Guinness Asset Management Ltd., whose alternative-energy fund fell 27 percent in the past year, expects a decline in wind-turbine prices in China to bolster returns after shares in the industry plunged.
The fund, which manages $40 million, has channeled 28 percent of its investments into Chinese renewables including wind developer China Longyuan Power Group Corp. (916), said co-manager Edward Guinness. Renewables stocks are attractive, he said, even as the Bloomberg Wind Energy Index lost 17 percent this year.
"The stocks are incredibly cheap, particularly now, but the outlook is still challenging for the next 18 months," Guinness, son of Chief Executive Officer Tim Guinness, said in a London interview. "The real winners will be the people who are installing and can make the most of these lower charges."
Shares in the Bloomberg Wind Energy Index fell 3.9 percent last month and the Bloomberg Large Solar Index sank 9.4 percent as investors sold higher-risk securities on concern the debt crises in the U.S. and Europe would hurt the world economy. The Standard & Poor's 500 index of 500 stocks declined 2.2 percent.
The Guinness fund, based in Dublin and Los Angeles, has no connection with the Irish stout beer company. It focuses on renewables, and Chinese investments represent the biggest chunk of its holdings.
Chinese turbine maker Xinjiang Goldwind Science & Technology Co. and hydropower generator Dongfang Electric Corp. are creating a "price war" in the country, driving down equipment costs for developers, Guinness said.
Canada Renewables
In June, the fund sold its holding in Iberdrola Renovables SA, the clean-energy unit of Spain's biggest utility. Guinness said he's looking for a stock to replace it and, in the "long term," favors renewables companies in Canada and hydropower developers in Brazil.
Government incentives in Canada have a fueled a renewables boom and the fund is focusing on Ontario and British Columbia, Guinness said. "Some of the utilities in Canada are trading on quite cheap evaluations," he said, adding that Canada's economy is likely to "ride through the crisis" better than others.
The Ontario Power Authority awarded contracts to 40 renewable-energy ventures totaling 872 megawatts of capacity in February. The projects, including 35 solar, one hydro and four wind plants, will require about $3 billion in private investment, the authority said at the time.
Brazil Hydro
Guinness also favors hydro and ethanol projects in South America, and holds Cia Energetica de Minas Gerais (CIG), a Brazilian electricity generator. The nation gets about 35 percent of its energy from hydropower, the most in the Americas.
"There are a handful of Brazilian hydroelectric utilities that are very much on our radar screen," Guinness said. He's also studying ethanol projects in Peru, where until 2008 the fund invested in Maple Energy Plc (MPLE), an ethanol refiner that generates power and explores for oil.
In Britain, Guinness is raising a new fund to finance small solar, wind and hydro projects for homes and businesses. His Enterprise Investment Scheme, aimed at funding as many as four companies to carry out free installations from next month, has 3.5 million pounds ($5.7 million) and may reach 6 million pounds with "follow-on co-investments," Guinness said.
He seeks to capture a slice of the rooftop solar market for homes, benefiting from incentives that ensure premium rates for renewable electricity.
