The Environment, Social, and Governance investment theme – also known as ESG investing – is anticipated to power as much as $67 trillion in investment flows over the next decade, according to research from Morgan Stanley. This estimate is driven by what may be the most significant long-term force driving finance over the next ten years: inheritance. Capital is to be passed from baby boomers to millennials, with an associated shift in sensibilities and thematic focus.
Similarly, Bank of America also recently said it believes more than a third of all investment flows will be targeted toward sustainable energy investments over coming years.
All of that forms the backdrop for this week’s “COP26” conference – the United Nations Climate Change ‘Conference of the Parties’ 26th annual summit. But this time around, it is finally turning out to be a major market mover.
As world leaders meet in Glasgow, Scotland, markets are reacting to clues about new regulatory standards and assignment of government goals and capital flows. The focus is broadly on steering the world toward a net-zero carbon path. But much of this will boil down to various strategies to drive investments in sustainable energy protocols. That suggests the biggest beneficiaries will be stocks aligned with this theme.
With that in mind, we take a look at some of the most compelling opportunities in the sustainable energy space.
NextEra Energy Inc. (NYSE:NEE) operates through the following segments: FPL & NEER. The FPL segment engages primarily in the generation, transmission, distribution, and sale of electric energy in Florida.
The NEER segment produces electricity from clean and renewable sources, including wind and solar. It provides full energy and capacity requirements services; engages in power and gas marketing and trading activities; participates in natural gas production and pipeline infrastructure development; and owns a retail electricity provider.
NextEra Energy Inc. (NYSE:NEE) recently announced that it has been awarded the Wolf Creek-Blackberry transmission line project by the Southwest Power Pool (SPP). According to the release, the SPP Board of Directors approved an industry expert panel (IEP) recommendation for NextEra Energy Transmission Southwest, LLC to build the Wolf Creek-Blackberry project. The IEP evaluated this project through its competitive transmission owner selection process, which is required under the Federal Energy Regulatory Commission’s (FERC) Order No. 1000 for certain transmission projects.
“We are pleased to have been awarded the Wolf Creek-Blackberry project by SPP,” said Eric Gleason, president of NextEra Energy Transmission. “This project award furthers our goal of creating America’s leading competitive transmission company and is consistent with our strategy of adding high-quality regulated assets to our portfolio.”
It will be interesting to see if the stock can break out of its recent sideways action. Over the past week, the stock is net flat, and looking for something new to spark things.
NextEra Energy Inc. (NYSE:NEE) managed to rope in revenues totaling $6.8B in overall sales during the company’s most recently reported quarterly financial data — a figure that represents a rate of top line growth of 29.3%, as compared to year-ago data in comparable terms. In addition, the company is battling some balance sheet hurdles, with cash levels struggling to keep up with current liabilities ($1B against $20.5B, respectively).
Houston Natural Resources Corp. (OTC US:HNRC) is an interesting potentially undervalued story on the OTC in the sustainable energy space that seeks to drive shareholder value through developing natural resources with state-of-the-art innovative technologies in tandem with sustainable toxic oil field waste disposal and recycling services that are environmentally safe and socially responsible. The company also recently noted that it is preparing an SEC filing to become an SEC reporting company and plans on uplisting onto OTCQX or major exchange.
The company owns 100% of the shares of its subsidiary, HNR Oil Services LLC, a Texas limited liability company, specializing in recycling and remediation of oil produced contaminates. HNR owns and operates a licensed reclamation plant strategically located in South Texas. Through this subsidiary, the company is responsible for collecting fluids from third-party operators and disposing of the fluids in the company owned disposal well and, ultimately, for remediating oil field waste solids at its treatment facility, which is designed specifically for maximining environmental protection for the oil producer, generating multiple streams of revenue for HNR Oil Services, and exceeding all state and federal regulatory requirements.
Houston Natural Resources Corp. (OTC US:HNRC) recently announced that it expects to report strong results for the quarter ending September 30, 2021. According to its release, the company’s net assets have increased by more than 100% to $73,446,688 over the last three years. The company’s net asset value is $4.76 per share for the period ending June 30, 2021. The company intends to continue to acquire additional assets over the next three years.
The company also noted that its revenues have increased by more than 150% to $7,614,534 over the last six months on a year-over-year basis, and net income has jumped over the same period by more than 250% to top $4 million.
In addition, the Company added that its subsidiary, Houston Natural Resources, Inc (“HNRI”), has built up to an independently appraised value of $69,000,000 in proven reserves that are valued at $4.47 per share. HNRI has acquired approximately 2,800 acres of oil and gas leases located in the Halff Oil Field in Crockett County, Texas. HNRI is currently reviewing possible acquisitions of producing oil and gas properties in addition to operating its water treatment facilities operated by its subsidiary HNR Oil Services, LLC. The company has taken delivery of new equipment to double capacity in the fourth quarter at the water treatment facility. HNR Oil Services LLC, has independently appraised value of $7,600,000 in equipment and permits that are valued a $0.49 per share.
Houston Natural Resources Corp. (OTC US:HNRC) further states that it intends to focus on realizing the value on the total of $9.67 per share in assets held by its subsidiaries for the benefit of its shareholders. To accomplish this, its strategy may include asset sales, a spin-off of one or more of its subsidiaries, and dividend distributions to its shareholders. HNRC trades on a tiny float of just over 100k shares according to OTCmarkets.com, which suggests a squeeze is always around the corner. The stock has been holding key support in the $0.50-0.60 per share area after pulling back from the $2 area over the summer. Given the spotlight on sustainable energy stocks right now, this is one to have on the radar. If the crowd spots it, there could be fireworks ahead.
Vertex Energy Inc. (Nasdaq:VTNR) engages in the recycle of industrial waste streams and off-specification commercial chemical products. The firm focuses on the recycle of used motor oil and other petroleum by-products. It operates through the following segments: Black Oil, Refining and Marketing and Recovery.
The Black Oil segment collects and purchases used motor oil from third-party generators, established network of local and regional collectors and sells used motor oil to customers for use as a feedstock or replacement fuel for industrial burners. The Refining and Marketing segment manages the re-refinement of used motor oil and other petroleum by-products and sells the re-refined products to end customers. The Recovery segment includes a generator solutions company for the proper recovery and management of hydrocarbon streams as well as metals.
Vertex Energy Inc. (Nasdaq:VTNR) recently provided an update on the proposed acquisition of the Mobile refinery (“Mobile”) located in Mobile, Alabama from Equilon Enterprises LLC d/b/a Shell Oil Products US, Shell Oil Company and Shell Chemical LP (“Shell”), subsidiaries of Royal Dutch Shell plc.
According to the company’s release, the planned transition of commercial operations from Shell to Vertex remains on-schedule. The transaction is currently expected to close during the first quarter 2022, subject to regulatory clearance, financing, and various closing conditions.
And the stock has been acting well over recent days, up something like 17% in that time.
Vertex Energy Inc. (Nasdaq:VTNR) managed to rope in revenues totaling $65.2M in overall sales during the company’s most recently reported quarterly financial data — a figure that represents a rate of top line growth of 205%, as compared to year-ago data in comparable terms. In addition, the company is battling some balance sheet hurdles, with cash levels struggling to keep up with current liabilities ($15.1M against $31M, respectively).
Other key plays in the sustainability space include Stem Inc. (NYSE:STEM), GFL Environmental Inc. (NYSE:GFL), Clean Harbors Inc. (NYSE:CLH), and Clean Energy Fuels Corp. (Nasdaq:CLNE).
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