Trump win hands insure funds $1.2bn triumph from bet against renewables

Investors running bets against renewable vigor stocks have racked up profits of more than $1.2bn from the heavy sell-off that swept the sector in the wake of Donald Trump’s US presidential election win.

Arrowstreet financing and Qube Research & Technologies were among firms that had built up short positions against companies such as Norwegian hydrogen firm Nel and German wind turbine manufacturer Nordex, according to data throng Breakout Point.

Shares in these companies fell sharply on Wednesday amid concerns that the president-elect will “terminate” President Joe Biden’s expense boost Reduction Act, a shift that could outcome in a halt to levy credits, and pull the plug on offshore wind advancement.

Hydrogen producer Plug Power and solar developer Sunrun, both of which have been heavily shorted by insure funds, fell 22 per cent and 30 per cent, respectively, as investors fled stocks likely to be hit by Trump’s plans. The two US stocks together generated around $350mn in profits for short sellers, according to calculations by data throng S3 Partners.

In Europe, Denmark’s Ørsted, the globe’s biggest offshore wind farm developer, fell nearly 13 per cent on Wednesday, while Nordex lost close to 8 per cent.

In total, funds made more than $1.2bn from bets against 20 of the largest renewable stocks in US and Europe, according to S3’s data.

The tidy vigor sector has been a popular target for short sellers, as high expense boost and profit rates placed strains on businesses whose shares had soared in the early stages of the coronavirus pandemic. The growing possibility of a second Trump presidency has added to those worries this year.

“There have been jitters over the prospect of the US election outcome,” said Deepa Venkateswaran, head of utilities and tidy vigor research at Bernstein. “It’s only in the coming months we’ll recognize what the policies actually are.”

Trump has pledged to complete offshore wind in the US on “day one” of his presidency and halt the rollout of subsidies that featured under Biden’s IRA.

Renewables have been in trouble for “a long period”, with investors losing patience with many of these stocks, said Eirik Hogner, deputy financing collection manager at tidy vigor shift, a insure pool spun out of Lansdowne Partners.

But on Wednesday, “every distribute that was in the renewable basket collapsed”, he added. “Everyone knows how large the IRA announcement was for the sector when it was introduced.” He declined to declare whether he had profited from Wednesday’s sell-off.

Bosses of renewables firms including Ørsted and wind turbine maker Vestas sought to stem negative commentary during their quarterly results on Tuesday as US voters went to the polls, telling the financial Times that renewables played a key role in job creation in Republican-leaning states.

Henrik Andersen, chief executive of Vestas, said statements made during the contest may not be put in to habit when Trump takes office. “Sometimes comments are comments made in political statements, and then we will view what actually comes out of it,” he said.

Andersen on Thursday bought 10,000 shares in the business he leads, according to community filings.

Some analysts have pointed to the growth in renewables during Trump’s first term in office as a rationale for optimism on the sector, although others have argued that a partial repeal of the IRA would significantly leisurely down growth.

Michelle Davis, head of global solar power research at Wood Mackenzie, said she anticipated elements of IRA would be “significantly modified”. She expects one-third less renewable vigor capacity could be built over the next decade in a worst-case scenario under which levy credits are significantly changed.

Meanwhile, the “permitting procedure for upcoming [offshore wind] projects might be halted by federal government agencies”, analysts at RBC warned on Wednesday.

Additional reporting by Ray Douglas