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dk1 last won the day on May 4 2016

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About dk1

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  1. dk1

    Trading Solars

    There will be some value but it will be very minimal...few points to that - with advancement in technology PV will be much cheaper...and with abundance of solar PV, daytime energy pricing will be very low..which means these assets will have very low value...you already see negative spot price in germany during a summer day - new panels will be far more efficient and hence will have lower O&M..there are new materials in developement, which don't require almost any cleaning That said, there will be value due to other infrastructure built around these projects like transmission lines and so on..but I think overall it will be very minimal and should not be counted upon for any investment decision IMO
  2. dk1

    Trading Solars

    There is slight difference in renewable and REIT/MLP in IMO...REIT assets have longer life and value of assets can potentially increase with time as underlying real estate becomes more valuable with time...this is not the case with yieldco assets...solar projects will be worthless in 20 years... This allows yieldcos to do simple arbitrage as new cash raised is expected to distribute only 4-5% while new projects yield 8-10%..so easy to show dividend growth, but you always rely on finding cheap capital through the market..buying at low div yield/multiple of BV might work but there is no margin of safety IMO and hence I will not touch it..I might trade it with small amount but for me to commit significant capital (>5% of my portfolio), I will only do if I can rely on the underlying existing value of the business....
  3. dk1

    Trading Solars

    I like NYLD, PEGI, CAFD...i bought into NYLD around 12...i dont want to pay much more than BV for any yieldco as from my understanding the underlying projects yield 8%-10% ROE and that is fine for me given the low risk profile of projects....but these numbers are achievable in the long run only if you buy at BV...I have no clue what glorious presentations all these institutional investors saw and bought all these yieldcos at multiple of BV...they work by logic of div yield, which is quite a flawed logic IMO...i never got to buy PEGI and CAFD, but if they come close to BV, I will..till then wait patiently till Mr. Market comes up with that price..as generally it does sooner or later ABY and TERP are also interesting at these prices...below BV due to obvious reasons..I have some TERP as well...i traded some ABY in the past..will buy and hold if goes down again as i think their parent issue should be resolved soon, though i find underlying project portfolio more risky than others..but at right price it should be fine!!
  4. dk1

    First Solar (FSLR)

    i think some of the yieldcos could qualify for this as long as you enter at right prices...might not hold for 50 years but I can imagine holding these for many years with decent return over this time period. Trouble with mfg is that there is no moat...FSLR comes close to it...but for others its a commodity business and returns will always reverse to mean and fluctuate with the cycle...IMHO
  5. One thing that I find amazing is that most of these companies have very low debt amortization rate. This inflates the CAFD numbers IMO..for example TERP only amortizes project level debt and not the corporate level...NEP has repaid only 28M in first quarter...at this rate it will take more than 30 years...and that is quite a mismatch with the lifetime of underlying assets!!
  6. Sorry for asking again..but I don't fully understand it... I think it does not matter that NEE shares are free, but they have a 71% claim...so they can claim 71% of cash generation..is that correct? If that is the case, CAFD available to public is only 23% of total CAFD..on 290 that is about 67M...at share price of 28 and 40M shares total worth of this cash flow stream is 1120M...that does not sound very attractive to me. I have another question...how much debt service is included in this calculation of CAFD..I looked into 10-K but can't see the calculation of CAFD in that....could you please help me with that? Thanks for all your comments..really appreciate this informative discussion on the yieldco finances.
  7. Robert, I have tried to look into NEP...seems too complicated to me due to their limited interest in the opco! Also their Dividend is already above minimum required for IDR...which means return on new projects will be rather low. How do you account for their non-controlling interest..I was trying to value the Opco without considering non-controlling interest...if I put similar level of EV/EBITDA like others..or even higher and get an equity value from this...then NEP has only 23% economic interest in the Opco, on that basis it does not look at all cheap to me!
  8. I was looking at PEGI and trying to get my head around its valuation, but I find it not so cheap. So wanted to share my thoughts to see if I am missing anything. From portfolio perspective, it is certainly top-notch. Also no IDR, strong parent with one of the best corporate structure. From valuation perspective, it seems slightly expensive on EV/EBITDA basis. I use this instead of div yield as not all companies amortize debt fully and depending on the difference in corporate and project level debt, this can lead to quite some difference. Pattern amortized only around 54M of its debt in 2015, from total of around 1.8B. This is quite low IMO and potentially overstates the cash available for distribution. Also it is trading at close to 2xBV... Would be great to know what others think of this.
  9. dk1

    Canadian Solar (CSIQ)

    8P3 has projects with minority shares I think..that is why they have more income than revenue as those are not consolidated...CSIQ can also have the same..what do you think?
  10. dk1

    Canadian Solar (CSIQ)

    I am not sure if I follow you...Chinese projects are more profitable on paper as FIT is higher than PPA in US and costs are less, but there is no payment yet..so once payments start flowing, they can be more profitable but remains to be seen...if they continue to curtail the output and payments are delayed by few years, project IRRs might not look very attractive in the end.. 50-60M cash flow to equity seems good to me...for 1.1GW at cost of lets say 2.5B with 20% equity that is 500M...10% yield on this looks fine to me...most yieldcos bought projects with cash yield of 8%-9%... Calculating net margins in project business can be misleading IMO..initially there are high depreciation and interest payments..then there are payment for tax-equity and debt payments...so one need to focus on project IRRs..like you mentioned in one other post unfortunately these companies dont give that number...but that will be the right number to look at IMO.
  11. dk1

    Canadian Solar (CSIQ)

    For yieldcos $/W does not matter...most important metric is IRR on projects. TERP has high $/kwh from legacy projects, but they paid more than 3$/W for that...new projects will go into yieldco at 1.5$/W..so even if revenue per W is half, it can be still fine. 50-60M cash flow is after debt service, tax-equity financing and so on..so it is like CAFD...with 5% yield that is equal to >1B market cap...8P3 has CAFD of around 70M I think and market cap of 1.2B...
  12. Like explo mentioned, SUNE fundamental business model is flawed...they said that they can become profitable by selling 4GW at 2$/W with 17% GM...if they can sell these at this rate... But if look through these numbers, you see the problem. Why they need 4GW..reason is their high overhead...their overhead is around 700M...of course some of this will be variable and linked to project volume..but at 4GW this is 0.17$/W, for 3GW this will be 0.23 $/W...that is very high for a project developer...from my experience of working with UK and German developers, these guys work at less than 0.10 $/W overhead...so only way to compete with them is through lower cost of capital..and thats why yieldco was the only reason that allowed SUNE to operate..but with yieldco premium going up, this is not viable at least in forseeable future. Then question is price of 2$/W...this is quite high especially now and for future projects..most of the new utility projects sell for 1.5 or below...in emerging markets of china and India, it can get to 1.3 or so...and I think that is the reason SUNE was pushing for commercial and residential segment..it has much higher ASP and allows for higer $/W. Gross margin of 17% is reasonable, but again depend on the project location and selling price. FLSR gets gross margin of 18% or around with a more integrated business model...can SUNE achieve this with only EPC and project development..may be but so far their third-party sales dont support this. SUNE stock is very volatile and likely to remain so...trading this you can make a killing if get right..but just be cautious as I see very little chance of it surviving...good luck!
  13. dk1

    Solar News

    Japan can not sustain 7-8GW market forever...its matter of time before surcharge on electricity will become too high for politicians to justify it..similar to what happened in Germany...IMO we can expect another couple of years of similar installations due to all the approved pipeline and then it should go down to 2-3GW...but hopefully emerging markets will pick up the slack by then...especially India has potential to become next 10GW market..it is picking up but will need another 2-3 years before it reaches that level IMO
  14. Asset can only grow at ROE (if all earnings are retained) or by generating ROE above cost of equity...so growth is valuable if one thinks ROE is higher than cost of equity cost.....personally i will not like to pay above BV for a company generating 7-8% ROE, but market of course can think differently. what do you think?