Invest
How to pick a winner in the energy sector
An environmentally friendly alternative, strong infrastructure and lack of government infighting has led to New Zealand’s energy sector becoming a stable earner for savvy investors.
How to pick a winner in the energy sector
An environmentally friendly alternative, strong infrastructure and lack of government infighting has led to New Zealand’s energy sector becoming a stable earner for savvy investors.
With the onset of climate change and growth in renewables, there are new fundamental considerations for investors looking to put their money into energy.
Using the case study of the New Zealand market, investors can learn how to spot a winner in 2019 and beyond.
From an investment point of view, the New Zealand electricity industry is considered far more predictable than the Australian market, leading to less volatility in the market and strong returns for investors.
What are the benefits of the New Zealand market?
The New Zealand energy market is currently 80 per cent renewable, with that number set to rise, according to Chris Tan, Co-Fund Manager of the Pengana Australian Equities Income Fund.
Having a renewable source of energy has led the New Zealand being priced accordingly due to stability in the market.
“New Zealand is in the happy position of being mostly renewable through hydroelectric, which is about 60-70 per cent – with wind, gas and coal making up the rest,” said Mr Tan.
“They are great businesses because they have this portfolio of basically irreplaceable and irreplicable dams and power stations,” Mr Tan continued.
Following suit
Despite large-scale schemes such as the Snow Hydro Electric Scheme, Mr Tan does not believe Australia can follow this more modern generation.
“Australia doesn’t have the ability to generate 60 per cent of its electricity from hydroelectricity as it simply does not have enough water,” said Mr Tan.
Mr Tan also believes it would require huge investment in order for Australia to go down the renewable path through solar or wind.
“One of the issues with most, although less so with hydro, it is intermittent in nature, it’s there when the sun shines or the wind blows,” said Mr Tan.
The other side, the transmission grids have been designed and built for more steady base load generators like coal.
“So there needs to be a big investment into the grid for this intermittent power where sometimes the power is coming from the solar plant or wind farm or not, and with rooftop solar that is sending power back into the grid, not the other way round,” said Mr Tan.
This email address is being protected from spambots. You need JavaScript enabled to view it.
About the author
About the author
Stock market
The pros and cons of DIY investing
“Social trading” is being flagged as a very real issue now affecting the Australian stock market – especially as low-cost stock trade platforms gain popularity. ...Read more
Stock market
Where to find dividends in a low-rate environment
Australian investors who are income-focused are still able to find strong dividend-paying stocks, but the market is changing, an expert has said. ...Read more
Stock market
Did investors overreact to the COVID-19 pandemic?
The economic downturn has not hit many sectors of the economy as hard as first predicted, with the reporting season revealing that many sectors will recover quickly, an investment fund has revealed. ...Read more
Stock market
Market volatility not a worry for Millennial investors
In spite of COVID-19-related volatility, Australian investors aged between 24 and 39 remain bullish about the current sharemarket. ...Read more
Stock market
Why investors will miss their mark for the next 5 years
Australian investors are urged to rethink their investment targets, with the COVID-19 recovery likely to have an impact on returns, new research has found. ...Read more
Stock market
Standing strong in a crisis, ethical investments are here to stay
Ethical investments are more than just a short-term fad, an investment manager has advised. ...Read more
Stock market
Sovereign wealth fund goes negative for the first time since the GFC
The Future Fund has posted a rare negative return for 2020 and warned that a “challenging and volatile” economic climate could hurt previously strong gains moving forward. ...Read more
Stock market
Don’t worry about dividends: Stocks still going strong
Dividends are still up for grabs for active investors willing to wade through the major headlines and an abundance of market negativity, an investment expert has flagged. ...Read more
Stock market
The pros and cons of DIY investing
“Social trading” is being flagged as a very real issue now affecting the Australian stock market – especially as low-cost stock trade platforms gain popularity. ...Read more
Stock market
Where to find dividends in a low-rate environment
Australian investors who are income-focused are still able to find strong dividend-paying stocks, but the market is changing, an expert has said. ...Read more
Stock market
Did investors overreact to the COVID-19 pandemic?
The economic downturn has not hit many sectors of the economy as hard as first predicted, with the reporting season revealing that many sectors will recover quickly, an investment fund has revealed. ...Read more
Stock market
Market volatility not a worry for Millennial investors
In spite of COVID-19-related volatility, Australian investors aged between 24 and 39 remain bullish about the current sharemarket. ...Read more
Stock market
Why investors will miss their mark for the next 5 years
Australian investors are urged to rethink their investment targets, with the COVID-19 recovery likely to have an impact on returns, new research has found. ...Read more
Stock market
Standing strong in a crisis, ethical investments are here to stay
Ethical investments are more than just a short-term fad, an investment manager has advised. ...Read more
Stock market
Sovereign wealth fund goes negative for the first time since the GFC
The Future Fund has posted a rare negative return for 2020 and warned that a “challenging and volatile” economic climate could hurt previously strong gains moving forward. ...Read more
Stock market
Don’t worry about dividends: Stocks still going strong
Dividends are still up for grabs for active investors willing to wade through the major headlines and an abundance of market negativity, an investment expert has flagged. ...Read more
More articles
Website Notifications
Get notifications in real-time for staying up to date with content that matters to you.
