By Tom Konrad, Ph.D., CFA

On Friday February 2nd, Brookfield Renewable (BEP and BEPC) reported earnings.  Judging by the immediate stock market reaction, many investors did not like the results.  Quarterly earnings actually beat expectations, but for Yieldcos like Brookfield, cash flow numbers and revenue (which can be more indicative of the company’s ability to pay and raise dividends) can be more important.  These fell short.

The company attributes the cash flow shortfall to its own clients delaying payments at the end of December, in order to make their own financial statements look better, and it expects the shortfall to reverse in the first quarter.

Beyond cash flow, I found the earnings report to be all good (if not particularly unexpected) news.  As one of the preeminent renewable energy infrastructure investors in the world, Brookfield’s access to capital is allowing the company to go on something of a spending spree, buying up cheap assets and companies as many of its rivals have to pull back.

Overall, I feel the pullback after the earnings call is a buying opportunity, and sold some short puts on BEPC this morning (February 5th.)

Why buy BEPC rather than BEP?

Unlike the nearly equivalent share classes of Clearway Energy (CWEN-A and CWEN, discussed here.), rival Yieldco Brookfield Renewable Energy has two share classes with significant differences: Brookfield Renewable Energy Partners (BEP) and Brookfield Renewable Energy Corporation (BEPC).

The company was originally organized as a limited partnership with all equity issued as partnership units (BEP).  In 2020, the company created Brookfield Renewable Energy Corporation (BEPC) through a combination of legal and financial wizardry in order to appeal to investors who prefer to get all their investment income from a brokerage’s 1099 form rather than the individual K-1s received by BEP limited partners.

This makes BEPC more appealing than BEP to many investors, so it is unsurprising the BEPC tends to trade at a larger premium to BEP than CWEN trades relative to CWEN-A.

As I write on Feb 5th, BEPC is trading at $26.10, compared to $24.55 for BEP, or a 6.3% premium.  I generally buy BEPC when the premium is under 10%, and BEP if the premium is higher than that.

Here’s a chart of the prices of the two shares and the BEPC price premium over time.  The data is from Yahoo! Finance on 2/5/2024.  

You’ll note that when BEPC was first launched in 2020, the C-shares temporarily traded at a slight discount (negative premium) to BEPC, and shot up to a bubbly 30%+ at the end of 2020 into early 2021.  The premium hit 25% in November 2020, and later got as high as 40%. At 25%, I thought BEPC’s premium was too high.  That was the only other time I’ve written about the premium publicly.  I thought it was far too low when it was below 5% for most of 2022, but I didn’t get around to writing about it.

Now that BEPC shares are a little more seasoned and we’re mostly done with the stock market disruptions of the covid pandemic, I doubt future swings in the premium will be nearly as dramatic, but it still make sense to pay attention to the price premium when you are deciding to trade BEP or BEPC.  

DISCLOSURE: As of 2/5/24, Tom Konrad and accounts he manages own the following securities mentioned in this article: CWEN-A, BEP, BEPC.  He does not expect to sell any of them in the next three weeks, and may buy more of CWEN-A or BEPC.  He might buy BEP if the BEPC premium over BEP increases to over 10%.

This material has been distributed for informational purposes only and should not be considered as investment advice or a recommendation of any particular security, strategy or investment product.  All investments contain risk and may lose value. Past performance is not an indication of future performance. Information contained herein has been obtained from sources believed to be reliable, but not guaranteed.

ABOUT THE AUTHOR: Tom Konrad, Ph.D., CFA is the Editor of AltEnergyStocks.com (where this article first appeared) and a portfolio manager at Investment Research Partners.

The post The Brookfield Renewable Energy Corporation Premium appeared first on Alternative Energy Stocks.

By Tom Konrad, Ph.D., CFA

A reader of my recent article on Yieldcos asked which share class of Clearway Energy was the better to buy for tax purposes: Class A shares (CWEN-A) or Class C Shares (CWEN).

For tax purposes, they are identical.  They pay the same dividend, and it is treated the same no matter which share class you buy.  The reason many large investors often trade CWEN rather than CWEN-A is because it is more liquid.  As I write on Jan 23rd, Yahoo! Finance puts the 3 month average share volume for CWEN at 1,372,714, while the corresponding number for CWEN-A is 412,958.  When you are trading tens of thousands of shares, this can make a big difference.  For you (presumably) and me, not so much.  I actually like illiquidity, since I usually trade using limit orders, and let people who want to trade a lot of shares come to me, rather than chasing the current market price.

Because large investors prefer CWEN, it usually trades at a small premium to CWEN-A, even though the dividends are the same, and a single share of CWEN-A represents 100 times more votes when it comes to proxy ballots.  This is only a big deal when there are rumors of a possible buyout or similar corporate action, but at such times the price premium CWEN usually enjoys is likely to become a discount, as investors who care how the vote turns out focus on buying votes instead of liquidity.

As you can see from the above chart, CWEN usually trades at around a 5% premium to CWEN-A, meaning you have to pay about 5% more for a class C (CWEN) share, even though you get more votes and the dividend is the same (so the percent dividend yield a.k.a. dividend for every $100 invested higher.)

Recently, the CWEN premium has been rising, and is around 7.5%.  I’ve always bought CWEN-A. Now, if anything, CWEN-A is an even clearer way to buy Clearway.

Maybe I Was Wrong?

I started this article by saying that there was no difference between CWEN and CWEN-A for tax purposes.  But now I’m thinking that the CWEN premium is more likely to narrow than widen in the medium term, so there is one difference: You’re likely to make more money buying CWEN-A than CWEN, and making money leads to a higher tax bill.

So if taxes are all you care about, you should buy CWEN.  Those of us who care more about making money should buy CWEN-A.

DISCLOSURE: As of 1/23/2024, Tom Konrad and funds he manages own the following securities mentioned in this article: CWEN-A. In the next two weeks, he may buy more or CWEN-A, and might sell some CWEN short as an arbitrage trade, especially if the premium over CWEN-A increases.

This material has been distributed for informational purposes only and should not be considered as investment advice or a recommendation of any particular security, strategy or investment product.  All investments contain risk and may lose value. Past performance is not an indication of future performance. Information contained herein has been obtained from sources believed to be reliable, but not guaranteed.

ABOUT THE AUTHOR: Tom Konrad, Ph.D., CFA is the Editor of AltEnergyStocks.com (where this article first appeared) and a portfolio manager at Investment Research Partners.

The post The Clear Way to Buy Clearway appeared first on Alternative Energy Stocks.

By Tom Konrad Ph.D., CFA

Despite a run-up in the fourth quarter of 2023, it has been a long time since valuations of clean energy stocks have been this cheap.  Perhaps it is worries about hostility towards clean energy under a new Trump administration, or disappointment at the slow implementation of the Inflation Reduction Act.  Whatever the cause, prices are low, and many clean energy stocks are likely to  produce good returns even if the political climate turns further against them.

This is especially true for companies that are less dependent on favorable policy or subsidies.  For instance, Yieldcos, high yield companies that own and develop clean energy assets like solar and wind farms get most of their profits from things which are already built.  New subsidies, like those included in the Inflation Reduction Act, almost exclusively target new facilities.  Because of this, changes in subsidies and interest rates will affect a Yieldco’s growth prospects, but will have limited effect on its short term earning potential.  

Yieldcos such as Brookfield Renewable Energy (BEP and BEPC), Atlantica Yield (AY), Clearway (CWEN and CWEN-A), and Nextera Energy Partners (NEP) fell as much as 50% in 2023.  At current prices, I love them all.  Collectively, these four names account for a fifth of the portfolio.  My current favorite is Nextera Energy Partners, which I have historically felt was consistently relatively overvalued because investors have had faith in its strong sponsor, Nexterea (NEE).  That valuation did not survive the effects when persistently high interest rates led NEP to sharply cut its dividend growth targets last September.

Among the Yieldcos, NEP got the least benefit of the strong rally in the fourth quarter, and it is still trading at a price that gives it an 11% dividend yield.  That high a yield would normally signal that investors are expecting a dividend cut.  I think such a cut is unlikely.  First, NEP’s liquidity and cash flow ratios are in line with other Yieldcos, and if management felt that a dividend cut might be necessary in the near future, they would have done it when they were already disappointing investors by slashing their dividend growth plans.  Instead, I expect NEP’s dividend growth to stall for several years.  But at 11%, who needs growth?  

Another likely scenario would be for NEE to buy back the outstanding shares of NEP to improve its own cash flow ratios.  This is far from unprecedented – Transalta (TA) did exactly that last year by buying back the outstanding shares of TransAlta Renewables (Toronto: RNW).  NEE, like TA, would buy NEP at a 10-20% premium to current prices.  NEP has significant convertible debt financing, much of which will need to be refinanced in 2026.  If NEP has trouble refinancing this convertible debt, I expect the most likely scenario will be a buyback by it parent, NEP.   I’d prefer to collect an 11% dividend for several years to come, but a small short term gain is not something to scoff at.

DISCLOSURE: As of 1/15/2024, Tom Konrad and funds he manages own the following securities mentioned in this article: Brookfield Renewable Energy, Atlantica Yield, Clearway, Nextera Energy Partners. He expects to add to (but not sell) some of these positions in January 2024.  This material has been distributed for informational purposes only and should not be considered as investment advice or a recommendation of any particular security, strategy or investment product.  All investments contain risk and may lose value. Past performance is not an indication of future performance. Information contained herein has been obtained from sources believed to be reliable, but not guaranteed.

ABOUT THE AUTHOR: Tom Konrad, Ph.D., CFA is the Editor of AltEnergyStocks.com (where this article first appeared) and a portfolio manager at Investment Research Partners.

The post Yieldco Valuations Look Attractive appeared first on Alternative Energy Stocks.

By Tom Konrad, Ph.D., CFA

This is a roundup of first quarter earnings notes shared with my Patreon supporters over the last week. If there is any theme, it’s that low interest rates and increased interest in green investments is lowering Yieldcos’ cost of capital to the benefit of stock investors.

Avangrid Earnings

Avangrid’s (AGR) Q1 earnings report showed solid progress.  Key items of note were:

• Increased outlook for full year 2021 Adjusted EPS a little over 5% 
• Key environmental approval for 800 MW offshore wind farm Vineyard Wind. Expected to begin construction later this year, with expected completion in 2024.  Avangrid is a leader in US offshore wind development, with over 4,000 MW already in the pipeline (including Vineyard) and plans to bid on more.
• The company’s Networks (electricity transmission and distribution) division is also performing strongly, and they are well placed to benefit from Biden’s plans to streamline long range transmission planning and open up existing rights of way to new transmission projects.  Transmission upgrades are essential to transitioning to a renewable electricity based grid, and Biden is the first president to take significant action on it.  It’s a little recognized clean energy investment theme, so it’s still possible to purchase stakes in key players like AGR at reasonable prices.
• The purchase of PNM Resources (PNM) looks likely to close near the end of the year.  I have mixed feelings about this one because PNM has a fair amount of coal generation, but on balance it’s probably a good thing because Avangrid will close coal plants faster than PNM would have as a stand alone, and the purchase will bolster its Networks business making it much more of a national player.  

Although Avangrid’s share price increased significantly after it got shareholder approval for the PNM merger, it remains reasonably priced compared to most Yieldcos.

Brookfield Renewable Partners Earnings Highlights

I originally put Brookfield Renewable Partners (BEP) shares in the 10 Clean Energy Stocks for 2021 portfolio because I thought its ability to raise capital by selling its turbocharged Brookfield Renewable Corp. (BEPC) share class would give the stock a boost if the ongoing clean energy stock bubble continued a few more months.

Two things undermined that thesis- the clean energy stock bubble popped sooner than I expected, and while its parent Brookfield Capital Management (BAM) did take advantage of the huge premium BEPC shares commanded at the time, the company itself did not issue any new BEPC shares so it was not able to get the influx of cheap capital I had hoped for.

Now that the stock is down 15 percent since the start of the year, I’m beginning to get interested again, and am beginning to sell out of the money cash covered puts on BEP to replace the BEPC shares I was selling at the end of last year during the height of the bubble.

To be clear, I don’t think BEP is cheap enough to be a strong buy yet, but it’s an important company to keep in the portfolio as a core long term holding.

A couple of the reasons I think of BEP as a core holding came up in the earnings call:

• They sold some of their older, de-risked assets at a 15% compounded annual return based on their initial cost.  This is just one example of Brookfield’s excellent value discipline.  Their strong balance sheet and long experience in renewable infrastructure let them stay on the right side of the investment cycle: When capital is flowing into the sector, they have assets to sell.  When capital is scarce, they can swoop in and buy assets at big discounts (as they did with Terraform Power in 2019.)
• They made their first investment in offshore wind.  Like Avangrid (AGR), they have the scale and financial strength to participate in this up and coming renewable sector where only the largest and strongest financial players will be able to participate, given the gigantic scale of most offshore wind projects.

In short, the first quarter earnings showed the ability to generate profits by operating their extremely stable assets well, selling assets after they have seen great appreciation, and by investing in new sectors like offshore wind where they are one of only a few players with the size and experience to operate successfully.  Given the limited number of developers who can compete in offshore wind, I expect the returns for those developers who can participate will be higher than solar and onshore wind where smaller players have a chance of being competitive.

Clearway Gets Green Bond Boost

While it’s not in the 10 Clean Energy Stocks list this year, Clearway Energy (CWEN, CWEN-A) was from 2016 to 2018, when it was NRG Yield, so I suspect it is still in many readers’ portfolios (as it is in mine.)

I thought it was interesting just how significant a boost the company got by refinancing… replacing $600 million of senior notes at 5.75% with a new green bond at 3.75% while extending the maturity from 2025 to 2031.  The lower interest payments alone allowed it to boost its outlook for cash available for distribution to shareholders by 5 cents a share annually.

Clearway is not alone; most Yieldcos have been refinancing and raising new debt in the current low interest rate environment, and the newly maturing market for green bonds.  The evidence is strong for a “Greenium:” a green premium allowing green bonds to trade at higher prices (and lower interest rates) than conventional bonds that do not support green projects. 

This bodes well for hopes for massive new investments in green infrastructure including wind and solar. Since these projects can be financed at lower interest rates due to the greenium, there will be more well financed developers willing to build them.

Green Plains Partners Earnings

Green Plains Partners (GPP) made significant progress reducing its debt burden in the first quarter.   In an agreement with lenders reached last year, substantially all its free cash flow beyond the current $0.12 dividend is going to pay down debt until the debt burden is paid off.  This quarter, that included cash from the sale of one of the partnership’s ethanol plants.

Without additional asset sales, GPP will be debt free in the second half of 2022, and free to redirect cash flows to paying the dividend and making new investments.  Before it cut its dividend last year, it was paying $0.475 a quarter.  This was using all of GPP’s free cash flow,  so if dividends are increased it will be to some lower level.  I would expect a new dividend in the $0.25 to $0.30 range, but with some prospects for dividend growth given the retained capital for investment.

At the current stock price of $12, that would be a substantial yield in the 8 to 10 percent range.  This is in line with most MLPs, so I consider GPP to be approaching fair value at this point and am beginning to take profits and trim my holdings so it’s no longer an outsized part of my portfolio.

DISCLOSURE: Long AGR, BEP, BEPC, CWEN-A, GPP

DISCLAIMER: Past performance is not a guarantee or a reliable indicator of future results.  This article contains the current opinions of the author and such opinions are subject to change without notice.  This article has been distributed for informational purposes only. Forecasts, estimates, and certain information contained herein should not be considered as investment advice or a recommendation of any particular security, strategy or investment product.  Information contained herein has been obtained from sources believed to be reliable, but not guaranteed.

The post Q1 Earnings Roundup: Yieldcos (AGR, BEP, CWEN, GPP) appeared first on Alternative Energy Stocks.

Tom Konrad, Ph.D., CFA

A reader asked:

Read your recent article on Pattern Energy (PEGI). Great summary and thoughts.

Would like to ask your view on TERP potential takeover by BEP (via shares swap) and whether you reckon the recent run-up on TERP is too excessive?

It’s a good question, and one that Robbert Manders on Seeking Alpha did a thorough analysis of here.  For the details of the merger, I refer you to his work.

While his analysis is careful and complete, I disagree with his conclusion.  TERP shares are not trading at a significant premium to the merger value.  The reason is one that Manders touches on, but dismisses as immaterial.  He says:

There is one more factor that can sow confusion which is that the shares to be issued to TERP shareholders will be BEPC, a new corporate share class. It is created to accommodate shareholders who want to own shares of a corporation instead of a partnership. The shares will have the same economic characteristics as BEP units and they will be convertible as well. I regard this as a minor detail to the thesis.

The difference between BEP and BEPC is not a minor detail.  I discussed this new class of shares in December:

Brookfield Renewable Energy Partners announced a stock distribution and the creation of a new corporation, Brookfield Renewable Corporation (BEPC).  This will allow investors who are not able to invest in limited partnerships like BEP to also invest in the stock, which is designed to have identical distributions to BEP and will be exchangeable for BEP units.  The stock price of BEP has been climbing since the announcement in anticipation of the new demand for shares from this new potential class of buyers.

It is also important to note that while BEPC shares will be convertible into BEP partnership units, Brookfield has not said that the exchange can happen in reverse.  The convertibility of BEPC shares into BEP will thus put a floor on the BEPC premium.  Without the ability to convert partnership units into BEPC, there will be no upper limit to the premium at which BEPC shares will trade compared to BEP partnership units.

If Brookfield did not think that BEPC shares would trade at a premium, why would they have bothered to issue the new share class?

Without the ability to convert BEP units into BEPC shares, I predict BEPC will trade at a premium to BEP.  We can see a similar effect with Clearway’s two share classes: CWEN trades at more than a two percent premium to CWEN-A based solely on better liquidity.  The only economic difference between CWEN and CWEN-A is that CWEN-A shares have more voting rights than CWEN, but large investors value the additional liquidity so much that they pay more than 2% extra to give up most of their votes.

With BEPC, many large investors will be able to buy BEPC but not BEP, so the BEPC premium over BEP is likely to be higher than CWEN’s premium over CWEN-A.  I expect it to be a little more than the 4% that has Robbert Manders trumpeting an arbitrage opportunity that will turn out to be illusory, and could easily lead to him losing money.

Disclosure: Long PEGI, TERP, BEP, CWEN-A. Short TERP Calls.

The post Why is Terraform Power Trading at a Premium to the Brookfield Renewable Merger Value? appeared first on Alternative Energy Stocks.

by Tom Konrad Ph.D., CFA

This morning, hedge fund Water Island Capital called on Pattern Energy (PEGI) Shareholders to vote against the merger with the Canada Pension Plan Investment Board (CPPIB).

Water Island claims the merger is undervalued compared to the recently surging prices of other Yieldcos, and that PEGI would be trading at over $30 given current valuations.  There are not a lot of other Yieldcos left, especially if we eliminate those with their own special circumstances.  These are Terraform Power (TERP) which is subject to its own buyout agreement with Brookfield Renewable Energy (BEP), and Clearway (CWEN and CWEN/A) where the PG&E (PCG) bankruptcy is still causing a little lingering uncertainty.

Of the remaining Yieldcos, NextEra Energy Partners (NEP) is up 25% since the merger was announced, Atlantica Yield (AY) is up 33%, and Brookfield Renewable (BEP) is up 50%.

PEGI’s pre-merger price was approximately $23, meaning that if it had risen as much as its peers, it would currently be trading between $28.75 and $34.50, so Water Island’s valuation is credible.

Scenario Analysis

Let’s consider the options:

1. A shareholder could sell the stock today for approximately $28.00 a share.
2. A shareholder could hold the stock and vote against the merger:
   1. If the vote fails, the voting period will likely be extended.  Subsequent extensions could last until November.  CPPIB might raise the merger price to induce more shareholders to vote for the merger
   2. If the vote succeeds, shareholders will walk away with $26.75 plus one or two dividends of $0.422 each.  $27.172 or $27.594 total.

Between 1 and 2b, selling now is clearly the better choice.  In the case of 2a, we need to consider likely changes in Yieldco valuations between now and November.  If they continue to increase, we will see an even higher valuation for PEGI, but we could have also invested the $28 we got by selling today in one of the other Yieldcos.

If Yieldco prices stay the same, we will have a return of between $1 and $7 compared to our $28/share in the next 9 months.  That’s about 14%, which is good, and fairly large compared to the risk that the merger goes through.

I chose to take the money and run.  $28 cash seems like a good deal in an uncertain market.  The decision is more because I worry about Yeildco valuations overall than my concern about the small loss if the merger does go through.  If Yeildco prices fall back to more reasonable levels, the potential gains of voting against the merger vanish.

Naturally, if PEGI’s price falls back down or rises more by the time you read this, the calculations will change.  $0.50 either way can make a big difference in this risk-reward calculation.  Expect the stock to remain volatile until we know the result of the vote on March 10th, and even longer if the first vote fails.

Disclosure: Long PEGI, short PEGI calls, long BEP, AY, CWEN/A, TERP, short NEP.

The post Should Pattern Energy Shareholders Vote Against the Merger? appeared first on Alternative Energy Stocks.

by Tom Konrad Ph.D., CFA

Although valuations and political uncertainty have me spooked, October was another strong month for the stock market in general and clean energy income stocks in particular.

While my broad income stock benchmark SDY added 1.6% for a year to date total gain of 19.6%.  My clean energy income stock benchmark YLCO did even better, 2.7% for October and 29.7% year to date.  The 10 Clean Energy Stocks model portfolio fell somewhere in between for the month (up 1.8%) but remains unchallenged for the year to date (40.7%).   My real-money managed strategy, GGEIP, lagged as I reduce market exposure in what I consider an increasingly risky market (as discussed last month).  GGEIP was up 1.0% for the month, and 35.0% year to date.

Individual Stocks

Analyst Downgrades, Sudden Stock Moves

The most notable stock move of the month was Covanta Holding Corp’s (NYSE:CVA) 16% decline.  This started on October 22nd, when Raymond James warned that the company’s earnings would be impacted by the weak commodity market.  The analysts like the company’s long term prospects, but reduced their rating from “Strong Buy” to “Market Perform” based on expected near term weakness.  Sure enough, the company reported weakness in commodity prices in its third quarter earnings.  After earnings, BMO cut its price target from $19 to $18, and UBS cut its from $17 to $15.50.

With the stock trading below $15, I see this as one of the few buying opportunities in the stock market today, and added to my exposure by selling cash covered puts with strike prices of $12.50 and $15.  I think the large sell-off is symptomatic of increasing investor nervousness.  We also saw a similar sell-off in Yieldco Clearway (CWEN, CWEN-A) based on analyst downgrades.

It feels to me that investors are looking for an excuse to sell, causing the market to overreact to analyst downgrades.  Regular followers of this blog, in contrast, will likely have already trimmed their holdings as the stocks rose, and so should remain unphazed by these sudden swings in sentiment.  If you have not been trimming your holdings in your biggest winners, you probably should be. Hannon Armstrong HASI, Terraform Power (TERP), and Brookfield Renewable Energy Partners (BEP) are all stocks in which readers should be considering taking some profits, if they have not already.  I continue to think these three stocks are all ripe for price corrections.

Buyout

One stock with significant gains where I am not currently taking profits is Pattern Energy Group (PEGI) because a cash buyout announced on November 4th for $26.75 removes most of the market risk from this stock.  Two  months ago, I dismissed the rumors that Terraform Power would be the buyer, but the rumors that the company was in talks for a buyout were well-founded.  The buyers ended up being the Canada Pension Plan Investment Board (CPPIB), which is also negotiating to purchase Pattern Development.

The price of the buyout was below the stock market price at the time of the announcement, but approximately 15% above the price PEGI had been trading at prior to the buyout rumors, which began to circulate in early August.  Because the buyout price was below the market price at the time of announcement, a number of shareholder class action lawsuits were immediately filed.  Investors should not be alarmed at the number of suits; class action lawyers are simply jockeying to be first, because typically most such class actions will be consolidated into one and the lawyers who were first to file generally get to take the lead and collect the lion’s share of the fees.

PEGI and CPPIB need to convince both the judge and shareholders that the buyout price was justified.  They need shareholders in order to win shareholder approval for the merger.  In order to make this case, it is not out of the question CPPIB may increase the buyout price slightly in order to bolster their argument.  But I don’t think that readers should expect this.  As I wrote in August, “At $27, I’d call PEGI fairly valued, so investors should be cautious about banking on a merger going forward.”

Even without a price increase, the merger dramatically lowers the market risk of PEGI stock.  With two expected dividends of $0.4222 before the expected close of the deal, shareholders can expect to receive a total of $27.59 over the next six to eight months.  As I write, the share price is $27.33, which would amount to a 1% gain over that time.  This is not a great interest rate, but it is better than cash, and holders do get the chance of an upward revision to the buyout price.

Conclusion

I continue to remain cautious.  Readers should take some gains in their biggest winners and be prepared for more of their stocks to fall suddenly and dramatically in response to even mild analyst downgrades and short term bad news.  A sharp market correction or bear market could start at any time… or the bull may continue to limp along.  I continue to believe the downside risks outweigh the possible gains of betting that the bull still has much life left in him.

Disclosure: Long PEGI, CVA, AY, TERP, BEP, EVA, GPP. INGXF, HASI, FR.PA/VLEEF, CWEN-A. 

DISCLAIMER: Past performance is not a guarantee or a reliable indicator of future results.  This article contains the current opinions of the author and such opinions are subject to change without notice.  This article has been distributed for informational purposes only. Forecasts, estimates, and certain information contained herein should not be considered as investment advice or a recommendation of any particular security, strategy or investment product.  Information contained herein has been obtained from sources believed to be reliable, but not guaranteed.

The post Ten Clean Energy Stocks For 2019: Pattern Buyout, Analyst Downgrades appeared first on Alternative Energy Stocks.

by Tom Konrad Ph.D., CFA

Almost every major index fell in 2018.  My Ten Clean Energy Stocks model portfolio and the Green Global Equity Income Portfolio (GGEIP), the real-money portfolio that I manage were not exceptions.  Still, I’m satisfied with their performance: the model portfolio lost only 1.3 percent for the year, while GGEIP was down 2.6 percent.  That’s well ahead of most indexes, including my benchmarks YLCO (down 7.8 percent) and SDY (down 4.1%.)  These benchmarks are intended to reflect the performance of clean energy dividend stocks and general of dividend stocks, respectively.  Non-income oriented indexes such as the S&P 500 performed similarly to SDY.

Short Term Predictions

While my full year performance was satisfactory, my short term predictions from the start of December fared less well.  I said:

I continue to be very concerned about stock market valuation, and expect the correction that started last summer to continue in 2019.  However, I expect December may continue the market rebound we saw in November, so I see the coming month as one in which to opportunistically take profits and increase allocations to cash in anticipation of better buying opportunities in 2019.

That predicted continued December rally was a rout, with the model portfolio down 7.0 percent, GGEIP down 2.6 percent, YLCO down 3.6 percent, and SDY down 8.5 percent.  Ouch.  My single stock pick for the month, Green Plains Partners(GPP), performed relatively well, however, actually gaining 0.4 percent while all the other stocks in the model portfolio fell.

Ten Clean Energy Stocks for 2019

Readers looking for my current picks should consider the most recent list, which was published on January first. Updates on individual stocks can be found there as well.

10 for 2018 Performance

Five Year Performance

Over the last 5 years, the Ten Clean Energy Stocks model portfolio has outperformed its clean energy benchmark every year.  Over 5 years, $1000 invested in Ten Clean Energy Stocks would have become $1646, while $1000 invested in the benchmark would have fallen to $699.  $1000 invested in SDY would have become $1509 (although I was not using SDY as a benchmark for the whole period.)

Disclosure: Long SSW, CVA, CWEN A and C, AY, PEGI, TERP, BEP, GPP, HIFR, EVA.

DISCLAIMER: Past performance is not a guarantee or a reliable indicator of future results.  This article contains the current opinions of the author and such opinions are subject to change without notice.  This article has been distributed for informational purposes only. Forecasts, estimates, and certain information contained herein should not be considered as investment advice or a recommendation of any particular security, strategy or investment product.  Information contained herein has been obtained from sources believed to be reliable, but not guaranteed.

The post Ten Clean Energy Stocks For 2018: Wrap Up appeared first on Alternative Energy Stocks.

by Tom Konrad Ph.D., CFA

Looking forward to 2019, I’m more optimistic than I have been since the start of 2016, in the wake of the popping of the YieldCo Bubble in late 2015.

The bear market that started in late 2018 seems like it’s far from over, but I expect in early 2019 will see it enter a less chaotic phase.  After the wild declines and swings of late 2018, I expect investors will begin the new year with an eye to safety more than growth.  This means that the clean energy income stocks which are my focus should outperform riskier growth stocks.  The end of interest rate increases by the Federal Reserve should also help these stocks as fewer investors are drawn away by the increasing yields of bonds and other income instruments.

As I write on December 28th, my Ten Clean Energy Stocks for 2018 model portfolio looks like it will end the year with a small loss, but ahead of its benchmarks.  You can see its returns through December 28th in the chart below, and stay tuned for a recap sometime in the next week.

Out with the old

With stock prices down and yields up, I plan to keep seven stocks from the 2018 list for 2019.  The exceptions are (somewhat coincidentally), the two winners: InfraREIT (HIFR), Seaspan Worldwide (SSW), and Clearway Energy, Inc (NYSE: CWEN and CWEN/A).  I’m dropping InfraREIT because the company is being bought out by Oncor in a transaction expected to close sometime in the second quarter.  Seaspan is losing its slot for lack of greenery.  I always considered the owner of relatively efficient container ships to be marginally green (due to the relative efficiency of its ships compared to those of its peers), and a recent purchase of an interest in liquefied natural gas transportation makes it no longer meet my standard for a green stock.

I’m dropping Clearway mostly based on relative valuation.  The company is still attractive, but a little less so than some of the other Yieldcos which made this year’s list.  Not only does Clearway have some fossil fuel assets, it also has a large number of power purchase agreements with PG&E (PCG).  PG&E, in turn, has significant potential liability from the possible involvement of its equipment in starting some of California’s recent wildfires.  Both California’s utility regulators and legislators are working to protect PG&E from bankruptcy, but what that protection might look like has yet to be seen.   Given the large number of Yieldcos at very attractive valuations, I see no need to keep Clearway in my top ten picks.

In with the new

Valeo SA (FR.PA, VLEEF)
12/31/18 Price: €25.21/$28.20.  Annual Dividend: €1.25. Expected 2019 dividend: €1.25.  Low Target: €20.  High Target: €50.

My friend and colleague Jan Schalkwijk of JPS Global Investments brought French auto parts supplier Valeo SA. Like many auto stocks, Valeo struggled in 2018 with industry oversupply and the ongoing trade war.  This led the stock to fall by more than half, giving it what I consider a very attractive valuation.

Valeo follows the European model of paying a single annual dividend based on the previous year’s profits.  Its 2018 dividend was €1.25, which would amount to slightly more than a 5% yield based on the current stock price of €24.55.  Analysts estimate the company will earn around €3 per share in 2018, easily enough to maintain that dividend in 2019, and they still expect growth in 2019.

A 7.5 forward P/E ratio and over 5 percent dividend yield would be enough to get me to take any stock seriously, but valuation is not the only factor attracting me to the stock. The company is a leading supplier for two accelerating trends in the automotive industry: electrification and autonomous driving.

The company is a leader in 48V mild hybrid technology, which can deliver most of the fuel savings from of a full hybrid vehicle at a fraction of the cost by allowing the gas engine to turn off instead of idling while the vehicle is stopped.  Beyond the technologies of today, Valeo has developed a full 48V electric powertrain system which is 20% less expensive than the high voltage systems used in most electric vehicles today.  Although I expect a low voltage electric drivetrain will have lower performance than the typical high voltage system, and so be less attractive to car buyers, it could be extremely well suited to transportation services such as car sharing services and autonomous taxis, such as the Autonom Cab, the world’s first robo-taxi, which was presented by its French designer Navya. This all-electric, driverless vehicle relies on Valeo laser scanners, and LiDAR (light detection and ranging.)

While I find it particularly difficult to predict which carmaker is likely to pull ahead in the race to make profitable electric and autonomous vehicles, I feel more confident investing in a part supplier that works with most of them.

Welcome back, Hannon Armstrong

Hannon Armstrong (NYSE:HASI )
12/31/18 Price: $19.05.  Annual Dividend: $1.32. Expected 2019 dividend: $1.32.  Low Target: $18.  High Target: $27.
 
Last year, I dropped a long time favorite stock, Hannon Armstrong (NYSE:HASI) from the list because I felt the stock was temporarily overvalued.  The stock ended 2017 at $24.06, and, as I write on December 28th, is currently trading at $19.54.  After the company’s $1.32 annual dividend, this amounts to a 13% loss for the year, well below the average total return of the stocks that made the list.

In the current uncertain environment, I am happy to welcome this unique clean energy financier back into the list.  The company arranges financing for a broad range of sustainable infrastructure projects, from renewable energy projects like solar and wind farms, to energy efficient upgrades of buildings for performance contractors and commercial property assessed clean energy loans (c-PACE). Hannon Armstrong’s broad range of clients allows it to focus on the most profitable sectors as certain clean energy technologies go in and out of favor with other financiers, and it also has the expertise to either sell the securities it creates to long term investors like pension funds and insurers when demand is high, or to keep them on its own balance sheet when that is most profitable.

The rising interest rate environment of 2018 meant that Hannon Armstrong did more securitization than in previous years. This strategy delivers short term profits, but does little to increase long term cash flows that can support increases in the dividend.  The recent well-timed secondary offering of 5 million shares at $22.40 per share and the refinancing and extension of its secured credit facilities this month hint that the company plans to keep more of the investments it creates in 2019 on its own balance sheet.  These investments should easily allow it to achieve Hannon Armstrong to achieve its target 2 percent to 6 percent growth in core earnings per share.

The expected 2 to 6 percent core earnings growth should allow the company to raise its dividend per share by at least one cent in 2019, but I am unsure if management will choose to do so, and instead retain the capital to boost future growth.  The company previously had a policy of distributing 100% of core earnings over the course of the year, but said on its first quarter earnings call, “As we grow earnings in 2019 and 2020, we will consider growing the dividend perhaps at a lower growth rate than the growth in core earnings.”  Hence I expect a quarterly earnings increase of no more than 1 cent in each of 2019 and 2020.  A one cent increase would amount to 3% dividend per share growth per year, towards the lower end of the company’s core earnings growth guidance range.  I don’t consider a half cent or no dividend increase at all in 2019 to be out of the question, but I am confident that dividend growth will resume by 2020.

The Marriage of Two Old Friends

Innergex Renewable Energy (Toronto:INE, OTC: INGXF)
12/31/18 Price: C$12.54/$9.27.  Annual Dividend: C$0.68. Expected 2019 dividend: C$0.70.  Low Target: C$11.  High Target: C$16.

Innergex has never been in the model portfolio before, but it has often been a close runner-up.  It also acquired 10 Clean Energy Stocks veteran Alterra Power in early 2018.  Alterra was featured here in 2012, 2013, and 2014.  Like US Yieldcos, Innergex owns wind and solar farms, but also much less common run of river hydropower and geothermal assets.

Innergex also develops its own assets in house as well as acquiring them after they are operational, which is the model for most Yieldcos. While many US Yieldcos are struggling to bring down their payout ratios in order to retain some cash flow for investing, Innergex has kept its payout ratio in the 80 to 90 percent range for the last five years, making it less reliant on the whims of the capital markets to fund future growth.

Updates on Stocks Retained from 2018

Covanta Holding Corp. (NYSE:CVA)
12/31/18 Price: $13.42.  Annual Dividend: $1.00. Expected 2019 dividend: $1.00.  Low Target: $13.  High Target: $25. 

Leading waste-to-energy operator Covanta’s stock cratered in December, but only in sympathy with broader market declines.  News from Covanta was limited to the expected: breaking ground on a new waste-to-energy combined heat and power in Scotland.

I’m very enthusiastic about the value of Covanta’s stock at the start of 2019.  The company shored up its balance sheet and found a source of future funding for growth capital in its partnership with Green Investment Group, but the market has not rewarded the stock.  The 7.5 percent current yield is more reflective of a company in financial distress than a company on an (albeit slow) growth trajectory.  

Atlantica Yield, PLC (NASD:AY)
12/31/18 Price: $19.60.  Annual Dividend: $1.44(%). Expected 2018 dividend: $1.52 (%).  Low Target: $18.  High Target: $30. 

Atlantica was the former Yieldco of Spanish developer Abengoa before its bankruptcy.  Its new parent, Algonquin Power and Utilities (AQN), has gotten it back on track to growth fater a couple tough years as Atlantica dealt with the fallout from its former sponsor’s bankruptcy.  During those two years, Atlantica kept its dividend low and reduced debt to strengthen its balance sheet.  It has now reached its long term target of an 85% payout ratio, and is growing its portfolio with the recent acquisition of a wind farm in Uruguay.

The location of the recent acquisition in Uruguay is not an aberration.  .Atlantica has one of the most geographically diverse portfolios of all Yieldcos, a legacy of its former Spanish sponsor.  It has assets not only in the US and Spain, but also in several other countries in South and Central America and Africa.   It also adds diversification with significant electrical transmission and water infrastructure.

Pattern Energy Group (NASD:PEGI)

12/31/18 Price: $18.62.  Annual Dividend: $1.688(%). Expected 2018 dividend: $1.688(%).  Low Target: $18.  High Target: $30. 

Wind energy Yieldco Pattern’s stock price continues to trade as if investors expect a dividend cut.  I am not one of those investors, and I am happy to collect the current over 9 percent yield while management continues the slow improvement of cash flow that began in 2018 to bring its payout ratio down to its target payout ratio of 80%.  I expect the payout ratio to decline only slowly, and likely end 2019 near 90 percent.

A dividend increase this year is extremely unlikely, but the yield plus any capital gains as investors gain confidence in the stability of the current dividend will be more than adequate reward for holding the stock.

Terraform Power (NASD: TERP)
12/31/18 Price: $11.22.  Annual Dividend: $0.56 Expected 2018 dividend: $0.60 (%)  Low Target: $10.  High Target: $16. 

Compared to other Yieldcos, Terraform’s stock was fairly resilient in 2018, meaning that it is less of a bargain than several others in this list. Solely on the basis of valuation, I was torn between Terraform and Clearway.  While Clearway is trading at a higher yield and both stocks are on similar dividend growth trajectories, Clearway has more underlying risks that compensate for its higher yield (see above.)  I chose to retain Terraform in the list out of environmental preference..  I have never been completely comfortable with Clearway’s fossil fuel assets.

Brookfield Renewable Partners, LP (NYSE:BEP)
12/31/18 Price: $25.90.  Annual Dividend: $1.96 (%). Expected 2018 dividend: $2.08(%).  Low Target: $27.  High Target: $40. 

The end of 2018 brings the chance to buy what I consider the highest quality Yieldco at a greatly reduced price. Brookfield stands out from other Yieldcos because of its larger size ($8 billion market cap, compared to $3 billion for the next largest, Clearway) which allows it access to low cost debt financing.  Its sponsor, Brookfield Asset Management (BAM), which is also Terrafom’s sponsor, also gives it access to flexible financing which has historically allowed it to purchase distressed renewable energy assets at very attractive prices. BAM’s position as a manager of a broad range of leading infrastructure funds like BEP and TERP means that it takes the long view, and its Yieldcos pursue acquisitions when valuations are good rather than getting into bidding wars with other acquirers in the pursuit of growth at any cost.

Brookfield’s managers seem to agree that the partnership became significantly undervaued at the end of 2018.  Over the last year, BEP repurchased 1.8 million units on the open market at an average price of $27.72 per share.  In contrast, the partnership did not purchase any of its units over the course of 2017, when the share price traded consistently above $30.  In fact, it sold 8.3 million units at C$42.15 (US$32.45) each in a secondary offering that year.

One rule of thumb I follow with Yieldcos is that you are likely getting a good value if you can buy the shares at a price below the most recent secondary offering.

Green Plains Partners, LP (NASD: GPP)
12/31/18 Price: $.  Annual Dividend: $1.90(%). Expected 2018 dividend: $1.90(%).  Low Target: $13.  High Target: $27. 

Ethanol MLP and Yieldco Green Plains Partners remains the riskiest stock in the model portfolio.  The ethanol market is suffering from the Trump EPA’s continued undermining of the Renewable Fuel Standard with “hardship” waivers to large, highly profitable refiners.  The price of ethanol’s main competitor, gasoline is low.  Retaliatory tariffs on ethanol exports further undermine the market.

GPP’s stock price reflects this distress.  GPP’s parent, Green Plains Inc. (GPRE) has  fallen as well, and racked up significant losses this year. Nevertheless, analysts expect GPRE’s red ink to stop in 2019.  That means that investors can be confident the minimum revenue guarantees that GPRE has given GPP remain safe.  Those guarantees should allow GPP to limp along, maintaining its current dividend through the weak ethanol market.

When the ethanol market recovers, the pressure on GPP’s stock price should ease, leading to capital gains for investors who buy at the current price.  The ethanol market is in such dire straits that a recovery could be triggered by a number of factors: rising gasoline prices, falling corn prices (perhaps as a result of the continued trade war), a change EPA policy (something advocated by powerful Republicans in the Senate), or the closure of excess ethanol facilities (a process which has already begun.)

While Green Plains Partners is undeniably a risky stock, the current 14 percent dividend is extremely attractive and any recovery in the ethanol market, if it happens, should lead to a dramatic gain in the stock price.

Enviva Partners, LP. (NYSE:EVA)
12/31/18 Price: $27.75.  Annual Dividend: $2.54. Expected 2018 dividend: $2.58.  Low Target: $24.  High Target: $40. 

Wood pellet Yieldco and Master Limited Partnership Enviva continued its growth through regular drop-down acquisition from its sponsor through 2018, increasing its distribution by a regular 0.5 cents per quarter.  With a payout  ratio in the high 80 percentile range and a new, lower interest rate credit facility in place, I expect this growth to continue unabated in 2018.

At a 9 percent yield with continued growth of at least three percent per year, the partnership seems likely to produce a solid return while providing good technology diversification.

Final Thoughts

During bear markets, most investors reassess their willingness to take risk.  Some sell all their stocks, while others reallocate their investments to less risky stocks.  These ten stocks are chosen to benefit from the latter trend.  For the most part, they produce steady income streams that are largely independent of economic conditions.

The first stage of the bear market, which we experienced in late 2018, has been mostly composed of indiscriminate selling by investors once again reawakening to the fact that stocks do not always go up.  I expect the next stages to be characterized by more discriminate selling, and investors begin to differentiate between stocks that may not do as well in a slowing economy crippled by political uncertainty and trade wars, while holding on to those investments that are less dependent on economic conditions.

The final stage of a bear market is capitulation.  In this stage, the optimistic investors who had been holding on to their losers in the hope that the bear market was just a temporary dip give up.  The only buyers at that point are deep value investors, who buy based solely on the future cash flows of a company, regardless of any hope of future appreciation.  Those deep value investors will put a floor under the stock prices of these ten stocks.

I could also be wrong about the future course of this market.  Although it seems unlikely to me, I have a history of underestimating the optimism of investors.  Perhaps the current bear market will be short-lived, and the Dow will be hitting new highs by the end of 2019.  If that happens, I expect that this model portfolio will produce gains as well, although it will likely lag the gains seen by the broad market of less conservative picks.

If this model portfolio makes modest gains in a mild bear market, makes less than spectacular gains in a recovery, or takes modest losses in a continued severe bear market, it will have accomplished my long term goal.  That goal is not taking the big loss, while staying open to the opportunity for gains.  As long as you are in the market, every now and then the stars will align, and you will make some great gains, as this model portfolio did in 2016 and 2017.  The trick is not to have all those gains disappear in the bad years.

2018 was a bad year, but it’s pretty easy to live with the model portfolio’s 1.3% loss.  A severe bear market could lead to another modest loss in 2019.  On the other hand, a recovery in the later part of the year could bring significant gains.  I’m looking forward to seeing how that wager plays out in 2019.

Disclosure: Long PEGI, CWEN/A, CVA, AY, SSW, TERP, BEP, EVA, HIFR, GPP. INGXF, HASI, VLEEF, AQN.  Tom Konrad earns consulting fees from JPS Global Investments for consulting on its Green Economy Strategy.

DISCLAIMER: Past performance is not a guarantee or a reliable indicator of future results.  This article contains the current opinions of the author and such opinions are subject to change without notice.  This article has been distributed for informational purposes only. Forecasts, estimates, and certain information contained herein should not be considered as investment advice or a recommendation of any particular security, strategy or investment product.  Information contained herein has been obtained from sources believed to be reliable, but not guaranteed.

The post Ten Clean Energy Stocks For 2019 appeared first on Alternative Energy Stocks.

by Tom Konrad Ph.D., CFA

At the start of November, I abandoned my short-term bearish stance on the market, writing “I’m not confident that the correction is over, but we seem to be heading into a temporary lull, and so I’m going to abandon cash as my top pick for November.”  This turned out to be a good call, with my Ten Clean Energy Stocks model portfolio up 4.3% for the month, slightly behind its broad dividend income benchmark, SDY, which was up 4.9%.    Its clean energy income benchmark YLCO gained 1.6%, as did the private portfolio I manage, the Green Global Equity Income Portfolio (GGEIP).

For the year through November, the model portfolio is up 6.8% beating both its benchmarks at 4.9% (SDY) and -4.3% (YLCO).  GGEIP is up 2.4%, well ahead of the clean energy income benchmark, but lagging the broader universe of income stocks.

Details of the stocks’ performance are shown in the chart below.

Top Picks

Last month, I chose Green Plains Partners(GPP), Covanta Holding(CVA) and Brookfield Renewable (BEP)as my top short term picks.  GPP fell 6.6%, while CVA and BEP gained 12.7% and 6.8% respectively, for an average gain of 4.3%, slightly behind the average stock in the model portfolio.  I think Green Plains Partners is in a good position for a strong rebound in December, so that will be my sole short term pick for the month.

Stock discussion

This will be an abbreviated update, focusing only on the handful of stocks that have had significant news since the last two updates at the start of November (here and here).

Seaspan Corporation (NYSE:SSW)
12/31/17 Price: $6.75.  Annual Dividend: $0.50 (7.4%). Expected 2018 dividend: $0.50 (7.4%).  Low Target: $5.  High Target: $20.
11/30/18 Price: $9.51  YTD dividend: $0.50 (5.26%)  YTD Total Return: 49.9% 

As mentioned in November, I will be taking gains in Seaspan and dropping the stock from the list in 2019, because I no longer consider the stock to be “green” due to an investment in liquefied natural gas facilities.

Covanta Holding Corp. (NYSE:CVA)
12/31/17 Price: $16.90.  Annual Dividend: $1.00(5.9%). Expected 2018 dividend: $1.00 (5.9%).  Low Target: $15.  High Target: $25. 
11/30/18 Price: $16.56 YTD dividend:  $0.75 (4.44%)  YTD Total Return: 2.7% 

Covanta had nice gain in November, but no significant news.

Clearway Energy, Inc (NYSE: CWEN and CWEN/A)
12/31/17 Price: $18.90 / $18.85.  Annual Dividend: $1.133(6.0%). Expected 2018 dividend: $1.26(6.7%)  Low Target: $14.  High Target: $25. 
11/30/18 Price: $18.26/$18.03   YTD dividend:  $1.324 (7.25%)  YTD Total Return: 2.9% 

Clearway’s stock sold off significantly due to its large number of above current market price Power Purchase Agreements with PG&E (PCG).  PG&E is facing the threat of possible bankruptcy due to liability from its equipment possibly being the cause of several of the recent fires in Californian, including the devastating Camp Fire.  The stock recovered somewhat when California’s utilities regulator, CPUC signaled that it was committed to ensuring reliable electric service for PG&E customers (which could possibly be disrupted in a bankruptcy), even if the utility may need to be restructured.

Atlantica Yield, PLC (NASD:AY)
12/31/17 Price: $21.21.  Annual Dividend: $1.16(5.6%). Expected 2018 dividend: $1.39 (6.6%).  Low Target: $18.  High Target: $30. 
11/30/18 Price: $19.62 YTD dividend: $1.44 (7.34%)  YTD Total Return: -1.1% 

Atlantica Yield rose modestly in November along with the rest of the market.

Pattern Energy Group (NASD:PEGI)

12/31/17 Price: $21.49.  Annual Dividend: $1.688(7.9%). Expected 2018 dividend: $1.70(7.9%).  Low Target: $20.  High Target: $30. 
11/30/18 Price: $20.69 YTD dividend: $1.266 (5.89%)  YTD Total Return: 3.0% 

Yieldco Pattern Energy Group rallied strongly after third quarter earnings discussed in the last update.

Terraform Power (NASD: TERP)
12/31/17 Price: $11.96.  Annual Dividend: $0. Expected 2018 dividend: $0.72 (6.0%)  Low Target: $10.  High Target: $16. 
11/30/18 Price: $11.50 YTD dividend: $0.57 (4.77%)  YTD Total Return: -1.1% 

Yieldco Terraform Power drifted higher with the market on minimal news.

Brookfield Renewable Partners, LP (NYSE:BEP)
12/31/17 Price: $34.91.  Annual Dividend: $1.872(5.4%). Expected 2018 dividend: $2.02(5.8%).  Low Target: $28.  High Target: $45. 
11/30/18 Price: $28.62 YTD dividend: $1.96 (2.81%)  YTD Total Return: -12.6%

Brookfield Renewable Partners recovered some of its losses from earlier in the year, but not on any significant news.

Green Plains Partners, LP (NASD: GPP)
12/31/17 Price: $18.70.  Annual Dividend: $1.84(9.8%). Expected 2018 dividend: $1.90(10.2%).  Low Target: $13.  High Target: $27. 
11/30/18 Price: $13.46  YTD dividend: $1.895 (10.13%)  YTD Total Return: -19.0%

Ethanol MLP and Yieldco Green Plains Partners continue to struggle because of a weak ethanol market caused by the Trump EPA granting waivers to favored oil refiners which are undermining the biofuels market.  Retaliatory tariffs on ethanol and a weak oil market are also hurting the stock.  However, the oil market has begun to recover based on a new cooperation agreement between Russia and OPEC, and the EPA is reviewing its policy on waivers.  I continue to think it is time to buy GPP while fears about the ethanol market have the stock trading remarkably cheaply.

InfraREIT, Inc. (NYSE: HIFR)
12/31/17 Price: $18.58.  Annual Dividend: $1.00(5.4%). Expected 2018 dividend: $1.00 (5.4%).  Low Target: $16.  High Target: $30. 
11/30/18 Price: $22.90 YTD dividend: $0.50 (2.69%)  YTD Total Return: 15.2% 

Electricity transmission REIT InfraREIT traded well above the $21 offer price from Sempra Energy (SRE) owned utility Oncor, but collapsed back down to $21 on December 4th when a second possible acquirer withdrew its non-binding offer.  The Oncor acquisition remains on track.  As I wrote in November, I will be dropping HIFR from the 2019 list because of the acquisition.  I hope that some readers managed to get out at the temporarily inflated prices above $21.50. My fund has made some nice gains trading the volatility, but also had some significant potential losses when the stock was above $22.

Enviva Partners, LP. (NYSE:EVA)
12/31/17 Price: $27.65.  Annual Dividend: $2.46(8.9%). Expected 2018 dividend: $2.65 (9.6%).  Low Target: $25.  High Target: $40. 
11/30/18 Price: $32.00 YTD dividend: $1.875 (6.78%)  YTD Total Return: 23.2% 

Wood pellet Yieldco and Master Limited Partnership Enviva gave back some of its gains in November, but without any significant news after the recent earnings report.

Final Thoughts

I continue to be very concerned about stock market valuation, and expect the correction that started last summer to continue in 2019.  However, I expect December may continue the market rebound we saw in November, so I see the coming month as one in which to opportunistically take profits and increase allocations to cash in anticipation of better buying opportunities in 2019.

Preview the 2019 List

Like the last two years, I am offering paying readers a preview of my Ten Clean Energy Stocks for 2019 list. I plan to publish the final article on Tuesday January 1st. If you would like to see a draft version mailed on Sunday December 30th (a full trading day before the final publication) please PayPal $10 to me at tom at alt energy stocks dot com (no spaces) with a note that it’s for the 10 for 2019 preview. The draft will contain the full list, but may not have a complete stock discussion for each stock… I expect to be working on the final version up to publication.

Disclosure: Long PEGI, CWEN/A, CVA, AY, SSW, TERP, BEP, EVA, HIFR, GPP.

DISCLAIMER: Past performance is not a guarantee or a reliable indicator of future results.  This article contains the current opinions of the author and such opinions are subject to change without notice.  This article has been distributed for informational purposes only. Forecasts, estimates, and certain information contained herein should not be considered as investment advice or a recommendation of any particular security, strategy or investment product.  Information contained herein has been obtained from sources believed to be reliable, but not guaranteed.

The post Ten Clean Energy Stocks For 2018: Quick November Update appeared first on Alternative Energy Stocks.