Institutional investors cautious on renewable energy stocks in Q4 2022

Institutional investors bought a net 1 million shares of 10 renewable energy companies tracked by S&P Global Market Intelligence during the fourth quarter of 2022 as they cautiously await a US solar manufacturing renaissance following the passage of the federal Inflation Reduction Act.

The law has already triggered a flood of new investment into US solar and prompted multiple domestic producers to expand their manufacturing footprints to produce renewable and battery storage components, even as some developers grapple with projects delayed by regulatory setbacks and supply chain bottlenecks.

During the third quarter of 2022, institutional investors sold a net 46.8 million shares in the renewable companies, largely driven by Brookfield Asset Management Ltd. exiting a 68.7-million share stake in subsidiary Brookfield Renewable Partners LP. Excluding the Brookfield Renewable Partners exit, investors in the third quarter purchased a net 22.8 million shares from the remaining nine companies.

Among the companies, the heaviest buying during the fourth quarter of 2022 was in Sunrun Inc., the largest US home solar installer. Greenvale Capital LP bought 1.3 million shares of Sunrun, increasing its stake in the San Francisco-headquartered company to 1.83%, or a total of $93.7 million. Grantham Mayo Van Otterloo & Co. LLC raised its ownership in the company to 3.29% with the purchase of 1 million new shares.

The US residential solar industry recorded a 43% year-over-year surge in installations in the previous quarter, with Sunrun reporting record capacity additions.

Sunrun is building out its virtual power plant networks in California and beyond. "We're close to getting to a tipping point where this is no longer seen as a fringe activity that some states are playing with, but frankly, is embraced radically ... all over the United States of America," CEO Mary Powell said in a Nov. 2, 2022, interview.

Investors dumped a net 3.9 million shares of Houston-headquartered residential solar installer Sunnova Energy International Inc. in the fourth quarter of 2022, marking a reversal from the prior quarter. Professional investors crowded into Sunnova in the third quarter, buying a net 10.3 million shares.

The top seller of Sunnova stock during the fourth quarter of 2022 was Nuveen Investments Inc., which exited its entire position of 3 million shares in the company. Moore Capital Management LP sold 2.4 million shares, trimming its holdings by about 89.3%.

Sunnova executives "remain bullish" on the company's prospects despite rising prices due to continued residential solar demand and strong customer retention.

"Competition and capitalism have made this country great. And the fact is, we don't have it in the US power industry. It's something that is very detrimental to the growth of this country and the health of its people," company chairman, president and CEO John Berger said on a third-quarter 2022 earnings call. Customers remain willing to pay for distributed generation, Berger said, adding, "People are paying us more and more because there's value in the service."

Boston-headquartered asset manager FMR LLC was the top seller of stocks in the companies, reducing its holdings by 13.6 million shares in five companies, including 5.6 million shares of NextEra Energy Inc., 2.9 million shares of Brookfield Renewable Partners LP and 2.6 million shares of AES Corp.

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