odyd

Pattern Energy Group Inc. (PEGI)

198 posts in this topic

Thanks for the comments. Anyone heard more about PEGI trying to bid for assets/sune yieldcos? BAM is expected to win but why enter if not serious, whats the plan? Sorry cant find any links to flesh this out but sure I read something about 8 weeks back cant access now. Do we know where Pattern Dev gets its money?

 

 

 

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Southern Cross project will tap abundant Texas wind for export From Recharge,

http://www.rechargenews.com/wind/1216611/southern-cross-project-will-tap-abundant-texas-wind-for-export

Pattern Development’s trailblazing Southern Cross transmission project could stimulate 3GW of new wind capacity build-out within the main ERCOT electrical grid in Texas by enabling other US states to access abundant low-cost energy there, a senior company official tells Recharge.

The proposed 400-mile-long (644km), 500kV direct-current line and related 37- to 40-mile-long 345kV Rusk-Panola transmission project in Texas will allow export of 2GW of power (after line losses) to Louisiana, Mississippi, Alabama and other southeastern states with poor onshore wind resource.

Ward Marshall, director of business development at Pattern, believes that investors will advance wind projects that easily exceed Southern Cross'  carrying capacity. In part, because wind is variable and additional generation capacity willl be necessary. But also because the huge ERCOT market provides ample opportunity to sell any excess electricity.

“This represents a new portfolio of projects not just in West Texas but throughout ERCOT. This portfolio increases the efficiency of wind and land royalties,” he says, referring to lease payments to landowners that now total $60m annually in Texas, the most in any state.

Pattern itself is scouting locations in central and south Texas and the blustery northern Panhandle for additional wind farm investments to help feed the line, Marshall adds.

Pattern plans to have Southern Cross built and energized by 2021. The overhead line will start in De Soto Parish in western Louisiana just over the Texas border and terminate in Lowndes County in eastern Mississippi near the border with Alabama. The actual route remains under study.

The double-circuit Rusk-Panola line will link Southern Cross with the ERCOT system. Municipal utility Garland Power & Light is sponsoring the project in conjunction with Rusk Interconnection LLC, an affiliate of Southern Cross. Garland will be the sole owner of the line and will operate it.

The Federal Energy Regulatory Commission (FERC), which regulates interstate transmission of electricity from Washington, DC, has approved the project. It still needs state approvals and permits.

ERCOT an island

Even though ERCOT is by far the smallest of three main interconnections that comprise the US power system, it has a disproportionately high percentage of the nation’s wind generation capacity – 17GW or more than 20% of 82.18GW on 1 January. ERCOT also leads with new capacity under construction.

Despite the abundance of wind energy, there are no exports from ERCOT to the east and west interconnections as all three operate largely independently from each other with limited transfers of power from any source between them.

ERCOT is unique in that it is located entirely within one state that also happens to be the nation’s largest state power market. Traditionally, Texas policymakers and regulators have been fiercely protective of ERCOT’s status as an island within the US power system, largely free from what they view as unwelcome federal interference.

They have viewed its mission as managing the flow of power to about 90% of the state’s electric load, not provision of economical energy elsewhere. (ERCOT also performs financial settlement for the competitive wholesale bulk-power market and administers retail switching for 7 million premises in competitive choice areas).

Their resistance to potential exports of energy has begun to soften somewhat with the meteoric rise of wind generation during the last decade within ERCOT.

Southern Cross, for example, would improve competitive conditions with ERCOT (and Southeast) by improving transmission service availability and electricity supply. The project would allow for increased utilization of several thousand miles of heavy-duty power lines built earlier this decade known as CREZ to transport wind energy from remote resource-rich areas to major load centers in Texas.

The project’s ability to move electricity bi-directionally would also benefit ERCOT (and Southeast) by more efficiently utilizing generation capacity, according to FERC.  Having access to outside energy sources will also contribute to ERCOT’s system reliability.

“I think we are doing generally what the Texas legislature has always wanted which is to create more competition and things that help the Texas economy. If you are able to take your products and sell them in other places, to me this is the true market concept,” says Marshall.

Only users of Southern Cross will pay the tolling fees and there will be no cost for ratepayers within ERCOT, according to Pattern. “It is self-supportive,” he says.

Transmission and Trump

Wind industry officials here say that Southern Cross is a project that should appeal to President Donald Trump, who has talked about a massive public-private investment initiative to modernize the country’s infrastructure. Details remain unclear.

They note that private capital will entirely finance the project, it will create new jobs, investment, tax base and economic development opportunities regionally, and domestic companies will entirely supply it. The federal government can do its part by facilitating any additional regulatory approvals and cooperating more broadly with states so that badly needed interstate transmission projects for wind can advance.

“We really haven’t spent this kind of money on our grid for a long time. The backbone was built in the 1960s and 1970s, and for a while we’ve really have been taking advantage of that overbuild,” says Marshall.

Texas Governor Greg Abbott and the state’s business leaders are hopeful that Trump’s administration will pursue economic policies that encourage investment for all forms of energy development. His appointment of former Governor Rick Perry to head the US Department of Energy was auspicious given his long public record of support for transmission infrastructure expansion and modernization.

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7 minutes ago, heliostat said:

I'll take that as a no!

Fair enough :-)

 

 

LOL. they can't all shut up.

heliostat, I read a short note but never seen anything since. I think it was something which could have been on the table, but exclusive with Brookfield blocked it. 

 

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Thought your article Robert on SA today re NEP vs CAFD was terrific, much appreciated. Cant wait for the next installment. You have marvellous grasp of the detail and make the picture much easier to follow, many thanks. Just wondering if NEE owns such a big piece of the NEPOpco  how NEE stacks up vs NEP in your opinion ?  I will read up on NEE. Have you thought of an article comparing parentco BAM/BEP vs NEE vs ?HASI? vs Total vs Pattern Dev etc? I like the lack of IDR with PEGI you pointed out in earlier article  and thinking that Southern Cross transmission etc you linked above might one day be like the gas pipeline transmission component of NEP.  PEGI strikes me as having genuine ambitions, trying to see if any big catalysts coming (?GLBL wind assets?). I'm still trying to understand what Pattern Dev  is really all about (hard as private company) and their longer term ambitions re PEGI.  The announcement a few weeks back of as I recall cooperation (Pattern Dev and PEGI) for larger financing seems positive.

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Thank you heliostat for your opinion. I am hoping to cover yieldcos I like the most, based on their content of renewables. I wish TERP were one of those. I like the subject of yieldco, few people put an effort beyond the template description, and most investors do not get involved in them. I am hoping it is going to be like an early discovery for those who do.

Their collapse was unnecessary but became our opportunity.  It is like all dinosaurs are dead to remember the good times.

Doing private companies is impossible. I mostly look for articles with the name in it. The way I see it here, at one point PEGI can be like NEE not NEP. PEGI is a corporation, not a partnership. At this stage, this does not mean a lot, but I think it can make an enormous psychological difference to the market. I believe they are very ambitious and think big, like the project you mentioned. I believe they are potentially an acquisition themselves. Seeing how NEE moved on the arena and how well they are doing, Southern, Duke can snap portfolio of the wind, very easy, later in time perhaps.

For now, I am waiting how they did the quarter and how NYLD did. I like utilities' yieldcos the most. PEGI is my risky bet but has some fundamental chips that make them soft. I hope to discuss them next.

 

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Thank you for comments Robert.  How useful do you think a discounted cash flow model  based on rate of dividend growth is as a methodology (+ fundamentals /catalysts)  for stocks like PEGI and NEP, NYLD  or other yieldcos in determining correct value and/or entry points?  (ie will standard dividend portfolio analysis be applicable here to determine price points)?

Trying to avoid FOMO re solarco (but also not miss the yieldco boat - already have some, looking to add) as current solarco SP gains last few days seems hard to explain ,as you have noted, although yieldco SP action much more muted.  What is going on in enewables ? Talking to friends in the funds management area they talk a lot about 'inflection point' for solar etc but realities of ASP/wafers costs etc and debt servicing dont go away.  For new entrants investing other people's money does low comparative P/E like CSIQ etc look cheap?

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Hi Heliostat,

Frankly, I do not know. I would be interested to see your results and explanation, opinion on this type of modeling.

I concentrate on fundamental aspects and how they ever support the financial side of any of those businesses. I also look at the market and evaluations. Most look at achieving income, and that is considered the standard point. For PEGI this is not so useful.  So I am very curious how you would do that here.

 

 

 

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10 hours ago, heliostat said:

Trying to avoid FOMO re solarco (but also not miss the yieldco boat - already have some, looking to add) as current solarco SP gains last few days seems hard to explain ,as you have noted, although yieldco SP action much more muted.  What is going on in enewables ? Talking to friends in the funds management area they talk a lot about 'inflection point' for solar etc but realities of ASP/wafers costs etc and debt servicing dont go away.  For new entrants investing other people's money does low comparative P/E like CSIQ etc look cheap?

It is strange that company goes up 17% on $240M loss in equity in one-quarter.  SunPower has summarized the issues very well but used the hypothetical engine to resolve them. and the market bought this. They do not have the tools; their financial status shows it. Unless the price, it was too cheap for that state. I thought they did fabulously deliver negative, zero margins in Q1 on $300M plus revenue. 

Perhaps FSLR will go to $40 for their actions? I am not sure if I can figure this.

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Incredibly on that note Heliostat, yieldcos seem flat and dropping. I would imagine the undertone of interest rates is playing in their evaluation again. I feel good about NEP, as it steps out a lot stronger than every other operator and mainly CAFD seems to me a bit clouded with risk.

I hope that PEGI will do well on results, and make me feel positive about them. My scorecard at this point and I am using the exit of solarcos with most of my funds (90% plus) in July 2016 delivered relief from 22% drop. If I use PEGI as a template for this period, I am looking at 16% drop, so I am about 6% better on my strategy (this includes Friday close). However, if the severity of my assumptions is not found in the market, I could easily be left out.

My personal holding status with dividend reinvestments is about 12% loss, which is in line what has happened above. Of course, I have been oblivious to the appetite for solar, walking out on the short trade from $12.02 to 12.53 missing Friday close over $14. I cannot blame myself for this, as that was just a gut.

I still think the market is naive about solar stocks; I believe we are going to lose one public company to insolvency in next 12 to 18 months. I recall SunEdison massive moves before it died, not the same here, but.....

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