by Daryl Roberts

A potentially paradigm-shifting technology has been under development at an R&D firm in NJ called Brilliant Light Power.   For people monitoring the situation, the question currently is about the status of commercialization.   It is not a publicly held firm, but is in mid-stages of private equity capitalization in the range of $100-120M.

I recently read a book  titled “Randall Mills and the Search for Hydrino Energy“, offering a detailed and compelling history of the development of this novel renewable energy technology, authored by an insider, an intern who stayed on to work there for several years (published in 2016, with company data as of end of 2015).  In order to provide some context, this article will summarize the concept, breakthrough achievements, compare its levelized costs to other generation technologies, offer a brief review of validation efforts, and touch on personnel and capitalization.   I will try to be faithful to information presented in the book and website materials, and will try identify my own cautious opinions in context.

Concept

The technology was developed by Randall Mills, whose special talents manifested while still a graduate student in physics at Harvard, when he made a discovery in 1989 while exploring a foundational question in physics about why an orbiting electron did not radiate away its energy.   Quantum mechanics diverged from classical mechanics without ever answering this question.  Mills emerged with a revised classical theory that included the proposition that hydrogen’s ground state can in fact be lower than previously thought, that it can have fractional ground states.

According to Mills’ theory, hydrogen can react with a catalyst in a 2-step process, in which first a small amount of energy is transferred by a process called resonant inductive coupling, in integer increments of 27.2 eV.  When this photon is accepted by the catalyst from the atomic hydrogen, the hydrogen electron then becomes unstable and will decay into a lower, fractional orbital, closer to the nucleus.  This 2^nd step releases a larger increment of energy than would be predicted by any other known chemical reactions,   200x higher than burning hydrogen.  The ending species of hydrogen was dubbed a “hydrino”.

Validation

Mills documents extensive experimental confirmation, which to date has identified hydrino states of 1/2, 1/3, 1/4, down to 1/10 (orbital shell distance below 1.0 ground state).  The theory calculates possible hydrinos with a theoretical limit of 1/137, constrained by relativistic speeds for the electron travel.

The book documents Mills’ 25-year journey of verification, both with collaborators and validation by a growing number of independent investigators who report finding confirmation in a wide range of experimental configurations.  Mills was prolific in publishing his findings in the face of persistent resistance from establishment figures, in progressively more prestigious journals. The reference section of the book documents 96 journal articles with Mills as primary author(as of late 2015, now over 100), 52 journal articles with non-BLP primary authors, and 31 other technical reports regarding hydrino research by various universities, national labs and corporations.

Early lab set ups involved low temperature electrolytic cells, but Mills eventually found that the phenomenon could be triggered and measured more successfully in high temperature plasma conditions.  Subsequently, tests were constructed using various types of instrumentation, & validated by leading experimentalists in this field, experts in thermal measurement.    A summary of the full extent of the verification data discussed in the book and website materials is beyond the scope of this article.   But it’s worth including one slide which shows a list of 29 types of confirming evidence that has been compiled to date, including 7 or  8 types of spectroscopy and 4 or 5 types of calorimetry.

On the website, most of the Validation Reports are compiled under the technology tab and also under the News/ What’s New tab.  The focus seems to be weighted most heavily on confirming that the energy is generated by the hydrino reaction process.   Business presentations pdf’s, PowerPoints & videos of conference are in the News / Archive tab.   The validation page reports 4 independent studies in 2020, 3 in 2019, 5 in 2016, and an additional 17 earlier reports.

Energy Gain

The specific excess heat generated is not documented uniformly within a single reference system.  As I searched to compile these results, I found various expressions of “gain” cited in PowerPoint slides reporting outcomes from a range of experiments, as follows:

• “energy gain of 200-500x”
• “Optical energy output of 30x input”
• In a table identifying specific experiments showing a gain column, with 3 cases with highest values showing 399x, 279x & 213x
• “peak power 20MW, time-avg power 4.6MW, optical emission energy 250x applied energy”
• “input power 6.68 kW, output 1,260 kW” 1260/6.68 = 188x
• in terms of power density, as “20MW in microliters”, and elsewhere “billions of watts per liter”
• the 2020 validation studies report finding that hydrino plasma produced excess power of 275kW, 340kW, 200kW & 300kW respectively.
• 2019 report power levels of 1000kW & 100kW.
• 2016 studies report 514kW of optical power & 1.3MW peak power; 689kW with 28x gain; thermal power levels of 440kW; & 1.5MW continuous power from 8.6kW input (1500/8.6 = 174x)

It would benefit the company to clarify and reconcile these value, especially when differing by orders of magnitude, ie., in ranges of 10x vs 100x.  This would help to make clear the specific the relationship between these output values and the resulting dramatic reductions in cost of energy production per kW, which are discussed further below.

SunCell

The experimental configurations evolved from demonstrating the effect in single shot events, to systems that could sustain continuous reactions and maintain a stable plasma.  These early events in which a target material was bombarded by a catalyst along with a high current, low voltage electrical discharge to create the plasma conditions, resulted in an excess of energy so hot that even electrodes made of tungsten were vaporized.

The next steps involved engineering design to develop a commercial prototype, and optimization of supporting systems.   The most challenging practical problem was designing an electrode that could withstand the high temperatures.  This was solved by making the electrode entirely liquid, an arcing molten metallic silver electrode with a continuous feed, into which the catalyst was mixed, which enabled a continuous plasma reaction.   The reaction took place in a small containment vessel, with the two feeder systems, one for the liquid silver, the other for moving the atomic oxygen and hydrogen in and hydrinos out.  The plasma is maintained at 400⁰C and generated very high energy photonic radiation in the Extreme Ultra Violet frequency range (EUV), producing excess heat and molecular signatures confirming Hydrino profiles.   Supporting systems were engineered for hydrolysis of the water, for induction pumping the silver, for heat transfer systems, and for electrical offtake.

The system was branded the “SunCell”.

The reaction produces no emissions other than the reduced hydrinos, which are 64x smaller volume than ordinary hydrogen.   Current design captures the hydrino gas in a charcoal trap or a milled halide hydroxide crystalline matrix to which the hydrinos can bind.  If exhausted into the air, it is inert, non-toxic, lighter than helium and would rise to the upper atmosphere.

The power from the plasma can be utilized either directly as heat with heat exchangers or can be converted to electricity by means of two distinct offtake technology configurations, that were developed and patented:

• Concentrating Photovoltaics (CPV) – the EUV can be converted by stepping down the frequency to the visible spectrum by means of “blackbody radiation”. The containment shell is made of refractory materials to optimize this conversion to optical energy which can then be captured with concentrating photovoltaic cells arrayed around the blackbody. The containment sphere is in essence like the filament of a light bulb, capturing multiple suns 24 hours a day, without intermittency.

• MagnetoHydroDynamic (MHD) – the plasma heats an expanding gas seeded with conducting silver nanoparticles is passed through a transverse magnetic field, converting kinetic energy to electricity.

The more detailed engineering diagram of the SunCell PV design gives a better sense of the relatively compact scale of the device, in this instance only about 3ft high from the base platform.

The device has very high power densities, can produce continuous power at 20MW/ liter.   Below is a working demonstrator prototype in 2016.

To illustrate the comparative power density of the SunCell compared to other stationary concentrating solar applications, they show this slide:Costs

Costs are low because the capital costs to construct the devices are low, one estimate was $60/kW, which is less than 2% of capital costs for solar.  Other operating costs are negligible, for maintenance & fuel, because other than the hydrogen fuel, which is derived from water, all the other materials, recycle within the device, and with few if any moving parts, and so can be expected to have life cycles of 20 years or more.   The resulting energy costs are estimated at $.01/kWh, substantially lower than any other source.In business presentations from 2016, BLP made an attempt to provide more conservative comparisons using the Levelized Cost of Energy tables provided annually from asset manager Lazard considered to be the most reliable & comprehensive surveys are available.  Using the most recent report published 11/7/19, BKP places their LCOE in this context, projecting costs at approximately 50% below the cost of solar & 30% less than Gas Combined Cycle. 

With such low operating & capital costs, the revenue model is based on a flat per diem energy lease transaction rather than a metered price per kWh.  Revenue is modeled based on a “breakthrough rate” below $.05/kWh, which is an arbitrary price sufficiently below market prices of competing sources, but with an enormous built in margin.   Most of the pricing would be based on off-grid provisioning, rather than through the wholesale market auctions through ISOs and other grid operators.  Hence, the capex & operating costs would represent approximately only 2-5%, with net earnings above 90%.

Costs will improve at scale, as the largest costs are for the CPV components.  At production rates of 10GW annually, the estimated costs of the CPV cells are $32 per kW at concentration of 2000 Suns. A cost analysis for parts for a production model of the 2000 suns version show the PV cell assembly constitutes 60%, or $15,000 out of the total of $25,000.  But at higher temperature plasmas, at 10,000 Suns concentration, optimizing output efficiencies, CPV costs drop to less than $6 per kW, or $2800, down to 23%.

Status of Commercialization

If the experimental validation data is accepted, and the resulting production cost calculations are supportable, the pressing question is:  what is the status of commercialization? Why are we not seeing some of these devices appearing in the market yet?  What is holding up the show?  The book doesn’t get into this issue, although the author has communicated his intent to update with a 2^nd edition that explains how this next phase has evolved since 2016.

The website unfortunately does not provide an easily accessible section featuring a sequential history of the  commercialization status, either in a front page or a top line item in a dropdown menu, or a side bar or a featured story.   However, digging deeper, comparing earlier & later website materials, the narrative can be reconstructed.   The two main sources are Business Plan pdfs, & Demonstration Days, found under different tabs.

Business Plan pdf’s:

Earlier commercialization plans indicate the first target market will be industrial thermal energy users.  The SunCell operates 3x more efficiently & 2.5x lower costs if the end product is process heat only, and the electric conversion phase of the system is not included.  BLP envisioned the rollout timeline as shown below, as of 6/14/19. In Phase 1, after industrial users, commercial & residential thermal users are targeted next.  Heat for high GHG generators, steel & concrete are targeted later presumably because those industries are more resistant to change.
Phase 2 targets electricity markets, initially with the SunCell Photovoltaic design scaled to 10kW – 150kW.  The next target would be scaled to 250kW – 2MW, to address Distributed Energy Resources (DERs) for industrial, commercial and multi-tenant residential buildings, providing micro-grid power that can be “islanded” from grid connection, simplifying system designs to eliminate the need for battery storage systems, and eliminating the utility connection costs & queueing time delays.  SunCells can operate continuously, but can also be taken off line without curtailment or the need to redirect current to storage.  They can be simply shutting down with smart controls to smooth peaking and manage very short ramping & re-start times.   Multiple SunCells can be networked with low voltage private grid interconnections, minimizing the need to even interface with the public grid, reducing complications associated with utility permitting.  Further, the potential for micro-grid configurations in rural applications could offer solutions to the wildfire risks in California.

Phase 3 addresses transportation applications in a subsequent phase, for trains, large-scale marine (transport ships that currently burn high emission bunker oil), buses & trucks, and ultimately passenger vehicles and electric aviation.  The MHD version can be scaled down for light vehicles to a size much smaller than either internal combustion engines or EV batteries.

Demonstration Days, found under the News/Archive tab, includes 6 videos of roadshow presentations, with slides, from 1/28/14 – 10/26/16, and 4 additional presentations actually called “Roadshows” (although it is not clear that any of the roadshows are intended to be investor pitches).

Information most relevant to the status of commercialization were a) presentations by two contracted engineering firms, and b) reference in one of the last Demo Day pdfs to a new set of contractors.

• Columbia Tech which is a mid-sized management firm in Boston, not a GE or Siemens, but does $200M/yr revenues, has 500 employees, was selected by BLP to manage transitional processes moving from the development engineering being done at BLP to the production engineering which may be further farmed out. They presented slides indicating where it thinks BLP is in the process.

This is a nice schematic infographic, but there was little in the content of the presenter’s material that disclosed that CT had actually started doing any work, or that there was an expected date for BLP to begin handing off tasks for CT to execute on its path to production development.   Later in that same Demo Day, the in-house marketing director showed his own similar schematic, which added some detail but no new information about actual developments.

• Masimo (formerly Spire, a PV manufacturer) contracted to develop a custom CPV system. However, Masimo also has disappeared, no further reference to either progress on their assigned contract, or that they are even still an industrial partner.  Instead, in some later pdf slides, there is indication in some indication that BLP has reconsidered using non-concentrating PV, that they have been making a closer cost benefit analysis.

In the last roadshow pdf 9/12/17, slides #42 – #47 indicated new progress:

• TMI Climate Solutions (subsidiary of MiTek, a Berkshire-Hathaway company) appears to have been engaged to develop designs for boilers to offtake heat for thermal applications;
• Re Columbia Tech, they announce: “SunCell Commercialization engineering is mature enough to be outsourced to CT. Equipment is being fabricated, procured, shipped”.  It seems to be associated with updated injector design solutions.   Despite this promising indication, there was no further updates about CT after this report. 
• PV development progress: indicates changes in design parameters, & perhaps a change from Masimo to SpectroLab (a Boeing company) to complete the development of the triple junction concentrator cells.

6/14/19 is the most recent update in a Business Presentation pdf.  However, the material merely refined prior messaging, with some updates of prototyping and engineering solutions of SunCell system components, some new validation experiments conducted by independent scientists, and another review of 17 out of the 29 methods for verification of the Hydrino explanation.   However, there were no further updates from ColumbiaTech, Spectrolab or Masimo, TMI Climate Solutions, or any other development partner about component status or overall system fabrication design status.

Advisory Board:   Most have relevant experience in renewable energy development, seem to be well chosen to facilitate the development goals, and some have very high level backgrounds, such as James Woolsey, former Director of the CIA.   This is at least a hopeful indicator that people with both management talent and influence consider the technology to have potential, & whose presence would tend to exert pressure for development progress.

$100 -120m of investment capital is mentioned in scattered references, all of which is from private equity offerings, but investors are NOT disclosed anywhere in the website.  In another reference, there was an indication that some of the other investors were utilities, including a rural electric coop in NM, which may have participated by placing pre-orders rather than taking equity.

The Wikipedia page, which is very one-sided & antagonistic, states:   “…Investors include PacifiCorp, Conectiv, retired executives from Morgan Stanley^[12] and several former BLP board members:

1. Shelby Brewer who was the top nuclear official for the Reagan Administration and CEO of ABB-Combustion Engineering Nuclear Power^[17][18] ,
2. Michael H. Jordan(1936 – 2010), CEO of PepsiCo , Westinghouse Electric Corporation, CBS Corporation and Electronic Data Systems.^[17]”.

Conclusion

With so much potential for triggering transformation with a technology that leaps forward in efficiency & costs and significantly reduces GHG emissions both in fabrication and operation, one can only hope that Brilliant Light Power will be able to accelerate their commercial development process, and upgrade their website to be able to make updates more transparent and accessible.

The post Brilliant Light Power – Commercialization Status appeared first on Alternative Energy Stocks.

Alternative energy power production stocks are companies whose main business is the production and sale of electricity from alternative energy installations, such as solar farms, wind farms, hydroelectric generators, geothermal plants, cogeneration facilities, and nuclear plants.

This list was last updated on 9/11/2020.

If you know of any alternative energy power producer that is not listed here or any stock that should be removed, please let us know by leaving a comment.

The post List of Power Production Stocks appeared first on Alternative Energy Stocks.

Wind farm owner and developer stocks are publicly traded companies that site, permit, develop, construct, own, or operate wind farms for producing electricity.

This list was last updated on 3/22/2022

Acciona, S.A. (ANA.MC, ACXIF)
Adani Green Energy (ADANIGREEN.NSE)
Algonquin Power and Utilities (AQN, AQN.TO)
Atlantica Yield PLC (AY)
Atlantic Power Corporation (AT)
Avangrid, Inc. (AGR)
Boralex (BLX.TO, BRLXF)
Brookfield Renewable Energy Partners (BEP)
China Longyuan Power Group Corporation Limited (0916.HK, CLPXF)
China Ruifeng Renewable Energy Holdings Limited (0527.HK)
Orsted (ORSTED.CO, formerly DENERG.CO)
E.ON AG (EONGY)
Enel SpA (ENEL.MI, ESOCF)
Greencoat UK Wind (UKW.L)
Infigen Energy Limited (IFN.AX, IFGNF)
Innergex Renewable Energy Inc. (INE.TO, INGXF)
Neoen S.A (NEOEN.PA)
NextEra Energy Partners, LP (NEP)
NextEra Energy, Inc. (NEE)
Nordex AG (NRDXF, NDX1.DE)
Northland Power Inc. (NPI.TO, NPIFF)
NRG Yield, Inc. (NYLD, NYLD-A)
Otter Tail Corp (OTTR)
PNE Wind AG (PNE3.DE)
ReNew Energy Global plc (RNW)
The Renewables Infrastructure Group (TRIG.L)
TransAlta Renewables, Inc. (RNW.TO, TRSWF)
Xcel Energy Inc. (XEL)
Wind Works Power Corp. (WWPW)

If you know of any wind farm owner or developer stock that is not listed here, but which should be, please let us know in the comments. Also for stocks in the list that you think should be removed.

The post List of Wind Farm Owner and Developer Stocks appeared first on Alternative Energy Stocks.

by Tom Konrad, Ph.D., CFA

It’s been a busy several days in the YieldCo space.

The post One Week, Three YieldCo Deals. Are More Buyouts on the Horizon? appeared first on Alternative Energy Stocks.

by Tom Konrad Ph.D., CFA

Last week, a Bloomberg reported on a rumor that Brookfield Asset Management (BAM) was in talks to buy Abengoa’s (ABGOY) stake in its former YieldCo Atlantica Yield (ABY).  Atlantica had been looking for a new sponsor for well over a year since parent Abengoa filed for bankruptcy.

Purchasing Yieldcos (companies that own clean energy infrastructure and use the cash flows to pay large dividends to shareholders) is not new to Brookfield.  Not only has BAM long sponsored Brookfield Renewable Partners, LP (BEP), a limited partnership that has essentially been a Yieldco since before the term was invented, but it is in the process of wrapping up the purchase of bankrupt SunEdison’s former Yieldcos, Terraform Power (TERP) and Terraform Global (GLBL).

Terraform Global

The smaller, Terraform Global is to be purchased outright for $5.10 a share.  On October 3rd, the bankruptcy court cleared one of the final hurdles preventing GLBL from putting the matter to a shareholder vote by approving a settlement regarding directors and officers insurance.

Terraform Power

The Terraform Power purchase is farther along, with the merger having already been put to a shareholder vote, with the deadline for submitting shares recently extended to October 12th.  Shareholders should make sure to participate in this tender offer and elect to take their compensation in shares rather than cash.  This is because the cash compensation is worth less than the current share price, and shareholders who do not submit their shares will be assigned shares or cash based on the remaining after as many as possible shareholders who do make an election have been allocated the cash or shares of their choosing.

To understand the value of the cash or stock election, we need to consult the merger agreement.  There we see that at the time of the merger, TERP will issue a special dividend of $1.97 per share.  51% of the outstanding shares will then be purchased for $9.52 cash, while the remaining 49% will remain TERP stock.

Each share of TERP which is submitted for cash will be paid $9.52 + $1.97 = $11.49, or less than the current share price, around $13.   The 49% of shares which are exchanged for more shares will get the $1.97 special dividend and of course a share of TERP stock.

Investors who are looking for cash from this merger are clearly better off selling the stock for $13 than electing to take $11.49 cash, and this accounts for why TERP shares have been falling in price in the lead-up to the election.  The buyers of those shares will naturally be submitting the shares they buy for stock, so we can be confident that nearly all shareholders will be electing to receive stock in the merger.  Since only 49% of shares can be exchanged for stock, it’s safe to say that the exchange will be subject to proration, meaning that a shareholder electing to receive stock will in fact receive approximately 50% stock and 50% cash, with the few shareholders who did not submit their shares receiving cash.

For each two TERP shares submitted for stock, the holder will then receive two special dividends of $1.97 each, plus $9.52 for one of the shares, plus a single TERP share.  So two TERP shares will become $13.40 worth of cash plus a single TERP share as the result of the merger.

With one Yieldco (Terraform Global) removed from the market, and half of Terraform Power’s previously public shares in Brookfield’s hands, I expect the remaining TERP shares to perform well due to increased demand.  The company will also benefit from a world-class sponsor in Brookfield Asset Management.  Brookfield Renewable Partners has been steadily raising its annual distribution since before most Yieldcos existed, and is currently targeting 5% to 9% annual distribution growth.  The track records of BAM’s large stable of other infrastructure funds should also give confidence to future TERP investors.

Atlantica

If the rumors of a buyout of Abengoa’s stake in Atlantica prove true, I expect this will also be good for Atlantica current shareholders.  Although Atlantica (unlike TERP and GLBL) has spent the last year and a half developing its own internal management so that it does not have to rely on Abengoa, the cost of that management is a drag on results.  As part of the Brookfield family, many of these costs can be more efficienctly shared with other parts of the Brookfield stable, and Brookfield’s backing should also help lower Atlantica’s borrowing costs.

Summary

Brookfield Asset Management has a well-deserved reputation for buying infrastructure assets at a discount, and the 2015 Yieldco bust (and related bankruptcies of SunEdison and Abengoa) have provided Brookfield with opportunities to buy the valuable clean energy assets of TERP, GLBL, and (possibly) Atlantica on the cheap.  This is good for Brookfield, but also good for investors like myself who bought the three Yieldcos shares even more cheaply in 2015 and 2016.

8point3 and NRG Yield

There are currently two other Yeildcos for sale: 8point3 Energy Partners (CAFD) and NRG Yield (NYLD and NYLD/A).  I don’t expect that shareholders of these two Yieldcos can expect Brookfield to buy them out at anything like current prices.

Brookfield, after all, has that reputation of a very careful buyer, and can only be expected to buy Yieldcos at a steep discount.  8point3 (as I have written elsewhere) is significantly overvalued at the current price of $14.70, and NRG Yield close to fair value.  I can’t imagine any buyer wanting CAFD at the current price, and if NYLD finds a buyer, it’s unlikely to be Brookfield Asset Management.

About the Author: Tom Konrad Ph.D., CFA is an analyst, portfolio manager, and freelance writer specializing in income-oriented green stocks.  He is Editor for AltEnergyStocks.com.

Disclosure: Long GLBL, TERP, ABY, BEP, NYLD/A.  Short CAFD.

The post Brookfield’s Yieldco Buying Spree appeared first on Alternative Energy Stocks.

by Debra Fiakas CFA

Renewable energy producer Juhl Wind filed to terminate registration of its common stock and cease filing financial reports with the Securities and Exchange Commission in September 2015, but the company was not withdrawing from the wind energy industry.  Instead Juhl expanded.  Now called Juhl Energy (JUHL:  OTC/PNK), the company’s corporate website boasts of its corporate headquarters in Minnesota powered exclusively by wind and solar energy.  The company also claims the successful development of over 350 megawatts of wind power generation capacity at 25 different wind projects.  Additionally, the company has dipped its corporate toe into biomass energy and natural gas systems.

After keeping a fairly low profile over the last two years, Juhl is making headlines again. The company is developing a mixed-source project in Red Lake Falls, Minnesota that is expected to be the first commercial solar-wind power generation source in the U.S.  When construction is complete in August 2017, there will be two 2.3 megawatt wind turbines and 1.0 megawatt solar conversion capacity.

Juhl is making small, community-based energy development like the Red Lake Falls project the focus of its business strategy.  The company recently sold several of its renewable energy assets to ConEdison Development, including three operating wind projects in Minnesota and Iowa with a total of 36 megawatts generating capacity and additional interests in various wind power projects with a total of 500 megawatts capacity.
Going forward Juhl plans to focus on renewable energy projects under 20 megawatts.  The company’s standard design for mixed-source power generation from wind and solar is expected to be a key offering.  The company sees demand for smaller projects in the 5 megawatt size from rural communities, small municipalities, industrial complexes and commercial campuses.

At the time of the asset sales, management expressed optimism about the ability of the company to grow with this new, more focused strategy, as proceeds of the asset sales could be used to pay down long-term debt.  However, no details have been made public.  Investors are left to guess about Juhl’s balance sheet.  The company has not filed financial statements for two years.  The last balance sheet filed in August 2015, indicated Juhl held $1.6 million in cash and had $15.9 million in long-term and non-recourse debt.

Juhl is not entirely cut off from investors.  Besides entertaining questions from the public, until recently the company accepted investments in preferred stock in a subsidiary called Juhl Renewable Assets.  The preferred stock gave investors a stake in Juhl’s solar and wind power projects.  Those preferred shares were redeemed at par when the assets were sold to ConEdison Development.

Debra Fiakas is the Managing Director of Crystal Equity Research, an alternative research resource on small capitalization companies in selected industries.

Neither the author of the Small Cap Strategist web log, Crystal Equity Research nor its affiliates have a beneficial interest in the companies mentioned herein.

The post Juhl Energy Diversifies appeared first on Alternative Energy Stocks.

by Al Speisman, Esq.

Al Speisman, Esq.

Power REIT¹ (NYSE MKT:PW) is a micro-cap Real Estate Investment Trust with assets generating consistent, secure cash flow.  Power REIT’s assets consist of long-term railroad infrastructure as well as 600 acres of land leased to solar farms. Power REIT’S current underlying value of $11.07 per share is delineated in a shareholder presentation on Power REIT’S Web-Site. This valuation does not factor in potential success in Power REIT’s pending Federal Appeal.

A recent article appearing in Value Investors Club lists Power REIT’s Net Asset Value at $10.62 per share plus a “lawsuit optionality value” of $1.09 or a total current valuation of $11.71 per share.  The Value Investors Club analysis assumes a 15% probability of success in the appellate litigation.  I believe this greatly under-estimates Power REIT’s chance of success, and the company has a strong chance of prevailing on its appeal.  The potential damage recoveries should it succeed are huge.

The Case

Power REIT has a CEO with vision, persistence and patience: David Lesser.  Mr. Lesser has been involved for several years in pursuing Norfolk Southern on potential lease violations and defaults. The Power REIT/Pittsburgh & West Virginia Railroad (PWV) litigation with Norfolk/Wheeling has been going on for five years. The Appellant Brief (PW), the Appellee Brief (Norfolk/Wheeling), and Appellant Reply Brief (PW) have been filed with the Third Circuit Court of Appeals (Federal Court).

Power REIT’s appeal with Norfolk Southern and Wheeling & Lake Erie Railway (Case No 16-1195) is ripe for a decision. The case “will be submitted on the briefs” to an Appellate panel of three justices on Thursday, January 19, 2017.  As is the norm in the vast majority of 3^rd Circuit cases, “there will be no oral argument.”  It is reasonable to believe that the appellate decision should be forthcoming during the First Quarter of 2017.

My summary of Power REIT’s position on the appeal follows.  My primary source is Attorney  Steven A. Hirsch

’s Amended Appellant Brief and Reply Brief.  It is enlightening to review both of these in conjunction with the original lease document.  Mr. Hirsch’s background and the outstanding job he has done preparing the appeal both lead me to believe it has an excellent chance of success.

The Lease

My overall assessment is that the lease itself is the key to this case, and the lease is the “blueprint of the deal.” 

Power REIT’s subsidiary, Pittsburgh and West Virginia Railway (PWV), owns 111.21 miles of rail line going between Pennsylvania and Ohio.  It also owns 5 short branch lines comprising an additional 20.38 miles.

In 1962, PWV entered into a 99-year renewable lease with Norfolk Southern (hereinafter “Norfolk”) with a fixed base rental of $915,000 per year plus “Additional Rent.”  Additional Rent includes, among other things, “deduction-based additional rental.” (Federal tax deductions for depreciation, amortization, etc.)  Norfolk is also obligated to pay all expenses Pittsburgh & West Virginia Railroad incurs when they come due and assumes “all obligations” Pittsburgh & West Virginia Railroad incurs relating to Pittsburgh & West Virginia Railroad performing its legal duties and protecting its rights under the terms of the lease.

Key lease provisions include:

• Leasing of Pittsburgh and West Virginia Railway’s property including the 111 mile stretch of Railroad and the 5 short branch lines (limited exceptions excluded). (See Section 1.)
•   Pittsburgh and West Virginia Railway property that Norfolk Southern determines to be not “necessary or useful” may be sold, leased or otherwise disposed of” by Norfolk Southern and shall be an indebtedness to Pittsburgh and West Virginia Railway. (See Section 9.)
• When lease terminates, whether by failure to renew or by default, leased property “shall be returned to Lessor in the same condition as it (was) in at the commencement of the term of this lease, reasonable wear and tear excepted….” (See Section 11.)
•  Norfolk Southern shall return enough property at the termination of the lease to run the railroad for one year with such property being in unchanged condition. (See Section 11.)
• A default under the Lease requires Pittsburgh and West Virginia Railway to provide 60-day written notice to cure. Upon determination of default, Pittsburgh and West Virginia Railway is entitled to the return of its property. (See Section 12b.)
•  Damages from a default of the lease include Interest at 6% from date of default, reasonable attorneys’ fees and expenses. Also, all remaining indebtedness becomes due when the lease is terminated. (See Section 11.)
•  Indebtedness between Norfolk Southern and Pittsburgh and West Virginia Railway is capped at 5% of the value of Pittsburgh and West Virginia Railway’s total assets “as long as any of the obligations of lessor (Pittsburgh and West Virginia Railway) which have been assumed by lessee (Norfolk Southern) remain outstanding and unpaid.” (See Section 16a.)

During 2011, David Lesser became CEO of Pittsburgh and West Virginia Railway.  He pinpointed the injustices involved in the Norfolk Southern transactions.

Norfolk Southern attempted to sell certain property and Power REIT challenged Norfolk Southern, alleging among other things, that it was entitled to attorney fees for reviewing and acting upon the proposed sale.  Norfolk Southern, trying to avoid a “default” under the lease terms, filed a Declaratory Judgment action in Federal District Court.  The District Court determined by summary judgment that Norfolk Southern had not defaulted.

A key aspect of the case, which goes to the extent of the damages recoverable by Power REIT, is whether Norfolk Southern and/or its sub-lessee, Wheeling & Lake Erie Railway Company, defaulted on the lease.

Four (4) potential defaults under the lease are being appealed by Power REIT:

1. Norfolk Southern violated Section 9 of the lease by failing to pay or record as an indebtedness almost $14 Million from “dispositions” of Pittsburgh and West Virginia Railway’s Property.

2. Norfolk Southern violated Section 11 by allowing resource extraction from these unrecorded dispositions, thus permanently altering Pittsburgh and West Virginia Railway property.  Each time resource extraction occurs it should be construed as a “permanent transfer”.

3. Norfolk Southern violated Section 4(b)6 by failing to pay Pittsburgh and West Virginia Railway’s attorney fees and litigation costs.

4. Norfolk Southern violated Section 16(a) which imposes a 5% cap based upon the assets of Pittsburgh and West Virginia Railway.  The section requires Norfolk Southern to pay any excess indebtedness in the Transactions/Settlement Account beyond the 5% c
ap to Pittsburgh and West Virginia Railway.  Confirmation of the indebtedness is evidenced by Norfolk Southern’s course of performance with the IRS.  Norfolk Southern prepared Pittsburgh and West Virginia Railway’s tax returns through 2012. Norfolk Southern’s tax returns, as well as the tax returns prepared by Norfolk Southern on behalf of Pittsburgh and West Virginia Railway, acknowledge and affirm the outstanding indebtedness in the Transaction/Settlement Account. (For greater detail and analysis of the tax treatment involved, see the Alpern Rosenthal expert report dated 3/29/13 concluding the Settlement Account on Norfolk Southern’s financials is an indebtedness/liability to PWV.)  Based upon that report, the Settlement Account balance exceeded five percent (5%) of the value of the assets on a market capitalization basis, of each year ending December 31, 1983 through December 31, 2012.  By December 31, 2012, the balance of the Settlement Account, per Norfolk Southern, was $16.66 Million and exceeded five percent (5%) of the value of Pittsburgh and West Virginia Railway’s assets by $15.91 Million.

Potential Damages include:

1. Recovery of Power REIT/ Pittsburgh and West Virginia Railway Attorney Fees: approaching $4 Million.

2. Recovery of Interest:  Section 11, (Termination of Lease) provides for interest at 6% per annum from date of default.

3. The Transactions Account reflects an admitted indebtedness of approximately $17 Million as of 2012. Of that amount, approximately $16 Million exceeds the 5% cap.  No updates of the current Transactions Account balance have been provided by Norfolk Southern to Pittsburgh and West Virginia Railway.

4. An additional $14 Million in dispositions have been identified by Pittsburgh and West Virginia Railway but have not been recorded by Norfolk Southern in the Transactions Account.

5. If the Court determines a Norfolk Southern default has occurred, under Section 11, Pittsburgh and West Virginia Railway is also entitled terminate the Lease and to “such machinery, equipment, supplies, motive power, rolling stock and cash as will be sufficient to enable Lessor to operate the demised property for a period of one year after the return thereof….”. A key variable in determining the amount owed to Pittsburgh and West Virginia Railway would require analysis of Wheeling & Lake Erie Railway Company’s detailed financial statements.

6. If the Court rules Norfolk Southern has defaulted, the entire property reverts back to Pittsburgh and West Virginia Railway.  The rental established of $915,000 per year was established in 1962 and does not escalate and is likely significantly below the current market value.

7. What Pittsburgh and West Virginia Railway could actually lease the property for in today’s market is speculative. Norfolk Southern and Wheeling & Lake Erie Railway have refused to provide operational and income data to Pittsburgh and West Virginia Railway (also a potential default based on a failure to comply with a contractual right contained in the lease that allows Pittsburgh and West Virginia Railway to inspect the  books and records of Norfolk Southern).  However, based upon discussions with railroad consultants, a generic valuation range may be in the range of $1 Million per track mile. Pittsburgh and West Virginia Railway has a total of 131.59 track miles. Note that in recent years, Wheeling & Lake Erie Railway has experienced significant traffic growth as a result of Marcellus Shale activity.

8. One could speculatively project that with either a new or renewed lease, annual revenues to Pittsburgh and West Virginia Railway would be between $5 Million to $10 Million per annum.  That projected valuation does not include potential mineral rights on Pittsburgh and West Virginia Railway land.

Summary

Litigation, especially Appellate Litigation, can have a life of its own. Recent articles written on Power REIT have predicted a probability of success in the area of 10 to 15 percent. However, after extensive review of the ongoing litigation, including in depth review and analysis of the facts and pending appellate briefs before the 3rd Circuit Court of appeals, I sincerely belief that David (Pittsburgh and West Virginia Railway) should defeat Goliath (Norfolk Southern) based on the merits of the case. Ultimately there is no way to know if the appeal will be successful….

Endnote

1) Price (1/13/17):  $6.88.  Shares Outstanding (in M) 1.78 Million.  Market Cap:  12.28 Million. Core Funds from Operations Annualized (FFO) .50 to .60.  Net Asset Value (NAV):  $10.62 to $11.07 (assumes Power REIT loses appeal)

ABOUT THE AUTHOR: Al Speisman is the principal of Speisman Law, LLC. As an investor, he focuses on undervalued, micro-cap companies. He received his M.B.A. from Northwestern University’s Kellogg Graduate School of Management with concentrations in finance and accounting. Mr. Speisman earned his Juris Doctorate degree from The John Marshall Law School.

DISCLOSURE: Al Speisman is a significant shareholder in Power REIT.  On January 3, 2017, he filed an Amended 13G.

DISCLAIMER:  Al Speisman is not employed with Power REIT.  Nor is he a Board Member. The above article should not be construed as legal or financial advice.  It’s strictly the opinion of the author.  For specifics regarding Pittsburgh and West Virginia Railway’s legal position on the appeal, Power REIT’s appellant briefs should be reviewed in detail in conjunction with the lease. The appellee brief filed on behalf of Norfolk Southern/Wheeling should also be reviewed. These, as well as other documents, are readily available on Power REIT’s website: www.pwreit.com. Go to PWV Litigation Update under the “Investor Relations” tab.

Other sources of articles online to consider reviewing when evaluating Power REIT as an investment include, but should not be limited to, the most recent Power REIT Investor Presentation on Power REIT’s website: www.pwreit.com, Tom Konrad’s numerous articles on Power REIT, several articles published with Seeking Alpha, Forbes On Line, AltEnergyStocks.com, and most recently Value Investors Club (VIC).
Investors are also encouraged to participate in dialogue on this article via http://investorshub.advfn.com/Pittsburgh-&-West-Virginia-Railroad-PW-20486/ as well as via the Seeking Alpha post of this article.

The post Power REIT: Why David Should Defeat Goliath appeared first on Alternative Energy Stocks.

by Debra Fiakas CFA
 
The atmosphere started getting uncomfortably hot for power developer Abengoa SA (ABGB:  Nasdaq)  in early August last year  –  and it was not just the seasonal high temperatures in the company’s home town of Seville, Spain.  Management had finally admitted that operations could not generate as much cash as previously expected, causing worries about Abengoa’s ability to meet debt obligations.  At the heart of the company’s cash flow woes is the reversal of Spain’s policies on solar power that has reduced subsidies and feed-in tariffs for solar power producers.

In August 2015, Abengoa also announced plans to raise capital by selling 650 million euros (US$715 million) in common stock and 500 million euros in assets (US$550 million).  The plan was to pay down debt thereby reducing future interest and principal obligations.  At the time the company had about 9.0 billion euros in debt (US$9.9 billion).

The company’s share price had already been weakened by rumors, but the news sent the stock plummeting to historic lows.  After stabilizing for a several months near the $5.00 level, ABGB was gain sent into a free fall last month with more negative news on Abengoa’s cash and debt woes.  The company has asked for protection from creditors, a precursor to declaration of bankruptcy.  The stock price at the time of this article was just a few pennies over a dollar.

The question for investors is whether Abengoa’s share price is oversold, opening a window of opportunity for equity investor with an eye for deep value.

 It is the calendar more than anything that has spooked shareholders and bond holders.  Abengoa has 500 million euros in bonds (US$530 million) coming due in March 2016.  The plan to sell equity appeared to be a viable solution until one of the largest equity investors pulled out in late November 2015, citing Abengoa’s failure to meet prerequisites for the financing.  Other than a 106 million euro line of credit to pay employees (US116 million), the company’s creditors have appeared reluctant to refinance the debt.  There appears to be little time for Abengoa to reach an orderly resolution to its balance sheet problems.

A financial solution might require a restructuring of the company and its many operating subsidiaries and investments.  Abengoa has already been selling assets, including shares of Abengoa Yield, plc (ABY:  Nasdaq).  Abengoa now owns less than half of the ‘yield-co,’ which is a portfolio of power generation and electricity transmission assets in the Americas and Europe that were originally developed by Agengoa SA.

Unlike its sponsor, Abengoa Yield is profitable, reporting US$674 million in revenue and US$7.4 million in net income in the twelve months ending September 2015.  Operating cash flow generated during that period was $282.9 million, making it possible for Abengoa Yield to support US$7.3 billion in debt and still provide shareholders with US$1.72 in annual dividends per share.  The recently negotiated line of credit is secured with the Abengoa’s yield-co shares.

There appears to be a great deal of uncertainty for Abengoa.  Even decision makers at the yield-co are hedging against a demise of their sponsor by proposing a change in the name from Abengoa Yield to Atlantica Yield.  Thus as tempting as the ABGB price might seem, perhaps it would be more prudent to take a position in Abengoa “Atlantica” Yield and collect a dividend.  The current yield is 10.0% and ABY shares are trading at 11.2 times forward earnings.

Debra Fiakas is the Managing Director of Crystal Equity Research, an alternative research resource on small capitalization companies in selected industries.

Neither the author of the Small Cap Strategist web log, Crystal Equity Research nor its affiliates have a beneficial interest in the companies mentioned herein.

The post Yin and Yang of Yield for Abengoa appeared first on Alternative Energy Stocks.

Jim Lane

In New York, NASDAQ shares in Abengoa SA (ABGB) plunged 49% in Wednesday trading after the embattled renewable energy developer said it would seek bankruptcy protection as it seeks to reorganize nearly $9.4 billion in debt. The protective filing was announced after an expected infusion of nearly $300 million from Spanish steelmaker Gonvarri did not materialize.

The company’s debt had been previously downgraded to a B3 rating by Moody’s, six rungs on the ladder beneath investment grade. Last week, Moody’s described the company’s cash reserves as “insufficient” and expressed that asset sales and a round of investment by existing backers would not be enough to stabilize the company’s finances.

Abengoa in an SEC filing Wednesday stated:

“In relation to the Material Fact (Hecho relevante) of November 6, 2015 (No. 230768) concerning the framework agreement entered into with Gonvarri Corporación Financiera (“Gonvarri”), the Company announces that it has received notice from Gonvarri that the framework agreement is terminated considering that the conditions to which that agreement was subject have not been satisfied.

“The Company will continue negotiations with its creditors with the objective of reaching an agreement that ensures the Company’s financial viability, under the protection of article 5 bis of the Spanish Insolvency Law (Ley Concursal) , which the Company intends to apply for as soon as possible.”

The company did not elaborate on the problems in meeting Gonvarri’s conditions. At the time of the announcement of the proposed investment, which would have made Gonvarri the largest shareholder in Abengoa, the companies said that “the Investment Agreement is subject to certain conditions such as the standby underwriting of the share capital increase by the underwriters announced on September 24th, 2015 continuing to be in force and the signing of a substantial package of financial support in favour of the Company by a group of financial institutions.”

The company developed the 25 million gallons cellulosic ethanol facility in Hugoton, Kansas, and is a major operator of ethanol and biodiesel production assets in the US and Europe.

Jim Lane is editor and publisher  of Biofuels Digest where this article was originally published. Biofuels Digest is the most widely read  Biofuels daily read by 14,000+ organizations. Subscribe here.

The post Abengoa Seeks Insolvency Protection appeared first on Alternative Energy Stocks.

by Debra Fiakas CFA

Last week NextEra Energy Partners, LP (NEP:  NYSE) reported financial results for the third quarter ending September 2015.  The numbers were released in along with quarter results from its parent, Florida-based utility NextEra Energy, Inc. (NEE:  NYSE).  The partnership is the operating arm of clean energy projects originated by the NextEra parent.  The ‘yieldco’ as these operating entities have been kindly dubbed by shareholders, delivered $1.0 million in reported net income, but operating cash flow was a whopping $36 million in the quarter.

The consensus estimate had been for $0.24 in earnings per share, but NEP delivered only a nickel.  The shortfall should not have been such a surprise.  The company has missed the consensus estimate in each of the last four quarters.  This might be due in part to the fact that NEP has only been public for just over a year.  Analysts may still be having trouble rationalizing NEP’s business prospects after the Company’s well publicized initial public offering last year.

Over the previous two and a half years NEP had converted 53.3% of sales to operating cash flow.  True enough the sales-to-cash conversion rate did slip slightly to 35% in the recently reported quarter.  However, some seasonal variability is expected in the wind and solar energy sources that comprise NEP’s revenue sources.  The company ended the September quarter with $696 million in cash and equivalents derived in part from operating activities.

Cash is a critical element in NEP’s growth strategy.  The company is expected to continue acquiring renewable and alternative energy assets, some of which could come from the stream of energy projects under development by its parent or sponsor NextEra Energy.  NEP recently acquired natural gas pipelines in Texas and a wind project in Canada.

The company also raised $319 million in new capital from the sale of new common units during the first nine months of 2015.  Going forward NEP has announced a new $150 million ‘dribble program’ whereby the company could issue new common units from time to time.  This program will allow the parent NextEra Energy to purchase units in periods of undervalued.

NEP management has suggested that acquisition plans to grow its portfolio of energy assets could eventually support distributions in excess of $1.20 per unit over the next five years.  This compares to the current distribution rate at $1.08 per unit.  The current distribution rate represents a current yield of 4.0%.

The yield might appear attractive, but the stock appears to be priced at a premium with a price-to-earnings multiple of 92.2 times trailing earnings.  Importantly, the price-to-cash flow multiple on a trailing basis is 5.2 times.  Since cash generation is NextEra’s forte, it seems appropriate to price the the basis of cash flows rather than reported earnings that include considerable noise from non-cash charges.

The stock hit 52-week low of $19.34 in late September as traders had seemed to remain stubbornly focused on each successive quarter earnings miss.  There appears to have been an awakening among traders to the value in NEP.  The stock has been attempting a comeback in recent weeks.  Money flows into the stock turned positive in late October just as the company was preparing to release third quarter results.  In my view, NEP is at an interesting point and is worth a serious look for yield-hungry investors.

Debra Fiakas is the Managing Director of Crystal Equity Research, an alternative research resource on small capitalization companies in selected industries.

Neither the author of the Small Cap Strategist web log, Crystal Equity Research nor its affiliates have a beneficial interest in the companies mentioned herein. 

The post Investors Awaken to NextEra YieldCo appeared first on Alternative Energy Stocks.