Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow
Energy consultancy Wood Mackenzie has declared the 2020s The Decade of Hydrogen, and described its reasoning in a publicly available report,
“Perhaps the most direct and tangible driver for demand is the EU’s target to deploy 40 gigawatts of electrolyzers within its own borders by 2030 and another 40 GW in neighboring countries. The plans, revealed in July, are a pretty clear signal for the whole green hydrogen value chain to get thinking on how to deliver on the infrastructure to make use of the immense production capacity implied. The ambitious plans range from exporting green hydrogen from North Africa to testing the potential for offshore floating wind turbines and electrolyzers to pump hydrogen molecules rather than electrons back to shore … Perhaps the most significant [large scale joint project] is the seven-strong Green Hydrogen Catapult formed in December. Members include giant Saudi Arabian IPP ACWA Power, offshore wind developer Ørsted, Chinese wind turbine OEM Envision and Italian gas grid firm Snam. They plan to deploy 25 gigawatts of green hydrogen globally by 2026.”
The potential for hydrogen power presents a strong investment outlook but I remain convinced that, with cost-competitive green hydrogen about a decade away, there will first be a boom and bust asset bubble in the sector.
“2020: The Year of Green Hydrogen in 10 Stories” – Wood Mackenzie
Citi energy analyst Timm Schneider has replaced Enbridge with TC Energy as his favourite Canadian stock pick,
“We are moving TRP to pole position over previously preferred ENB due to 1) ENB’s strong relative outperformance (we believe the stocks will converge given comparable long-term dividend growth trajectory); 2) our continued preference for regulated natural gas leveraged midstream assets overall (despite a still-favorable view on WCS demand); and 3) a modest shift in upside risk favoring TRP post commencement of Line 3 Replacement construction in Minnesota at ENB, on the regulatory front (upcoming Georgia run-off election and a handful of upcoming 2021/22 rate cases among other potential positives) and with the upcoming roll-up of TCP on the horizon.”
His price target is Cdn $50 for Enbridge and Cdn $65 for TC Energy. The stocks closed at $40.82 and $51.28, respectively, on Thursday.
“@SBarlow_ROB Citi now prefers TC Energy Corp over Enbridge” – (research excerpt) Twitter
The spread of 5G wireless technology is a theme for investors to watch in 2021. The Economist reports on the related ramp up in investment,
“It may be the most hyped technology since blockchain. But even sophisticated telecoms giants are now placing huge bets on 5G… when the first part of the auction [for radio spectrum] was concluded on December 23rd, the bids had reached a staggering $70bn. The winners will be on the hook for “clearing costs” of another $13bn-15bn, in part to compensate satellite firms for giving up some of their spectrum that is particularly well-suited for 5g. The auction will resume on January 4th. By the time it ends, the proceeds may exceed $90bn… As Jonathan Chaplin of New Street puts it, “it is almost impossible for carriers to overpay for this spectrum.”
The spectrum options underscore the volume of telecom equipment that must be bought to get 5G service to consumers, benefitting firms like LM Ericsson.
“The $90bn prize fight: Why American telecoms firms are splurging on 5G spectrum " – The Economist
Diversion: “The Man Behind Pixar’s Deepest Explorations” – The Ringer
Tweet of the Day: “@jsblokland BCA Research is calling peak #technology! - Twitter
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