Today on the stock market: why?

Voyager2002

Today has been dramatic so far with the changes in the value of sterling. Can anyone explain why shares in renewable energy providers have shown such a marked fall? For instance, Greencoat wind has no operations outside the UK so the fall in sterling should be irrelevant to it, while it should be helped by a rise in the cost (in pounds) of imported energy that competes with it. So why is Greencoat down today?

Millyonare

Cheaper natural gas, the return of nuclear, soaring interest rates, a plunging pound / euro, and concerns about the shaky finances of some green-energy providers are giving the renewables sector the jitters in the US, EU and UK.

coastline

Gone from 135 to near 170 this year so isn't a bad story. Sometimes profit taking comes in ? When sentiment is poor then most take a hit ? I'd guess at the rising bond yield . UK 10yr is now 4.1% and UKW is 4.5% dividend. Similar with SSE SVT and UU to name a few and all falling. If bond yields continue to rise the situation will probably get worse.

United Kingdom Government Bond 10Y - 2022 Data - 1980-2021 Historical - 2023 Forecast (tradingeconomics.com)

Greencoat UK Wind Share Price. UKW - Stock Quote, Charts, Trade History, Share Chat, UKW Values. Greencoat Uk Wind Plc Ord 1P (lse.co.uk)

dunstonh

 Can anyone explain why shares in renewable energy providers have shown such a marked fall?

They have benefitted from the rise in electricity prices. That has been driven by the price of gas rising.  However, gas has fallen significantly, and that is bringing electricity prices down.   So, the windfall profits are going to be lower for the renewables.

Cus

Maybe all the equipment and materials are bought from overseas so now going to cost more?

Adyinvestment

Because the market is far from rational.

snarffie

dunstonh said:

 Can anyone explain why shares in renewable energy providers have shown such a marked fall?

They have benefitted from the rise in electricity prices. That has been driven by the price of gas rising.  However, gas has fallen significantly, and that is bringing electricity prices down.   So, the windfall profits are going to be lower for the renewables.

I’ve been thinking of dumping some of my INRG for this reason. Currently up some 50%, having held for a few years (and through the heady days in the 1400s  it might now be time to take a rest after a fair recovery since Feb, in anticipation of a pull-back going forward.

Long-term, I’m quite keen on this ETF so will probably leave it alone!

biscan25

@coastline has it. Basically it's interest rates. As interest rates rise, in general assets (in this case wind farms) fall in value, as the future revenue stream is discounted at a higher interest rate.

As the dividend yield on these shares is now comparable to gilt returns, why would you hold a risky infrastructure asset if you could hold a "risk-free" asset such as index-linked gilts instead?

daz378

So bond yield rate rises  as central banks stop buying and even start slowly selling...so stockmarket  could be in for a bumpy ride

Albermarle

dunstonh said:

 Can anyone explain why shares in renewable energy providers have shown such a marked fall?

They have benefitted from the rise in electricity prices. That has been driven by the price of gas rising.  However, gas has fallen significantly, and that is bringing electricity prices down.   So, the windfall profits are going to be lower for the renewables.

I think the 'new' government was also making noises about delinking electricity prices from gas prices.

wmb194

Albermarle said:

dunstonh said:

 Can anyone explain why shares in renewable energy providers have shown such a marked fall?

They have benefitted from the rise in electricity prices. That has been driven by the price of gas rising.  However, gas has fallen significantly, and that is bringing electricity prices down.   So, the windfall profits are going to be lower for the renewables.

I think the 'new' government was also making noises about delinking electricity prices from gas prices.

The European Commission has been saying the same thing and this would affect those with assets on the continent e.g., TRIG.

Looking at a couple e.g., TRIG and UKW it looks like they've fallen to roughly their NAVs so some of the froth has come off them - many had been trading at big premiums.

Btw, TRIG announced today that the cancellation of next year's increase in corporation tax from 19% to 25% should add 5p to its NAV, so it isn't all doom and gloom for these companies.

https://www.londonstockexchange.com/news-article/TRIG/net-asset-value-update/15643013