A wave of "new energy" is transforming the world...
In 2020, the European Commission (the executive branch of the European Union) created a major plan called the "European Green Deal" with the primary goal of eliminating Europe's greenhouse gas emissions by 2050.
In 2018, 18% of the European Union's total energy consumption came from renewable sources like wind and solar power. But as part of the European Green Deal, the EU plans to nearly double that figure over the next decade.
In July, EU leaders agreed on a €672.5 billion ($1.17 trillion) stimulus effort called NextGenerationEU to aid with the COVID-19 recovery. It includes €17.5 billion for environmental sustainability... And at least 37% of the funds must be allocated to "green investment and reforms." A lot of this money will likely go into building clean-energy infrastructure.
Meanwhile, here in the U.S., things are moving more slowly. Solar power has gone from generating 0% of the country's electricity in 2010 to around 3% today. Wind power has risen from 2.4% of the U.S.' electricity production in 2010 to 8.6% so far this year.
But things are going to pick up speed with the new presidential administration...
President-elect Joe Biden is pushing for a $2 trillion "green" infrastructure plan. While the official plan won't be released until February, according to Biden's website, he wants to build a "clean energy future." That likely means investing in both wind and solar energy infrastructure.
As a result, some of the world's largest energy companies – including oil majors Royal Dutch Shell (RDS-B) and BP (BP) – are investing heavily in clean energy. And activist investor Engine No. 1 in ExxonMobil (XOM) is pushing the company to do the same.
But while this trend is seeing billions of dollars from governments in Europe, it's still in its infancy here in the U.S. So there's lots of room for growth.
And all this is great news for today's company...
Vestas Wind Systems (VWDR.Y) is a $45 billion leader in developing, building, installing, and servicing wind turbines, which generate electricity from wind. Overall, it has installed about 73,000 turbines in 81 countries.
And even though wind is becoming a more established energy source, it's still growing (at a rate of about 15% annually over the past 10 years).
Vestas is the clear leader in onshore wind turbines, which are responsible for most of the world's wind power today. And it comes in second in offshore wind turbines, which offers the biggest growth potential. (Wind is stronger and more consistent offshore... And the turbines can be bigger, which means more electricity.)
Vestas generated record sales of $15.6 billion over the past 12 months, up 36% over the prior 12 months. And the company also has a record backlog of business, including orders for $19 billion worth of turbines and service contracts worth $22 billion.
In other words, Vestas' products and services are in high demand. And they should stay that way as the clean-energy trend plays out.
While Vestas generates most of its revenue from Europe (about 40% of total sales), the U.S. is Vestas' second-largest market – generating about 30% of its revenue. And it's perfectly positioned to take advantage as clean energy catches on in the U.S.
The company is in great financial shape. It has enough cash on its balance sheet to pay off all its debt and still have more than $1 billion left over.
Investors have noticed. Take a look at this chart...
Vestas' stock more than doubled over the past 12 months, and recently reached an all-time high. But the gains may not be done just yet...
Its leading market position should ensure that the U.S. turns to Vestas as it builds its "green" infrastructure. And with Joe Biden in the White House and a Democrat-controlled Congress, more investment in wind power is coming. This could push Vestas shares even higher.
Sometimes investing is simple.