Who in the US will benefit from the energy transition

The United States is projected to gradually transition to renewable energy sources in order to maintain its leadership in the field of energy and reduce dependence on conventional energy sources.

As part of this process, the country will increase investment in renewable energy infrastructure, while at the same time reducing the extraction of traditional energy resources.

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The United States has become the world’s largest producer of oil and natural gas through the development of shale mining. But, according to Goldman Sachs, this sector has begun to experience a decline. Shale resources are expected to peak in the next 3-5 years.

Goldman Sachs believes that the US can no longer rely on the shale industry to maintain energy leadership for the next decade, they need a new energy revolution. Analysts say the new US Inflation Reduction Act should free up $3 trillion for investment in renewable energy, which will help fuel the transition to new technologies. As a result, renewable energy sources will be able to provide twice as much energy as shale deposits by 2032.

Consider the companies that will benefit from these changes.

First Solar

First Solar is a leader in high efficiency solar panels with high energy efficiency. The company has been able to take a leading position in the market through the implementation of several projects for the production of solar panels around the world, which has allowed it to expand its coverage and diversify its portfolio of projects. In addition, the company shows a high rate of development of production, and the volume of demand for its spare parts has increased sharply three times in a year.

First Solar will be able to double its capacity by 2024 with the construction of new factories in the US and India. The company can also build and launch new plants in as little as 18 months, thanks to an integrated manufacturing process and reduced dependence on Chinese silicone supply chains. All this gives First Solar significant advantages in rapidly scaling its business.

One of the factors helping First Solar grow is the improving political environment in the US, where it is the largest solar panel manufacturer by a wide margin. Another benefit is increased efficiency and reduced costs compared to raw material suppliers.

This year, First Solar’s net sales are expected to be between $3.4 billion and $3.6 billion, with a gross margin of 35% or higher. As the business expands, the company should become even more profitable, making it not only a growing renewable energy company, but also an attractive investment opportunity.

In addition to the financial outlook, First Solar has several solar panel projects around the world and is seen as an undervalued company with strong earnings growth that could help it outperform the market.

However, competition from China and other companies could lead to a decrease in market share and prices, and a change in cost dynamics in favor of natural gas could also have a negative impact.

Despite these challenges, First Solar’s market position makes it a solid long-term investment for large scale projects.

General Electric

Over the past two decades, General Electric (GE) has faced significant hurdles. In 2008, the economic crisis forced this industrial giant into a radical reorganization, and the COVID-19 pandemic, which began in late 2019, only added to the difficulties.

The company has been trying to get back on its feet for a long time, but only now it has a real chance to do so with the arrival of a high-performing management team that has refocused its business model on the main divisions.

With the spin-off of GE HealthCare Technologies into a separate company, the issuer is left with three main business lines: aerospace, energy and renewable energy. In 2022, the company’s management decided to go further along the path of separation, and announced plans to spin off several more of its divisions into a separate business. This time the division will cover the energy segment and the renewable energy segment. The new subsidiary will be called GE Vernova and will be established in early 2024. The remaining company will be called GE Aerospace.

Despite the difficulties, GE is optimistic about the future. The company expects GE Vernova’s energy business to break even by the end of 2023. In the medium term, GE sees a direct path to high profitability for Vernova. This is critical because the division has been underperforming for a long time, and the possibility that this business could move on to a successful path could lead to significant changes in GE’s overall strategy.

The market opportunity estimate for the conventional energy, wind energy and electrification markets is $265 billion. All three sectors are expected to grow in the coming years. The company’s renewable energy division experienced negative revenue growth last year. However, earnings are projected to grow at a low to medium single digit pace in 2023 and at a moderate pace in 2024.

As a combined entity, GE Vernova had an operating loss of $1 billion in 2022. The loss is forecast to narrow to $0.2-$0.6 billion in 2023, and the venture will become profitable in 2024.

GE has already taken significant cost-cutting measures, and improving market conditions are driving this forward significantly. The management of the company believes that in the long term profitability can reach high single digits.

GE is currently considered an undervalued stock with a strong balance sheet and is well positioned to take advantage of the strong growth expected in the aerospace and healthcare industries in the coming decades.

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