AUSTIN - German energy company RWE (LON:0HA0) AG (OTC:RWEOY) has struck a 15-year power purchase agreement (PPA) with electric vehicle maker Rivian (NASDAQ:RIVN) Automotive Inc, to provide clean electricity from a wind farm in Texas, both companies announced Thursday. The deal involves RWE's Champion Wind project in Nolan and Mitchell Counties, which will supply Rivian's charging network with 100% renewable energy.
The 127-megawatt (MW) Champion Wind farm, currently undergoing upgrades to install new turbine nacelles and blades, is expected to resume operations in mid-2025. The upgrades will extend the wind farm's life and contribute to Rivian's aim of enabling 7 billion miles of renewable driving.
Christoph Hunfeld, RWE Clean Energy's Chief Commercial Officer, highlighted the company's commitment to partnering with innovative firms like Rivian in the transition to a decarbonized grid. Rivian's Vice President of Propulsion, Charging & Adventure Products, Paul Frey, noted the project's role in fostering a cleaner grid and supporting a circular economy.
The repowering of Champion Wind involves the construction company M.A. Mortenson and Siemens Gamesa Renewable Energy (OTC:GCTAY), which is supplying 41 turbines. These turbines are being produced in the U.S., and the project will also feature six new Siemens Gamesa turbines rated at 3.1 MW each.
Once operational, the wind farm is expected to generate sufficient electricity to power nearly 1 billion miles of renewable driving annually or supply around 36,000 Texas homes. RWE is partnering with REGEN Fiber to recycle the old turbine blades into reinforcement fibers for the construction industry, preventing them from ending up in landfills.
The project is also set to deliver approximately $31 million in tax revenue over the next two decades, supporting local communities in Nolan and Mitchell Counties. RWE's presence in the U.S. includes a renewable energy portfolio of 9.7 gigawatts (GW) and a project pipeline exceeding 36 GW.
Rivian, listed on NASDAQ: RIVN, is known for its electric vehicles and aims to accelerate the shift to zero-emission transportation. The company's vehicles are produced in the U.S. and sold directly to consumers and commercial customers.
This partnership is based on a press release statement and reflects the ongoing efforts of companies to invest in renewable energy solutions.
In other recent news, Rivian Automotive has faced a series of developments. Barclays (LON:BARC) maintained its Equalweight rating on Rivian, noting potential for expanded collaboration with Scout. DA Davidson also reaffirmed its Neutral rating, ahead of the company's third-quarter earnings report. Despite Rivian's promising products, the firm expressed caution due to uncertainties surrounding production and supply-chain dynamics.
Deutsche Bank (ETR:DBKGn) adjusted its outlook on Rivian, lowering the price target due to concerns about achieving a positive gross margin in the fourth quarter of 2024, given ongoing supply chain challenges. The bank's revised model now sets the third-quarter revenue estimate at $867 million. The delivery forecast for the full year has been adjusted to approximately 51,000 units, with projected revenues at $4.4 billion.
Goldman Sachs (NYSE:GS) maintained a Neutral rating on Rivian, despite lower-than-expected vehicle deliveries and production numbers for the third quarter of 2024. The company delivered approximately 10,000 vehicles, marking a decrease compared to previous periods. Rivian also revised its 2024 production forecast to between 47,000 and 49,000 vehicles, due to ongoing supply chain constraints.
Lastly, Baird maintained its Outperform rating on Rivian, despite the company's announcement of lower than expected third-quarter deliveries and a reduced 2024 production forecast. The firm highlighted two major areas of focus for Rivian: the detailed plan for improving margins and the specifics surrounding the joint venture with Volkswagen (ETR:VOWG_p). These factors are expected to play a significant role in Rivian's trajectory toward profitability.
InvestingPro Insights
As Rivian Automotive Inc (NASDAQ: RIVN) forges ahead with its commitment to renewable energy through this significant partnership with RWE AG, it's crucial to examine the company's financial landscape. According to InvestingPro data, Rivian's market capitalization stands at $10.48 billion, reflecting its position as a major player in the electric vehicle market.
Rivian's revenue growth has been impressive, with a 68.2% increase over the last twelve months as of Q2 2023, reaching $5.014 billion. This growth aligns well with the company's ambitious plans to enable 7 billion miles of renewable driving through partnerships like the one with RWE.
However, InvestingPro Tips reveal that Rivian is "quickly burning through cash" and "suffers from weak gross profit margins." These insights are particularly relevant given the capital-intensive nature of the electric vehicle industry and the significant investments required for projects like the Champion Wind farm partnership.
It's worth noting that Rivian "holds more cash than debt on its balance sheet," which could provide some financial flexibility as it pursues its renewable energy goals. This strong cash position may be crucial for supporting long-term initiatives such as the 15-year power purchase agreement with RWE.
For investors seeking a more comprehensive analysis, InvestingPro offers 11 additional tips for Rivian, providing a deeper understanding of the company's financial health and market position.
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