technologically diversified and skilfully composed benchmark into the portfolio. The timing for the actively managed product could be favourable, not least given the recent price correction in this sector. The Climate Change Conference taking place in Glasgow in November should also bring this exciting theme into sharper focus.
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