Wind in their sales: What to watch as Interest-rates drop boosts renewables deals

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It’s amazing what a change in the rate cycle will do for deals on Wall Street. After months of a prolonged downturn, sustainable stocks look good again. Not just to investors but potential acquirers.

Australian mining giant Rio Tinto wasted no time looking for bargains, making an unsolicited offer this week for Arcadium Lithium, whose stock promptly soared 36% to give it a value of about $4.5 billion.

Lithium is a key ingredient in electric batteries used for EVs but has been depressed for more than a few years because of oversupply and, lately, a downturn in EV sales growth. Renewable stocks took off a few weeks back after the Federal Reserve started cutting rates again, prompting speculation the sector will return to a growth stage.

Also this week, Norwegian energy giant Equinor pushed back into the renewable energy industry by agreeing to buy a 10% stake in Danish wind leader Orsted for about $2.5 billion. Equinor said its move was a long-term vote of confidence in the wind industry, but it must have helped that Orsted’s shares were down about 70% in the past year.

Many renewable energy stocks have begun to bounce back in the last month as the rate cycle shifted, but not so much yet that they don’t still look like bargains. Gains in solar capacity worldwide in the last two years, in particular, will have buyers sizing up some of those stocks. And wind shares have been badly beaten down by supply chain issues and higher borrowing costs, so they look attractive too.

As Equinor proved this week, the buyers might even be larger oil and gas companies looking to dip a toe back into renewables after getting clocked over the last several years. For the first time in a while, it is good to be an investment banker. . . .