Gambling Greenie September 14

Blowing in the wind

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The Gambling Greenie’s portfolio

BUYING MORE shares in the wave energy developer Carnegie Clean Energy probably wasn’t a good idea.  The GG’s latest investment is already under water.  Developing cutting edge technology is always a dodgy business.  When a company’s shares are sell for a couple of cents each, you can be pretty sure it is a hairy investment. Sigh.

Partly for that reason, the Gambler has switched tactics this time and decided to invest in a much more solidly based renewable energy mob, Infigen.  Infigen (ASX code IFN) has six wind farms operating around Australia and nine more in the pipeline.  It has expanded into solar, and has eight sites under development, and it has added its first big battery.  It has sales of $210 mln a year and its net profit after tax was up 41 per cent to $45.7 mln in the year to June.

There are several reasons NOT to invest in Infigen. Despite the jump in profit, it didn’t pay a dividend this year.  Net debt in the year ended in June rose 31 per cent to $531 mln.

Infigen generates electricity, and wholesale electricity prices are slowly falling, particularly in South Australia, where renewables have been powering ahead.  So Infigen will have to sell more just to stand still.

Between August 2015 and August 2016 investors discovered IFN and the shares soared fourfold to $1.19 each.  It has been a bumpy ride since then but the trend has been steadily down.  The rush of enthusiasm has long since faded, and the Gambler doesn’t expect to make a quick killing on this one.

On the positive side, Infigen did boost profits last year, and has even hinted that it may resume dividends in the future.   The big jump in debt largely reflects the capital cost of its Bodangora development.  This wind farm will boost the company’s generation by about 14 per cent this year and by some 24 per cent by 2020.  And once the propellers start turning, the running costs are relatively low — the wind is free.

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