Income Investments

India had been trying to get a corporate bond market going for 15 years – search “growing India corporate bonds” and you’ll find papers on the subject from the Reserve Bank of India, Bank of International Settlement and others scattered over past years. The latest Indian 5 year plan has this as a priority – and has green finance as a priority in a separate section. India has a particular need: a miniscule local corporate bond market means restricted financing options for business, including for renewable and energy efficient building developers – diversity with financing options helps drive down costs...

by Sean Kidney Warren Buffet is a famous proponent of value investing and he surely received a sign of the value in solar investments over fossil fuels last week. The MidAmerican Energy $850m Topaz solar project bond we mentioned a couple of weeks ago was so successful that a second tranche is expected to cover the remaining debt of the project. The offer was oversubscribed by $400m which would have mopped up the total $1.2bn of debt in the project; Buffet's Berkshire Hathaway (BRK-A) controls MidAmerican. In contrast, Buffet’s investment in $2bn of bonds from gas company...

Tom Konrad CFA Jeffrey Eckel Jeffrey Eckel has an investor relations problem. No, there has not been any scandal involving fudging the books or sweatshop labor.  Rather, most investors simply don’t seem to “get” his company. His company recently went public as a REIT, or Real Estate Investment Trust, and the traditional REIT investor likes the familiar.  They invest for income, and for many, a track record of past income and dividends is a must.  While Eckel’s company manages $1.8 billion of securitized energy efficient and sustainable infrastructure...

By Bridget Boulle and Rozalia Walencik Last week BBB-rated Vornado Realty (NYSE:VNO) became the second US real estate investment trust to issue a corporate green bond, following the Regency Centres (NYSE:REG) bond late last month. The 5 year, $450 million bond was structured by Bank of America Merrill Lynch. Pricing was in line with non-green bonds. Investors included asset managers, pension funds, insurance companies and governments, of which some were regular investors and others had a specific green interest. Some non-US investors also came in. According to the prospectus, the proceeds will be used to fund buildings and retrofits...

Investors did not like Hannon Armstrong's (NYSE:HASI) fourth quarter earnings announcement last night.  While core earnings were a little weaker than expected, that is not what has the stock trading down 11% today.  What shocked investors is the fact that the company did not raise the dividend this year for the first time since the REIT went public, and it gave 3 year guidance which likely disappointed many investors. Last month, I wrote, I expect that Hannon Armstrong will continue to be a well run and conservative business in 2018, and that management will raise the dividend at the lower end...

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...

Tom Konrad CFA Disclosure: I am long PW and HASI. In a rational world, the sunniest places would have the warmest reception for solar technology and investment.  While solar is having its day in the sun in Hawaii, state incentives make the economics of photovolatics equally attractive in Vermont, a state not known for its sunny skies.  And while California is famous for its rapid deployment of solar, the economics are at least as good in Washington state, New York, New Hampshire, and chilly Maine. It’s not only the economics of solar which can counter-intuitively get better...

New Canadian Climate bond: Northland Power releases a pretty big ABS - CA$232m (US$206m) - backed by solar projects with proceeds for renewables. 18-year tenor, 4.397% coupon, BBB. Securitisation key future area for green bonds.

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...

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 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 Where did all the CREBs and QCEBs go? Mystery solved. The US has for a long time used tax credits to promote the development of oil and gas and other industries. With tax credits the bond issuer still pays a coupon, but their payment is subsidized, effectively lowering the rate of interest paid. The Obama administration brought in a big program of credits for renewable energy bonds. The plan was that States, large local governments, tribal governments and public power bodies would issue bonds to finance energy efficiency or renewable energy. The US ...

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.