Income Investments

by the Climate Bonds Team Second green bond from TerraForm to finance wind power acquisition, $300m 10yr, 6.125% s/a coupon, BB-/B1 TerraForm Power Operating , the yieldco spin off from SunEdison , has issued a second green bond shortly after tapping its inaugural green bond for a further $150m (making their first green bond a whopping $950m!). The new $300m green bond has 10-year tenor and semi-annual coupon of 6.125%, and was issued in the US private placement market. It is sub-investment grade with a rating of BB- from S&P and B1...

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....

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 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...

Jennifer Runyon According to Richard Kauffman, Senior Advisor to the Secretary, DOE, making REITs or MLPs available for renewable energy project financing is the key to advancing the industry.   Top engineering, procurement and construction firms gathered to network, learn and do business with corporate-level project developers at the PGI Financial Forum, one of four co-located events that took place in Orlando, Fla. earlier this month. Richard Kauffman, Senior Advisor to the Secretary of the U.S. Department of Energy, gave the keynote address during a luncheon that took place during the conference. ...

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...

Tom Konrad CFA Renewable Energy Investing Grows Up. In January I predicted 2014 would be the year "renewable energy finance comes of age."  Here's how Jennifer Runyon quoted me on Renewable Energy World: Konrad believes that 2014 will be a great year for renewable energy finance, he said.  He said that we saw the beginning of it in 2013 with the securitization of a bond by Solar City (SCTY) and pointed to Hannon Armstrong’s (HASI) securitization of an energy efficiency bond in late December 2013 as another indicator that renewable energy...

By Bridget Boulle and Sean Kidney Helping to push along the green muni space, the New York State Environmental Facilities Corp (EFC), rated AAA, has issued a USD 213 million green / water bond. There were 30 bookrunners on this bond with JP Morgan and LOOP Capital Partners co-leads - see prospectus. The proceeds will be used to provide financial assistance to local governments to finance and refinance drinking water projects as well as to refund certain bonds previously issued. They expect to support 128 drinking water and wastewater infrastructure projects across the State. Qualifying projects...

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...

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...

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...

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...

by Tess Olsen-Rong Green municipal bonds are set to take off in 2015 after a flurry of issuances in the latter half of 2014. With interest rates at an all time low, this is the time to finance the vast backlog of infrastructure upgrades and developments needed – and to green that infrastructure. This, according to the Financial Times, is especially so in the US. With green muni growth has come a growing diversity in the use of proceeds. Some green municipal bonds are using proceeds for projects where the green credentials are more complex to analyse...

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...