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The whole world is on a decarbonization mission amid rising climate change concerns. In fact, the International Energy Agency (IEA) estimates that this year will bring $1.7 trillion worth of investments in deploying renewable energy and other clean-energy technologies—a new all-time high that follows six straight years of increases.
Experts have, however, warned that decarbonization will involve more than just electrifying transportation and using more solar and wind-generated energy. It will also take sustainable agricultural practices, low-carbon manufacturing, green construction and other climate-friendly solutions.
This has resulted in a surge of deal-making, as illustrated by the fact that venture capital decarbonisation-related deal value topped $433 billion in 2023, according to GlobalData Net Zero by 2050 report. In addition to that, a number of global funds have shown their overwhelming support for the trend. For instance, the Arab Energy Fund has said it plans to invest up to $1 billion over the next five years in decarbonisation technologies in the Middle East and North Africa
For a long time, the only way for investors to get exposure to the decarbonization opportunity was through pure-play industrial carbon capture companies, mostly done in private markets, meaning everyday investors are completely shut out. However, we have identified four companies that could provide an alternative way of playing the increasing decarbonization momentum.
As mentioned earlier, one crucial part of the effort to achieve net-zero emissions in addition to carbon reduction strategies is the transition to electric vehicles (EVs), which is where VivoPower International PLC (NASDAQ:VVPR) comes in.
VVPR’s flagship subsidiary, Tembo, supplies conversion kits containing all the parts needed to convert a vehicle from an internal combustion engine (ICE) to an electric vehicle (EV). These parts include the batteries, an e-motor, a reduction box, a charger, software, and many other components that make the converted vehicle work safely and seamlessly.
Over the past year or so, the EV specialist has been one of the major beneficiaries of the EV transition, especially outside the US. Tembo’s conversion kits have seen significant interest from the market, as illustrated by the company securing a commitment of 5000+ kits and an order pipeline of 10,000+ in the first half of 2023. Those included an MOU in Jordan for 1,000 kits, opening a path to the Middle East, which is the largest Landcruiser market, and a definitive agreement in Kenya for 4,000 kits, providing entry into second-hand vehicle segments, which expands the addressable market considerably.
That early success in those markets has validated Tembo’s conversion kits as a viable solution to help in the decarbonization process, and investors are taking notice. VivoPower International PLC (NASDAQ:VVPR) recently announced that Tembo had met all the milestones to obtain the final follow-on strategic direct equity investment pursuant to a commitment received in June 2023 from a UAE-based private investment office backed by a member of the ruling Al Maktoum family of Dubai. Under the agreement terms, the investor had the option to increase their cumulative investment in subsequent closings up to $10 million based on milestones that have now all been met. The follow-on financing values Tembo at $120 million, which means the value per share of VVPR should be approximately $40 per share.
VivoPower International PLC (NASDAQ:VVPR) will continue to retain its majority stake in Tembo, which appears to be on track to unlocking even more shareholder value. Tembo recently announced it would be going public via a merger with Cactus Acquisition Corp. (CCTS), a NASDAQ-listed SPAC, at an indicative pre-money equity valuation of $838 million. Here’s a quick breakdown of the deal:
VivoPower shareholders get 5 Tembo shares worth $10 each for every share held.
Tembo will issue a special dividend of $1 per share, which would translate to an additional $5 per share held for VivoPower shareholders.
Even if the Tembo share price upon IPO is only $1, this implies a per-share valuation for VVPR of $25, including the value of dividend shares.
At the same time, the company has announced that its board has authorized a capital management strategy, including a stock buyback program, that will allow the company to purchase up to $5 million of its outstanding shares. These share buybacks will be funded using the company’s proceeds from the realization of business and asset divestitures, including spin-offs like the Caret business unit’s portfolio.
VivoPower International PLC (NASDAQ:VVPR) stock has performed exceptionally considering that over the past week alone, shares of the sustainable energy solutions company have created new 52-week highs and made investors triple-digit returns.
Array Technologies (NASDAQ:ARRY) enables renewable energy companies to harness the sun’s power with patented trackers that drive multiple rows of solar panels and track the sun’s rays for efficient energy generation throughout the day. Though it may sound like a niche product, it has a large addressable market, as illustrated by the fact that tracker demand is growing 30%–40% faster than the rest of the solar industry, according to the company’s November 2023 investor presentation.
One of the key metrics for the company’s business is the levelized cost of energy (LCOE), and Array claims to deliver the lowest LCOE for its customer base over an expected 30-year life. Another aspect that makes ARRY appealing from an investor viewpoint is that the company looks set to receive a lot of support from the Inflation Reduction Act since almost all of its materials are domestically sourced.
Furthermore, the company is also growing its international presence, as shown by its recent partnerships with companies like Aluminum Products Company to support the increasing market for the renewable energy sector in the Middle East.
According to its most recent filings, Array Technologies. generated $1.57 billion in revenue in FY 2023, while adjusted earnings per share for the full year came in at $1.13, almost five times higher than the $0.26 per share it reported in 2022.
Enlight Renewable Energy (NASDAQ:ENLT) is an independent power producer (IPP) that builds and develops solar and wind power facilities worldwide. While most of its current plants are in Israel and Europe, the company also has several projects nearing completion in the US. According to its filings, the company has a gross installed capacity of 1883 MW, with a pipeline expected to further install 618 MW and 1500 MWh of capacity by the end of 2025.
The company recently reported Q3 2023 earnings, revealing that its revenues grew by 3% YoY, reaching $58 million, fueled by new projects and inflation indexation in PPAs. During the period, the company's net income increased by 35% to $26 million, primarily due to a non-cash benefit of $8 million from the mark-to-market of interest rate hedges related to the Atrisco project.
The company’s renewable energy projects have gained solid momentum across Europe, with the company revealing that the European Bank for Reconstruction and Development (EBRD), together with Erste Group Bank AG and its local bank Erste Bank a.d. Novi Sad (Erste), have approved a financing package worth $101 million for the construction of a new windfarm in Serbia.
The EBRD and Erste will provide parallel loans worth $50.5 million each, including the associated debt service reserve facilities that Enlight will use to develop, construct, and operate the 94-megawatt (MW) windfarm. This project was financed under Serbia’s first renewable energy auction for wind capacity, which took place in 2023, and once commissioned, the Pupin windfarm will be able to supply clean, green electricity to more than 40,000 households.
SolarMax Technology, Inc. (NASDAQ:SMXT), through its subsidiaries, operates as an integrated solar energy company in the United States and China. The company's US operations primarily consist of the sale and installation of photovoltaic and battery backup systems for residential and commercial customers and the sale of LED systems and services to government and commercial users, while its China operations mainly consist of identifying and procuring solar farm projects for resale to third parties and performing EPC services primarily for solar farm projects.
Last month, the company announced the closing of its initial public offering of 4.5 million shares of common stock at an initial public offering price of $4 per share, raising gross proceeds of $18 million.
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