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dydo

NextEra Energy Partners, LP (NEP)

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3 hours ago, odyd said:

NRG Energy is bidding on 2.1GW dc operating assets of SunEdison, today, for $144M. Check the thread on NYLD. This is an equity payment for SUNEQ companies interest. 1.6GW ac assets cost $0.10 per watt. In turn, they will sell those assets to NYLD say for $288M (my joking estimate), making 100% return, moving intact debt from SUNEQ to NRG  to NYLD. 

How much more they have to pay, is not that relevant to NYLD. However looking at the price of NEP purchase this is massive benefit to NYLD

Ok. So the debt part is excluded in those numbers? The price becomes quite irrelevant if there's assumed debt unaccounted for in it. They bid $0.10 per watt for it, but if for example the SUNE projects have negative value (more debt than value) it's still a high price. How do we know if $0.10 per watt is a good price without knowledge about debt and value? Value being estimate of discounted future cash flow from the projects..

We can assume though that NRG won't bid high for a massive asset base on fire sale but we can't really know how low the bid is relative to net value..

Edited by explo

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We can assume plenty, look at the price of the solar/wind watt from perspective of overall cost. The 10 cents is for equity part and debt is assumed. Those are operating assets with known dates of delivery and ppas. I don't know exact details, but looking at the nep purchase is already giving a lot of ideas.

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I'm not sure we can assume that SUNE used the same project debt ratio as NEP's sponsor.

Anyway, a winning stalking horse bid can probably be assumed to have made a good deal.

 

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Well, I dug deeper in the purchases, they may be still projects at various of stages of construction including completion within those packages, but indeed, not all being completed utility producing plants, as I thought.

There were over 112 parties in the review process, NRG got the leading role, they are also earnout payments worth $43M in addition to $144M price. In relative terms, like those in any relating to projects in solar or/wind, 2014-2016 versus 2011, is cheaper, so the comparison to NEP is skewed. However buying projects in what may have been auction is by the nature of arrangements cheaper than buying from a seller. Projects are managed at that level as individual companies, with interest, non-recourse debt, etc. Those are not corporate debts, and they have to follow a structure defined for each, which has never dropped in project financing below 20% and most of the time was at 30% or would be allowed to move lower. Not knowing as you point out I imagine, NRG has made decisions to benefit and not to damage itself by making those, and I consider this a financial benefit transferable to own yieldco.  

NEP is putting $218M to get 132MW plus $258M in debt, ilustrates pricing mechanisms of legacy projects built by FSLR some years ago. They were sold with PPAs also reflective of times. Stil while $218M for 132MW is not disputable, I can permit myself to think that $144M plus $43M, or $188M for 2.1GW of interest has to offer rather incredible opportunities for the buyer, transferable to its yieldco when done.

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1 hour ago, odyd said:

Great outlook for NEP, 12 to 15% growth in dividend till 2022, change in IDRs, reduction to benefit further unit holders.

http://www.investor.nexteraenergypartners.com/phoenix.zhtml?c=253465&p=EarningsRelease

Nice. Now I can regret not picking up the dip to $23 even more.

Edited by explo

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Reading further in NEP, change in IDR, is expected to eliminate the need for equity sale in 2017 or 2018.

Wow, that is new for a yieldco structure. I like this very much. 

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From Recharge:

NextEra Energy, the world’s largest generator of wind and solar power, safe-harboured enough wind components in late 2016 to build 10GW of future capacity eligible for the full PTC, and is confident the Trump administration will do little to dent the US renewables market.

On a conference call Friday, chief executive James Robo acknowledged investor concern about the impact of Trump’s approach to energy and climate policy on a company like NextEra.

In addition to its rate-regulated utility, Florida Power and Light, NextEra Energy owns an immense fleet of wind and solar projects across North America through its Energy Resources unit, and is among the continent’s most prolific developers. It also controls a renewables-focused yieldco, NextEra Energy Partners.

Robo noted that 9 November, the day after the US presidential election, was the worst day for NextEra’s stock relative to the S&P 500 Index in eight years. But he expressed confidence that key renewables tax incentives will be allowed to phase out as scheduled under Trump, and said he expects another near-term “step change” in wind turbine technology will make renewables competitive by 2020 without federal support.

“With regard to concerns over renewables tax incentives, I believe it’s unlikely that either the [wind production tax credit] or the [solar investment tax credit], each extended under a five-year phase down by the Republican congress at the end of 2015, will be retroactively changed,” Robo says. 

As evidence, Robo pointed to recent remarks by Steven Mnuchin, Trump’s pick to become the next US treasury secretary, confirming his support for allowing the wind PTC to phase out as planned.

“Given how rare it is for our government to retroactively change laws, particularly when parties have relied on them to make long-term investment decisions, I believe our safe-harboured projects will receive the 100% PTC through 2020,” Robo says.

“The major driver behind bipartisan support for the five-year phase down is jobs,” he added.  

Robo says NextEra does not expect any changes to the current “start of construction” guidance for wind farms, which gives developers four years to build wind projects they qualified for the full $23/MWh PTC in 2016.

He expects NextEra to continue having “robust access” to tax equity for its projects, although he believes smaller developers may suffer.

Armando Pimentel, chief executive of power-generation unit NextEra Energy Resources, says the company has not noticed much change in the US renewables market since the election. Since NextEra’s last financial earnings were released, on 31 October 2016, it has signed contracts for another 640MW of renewables capacity, including 540MW of wind for delivery in 2017/18.

“We haven’t seen anything come off the table [since the election],” Pimentel says. “We’re still having a lot of discussions with customers, and they’re not really focused on it, honestly.”

“There’s a little bit of talk about, hey, let’s try to get something done in the earlier years,” Pimentel says. “But I fully expect 2017 and 18 to be really good years for origination for renewables.”

NextEra built 4GW of new wind and solar capacity over the last two years, a record for the company, and expects to develop 2.8GW-5.4GW during 2017/18. It is also undertaking a major repowering programme, adding new turbines at many of its older wind farms.

Even if the PTC and ITC extensions are preserved, they are still set to phase down over the next few years—to nothing in the case of wind projects that enter construction after 2019. But Robo says technology and efficiency improvements will allow the renewables market to continue buzzing into the 2020s.

“We expect yet another major step-change in wind turbine technology through a combination of even taller towers and wider rotor diameters, which would further increase net capacity factors,” he says.

“So even if I’m wrong about continued federal incentives for renewables, as we near the end of this decade, I’d expect that in 2020 even without the PTC wind will be be a 2¢-3¢/kWh product, and solar without the ITC will be a 3¢-4¢/kWh product.”

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It was confusing to see a drop on Friday, NEP looks great, one of best yieldcos.

Sent from my HTC One_M8 using Tapatalk

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Looking at the numbers given by NEP for the growth of dividend and using the scale of current yield by 2022, the stock would be expected to trade at double of present value or $62.40.

The dividend would be around of $2.78 at 12% growth by 2022 annually. If growth was 15%, the stock could trade at $73 and have a dividend of $3.26.

This one is really good looking one.

 

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You're right, Moody has a different view. At first, I also thought the PW acquisition would be too expensive but as it turned out, Moody upgraded all the TERP dept, and the profile was raised to a positive tone back when the stocks were around $40. So, I guess Moody's trick was mostly focused on stating the obvious problem, but stating the future effect is done through the use of other skills.

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I read Treasury rate dropped. NEP 's dividend is growing at 15% per year for the next five years. In my article, I suggested it for it to double in the span of time holding a low yield of 4%. This is also a thinly traded security.

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I know that NEP went up today nicely, but I strongly suggest some of you who are not interested in huge volatility to see if this stock seems to fit your investment criteria.  If you want to collect $0.36 per share, buying this week would be recommended, a record of May 5th is payable May 15th.

 

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Thank you for your comments Heliostat,

This quarter I certainly like NEP and NYLD. I am cooling to PEGI as their high payout, is concerning somewhat. Still, great dividend, but will not see a lot of growth. Their strategy seems to lack the financial strength to support it, so I am curious how would it be done.

I think one cannot go wrong with NEP and NYLD for next five years. My concern is I do not have enough to park the money for five years to make this meaningful. I believe action could be better in the solar ring, and sooner than the five years I expect NEP to grow to a double.

I can only make a small investment of 15% and will dedicate this portion to yieldco, while the rest will be trying to get the better of the peaks and valleys. I think the choppiness of solar industry can be explored, first test starting next week.

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3 hours ago, odyd said:

I think the choppiness of solar industry can be explored, first test starting next week.

Precisely!  Good luck (to us all)!!

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Hi Robert, Thank you for excellent article re PEGI whitepaper.  Wondering from your research for that article how you see potential returns of NEP VS PEGI  over next 5 years assuming Pattern Dev 2.0 proceeds and no major hickups? You calculate approx $27 for PEGI on 6% return (is this post near term equity raise to finance the 100m?) and can see in your analysis how the 100m into Dev2.0 projects can lead to cash flow for acquisition of the next 2.3GW.  What I'm wondering is what kind of 2020 SP  valuation  this might imply for PEGI?  Beyond 2020  does this Dev2.0 investment then compound or hits a ceiling , limiting growth after that , assuming ppa get less generous etc? This is a long way of saying I am trying to weigh up NEP 2022 SP projection you have made previously vs  2022  PEGI SP potential  if Dev2.0 proceeds sucessfully. I am planning to hold both longterm but can add a bit to either position at this time and working through this decision. Thanks in advance.

Edited by heliostat
punctuation for clarity

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I think the best way to look at it is to assume how many steps PEGI needs to take to reach its goal. Let's take the $100M for example. Nowhere in the paper, the company says that amount would be $100M at 6% yield. They describe market conditions of yieldco having a yield of 6% to buy projects.

I had used this reference as I had none other. If I said that Pattern financing project equity to earn money at two times, would it matter to you they would sell shares now, a 7.7%?

They still need to buy all those projects; they need to build them and now whether they make money (which they may not ) they need sell equity every time. I figured if they sold equity to buy projects at 7.7% yield vs. the amount accretion plus CAFD they cannot pay for the outflow.

NEP will not issue shares until 2018 and still grow dividend 15% in this period; they may issue them at $40, to buy more of 13GW of renewables being built by another company in an internal network supported by utility cash generation of NEE. All to keep growing them all the way to 2022.  PEGI if they raise dividend now, they will be paying it from tax equity payments or that 12% undisclosed in CAFD. Frankly, they have no room for more dividend increases. In this instance they at the dead end. I am interested what happens on May 9th, is is possible they will only raise dividend symbolically? I would not be surprised.

After Q1 balance sheet, they will have a little cash left, and their liquidity will consist of a mostly revolver.  Q2 will be the state as of now, and it will look soft. They need a lot of operational savvy and tone of luck to be successful here. PEGI is a risk and very fragile to avoid it. NEP is not. That is my take on it.

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Thanks Robert very useful thoughts.  I read your comments on NYLD , thinking about NEP comparison, half the price of NEP is attractive but NEE seems a lot stronger parent than NRG . I realise NYLD is advising 16% div growth next two years which ~ matches or slightly better than NEP. How do you see NYLD vs NEP after 2020? NYLD has dropped to $16.75 AH ?entry?

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Thanks Robert very useful thoughts.  I read your comments on NYLD , thinking about NEP comparison, half the price of NEP is attractive but NEE seems a lot stronger parent than NRG . I realise NYLD is advising 16% div growth next two years which ~ matches or slightly better than NEP. How do you see NYLD vs NEP after 2020? NYLD has dropped to $16.75 AH ?entry?

NYLD is not NEP but it is better than PEGI. I see it growing as good but I need to analyze it more.

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