The Choppy Waters Of Ocean Power Investing

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by Debra Fiakas CFA

The last post introduced Atlantis Resources Ltd. (ARL:  LN), a developer of tidal power generation technologies.  Atlantis has been working on a project called MeyGen ofthe coast of Scotland, which is to become the world’s largest tidal stream energy project.  It is a distinctive location where tidal action reaches up to five meters per second.  Atlantis will supply the underwater turbines for the 400-megawatt project, which has received regulatory consent.

Atlantis is not the only tidal power developer to hear the call to the high seas off the coasts of Ireland and Scotland, active waters particularly attractive for tidal power generation.  DP Energy Ireland Ltd. is seeking permits to build a 100 megawatt energy project off the coast of north Ireland near Ballycastle.  DP Energy is a renewable energy developer with far ranging interests in solar, wind and tidal power.  Its Fair Head Tidal project is the focus of a joint venture with Blue Power NV of Belgium, a renewable energy construction company with prior experience in tidal power.

Brookfield Renewable Energy Group and DCNS’s OpenHydro subsidiary are also dipping their collective toes into the ocean with another 100 megawatt tidal power project immediately adjacent to DP Energy’s Fair Head project.  The two companies have formed their own joint venture called Tidal Ventures Ltd.  An environmental impact statement has been completed, but Brookfield and OpenHydro still need to get marine licenses and other permits before moving forward with construction.  Like the Fair Head Tidal project, Brookfield plans to sell to the electrical grid operating in north Ireland.

Investors looking for exposure to tidal power development will find the alternatives few.  All of these developers are private companies and probably accessible only by those investors with the wealth and income to be considered ‘qualified’ investors.

Brookfield’s Renewable Energy Partners LP (BEP:  NYSE) provides an alternative. The shares are supported by a portfolio of renewable power generating facilities, most of which are hydroelectric dams and wind towers.  Purists might be put off by the two natural gas fired power plants in the mix.  Total the Brookfield limited partnership operates plants with a total generation capacity of 6,700 megawatts across the U.S., Canada, Brazil and Europe.  It is expected that once in operation the Tidal Ventures projects to end up on the portfolio.

The forward annual dividend yield on the Brookfield shares is 6.7% at the current price level. A long position in the stock will come at a price as the earnings multiple is 63.1 times the consensus estimate for 2016.

Neither the author of the Small Cap Strategist web log, Crystal Equity Research nor its affiliates have a beneficial interest in the companies mentioned herein. DP Energy Ireland Ltd. is included in the Ocean Group of Crystal Equity Research’s Earth, Wind and Fire Index of companies using the power of the planet to generate energy.


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