2015 Alternative Energy Stock Predictions

Well, it’s that time of year again…

Time to lay out my top five alternative energy stock picks for the coming year.

So let’s not waste any time with delightful anecdotes and entertaining bar stories today. Let’s just jump right in!

The Year of the Yieldco

In the world of renewable energy, yieldcos are relatively new. But it is the yieldco, my friend, that will usher in a new wave of opportunity for renewable energy investors in 2015.

Yieldcos essentially allow renewable energy to continue its rapid pace of integration by lifting it out of the slow lane with mountains of capital.

Here are three I told you about earlier this year that I believe will win big in 2015…

Pattern Energy Group (NASDAQ: PEGI)

Pattern Energy owns and operates 11 wind power projects in the U.S., Canada, and Chile. Combined, these represent a total owned capacity of 1,434 megawatts.

Pattern has developed, financed, and managed more than $12 billion worth of infrastructure assets. Roughly 3,000 megawatts of this is in wind power, and the company has more than $300 million of liquidity (as of December 31, 2013).

The off-takers of PEGI’s projects boast a weighted average credit rating of “A.” These include the following:

• San Diego Gas & Electric
• NV Energy
• Credit Suisse Energy
• Pacific Gas & Electric
• Morgan Stanley Affiliate
• Ontario Power Authority
• Manitoba Hydro
• Puerto Rico Electric Power Authority

Pattern Energy Group offers a 4.5% yield.

NRG Yield, Inc. (NYSE: NYLD)

NRG Yield boasts a contracted generation portfolio that includes three natural gas facilities, eight utility-scale solar and wind generation facilities, and two portfolios of distributed solar facilities. Collectively, these represent 1,324 megawatts of generation capacity.

The diversification with natural gas is nice, but quite frankly, I’m less concerned about diversification with renewable energy assets, as there are no issues of resource depletion or energy shocks.

The distribution of solar and wind doesn’t change. Yes, it’s intermittent, but the energy source itself can always be counted on and can never be affected by geopolitical events or logistical mishaps.

Still, with natural gas so dirt cheap, certainly NRG’s natural gas assets are beneficial to the overall portfolio.

NRG has performed quite well this year, starting off 2014 at $39.95 a share and reaching a recent high of $53.19 a share. That’s a 33% gain in about six months. Not bad at all.

NRG Yield offers a 3% yield.

TransAlta Renewables (TSX: RNW)

TransAlta is primarily focused on wind. Its portfolio contains 92% wind, with 8% in hydro.

With 17 wind facilities and 12 hydro facilities, RNW boasts 1,255 megawatts of installed generating capacity. It also boasts Canada’s largest fleet of wind generation.

Management is also focused on aggressive third-party acquisitions, so I suspect it will continue to lead the wind game in Canada. As well, the company is also looking into expanding into solar, gas, and transmission assets.

TransAlta Renewables offers a 6.2% yield.

Don’t Fear the Sun

Although it’s had a rough year, I remain bullish on SolarCity (NASDAQ: SCTY).

This solar installation and financing company is a big-dog player, and its growth strategy is one of the most aggressive I’ve ever seen. Unfortunately, it’s this growth strategy that will require patience from investors.

It’s doubtful SolarCity will be profitable in 2015, but I’m convinced the steps management is taking today to ensure the company is the dominant player in the space in the future are necessary and smart.

If you’re looking for a quick payday, SolarCity isn’t the stock for you. But if you can get in at a good price — I’d say less than $60 a share — you could be rewarded with a solid 40% to 50% gain inside of two years.

Back to the Future

One stock that delivered quite well for us in 2014 was U.S. Geothermal (NYSE MKT: HTM).

Although geothermal is one of the slowest-growing sectors in the clean energy space, it remains to be a steady burner. In other words, there’s no meteoric growth, but its ability to provide base load power generation is a benefit that plenty of regions are happy to pay for — especially considering that the retail price of the power is actually quite competitive once initial capital costs of drilling and construction are recouped.

Last year, U.S. Geothermal was my top geothermal pick. For the year, we’re up more than 40%. I’m including U.S. Geothermal in this year’s top alternative energy stocks, too.

The stock is currently trading around $0.55 a share. My one-year price target is $0.75.

Of course, anything can change at a moment’s notice, so throughout 2015, we’ll continue to provide coverage on all five of these stocks.

To a new way of life and a new generation of wealth…

Jeff Siegel

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Jeff is the founder and managing editor of Green Chip Stocks. For more on Jeff, go to his editor’s page.

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