Bloomberg News

Plummeting Clean-Energy Shares Exaggerate Risk, BNP Paribas Says

November 07, 2011

Nov. 4 (Bloomberg) -- The performance of clean energy stocks, which have plummeted 41 percent this year, exaggerates the risks of an industry that is more likely to reward investors amid an increasingly volatile global economic climate, BNP Paribas SA said.

“There’s a perception at the moment that listed equities in the clean energy space are highly volatile,” said Peter Dickson, technical director at BNP Paribas Clean Energy Partners, which invests in renewable energy power projects in Europe. “That’s overlooking a trend that’s very secure and very robust.”

The S&P Global Clean Energy Index, comprised of 30 companies including the world’s biggest solar panel and wind turbine makers, has lost 35 percent since Aug. 1 amid concerns that Europe’s worsening debt crisis could stall projects. Customers can’t get loans to start new plants, Renewable Energy Corp. and Canadian Solar Inc., two of the world’s biggest solar panel suppliers, said this week.

“Returns in conventional energy projects have now become commoditized,” said Mumtaz Khan, chief executive officer of Maybank MEACP Pte., which has raised $150 million from investors including the Asian Development Bank for clean power projects and plans to raise an additional $350 million by the end of 2012.

“If you’re lucky, you can get 11 percent in an oil or gas project in the Middle East,” Khan said. “In comparison, a biomass project in the Philippines could get you above 20 percent.”

Asia to Benefit

Contrary to most perceptions, “government policy is exactly what makes alternative energy a more certain investment,” Dickson said. State subsidies, including preferential rates paid for clean power known as feed-in tariffs, are backed by laws that give projects predictable, stable cash flows for up to 20 years, he said.

Europe’s sovereign debt crisis won’t change that even with steps taken by governments in Spain, the Czech Republic, the U.K. and Germany to roll back subsidies to control the industry’s growth and state expenditure, he said.

“There are cyclical trends but the underlying growth of renewable energy has been very constant,” Dickson said.

Even with the financial crisis in 2008, the clean energy industry attracted a record investment of $243 billion in 2010, topping investments in conventional power projects for the first time, according to Michael Liebreich, chief executive officer of Bloomberg New Energy Finance.

The clean energy industry in Asia may benefit as European investors seek growth outside of the zone, Khan and Dickson said. Fast-growing Asian economies see wind, solar, geothermal and biomass power as a way of reducing their dependence on fossil fuel imports and as a “stable, non-correlated price of energy which is a hedge against international power prices,” said Dickson.

“In a very uncertain world where there are very few asset classes that are performing, alternative energy is a growth market that is going to remain very stable.” Dickson and Khan spoke in interviews at the Clean Energy Expo Asia in Singapore.

--Editors: Baldave Singh, John Chacko

To contact the reporter on this story: Natalie Obiko Pearson in Mumbai at npearson7@bloomberg.net.

To contact the editor responsible for this story: Reed Landberg at landberg@bloomberg.net.


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