Plot thickens for BEPC and NEP stock prices as clean energy woes mount

The Brookfield Renewable Corporation (NYSE: BEPC) stock price has been in a freefall after peaking at $57.53 in 2021. It has dropped by more than 55% and is now nearing the lowest level on record. This price action is similar to that of NextEra Energy Partners (NYSE: NEP), which has plunged to $38.22, the lowest level since April 2022.

BEPC, NEP stock chart

Is the clean energy bubble bursting?

BEPC and NEP are two of the biggest players in the clean energy business. They are investment giants with billions of dollars in assets under management. NextEra Energy Partners owns wind, solar, and natural gas projects in the US. 

Brookfield Renewable Partners, on the other hand, owns key assets in wind, solar, hydroelectric, and energy storage solutions. Wind is its biggest business with over 10,000 MW operational and 26,000 MW in development. It is followed by hydro, solar, and storage.

Brookfield and NextEra have underperformed in the past few months as investors predict that the clean energy bubble has burst. A good example of this is in wind energy, which relies heavily on government subsidies. In a letter this month, six governors urged Joe Biden to provide subsidies to offshore wind projects, saying that the industry was on life support.

Orsted, one of the biggest players in wind, has warned that it could walk away from key projects in the US. The company cited low returns and high costs in the industry. 

In Germany, Siemens Energy share price has crashed, becoming the worst performer in the DAX index. Siemens is one of the biggest players in the wind energy equipment manufacturing globally.

Meanwhile, in the UK, the latest auction for North Sea wind farms saw no bid as companies complained of low returns in the industry.

NextEra Energy Partners cuts guidance

At the same time, oil supermajors like Shell and BP, which invested heavily in the industry, have scaled back their ambitions, citing low returns.

These challenges are hitting these Brookfield and NextEra. In August, Brookfield Renewable Partners said that its revenue dropped by 9.37% YoY to $898 million while its loss per share was 10 cents. 

And on Thursday, NextEra lowered its revenue and profitability guidance. It also lowered its partner distribution per unit to  5% to 8% from 6%. This explains why the NextEra Energy Partners stock price plunged by more than 15%. The CEO noted:

“Tighter monetary policy and higher interest rates obviously affect the financing needed to grow distributions at 12%, and the burden of financing this growth has had an impact on NextEra Energy Partners’ unit price and yield.”

Analysts believe that the NextEra and Brookfield Renewable Corporation stocks have more upside going forward. Their dividend yields of ~4% is lower than the risk-free rate while soaring interest  rates will make it more expensive to raise cash.