Bruce Jefferson
3
All posts from Bruce Jefferson
Bruce Jefferson in Commodities,

How Renewable Energy Stocks Would Fare Under A Trump Administration

Citi expects 10 percent upside in shares of independent power producers (IPPs) if Donald Trump wins the presidential election. This implies a Trump presidency would be a negative for renewable energystocks, at least in the near term.

A Trump Presidency

Tina Fordham, Citi's political strategist, still believes Hillary Clinton will win, but the probability of victory has decreased from 75 percent to 60 percent. This implies a “non-negligible” risk of a Trump victory.

Trump has expressed skepticism on global warming and support for fossil generation, and his potential presidency could slow down the pace of renewable engine growth.

Renewables

“While we don’t think he can reverse the trend of increasing renewables or the challenges for coal, he surely could slow down renewables penetration. Any slowdown in renewable will likely extend the economic asset life of IPPs’ existing asset bases,” analyst Praful Mehta wrote in a note.

Assuming about a five-year increase in asset life, Mehta’s target prices for Calpine Corporation , Dynegy Inc.  and NRG Energy Inc  would increase by 10.5 percent, 38 percent and 9 percent, respectively.

The base price targets for these stocks are $19, 13 and $11, respectively. The estimated increase could boost their target prices to $21, $18 and $12, respectively.

Solar And Wind

According to the EIA, without implementation of the Clean Power Plan (CPP), solar and wind capacity development could be 26 percent and 15 percent lower by 2040 versus the base case. In other words, base solar and wind capacity could increase to 156GW and 146GW. Without implementation of CPP, solar and wind capacity could increase to only 115GW and 124GW, respectively, by 2040.

Coal

Trump wants to revive the coal industry for which he would need to overturn the EPA’s Mercury and Air Toxics Standards (MATS) rule, which led to the closure of 50 GW of coal-based power plants since 2011.

Although a Trump win can't bring these plants back, he may oppose subsidies for renewable energy, effectively slowing the pace of renewable growth. However, it would be tough for Trump to stall the billions of renewable energy projects that are underway across the United States, thanks to the extended tax credits for solar and wind energy projects in late 2015.

Potential Stocks Under Pressure

Nevertheless, a potential Trump presidency would pressure stocks such as Tesla Motors Inc , First Solar, Inc. , Canadian Solar Inc.  and Sunrun Inc .

There also some lesser known clean energy stocks that may witness downward movement on potential Trump win on negative sentiment. They include Pattern Energy Group Inc ,Enviva Partners LP , TerraForm Global Inc , Renewable Energy Group Inc  and Ameresco Inc .

But, If Trump Loses

On the other hand, if Clinton wins, it could boost renewable energy stocks. Clinton targets to generate enough renewable energy to power every home in America within a decade and for 25 million homes to have rooftop solar by 2020.

Image Credit: By Gage Skidmore from Peoria, AZ, United States of America (Donald Trump) [CC BY-SA 2.0], via Wikimedia Commons

Latest Ratings for AMRC

DateFirmActionFromTo
Oct 2015OppenheimerAssumesOutperform
Jan 2015Northland SecuritiesInitiates Coverage onOutperform
May 2014Canaccord GenuityMaintainsBuy

View More Analyst Ratings for AMRC
View the Latest Analyst Ratings