Bluefield Solar Income Share Discussion Threads

[williamcooper104] 31/1/2020 13:51

Short/medium term you are right Long term JPM are right Question is how short is short/medium and how long is long And to that I have no clue Wish they'd just securitise their ROCs (unbelievably valuable) to leave a share price that was literally just power price risk

[williamcooper104] 31/1/2020 13:49

Usually solar farms don't own the land their on So will have to negotiate with the land owner for new lease (most out outside of the act so don't have any protection/security of occupation)

[11_percent] 31/1/2020 13:38

Was reading some previous posts and saw the below. ============= What will happen to my solar panels after 25 years? "The truth is we don`t really know – there`s not really a lot of data to look at since photovoltaics is a relatively new technology (the vast majority of all solar panels are less than 10 years old). However, from what we are seeing so far, we have reason to be excited. Here are a couple of interesting reports: A 33W solar panel (Arco Solar 16-2000) actually outperformed it’s original factory specifications 30 years after it was manufactured. World`s first modern solar panel still works after 60 years. Kyocera has reported several solar power installations that continue to operate reliably and generate electricity even though they are nearly 30 years old. The technology has improved, the solar panels on today`s market are more robust and durable. This is where it gets really interesting. What does all of this actually mean? The lifespan of a modern solar panel is far longer than the 20 years that we use to calculate costs and earnings. This basically translates into more money in your pocket. I would bet that a solar panel installed today would be up and running (and still generating a good amount of electricity) 30 – 40 years down the line." hTTps://energyinformative.org/lifespan-solar-panels/ ========= I am going to stick my neck out here and say...….although individual solar panels have a life...…...solar farms do not. All panels in a farm will not fail.....all together, at 25 years. They will fail individually, and can be replaced individually. I am thinking 2 guys and a fork lift truck...….and a supply of panels. Replace as they fail.

[tartshagger] 31/1/2020 12:07

I may be speaking too soon, but buyers are stepping up at support this morning - BSIF goes xd next week, the yield may be putting a floor under the price here

[nimbo1] 31/1/2020 08:26

Cool well good luck with your position - correct ref the one percent I didn’t read the end of your post properly. Rationality hasn’t gone out of the window at all - I’m not talking anything other than factual market mechanics...it will hopefully bounce from here.

[masurenguy] 31/1/2020 08:03

I'm not going to continue this debate since rationality has gone out of the window and you keep moving the goalposts. You can believe whatever you want to believe. "1 percent of shares sold in a company" Meanwhile, who stated that 1% of the shares had been sold? I stated that 1% of the shares had been traded, which covers both sides of the equation.

[nimbo1] 30/1/2020 21:49

‘Shares rise or fall before the market opens based on reaction to news before any trades have been placed’.... watch the opening auctions on L2! For c.10 minutes every morning buys and sells are matched against each other (demand and supply in action - the weight on either side determines the opening price...sentiment impacts the buy side or sell side volume - the supply and demand on either side moves the price - always). That auction happens c7.50 am before the market actually opens - where electronic trading is in play anyway. 1 percent of shares sold in a company if there is no demand for stock because sentiment has been trashed by those articles can easily move the share price down - as we’ve all just witnessed proving demand and supply of stock is always the driver of share prices.

[masurenguy] 30/1/2020 15:48

"no need to split hairs. sentiment when it leads to a reaction from a market participant involves a buy or a sell" It is not 'splitting hairs' ! Demand and supply are measurable equations whereas sentiment is an emotional/subjective response. Many share prices rise or fall at the market open based upon reaction to news and that is before any trades have been placed. Tartshaggers posts above illustrate the fact that sells over the past 2 days were triggered by the JPM report and therefore based entirely upon sentiment. The price fall since then is based upon circa 3.7m shares traded over these two days and that just constitutes 1% of the shares in issue, so liquidity and demand/supply issues are really not significant factors in this context.

[nimbo1] 30/1/2020 14:06

measurenguy - no need to split hairs. sentiment when it leads to a reaction from a market participant involves a buy or a sell... therefore call it what you want sentiment or excess supply....if there are more sellers than buyers in the demand equation prices fall....as it is now doing... fwiw there is ok support at 130p for the moment from both a chart and L2 perspective thanks tartshagger for your post. I would be a buyer here at 120p for sure although I don't think it will get there.

[tartshagger] 30/1/2020 12:26

The more I watch this, the more it looks like a massive JP Morgan instigated tree shake. Possibly JPM are wanting to buy into the renewables sector for the highly attractive, inflation linked yield - but at their predicted 40% lower price. So here's what we know1) The directors are not selling2) Elliot Cap closed their 1% short position (opened on 4th Jan ) on 20th Jan - shorttracker.Co.UK reports no other short positions today3) The dividend is well covered at 1.9x and the Company paid a special divi last year4) Bluefield exposure to electricity prices only affects 1/3 of the income stream, the other 2/3 is guaranteed government FITs and ROC payments5) Bluefield have fixed price electricity supply contracts with their buyers 3 years out6) Brookfield Renewable, a huge NYE renewables firm is still within 0.25% of its all time high7) Possibly the two JPM analysts have misunderstood the basis of the UK renewable sector business model - BSIF, GSF, JLEN and TRIG have all announced recent plant aquisitions/construction projectsThere you have it. IMHO, hold and buy.

[masurenguy] 30/1/2020 11:19

"share prices are driven by demand and supply" Share prices are primarily driven by sentiment - the supply/demand equation is more significant with small, illiquid stocks.

[nimbo1] 30/1/2020 10:59

share prices are driven by demand and supply - in my opinion much of the premium here is driven by the misconception that it is a risk free high yield in a very appealing sector....those articles will make 'the market' wake up that it is not the case - therefore the premiums will fall. IMO only. As the selling starts the wealth managers will reduce...its how they work : )

[fw7] 28/1/2020 20:35

Correction to my last post. I think 7.18% is the equity discount rate (I was confused by the reference to 'weighted average discount rate' in the last annual report). This is still higher on a WACC basis than the market discount rate for portfolios of this type, so the NAV still undervalues the underlying assets. I also expect the market discount rate to continue to fall as it has done steadily for the last 5 years. BSIF is not significantly exposed to short term price movements as it enters into fixed price PPAs with 12-36 month duration. If the electricity price was to fall in the long term, then 1/3 of cashflows would be impacted, but with the increased future demand coming from EVs and heat pumps (low carbon heat), I think it is just as likely that prices will rise.

[fw7] 28/1/2020 18:49

Just read comments below and think the bear case is weak for a few reasons. BSIF NAV is based on a WACC discount rate of 7.18% (Jun19), which includes 33% low cost long term debt. Pension funds are now active buyers of these assets as they provide a long term inflation linked yield which is attractive compared to other inflation linked bonds. BSIF could probably sell their whole portfolio at a discount rate of 5.5%, so first point to make is that the BSIF discount rate is artificially high, so a premium over NAV should be expected. 2/3 of the revenue stream is RPI linked ROC payments, so only 1/3 is exposed to market prices. Electricity price has fallen in recent months, but it is very volatile (look up baseload electricity price chart). Poyry and Baringa produce electricity price forecasts and these change every quarter. Sometimes they go up and sometimes down, but it is certainly wrong to assume that the price will stay low forever. Last reason why these projects are attracting investment is that the cashflows are largely stable and therefore investors can park their cash and get a safe inflation linked yield that is significantly higher than is available elsewhere. On this basis they will be happy to get 5.5% yield, if the alternative is 1.5% in a bank. There is equity risk, but these projects are very boring and there is not much that can go wrong if managed correctly.

[nerja] 28/1/2020 17:42

hxxps://citywire.co.uk/investment-trust-insider/news/risky-renewables-now-jefferies-questions-dividend-cover-if-power-prices-plunge/a1317805?section=investment-trust-insider&_ga=2.235307718.630262266.1580232792-291942799.1580232792 For the doubters this is off insider info from city wire

[nerja] 28/1/2020 17:38

Risky Renewables: now Jefferies questions dividend cover if power prices plunge Renewable infrastructure investment company share prices fell again today as investors continued to respond to yesterday’s bearish note on the sector by analysts at JPMorgan Cazenove and Jefferies analyst Matthew Hose added to investor concern about the impact of falling power prices on the income funds ability to pay covered dividends. Where Cazenove’s Chris Brown focused on the hit to valuations of the six listed renewables funds from declining long-term electricity price forecasts – predicting their net asset values (NAV) could fall by a third on average and their shares, trading at double-digit premiums over NAV, could slump by over 40% - Jefferies’ Hose highlighted the reduction in earnings and dividends this slump could cause. Like Brown, Hose contrasted how Foresight Solar, JLEN Environmental Assets, NextEnergy Solar and Greencoat UK Wind predicted 0.4% to 1% annual real growth after inflation in power prices despite independent forecaster Bloomberg New Energy Finance positing 4% annual declines up until 2040. In a note to investors, Hose said the weakness in power prices could burst a bubble in the shares that had been inflated by the wall of money from ESG (environmental, social, governance) investors last year. Hose believed renewables funds shares, which closed at an average premium of 14% on Monday, could tumble to the low discounts to NAV they stood at in 2015/16 when power prices were also under pressure. Sensitive NAVs This is because his analysis shows a 5% reduction in power price assumptions knocks the NAVs of the different funds by between 2.9% and 5.3% making their high share price ratings even more precarious: NextEnergy Solar (NESF), 9.8% share price premium, -5.3% hit to NAV; Foresight Solar (FSFL), 10.8% premium, -4.4% hit; Bluefield Solar (BSIF), 20% premium, -3.7% hit; Greencoat UK Wind (UKW), 14.4% premium, -3.7% hit Renewables Infrastructure Group (TRIG), 13.7% premium, -3.5% hit; JLEN Environmental Assets (JLEN), 15% premium, -2.9% hit. But the more pressing risk for income investors, said Hose, was the impact on near-term cash flows as revenues from selling power declined and weakened dividend cover. ‘We see the cover of certain funds as relatively thin and, in some cases, as being supported by fixing/hedging that could eventually roll off into lower realised power prices,’ the analyst said. According to Hose, Greencoat UK Wind has the best dividend cover, with earnings 1.7 times its payouts, in contrast to the other five on multiples of just 1.1 at Bluefield, 1.2 at Foresight and JLEN and 1.3 at NextEnergy and Renewables Infrastructure. Bluefield's dividend challenge Bluefield Solar Income, downgraded to ‘underweight’ by Brown and rated ‘negative̵7; by Hose, was the biggest faller in the group today. Its shares fell 5p or 3.5% to 137.5p after yesterday it announced its first purchase in over three years of three UK solar parks for £13.9m. Today it announced its first quarterly dividend of 1.95p per share for the financial year to 30 June for which it is targeting a total of 7.90p. This will be up from 7.68p last year, although the company, which is unusual in having a policy of paying out all its earnings, topped this up with a special dividend of 0.63p in 2019. Brown questioned the sustainability of Bluefield’s dividend, which is currently linked to the retail prices (RPI) index, a higher measure of inflation than the standard consumer prices (CPI) version. ‘While we share the BSIF board's confidence in the shorter-term outlook for the dividend, if the shorter-term power price remains weak then the average fixed power price would be expected to fall while the dividend target is based on RPI, with only the regulated income [from government ROC subsidies] guaranteed to rise in line with RPI. ‘We think meeting these targets will be a challenge across the sector, but with a full payout policy, it might be felt earlier by BSIF than by some of the peers,’ said Brown. Other fallers JLEN Environmental Assets shed 2p or 1.7% to 119p as it announced plans to invest €25m in a portfolio of construction ready wind farms and solar parks in Europe. NextEnergy Solar slipped 3.5p or 2.9% to 118p and GCP Infrastructure Investments (GCP), a generalist infrastructure fund that also invests in renewables, slid 3.8p or 2.9% to 128p. Renewables Infrastructure Group, Greencoat UK Wind and Foresight Solar eased between 0.3% and 1.25% lower.

[nimbo1] 28/1/2020 17:12

See SQN asset finance as an example of what can happen when pricing assumptions change. Its just a risk - it may never come to pass on the solar funds and premiums to NAV may increase....I have no idea.

[williamcooper104] 28/1/2020 15:59

They won't ignore NAV if it starts to plummet

[williamcooper104] 28/1/2020 15:58

The issue with renewables is that the senior and junior debt is usually for the life of the PPA (10 to 15 years) and that sucks up much of the cashflow meaning that the equity is repaid out of the tail of the project so is hugely dependent on power prices The DCF models used to create NAV will assume a lot of inflation - so the equity is really rather sensitive to long term power price forecasts Sub-debt in renewables was always the better risk/return 5.5 percent is good - but the satefy check is the PV of that growing at inflation for the averages PPA price - difference between that and share price is the risk

[damp seaweed] 28/1/2020 13:24

The NAV is based on discounted cash flows projected 25-30 yrs out. But as the share price of BSIF is so disconnected from the NAV. Then maybe investors will ignore this fundamental. Though @~5.5% yield it hardly looks a bargain........IMHO

[bobdouthwaite] 28/1/2020 12:13

So the bubble could burst in the next 20-30 years? Hardly a reason to panic.

[nerja] 28/1/2020 10:31

Update) Investors in London’s expensive listed renewable energy funds are at a risk of a 43% share price fall and a 33% drop in asset values due to the slide in long-term power forecasts, JPMorgan Cazenove has warned. Strong investor demand for their reliable dividends and environmentally friendliness has pushed shares in London’s six wind and solar power investment companies to an average 16% premium above their underlying net asset values (NAV). But UK investment companies analyst Christopher Brown said the double-digit premiums of companies in the £9bn renewables sector were unsustainable in face of mounting evidence that growth in carbon-free energy would slash the cost of electricity in the next 20-30 years. While that's good news for consumers and the planet, it is bad news for funds generating most of their revenues from selling electricity into the wholesale market, said Brown and fellow analyst Adam Kelly. Using the latest figures from Bloomberg New Energy Finance, an independent forecaster owned by financial media giant Bloomberg, the analysts believed the NAVs of Bluefield Solar Income (BSIF), Foresight Solar (FSFL), Greencoat UK Wind (UKW), JLEN Environmental Assets (JLEN), NextEnergy Solar (NESF) and Renewables Infrastructure Group (TRIG) could drop by a third on average. And because of their elevated share prices – trading at premiums of between 12% and 23% - that could translate into a 43% fall in their stocks, they said.