Jump to content
dydo

Pattern Energy Group Inc. (PEGI)

Recommended Posts

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?

Share this post


Link to post
Share on other sites

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.

Share this post


Link to post
Share on other sites
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.

 

Share this post


Link to post
Share on other sites

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.

 

Share this post


Link to post
Share on other sites

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.

Share this post


Link to post
Share on other sites

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).

 

Share this post


Link to post
Share on other sites

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.

Share this post


Link to post
Share on other sites
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.

 

Share this post


Link to post
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now

  • Recently Browsing   0 members

    No registered users viewing this page.



×