Over the prior week the Eagle Global Renewables Infrastructure Index (RENEW) returned (3.38%), underperforming the S&P 500 by 117 basis points and the S&P Global Clean Energy Index by 81 basis points. The Eagle North American Renewables Infrastructure Index (RENEWNA) returned (2.64%), slightly underperforming the S&P 500 by 43 basis points though in line with the S&P Global Clean Energy Index.
Source: Bloomberg. *Please review disclosure information at the end of this post.
Macro Mash Up
U.S. Legislative Stalemate. Progressive and moderate Democrats in the U.S. Congress are at a stalemate regarding the $1.2 Trillion bipartisan infrastructure bill (“Infrastructure Investment and Jobs Act”) and the $3.5 Trillion Reconciliation bill that targets climate change, family aid, Medicare expansion, and more. At the forefront is the high cumulative cost of the bills as concerns over inflation builds. If passed as is, the Reconciliation bill’s climate change initiatives could potentially reshape economic development while more aggressively combating climate change.
Japanese election results. Fumio Kishida won the race to lead Japan’s ruling party and become the country’s next prime minister, outpacing top contender Taro Kono. Taro Kono was widely seen as the most ambitious environmentalist among the contenders, who if elected would have pushed hard for a quicker conversion to renewable energy.
Global Energy Crisis. Energy prices continue to move higher across the globe as the economy recovers from the Covid-19 pandemic. Brent oil prices are trading above $80/barrel, natural gas prices are similarly high as storage is dangerously low before the start of the cold weather (winter) drawdown, and even coal has seen a rebirth as electricity shortages have driven the re-opening of coal power plants across the world. There appears to be no end in sight as well, as several experts published reports stating conditions were ripe for higher energy prices for at least the next 6 months. Leaders from the E.U.’s 27 member countries are expected to discuss surging energy prices when they meet next on October 21-22.
Renewables Roundup
AES Corp (AES). Fluence Energy filed with the SEC its plans for an initial public offering. Fluence is an energy storage venture between AES and Germany’s Siemens AG that was launched in January 2018. Energy storage is a critical component of the energy transition as it will help improve the reliability of renewable energy sources.
Eversource Energy (ES). The company announced a settlement with key parties regarding its interim rate case proceeding in Connecticut, a constructive settlement that provides savings to customers while maintaining its current allowed return on equity and equity ratio. These terms, if approved by the state’s regulatory agency, would be in place until January 2024. We believe Eversource has among the more compelling renewable energy growth stories in the U.S., which with this rate case behind them will come more into focus for investors.
SSE Plc (SSE LN, ADR: SSEZY). The U.K. and Ireland based company reaffirmed its strategic focus on renewable and net zero opportunities, and separately announced its entry into the Japanese offshore wind market through a new joint venture with Japanese renewable developer Pacifico Energy. SSE also reiterated its confidence in full year financial expectations despite market volatility and unfavorable weather conditions that has driven an 11% shortfall on its forecast for total output.
Breakdown: RENEW Index
Source: Bloomberg
Breakdown: RENEWNA Index
Source: Bloomberg
*No Warranties. The accuracy and/or completeness of any Eagle Global Advisors index, any data included therein, or any data from which it is based is not guaranteed by Eagle Global Advisors, and it shall have no liability for any errors, omissions, or interruptions therein. Eagle Global Advisors makes no warranties, express or implied, as to results to be obtained from use of information provided by Eagle Global Advisors and used in this service, and Eagle Global Advisors expressly disclaim all warranties of suitability with respect thereto.
You Must Make Your Own Investment Decision. It is not possible to invest directly in an index. Index performance does not reflect the deduction of any fees or expenses. Past performance is not a guarantee of future returns. You should not make a decision to invest in any investment fund or other vehicle based on the statements set forth in this document, and are advised to make an investment in any investment fund or other vehicle only after carefully evaluating the risks associated with investment in the investment fund, as detailed in the offering memorandum or similar document prepared by or on behalf of the issuer. This document does not contain, and does not purport to contain, the level of detail necessary to give sufficient basis to an investment decision. The addition, removal, or inclusion of a security in any Eagle Global Advisors index is not a recommendation to buy, sell, or hold that security, nor is it investment advice.