Why are renewable energy stocks shining bright?
Finance
Bedlam broke loose as gas prices soared and the scarcity of coal made headlines.
Amidst this scene of chaos emerged the news of Reliance’s plan to acquire a 40% stake in Sterling and Wilson Solar Ltd.
This heralds the fact that RIL has made it to the foyer of the world of Renewable Energy.
Understanding renewable energy
The energy that comes from natural sources or from processes that are constantly being replenished is deemed renewable. For instance, sunlight is not going anywhere nor is wind. Energy derived from these sources offers lower emissions of carbon and other pollutants.
But unfortunately, over the past 500 years or so, humans increasingly turned to cheaper, dirtier energy sources such as coal and fracked gas.
Renewable energy in India
The National Solar Mission launched in January 2010 took the first steps towards formally tapping into naturally abundant solar energy.
This has been revised twice and they finally settled on a target of 100 GW of solar photovoltaic (PV) by 2022.
Some other schemes:
Sources: www.iea.org, mnre.gov.in
India’s global stand
In the 58th edition of EY’s ‘Renewable Energy Country Attractiveness Index' (RECAI), which ranks the world's top 40 markets (nations) on the attractiveness of their renewable energy investment and deployment opportunities, India retained the third position.
A new Power Purchase Agreement (PPA) Index - introduced in this edition of RECAI - focuses on the attractiveness of renewable power procurement and ranks the growth potential of a nation's corporate PPA market. India is ranked sixth among the top 30 PPA markets.
United nations and sustainable development goals
All member nations in 2015 adopted the 17 Sustainable Development Goals as (SDGs) a part of the 2030 agenda. SDG 7 focuses on, ‘Affordable and Clean Energy’.
India’s rank slipped two spots to 117 this year primarily because of challenges like ending hunger and achieving food security (SDG 2), achieving gender equality (SDG 5) and building resilient infrastructure, promoting inclusive and sustainable industrialisation and fostering innovation (SDG 9).
The solar reliance
On Sunday, October 10, Reliance New Energy Solar Ltd (RNESL) a wholly-owned subsidiary of Reliance Industries Ltd (Reliance) executed definitive agreements with Shapoorji Pallonji and Company Private Ltd (SPCPL), Khurshed Daruvala and Sterling and Wilson Solar Ltd(SWSL) to acquire 40% stake post-money in SWSL through a series of transactions.
The deal size is being estimated to be INR 2,845 Cr.
RNESL has also acquired a 100% stake in China's REC Solar Holdings for a value of USD 771M.
About Sterling and Wilson solar
When the legendary friendship between Shapoorji Mistry Sr and Mehervan Daruvala evolved into a business partnership, Sterling & Wilson Private Ltd was born.
The solar EPC division of the company, Sterling & Wilson Solar commenced operations in 2011 and was demerged in 2017. They are now the leading solar EPC solutions provider in the world with a presence in 24 countries.
They have already executed 11-plus GW of solar turnkey projects across the globe.
A brief about financials
As of June 2021, the company reported an EBIT of INR -74.22 Cr and a basic EPS of -4.75. The current PE Ratio is -24.64 but the sector PE is at 65.36.
The financials are particularly not impressive but the PE ratio has a vast ground to cover. Green stocks are a charm these days and in line with the sentiment, the shares of SWSL rose 13% post-RIL’s acquisition news broke out.
Author’s opinion: Way ahead
The age-old pandemic no one really talks about happens to be that of energy crisis and climate change.
Depleting repositories of fossil fuel, the rise in global temperatures and the shifting back of Earth Overshoot Day with each passing year has engraved a question mark upon the future of humanity. Considering the global initiatives one may invest in green ventures with a long-term outlook.
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