Over the past weeks we have been looking carefully at the “Green Energy” theme — taking the view that as the world moves away from fossil fuels and towards cleaner sources of energy, companies that are pioneering innovative new technologies and those that own the infrastructure which generates, stores and transmits these forms of power will benefit.
We’ve been looking at three companies in particular:
- Bloom Energy Corporation, which manufactures power generation equipment, in particular a fuel cell that allows its generators to run on natural gas, biogas or hydrogen without combustion.
- NextEra Energy, which generates wind and solar power and also operates commercial nuclear power units.
- First Solar which designs and manufactures solar modules using a thin film semiconductor technology.
It is possible to price very attractive structured products linked to these three shares. For example, we have priced a 3-year structured note which can generate 28% per annum if the three shares do not fall significantly during the term:
- If, after the first year, the three shares are at or above their initial level, the product will redeem early at a premium of 28%.
- If not, and at the end of the second year the three shares are at or above 75% of their initial level, the product will redeem early at twice that premium (i.e., 56%).
- And if the product has still not been redeemed, if at the end of the second year the three shares are at or above 50% of their initial level, the product will redeem early at three times that premium (84%).
Capital is at risk, of course, and so if one of the shares is below 50% of its initial level the note will be redeemed at a similar loss (that is, the percentage amount that the worst-performing share is below its initial level).