only a matter of time before this re-rates $10 upside
PIF announced they have acquired an operating solar asset in the Dominican Republic with further development opportunities … details below:
* 32 MWdc / 26MWac operating solar asset called Canoa 1 in Barahona Province, Dominican Republic
* The project reached COD in March 2020, and has a 20-year PPA with Edesur Dominicana SA, a local DR distributor
* PPA power rate of $128.10/MWh in 2022 with a 1.22% annual inflator until the price reaches $142.80/MWh, at which point the price is capped until the end of the PPA in 2040
* Implied revenue of ~$7.3 MM (at 25% capacity factor) and $5.5-6.0 MM of EBITDA
* PIF is paying $18.4 MM in cash and assuming $35 MM of project level debt
* Implies purchase price EV/EBITDA of 9.75x
* The project also comes with expansionary opportunities whereby the project would double in size to 65 MWdc / 52 MWac
* PIF is already under negotiation for a PPA for this additional capacity, with commentary suggesting that the power prices have come down since Canoa 1 reached operation – if we assume ~$75/MWh (BNEF estimates an LCOE range of $65-123/MWh), implies an additional ~$4.3 MM in annual revenue, and ~$3.2-3.4 MM of EBITDA
* Including this additional capacity, we estimate the consolidated acquisition multiple is in the range of 8.75x (on a $1 MM / MW capex budget for the extra 26 MW to develop Canoa 2)
* The project is expected to close in ~90-days and will be funded with cash on hand (PIF exited Q4/21 with ~$98 MM of cash)
This Dominican acquisition comes on the back of PIF’s Ecuadorian and Panamanian acquisitions mid-March (see email below), represents the companies fifth jurisdiction and sixth operating asset. The geographic and fuel type diversification continues to highlight the renewable power platform PIF is building in LATAM, which should drive a meaningful re-rate in the company’s valuation. Prior to the acquisition, PIF was trading at 2023 metrics of 6.3x EV/EBITDA, 14.3x P/E and 17.1% FCF yield (vs. peers with more than double the EV/EBITDA multiple).