The New Green Energy Giants Challenging Exxon and BP

By Katherine Blunt and Sarah McFarlane | for Wall Street Journal

Three utilities that invested early in wind and solar power now rival major oil companies in market value. Can they continue to dominate as the world’s shift to renewable energy accelerates?

A decade ago, NextEra, Iberdrola IBDRY 0.33% and Enel ENEL 0.91% were sleepy regional utilities with little name recognition.

Now they are fast-growing giants with market values rivaling the likes of oil majors Exxon Mobil Corp. XOM -3.25% and BP BP -2.88% PLC, thanks to their early all-in bets on wind and solar farms.

And still, many people have never heard of them.

Their early lead in the global transition away from oil has put these companies on track to become the major energy companies of the coming decades—the “green energy majors.” But they now face the threat of increased competition as some of the oil titans that have traditionally dominated the energy industry diversify into wind and solar power.

If the green majors are nervous about a coming clash, they aren’t showing it. NextEra Energy Inc. NEE -0.15% Chief Executive James Robo dismissed the idea that oil majors in the U.S. and Europe posed a competitive threat at an investor conference this fall, saying that the companies’ green projects were among the worst he had seen.

“I don’t worry about the oil majors at all,” he told the audience. “If I have 100 things I worry about at night, it’s not even on the top 100.” Mr. Robo declined to be interviewed.

For now, NextEra, Enel SpA, and Iberdrola SA are Wall Street darlings, after Spain’s Iberdrola and Italy’s Enel became global builders of green energy projects, while NextEra became America’s largest generator of wind and solar power.

Sand is screened during construction to expand the Beinn an Tuirc Windfarm on the Kintyre peninsula in Scotland. Iberdrola is the world’s second-largest renewable energy generator outside of China.

Each of the companies has seen its share price soar in recent months as investors bet on their ability to lead the transition to a lower-carbon future with massive investments in renewable energy, battery storage, and improvements to the electric grid.

That transition is expected to accelerate in the U.S. under President-elect Joe Biden, who has promised to focus on climate change, and within the European Union and China, where ambitious carbon-reduction efforts are underway.

Enel and Iberdrola have outlined plans to substantially expand their portfolios of renewable energy projects over the next decade with about $170 billion in collective investments. NextEra, which hasn’t disclosed a long-term spending plan, expects to have invested $60 billion in renewable energy projects between 2019 and 2022.

Still, analysts caution that increased competition within the renewables industry could reduce profit margins for the most established players.

“Oil companies entering the renewables market will need to accept lower returns on projects initially to gain market share, and this is going to result in a reduction in margins across the board,” said Fernando Garcia of RBC Capital Markets.

Already, Denmark’s Ørsted A/S, a company formerly known as DONG Energy that focused on oil and gas, has transitioned into a leading player in offshore wind projects. BP is planning a big shift too: It says it will increase its clean-energy investments in the coming years as it dramatically scales back oil and gas production.

However, the coronavirus pandemic has decimated demand for fossil fuels this year, briefly turning U.S. crude prices negative and forcing the oil industry to lay off thousands of workers and slash spending. That has sapped the oil giants of much of their financial strength, making it harder for them to quickly transition into renewables projects, which require large upfront investment in order to reap steady returns over a longer period.

Content in the public domain and is for general information purposes only, with no representation, guarantees of completeness, warranty of any kind, express or implied regarding the accuracy, adequacy, validity, availability, completeness, usefulness or timeliness of any information contained within. Please also excuse any syntax as authors and reposted articles are sourced from global origins. UNDER NO CIRCUMSTANCE SHALL WE HAVE LIABILITY TO YOU FOR ANY LOSS OR DAMAGE OF ANY KIND INCURRED AS A RESULT OF THE USE OF THIS REPOSTED ARTICLE. THE USE OF THIS ARTICLE AND YOUR RELIANCE ON ANY INFORMATION CONTAINED HEREIN IS SOLELY AT YOUR OWN RISK. VANADIUMCORP ALSO ASSUMES NO RESPONSIBILITY OR LIABILITY FOR ANY ERRORS OR OMISSIONS IN THE CONTENT OF THIS ARTICLE.

Continue reading the full story here >>