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Tom Konrad, CFA

 
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  • NRG Yield - Well Hedged Yield Co With Great Growth Prospects Going Into 2015 [View article]
    There are a couple big confusions in this article. First, you confuse diversification with hedging. A hedged portfolio is one where some assets tend to gain in value while others fall. NYLD's portfolio is diversified between fuel sources, not hedged.

    Second, most yieldcos, including NYLD, own assets which sell power under long term contracts, with the prices locked in and guaranteed by the buyer. Further, the political incentives for renewables are locked in when the plants are built- the political risk here applies to new construction, as business few yieldcos are involved in. Hence, if the goal is to reduce the risk to a yieldco's cash flows, it's more important to have a diverse group of customers buying your power and to make sure that your operating costs are hedged in the power purchase agreements or by your fuel suppliers (in the case of fossil plants - renewable operating costs are mostly fixed.) Renewables benefit from geographic diversification and diversification between renewables because this smooths weather variability.

    In short, a mix of fossils and renewables may or may not diversify risk (it will never "hedge" risk). Unless fuel costs are hedged, inclusion of more than a small percentage of natural gas plants will tend to increase risk, since volatile natural gas prices lead to volatile costs, which is not a problem for renewables which have no fuel costs. Even when fuel costs are hedged. fuel diversification is no more important than geographic diversification, diversification between renewables (solar, wind, hydro, geothermal, biomass) or diversification between conventional fuels (coal, natural gas, nuclear), long term power purchase agreements, and diversification of offtakers.

    If you want to make a case that NYLD is less risky than other other yieldcos, these are the questions that you'll need to ask.
    Dec 20, 2014. 12:24 PM | Likes Like |Link to Comment
  • Yield Co Pricing Less Irrational, But Plenty Of Opportunity Left [View article]
    The Ofwat ruling was quite bad. (Caught me by surprise, too, I should have paid more attention.) Don't know if it justifies the decline, but it probably would if the appeal fails. Bristol appealed last time and got a better result because of it.
    Dec 12, 2014. 07:27 PM | Likes Like |Link to Comment
  • 2 Clean Energy Speculations For 2014: Wrap-Up [View article]
    No insights- I'm not following it any more. That's what happens when I get out of a stock.

    The thing about call options is that most expire worthless. But if you want one, I can think of a lot of better bets. HASI June $15 Calls come to mind.
    Dec 11, 2014. 10:42 PM | 2 Likes Like |Link to Comment
  • U.S. Geothermal Inc. - Non-Controlling Interest Casts A Shadow Over The Company [View article]
    One other note on your article. You said "HTM will need capital to grow. This capital will be obtained either through new offerings or through taking more debt." There is one other option, which I'm surprised you did not mention, given the subject of this article. HTM could fund development through the sale of non-controlling interest in their (currently 100% owned) development projects. I consider this the most likely scenario, since it is how they have funded development in the past- funding development is precisely how Enbridge got their stake in NHS.

    Not that this changes your conclusion one bit- I just mention it to add color to the discussion.
    Nov 28, 2014. 12:21 PM | 1 Like Like |Link to Comment
  • U.S. Geothermal Inc. - Non-Controlling Interest Casts A Shadow Over The Company [View article]
    Thanks for the in depth look at how HTM reports income. I sold this stock last spring in part because I did not like the confusing way HTM accounts for income (although mostly because it was overvalued at the time.) I have just a tiny trading position now that I picked up at $0.40 a couple months ago.

    Note that I don't have any problem with Enbridge owning a slice of NHS, I just think the accounting should be clearer. IMO, since HTM has < 50% of economic interest in NHS, that project should not be consolidated. Even though they are able to get their auditors to go along with this practice, such confusing accounting makes me think twice before buying the stock- if the company does not report their accounts in the most straightforward way possible, I have to wonder why.
    Nov 26, 2014. 10:35 AM | 1 Like Like |Link to Comment
  • Yield Co Pricing Less Irrational, But Plenty Of Opportunity Left [View article]
    I'm modelling a 12% annual dividend increase for NYLD over 2 years from 3.2% today to 4% in 2016. I believe this is in-line with management statements about their intentions, but feel free to check it yourself.

    A 12% dividend increase is quite high compared to other infrastructure investments. The only reason they've been able to increase it faster since the IPO is that they started at an artificially low dividend. If you want to talk about track records of dividend increases, HASI had a 4c dividend in Q2 2013, and will have a 26c dividend in Q4 2014. But I'm only modelling a 13% annual dividend increase for them going forward, from 7.6% in Q4 2014 to 9.7% in Q4 2016.

    Yield cos tend to talk about their dividend increases as a percentage of the current dividend, which makes NYLD's plans to increase its yield by 0.8% sound almost as impressive as HASI's plan to increase its yield by 2.1%. While NYLD's plans may sound impressive, they aren't (at least in a relative sense.) Part of the reason I chose to display the dividends in this format was to alleviate the confusion.
    Nov 25, 2014. 09:40 AM | 3 Likes Like |Link to Comment
  • U.S. Geothermal Inc. - After Gloomy Years This Company Offers Value [View article]
    There are two types of geothermal plant- flash steam and binary cycle. Flash uses geothermal steam to directly turn a turbine, while binary uses geothermal fluids or other heat sources such as waste heat from industrial processes or a flash plant (in which case it's called a bottoming cycle) to vaporize another fluid with a lower boiling point and use that vapor to turn a turbine.

    Flash steam is the most established technology, but requires a much hotter resource. In the US, that is limited to the Geysers in CA, but there are many flash plants in places like Japan and the Philippines. Ormat was the innovator in binary technology, but there are several competing varieties available from other vendors currently. All HTM's plants are Binary, and I think they mostly use other vendors than ORA.
    Nov 12, 2014. 09:29 AM | 1 Like Like |Link to Comment
  • 10 Clean Energy Stocks For 2014: Spooky October [View article]
    I have not run the numbers, but I doubt the change in outlook compensates for the stock decline this year.
    Nov 11, 2014. 11:36 AM | 1 Like Like |Link to Comment
  • Axion Power's IPO Crash: An Opportunity To Buy? [View article]
    Sounds like the PIPE from last year all over again. I think the biggest lesson to be learned here is that Axionistas' love affair with Axion is one-sided. Management does not care what happens to existing shareholders.
    Nov 8, 2014. 06:30 PM | 23 Likes Like |Link to Comment
  • Power REIT: Light At The End Of The Tunnel? [View article]
    The lack of recent buying activity is because the company is about to release 3Q results. Per an email from Lesser 2 days ago:

    "While I do not think there is anything particularly material in the upcoming 10Q, I do not think it is advisable to make any purchases just prior to the release. I cannot really say what my intentions are regarding future purchases other than that I feel PW is undervalued and a very compelling risk adjusted investment at this time. I plan on updating the investor presentation in the near future to continue to try to lay this out for investors."
    Nov 8, 2014. 12:05 AM | 2 Likes Like |Link to Comment
  • Selling Exide [View article]
    Rich in Q-
    Thanks for saying that, and sorry I was not able to persuade you at the time. It's a hard lesson to learn- I learned it the hard way, too. If you learn from the experience and don't make the same mistake again, you'll at least have gotten something more than a tax write off. From your comments, it sounds like you have.
    Nov 7, 2014. 11:26 PM | 1 Like Like |Link to Comment
  • 10 Clean Energy Stocks For 2014: Spooky October [View article]
    Lowering targets is always a good reason for a stock price move.
    Nov 6, 2014. 06:33 PM | 1 Like Like |Link to Comment
  • 10 Clean Energy Stocks For 2014: Spooky October [View article]
    I can't keep up with all the earnings this week... Just reviewed HASI's and AMRC's. No surprises at HASI. AMRC continues to be cautiously optimistic, which I consider a good sign, not sure why it's selling off today. MIXT is next.
    Nov 6, 2014. 01:42 PM | 1 Like Like |Link to Comment
  • Power REIT Lawsuit In-Depth Analysis: Mineral/Oil Rights Issue [View article]
    Sounds like you are right that I missed the previous sales of mineral rights. Thanks for finding that.

    I don't consider myself a cheerleader for this stock... while the stock could double if PW wins everything they want, I only ascribed a 5% probability to that outcome, a point you ignored. I also think it could (25% probability) halve, something that you chose not to mention.

    You continue to proceed as if you have an agenda here - characterizing me as a cheerleader and emphasizing that I think the lawsuit could lead to a $20+, even though I gave it a tiny probability. You also neglect to mention that you are only rebutting part of one of three points I made... there are still other aspects of the lease for which performance, such as legal fees. You also repeated your emphasis of the irrelevant fact that NSC appears confident without demonstrating that it is relevant to the case, while mis-characterizing my valuation without providing your own.

    It's easy to make mistakes in understanding a complex case like this one, but unless you can admit those mistakes when they are pointed out.
    Nov 5, 2014. 04:57 PM | 3 Likes Like |Link to Comment
  • 10 Clean Energy Stocks For 2014: Spooky October [View article]
    You're welcome. I sold my HTM last year, but just bought back in with a small position when it fell back down to $0.50- I was hoping it would fall more, but the news sent it back up.
    Nov 4, 2014. 10:12 AM | 1 Like Like |Link to Comment
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