RE:Ridiculousnavajojoe wrote: AQN is paying $12,500 US per customer for mostly coal power, then is going to spend gawd knows how much more to "green" that part of the company?
This is friggin lunacy.
You have to understand that it's a regulated utility.There is a guaranteed return on the rate base (and the rate base is guaranteed as well) and whatever they invest to turn it into "green" adds to the rate base, so will return guaranteed cashflows and return.
They state a $2.2B rate base around purchase time. Let's say that the rate base is considered 50% equity and 50% debt, with the equity yielding a return of 9% (per their presentation) and the debt at 3%, for an average 6%, with an amortization of the rate base over 20 years, then AQN will receive yearly cashflows of $110M for the rate base and around $100M in return for the equity investment in the first year (then it goes down yearly as the rate base erodes). When they invest in renewables, the cost of the investment gets added to the rate base with the same returns over time.
Purchasing a regulated utility that requires investment is a good way to generate returns because even though you buy the initial rate base at a premium, all the new investments are done without premiums (and would generate a premium upon sale).
I think the problem with AQN isn't that they are making accretive investments, but that they are serial issuers of stock, which regularly pulls back the stock price.