Sweet 16 - Investment Themes for 2016

James von Riesemann
James von Riesemann Managing Director, Power, Utilities and Alternative Energy
December 13, 2015



We present our 16 Key Investment Themes for 2016. The year ahead could prove to be challenging on many fronts and we expect investors to tread carefully and remain nimble throughout the year.

Key Points

2016 could well be another year of major twists and turns. Here are the 16 major themes as we see them plus one other one we dare not to handicap, at least not at this stage:

  1. The best offense is probably a good defense.
  2. 2016 is likely to be the "Critical Year of the YieldCo".
  3. For power-sensitive names, it's still about underlying commodity prices. Nothing more, nothing less.
  4. Certain equity stories became credit ones.
  5. Beware of asset impairments.
  6. Parent leverage is good, until it's not.
  7. Pension plans and nuclear decommissioning trusts face greater scrutiny. Another tough year appears in store for natural gas, which faces challenges on several fronts.
  8. $2 natural gas prices, or less, do not lend itself well to renewables growth (or new nuclear) without continued public policy and regulatory support. Solar enters the teenage years.
  9. Welcome back...is re-regulation is upon us?
  10. The pace of M&A activity begins to slow, despite the low cost of capital environment for strategic and financial sponsors alike.
  11. The gas infrastructure play for utilities is far from over.
  12. A rising rate environment is not necessarily a recipe for underperformance. The capital spending cycle is not over.
  13. Expect another year of significant price discrepancy in the group; and, importantly,
  14. The presidential election bears careful monitoring (as it relates to energy policy).

Each of these themes are flushed out in the body of this report. Key stock ideas are included as well.

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