Income Investments

by Corporate Bonder The global bond market is huge. Data from the Bank for International Settlements shows that the total size of the global debt securities market (domestic and international securities) was $99.5 trillion as at June 2011, of which $89.9 trillion were notes and bonds. Governments accounted for $43.7 trillion of outstanding debt securities, financial organizations $43.8 trillion, corporations $11.0 trillion and international organizations $1.0 trillion. Against that, Bloomberg has estimated that there are $230bn outstanding of fixed-interest securities that meet their “green bonds” definition. And of course the IEA talks of $1 trillion of investment a...

Sean Kidney Out Monday: a very interesting bond from US listed sustainable infrastructure investor, Hannon Armstrong Sustainable Infrastructure (NYSE:HASI): a $100 million asset-backed securitization of cash flows from over 100 individual wind, solar and energy efficiency installations, all with investment grade obligors. They’re calling them “Sustainable Yield Bonds”; Climate Bonds for us. Coupon is 2.79%. This first bond was privately placed - but they’re planning lots more. Hannon Armstrong have taken the high ground on emissions and built in quantitative annual reporting of greenhouse gas emission reductions, measured in metric tons per $1,000 of par value. The assets...

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...

by Sean Kidney   Earlier this month CitiBank (NYSE:C) and Bank of America Merrill Lynch (BoAML; NYSE:BAC) launched, via a special EuroWeek report on ‘sustainable’ capital markets, a “Framework for Green Bonds“. This is potentially a big development. In the paper the two banks laid out a ‘vision’ for the green bonds market and called for a Green Bonds Working Group of issuers, dealers and investors to be formed to drive the evolution of the nascent market. The paper calls for debate about the green bond market, especially about...

by Tom Konrad, Ph.D., CFA It's been a busy several days in the YieldCo space. On February 5, 8point3 Energy Partners (NASD:CAFD) announced an agreement to be acquired by an infrastructure investment fund managed by Capital Dynamics. While I was still writing an article on why the sale price was at a virtually unheard of discount relative to the stock market price, two more YieldCo deals were announced: NRG Energy (NYSE:NRG) agreed to sell its sponsorship stake in NRG Yield (NYSE:NYLD and NYSE:NYLD/A) to Global Infrastructure Partners, and YieldCo TerraForm Power (NASD:TERP) made an offer to buy out Spanish YieldCo Saeta Yield (Madrid:SAY) at a 20 percent...

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...

by the Climate Bonds Team Yieldco TerraForm Global (GLBL) issues a whopping $810m green bond (7 years, 9.75%, B2/B+) TerraForm Global Operating has issued an $810m green bond, with 7-year tenor, 9.75% coupon and ratings of B2 and B+ from Moodys and S&P respectively. TerraForm Global is a recent yieldco spin off (IPO last month) of SunEdison (SUNE) group (have a look here if the yieldco concept is new to you). Terraform Global owns and operates renewable energy assets - solar, wind and hydro - in emerging markets, in the following locations: Solar: China, India, South Africa,...

Tom Konrad The 5.7 MW Solar Farm in Salisbury, MA is the largest solar farm in New England. The land under if was purchased by Power REIT (NYSE:PW) in December. Photo source: Power REIT I first wrote about Power REIT’s (NYSE:PW) plans to invest in renewable energy real estate in May 2012.  The intent was to buy the real estate underlying a solar, wind, or other renewable energy project, charging the project owners rent.  This can be done profitably because REITs often have a lower cost of capital...

Tom Konrad CFA Disclosure: Long BEP, HASI. NRG Yield (NYSE:NYLD) was spun out of its parent, NRG Energy, Inc. (NYSE:NRG) in July, and has since been greeted with enthusiasm by investors.  The stock priced at $22, 10% over the mid-point of its expected range, and the underwriters exercised their full over-allotment option. NRG Yield presents itself as an owner and operator of contracted renewable and conventional electricity generation, as well as thermal infrastructure assets.  (Thermal infrastructure provides heat or cooling to businesses for use in their operations.)  The company has a green tinge because of its wind and...

Tom Konrad CFA Disclosure: Long BEP, HASI. Canada’s stock exchanges have long had the lead as the place for energy infrastructure companies to list.  This includes green energy, as well as the fossil fueled sort.   Because Canada’s reporting rules are somewhat less stringent, and its markets less liquid than those in the US, the large number of offerings trade at lower valuations and higher yields than do their (few) US-listed equivalents. In fact, it was the promise of a higher valuation which led Brookfield Renewable Energy Partners (NYSE:BEP, TSX:BEP-UN) to obtain its US listing on June...

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...

by Susan Kraemer As unrealistic expectations of dividend growth are scaled back, yieldcos are now on a more sustainable path. Weaknesses in the US yieldco model came into sharp relief this summer as share prices fell along with oil and gas stocks. This was in part due to investor confusion about energy stocks but also in response to a flaw in US yieldco expectations. Manager of the Green Global Equity Income Portfolio and AltEnergyStocks.com editor Tom Konrad Ph.D., CFA had warned of the looming potential for exactly this kind of market correction in a conversation a...

Tom Konrad CFA Conserving the planet for conservative investors. Investing in clean energy stocks has an (often well-deserved) reputation for risk.  Although energy efficiency and more inclusive progressive energy indexes have held up fairly well over the last few years, the performance of narrower clean energy sectors has been dismal, and some industry observers feel that the declines in wind and solar are structural (and hence permanent) as opposed to cyclical (and therefor temporary.) This presents a conundrum for investors with long time horizons who not only need their investments to earn a steady return...

Tom Konrad CFA Capstone Infrastructure Corp.'s Gas Cogeneration facility in Cardinal, Ontario. Capstone Infrastructure Corporation (TSX:CSE, OTC:MCQPF. Disclosure: I own this stock) is an international operator and developer of green infrastructure assets and utilities which is currently selling at a significant discount to most comparable firms.  I recently ran a comparison of six similar Canada-listed firms, and Capstone seemed much cheaper on several measures. The Discount The following chart compares five renewable energy and green infrastructure firms with most of their operations in Canada: Capstone, Algonquin Power and Utilities (TSX:AQN, OTC:AQUNF), Brookfield Renewable Energy Partners (NYSE:BEP),...

Tom Konrad CFA Disclosure: I have long positions in MCQPF and AQUNF. Capstone Infrastructure Corporation (TSX:CSE, OTC:MCQPF) has been trading at a significant discount to its peers because of a  power supply agreement which expires at the end of 2014.  Capstone is seeking a new agreement with the Ontario Power Authority for its Cardinal gas cogeneration facility, a process which has taken much longer than management expected. The cardinal Cardinal plant currently accounts for about a third of Capstone’s revenue and a quarter of earnings before interest, taxes, and depreciation (EBITDA), but two-thirds of distributible income.  The high fraction...