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Surging Canadian Renewables Stocks Deliver ‘Pleasant Side Benefit’ to Ethical Investors

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Shares in three Canadian renewable energy companies surged in 2019, producing a “pleasant side benefit” to investors who may have signed on for the good of the planet by “delivering gains that mock the fossil fuel-clinging political leadership in Washington,” the Globe and Mail reported in mid-December.

Northland Power Inc., which operates solar and wind farms in Canada and Europe, saw its share prices rise 27%, the Globe said [1]. Algonquin Power & Utilities Corporation, which owns wind, solar, and hydro facilities in Canada and the U.S., increased 34%. And global hydro, wind, and solar investor Brookfield Renewable Partners LP soared by nearly 72%.

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“Not bad for utilities, and these returns don’t include the stocks’ impressive dividends,” wrote investment reporter David Berman. “The gains have easily beaten the broad S&P/TSX Composite Index, which is up 18.7% [in 2019]. And consider that the fossil fuel-heavy S&P/TSX Energy Index trails with gains of just 12.6%.”

The Globe attributed the gains to several factors: a general investor interest in “defensive utilities”, including green ones, growing emphasis on socially responsible investing, and the reality that “renewable energy capacity is rising at a brisk clip, even with a climate change skeptic in the White House.”

The U.S. Energy Information Administration expects non-hydro renewables to supply 12% of the country’s utility-scale electricity in 2020, up from 9% in 2018, and “the EIA’s longer-term forecast looks even better,” the paper adds. “By 2050, total renewable energy generation (including hydro) will account for 31% of the grid, up from 18% in 2018, as the importance of coal and nuclear energy decline. A U.S. president with a more favourable disposition toward wind and solar could raise these estimates.”

Moreover, “the cost of renewables has come down substantially over the past five to 10 years, to the point where they are competitive even without subsidies,” Chris Namovicz, EIA’s renewable electricity analysis team leader, told Berman.

The companies on Berman’s list are seizing that moment. Algonquin Power is planning to increase its renewable energy capacity 68% over the next five years, with US$2.5-billion in investments across a project list that includes wind farms in Texas and Illinois. Brookfield saw its available cash flow increase 25.5% last year, and is restructuring to make its shares more widely available.

The Globe report includes analysts’ views on the ups and downs of the three stocks.