3rd Quarter 2016 Conference Call Notes It appears as if the market has over reacted once again. I cannot necessarily blame it though, for when I step back and look at the company I find some confusion. The long-term investor is wondering what is going on: the refinance “felt like” it took forever and we have more of a short-term than long-term solution, the dividend is finally being paid and the capital raise was totally out of the blue. Trying to get a clear picture of the company is difficult! Are we a growth company? Value? Income? How should we be priced? Are we cash flow positive?
Side tangent: on the refinance – in my ventures I have been very frustrated with banks lately as we cannot lock in rate for anything longer than 5 years. This is most likely due to the bank all believe rates are going up and don’t want to lock in. Dealing with banks is no fun and takes extreme amounts of patience and understanding the box the banks are trapped in.
The long-term small investor might feel sold out as well. We have stayed around for a long time, where are our options? Why weren’t we invite for the offering?
Perhaps, the company is setting up for its next stage. We are no longer an infant, but have reached adolescence! We need a few new items like branded jeans, cell phones and dad better drive a cool car when he drops me off at school.
In this case, the projects are requiring more technical items, tax experts, larger financing, management teams, construction expertise, etc. Sorry small guys (me included) you don’t have the resources to pool.
Time to think where the company needs to be in 2 to 3 years! Time to think much, much bigger!
But can we execute? Can we inspire?
· Congratulations on the BC Hydro award and Jay Sutton for his achievement!
· Very fast call compared to the last quarter (that is how it felt to me, but it appears it was longer by 1 minute)
o 47 minutes: ~21 minute presentation + 17 minutes (analysis) + 9 minutes (investors)
§ Questions came from
· 2-3 analysis, ok questions, surprise of might “likely” sell a stake of Flat Top
· 2 investors
· Mr. Beaty answered PR is about to hit about minute 39 to drive higher share price
· Mr. Carson generation to be added per year for next 2- 4 years is ~200 MW
o 2Q2016 call was 46 minutes with 29 minutes of questions with analysis
· Dividend to be recorded November 30, 2016 and paid in December
o Yield is now over 1%
o Annual rate in CAD $0.05 / $4.25 (Monday’s close 11/14/2016) = 1.176%
o Annual rate at 52 week high $0.05 / $7.50 = 0.67%
o This is better than I receive in my money market. Although I need liquidity in my multiple ventures, I did liquidate a small money market and invest it all in Alterra; higher yield, better future, higher risk, I am ok with it
· Operates 819 MW of generation and owns 381 MW per website (feels like this needs to be updated)
o Have over 220 MW in late-stage development coming online
§ 200 MW Flat Top and 20 MW Solar including 7 MW at Kokomo
o There were also several other projects, including a 14 MW in Michigan in the works
o Concluding: they can grow their pipeline of revenue generating assets which they operate at 25% for the next 2 years; ownership the same rate assuming they are selling 50% of Flat Top
§ Mentioning the potential sell of an interest of Flat Top might have triggered some of the sell in stock; wouldn’t you want to own 100% of this if it’s such a great asset as they have stated?
· Why is anyone worried?
o Lynda Freeman, CFO responded to an injury that the company will meet the forecast
o If you combine the forecast + dividend + new financial strength of the balance sheet you should get quite a significantly higher value an $4.25 CAD (Monday’s close 11/14/2016)
· Confusion with finances
o Yahoo!Finance shows them beating, even though at first glance you would think they missed
o Generation, revenue and EBIDTA is hard to back into back into, confusing perhaps; management needs to reconcile it plainly
o The confusion could be a part of the real reason the stock price is suffering
o Can anyone plainly state the total assets, total debts, total revenues involved here?
· OK the cost of capital did have me a little frustrated, really, we can’t borrow at less?
o How does this make the new shareholders feel?
o We diluted you because capital is so cheap?
o It is probably a very intelligent move however:
§ It strengthens the balance sheet
§ Adds $12M in cash
§ Pays down debt $12M
§ Pays for earl stage construction $11M
§ Pays for development costs $2.7M
§ Pays for Flat Top $27.9M
§ I still cannot believe they raised this much funds, Mr. Beaty has certainly placed his reputation on the line once again, if you do not believe he is all in, you are mistaken!
· Communication
o OK, this call has me ready for a restatement that they need to communicate their message clearly and better
o I start my meetings with my mission statement, vision statement and values it takes 5 minutes; I think they need to do this as well
o I mean they were asked a yes\no question about if they were on target with the forecast and they couldn’t say “yes, AND due to the additional projects it appears we will beat the 2017 forecast” instead an answer of blocks of additions?
· Inspiring leader
o Although I believe John Carson is improving; it may just be time for an inspiring leader who can rally the troops and investors
The stock price was rewarded earlier for being in the right place at the right time (utility sector and renewable energy). Now it is being punished for the same reasons.
As for Trump, he is full of rhetoric and is a marketing machine. I am willing to bet he doesn’t do half the things he said he would do (just like all of the previous Presidents elected before him). In 2 years Congress will flip, just like on Obama, just like on Bush, just like on Clinton…the American people generally do not like 1 party in charge of too much (right now the Republicans run local, state and federal)…Hope turns to Nope, change turns to more of the same.
My plan: I invested in more, willing to take the risk…or take advantage of market mis-timing or mis-pricing. I see progress and the stock price is being set out of fear, not reasonableness => therefore I purchase.
My position is up significantly from the shareholder meeting now (lots of nibbles at these prices, see above). It is pushing on some investment guidelines of ones % of net worth. If the stock price declines I and all else stays the same, I will most likely invest more. As the stock price recovers and the % goes over the net worth investment % boundary, will I have to sense to follow the rules, or stay convicted to my long-term vision of the company?
Frustrated and patient…but I would rather be…
Strong and Bold,
Bold Forbes
Heroes like character as in true leaders rise during more challenging times.