Hedge funds clean up with bets against renewables after Trump win

A clutch of hedge funds made massive profits after building up short positions against clean energy companies ahead of Donald Trump’s emphatic election victory in the US.

Wind turbine manufacturer Nordex, developer PNE and Norwegian hydrogen outfit Nel were among the renewables sector companies successfully targeted by short-sellers ahead of the US election, according to data gathered by market intelligence firm Breakout Point.

A list of the most active short-sellers compiled by Breakout Point showed Arrowstreet Capital, Cube Research & Technologies and Ennismore Fund Management among the hedge funds in action, although Canada Pension Plan Investment Board was also identified taking short positions in Nordex.

The German OEM's share price took a tumble of nearly 6% on Wednesday.

Danish offshore wind developer Orsted suffered one of the biggest share price reversals, dropping close to 13% on the same day.

The reversals were pinned on concerns that a second Trump administration will end the tax credits provided by President Joe Biden’s flagship Inflation Reduction Act and possibly take direct action to stop new offshore wind development from moving forward.

Shares in clean energy companies were further pressured by uncertainty about how far a second Trump administration will go in ramping up tariffs on imports, including the possibility of an even higher rate for imported equipment deemed to have significant Chinese components.

But some companies at the receiving end of this week’s sell off have been trying to reassure investors that Trump is unlikely to launch an all-out attack on an industry that is bringing billions of dollars of investment and thousands of jobs to several Republican-dominated states, including oil-producing heartlands such as Texas.

'All boats rising'

Addressing analysts in an earnings call on Tuesday, Orsted Mads Nipper said growing demand for energy in the US amounts to an “all boats rising” situation and a prominent place for renewable generation, even with a Trump win.

Henrik Andersen CEO of Vestas, told analysts that comments made during political campaigns should be viewed in that context. "We will see what actually comes of it," he stated.

Some analysts also played down the threat of a rolling back of the IRA tax credits scheme.

“Tax credits have been a cornerstone of US energy policy for decades and installations of wind and solar saw significant growth during the first Trump Administration,” said Alfred Johnson, CEO and co-founder of Crux,a sustainable finance company that created the leading platform to transact and manage transferable tax credits.

“Since 2022, these credits have been extended and expanded to support a wider range of technologies — battery storage, biogas, carbon capture, nuclear, and domestic manufacturing. These credits are creating millions of construction, manufacturing, and mining jobs across the country.”

Recently, 18 Republicans wrote a letter to the House of Representatives Speaker urging steps to protect the energy and manufacturing tax credits that have driven innovation, investment and jobs in their districts, raising hopes that Trump will take a pragmatic approach to legislation that he has attacked whilst on the campaign trail.

“Repealing the credits would raise the cost of energy for consumers and businesses, hurt workers, and increase taxes on companies. Those outcomes are unlikely to be attractive to the Administration and Republicans in Congress,” Johnson commented.