After many years of holding BP shares, I finally sold them. $BP. (+0.59%) share.

Lack of perspective, hardly any growth despite annual share buybacks and dividend increases.

Deathblow that meanwhile competition like Shell $SHEL (-0.33%) and Total Energies $TTE (+0.61%) want to buy up or take over.

I have taken good dividends over the years and am out with a plus.

In the end, I invested the proceeds in the competitor Shell $SHEL (-0.33%)

and in the refrigeration and air conditioning technology of Carrier Global $CARR (+3.4%) refrigeration and air conditioning technology.

I will miss the high dividend (my personal dividend yield has now reached 8%)

But Carrier and Shell are growing very strongly and if Shell were to take over BP after all, the money would end up back there ☝🏻😜

• Earnings per share increase by 27 percent
• Free cash flow jumps to 420 million dollars
• New products and partnerships for growth (e.g. with Google on grid security and intelligent energy management)
• Optimistic outlook and forecast
• Share buybacks and dividends strengthen shareholders

https://www.finanztrends.de/carrier-global-aktie-kam-ueberraschend/

$CARR (+3.4%)

• $CARR (+3.4%) (NYSE: CARR) reported fourth quarter EPS of $0.54, $0.05 more than the analyst estimate of $0.49.

• Revenue for the quarter amounted to $5.15B, compared to the average estimate of $5.27B.

Forecast 2025

• Carrier Global expects EPS of $2.95-$3.05 in the 2025 financial year. Analysts had expected an average of $2.99.

• Carrier Global estimates revenue of $22.50B-$23.00B in financial year 2025. Experts had expected an average of $22.95B

Graphic: AI generated

The rapid development of AI has triggered a veritable boom in data centers. Companies such as OpenAI and DeepSeek are driving this revolution and the demand for high-performance servers is growing exponentially.

However, the increase in computing power is also accompanied by massive energy consumption, an issue that is leading to global discussions about infrastructure, efficiency and future investments [1].

At the same time, the question arises as to whether there is currently an overinvestment in computing power. The Chinese AI company DeepSeek, for example, has presented a model that works more efficiently than previous large language models (LLMs).

Does this mean that we will soon need less computing power?

Or will the Jevons paradox occur instead, i.e. the effect that more efficient technologies actually increase overall consumption in the long term? [2, 3]

In this article, I will focus on the key developments in the data center sector, the growing demand for energy, regional characteristics, current challenges and potential investment opportunities.

As always, the article is intended to shed light on the background to current events, provide food for thought and give impetus. The stocks mentioned do not, of course, constitute investment advice.

🤖 Data centers: the foundation of the AI revolution

The growing global demand for AI-supported software and digital applications requires powerful data centers. Goldman Sachs analysts forecast that the global demand for power from data centers will increase by 50% by 2027 and by up to 165 % could increase [1].

This chart below forecasts the energy consumption of data centers (in terawatt hours) by 2030, distinguishing between AI- and non-AI-based applications in the US and the rest of the world. Total consumption is expected to rise to over 1,000 TWh by 2030 [4].

Our analysts expect data center power consumption to increase by more than 160% by 2030

Source: [4], primary: Masanet et al. (2020), Cisco, IEA, Goldman Sachs Research

This data shows how AI applications will massively increase energy consumption. The rapid increase in the area of "US AI" and "Rest of world AI" is particularly striking.

The three main reasons for this increase are

• Larger AI models:

New models such as GPT-5 or DeepSeek AI require more and more computing power. Training and operating these models requires trillions of calculations [1].

• Real-time AI applications:

Companies are integrating AI into numerous applications: from search engines to personalized financial and healthcare services.

• Cloud computing & data storage:

As digitalization progresses, the global demand for data storage and cloud services is increasing [1].

Which companies dominate the market?

On the demand side for data centers, large hyperscale cloud providers and other companies are building large language models (LLMs) that are capable of processing and understanding natural language. These models need to be trained on huge amounts of information using power-intensive processors [4].

On the supply side, hyperscale cloud companies, data center operators and asset managers are deploying large amounts of capital to build new high-capacity data centers.

These include, among others:

• Microsoft $MSFT (+0.27%) : Operator of Azure Cloud and partner of OpenAI
• Alphabet $GOOGL (+1.27%) : With Google Cloud and DeepMind
• Amazon $AMZN (+0.1%) : AWS, the world's leading cloud provider
• Meta $META (-0.65%) : Develops its own AI chips and continues to expand its infrastructure

In addition, specialized data center providers such as Equinix $EQIX (+1.78%) and Digital Realty $DLR (+1.86%) as they supply physical infrastructure to the hyperscalers [6].

According to Goldman Sachs Research, demand for data center infrastructure will increasingly outstrip supply in the coming years.

The utilization rate of existing data centers is expected to rise from around 85% in 2023 to more than 95% by the end of 2026. However, the situation is expected to ease from 2027 onwards as new data centers are commissioned and demand growth driven by AI slows down (see chart below) [1].

Goldman Sachs currently estimates that the global power consumption of the data center market is around 55 gigawatts (GW). This is made up of cloud computing workloads (54%), traditional workloads such as email or data storage (32%) and AI (14%) [1].

For the future, analysts predict that electricity demand will increase to 84 GW by 2027. The share of AI is expected to grow to 27%, while the cloud share will fall to 50% and traditional workloads to 23% [1].

By the end of 2030, around 122 gigawatts (GW) of data center capacity will be online.

At this point, I asked myself as a layman how the units mentioned so far are to be understood, in my first graphic I speak of 1,000 TWh of energy consumption of all data centers by 2030 and now here is talk of 122 GW of data center capacity? In order not to go completely beyond the scope of the article, I have added a section at the very end in case some of you also feel like a layman and want to put the "units" into perspective.

... and now on with the article...

One central problem remains:
Where does all the energy come from?

⚡️Energieversorgung: Can the grid keep up?

According to estimates by Goldman Sachs, more than 720 billion US dollars will have to be invested in expanding the power grid worldwide by 2030 in order to supply the new data centers with sufficient energy [1].

Europe in particular, where electricity consumption was expected to decline for many years, is experiencing a veritable "demand shock" [1].

Which energy sources supply data centers?

• Natural gas & battery storage:

Natural gas is seen as a realistic short-term solution to meet continuous demand. It serves as a bridging technology until renewable energy and storage solutions are further developed, as renewable energy is not available around the clock [4].

• Renewable energies:

Wind and solar energy could cover around 80 % of demand in the long term, provided that sufficient storage solutions are integrated [4].

In practice, solar plants run on average only about 6 hours per day, while wind power plants run on average 9 hours per day. There is also a daily volatility in the capacity of these sources, depending on the radiation of the sun and the strength of the wind [4].

The graph shows the fluctuations in capacity factors for wind and solar energy in the USA in 2023. The capacity factor indicates how efficiently an energy source utilizes its maximum output throughout the year.

• Wind energy (light blue line): The highest capacity factors occur in the winter months (Jan-March) and drop significantly in the summer months (Jun-Aug).

• Solar energy (dark blue line): Efficiency rises in the spring (Mar-May) and reaches its maximum in the summer months (Jun-Aug) before falling in the winter (Nov-Dec).

The graph illustrates that wind and solar energy can complement each other seasonally: While wind is more efficient in winter, solar energy provides the highest yields in summer. This shows how important a balanced energy mix is to ensure security of supply.

In addition to finding environmentally friendly energy sources to power data centers, technology providers can reduce emissions intensity through efficiency gains.

The following chart shows the development of the workload and energy consumption of data centers between 2015 and 2023. Although the workload almost tripled, energy consumption remained almost constant until 2019 thanks to efficiency gains. The efficiency gains then slowed down from 2020 onwards.

Source: [4], primary: Masanet et al. (2020), IEA, Cisco, Goldman Sachs Research

This chart supports the discussion on the Jevons paradox (see below). Efficiency gains could be offset or even exceeded in the long term by higher workloads and AI demand. This highlights the need to make data center energy sources more sustainable.

• Nuclear energy:

Meanwhile, governments are also becoming more supportive of nuclear energy on the whole. Switzerland is reconsidering the use of nuclear generators for its electricity supply, while nuclear energy enjoys bipartisan support in the US and the Australian opposition party has put forward plans to introduce nuclear reactors [4].

Participants at the COP28 conference at the end of 2023, an annual summit convened by the United Nations to combat climate change, agreed to triple global nuclear capacity by 2050 [4].

Nuclear energy is considered the ideal option for basic power supply as it provides a reliable and constant supply of energy.

As a result, more and more large tech companies such as Alphabet, Amazon and Microsoft are turning to small modular nuclear power plants (SMRs).

📊 Increasing efficiency & the Jevons paradox

With new technologies such as DeepSeek, AI could work more efficiently in the future. But does greater efficiency automatically mean that less computing power is required?

The Jevons paradox: More efficiency = more consumption?

The Jevons paradox describes the fact that increases in efficiency often do not lead to lower consumption, but to higher consumption overall.

-Example:

In the 19th century, more efficient steam engines did not lead to lower coal consumption; on the contrary, as the machines became cheaper and more versatile, coal consumption actually increased.

With cars: more fuel-efficient engines did not lead to less gasoline consumption, but to people driving more cars.

-Applied to AI:

As AI models become more efficient, the cost per computation decreases. This makes AI applications attractive in even more areas, which in turn leads to a higher overall demand for computing power.

🌎 Regional distribution and global expansion of data center infrastructure

Current distribution: Where are the data centers located today?

Today, most data centers are located in the Asia-Pacific region and North America. Well-known locations are:

North America:

- Northern Virginia

- San Francisco Bay Area

Asia: Beijing

- Beijing

- Shanghai

These regions are characterized by high computing power, intensive data traffic and strong demand from corporate campuses [1].

The chart also shows the historical development of data center capacity by region (North America, APAC, etc.) from 2017 to 2024. The figures illustrate how fast the infrastructure for the AI revolution is growing and underlines why the energy requirements of data centers are increasing so rapidly.

The increase in capacity from around 20 GW in 2017 to almost 60 GW in 2024 shows an enormous growth trend. This correlates directly with the increasing demand for AI applications and cloud computing.

How is supply growing?

Goldman Sachs Research estimates that global data center capacity will increase to around 122 GW by the end of 2030, as mentioned above. The share of hyperscalers and specialized operators will increase from the current 60% to around 70% [1].

• Asia-Pacific:

The largest expansion of data centers has been recorded here in the past ten years.

• North America:

The largest expansion of new data centers is planned in North America over the next five years.

📈 Investment opportunities: Some winners of the AI and data center revolution

US shares e.g.:

• Carrier Global $CARR (+3.4%) : Precise cooling technology and air conditioning for data centers
• Vertiv Holdings $VRT (+0.22%) : Specialist in cooling and power solutions specifically for data centers
• Brookfield Renewable Partners $BEP.UN : Leading provider of renewable energy (hydropower, solar, wind) - supply contracts (PPAs) with data centers
• ON Semiconductor $ON (+0.6%) : Leader in chips for energy efficiency and thermal management. Solutions reduce power consumption in data centers and support AI integration
• Texas Instrumentes $TXN (+0.01%) : Energy-saving semiconductor products used in data center servers
• Equinix $EQIX (+1.78%) : Specialized in data center infrastructure
• Digital Realty $DLR (+1.86%) : Provider of physical infrastructure for data centers
• IBM $IBM (-0.28%) : Quantum computing technologies that potentially consume less energy and development of energy-efficient AI solutions
• Arista Networks $ANET (-0.2%) : Specialist in high-speed networking products for data centers
• Nvidia $NVDA (+0.4%) : Leader in AI GPUs, Leader in AI training market. Best choice for large AI models and data center training
• AMD $AMD (+1.56%) Competing with Nvidia with its own AI chips, but better positioned in the AI interference market where energy efficiency and cost-effectiveness are key. The interference market will be the next most important market, perhaps even the more important one.
• Broadcom $AVGO (-2.17%) Profits from network solutions for data centers
• Microsoft $MSFT (+0.27%) Google $GOOGL (+1.27%) Amazon $AMZN (+0.1%) : The big hyperscalers investing heavily in AI and cloud

European stocks e.g.:

• Siemens Energy $ENR (-0.15%) Important role in modernizing power grids, integrating renewable energies and improving storage solutions for data center reliability
• Schneider Electric $SU (-0.79%) : Leader in the development of energy management and cooling technology for data centers - specialty in the automation of both systems.
• ASML $ASML (-1.43%) : Indispensable for modern chip production
• Infineon $IFX (-0.63%) and STMicroelectronics $STM (-0.86%) : Leading semiconductor companies with a focus on AI applications
• RWE $RWE (-0.46%) and Enel $ENEL (+1.07%) Utilities that are increasingly focusing on renewable energies for data centers

Japanese stocks e.g:

• Daikin Industries $6367 (+0.4%) World market leader in air conditioning and cooling, offers specialized cooling systems for data centers and AI-supported plant management systems to further increase efficiency
• Tokyo Electron $8035 (-0.27%) : Important supplier for semiconductor manufacturing
• Mitsubishi Heavy Industries $7011 (+2.95%) : Works on the development of new nuclear power plants to secure the energy supply

🧠 Conclusion: AI, data centers & energy as the trend of the century?

Although some analysts warn of possible overinvestment, the figures indicate that the demand for computing power and energy for AI data centers will continue to rise sharply.

• Efficiency gains from models such as DeepSeek or new chip technologies could reduce energy consumption per computer, but the Jevons paradox means that overall demand will increase because more efficient systems will be used more often.

The biggest winners are therefore:

• Semiconductor companies: They supply the AI chips needed.
• Data center operators: They build the necessary infrastructure.
• Energy suppliers: They ensure the energy supply for the AI revolution.

In the long term, these companies could be among the biggest beneficiaries of the coming decades.

👨🏽‍💻 How do I position myself?

Personally, I think I am well positioned with the NASDAQ 100 $CSNDX (+0.27%) (portfolio share of 23%), as the focus is on US technology and growth stocks. The ETF complements my All-World with a stronger weighting in innovative sectors such as AI and cloud computing.

In the near future, I will also take a closer look at Daikin Industrie $6367 (+0.4%) share in order to increase the exposure to Japan and the share price offers an entry point at first glance.

In addition, AMD $AMD (+1.56%) has also caught my attention, the reason being its positioning in the aforementioned interference market. Most of the capital is currently flowing into the expansion of new AI models. However, as soon as these become a "commodity" and everyone uses them, most of the capital will probably flow into the interference market (market for the application of AI models).

Furthermore, I have Siemens AG $SIE (-0.96%) with approx. 2.3% portfolio share (still growing to approx. 4%), which I also see as well positioned for the future for the following reasons (in the context of the article):

Network stability

• Develops technologies for intelligent power grids ("smart grids"), essential for integrating renewable energies into the supply of data centers.

Data center control

• Provides automation and monitoring systems that optimize the energy consumption and efficiency of data centers

Efficient building structure

• The "Smart Infrastructure" division supports data centers with energy-efficient solutions for lighting, air conditioning and building monitoring

Not directly cooling systems, but:

• offers technologies that increase the energy efficiency of cooling systems by optimizing energy flows and data analysis

What is your opinion❓

• Which companies do you have on your radar?
• Is there a threat of overinvestment or are we just at the beginning of a century revolution?

Thanks for reading! 🤝

...Said digression follows after the sources...

__________

Sources:

[1] https://www.goldmansachs.com/insights/articles/ai-to-drive-165-increase-in-data-center-power-demand-by-2030

[2] "The Coal Question"
http://digamo.free.fr/peart96.pdf

[3] https://de.m.wikipedia.org/wiki/Jevons-Paradoxon

[4] https://www.goldmansachs.com/insights/articles/is-nuclear-energy-the-answer-to-ai-data-centers-power-consumption

[5] https://www.mckinsey.com/capabilities/quantumblack/our-insights/the-state-of-ai

[6] https://www.cbre.com/insights/reports/global-data-center-trends-2024

__________

🧭 Digression: on gigawatts and terawatt hours

In order to understand the relationship between the two figures, 122 GW (gigawatts) and 1,000 TWh (terawatt hours), it is important to clarify the units and their meaning:

• 122 GW (gigawatts):

Refers to the current average power capacity that data centers worldwide require to function. Power (measured in GW) describes the amount of energy consumed per second. This is therefore a snapshot of energy requirements.

• 1,000 TWh (terawatt hours):

This is an indication of energy consumption over a certain period of time, in this case one year. It describes how much energy is required in total in 12 months.

The forecast of 1,000 TWh is slightly below the value resulting from the calculation. The graph shows values slightly above 1,000 TWh; according to the calculation based on 122 GW of power capacity, energy consumption should be around 1,069 TWh.

Nevertheless, general reasons for deviations may be as follows:

• Efficiency improvements: Data centers could operate more efficiently through improved cooling, optimized hardware and software and thus consume less energy.
• Peak vs. average consumption: The figure of 122 GW could reflect peak demand, while the actual average annual demand is somewhat lower.
• Adjustments to the model: It is possible that the forecast of 1,000 TWh is conservative and does not take into account all additional loads or regional differences.

This shows how much the demand for data centers and energy will increase due to AI and digitalization by 2030

__________

I find this very exciting, especially if the economy and house building pick up again. Let's see what happens

⚠️⚠️⚠️Breaking News⚠️⚠️⚠️

ATTENTION to all who have a deposit with Trade Republic, today more than 100 savings plans will be executed with me, the real offensive starts at 15.30 and can take up to 4 hours, as there may well be "massive" "failures" and "delays" during this time, I ask you to keep calm, take a deep breath and not to bombard Trade Republic customer support with inquiries. Thank you very much 😁

As far as the Ultimate Homer "ETF" is concerned, many new stocks were added in September 😁

In since September 2

🇺🇸Chipotle $CMG (+0.09%)

🇺🇸Costco $COST (+1.47%)

🇺🇸Domino's Pizza's $DPZ (+1.02%)

🇺🇸Texas Roadhouse $TXRH (+2.05%)

🇺🇸TransDigm $TDG (+1.45%)

Newly launched today

🇺🇸Booz Allen Hamilton Holding
$BAH (+0.81%)

🇺🇸Blackstone $BX (-0.27%)

🇺🇸KKR & Co
$KKR (-0.27%)

🇺🇸Vulcan Materials
$VMC (+2.07%)

🇺🇸CSX $CSX (+0.04%)

🇺🇸Carrier Global $CARR (+3.4%)

🇺🇸Hilton Worldwide $HLT (+1.51%)

🇺🇸Merck & Co $MRK (+1.8%)

🇺🇸Moodys $MCO (+0.46%)

🇺🇸Rollins $ROL (+0.83%)

🇺🇸Toll Brothers $TOL (+0.21%)

🇺🇸Watsco $WSO (+2.94%)

🇺🇸Cardinal Health $CAH (+1.69%)

🇺🇸Colgate Palmolive $CL (+2.63%)

🇺🇸Emerson Electric $EMR (+0.49%)

🇺🇸Nordson $NDSN (+2.24%)

🇬🇧BAE Systems
$BA. (+0.31%)

🇬🇧RELX
$REL (+0.81%)

🇬🇧Bunzl
$BNZL (-0.59%)

Picked up another air conditioner for the last warm days

(The heat pump and investing - nothing but hot air?)

The news broke like a storm in the German news last week: Viessmann is switching to Carrier $CARR (+3.4%) for a hefty 12 billion euros. 💰

But is this news really that big or is it not actually exactly the scenario that I have repeatedly alluded to and discussed in my previous articles on NIBE? ☝️

The heat pump market has been a topic with enormous potential, opportunities and risks, and not just since the decision by the German government and other countries.

Reason enough for me to look at the topic of heat pumps and once again at my investment, NIBE Industriers $NIBE B (-4.8%) 🧐

The heat pump - definition and function:

In short, a heat pump is a heat engine that uses technical-mechanical work to absorb thermal energy from a source with a lower temperature than the target temperature and transfers it to a heating system as useful heat. [see diagram 1; source 1]

Heat pumps are primarily used to heat buildings, but are also used in the process industry, in domestic tumble dryers and also in refrigerators (at least systematically with the process principle of the heat pump...).

Heat pumps are classified according to their process, heat source, heat utilization and mode of operation. It would go beyond the scope of this article to go into all the different methods. You can find more details in [Source 2]. What is important for most people, however, is the type of heat source.

There are three main sources and the associated operating modes of heat pumps:

• Air-to-water heat pump (energy from the ambient air is drawn in and when it comes into contact with the refrigerant, it evaporates and sets the heat pump circuit in motion)
• Brine-water heat pump (geothermal heat is transported via a geothermal probe and brine-filled pipe to generate energy, known as a geothermal heat pump)
• Water-to-water heat pump (groundwater is pumped via a probe and well into another "well", where it is heated by the geothermal energy and then fed into the heating process)

The heat pump - advantages and disadvantages:

Below I briefly list the advantages and disadvantages of the heat pump. However, the advantages and disadvantages mentioned here are WITHOUT evaluation. It is therefore purely a list to provide an overview. Also, certain points in the advantages and disadvantages are only relevant if certain conditions are met!

No claim to completeness, these are my loose considerations.

Advantages:

• Energy efficiencythrough the use of environmental heat
• Cost savings, lower energy requirement of the pump leads to lower operating costs
• Environmentally friendly, no fossil fuels therefore reduction in CO2 emissions
• Versatility, various applications are possible - heating, hot water preparation and cooling
• Comfort, with a constant room temperature throughout the year
• Durability, long service life and low maintenance requirements

Disadvantages:

• High purchase costs, conventional heating systems are cheaper to purchase, therefore higher investment costs are required
• Dependence on ambient temperature, reduces energy efficiency, especially in winter
• Space requirementDue to the size and installation space required, more space is needed in the house and on the property
• Noise developmentsome heat pumps generate a lot of noise, especially when starting up or under load
• Complexityheat pumps are not maintenance-free and require regular servicing to ensure the pump's longevity

The heat pump - a "short" history

In 1834, Jacob Perkins was the first developer to complete the construction of a machine based on the principle of the heat pump. At that time, he designed a cooling device in which ether was pumped into a cooling coil system and used on ships, for example. 💡

The machine he designed already contained the four main components of a modern heat pump: the compressor, a condenser, an evaporator and an expansion valve.

It was Lord Kelvin (yes, the very gentleman after whom the Kelvin temperature unit is named) who predicted that a "reverse heat engine" could and would also be used for heating purposes. It was also he who recognized that a heat pump would require less primary energy to be of effective use due to its principle of extracting heat from the environment.

Nevertheless, another 85 years passed before the first heat pump for space heating went into operation. It was thanks to pioneers such as the German Carl von Linde (inventor of the modern refrigerator) and other inventors with a thirst for action, that heat pump technology could be further developed and built upon thanks to refrigeration machines.

Finally, the Swiss Heinrich Zoelley was the first daring inventor to propose and devise an electrically driven heat pump using geothermal energy as a heat source. He was granted patent number 59350 in 1919, but again... the time was not yet ripe and it took another 20 years for the first technical realization. From 1930, the first air conditioning systems for room cooling with the option of additional room heating were built. However, the efficiency was sufficiently modest. 😔

In the wake of the Second World War and the resulting coal shortage, Swiss companies such as Sulzer, Escher Wyss and Boverei developed and commissioned around thirty-five heat pumps between 1937 and 1945. The main sources of heat were lake water, river water, groundwater and waste heat. The first pumps mentioned were therefore water-water heat pumps. Special mention should be made of the heat pump from Escher Wyss, as this heat pump built in 1937/38 was used to replace wood-burning stoves in Zurich City Hall. This heat pump heated the town hall for 63 years. Until the year 2001.😳

Falling oil prices in the 1950s and 60s, on the other hand, were a major blow to the development of the heat pump. Burning fossil fuels was more lucrative, sometimes more effective and, above all, cheaper.

In Germany, the first heat pump was installed in a detached house in 1968. Here, a geothermal heat pump was used in combination with low-temperature underfloor heating.

It was only with the oil embargo and the resulting rise in the price of oil that the heat pump suddenly became interesting again. But the story would be too simple if the many incompetent suppliers in the heat pump sector and the renewed fall in oil prices at the end of the 1980s had not heralded another abrupt end to heat pump technology.

In the end, it was the Swedes who, together with the Swiss company Sulzer-Escher-Wyss, developed and commissioned the largest heat pump system in the world (180 megawatt heat pump system) with 6 pump units of 30 MW each for the Stockholm district heating network. The system works with the heat source of seawater from the Baltic Sea.

The rapid spread of heat pump heating began in 1990. This was due to technical advances, greater reliability, more efficient compressors and, of course, significant price reductions. 📈

Renewed and even greater importance has been attached to heat pump technology since the outbreak of the Ukraine conflict and the associated war. This is because the heat pump promises to decouple the use of fossil fuels such as gas and oil.

The heat pump - manufacturers in Germany and internationally

In Germany, the market for heat pumps is served by manufacturers such as Bosch Thermotechnik, Stiebel, Eltron, Vaillant and, last but not least, Viessmann. Bosch Thermotechnology is the subsidiary of the supplier Bosch and stems from the takeovers of Buderus and Junkers. This makes Bosch one of the largest heating manufacturers in Europe. Vaillant was founded in 1874 and today stands primarily for the manufacture of heating, ventilation and air conditioning technology. Vaillant achieved a turnover of 3.3 billion euros in 2021. Sales of heat pumps at Vaillant increased by 50% compared to the previous year. Striebel Eltron was founded in 1924 and has been developing heat pump technology since the early 1970s. The company generated a turnover of more than 830 million euros in 2021. There are plans to more than triple production capacity at the Holzminden site.

Among international manufacturers, Daikin Industriers and Panasonic (both Japan) as well as LG or Samsung (both South Korea) and NIBE Industriers (Sweden) are among the largest manufacturers of heat pumps. With the acquisition of Viessmann and the recent takeover of Toshiba Klimatechnik, Carrier Global has also made further inroads into the heat pump market.

It can be assumed that other, currently smaller players want to and will jump on the heat pump bandwagon. This also includes companies that we still classically assign to fossil fuels or only remotely associate with air conditioning and heating technology.

The heat pump - the market (in Germany), its key figures and future

The market for heat pumps has experienced a massive upswing in recent years. The sales volume in 2017 was 48 billion US dollars. It is now expected to double to up to 100 billion US dollars worldwide this year. 🤑

While Asia and the USA were still the drivers of global demand for heat pumps in recent years, Europe has seen a real boom in demand since the outbreak of the war in Ukraine. In Germany alone, sales rose from 154,000 heating heat pumps in 2021 to 236,000 appliances in 2022 (+53.25%).

The federal government in Germany also decided to consistently expand and standardize this heating technology by 2030. Half a million heat pumps are to be installed in 2024, and by 2030 the installed base will be 6 million appliances. 📊

No wonder the industry association "Bundesverband Wärmepumpe e.V." summarizes: "This will make the heat pump the new standard heating system." According to its study from January 30, 2023, these targets can be considered realistic. [Source 3]

The market share of heat pumps in the so-called heat generator market increased from 16.5% to approx. 25% in 2022. This means that one in four heating system replacements involves the installation of a heat pump. Around 56,000 heat pumps were installed in new buildings, which corresponds to 54% of newly built properties. 🏠

In 2022, 1.45 million heating heat pumps were in operation in Germany. The majority of these systems were installed in the last 15 years. With the long service life of these appliances described above, most of them are still in their "youth", which is why the replacement rate for old appliances is currently still below 2% of annual sales. An increase of 5% is expected by 2030.

The International Energy Agency (IEA) expects the installed heating capacity of heat pumps to increase from the current 1,000 GW (gigawatts) to up to 2,600 GW (gigawatts) by 2030. In some countries, such as the USA and Scandinavia, heat pumps are already a standard heating system.

By the end of the decade, the heat pump industry association expects the annual number of heat pumps installed in Germany to be slightly less than one million.

My investment - NIBE at risk?

Of course you start to wonder when you read news like the Viessmann takeover. Is my investment and the decision to invest in it the right one? Can the Group survive in this tough market? Is the company equipped for the future?

NIBE - The company

In 1949, Nils Bernerup and Christian Backer founded Backer Elektro-Värme AB in Sösdala, Sweden, which manufactured the so-called Backer element (based on a patent held by Christian Backer for tubular heating elements). In 1952, Bernerup also founded NIBE-Verken AB in Markaryd by taking over Ebe-Verken. Since then, Bernerup's initials have formed the company name NIBE.

With Sven Christiensson and then Rune Dahlberg, NIBE developed into a leading manufacturer of tubular heating elements with a focus on quality and efficient production by 1987.

However, the company was already present in 1952 with water heaters in the agricultural sector (here for milking systems), manufactured fireplaces for the Handöl brand as a subcontractor, later took over this brand and introduced the first heat pump (Fighter Twin) from NIBE in 1981. Production of heat pumps begins immediately afterwards in Markaryd.

In 1989 the Bernerup family decides to sell the two companies Backer-Värme AB and NIBE-Verken AB. Employees from these two companies, together with two other investors, set up what is now known as NIBE Industrier AB and took over the business.

Gerteric Lindquist is appointed CEO, who is still the CEO of NIBE today.

NIBE Industrier AB has been listed and traded on the Stockholm Stock Exchange since 1997. The IPO is also the starting signal for the company's strong expansion and acquisition strategy, which continues to this day.

More than 70 acquisitions and purchases have been made since the IPO. The complete list is available at https://www.nibe.com/nibe-group#Text3 and https://www.nibe.com/de/nibe-group/akquisitionen-der-nibe-group to view the complete list.

A special feature of acquisitions by NIBE is the independence of the acquired companies after the takeover. Newly acquired companies are encouraged to continue to write their own corporate history with commitment. This means that acquired companies should retain their identity and brands. The previous business owners are also left untouched as far as possible. The companies are to be continued with their existing management at the original locations and thus stand for continuity and responsible local action.

NIBE in figures = love?

The latest annual report can be found at [Source 5] from 14.04.2023.

NIBE's core market is North America with 27%, the Scandinavian countries with 22% and Europe with 46%. In the year 2022, the sales amounted to SEK 40.071 billion (EURO 3.5 billion) compared to SEK 30.83 billion (EUR 2.7 billion) in the previous year. This corresponds to growth of 30%. Sales growth has been stable for at least 5 years.

The earnings per share amounted to SEK 2.17 (0.19 EURO). This is the fifth consecutive year of profit growth.

The operating margin increased slightly in 2022 from 14.4% (2021) to 14,7%. After tax, NIBE will generate consolidated profit of SEK 4.428 billion (EUR 387 million)which corresponds to an increase of 33.16% compared to the previous year (SEK 3.348 billion). With an equity ratio of more than 50% the company is financially sound and ready for further acquisitions.

NIBE pays a dividend. However, this is quite meagre. However, it makes sense in view of the capital expenditure required for development and acquisitions. The dividend yield in relation to the share price is approx. 0.57% at SEK 0.65 (€0.057). In the long term, the payout ratio is expected to be 25-30% of consolidated profit. Investors should also be aware that Swedish shares are subject to a higher withholding tax.

NIBE = future?

NIBE has already defined targets for its business activities in the past. These include corresponding targets for key operational figures, but also targets in the areas of SRI and ESG.

The corporate targets focus on growth (at least 20% per year), return on equity (at least 20%), operating margin (of at least 10% of sales) and equity ratio (should not fall below 30%).

In terms of the sustainable corporate goals, 60% of the product portfolio was originally intended to represent sustainable and higher climate protection by the end of 2023; this target has now already been achieved at 63.2% and has therefore been reformulated to 70% by 2026.

Energy consumption is to fall continuously and the accident rate in the workplace is to remain constantly low. The LTIF value is used for this purpose.

The CO2 balance is to be improved and NIBE wants to be completely climate-neutral by 2050. To achieve this, emissions are to be reduced to 65% of the 2019 baseline by 2030. This corresponds to 11,500 tons of CO2.

NIBE sees its opportunities in the areas of energy efficiency in the end consumer's own home, safety in everyday life in the supply of hot water, energy efficiency in buildings, infrastructure and industry.

Opportunities for NIBE:

• Great market potential for heat pumps and climate control solutions
• Potential in the renewable energy sector
• International market presence
• Broad product range
• Intensive and proactive product development
• Synergy effects from new acquisitions and cooperations
• Expansion through acquisitions
• Energy prices may force consumers to take action

Risks for NIBE:

• Legislative changes and decisions by authorities affecting existing product ranges
• Weak economy
• Increasing competition and competitors from Asia and the USA
• Energy prices could fall for consumers or rise for production
• raw material prices
• Currency fluctuations (SEK to dollar and EURO)
• Dependence on suppliers (see supply chain problems)
• Geopolitical situation such as wars and sanctions

The bottom line:

The topic of heat pumps is a highly complex one. Not only are politicians currently looking for solutions and ways to quickly move away from fossil fuels or reduce dependence on certain countries or resources, but complex interrelationships such as the energy-efficient use of air conditioning technology products or heat and cooling pumps used in production and process chains will also play an important role in the future.

The sale of Viessmann's air conditioning division to a major player in air conditioning technology shows that the cleansing and consolidation of the market is only just beginning. Large groups from Asia in particular will penetrate the individual regional markets.

In market terms, there is still a lot of cake to be divided up, but the battle for distribution is no children's birthday party and will take one or two competitors and protagonists out of the race.

Viessmann was just the beginning for us Germans and now, of all times, the big outcry. In a normal news situation without the explosive nature of the current situation, this takeover would probably have remained a side note. Now, in the meantime, the news is being spread with brute words such as the "sell-out of German industry"... but this sale is by no means a sell-off, but it shows the direction in which the market is moving. Eat or be eaten.

NIBE has been expanding for many years now. The areas of activity are broadly based and not just limited to heat pumps. Whether heating solutions with fireplaces, heat pumps or as a partner to industry, NIBE has established itself as a professional, solution-oriented and, above all, committed company (in terms of the environment and social responsibility). The solutions on offer are constantly being developed, collaborations with other companies are being sought and the company's expansion strategy is being driven forward.

I am not currently concerned that the market for heat pumps or other climate-friendly solutions will slow down or be sold off to Asian competitors (similar to PV and solar solutions in the past). NIBE would do well to maintain its growth trajectory.

I am also positive about the company's future goals and competencies and hope for further sustainable developments in the future.

I am sticking with it, even if I expressly warn against exuberant feelings for shares:

NIBE is LOVE. ♥️

At least for my portfolio.

Source 1: Chart 1 - https://um.baden-wuerttemberg.de/fileadmin/redaktion/m-um/intern/Dateien/Dokumente/2_Presse_und_Service/Publikationen/Energie/Energieeffiziente_WP_Heizungsanlagen.pdf or as a video at https://youtu.be/KDL1Xf-kuIA

Source 2: Wikipedia on the heat pump https://de.m.wikipedia.org/wiki/Wärmepumpe

Source 3: Heat pump industry study 2023 https://www.waermepumpe.de/fileadmin/user_upload/waermepumpe/05_Presse/01_Pressemitteilungen/BWP_Branchenstudie_2023_DRUCK.pdf

Source 4: Graphic from the study by source 3, heat pump sales (Heat pump sector study 2023)

Source 5: Annual report 2022 from 14.04.2023 https://www.nibe.com/download/18.4ccfd67f186f21bb5967bdd/1681288254456/DE-G-bericht-22-W.pdf

#nibe

Long live the #tldr club ! 📝