Alterra Power MGMXD

RE:$30m to $35m in free cash flow in 2017

[Harbinus]

Yes, my post from yesterday was my first in many years on this site, I couldn't remember my old login so had to make a new one.  As I said, I have been following this company since 2006, when it was Plutonic Power (PCC), early on as an investor and later as an observer.  PCC was the first company that I covered as a sell-side analyst (FYI, I am on the buy-side now), so I've been curious to keep following it even when I didn't think it was an attractive investment.  

Back in 2007/2008 PCC reached over $400 million market cap with no producing assets but based on selling a dream of 1+GW in hydro development potential, but the only plant that ever made it to production was Toba-Montrose and soon Jimmie Creek.  I remember the optimism back in those days but investors didn't really grasp the difficulties of developing anything substantial in BC...

Distributable cashflow in 2017 of $30 million seems very reasonable, but who knows how much will be spent on development, I'm hoping not that much.  Too much spent on development of projects with questionable potential has been the problem of Alterra in the past and why we've seen massive writedowns in recent years.  I think Ross Beaty is very intelligent and has learned a lot about renewable energy development  over the years, what is risky, what works and what doesn't work so well.  I've seen positive adjustments in the Alterra's development strategy in recent years, so I think/hope they won't repeat the mistakes of past years.

I'm not even going to bother trying to predict cashflow beyond the assets that they already have or are currently under construction because visibility on development past 2017 is not clear at all.  Alterra has various potential options, but I think even management doesn't really know at this point which ones will be developed after Jimmie and Shannon.  Certainly I would prefer to see a cluster development strategy, maybe relatively low-risk expansion at Reykjanes and Svartsengi, maybe some new opportunities present themselves in <15MW hydro in the Toba Valley in BC and we'll have a better idea about the potential of Mariposa then.  Maybe development of new projects that we don't even know about today.

I might exit after 2017 if their development strategy seems riskier and the stock is over $0.70 but what is clear to me now is that today is that the company is around 60-100% undervalued vs. where it should be in about 18 months time based on cashflow.  I like the cashflow stability/value profile of their assets and chart technical analysis looks great too, if you care to look at stuff like that.

Ross Beaty also threw down $10 million of his own money to increase his stake by over 5% over the last 2 years, I don't know any other stock where the chairman has been accumulating so aggressively with personal money...

Everything points to new highs for Alterra in 2016 and beyond