Has the Sell-off Created Value Stocks Among Clean Energy Conglomerates?
Tom Konrad CFA The silver lining of all market declines is the chance to buy stock in quality companies at attractive prices. That opportunity has been notably absent over the last two years, which is why my focus has shifted to smaller and smaller companies in search of reasonable valuations over that time. Although I still don't believe the market is cheap by any measure other than comparing it to a couple months ago, the volatility is starting to bring some individual bargains, especially on heavy selling days. For instance, I've started to acquire some of...
Record-Breaking $9bn Green Bonds Issued in Q1
Bridget Boulle It’s been another ground breaking quarter for green bonds – the biggest yet with just under USD9bn issued ($8.997bn). It seems our initial estimate of $20bn for the year will be met much sooner than we thought so we’ve revised it to $40bn (there are no rules). There have been new issuers, new currencies, new underwriters, new areas of issuance and, for the first time, a green bonds index. All good things, here is a summary… The development banks led the way for the quarter but not by too much: development banks = USD4.9bn while corporates =...
Are YieldCos Overpaying for Their Assets?
Tom Konrad CFA YieldCos buy and own clean energy projects with the intent of using the resulting cash flows to pay a high dividend to their investors. Several such companies, often captive subsidiaries of listed project developers, have listed on U.S. markets since 2013. So far, YieldCos have been a win-win: The developers that list YieldCos have gained access to inexpensive capital, and income investors have gotten access to a new asset class paying stable and growing dividends. So far, they have also gained from significant stock price appreciation. The seven U.S.-listed YieldCos are up...
SolarCity’s Second Solar Lease-Backed Bond Closes Thursday
SolarCity is on the road with a $70.2m, 8yr, BBB+ rooftop solar leases securitization; closes Thursday Sean Kidney US company SolarCity (NASD:SCTY) has priced a solar bond backed by cash flows from a pool of 6,596 mainly residential solar panel systems and power purchase agreements in California, Arizona, and Colorado. Expected bond figure is $70.2 million, but the bond doesn’t close until Thursday this week. Interest rate is 4.59%. Credit Suisse is structurer and sole bookrunner. This is SolarCity’s second solar securitization in six months. Their previous (ground-breaking) bond was for $54.4 million with an...
Brookfield’s Yieldco Buying Spree
by Tom Konrad Ph.D., CFA
Last week, a Bloomberg reported on a rumor that Brookfield Asset Management (BAM) was in talks to buy Abengoa's (ABGOY) stake in its former YieldCo Atlantica Yield (ABY). Atlantica had been looking for a new sponsor for well over a year since parent Abengoa filed for bankruptcy.
Purchasing Yieldcos (companies that own clean energy infrastructure and use the cash flows to pay large dividends to shareholders) is not new to Brookfield. Not only has BAM long sponsored Brookfield Renewable Partners, LP (BEP), a limited partnership that has essentially been a Yieldco since before the term was...
Solar Bonds and Other Green Income Investments Compared
by Tom Konrad CFA Clean-energy stocks’ performance over the last couple of years proves that it’s possible to do well – sometimes very well – while doing good. Unfortunately, it’s also possible to lose a lot of money. Case in point: solar installer SolarCity’s stock (SCTY) price has more than quintupled since its 2012 IPO, but has fallen 40% since the start of the year. Swings like these are just too wild for many investors to stomach. So the news that California-based SolarCity launched the first public offering of solar bonds last week likely piqued the interest of sustainability-minded...
How Much Can YieldCo Dividends Grow?
Tom Konrad CFA U.S.-listed YieldCos seem to offer the best of two worlds: high income from dividends, combined with high dividend per share growth. YieldCos are listed companies that own clean energy assets, and like the real estate investment trusts (REITs) and master limited partnerships (MLPs) they are modeled after, they return almost all the income from their investments to their shareholders in the form of dividends. Unlike REITs and MLPs, however, U.S.-listed YieldCos have management targets to deliver double-digit per-share dividend growth. YieldCos shown are NRG Yield (NYLD), Abengoa Yield (ABY), TerraForm Power...
Roundtable Greenlights Effort on Renewable Energy Covered Bonds
by Sean Kidney “There is more liquidity than ever being put into the system, but funds are still not being allocated to renewable energy projects” “The bottleneck for renewable energy is not in construction financing but a year or two after construction .” “ is not an asset class where risk changes over time – it changes between pre-completion to post-completion stages… it is incorrect to think that offloading an asset post-completion dumps risk onto others because the riskier part of the project is past.” “Alignment of interest with investors is strong as the issuing bank...
Solar Investing Grows Up
Tom Konrad CFA Disclosure: Long HASI, BEP. Short PEGI calls, NYLD calls. When I was asked in an interview last month what I thought 2014 would hold for green tech finance, I said 2014 would be the year that “renewable energy finance comes of age.” What I mean is that a new type of renewable energy investment is proliferating. Solar, other renewables, and energy efficiency investments are no longer limited to risky growth plays like Tesla Motors (NASD:TSLA.) There are now a number of yield focused investments available to small investors. As of last year,...
Solar Rooftop Lease Securitization A Ground-Breaking Success
Sean Kidney Last week we blogged that SolarCity (SCTY) and Credit Suisse were about to issue a new $54.4 million, climate bond – a rooftop solar lease securitization. It’s out: BBB+, 4.8%, 13 years. The long tenor is interesting – and great. And S&P’s BBB+ rating suggest those credit analysts may be beginning to understand solar. This bond has been long-awaited by the green finance sector, who are hoping it’s the harbinger of things to come. I did get the chance to look at the S&P opinion. Their rating reflected, as they put it, their views on over-collateralization (62%...
Trina Solar’s Second Convertible Bond
By Beate Sonerud and Sean Kidney China’s Trina Solar (TSL)is issuing US$100m of convertible bonds with 5-year tenor and 4% annual coupon, with semi-annual payments. An extra US$15m could be raised, as Trina has given the underwriters a 1-month window to buy additional bonds. Guess they are waiting to gauge demand. Underwriters are Deutsche Bank, Barclays, and Credit Suisse, with Roth Capital Partners as co-manager. The bonds can be converted to shares (American Depositary Shares, meaning they are listed in the US) at an initial price of US$14.69 per share. Currently, Trina’s shares are trading at US$11.40, after...
Why is Terraform Power Trading at a Premium to the Brookfield Renewable Merger Value?
Tom Konrad, Ph.D., CFA
A reader asked:
Read your recent article on Pattern Energy (PEGI). Great summary and thoughts.
Would like to ask your view on TERP potential takeover by BEP (via shares swap) and whether you reckon the recent run-up on TERP is too excessive?
It's a good question, and one that Robbert Manders on Seeking Alpha did a thorough analysis of here. For the details of the merger, I refer you to his work.
While his analysis is careful and complete, I disagree with his conclusion. TERP shares are not trading at a significant premium to the merger value. The reason is...
Trash Stocks Trashed: An Income Opportunity?
Tom Konrad CFA Dumpster diving for high yielding gems. An earlier version of this article was written at the end of July and published on my Forbes blog, before the August market implosion. I've updated it here to reflect the new stock prices and some recent company news. Renewable energy has many advantages over fossil energy. One of the most important is that it's renewable. As supplies of Oil and other fossil fuels are used up, they become harder and more expensive to extract, while renewable energy is generally getting cheaper over time,...
Hannon Armstrong Yeild On Track For 7% in Q4 With More To Come
Tom Konrad CFA After the close on Thursday, November 7th, Hannon Armstrong Sustainable Infrastructure Capital (NYSE:HASI) declared third quarter earnings. Results were in-line with my, and other analysts’ expectations: Earnings per share (EPS) of 14 cents, and a declared dividend of 14 cents as well. This more than doubled the second quarter’s 7 cent EPS and 6 cent dividend. Note: I have a large long position in HASI. HASI remains on track to reach managements’ dividend target of “over 7% of the $12.50 IPO price” (22 cents a quarter,) and provided some additional guidance for future dividends....
Buyer’s Guide to New York Community Solar
By Ishaan Goel
WHY COMMUNITY SOLAR?
A home solar system is a great investment, with financial returns far in excess of any financial investment that has comparable risk. It’s also a tangible step a homeowner can take to help the environment.
Unfortunately, most New Yorkers (and Americans in general) can’t install home solar. They may be renters, or have roofs that are too old or shaded. Or they may not be able to afford the up-front cost, or not have enough income to take advantage of the tax credits.
That is why New York’s electricity regulator, the Public Service Commission, created community solar:...
Atlantica Q1, Buying Hannon Armstrong
By Tom Konrad, Ph.D., CFA
Here are two more updates from last week on Patreon. Also, I realize I neglected to publish the monthly performance chart for my 10 Clean Energy Stocks model portfolio here at the start of the month, so here it is as well:
Atlantica Sustainable Infrastructure Earnings
(published May 11th)
Atlantica Sustainable Infrastructure (AY) released its first quarter earnings announcement and financial statements on May 6th.
Atlantica is one of the higher yielding Yieldcos, 5.3% at the new quarterly dividend rate of $0.43 and a $32.50 stock price. The dividend is safe, since most of Atlantica's debt is fixed rate,...
