Author Topic: AT - Atlantic Power Corp  (Read 43771 times)

petec

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Re: AT - Atlantic Power Corp
« Reply #160 on: May 30, 2019, 12:44:31 AM »
I own the prefs and have followed this thread since it started. I'm just starting to get interested in the common. If one of the common bulls has updated numbers around the bull case I'd greatly appreciate it. I understand the debt dynamics - it's more how you think about earnings in the long run. There was a good discussion about that a while back but the numbers have changed somewhat with the transactions etc.


ander

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Re: AT - Atlantic Power Corp
« Reply #161 on: May 30, 2019, 07:07:52 AM »
I own the prefs and have followed this thread since it started. I'm just starting to get interested in the common. If one of the common bulls has updated numbers around the bull case I'd greatly appreciate it. I understand the debt dynamics - it's more how you think about earnings in the long run. There was a good discussion about that a while back but the numbers have changed somewhat with the transactions etc.

I'm in the same boat as petec. I did a plant by plant analysis 3 years ago and couldn't get there, but it looks much more interesting now.

brycepeterson

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Re: AT - Atlantic Power Corp
« Reply #162 on: May 31, 2019, 10:11:20 PM »
Petec, Ander, plus others,

Attached is a sheet detailing Atlantic Power.  I'd appreciate ideas / if I have something wrong that needs fixing, etc.  It's all my research from public documents. 

My conclusion:  AT is one of the best single risk vs. reward investments I've encountered in my career.  My all-time fav's rivaling AT were Widmer / now Craft Brewers Alliance (ticker was HOOK, now BREW - don't like it at current prices) at $4-$5 share, and Buffalo Wild Wings (was BWLD, now private) when market cap was $250-$400 million.  In the past, my biz owned a lot of HOOK/BREW, and 3% of BWLD (sold out). 

How I base risk vs. reward:  I value businesses based on free cash flow yields.  Obviously, current vs. future interest rates play a big part in valuation.

Please note my four point section re what I'm missing.  Biggest, IMO, is I give zero value to future PPA extensions & buyouts (example - Manchief just agreed to be sold for $45 million, which is significant.  Other news like this would positively alter valuation.  Manchief is included in attached sheet, as you'll see).

2nd note:  You'll see I put in $5/share valuation when you look at FCF yield.  At $2.35 it's off the charts.  Hopefully you can alter the share price in the attachment and see for yourself.  Like someone said earlier, "this one is in plain sight."  Hope we're right.

Part of my confidence is CEO is excellent.  Read the annual and quarterly reports and decide for yourself.  CEO has done exactly as stated, plus has one of the best capital allocation attitudes I've witnessed.  CEO change would be negative; but if Mr. Moore has a successor with similar approach, at the current price $2.35/share, the investment provides a tremendous margin of safety.

I appreciate all corrections of facts or "ideas" / changes you find as you go.  I'll update the model as they come in.  Thank you very much.

Bryce

wisowis

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Re: AT - Atlantic Power Corp
« Reply #163 on: June 01, 2019, 06:51:39 AM »
Thanks for sharing your analysis Bryce, it's much appreciated.

SafetyinNumbers

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Re: AT - Atlantic Power Corp
« Reply #164 on: June 01, 2019, 10:59:51 AM »
https://www.canadianinsider.com/company?ticker=ATP

Some insider buying but also, one of the directors, Gil Palter, sold about 10% of his common share position to buy some of the floating rate preferred.

He still owns a lot of common but I thought the switch was interesting. Maybe someone can ask him about it at the AGM coming up soon?
Top 5 positions: ELF GCM.NT/GCM.WT.B PIF EFR.DB TII.V

mcliu

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Re: AT - Atlantic Power Corp
« Reply #165 on: June 01, 2019, 11:57:46 AM »
Petec, Ander, plus others,

Attached is a sheet detailing Atlantic Power.  I'd appreciate ideas / if I have something wrong that needs fixing, etc.  It's all my research from public documents. 

My conclusion:  AT is one of the best single risk vs. reward investments I've encountered in my career.  My all-time fav's rivaling AT were Widmer / now Craft Brewers Alliance (ticker was HOOK, now BREW - don't like it at current prices) at $4-$5 share, and Buffalo Wild Wings (was BWLD, now private) when market cap was $250-$400 million.  In the past, my biz owned a lot of HOOK/BREW, and 3% of BWLD (sold out). 

How I base risk vs. reward:  I value businesses based on free cash flow yields.  Obviously, current vs. future interest rates play a big part in valuation.

Please note my four point section re what I'm missing.  Biggest, IMO, is I give zero value to future PPA extensions & buyouts (example - Manchief just agreed to be sold for $45 million, which is significant.  Other news like this would positively alter valuation.  Manchief is included in attached sheet, as you'll see).

2nd note:  You'll see I put in $5/share valuation when you look at FCF yield.  At $2.35 it's off the charts.  Hopefully you can alter the share price in the attachment and see for yourself.  Like someone said earlier, "this one is in plain sight."  Hope we're right.

Part of my confidence is CEO is excellent.  Read the annual and quarterly reports and decide for yourself.  CEO has done exactly as stated, plus has one of the best capital allocation attitudes I've witnessed.  CEO change would be negative; but if Mr. Moore has a successor with similar approach, at the current price $2.35/share, the investment provides a tremendous margin of safety.

I appreciate all corrections of facts or "ideas" / changes you find as you go.  I'll update the model as they come in.  Thank you very much.

Bryce

Thanks for the analysis. A couple of suggestions:
a) Have you tried doing a DCF based on your cash flows? Even though the FCF yield may seem high, given that it's a declining stream, you may find that the PV to be quite low.
b) I don't think you've deducted the capital expenditures for the recent acquisitions, but you have included the EBITDA from those acquired projects.
c) Did you include the $200M in preferred shares in your EV calculation? It may also be good to deduct preferred dividends to get to FCFE.
d) I think the debt repayment schedule is a little more aggressive than what the company projected in their presentation. Actual interest expenses might be slightly higher.

gokou3

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Re: AT - Atlantic Power Corp
« Reply #166 on: June 02, 2019, 10:38:50 AM »
Petec, Ander, plus others,

Attached is a sheet detailing Atlantic Power.  I'd appreciate ideas / if I have something wrong that needs fixing, etc.  It's all my research from public documents. 

My conclusion:  AT is one of the best single risk vs. reward investments I've encountered in my career.  My all-time fav's rivaling AT were Widmer / now Craft Brewers Alliance (ticker was HOOK, now BREW - don't like it at current prices) at $4-$5 share, and Buffalo Wild Wings (was BWLD, now private) when market cap was $250-$400 million.  In the past, my biz owned a lot of HOOK/BREW, and 3% of BWLD (sold out). 

How I base risk vs. reward:  I value businesses based on free cash flow yields.  Obviously, current vs. future interest rates play a big part in valuation.

Please note my four point section re what I'm missing.  Biggest, IMO, is I give zero value to future PPA extensions & buyouts (example - Manchief just agreed to be sold for $45 million, which is significant.  Other news like this would positively alter valuation.  Manchief is included in attached sheet, as you'll see).

2nd note:  You'll see I put in $5/share valuation when you look at FCF yield.  At $2.35 it's off the charts.  Hopefully you can alter the share price in the attachment and see for yourself.  Like someone said earlier, "this one is in plain sight."  Hope we're right.

Part of my confidence is CEO is excellent.  Read the annual and quarterly reports and decide for yourself.  CEO has done exactly as stated, plus has one of the best capital allocation attitudes I've witnessed.  CEO change would be negative; but if Mr. Moore has a successor with similar approach, at the current price $2.35/share, the investment provides a tremendous margin of safety.

I appreciate all corrections of facts or "ideas" / changes you find as you go.  I'll update the model as they come in.  Thank you very much.

Bryce

Bryce,

Thanks for sharing.  I have built a similar model and by comparing to yours, I have identified a couple missing things in mine.   OTOH I have the following comments for your model in addition to McLiu's:

- Interest expense - You seem to have hard-coded the interest expense in and the implied interest rate is higher than the 5-6% annual rate that the company paid in 2018.  However, my model shows less interest expense in the next few years and more in the out years (likely because I have a slower debt paydown)
- The company guided for a $4M cash tax in 2019
- Not sure if pref dividends are deducted

Once the adjustments above are made, the conclusion I draw is that the common equity value is lower than the current market price IF the draconian assumption is made that the company's assets do not get any cashflow beyond their PPA.  In other words, simply adding the cash earnings in your column "AB", add BS cash, and deduct $770M debt and $138M pref without applying any discount rates.  As much as I like management's allocation skills, I don't know the industry and power prices enough to make a confident bet on the commons.  The prefs on the other hand are still well covered.
« Last Edit: June 02, 2019, 10:54:02 AM by gokou3 »

mcliu

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Re: AT - Atlantic Power Corp
« Reply #167 on: June 02, 2019, 01:51:04 PM »
Petec, Ander, plus others,

Attached is a sheet detailing Atlantic Power.  I'd appreciate ideas / if I have something wrong that needs fixing, etc.  It's all my research from public documents. 

My conclusion:  AT is one of the best single risk vs. reward investments I've encountered in my career.  My all-time fav's rivaling AT were Widmer / now Craft Brewers Alliance (ticker was HOOK, now BREW - don't like it at current prices) at $4-$5 share, and Buffalo Wild Wings (was BWLD, now private) when market cap was $250-$400 million.  In the past, my biz owned a lot of HOOK/BREW, and 3% of BWLD (sold out). 

How I base risk vs. reward:  I value businesses based on free cash flow yields.  Obviously, current vs. future interest rates play a big part in valuation.

Please note my four point section re what I'm missing.  Biggest, IMO, is I give zero value to future PPA extensions & buyouts (example - Manchief just agreed to be sold for $45 million, which is significant.  Other news like this would positively alter valuation.  Manchief is included in attached sheet, as you'll see).

2nd note:  You'll see I put in $5/share valuation when you look at FCF yield.  At $2.35 it's off the charts.  Hopefully you can alter the share price in the attachment and see for yourself.  Like someone said earlier, "this one is in plain sight."  Hope we're right.

Part of my confidence is CEO is excellent.  Read the annual and quarterly reports and decide for yourself.  CEO has done exactly as stated, plus has one of the best capital allocation attitudes I've witnessed.  CEO change would be negative; but if Mr. Moore has a successor with similar approach, at the current price $2.35/share, the investment provides a tremendous margin of safety.

I appreciate all corrections of facts or "ideas" / changes you find as you go.  I'll update the model as they come in.  Thank you very much.

Bryce

Bryce,

Thanks for sharing.  I have built a similar model and by comparing to yours, I have identified a couple missing things in mine.   OTOH I have the following comments for your model in addition to McLiu's:

- Interest expense - You seem to have hard-coded the interest expense in and the implied interest rate is higher than the 5-6% annual rate that the company paid in 2018.  However, my model shows less interest expense in the next few years and more in the out years (likely because I have a slower debt paydown)
- The company guided for a $4M cash tax in 2019
- Not sure if pref dividends are deducted

Once the adjustments above are made, the conclusion I draw is that the common equity value is lower than the current market price IF the draconian assumption is made that the company's assets do not get any cashflow beyond their PPA.  In other words, simply adding the cash earnings in your column "AB", add BS cash, and deduct $770M debt and $138M pref without applying any discount rates.  As much as I like management's allocation skills, I don't know the industry and power prices enough to make a confident bet on the commons.  The prefs on the other hand are still well covered.

I got to similar numbers in my model as well. The cash flows from just PPAs leave very little for equity holders. The Manchief sale does show there's value beyond the PPAs.. (but given the sale price, there's really not too much..) If management do the right things in terms of capital allocation and get lucky with some sale/renewal, there's potential that you can do well but..

wisowis

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Re: AT - Atlantic Power Corp
« Reply #168 on: June 13, 2019, 07:04:45 PM »
https://www.canadianinsider.com/company?ticker=ATP

Some insider buying but also, one of the directors, Gil Palter, sold about 10% of his common share position to buy some of the floating rate preferred.

He still owns a lot of common but I thought the switch was interesting. Maybe someone can ask him about it at the AGM coming up soon?

A week later, he bought back a good chunk (25k shares) of the common shares for ~14% less than what he sold them for a week before.

SafetyinNumbers

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Re: AT - Atlantic Power Corp
« Reply #169 on: June 13, 2019, 11:22:22 PM »
https://www.canadianinsider.com/company?ticker=ATP

Some insider buying but also, one of the directors, Gil Palter, sold about 10% of his common share position to buy some of the floating rate preferred.

He still owns a lot of common but I thought the switch was interesting. Maybe someone can ask him about it at the AGM coming up soon?

A week later, he bought back a good chunk (25k shares) of the common shares for ~14% less than what he sold them for a week before.

Nice trade! Donít usually see the BOD trading the stock.
Top 5 positions: ELF GCM.NT/GCM.WT.B PIF EFR.DB TII.V