The Green Bond Trend
DTE Energy Company (DTE: NYSE) recently priced a ‘green bond’ issuance of $525 million to support renewable energy and energy efficiency. The thirty-year bonds provide a coupon payment at 4.05%. DTE is planning to buy solar arrays and wind turbines with its newly flush cash kitty. The capital raise is of significance less for its size and purpose and more for the fact that a U.S. electric utility company is tapping this unusual financing vehicle.
True enough, green bonds are nothing new. Created to fund projects with environmental or climatic benefits, the first green bonds were issued in May 2007 by the European Investment Bank (EIB). The...
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...
Yieldcos: Calling The Bottom
by Tom Konrad Ph.D., CFA On a podcast recorded on September 14th, I said I thought that Yieldco stocks had bottomed at the end of September. Two weeks later, that call still looks like a good one (see chart.) I'm starting to hear optimistic noises from other Yieldco observers, although the general tone remains quite bearish. Why do I think September 29th was the likely bottom? End of quarter. Some institutional investors such as mutual funds reshuffle their portfolios at the end of the quarter so that they don't have...
The Clear Way to Buy Clearway
By Tom Konrad, Ph.D., CFA
A reader of my recent article on Yieldcos asked which share class of Clearway Energy was the better to buy for tax purposes: Class A shares (CWEN-A) or Class C Shares (CWEN).
For tax purposes, they are identical. They pay the same dividend, and it is treated the same no matter which share class you buy. The reason many large investors often trade CWEN rather than CWEN-A is because it is more liquid. As I write on Jan 23rd, Yahoo! Finance puts the 3 month average share volume for CWEN at 1,372,714, while the corresponding number...
YieldCo Bubble: The Aftermath
Readers may be interested in listening to this podcast. Where Stephen Lacey and Shayle Kann of GreenTechMedia speak with me about the current YieldCo landscape. Follow this link to The Interchange Podcast. -Tom Konrad, Editor
Solar Bonds For Small Investors
By Beate Sonerud SolarCity (NASD:SCTY) is issuing US$200m of asset-linked retail bonds, with maturities ranging from 1-7 years and interest rates from 2-4%. Wells Fargo is the banking partner. While the bonds are registered,SolarCity expects the bonds to be buy and hold, and not traded in the secondary markets. The bond is issued for small-scale investors, with investment starting at US$1000, giving this bond issuance a crowdfunding aspect. Choosing such a different structure allows SolarCity to diversify their investor base – the company stresses that small-scale investors are a complement, not substitute, for large-scale institutional investors. While...
What Yieldco Managers Are Saying About The Market Meltdown
by Tom Konrad Ph.D., CFA Note: This article was first published on GreenTechMedia on Noveber 27th. In the last six months, YieldCos have fallen from stock market darlings to pariahs. YieldCos are companies that buy clean energy projects such as solar and wind farms, and use the majority of free cash flow from these projects to pay dividends to investors. Many are listed subsidiaries or carve-outs of large developers of clean energy projects. Last year, investors repeatedly punished leading solar developers and manufacturer First Solar and SunPower for their reluctance to launch YieldCos. When...
Eneti and Brookfield Renewable Earnings
By Tom Konrad, Ph.D. CFA
Here are a couple earnings notes I shared last week with my Patreon followers.
Eneti, Inc. (NETI) - formerly Scorpio Bulkers (SALT)
Eneti completed its name and ticker change on February 8th. New ticker is NETI (formerly Scorpio Bulkers (SALT), which I recently wrote about here.
Highlights from February 2nd earnings report:
37 of the 47 vessels owned at the 3rd quarter have been sold or have completed sale agreements.
Net asset value is $23.94/share. Since most assets are cash or vessels held for sale, this number is basically accurate.
The stock is still a good buy...
Investors Expect Rapid Growth At Pattern Energy Group
Tom Konrad CFA Pattern Energy's Gulf Wind Farm in Armstrong, Texas Disclosure: Long BEP. Pattern Energy Group (NASD:PEGI, TSX:PEG) completed a very successful Initial Public Offering (IPO) on the Nasdaq and Toronto stock exchanges on September 27th. Not only did the shares price at $22, near the top of the expected range, but the underwriters exercised their full over allotment option to purchase 2.4 million shares in addition to the initial 16 million offered. Total proceeds from the offering were $404.8 million. Most of the proceeds went to Pattern Energy Group, LP (PEGLP) in consideration for a...
Buying Innergex – Texas Was Bad, But Not That Bad
By Tom Konrad, Ph.D., CFA
Last week, I published this call to buy Innergex (INGXF, INE.TO) because investors had been overreacting to the losses from the February cold snap in Texas. The stock is up since then, but still seems a decent value.
Canadian Yieldco Innergex Renewable Energy (INGXF, INE.TO) took a big financial hit from the power disruptions in Texas in March.
It's complex, but their financial hedges on power prices for three of its wind farms ended up creating enormous liabilities - more, in fact, than two of their wind farms are worth. Two of their facilities also had benefits...
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...
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...
Five Pioneers Mining the Sun for Income
by Jared Wiedmeyer For the past few years, solar industry stakeholders have imagined a future where the general public has the ability to invest in pure-play renewable energy real estate investment trusts (REITs) that finance and construct both utility-scale and distributed photovoltaic (PV) projects in the United States. While these stakeholders wait for this reality to come to fruition, existing REITs already have several options to own or develop solar projects that still allow them to comply with the IRS's asset and income tests. This past May, Chadbourne & Park's Kelly Kogan and Scott Bank moderated a roundtable with...
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...
Income From Hydroelectric Power
by Debra Fiakas CFA Are you an investor hungry for current income? Is there a green line of global warming fear running through your investment selections? I have stock that fulfills both requirements. Brookfield Renewable Energy Partners (BEP: NYSE) is a renewable power producer with assets in Canada, the U.S. and Brazil. Brookfield generates over 5,900 megawatts of power each year from plants running on river water, wind or natural gas. Another 2,000 megawatts is apparently under development in Canada and Brazil. What Brookfield does best is hydroelectric production. The company claims over 170...
Three New Green Bonds
by Sean Kidney The International Finance Corporation (IFC) is planning to issue $1bn Green Bonds per annum. Hawaii is setting up a bond-funded green bank Germany’s PNE Wind is planning a €100m corporate bond Trade Finance magazine reports that the IFC is planning to issue $1bn a year of Green Bonds. After talking with IFC folk in Washington DC last week I think I can say that the resounding success of last month’s first $1bn IFC Green Bond is making them think much more ambitiously than before. We think they should also...
