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8point3 Energy Partners LP (CAFD)

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Black numbers. Less than 50% of target CAFD. Raising DPS 3.5%. Should have a decent reception I think.

 

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So basically, given the information CSIQ has provided, they would be able to create a yieldco with cash available for distribution similar to CAFD. CAFD has a market cap of $744M (from broker, haven't verified). This means at a cost to build of $2/W and 30% equity, the Recurrent pipeline will cost $2.4B to build after putting in $720M in equity. In other words, it is essentially worthless in current market conditions. 

I do not know how one account for the ITC tax credit, is that rolled into the cash available for distribution as CAFD revenue was only 50% of it dividend payout.

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So basically, given the information CSIQ has provided, they would be able to create a yieldco with cash available for distribution similar to CAFD. CAFD has a market cap of $744M (from broker, haven't verified). This means at a cost to build of $2/W and 30% equity, the Recurrent pipeline will cost $2.4B to build after putting in $720M in equity. In other words, it is essentially worthless in current market conditions. 

I do not know how one account for the ITC tax credit, is that rolled into the cash available for distribution as CAFD revenue was only 50% of it dividend payout.

It would indeed be bad news if Recurrent's pipeline gets built at 17% to 30% higher than average Q1 2015 utility solar costs.

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It would indeed be bad news if Recurrent's pipeline gets built at 17% to 30% higher than average Q1 2015 utility solar costs.

Go and insert some costs and see what it takes for CSIQ to recover it acquisition cost and make s profit that rationalizes the buildout. At 1.70 which SEIA estimates as the average for Q1, they still don't recover their acquisition costs.

Edited by BIPV Investor

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Go and insert some costs and see what it takes for CSIQ to recover it acquisition cost and make s profit that rationalizes the buildout. At 1.70 which SEIA estimates as the average for Q1, they still don't recover their acquisition costs.

What are the acquisition costs?

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What are the acquisition costs?

 

The $265M they had to pay Sharp to buy Recurrent. 8th dimension has done lots of rough estimates on cash generation for the current generation of solar plants being built/bid and it is not overly apparent that they make financial sense based on the estimated cash generation over the projects lifetime. The key with solar plants is that it is a depreciating asset that has little value 20 years out. We aren't buying real estate here as that tends to appreciate over time, hence in is willing to accept a lower return. 

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The $265M they had to pay Sharp to buy Recurrent. 8th dimension has done lots of rough estimates on cash generation for the current generation of solar plants being built/bid and it is not overly apparent that they make financial sense based on the estimated cash generation over the projects lifetime. The key with solar plants is that it is a depreciating asset that has little value 20 years out. We aren't buying real estate here as that tends to appreciate over time, hence in is willing to accept a lower return. 

What happened to the rest of the pipeline?

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The $265M they had to pay Sharp to buy Recurrent. 8th dimension has done lots of rough estimates on cash generation for the current generation of solar plants being built/bid and it is not overly apparent that they make financial sense based on the estimated cash generation over the projects lifetime. The key with solar plants is that it is a depreciating asset that has little value 20 years out. We aren't buying real estate here as that tends to appreciate over time, hence in is willing to accept a lower return. 

You mean $130M?

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The $265M they had to pay Sharp to buy Recurrent. 8th dimension has done lots of rough estimates on cash generation for the current generation of solar plants being built/bid and it is not overly apparent that they make financial sense based on the estimated cash generation over the projects lifetime. The key with solar plants is that it is a depreciating asset that has little value 20 years out. We aren't buying real estate here as that tends to appreciate over time, hence in is willing to accept a lower return. 

Little value? As in depreciation taking down to zero?

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So basically, given the information CSIQ has provided, they would be able to create a yieldco with cash available for distribution similar to CAFD. CAFD has a market cap of $744M (from broker, haven't verified). This means at a cost to build of $2/W and 30% equity, the Recurrent pipeline will cost $2.4B to build after putting in $720M in equity. In other words, it is essentially worthless in current market conditions. 

I do not know how one account for the ITC tax credit, is that rolled into the cash available for distribution as CAFD revenue was only 50% of it dividend payout.

Are you quoting $2.4B worth as cost?

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Unfortunately they haven't given us enough information to understand either costs or revenue. 

 

Rough calculations for 1,200 MW and 30% equity:

@ $1.5/W = $1.8B and $540M equity

@ $1.6/W = $1.92B and $576M equity

@ $1.7/W = $2.04B and $612M equity

@ $1.8/W = $2.16B and $645M equity

@ $1.9/W = $2.28B and $684M equity

 

As the revenu remains fixed and may well be comparable to CAFD's, you can quickly see how low the costs need to come in for this buildout to make any sense given current market conditions. And yes it cost $265M to buy Recurrent. 

http://m.pv-magazine.com/news/details/beitrag/canadian-solar-completes-acquisition-of-recurrent-energy_100018858/

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Well, BIPV you need to take more granular approach to details when trying to figure this area.

CSIQ bought R for $265M, but they bought $130M in solar plant build out, paying for brand, project agreements, people and RE some $135M. So the premium is $135M.

The $1.70 is a price per Wdc. 200MWac project which is listed for 258MWdc in every piece of literature published got $337M financing. At 20% equity this project is costing CSIQ $421M. This means at wattdc the cost is $1.64. Every project in Texas gets 10% ITC credit in addition to 30% ITC national. As you know ITC is applied to income tax. How is a company like CSIQ can get $84M in income tax credits? Simply by selling them to partners.

This is where the Mustang project comes along. They borrowed $165M, which actually at 80% is around $2 per watt (it is ac as per pr so costs are coming down). How did they get $101M in tax equity investment? 30% at $2.4 per watt is about $72M, even at value of money today for equity sold there is a premium. Not sure how it is done yet, but it is rather very profitable.

Put those two numbers together $200M cost, $101M in investment tax credit. that is about 50% of cost.  It does not sound that they sold anything else but ITC and perhaps some tax incentives in Cali.

Cheers

 

Edited by odyd

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US pipeline is 2.7GW, and we are talking only about 1.2GW now. R has 4GW including somewhat doubtful 1.2GW in Australia.

$135M/4GW this is about 3 cents per watt. They can possibly drop those 3 cents in price of modules in 6 months.

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I guess nothing what I wrote in my two posts can be found in SA articles. LOL.

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Well, BIPV you need to take more granular approach to details when trying to figure this area.

CSIQ bought R for $265M, but they bought $130M in solar plant build out, paying for brand, project agreements, people and RE some $135M. So the premium is $135M.

The $1.70 is a price per Wdc. 200MWac project which is listed for 258MWdc in every piece of literature published got $337M financing. At 20% equity this project is costing CSIQ $421M. This means at wattdc the cost is $1.64. Every project in Texas gets 10% ITC credit in addition to 30% ITC national. As you know ITC is applied to income tax. How is a company like CSIQ can get $84M in income tax credits? Simply by selling them to partners.

This is where the Mustang project comes along. They borrowed $165M, which actually at 80% is around $2 per watt (it is ac as per pr so costs are coming down). How did they get $101M in tax equity investment? 30% at $2.4 per watt is about $72M, even at value of money today for equity sold there is a premium. Not sure how it is done yet, but it is rather very profitable.

Put those two numbers together $200M cost, $101M in investment tax credit. that is about 50% of cost.  It does not sound that they sold anything else but ITC and perhaps some tax incentives in Cali.

Cheers

 

While interesting,  getting caught up in the details can just confuse things. The fundamental question is if the cash available for distribution numbers they provided then retracted included ITC credits, or if this tax credit will be retained by CSIQ as a huge windfall. Obviously at 30% equity financing, the tax credit is  of equal magnitude and Cabot be overlooked. If the tax credit is retained by CSIQ and the guided CAFD is independent, I find it hard to believe they would have clearly indicated as much. This isn't really a topic I fully understand so if anyone has more clarity, please share. 

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US pipeline is 2.7GW, and we are talking only about 1.2GW now. R has 4GW including somewhat doubtful 1.2GW in Australia.

$135M/4GW this is about 3 cents per watt. They can possibly drop those 3 cents in price of modules in 6 months.

i think FSLR said their Australia pipeline is back in play after some policy changes their.

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Some more amusing numbers. CAFD raised annual dividend to $0.88 yesterday. The market responded by pegging PPS at a level corresponding to 8.3% (8 point 3) yield. 

 

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While interesting,  getting caught up in the details can just confuse things. The fundamental question is if the cash available for distribution numbers they provided then retracted included ITC credits, or if this tax credit will be retained by CSIQ as a huge windfall. Obviously at 30% equity financing, the tax credit is  of equal magnitude and Cabot be overlooked. If the tax credit is retained by CSIQ and the guided CAFD is independent, I find it hard to believe they would have clearly indicated as much. This isn't really a topic I fully understand so if anyone has more clarity, please share. 

If you want to simplify things just view the premium that CSIQ paid over RE book value as a acquisition cost that can be distributed on the development cost of the late stage pipeline. With PPAs already in place this won't affect the future cash flow from these projects, just how much profit they'll report. So the question is if the cost exceeds the value. The value depends on discount rate used for the stable future cash flows from the PPA based power sales. The higher yields of yieldcos could be interpreted as lower market valuation of (the future cash flow from) PV plants, even though there's a growth component and other involved in yieldco valuations.

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