I Would Not Buy Prokon Anyway

SPIEGEL magazine runs another article critical of renewable energy in Germany (not news).

Surprisingly, there may be some substance to the claims there. Usually with SPIEGEL articles about renewable energy one can be quite sure that none of it is true.

That article is written by Christian Kirchner, who is not working at SPIEGEL.

Kirchner there questions the business model of the large German wind energy and biomass operator Prokon.

That business model is based on interest payments to investors, which are set rather high between six and eight percent. Prokon has secured regulatory approval to collect EUR 10 billion with this type of security. According to Kirchner they are selling around EUR 30 million each month of these securities (Genussrechte) right now.

Kirchner now most inconveniently compares the sum of interest paid to investors with Prokon’s profit. He says that the former sum is higher than the latter, which would leave only the option to use new investments to pay back interest and capital of previous investors. There is a name for that.

The name “Prokon” is derived from the German words of “project” (Projekt) and “concepts” (Konzepte). In English, “Pro-Con” would not necessarily be a name that inspires confidence with investors.

I have no opinion on whether Kirchner’s numbers add up. If they do, that would raise some significant concerns.

But I would not buy these securities anyway. While Prokon says they have built-in protection against inflation, at the end of the day the investor only owns an IOU, and not actually a part of the wind parks. You need a to buy a stock for that to happen.

I am not aware of any stock on the German or Japanese market that would allow investors to actually own a part of renewable energy infrastructure. The closest thing I could find is ENEL Green Power, which I have on my List of Global Warming Stocks. As I wrote then about them:

For a model where I hope to see SB Energy in ten years, there is Enel Green Power (also a shareholder in Desertec).

They had had revenue of EUR 2,688 million last year, leaving them with a consolidated net income of EUR 431 million. Installed capacity from renewables is 8.689 MW, produced by over 740 plants in operation around the world, with an annual production of 25 TWh.

31.71% of the stock is publicly owned; the rest is owned by the Enel group, a fortune 500 company at place 52 in the latest edition, with a (weak) investment grade Moody rating of Baa2. As noted in an earlier post about Enel, 34 GW of their 97 GW production capacity is renewable energy. And only 22% of revenues from their renewable capacities came from subsidies at the time (2011).

I think this is the way to go right now for an individual investor that wants to own stock in a company investing exclusively in the operation of renewable energy installations.

Of course, such investors may also choose to use Mosaic (if you are based in the United States). These are relatively stable investments in individual installations.

The problem with that, however, is that these are cash-based investments over a long term. The risk of high inflation rates lies with the investor. And you can’t easily get out of such an investment if you want to for some reason or other. With a stock, you can sell it anytime you want.

The same is true for investing in projects of the Greenpeace company “Planet Energy” (if you are based in Germany). You get a stable cash based investment that leaves you with the inflation risk and no easy way out.

That’s the main reason I won’t buy any Prokon investment. If I want to own renewable energy infrastructure, Enel Green Power is much bigger, much more stable, and I get a stock instead of an IOU.

 

Published by kflenz

Professor at Aoyama Gakuin University, Tokyo. Author of Lenz Blog (since 2003, lenzblog.com).

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