RE Royalties and the Energy Transition

An opinion piece by Nico Popp (Apaton Finance GmbH).

The Canadian company has transferred a financing model from the raw materials sector to renewable energy. Instead of operating wind or solar parks itself and having to deal with maintenance or weather risks, RE Royalties finances project developers and, in return, receives a share of sales in the form of a royalty.

The model impresses with its simplicity and robustness. A key advantage is the share in what are known as "top-line revenues." RE Royalties receives a share of gross revenue before the operator deducts its operating costs. This effectively protects revenues from inflation or rising operating costs for the plant operator. Another plus point for shareholders is the partial elimination of the dilution risk. Unlike many other growth stocks, investors here have less to worry about their shares, as growth is largely financed organically from the cash flow of the projects. However, capital increases for even stronger growth cannot be ruled out.

Read the full article here.