􀀗 The Treasury grant for wind developers
in the US should improve near-term
sentiment for the US wind market
􀀗 From an investment perspective, we
prefer the wind OEMs to the utility
developers at the moment as they are
more geared to a US market recovery
􀀗 EDF EN and Iberdrola Renovables each
have c50% of their pipelines exposed to
the US. We upgrade our target prices on
both names and reiterate our
Overweight (V) ratings
Treasury grant should improve nearterm
sentiment for US wind market
We have now seen signs of a wind industry inflexion point,
spurred by positive regulatory developments in the US
market and confirmed by an increase in new order flow over
the last couple of months, more anecdotal optimism and
visibility from OEMs, and a generally positive Q1 results
season. Furthermore, we have seen a pick-up in new
issuance for renewables companies, highlighting a return of
positive sentiment to the sector.
In this report, we evaluate in detail the three US subsidies
(the Investment Tax Credit (ITC), the Production Tax Credit
(PTC) and Treasury grant) currently available to a US wind
farm developer and assess their impact on the market. In our
view, the Treasury grant should improve near-term
sentiment for the US wind market and should help stimulate
a V-shaped recovery. We expect further positive 2009
legislative changes in the US in the form of Federal “RES”.
From an investment perspective, we now favour the quality
OEM names, Vestas and Gamesa, as they are more highly
geared to a US market recovery and offer the greatest
potential returns among our universe. Until recently, we had
a defensive preference for the utility wind farm developers;
however, we would still own the quality names, such as EDF
EN and Iberdrola Renovables, both of which have c50% of
their pipeline in the US. We upgrade our target price for
EDF EN to EUR40 from EUR35 and for Iberdrola
Renovables to EUR4.20 from EUR3.65 and maintain our
Overweight (V) rating on both stocks.