Author Topic: AT - Atlantic Power Corp  (Read 32980 times)

Larry

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Re: AT - Atlantic Power Corp
« Reply #20 on: February 26, 2017, 02:33:22 PM »
This is an interesting pick, thanks for the write up. I did some research on the company over the weekend and went through some of the recent conference calls and presentations. If they can keep up the cash flow and continue to pay down debt and repurchase some common this could do well.

Just couple of points: Whats the difference between EBITDA and Project Adjusted EBITDA, for example I got 30,5M of EBITDA from gurufocus for Q3 but on their call they presented Project Adjusted EBITDA which was 51,3M. Im sorry if the reconciliation is somewhere but I went through their 2015 annual report and couldn't find whats the difference.

The CEO seems decent, talks a lot about capital allocation. Also he says that they are operating in a cyclical industry. I guess he specifically refers to power prices being volatile? I think the ultimate demand for electricity is quite stable. We have been experiencing very low spot rates here in Scandinavia for a few years too but I guess that's just a coincidence..


SafetyinNumbers

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Re: AT - Atlantic Power Corp
« Reply #21 on: February 26, 2017, 06:28:53 PM »
In speaking with the CEO, he seems really excited by the possibility of not only getting a transfer of value from debt to equity but also getting a move higher in power prices and multiple expansion. The trifecta makes things really interesting. One thing that supported the idea is that asset sales prices are well ahead of current EV/EBITDA multiples suggesting the public market has a lower valuation than the private market which should rationalize over time (one way or another!).

I own a lot of the AZP.PR.C so I haven't bought the equity yet but I did buy Calpine (CPN.N) under a similar thesis.
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rukawa

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Re: AT - Atlantic Power Corp
« Reply #22 on: February 26, 2017, 09:30:14 PM »
And they are cumulative, right? So unless you think the company goes under, not a bad bet.

Of course, if the company doesn't go under and even just continues to repay its debt it'll be much better to own common  :o

Their preferreds are some of the highest yielding available today. Here's a list I maintain by yield: http://www.conferencecalltranscripts.org/prefs/

I don't really get the logic of owning the common. I feel like the preferreds are the better risk/reward.

Sunrider

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Re: AT - Atlantic Power Corp
« Reply #23 on: February 27, 2017, 04:18:14 AM »
17ish will go to 25 par with a 6% dividend.

For the common - if you keep EV constant and assumed PPAs just roll off as per schedule and otherwise everything gets paid, you end up with ca. $300m ish of cash generated that would go towards debt reduction. That's 300m on top of current market cap of ca. 250 - 300m (depending on what you take into diluted shares). A bit better than pref.

If the company goes belly up, you're one step up in the capital structure but at that point you'd have to be convinced there's enough value in the recovery for anything to go to pref.

Chose your poison. :o


And they are cumulative, right? So unless you think the company goes under, not a bad bet.

Of course, if the company doesn't go under and even just continues to repay its debt it'll be much better to own common  :o

Their preferreds are some of the highest yielding available today. Here's a list I maintain by yield: http://www.conferencecalltranscripts.org/prefs/

I don't really get the logic of owning the common. I feel like the preferreds are the better risk/reward.

Cardboard

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Re: AT - Atlantic Power Corp
« Reply #24 on: February 27, 2017, 07:07:13 AM »
The trade was to start by buying the convertibles (which I didn't do), then the preferreds and now I would say it is the common's turn.

When I got into the preferreds they were trading around $10. Now both AZP.PR.B and AZP.PR.C have moved up by over 60% without counting the dividends. The discount to par, better tax treatment of dividends vs interest is likely why I passed on the debentures but, I would have made more money by buying the debs first.

Today, the enormous discount to par and spread to other preferreds from utilities/power producers in Canada has been largely reduced. To get to par you would also need the entire preferreds complex to move up which becomes a macro thing.

Currently, I still own some AZP.PR.C and ATP. What I like is that the entire position interest cost is funded entirely by dividends from the preferreds. And the margin requirement on the common is better than the preferreds at my broker or 30% and 50% respectively.

While it made zero sense to look at the common when I bought the preferreds, I think today it is different. Improvements have continued, I am even more confident in management than I was back then and the potential in the common vs preferreds is now too large to ignore. This thing has all the hallmarks of a successful turnaround and what is nice is that you could move down the capital structure as the story played out while normally you miss out on of them as the price of one move up too rapidly.

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awindenberger

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Re: AT - Atlantic Power Corp
« Reply #25 on: February 27, 2017, 01:34:25 PM »
In speaking with the CEO, he seems really excited by the possibility of not only getting a transfer of value from debt to equity but also getting a move higher in power prices and multiple expansion. The trifecta makes things really interesting. One thing that supported the idea is that asset sales prices are well ahead of current EV/EBITDA multiples suggesting the public market has a lower valuation than the private market which should rationalize over time (one way or another!).

I own a lot of the AZP.PR.C so I haven't bought the equity yet but I did buy Calpine (CPN.N) under a similar thesis.

How recently did you speak to the CEO?

SafetyinNumbers

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Re: AT - Atlantic Power Corp
« Reply #26 on: February 27, 2017, 04:34:07 PM »
It was the last AGM.
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Cardboard

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Re: AT - Atlantic Power Corp
« Reply #27 on: March 02, 2017, 06:10:26 PM »
They missed their project EBITDA guidance with $202.2 million vs $205-$215 million for the year due to a few one time items but, I really like their 2017 guidance at $225-$240 million:

http://www.stockwatch.com/News/Item.aspx?bid=Z-C%3aATP-2449090&symbol=ATP&region=C

As they follow their plan to repay $150 million or more of debt in 2017, the thesis of shifting EV to shareholders vs debt holders will really start to play out. I would expect debt upgrades along the way too.

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SafetyinNumbers

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Re: AT - Atlantic Power Corp
« Reply #28 on: March 02, 2017, 09:02:12 PM »
With only about 115m shares outstanding, its not hard to move the needle!
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SafetyinNumbers

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Re: AT - Atlantic Power Corp
« Reply #29 on: March 03, 2017, 04:56:50 AM »
Management posted its prepared remarks from the upcoming conference call.

Good reading from page 25 on how the CEO thinks about the business.

https://s3.amazonaws.com/filecache.drivetheweb.com/mr5ir_atlanticpower/195/download/03.02.2017+ATP+Q4+2016+Prepared+Remarks+FINAL.pdf
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