GLBL--Terraform Global

[ugadawg_98]

Looks to be an interesting week ahead for SUNE's yieldcos TERP and GLBL.

 

GLBL is interesting because it just IPOed at $15 in August and has been a disaster since, falling to just over $2.

 

Even after a disastrous year including (probably) being stiffed by SUNE for $231 mil of uncompleted Indian power plants, it should still have roughly $800 mil in cash plus an undrawn credit line, set against over a billion in debt. Allegedly, it has a book value over $9, though that number may be inflated. It does have cash producing assets, though, again, how you value them is the big question.

 

I think there's value here at some point, but not certain if it is still cheap enough.

 

I'm setting up a separate thread here for GLBL because it seems timely. Thoughts on this pig?

[kab60]

Could you explain and break down how you get to a book value of 9$ per share? Last 8-K has stockholers equity at 873m vs a market cap of 410m (and they paid a dividend since). I might go about this the wrong way, so I'm genuinely interested.

 

As I wrote in the Sune thread a couple of months back I couldn't get comfortable with the fact that a Sune BK could possibly trigger a change of control at GLBL which might accelerate debt maturities and renegotiations of PPA's. From my understanding Sune also owes GLBL 231m (plants in India) as well as 180-205m (interest support and other) or 436m $ in all.

 

Considering how awful these companies have been run and their disclosures (we don't know much about their PPA's which it all depends on) I think it's best to stay away. A lot of retail investors have jumped on GLBL due to the high yield, and that is somewhat worrisome in itself I think. I'd want a massive discount to TBV since I'd expect them to have overpaid and negotiated bad PPA's (I wouldn't give them the benefit of the doubt) and even then I'm not sure I could ever get comfortable.

[jay21]

You should read the latest GLBL 8-K. Lots of disclosure: http://www.sec.gov/Archives/edgar/data/1620702/000156761916002097/s001258x1_8k.htm

 

I think GLBL is a good value and can 2-3x from here but agree theres some chance of a zero.

[Palantir]

Do you know if counterparties can exit contracts in case of SUNE bk?

 

 

[ugadawg_98]

Could you explain and break down how you get to a book value of 9$ per share? Last 8-K has stockholers equity at 873m vs a market cap of 410m (and they paid a dividend since). I might go about this the wrong way, so I'm genuinely interested.

 

As I wrote in the Sune thread a couple of months back I couldn't get comfortable with the fact that a Sune BK could possibly trigger a change of control at GLBL which might accelerate debt maturities and renegotiations of PPA's. From my understanding Sune also owes GLBL 231m (plants in India) as well as 180-205m (interest support and other) or 436m $ in all.

 

Considering how awful these companies have been run and their disclosures (we don't know much about their PPA's which it all depends on) I think it's best to stay away. A lot of retail investors have jumped on GLBL due to the high yield, and that is somewhat worrisome in itself I think. I'd want a massive discount to TBV since I'd expect them to have overpaid and negotiated bad PPA's (I wouldn't give them the benefit of the doubt) and even then I'm not sure I could ever get comfortable.

 

 

That $9 figure, as I recall, was at the time of the IPO. I realize we're using old numbers here, but my rough idea as to value is there should be $800 mil or so of cash left ($1.1 bil at last 10q less $231 mil for Indian theft) and the cash generating assets are worth enough to cover debt. This is very rough, but it's also fallen a lot and may fall more next week.

[ugadawg_98]

Do you know if counterparties can exit contracts in case of SUNE bk?

 

 

 

This is from the March 29th 8-k regarding BK effect on existing operations. I note that it's probably wise to consider the Indian investment a total loss anyway. As to change of control, a SUNE ch11 shouldn't be a change of control. Rather, a reorganized SUNE would own the GLBL stake.

 

"Existing Portfolio.  The majority of our existing power purchase agreements (“PPAs”) and project-level financing agreements do not include provisions that permit the offtake counterparty to terminate the contract or for a lender to accelerate debt maturity in the event that SunEdison files for bankruptcy or in the event that SunEdison, Inc. ceases to control or own, directly or indirectly, a majority of TerraForm Global. However, the project-level financing agreements for our remaining three levered power plants in India contain provisions that provide lenders with the right to accelerate debt maturity due to SunEdison’s bankruptcy as an original sponsor of the project and/or party to certain material project agreements, such as O&M and EPC related contracts, or due to a change of control of TerraForm Global. In addition, for our power plants in South Africa, the PPAs contain events of default provisions triggered by a change of control of TerraForm Global and the project-level financing agreements contain events of default provisions triggered by the bankruptcy of SunEdison as a party to certain material project contracts, such as O&M and EPC related contracts, and by a change of control of TerraForm Global."

[johnny]

Not made comfortable with "the majority" quantification there. 49% is more than enough to blow the thing up.