{"id":21571,"date":"2023-06-12T12:52:40","date_gmt":"2023-06-12T16:52:40","guid":{"rendered":"https:\/\/ifintechworld.com\/news\/rising-electricity-consumption-and-interest-rates-give-encavis-a-tailwind-otcmktsencvf\/"},"modified":"2023-06-12T12:52:42","modified_gmt":"2023-06-12T16:52:42","slug":"rising-electricity-consumption-and-interest-rates-give-encavis-a-tailwind-otcmktsencvf","status":"publish","type":"post","link":"https:\/\/ifintechworld.com\/?p=21571","title":{"rendered":"Rising Electricity Consumption And Interest Rates Give Encavis A Tailwind (OTCMKTS:ENCVF)"},"content":{"rendered":"
\n

Editor’s note: Seeking Alpha is proud to welcome Kai-Frederik Kossyk as a new contributor. It’s easy to become a Seeking Alpha contributor and earn money for your best investment ideas. Active contributors also get free access to SA Premium. Click here to find out more \u00bb<\/span><\/p>\n

\n

<\/picture>
<\/figcaption><\/figure>\n<\/p>\n

Investment Thesis<\/h2>\n

Encavis (OTCPK:ENCVF) is a large renewable energy provider. They manage solar\/wind-parks and sell the electricity to large corporations through long-term contracts. The business model is very capital intensive, but once the parks are in place, they will be very predictable and highly profitable. Due to rising interest rates, the competition to acquire such parks is diminishing. Encavis is taking advantage of this situation to accelerate growth. The stock is down about 35% since the 2021 high and, in my opinion, offers a good risk\/reward ratio at present.<\/p>\n

Introduction<\/h2>\n

Encavis is an acronym for: ENergy (“Energy forms the basis of our collective activity and work”) CApital (“We invest capital to acquire wind farms and solar parks to generate attractive returns”) and VISion (“We are working towards a future with decentralised power generation from wind power and solar energy”). They generate electricity in two ways: Solar(PV) and Wind. They also have a small Asset Management Arm.<\/span><\/p>\n

\n

\"A<\/picture>
\n

Geographical breakdown of assets (Encavis Website)<\/p>\n<\/figcaption><\/figure>\n<\/p>\n

Encavis originated in Hamburg, Germany, but is gradually conquering Europe. They are currently focusing on Italy, France, England and Sweden, as there is either a lot of wind or sun to be found.<\/p>\n

Business Model<\/h2>\n

Encavis’ business model is to acquire completed parks and manage them. They do not build the parks themselves. This is an important point as it significantly mitigates the risk, as it means that risks such as permits not being issued or conservation zones being built do not fall on the company.<\/p>\n

\n

\"risk<\/span>
\n

Business model: risk structure (Encavis Factbook)<\/p>\n<\/figcaption><\/figure>\n<\/p>\n

They sell the electricity to companies via so-called PPAs (power purchase agreements). These are long-term contracts for the purchase of electricity that usually run for 20 years. They also have an asset management arm where they do parks for institutional investors, insurance companies or other large corporations. This is a very interesting part of the company because it is very high margin, requires little capital, and is low risk.<\/p>\n

\n

\"A<\/span>
\n

Encavis Business Model (Encavis-Conf-Call-FY-2022)<\/p>\n<\/figcaption><\/figure>\n<\/p>\n

Today, Encavis offerings can be divided into the following four categories:<\/p>\n