A Clean Energy REIT: Hannon Armstrong Sustainable Infrastructure
Tom Konrad CFA On April 18th, Hannon Armstrong Sustainable Infrastructure Capital (NYSE:HASI) IPOed on the New York Stock Exchange. HASI is one of only two publicly traded Real Estate Investment Trusts (REITs) dedicated to sustainable infrastructure. The other such sustainable REIT is Power REIT (NYSE:PW), which I have written about extensively. PW is both illiquid and involved in significant litigation, two factors which may put off the conservative investors who gravitate towards REITs. In December, Power REIT purchased the land...
Fifteen Clean Energy Yield Cos: Company Structure
Tom Konrad CFA In the first article of this survey of yield cos, I looked at the possible reasons for the seemingly endless enthusiasm for US-listed clean energy yield cos. Here, I'll take a look at how these yield cos are constructed, and why investors should prefer one structure over another. Who's Your Daddy? Most yield cos have been created by clean energy project developers in order to create a ready, low-cost buyer for those projects. With the recent string of very successful IPOs, the capital available for such projects may prove...
Should Pattern Energy Shareholders Vote Against the Merger?
by Tom Konrad Ph.D., CFA
This morning, hedge fund Water Island Capital called on Pattern Energy (PEGI) Shareholders to vote against the merger with the Canada Pension Plan Investment Board (CPPIB).
Water Island claims the merger is undervalued compared to the recently surging prices of other Yieldcos, and that PEGI would be trading at over $30 given current valuations. There are not a lot of other Yieldcos left, especially if we eliminate those with their own special circumstances. These are Terraform Power (TERP) which is subject to its own buyout agreement with Brookfield Renewable Energy (BEP), and Clearway (CWEN and CWEN/A) where...
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,...
Retail Renewable Energy Bonds Proliferating
by Sean Kidney Renewable Energy Finance via BigStockPhoto There has been a bit of interest recently about rapidly expanding options for retail investors to get involved in renewable energy projects. While we still see retail bonds as making a relatively modest contribution to the transition to a low carbon economy, they are important in engaging the public and creating awareness for green thematic investments which can only be good. Here’s a round up of some of the activity going on in the retail bond market (please note, this...
Unlocking Solar Energy’s Value as an Asset Class
by James Montgomery
2014 is predicted to be a breakout year for solar financing, as the industry eagerly pursues finance innovations. Many of these methods aren't really new to other industries, but they are potentially game-changing when applied in the solar industry.
Green Asset-Backed Bond From Hannon Armstrong Has Measured GHG Savings
by the Climate Bonds Team Hannon Armstrong’s (HASI) second green ABS, $118.6m, will save 0.39 tons of GHG annually per $1,000! ($100.5m, 4.28%, 19 yr, A and $18.1m, 5.00%, 19 yr, BBB) Hannon Armstrong (NYSE:HASI) closed its second green ABS bond (Sustainable Yield Bond) following its inaugural issuance in December 2013. The ABS was a private placement split into two tranches with different credit ratings (from Kroll Bond Credit Rating Agency): $100.5m with a rating of A and 4.28% interest rate, and $18.1m with a rating of BBB and 5.00% interest rate. Both tranches have a 19-year tenor....
Green Bonds From Terraform Global, SolarCity, and Hannon Armstrong
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,...
The Making of a Solar REIT: By the Numbers
Tom Konrad, CFA A solar project at Fort Hunter Liggett in California. Photo: US Army Corps of Engineers Power REIT (NYSE:PW) announced yesterday that it had closed on a deal to buy approximately 100 acres of land leased to the owners of over 20 MW of solar projects near Fresno, CA. This will be the company’s second solar transaction and increases the share of its revenue from solar to 21%. These two solar transactions put PW well on its way to becoming the nation’s first REIT...
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...
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...
Green Dividend Yield Portfolio
By Harris Roen There is a new and growing interest in the world of alternative energy investing, the search for high-quality dividend yield among green investments. To this end, the Roen Financial Report has created a Green Dividend Yield Portfolio, a select group of high-yield alternative energy stocks. Together, this selection of companies can produce a steady stream of income for the alternative energy investor. A New Source for Dividend Yield The Green Dividend Yield Portfolio is a collection of high-yield stocks that are in the alternative energy business. Companies that fall...
Terraform Power Issues $800m High Yield Green Bond
by the Climate Bonds Team This week the yieldco TerraForm Power (TERP) issued a huge high-yield green bond; seeing more high-yield bonds is a sign that the green bond market is continuing to mature. In addition to TerraForm, more green bonds from repeat issuers OPIC, World Bank, IFC and Credit Agricole have been announced and will be closing in the coming weeks. For today, let’s dig deeper into the latest green high-yield offering. The US-based renewable energy company TerraForm Power Operating has issued US$800m of senior unsecured green bonds (debentures), making it the largest green bond of 2015...
The Yieldco Virtuous Cycle
by Tom Konrad, Ph.D., CFA
Readers who followed my coverage of the Yieldco bubble in 2015 know the Yieldco Virtuous Cycle.
A Yieldco’s stock price rises
It issues new shares, and invests the money in renewable energy projects.
Because the stock price is high, it is able to buy more project cash flow by issuing fewer shares than it has in the past.
Cash flow available for distribution (CAFD) per share increases, despite the increasing number of shares outstanding.
Yieldco management sets a target for continued rapid annual distribution growth, which can be met either by further share issuance (if...
My Yieldco Raised Its Dividend With This Weird Trick
Tom Konrad CFA Clean energy yieldcos buck the general trend by paying out a large proportion of cash flow to investors, and rapidly increasing their dividends at the same time. The key to this trick has been their rapidly appreciating stock prices. High yield companies generally grow slowly, while high growth companies have low dividend yields. Normal companies grow by investing some profits in new business opportunities. Early stage growth companies typically retain all their earnings to invest in new business. More mature companies have fewer opportunities, and so share a larger proportion of...
