RE:what is happening Selloff is overblown; PEGI’s portfolio should be safe
PEGI’s stock price declined over 10% with a couple of
downgrades and the Ontario Throne Speech. One major
concern on the street is the fact that PEGI’s portfolio in
Ontario (about 14% of total) could be at risk with the PC party
not favouring renewable energy in the province (could look to
cancel Green Energy Act).
Contract is a contract; we believe risk is minimal
We believe that the precedents in Ontario are clear, a contract
is a contract. Most recently, Northland Power Inc. (NPI: TSX,
Outperform) was involved in a dispute with the OEFC over
changes to its natural gas contracts. Multiple levels of courts
sided with NPI, up to the Supreme Court, supporting more
than a $100 mln settlement to NPI. Cancelled gas plants by
the Ontario Liberals after the 2011 election were not even built
and were estimated to cost the government more than $1.1
bln. If the government tries to cancel existing contracts, the
noise could hurt but we believe the government could lose.
Growth opportunities in Ontario are limited
The Ontario government is more likely to successfully stop
future renewable energy construction. Pattern Development
has a number of projects under development in Ontario, but
we do not see any risk from PEGI from these projects.