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Hedge funds are profiting from a series of timely bets against wind energy stocks, with some betting that further pain is ahead for the struggling sector.
Marshall Wace and quantitative trading firm Qube Research & Technologies are among those to make millions of pounds in profits from this year’s sharp decline in the prices of wind industry stocks such as Siemens Energy and Ørsted.
The short bets reflect a broader loss of enthusiasm for green energy stocks, despite huge tax credits and subsidies offered by governments to renewable energy companies in the United States and Europe.
Wind companies typically enter into long-term contracts that set the price at which they sell energy. However, high inflation has driven up their costs, while high interest rates have made it more expensive to raise money for their often expensive new projects.
The S&P Global Clean Energy Index, which is made up of 100 of the largest renewable energy stocks, soared in the early stages of the coronavirus pandemic to peak in early 2021. But it fell sharply more late that year and, after losing further ground in 2022, is down another 35 percent this year.
Short sellers have been increase their bets against green energy stocks for some time, amid growing expectations that higher borrowing costs will start to cause problems in the sector.
They have been vindicated in recent months. Ørsted, the world’s largest offshore wind developer, announced this month that it was abandoning two projects it was developing off the coast of New Jersey due to rising financing and supply costs, sending shares by 26 percent on the day.
Ratings agency S&P placed the company’s long-term rating on negative watch, and on Tuesday Ørsted said it had reshuffled its senior management.
Its shares are now down more than 50% this year, giving it a market capitalization of 122 billion Danish crowns ($18 billion), or about a fifth of its value at the start of 2021, at the height of the surge. towards green stocks.
The proportion of the company’s shares sold short began to increase around March this year and reached a high of 1.64 percent on November 3, according to S&P data. None of the positions met the threshold for individual disclosure.
Shares of German manufacturer Siemens Energy have fallen around 57 percent since the end of June after a series of disappointing news linked to technical problems with wind turbines produced by its subsidiary Siemens Gamesa.
It is expected to update the market on Wednesday on negotiations with the German government over financial support to help it shore up its balance sheet.
Short sellers have also targeted Danish wind turbine maker Vestas Wind Systems, whose shares have fallen 17 percent this year, although they rose last week after its action was confirmed. it should be profitable This year.
In a sign that some traders don’t think the worst is over, nearly 14 percent of Siemens Energy shares are now short, up from 8 percent at the start of the year, as are about 1 percent of Ørsted shares. Last year. week.
However, Renaud Saleur, a former trader at Soros Fund Management and now head of Anaconda Invest, said he covered his short positions in Siemens Energy and Ørsted in early November and now owns Ørsted shares.
“We like to think that all the bad news is out now,” he said. Governments will need to adjust the terms they offer to wind developers to get projects off the ground, he added, as “long-term (interest) rates look.” . . reached a peak.
Marshall Wace declined to comment. Qube did not respond to a request for comment.