Author Topic: AT - Atlantic Power Corp  (Read 57827 times)

brycepeterson

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Re: AT - Atlantic Power Corp
« Reply #140 on: April 29, 2019, 12:51:40 PM »
Hi Gang - Quick question - Usually power plant operators have a fairly high level of maintenance capital expenditures (at least matching Depreciation).

Why are Atlantic Power's annual capital expenditures only in $2-$7 million range from 2016-2018 vs. depreciation $80-$115 million?  Do I have my numbers correct, or is there something about the biomass/hydro/natural gas plants that I don't understand?  Maybe you can run them efficiently for years without major work/repair?

Or - Is Atlantic Power expensing certain costs, thus running through income statement instead of Statement of Cash Flows?

I've been researching AT and looks extremely cheap. 

Thank you very much!

Bryce


SafetyinNumbers

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Re: AT - Atlantic Power Corp
« Reply #141 on: April 29, 2019, 02:27:17 PM »
Hi Gang - Quick question - Usually power plant operators have a fairly high level of maintenance capital expenditures (at least matching Depreciation).

Why are Atlantic Power's annual capital expenditures only in $2-$7 million range from 2016-2018 vs. depreciation $80-$115 million?  Do I have my numbers correct, or is there something about the biomass/hydro/natural gas plants that I don't understand?  Maybe you can run them efficiently for years without major work/repair?

Or - Is Atlantic Power expensing certain costs, thus running through income statement instead of Statement of Cash Flows?

I've been researching AT and looks extremely cheap. 

Thank you very much!

Bryce

Are you sure that's true about maintenance capex matching depreciation? I would not expect that intuitively, given the very large upfront costs building a facility but I imagine the age of the facility has a lot to do with it. I know for RNW, for example, last year had sustaining capex at about a quarter of depreciation.

I own the preferred (AZP.PR.A) which have an 8% yield which is over 600bps vs the 10-year, with the view that I get paid to wait and if the company is successful, the credit spread will tighten leading to capital gains and if the company gets taken out, I might even get par which is 60% upside.

brycepeterson

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Re: AT - Atlantic Power Corp
« Reply #142 on: April 29, 2019, 06:27:52 PM »
Safety -

This is where I probably do not understand the power plant business.  But, it feels like every power plant operator I've studied spends more per year on capex than depre expense (go down the list from large to small...DUK, EXC, SO...XCEL, Portland General, etc).  That could be due to most public utilities / power companies having distribution sides (power lines, etc.)  So I'm just wondering if I'm missing something with AT.  My sense is nothing is "wrong" with AT, but I just don't understand the economics driving the business, and am hoping someone can help.  Reason I ask is I do not want to wake up with a nasty surprise "we need to spend $XX million per year for the next few years to update / maintain our plants..."  That would significantly reduce free cash flow and debt reduction.

Thank you,

Bryce

SafetyinNumbers

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Re: AT - Atlantic Power Corp
« Reply #143 on: April 29, 2019, 06:55:47 PM »
Safety -

This is where I probably do not understand the power plant business.  But, it feels like every power plant operator I've studied spends more per year on capex than depre expense (go down the list from large to small...DUK, EXC, SO...XCEL, Portland General, etc).  That could be due to most public utilities / power companies having distribution sides (power lines, etc.)  So I'm just wondering if I'm missing something with AT.  My sense is nothing is "wrong" with AT, but I just don't understand the economics driving the business, and am hoping someone can help.  Reason I ask is I do not want to wake up with a nasty surprise "we need to spend $XX million per year for the next few years to update / maintain our plants..."  That would significantly reduce free cash flow and debt reduction.

Thank you,

Bryce

Iím definitely no expert either. I think the biggest concern with AT, are the PPA expirations over time. It makes sense they would limit sustaining capex without extensions in hand. Another reason, I feel slightly better in the preferred.

spartansaver

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Re: AT - Atlantic Power Corp
« Reply #144 on: April 30, 2019, 01:59:01 PM »

Philbert77

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Re: AT - Atlantic Power Corp
« Reply #145 on: April 30, 2019, 04:23:18 PM »
Wow! what an impressive letter. Clear vision and a clearly articulated plan of attack. Makes me want to own common stock! Currently holding A,B & C preferred shares.

StubbleJumper

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Re: AT - Atlantic Power Corp
« Reply #146 on: April 30, 2019, 04:33:32 PM »
Wow! what an impressive letter. Clear vision and a clearly articulated plan of attack. Makes me want to own common stock! Currently holding A,B & C preferred shares.

It doesn't get much more clear than these guys.  They update their investor presentation every quarter and they telegraph their intentions pretty loudly.  The common might end up with a great return, but the preferred has been a no-brainer at numerous points in time over the past couple of years when the YTW hits ~8.25% with a fairly compelling kicker coming down the pipe in the form of tightening spreads as the debt is progressively retired.

Hard to believe that this one just sits there in plain sight.


SJ

brycepeterson

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Re: AT - Atlantic Power Corp
« Reply #147 on: April 30, 2019, 05:47:20 PM »
If anyone was following my capex question - I read in the 2018 10K they expense capital expenditures / run it through the income statement.  Did $35 million in 2018.

Great 2018 letter. THX for alerting us.

wisowis

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Re: AT - Atlantic Power Corp
« Reply #148 on: April 30, 2019, 07:10:17 PM »
Great letter (as always!).

I liked this cute little story:

Quote
We do know that commodity prices tend to fluctuate in
surprising ways and group think often turns out to be strongest just before it is proven wrong. As Iíve
noted before, in 2001 I handed out copies of a book on peak oil to the board of directors of a wind
energy company. Anyone at all familiar with subsequent events will realize that I was aligned with
conventional wisdom and I was spectacularly wrong in believing that we were reaching peak levels of
oil production.

roark33

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Re: AT - Atlantic Power Corp
« Reply #149 on: April 30, 2019, 09:23:37 PM »
Looking back at the stock price for the past 5 years, it reminds me of Buffett saying it is better to bet on a good horse than a good jockey.