The US is the third-largest producer of hydropower in the world after China and Brazil, with total hydropower installed capacity of almost 103,000 MW. In fact, hydropower accounts for about 52% of the country’s total power generation.
Analysts predict that hydroelectric stock valuations are likely to increase because of the rising demand for clean energy. As the US government limits carbon emissions and the demand for sustainable energy sources grows, the valuation for hydro-power stocks foresees consistent growth. The market for hydro stocks is predicted to reach a whopping $11 trillion by 2050.
Let’s take a look at 3 stocks with considerable potential for value appreciation.
Brookfield Renewable Partners
Brookfield Renewable Partners (NYSE: BEP) has over 75% of total energy generation from 81 river systems in Canada, the U.S, Brazil, and Colombia. The company has a massive portfolio, which generated funds from operations of $125 million for Q3 2020.
The Canada-based renewable power assets operator has generated more than 90% since the start of 2020. The company predicts a $100 trillion investment opportunity in renewables over the next three decades, and the cash flow per share is expected to grow between 11% and 16% by 2025.
Considering the valuations the company is heading for in 2021, the share price is currently at a discounted price, trading at $42.80 per share.
Duke Energy (NYSE: DUK), operates a portfolio of 25 hydroelectric power assets in the Carolinas and Tennessee. It generates and distributes electricity to 7.7 million customers in six states.
The North Carolina-based hydroelectric operator posted its Q4 results for 2020, which showed a 7.15% growth in revenue at $5.78 billion. The ROI is around 4.1%, which is more than what an investor would get from an investment in an S&P 500 index fund.
The dividend paid by the company has shown a 3% growth year on year, which can be a good option for conservative dividend investors. The company’s PE ratio is 34, which is in line with the industry.
The company is expecting earnings growth of 4% to 6% a year till 2024 based on its capital spending plans.
Bloom Energy (NYSE: BE), offers fuel cells primarily in the U.S, Japan, India, and South Korea. The company’s focus as of now is to create zero-carbon energy and expand the use of hydrogen energy as a fuel. Bloom Energy’s key value proposition is lower-cost fuel cells with greater efficiency.
Hydrogen is getting a lot of policy support in Europe and East Asia, mainly Japan and Korea. Bloom Energy, being one of the largest hydro-power cell producers, has a huge scope to scale across the globe.
The California-based fuel cells producer had total revenue of $249.4 million in the fourth quarter of 2020 with an increase of 17%. The company targets a gross margin of 30% and an operating margin of 15% by 2025.