At long last, Terraform Global (NASDAQ:GLBL) has provided an update on their Q4 2015 and Q1 2016 financials, albeit only unaudited results. The slide deck containing these updates was provided to the company's bondholders, along with commentary highlighting key initiatives being undertaken by the company.
It's great to see that Thomas Studbaker David Rawden, the recently appointed COO and Interim Chief Accounting Officer, are quickly getting to business appeasing Global's bondholders and working towards a long term solution with SunEdison (OTCPK:SUNEQ). Hopefully they can get the financials completed before the NASDAQ deadlines and also present an update on when the company will start paying a dividend again.
1. Global now has 917MW, about 75 more than they had last noted. It seems that the additional MW are due to the way the MW are calculated. Before, they were noted on a combined equity and economic basis, whereas now it is strictly on an economic basis. To be honest, I'm not certain what that actually means, and would love comments from anyone that does.
2. The company noted that it does not expect to receive the 425MW of Indian projects, nor another 93MW of other projects that were supposed to be delivered by SUNEQ during the past few months. This means that the $231mil pre-paid by Global to SUNEQ is likely out the window, and that SUNEQ has not fulfilled a large portion of their IPO commitments to Global. This outcome was expected by me in late March and was already baked into the price of the shares.
3. Global delivered revenue and CAFD (cash available for distribution) that matched my expectations for Q4 and Q1 2015. However, they noted that extremely low wind conditions in Brazil negatively impacted revenue during Q1, which is a long term positive in my book.
|(Q4 and Q4 use midpoint data)||Q3 2015||Q4 2015||Q1 2016|
|MW Capacity (end of period)||728||855||890|
It seems that the company's current fleet is on pace to deliver annual revenue of between $220-240Mil in 2016.
4. The company produced solid Q1 CAFD of $45Mil, in large part due to the $41Mil interest support that was paid by SUNEQ in February. SUNEQ is supposed to send over another $40Mil in August and $100Mil over the next four years, but these amounts are extremely unlikely to be paid at this point.
5. Probably the most interesting point is that Global is working with SUNEQ to facilitate a joint effort to market and potentially sell SUNEQ's interests in the company. This is of extremely high interest to us Global shareholders, as it opens the door to an expedited return to normalcy; consistent dividend payments and a higher share price.
Having a strong 3rd party such as Brookfield Asset Management (NYSE:BAM) buy out SUNEQ's class B share and IDR interests in Global would be the best outcome for Global shareholders. Having a new, strong sponsor would assuage counterparty and debt holder fears, allowing the company to resume their previous plans to add to their portfolio. The company could then begin paying the projected $1.10/share annual dividend again, and potentially even grow in slowly over time.
BAM has already purchased a large stake in Terraform Power (NASDAQ:TERP) and expressed interest in purchasing SUNEQ's Class B shares in that Yieldco, so here's hoping that they are also interested in the higher yielding international assets.
The market was clearly happy to see the news, as the stock is up to over $3.70, its highest level since the last dividend was announced in early March. As I noted in late March, I estimate the shares to be worth at least $4-5 in the worst case scenario, but they would quickly rise to the $7-8 level if a strong new sponsor takes over control from SUNEQ.
I recently was fortunate enough to take a position in Capital Products Partners (NASDAQ:CPLP) thanks to an excellent set of articles by fellow contributor Darren McCammon. The stock is up from the $3.00 level to $3.80, but still sports a close to 8% dividend that is likely to be increased substantially over the next couple years. If you're interested in another high yielder at a good price, I recommend reading Darren's articles on the company.
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Disclosure: I am/we are long GLBL, TERP, CPLP.
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