Green chips refer to environmentally friendly stocks and they are gaining in popularity. With the government having an expanded renewable energy target of 20% by 2020, how can you know which companies will turn out to be the winners?
Renewable energy refers generally to:
When looking at investing in these companies, it's important to separate the developing technologies from companies still making money. Any company developing something new needs to have a few questions thrown at them including:
An example of a company that is already fairly well developed and making money is Infigen Energy. This company owns wind assets in Asia, Europe and North America. It's been looking to sell its assets in the US, Germany and France to increase growth in Australia.
The Rudd Government's emission trading targets means that Infigen sees more growth in Australia than these other markets.
Then on the other end of the spectrum are companies which are testing new technologies. Recently the government gave $235 million towards developing these technologies.
Four companies received these funds:
Geodynamics is focused on geothermal technology. It's developing its proof of concept project at Cooper Basin which has the hottest known rocks of its type in the world.
The company believes that Copper Basin will be the lowest-cost renewable resource source in Australia. It's received $90 million from the Federal Government which it hopes will lead to commercial expansion of the Cooper Basin.
Petratherm is another geothermal company with projects in Australia as well as overseas. Recently, the company entered into an agreement with four Chinese institutions to identify potential geothermal projects in China.
It will be using the funding from the Federal Government to develop a geothermal system in South Australia.
Victoria Wave Partners is another company with an association to big names. It's a partnership between Leighton Contractors and Ocean Power Technologies. As the name suggests, the company is looking to harness energy.
Hydro Tasmania is the only company not listed on the sharemarket. This company is looking to demonstrate the integration of wind, solar and storage with a biodiesel generator.
And then there are companies such as Origin Energy which have had a good track record of recognising new energies and investing in them. It's involved in a joint venture with Geodynamics to bring their energy to market.
All in all, it looks like renewable energy is set to be an exciting area. Like any developing industry, there will be leaders and there will be companies left by the wayside.
The excitement of investing in an emerging industry is the potential for 'blue sky' returns but the risks are many and plenty too.
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Happy investing!
Julia Lee Equities Analyst Bell Direct
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