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Pattern Energy Group Inc. (PEGI)

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so PEGI dividend is almost 10% above TERP, but stock price is over 60% above TERP?

I wonder if the down spike was someone seeing $0.38/qtr divi and thinking that was annual (i.e. big cut)?

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12 minutes ago, disdaniel said:

so PEGI dividend is almost 10% above TERP, but stock price is over 60% above TERP?

Yes even though pressured from highs it's rare to find other yieldcos that offer the same high yields as the SUNE ones (am that's why I am very over weighted on these). Some of them are still doing will like NEP with mid single digit yield.

12 minutes ago, disdaniel said:

I wonder if the down spike was someone seeing $0.38/qtr divi and thinking that was annual (i.e. big cut)?

Maybe, or usual head fake WS game in a yieldco confused market.

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3 hours ago, odyd said:

The dividend is paid to those on record for March 31st; payment is made April 29th,

That is quite a float!

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Different, not sure why, if you on record you got to wait longer for money.

Are you planning to get in? I was pleasantly surprised this was all wind, I also noticed they added 40% or so of the MW in the second part of 2015. They are looking to add 46% of CAFD in 2016.

An alternative to TERP while waiting for resolution.  I have not given up on TERP but I do feel better being outside under the circumstances.

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3 minutes ago, odyd said:

HASI is having a dividend on record for holders on March 30th, I may put the other half into it.

http://finance.yahoo.com/news/hannon-armstrong-announces-0-30-203000410.html

Or not, they asset class does not interest me as much, besides PEGI pays more, I am just exploring ideas. I still like NEP second best, but their yield is not that good.

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I think I will dip into PEGI.  I'm pretty intrigued.  The link that you gave of th ER said quite a bit.  No IDR.  Private company that drops down to them.  Lots of wind.  And best of all NO drama

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Great to see you analyze the whole yieldco space odyd. I just decided to go big on yieldcos after crash and just went for a broad basket to reduce risk through diversification, weighting only by coarse measures like where in their recent trading range they were, what yield they offered and as usual what margin (leveraged yield) my broker offers. For pick criteria (which i've done extensive FA for CN11 to long ago conclude CN4 as the investable ones) I just looked at some basic muliples like PB and EV/EBITDA. Due to simpler business model with more predictable future cash flows, this coarse analysis by just looking at some key multiples is more adequate than the fast moving business structures of CN11.

So it still remains for me to do the deep dive analysis in these names and I'm happy to see others take a broader dive into the yieldco ponds.

 

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Hi Explo, I did not do a lot of "deep" analysis either, I looked at the asset structure, looked at the stages yieldco was in, tried to understand growth, yield etc. Pretty much the first statement of my analysis was to avoid future drama. This left me with three, NYLD, PEGI and NEP. I did not like that NYLD was sort of considered part of partner delivery, and it was having thermal and conventinal energy. I may still buy it.

I am trying to see if I can do dividend walk meaning if I have a gain in equity plus dividend payment whether is worth it to time moving from dividend to dividend company and collect those or stay. PEGI looked pretty good as deep inside I was always interested in wind holdings. 

I appreciate your effort to put the roster as you have done, it help me to see them all in one place.

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No, probably not going to branch out into yieldco's more broadly at this time.  Dividend stocks in general don't interest me.

8 hours ago, odyd said:

Are you planning to get in?

  I only got into TERP and then GLBL when I saw crazy high yields.  I thought this was due to misplaced fear of SUNE BK--not because people selling knew how messed up things between sune and yieldcos were.  I really though the SUNE BK was going to be resolved when deal did not happen (yet so many seemed to expect it would) or at least when they announced earnings after first delay--haha greater fool me...

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1 hour ago, odyd said:

I appreciate your effort to put the roster as you have done, it help me to see them all in one place.

There are two more on the Toronto exchange (besides mentioned NPI.TO) that I have on observation list but never entered. INE.TO and CSE.TO. CSE.TO had some special risk (legal conflict) I think when I looked it up and I was not willing to do the DD to assess that risk at the time. INE.TO might be a candidate, but I never found that it presented as good opportunity as the rest (same as NPI.TO which looks more attractive to me though). The Toronto listed yieldcos never crashed as much as the US listed..

 

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Thank you July,

a bit fresher press here, Canadain main financial newspaper. Errors on GLBL on not reporting but neat mention for PEGI. I am curious about reconciliation with the partner

http://www.theglobeandmail.com/globe-investor/investment-ideas/market-volatility-leaves-few-yieldcos-still-standing/article29298556/

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Looking at yieldcos of different types, I see that most of the time, the motion of EPS makes a difference to a yield level. In general, yieldco which shows EPS, or profit, will have a lower yield (higher stock price). Companies which under GAAP lose money have higher yield, driven by lower price. I do not think this is a particularly surprising, as value investors here we put a lot of importance on EPS and most people understand profit.

I do not believe this will change for some time. By complete accident, I see that PEGI is one which could potentially turn a profit, hence receive possibly 5 to 6% yield or somewhere in the range of $30.

I am curious if anyone here has similar observations, I wish I knew more on the dynamic of their income statement to make a more informed opinion, but one has to start somewhere.

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Yes I think that's the case too. Profit (= intrinsic equity growth) suggests dividend growth is possible without dilutive equity sales, while losses conversely suggests dividend unsustainabilty without dilutive equity sales. The dilutive equity sales works well to replenish or grow equity per share and dividend if you already are awarded a high PB and low yield by the market. If market awards this to the profitable ones they have double growth outlook benfits. While the high yield ones give back more of its equity quickly to investors. 

I'm still focusing on the high yield ones though.

Take GLBL as best example. Even if their dividend won't sustain beyond 10 years they are priced for it to sustain 3 years and the be completely tapped out.

If PB is clearly less than 1 then they must have really overpaid for assets to not be a bargain.

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I did some common tests on GM and Q4 was only 18% versus running 21%. Condition probably due to a combination of the new PPAs impacting result. However, what caught my attention was $114M in project expenses. Now when projects are established should this line be an immediate path to  profitability, especially with the increased revenues?

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The problem for GLBL is still ongoing building strategy and the fact we do not know how this strategy is going to be revised for SUNE rescue-self package. We also do not know similar for TERP. The fact that dividend got paid for GLBL is somewhat relaxing the concerns, but it is not removing them. Further, GLBL reporting is required to SUNE consolidation, but it is not necessary for GLBL, making the concerns, in this aspect, milder.

My paradigm is if the GLBL would delay its reporting, TERP is not as bad off as the problems are localized to SUNE. If GLBL is reporting like nothing, then TERP is being handled to help SUNE situation, spelling specific issues to that company. I would imagine TERP to drop substantially in this outcome.

What I am saying SUNE has deprived own yieldcos of stability. Its actions, in fact, has made them unstable. The irresponsible behavior is the pricing mechanism for those companies today as you cannot or more precisely the market cannot ignore this. Any other evaluation is a prognosis using hope or a gamble.

It was a tough decision for me to sell TERP as I have invested many hours to strategize the situation. I guess I did not expect that SUNE is going to put double action to own yieldco's head. Now anything can happen.

Bottom line yieldcos are not independent of the perception of the health of an own parent. Both NEP and NYLD benefit from it. CAFD is also clearly a paper structure built by a substantial value, riding the prosperity of FSLR and image of SPWR. PEGI not having development company in the public eye is a case of conservative confusion where EPS could free some of the reluctance.

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1 hour ago, odyd said:

I did some common tests on GM and Q4 was only 18% versus running 21%. Condition probably due to a combination of the new PPAs impacting result. However, what caught my attention was $114M in project expenses. Now when projects are established should this line be an immediate path to  profitability, especially with the increased revenues?

I'm not sure if those 114M is more than O&M. At 35% of revenue it looks high compared to solar where maybe 10% is targeted. Around 22% GM (depreciation 43% and O&M 35%) is still different dynamic than Jinko in China who gets 60% GM (depreciation 30% and O&M 35%). I know too little about wind though. Enter at opportunity, collect dividend and trade them is how I use the yieldcos to diversify from those who have more of their revenues from product and project sales and only a portion from electricity sales for now. I like the electricity sales better, but I think the strongest in the latter group can acquire projects in-house at lower cost and thus better IRR allowing more accelerated asset growth, maybe through launching multiple yieldcos, collecting IDRs etc., but this is a very long-term vision.

Meanwhile I want more electricity sales exposure to the sector and found an opportunity to pick up asset parks organized in yieldcos at low market caps during a market confusion about the financial model. Besides offering dividends these stable cash flow companies paradoxically also offer great trading opportunities. In the "About Me" in my profile I track how I collect both dividends and trading gains in TERP and GLBL to effectively lower the cost basis of my shares.

So to conclude. Whether TERP and PEGI and some others might have bloated their dividends more than say NEP (who have quite bloated IDRs, which PEGI lacks) is not of main interests, since we can milk these stocks in different ways to reduce risks and increase gains in our overall portfolios.

 

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I can understand GLBL concerns. Especially in the yieldco space I found myself not as eager to go for THE pick like I've done with CN11, often only holding one name there. The main reason is likely that I became too lazy to do the deep DD required for aggressive concentration strategy. Instead I just pick a basket of decent looking yieldcos from different perspectives (some high yield, others solid growth outlook), knowing that it might be harder for the market to miss who is going to win (its not like these do R&D to expand margin and demand for the their product and we have to figure out who's in for a market-share or profitability boost) I did not expect individual names to need revaluation to market's inability to tell difference between the, but more the whole sector as it is still new to the market.

 

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I look at the dividend structure, but I am also looking for equity gains. I cannot any longer trade TERP in this fashion as not having dividend the risk of the parent hurting it is too great without paying me for taking on the risk. The reason I look at PEGI as they may have equity value event when they get EPS better. This is why it is logical for me. If I focus on dividend idea only I already mentioned STWD, which offers even better one for the same price.

I am not wealthy enough to have dividend payments only to improve my portfolio, but even more so I am not wealthy enough to take my six figures to a poker table like TERP or what I also see a concern as GLBL. However, I only learn that I am at the poker table on the 16th this month. I guess I was naive to believe that SUNE was running  the largest solar company not the bawdy house.

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I get the risk point. In case of GLBL I've only exposed 4% of my capital to it. That said I won't take any high risk bet just because exposure is small. In GLBL case I think the risk/reward is very attractive, while the risk is acceptable to me due to very discounted (PB below 0.5) hard assets (power plants with 20 year fixed price PPAs) with risk reduction through diversification.

To take a more extreme example ABY's parent ABGB recently hit over 90% in yield, but there the risk that the dividend would never be paid again or severely diluted was too high and there were no hard assets at discounted price to back an investment decision, thus making it a pure gamble even though short-term it could double and it did (same like doubling easily by betting all on red).

 

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As you know I have no argument over the "known" company metric. I have a problem with the one who describes those metrics, SUNE, especially when it may restate things. This is not GLBL story.

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45 minutes ago, odyd said:

As you know I have no argument over the "known" company metric. I have a problem with the one who describes those metrics, SUNE, especially when it may restate things. This is not GLBL story.

Yes. I agree that the SUNE mess could warrant considering its yieldcos uninvestable.

 

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