Hot Picks: Three energy plays benefiting from the global transition to cleaner fuels

A new wave of energy companies is emerging from the transition toward cleaner, more predictable revenue streams. From power generation to renewable fuels, investors are finding opportunities in businesses backed by long-term contracts, major corporations and supportive policy frameworks.

BNN Bloomberg spoke with Shawn Severson, CEO and co-founder at Water Tower Research, who highlighted three energy companies he believes are well positioned for structural growth — Liberty Energy, REX American Resources and Gevo — as the industry moves from cyclical volatility to durable, contracted returns.

Key Takeaways

• Liberty Energy is expanding from oilfield services into distributed power generation with long-term take-or-pay contracts.
• The company expects to deliver more than one gigawatt of power by 2027, serving data centres and industrial customers.
• REX American Resources is transforming its ethanol business through carbon capture and major U.S. tax credit incentives.
• The firm is expanding production capacity while benefiting from new policy support for year-round E15 fuel sales.
• Gevo is a leading sustainable aviation fuel producer with long-term airline contracts and cost-competitive technology.

Read the full transcript below:

ANDREW: Time for Hot Picks. Our guest has three ideas in energy generation and renewable fuels. He says one advantage here is predictable, contracted revenue streams backed by major corporations and federal government policy. We’re joined by Shawn Severson, CEO and co-founder of Water Tower Research. Thanks very much indeed for joining us. You’ve got some fresh names first — this is great — Liberty Energy. Tell us what they do and why you like the look of them.

SHAWN: Yeah, great. Thanks, Andy. I think one of the big trends we’ve seen is the growth in power generation and consumption in AI and data centres. There have been a lot of obvious plays out there that people have looked at, like Oklo, Constellation and NRG, really driving into this. But peeling back the layers and getting into some of these other companies like Liberty is particularly attractive because they have an emerging business that’s transforming their overall mix.

That’s what they call Liberty Power Innovations, or LPI, which they launched in April 2023. It’s developing a big presence in distributed power generation driven by natural gas — a key bridge fuel and bridge technology. They’ve been making great strides in that area. So we like that trend, we like how they fit into the power-demand equation, and they’re not as widely discovered as some of the other plays out there.

ANDREW: Did we look at the stock? I can’t remember — LBRT. So, are they running small? How are they using natural gas?

SHAWN: Yeah, so it’s distributed power generation — on-site production. This is using power generation right on data centre sites with natural gas. People sometimes forget that natural gas is an incredible bridge technology, and it’s going to be a key part of the power generation ecosystem.

In fact, they struck a deal with Oklo on using SMRs and the nuclear side on-site. But as a bridge technology, natural gas is playing a big part here. Liberty Energy transforming their business toward distributed energy is going to be key.

ANDREW: Your next idea, REX American Resources — they’re active in renewable fuels and carbon capture?

SHAWN: Yeah. One thing that’s often forgotten when we talk about energy generation is that the agricultural ecosystem can play a very important role in fuels. People always think of oil, but REX American is a good example of an ethanol company expanding into carbon capture, creating low-carbon ethanol.

They’re able to generate credits from 45Z and other regulatory tailwinds. I think E15 — an initiative in the U.S. to expand the ethanol blend from 10 to 15 per cent — is also driving a lot of demand for ethanol, particularly low-carbon ethanol. This is often forgotten as a key part of the fuel infrastructure in the United States.

ANDREW: Now, our chart showed a big drop in the stock, but I think REX just split two for one, so that may be distorting things.

SHAWN: They did, yes. It was a bit of a rocky road in the beginning because there were questions about how 45Z and 45Q were going to play out when the new administration came in. But after everyone had a chance to digest that, they realized the extensions to tax credits were solid, business fundamentals were strong, and it started to catch investor attention across the renewable fuel and ethanol sectors.

ANDREW: And your final idea is involved in renewable aviation fuel?

SHAWN: Yes, GEVO — ticker GEVO. The sustainable aviation fuel market is very interesting. If you look at the airline industry, really the only way they can reduce carbon is through fuel. Recycling your Coke can on the airplane isn’t going to do it, right? So you have to have a solution on the fuel side, and SAF is really the only solution that helps achieve those targets.

Jet fuel demand has been growing — estimates are around nine per cent — while refining capacity is shrinking. That’s putting pressure on the system from both carbon-reduction and demand sides. SAF, and Gevo in particular, sits right in the middle of that trend. Estimates suggest you could produce about 70 alcohol-to-jet facilities using renewable sources such as corn or other carbohydrates — from the field to the wing.

ANDREW: From the field to the wing — so corn and other starchy plants are the essential feedstock here?

SHAWN: That’s right. And it’s a drop-in fuel, which is important. Drop-in fuels like SAF can fit into the existing infrastructure that’s out there, so you can mix it with petroleum-based jet fuel. You don’t need separate infrastructure for transportation or blending. It really is a drop-in solution, and people — especially big airlines — are starting to notice this. It’s going to be a major focus over the coming decade, and SAF is going to be the solution for them.

ANDREW: We’d better leave it there. Shawn, thank you very much indeed for joining us.

SHAWN: Thank you very much for having me.

ANDREW: Shawn Severson, CEO and co-founder of Water Tower Research.

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This BNN Bloomberg summary and transcript of the Oct. 30, 2025 interview with Shawn Severson are published with the assistance of AI. Original research, interview questions and added context was created by BNN Bloomberg journalists. An editor also reviewed this material before it was published to ensure its accuracy and adherence with BNN Bloomberg editorial policies and standards.