The Australian longer term investor’s search for yield has not abated in early 2015. Indeed, on stock market performance to date, it has intensified. Yesterday’s rate cut from the RBA is only one accommodative move in a long line of global monetary policy easing, from increased Japanese stimulus to the ECB’s “shock and awe” QE and on to rate cuts in China and in many commodity-exporting countries.
Having long been considered a possible takeover target renewable energy group Energy Developments (ENE) may have initiated the process by declaring it would commence a strategic review that may result in some or all of the company being sold off.
Around this time last year there was a real focus in Australia and around the globe on the issue of greenhouse gas emissions. The Howard government was refusing to sign the Kyoto agreement, but had commissioned a report on a potential national carbon trading scheme. As the task force included only the country’s heaviest polluters, and no environmentalists, it was seen as a farce. But at the same time a bloke by the name of Kevin Rudd was beginning to soar in popularity, and he was talking tough on Kyoto, emission reductions and trading schemes. It just might be that he could win the election.
The broker has lifted its FY16 earnings forecasts for Energy Developments by 13% on the forecast of a $50 REC price and expectations of higher Qld pool price assumptions. The broker believes the company will continue to be successful with renewal of its waste gas and remote area electricity portfolio, albeit mining companies are eager to reduce costs.
Renewable Energy Contract pricing has continued to rise well above Energy Developments’ and the broker’s forecast. The deferral of some anticipated mines closures is also a positive, the broker notes, and there is upside if the South32 contract is also deferred.
Energy Developments has lifted FY15 guidance to $205-210m from $192-202m thanks to a strong performance from recently acquired Envirogen, Qld electricity pricing and higher renewable certificate prices.