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TerraForm Power, Inc. (TERP)

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2 hours ago, kknd1234 said:

Interesting article about SUNE from last week.

 

http://brontecapital.blogspot.com/search?q=Sun+Edison

another proof that something wrong with SUNE. I can confirm that they did not answer emails including  my 3 emails. $3 price talks for itself: the stock lost 90% within less than 4 months. We had this kind of debacles only in 2008. When I make DD a quality of management is #1 criterion. A great example is BBRY vs AAPL. BBRY ALREADY had a lion share in  smart mobile phone world  while AAPL just started this business. We know an outcome and this is entirely due to quality of leaders. If you come back to solars a starting point for LDK and CSIQ was equal. When LDK CEO begun a buying spree, borrowing beyond any reasonable limits, I sold out all my LDK shares in $12-14 range (losing 30%) and forgot about the stock.   

Edited by alex_iff

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I see that quite few people had bought yieldcos recently and questions or doubts circulate about those decisions. Fear in combination with excitement of opportunity shown by those who are buying and surprise mixed with confusion by observers of this action seem to trend on the forum

I think it is important to start at the beginning to establish some boundaries. First SUNE's situation is not a surprise to me. I have predicted sooner or later that organization will plunge into chaos based on its financials.  I suspect that SUNE can become bankrupt, if and when they do not change business profile. That change is simple, sell and sell a lot of your solar plants to third buyers and yieldcos. Suspend third party acquisitions and remove any unnecessary activity  to spend money.

Any organization which sells its goods without operating profit is doomed. You need to sell so much that you support your borrowing costs and serve the principle of it. Simple laws, which myself and explo promote here.

Now myself and explo are moving into arm's length organization like TERP, and invest in it?

Is this a glitter of low price and high yield attraction? Is there a deeper reasoning?  Naturally as I had stated on CSIQ discussion I apply the same set of tools to evaluate my investments.

Balance sheet analysis followed with income statement analysis is a critical part of this decision for me. Reading 10Qs and details from the source not from the Barron's supports my moves. I cannot afford to use Travis Holium as genuine source of opinion as he lacks comprehension of the solar landscape, business acumen and accounting knowledge.  I can't use opinion of RBC analyst about FSLR or UBS guy about TERP, as they are hardly better in their subjective view. They are not independent as they represent own organization making business in equities of those companies.

So i have to use my own.

Any organization can become bankrupt, in general by spending more than it makes.  In this line TERP can become bankrupt. However TERP's profile shows that it spends less than it makes and it is capable of producing operating profit. In this light TERP is better than SUNE. SUNE does spent more than it makes so it is a prime candidate to be bankrupt.

However changing the game SUNE can survive. Selling assets to yieldcos and third parties is the best way to secure profit for SUNE. So SUNE can be saved as developer with low margin business, which can pay its debts.

TERP can survive bankruptcy of SUNE. There is no avenue to take assets of TERP to cover holes in SUNE's balance sheet.  This is a reason number two for TERP to be a float.

Number three reason is the yield of course. The sole purpose of this organization. At $42 it seemed like ok investment, at $7 seems like free lunch. The other two reasons synergize into this one.

One needs to know the detail of GLBL deal to see that execution and money management is helping GLBL, it is helping SUNE and it is done in a way that cash is still floating in both organizations. Why pay a third party for their assets if I have good own assets. This is precisely the expectation. Selling should take place to third parties not buying. SUNE did a step to turn away from the path of own bankruptcy.

The next SUNE's move should be made for TERP.

 

 

 

  • Upvote 4

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The SUNE's move should be made for TERP. We have case of Invenergy wind portfolio, Vivint asset portfolio and Obligations to buy solar and wind plants from Edison.

Edison has already reduced TERP obligations to purchase wind assets to some $600M from about $1.4B. This leaves Invenergy acquisition and Vivint acquisition.

To walk away from Vivint, which consumption of the deal for SUNE would be logistical nightmare as far as share, cash and bond portion goes, would save a commitment of $922M for TERP. Money mostly borrowed.

All it takes to break Vivint deal a letter of mutual agreement between SUNE and VSLR, no further action would follow.

The deal is $9.89 cash, financed mostly from TERP spending $922M on the portfolio of projects, share deal, at $3.31 per share SUNE would have to issue 110M shares diluting own business by 30% and add $350M bond.

Immediate issues for SUNE $165M of own cash to complete transaction ($1087-922) which comes from Goldman $500M facility.

There is a money for this, but why to do it?

TERP has same Goldman basically paying for the the whole thing with bridge load of $960M. There is money for it but why?

At the end TERP gest the assets while SUNE gets the name. 400MW was reported by Q3, suppose to be 500MW for the year.

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I would recommend to everyone to read management discussion in 10Q for Q3, 2015 (attached)

It will answer most of the questions on debt if not all of them.

Secondly dated yesterday you can see that directors of TERP had quit the board during recent shuffle in protest of the changes. The reason, they cannot serve shareholders after the changes. This is an interesting statement knowing that class B shares are owned by SunEdison and they hold 34% of TERP. 

The same board, the same people had agreed to Vivint and Invenergy acquisition. Vivint in particular being a stinker in a bunch. Does their resignation illustrate departure form those objectives? Are they not happy that SUNE assets will replace those assets?

Removing couple of million a year salaries is never a bad thing, as part of the reorganization offered recently, especially that business of yieldco is a fairly boring one. 

10QTERP.pdf

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Why is Yahoo finance showing that TERP has 91.4M share float with 80M shares outstanding?

I am pretty sure that TERP has ~80M shares total...

Since they have/had $636M in cash, that means cash is really ~$8/share [not the ~$5 I suggested the other day--yes I was lazy and just used Yahoo finance figure without double checking since I had no idea they would be that far off... 

And the market cap figure on yahoo is way off...is Yahoo Finance just that bad at numbers?

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Shoot...that means etrade is way off on its outstanding sharecount (80M)....and I use them for trading!

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3 hours ago, disdaniel said:

Shoot...that means etrade is way off on its outstanding sharecount (80M)....and I use them for trading!

In the reporting they seem to treat the 60M as a non-controlling insterest though, so it's a bit confusing. If you're gonna use 140M I think you need to look at numbers (e.g. profit and equity) including non-controlling interest to get correct valuation multiples.

 

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If Brazil deal is off and I suspect has to do with Renova, then SUNE is showing that getting involved with third parties is over.

This also, contrary to opinions on the board to weak value of the Recurrent assets getting sold left and right, points to valuable profile of TERP assets.

I think SUNE having large portfolio of the US projects, would be interested in getting those large, commercial or utility projects into TERP books. While Vivint deal is really toxic to shareholders of SUNE, it would be just another, domestic acquisition of assets below $2 per watt. Toxic to shareholders if they issued 110M of stock, and another $350M bond, The invenergy deal is a great set of wind farms in the US. Another, better to its nature and energy format asset.

If Brazil deal is off, we could think positively about path set by SunEdison to recover. This is the only path. Do not buy from third parties and sell to third parties. Still TERP is the different asset pool.

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TERP upgraded at Oppenheimer but I see no prices, do not have access

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2 hours ago, explo said:

In the reporting they seem to treat the 60M as a non-controlling insterest though, so it's a bit confusing. If you're gonna use 140M I think you need to look at numbers (e.g. profit and equity) including non-controlling interest to get correct valuation multiples.

Yeah, the company seems to say there are ~80M shares outstanding as well, according to top of page 2/4 of "tearsheet": http://www.terraformpower.com/Tearsheet.ashx?c=253464

Of course they also show institutional ownership of 108%! 

Sorry for the multiple posts, I thought shares outstanding was total shares issued and float was shares owned by the "public"--clearly I need to go back to school...

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36 minutes ago, odyd said:

TERP upgraded at Oppenheimer but I see no prices, do not have access

Up 13% in PM trading now.

 

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2 minutes ago, pg6solar said:

Not sure that's the reason. I think today's David Tepper (Appaloosa) letter to TERP is.

 

 

Link?

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1 minute ago, pg6solar said:

Look in your brokerage account. I am sure it's hitting the wires all over by now.

 

Not a US broker. So not much news feed on US stocks from broker..

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