PIF.TO - Polaris Infrastructure

[NorteCapital]

Good results presented by PIF today (as expected).

 

http://polarisinfrastructure.com/wp-content/uploads/2018/11/2018-Q3-Press-Release-2018-11-06.pdf

 

Don't like the dividend tho. I would prefer that they keep the cash for UEG developments or pay down debt.

 

I don't understand your dividend comment. It's at the same rate it was before. Would you prefer they cancelled it?

 

The debt is already being amortized according to a predetermined schedule and is secured by the Nicaragua assets. I don't think it makes sense to pay down that debt more aggressively as its ring fenced by the project. If they could find a way to restructure the debt to add even more debt and pull equity out, I think that would be a worthwhile endeavour.

 

That's what I meant sorry. I could understand the dividend before the UEG acquisition given that there were no capital needs in the short and medium term.

 

Probably my approach is too simple. But I do not like to pay taxes (associated to the dividend) and neither I like the firm to pay extra financing costs.

[matts]

That's a fair point. But cutting the dividend would be painful at this point. I don't know how many people in the stock are as rational as you. I'm willing to bet there is still a lot of previous owners who did not sell because of the dividend and were holding and praying all those bad hombres settled down.

 

 

 

 

 

[petec]

Bought a small position in this yesterday. My thinking, for what it's worth:

 

- Nicaragua

○ San Jacinto can do 67-68mw sustainably vs nameplate 77. They have a PPA for all of this to 2029 with discos owned by a Spanish utility, increasing 3% annually. Demand is predominantly residential and growing steadily as the country electrifies and connects more homes. Hit full run rate production in 3q18. Ballpark, this will generate U$40m of OCF. Typical maintenance spend at SJ is $2m plus occasional “small dollar” well workovers and perhaps occasional new wells - I don't know if steam wells deplete.

○ I think one could roughly value this assuming $40m of FCF, and I'm pretty sure not less than $35m. At $11, using USD/CAD of 1.32, it's on a market cap of $130m for a 25-30% FCFY. Net debt is $120 and ebitda $60-70 for EV/ebitda of 4x. Finance costs run at $16m/year so there's material scope to increase FCF via debt payment. Debts amortise at about $13m/year and mature 2024-29. Rates are 6% fixed (subordinate) and LIBOR+ 5.5% and 6.5% (senior). All debt is non-recourse and only 3-4 months' worth of operating cash is held in Nicaragua.

○ Growth prospects in Nicaragua (on hold)

§ 8-10mw of cheap capacity expansion at SJ.

§ A major expansion into SJ's western zone.

§ A second project in Nicaragua, Casita, which is 60 miles from SJ. Whether this goes ahead currently seems to be with the World Bank and they are sitting on their hands until the political risk dies down.

○ Offsetting this cheapness is the unknowable of Nicaraguan political risk. Ortega looks like a bad guy but is under a lot of domestic and international pressure. The discos are paying a little later, so PIF assume the clients are paying later - if they don’t pay they get cut off, which is a good incentive, but also a clear political risk. PIF also speculate the discos credit lines have tightened. CLEAR RISK HERE - MONITOR.

 

- Peru. In November 2018 they announced a transformative deal to buy hydro projects in Peru from Union (of Dundee infamy). They paid in shares at a very low price but they get assets near production which will boost cash flow and diversify political risk, plus a long tail of development projects that could completely reshape the company.

○ They bought a total of 242mw in various stages of development:

§ Canchayllo, 5mw, operating. Will produce 29gwh annually and has a PPA 2015-2035 at $47.4 for $900k ebitda.

§ Generacion Andino, consisting of 8 de Agosto (19mw, 132gwh annually at $55.7) and El Carmen (9mw, 45gwh annually at $53.9). Construction 80% complete but halted in 2016 due to capital constraints and construction issues caused by pushing on with work during rainy season, causing landslides. No major damage but they were already behind on paying the contractor so work ground to a halt. Fixes are fairly simple. Have chosen a new contractor - local specialist in run of river hydro (they own some stakes) to replace a multinational focussed on the Panama Canal, so they’ll have a direct line to the CEO. They have also hired an owner’s engineer so they will have a technical guy onsite checking work, which wasn’t the case before. PIF have committed capital as part of the deal and the plants should be up and running in late 2019. Both projects have PPAs to 2039. The deal values $80m of investment to date at $25m. The projects come with $44m of restructured non-recourse loans paying 0%, amortising at $2m a year rising 1% annually which gets you to 2038. Discounted at 6.5% the PV of debt is $24m. PIF estimate $35m of further capital is needed, of which $10m is just settling the debt with the old contractor, and the projects will generate $7-9m in ebitda. PIF have a 15% preferred return on all capital plus capitalised operating costs before the debtholders get anything (16-17% when you include transmission and CoO2 revenues, which is excellent for assets in this advanced stage of development). My maths: 25+35+44=104/8=13x ebitda or if you use the discounted debt number 25+35+24=84/8=10.5x. They say equity value will be $65-80m, which ties in with the claim that insurers will buy these assets at an 8% cap rate ($8bn ebitda taxed at 30% is $70m at 8%, although I'm not sure how to account for principal repayments). They claim this is a double, which is a bit naughty as it must be based off the $35m incremental capex, ignoring the $25m paid in shares.

§ Karpa, 20mw, has PPA and near to fully permitted. Will do 130gwh annually at $55.7 for 20 years. Based on Canchayllo this suggests $5m ebitda. The presentation implies they think they can have Karpa operating by the end of 2020. This has a $4.75m performance bond which they think they can either liquify or roll into another project.

§ Development projects, which the presentation implies could be built in 3 years - a stretch if you ask me. NB these assets are all in mountain jungles with strong rainfall so they have 70+% availability which is very good for hydro and likely makes them competitive in future bids. There will be a bidding round in 2h19. Peru's generation park is 60-70% carbon - they want it to be 60% renewable and high-availability hydro is a good offset to wind and solar. Permitting is relatively simple for the smaller assets, 20mw and below, and they are bringing their community relations people from Nicaragua to implement the World Bank playbook they use there which is best in class. Projects are:

□ Amazonas, 119mw, 677gwh annually, PPA pending. Sell when they FID this?

□ Puglush, 20mw, in development.

□ Nueva Esperanza, 50mw, in development.

○ They paid:

§ 600k shares

§ 300k warrants exercisable at a 20% premium to closing price

§ 600k shares for a total of 1.5m fairly assured dilution plus $400k on startup of Generacion Andino.

§ Up to 970k shares according to a bonus formula should generation exceed expectations for 2 years after startup - not clear whether this relates only to GA or to the whole park.

 

○ Bottom line Canchayllo and GA together add nearly $10m in ebitda by YE19 and given zero interest maybe $7m in FCF, plus $1-1.5m in high margin transmission and CO2 revenues, in exchange for 1.5m-2.5m new shares. On that basis FCF should be about $45m (SJ 35-40m, Peru $7+1m) and the deal is marginally FCFPS accretive in 2020. Caveat: they give proforma CF at $40-45m which is a bit below both me ($47m) and analysts, and FCFPS at 1.90-2. However they don't define either and analysts seem to give FCF after debt amortisations, so I suspect the company does too. Best case the company could be on near 3x 2020 FCF; I'm fairly confident in 4x; and even at $2/share it's on 5.5x. Downside thinking: if debt is non-recourse Nicaragua can’t threaten Peru, and if they have $40m on hand less $12m escrow against debts then they are close to funding Generacion Andina. If GA equity is $65-80m after completion, with a market cap of $130m, then downside might be 50%, and from there you can still fund the development assets. Best case upside is 3-4x your money to get to 12x FCF, with no value allocated to the late stage assets.

○ Especially once they have Kallpa up and running they will have a portfolio they can refinance locally. There’s a big local market for stable long run debt, unlike Nicaragua.

 

[writser]

$40m in cash on the balance sheet, you pay out $9m+ in dividends this year and then you issue 2m shares at (what was perceived in this thread to be) a bargain price to buy shit in Peru? I'm a simple guy, please tell me how that makes sense. Probably insiders don't own many shares?

[petec]

$40m in cash on the balance sheet, you pay out $9m+ in dividends this year and then you issue 2m shares at (what was perceived in this thread to be) a bargain price to buy shit in Peru? I'm a simple guy, please tell me how that makes sense. Probably insiders don't own many shares?

 

Point one, I suspect these assets aren't shit. I know Peru fairly well. It's a great jurisdiction (one of the world's genuine miracle economies of the last 20 years due to very sound macro policy enshrined in the constitution) and everything Polaris is saying about these small hydro assets rings true with what I hear from locals.

 

Point two, the share issuance is FCF accretive in year 2 despite the extraordinarily low price of the shares.

 

Point three, despite point 2 you could argue it would be better to buy back shares. Mathematically that's true but it's not very smart. Buybacks don't reduce/dilute the political risk like the Peru deal does, and in the worst case they could spend 100% of FCF on buybacks and then have the asset confiscated in a nationalisation, in which case the NPV of future cash flows today would be 0. Downside risk is lessened by diversifying, and rule no1 is don't lose money.

 

Point four, could they have done the deal with cash instead? Maybe. But there's an enormous cash component to this deal anyway, which is the capex involved in building out the hydro assets. In effect they've issued about 10% additional shares for an investment pipeline that could absorb all of their FCF for several years at high returns (and transform the country mix which should have a significant impact on the multiple). Also, I wouldn't be at all surprised if the seller insisted on some shares to share in the upside of developing the portfolio of assets they have worked hard to put together. Put another way, if I was the seller I'd have accepted a lower $ value of shares than cash, so issuing shares might have been the better deal, we can't know. Finally, had they done the deal with cash, under certain very negative assumptions (Nicaragua cash flows stop soon e.g. because of capital controls) they could have had issues financing the completion of the two assets due to come online in 2019. No point risking that.

 

FWIW the CEO owns 2.4% of the shares. I would imagine, but I do not know, that that is a material portion of his net worth.

[writser]

Good reply, thanks.

 

If the transaction works out all is well, obviously. But still it's a bit of a speculative proposition: buying new assets in another country. Trying to expand the empire, so to say. A large part of the acquired portfolio is still in construction. Projections look optimistic at first glance. $35m investment, worth $80m in 12 months. Why was nobody else interested in buying this? The possibility of success in the future has to be weighted vs. the certainty of buying back cheap shares right now. With a depressed share price the hurdle rate for success is high.

 

I'm also a bit skeptical about the diversification argument. First of all, investors can diversify at the portfolio level. I don't want all my holdings to diversify - I want them to allocate capital sensibly. Second, if you issue ~15% shares to buy assets in Peru you aren't quite diversified - the vast majority of your assets / earnings still come from Nicaragua. Sure, if after 5 years of reinvestment you have significant operations in Peru you might deserve a higher multiple. But until that time diversification is more of an idea than reality. Also, this plan is not guaranteed to succeed (execution risk) not to mention that you could have used all that cash to buy back shares as well.

 

Criticism is all very high level obviously. If you have done your DD feel free to ignore :) .

[petec]

There's certainly a speculative element to this. I can't handicap the Nicaragua risk. I am just willing to accept a risk I can't handicap when I'm paying 3-4x FCF and can see a valuation floor at -50%.

 

I don't think the projections are particularly optimistic. It's not $35m becoming worth $80m - a lot has already been invested, and $35m is only the incremental part.

 

For all we know others *were* interested in buying this but couldn't pay in undervalued shares ;)

 

Investors can diversify at the portfolio level. But PIF management aren't interested in my portfolio. They're interested in maximising the value of their own shares, and rightly so. There is a low but not-zero risk of the Nicaragua asset being worth nothing. That turn of events would make buying back (too many) shares look very reckless. This deal, if they can deliver the assets on time and on budget removes the odds of the stock being worth zero. That's a sensible move. And execution actually isn't *that* hard - there's plenty of expertise locally and they won't make some of the schoolboy errors the prior owners made, as explained on the q3 call. (Famous last words!)

 

Diversification is actually quite material immediately. Predeal if Nicaragua went to zero the company went to zero. Postdeal, not so. They have cash on hand to complete the GA assets, so $10m in ebitda from Peru doesn't depend on continued cash from Nicaragua. Those first Peruvian projects create $65-80m of equity value, which is quite relevant in the context of a market cap of $130m. And, from that point, they'd be able to use Peruvian cash flow plus local PPA-backed debt to develop the other assets, growing equity value off the new lower base in the future. This deal materially and immediately transforms the risk/reward.

 

Thanks for the criticism - it makes me think.

[Foreign Tuffett]

Original Thesis: Company is cheap because the market is pricing in too high a probability of the geothermal asset being impaired.

 

New Thesis: Company is an even better bargain because they are buying hydropower assets in Peru using their undervalued stock.

 

Thesis drift? While I understand that it's possible to reconcile these two theses in an intellectually honest way, I think it's unlikely that they are both true. Is the Peru deal really so good that it overcomes the disadvantage of being done with (apparently) undervalued stock?

 

Also, my initial take on the deal was that management is in a hurry to diversify away from its Nicaragua asset. What does that say about its value? 

 

Finally, I am skeptical of maintenance capex estimates for geothermal assets.

[petec]

Original Thesis: Company is cheap because the market is pricing in too high a probability of the geothermal asset being impaired.

 

New Thesis: Company is an even better bargain because they are buying hydropower assets in Peru using their undervalued stock.

 

Thesis drift? While I understand that it's possible to reconcile these two theses in an intellectually honest way, I think it's unlikely that they are both true. Is the Peru deal really so good that it overcomes the disadvantage of being done with (apparently) undervalued stock?

 

Also, my initial take on the deal was that management is in a hurry to diversify away from its Nicaragua asset. What does that say about its value? 

 

Finally, I am skeptical of maintenance capex estimates for geothermal assets.

 

I didn’t subscribe to the original thesis so no drift for me. As I’ve said I can’t handicap the odds of the value of Nicaragua being impaired. The Perú deal, however, materially reduces the odds of this being a zero which changes the odds sufficiently for me to make a small, somewhat speculative bet on its reaching fair value.

 

As I’ve argued, buybacks would be reckless in an asset where you can’t handicap the odds of a zero. And I much prefer the Peru deal to dividends or sitting in cash.So, yes, on balance it’s far better than a buyback.

 

The hurry to diversify is very smart in my view.

 

I’m very interested in your views on maintenance capex, please.

[writser]

I didn’t subscribe to the original thesis so no drift for me. As I’ve said I can’t handicap the odds of the value of Nicaragua being impaired. The Perú deal, however, materially reduces the odds of this being a zero which changes the odds sufficiently for me to make a small, somewhat speculative bet on its reaching fair value.

 

As I’ve argued, buybacks would be reckless in an asset where you can’t handicap the odds of a zero. And I much prefer the Peru deal to dividends or sitting in cash.So, yes, on balance it’s far better than a buyback.

 

If you can't handicap the odds of the Nicaragua asset being worth zero isn't owning this stock reckless in the first place?

 

I understand your thesis and even like it somewhat but I think you are too optimistic about how quickly Polaris becomes insulated from what happens in Nicaragua. Yes, if they buy back stock right now and Nicaragua goes to shit then Polaris likely goes bankrupt or something similar. However, if they expand in Peru and Nicaragua goes to shit the next few years then your investment likely won't work out either as Nicaragua generates the cash required to expand in Peru .. Maybe it goes down 80% instead of 100% but on the other hand you have the execution risk of completing large infrastructure projects in another foreign country - I don't think that that's a risk-free proposition either.

 

In short, if you are afraid of / can't handicap / can't peg a number on the Nicaragua asset I don't see how this is attractive either way.

[bargainhunter]

 

If you can't handicap the odds of the Nicaragua asset being worth zero isn't owning this stock reckless in the first place?

 

 

Good discussion here. I am also long (but small speculative position only). My thinking is very similar to petec's. I like the deal for the same reasons. FWIW, I do think the Nicaragua risk is somewhat overstated. For one, the World Bank is financing their geothermal project. Never a good idea for a country like Nicaragua to earn the wrath of international lenders. That said, this is Latin America and anything can happen. I take some comfort from the fact that the risk of Ortega nationalizing this project should be almost totally uncorrelated to a lot of the other risks embedded in my portfolio -- Trump doing something else dumb on trade, oil falling further, or even a global recession. Relatively uncorrelated bets like this are not easy to find. So each to his own but I do not view this as a reckless investment.

[petec]

I didn’t subscribe to the original thesis so no drift for me. As I’ve said I can’t handicap the odds of the value of Nicaragua being impaired. The Perú deal, however, materially reduces the odds of this being a zero which changes the odds sufficiently for me to make a small, somewhat speculative bet on its reaching fair value.

 

As I’ve argued, buybacks would be reckless in an asset where you can’t handicap the odds of a zero. And I much prefer the Peru deal to dividends or sitting in cash.So, yes, on balance it’s far better than a buyback.

 

If you can't handicap the odds of the Nicaragua asset being worth zero isn't owning this stock reckless in the first place?

 

I understand your thesis and even like it somewhat but I think you are too optimistic about how quickly Polaris becomes insulated from what happens in Nicaragua. Yes, if they buy back stock right now and Nicaragua goes to shit then Polaris likely goes bankrupt or something similar. However, if they expand in Peru and Nicaragua goes to shit the next few years then your investment likely won't work out either as Nicaragua generates the cash required to expand in Peru .. Maybe it goes down 80% instead of 100% but on the other hand you have the execution risk of completing large infrastructure projects in another foreign country - I don't think that that's a risk-free proposition either.

 

In short, if you are afraid of / can't handicap / can't peg a number on the Nicaragua asset I don't see how this is attractive either way.

 

I think whether you’re happy to own an asset where you can’t handicap the risk is a very personal thing. Some might say the risk of a zero is offset by 10x upside potential. Not me - the risk of a zero puts me off an investment. But I’m happy with 50% downside risk that I can’t assign a probability to, if the upside is 3-4x. I think that’s the case here.

 

On the downside, if Nicaragua is nationalised without compensation (the worst case) the debt also disappears. As a result, if the GA assets can be completed by 2H19 using cash on hand, which is my base case, then you have line of sight on $70m of equity value with no need for Nicaraguan cash. Add a year of Nicaraguan FCF and you’re at $100m. Add 2 years and you’re at the current market cap. That’s a lot of downside, gone. Or to put it another way you’re paying a lot less for the Nicaraguan asset than you were a month ago.

 

As for building out the other assets without Nicaraguan cash, that’s a question we can’t answer without knowing capex for each project. But I do know that you can borrow against PPAs locally. So once the PPA for Karpa is renegotiated, it may well be that cash flow from GA is enough to finance Karpa. (Or, they could sell GA.) Once Karpa is in, they think they can refinance the whole package which would help with another project. There’s a lot of speculation here but it’s somewhat informed speculation and it all assumes worst case, which is that Nicaraguan cash flows stop NOW. If they don’t then every quarter adds to the cash pile.

 

[NorteCapital]

Results in line with what I was expected. They delayed El Carmen one quarter but does not seem significant + Not much capex this year in San Jacinto.

 

Looks cheap imo.

[peterHK]

Results in line with what I was expected. They delayed El Carmen one quarter but does not seem significant + Not much capex this year in San Jacinto.

 

Looks cheap imo.

 

Would agree. It's going to take time for them to dig out of the valuation hole though, so it's likely to stay cheap for a while.

[peterHK]

Been a year since I posted this. Stock is now up ~7.6% + a 5.3% dividend, so considering all the crap, not a bad result!

 

Worth noting that EV/EBIT was 6x a year ago, is 5.5x today, so the valuation has compressed somewhat.

[Philbert77]

Why is no one talking about PIF on here anymore? This is still a compelling investment. Cash flow is about to see a good bump in Q3/Q4 due to the nature of contracts in Peru. Debt likely refinanced at a much lower rate within a year. They sailed through COVID-19 relatively unscathed.

 

Q1 results: https://polarisinfrastructure.com/wp-content/uploads/2020/05/2020-Q1-Press-Release-FINAL.pdf

 

Q1 transcript: https://seekingalpha.com/article/4349428-polaris-infrastructure-inc-rampf-ceo-marc-murnaghan-on-q1-2020-results-earnings-call?part=single

 

 

[peterHK]

Why is no one talking about PIF on here anymore? This is still a compelling investment. Cash flow is about to see a good bump in Q3/Q4 due to the nature of contracts in Peru. Debt likely refinanced at a much lower rate within a year. They sailed through COVID-19 relatively unscathed.

 

Q1 results: https://polarisinfrastructure.com/wp-content/uploads/2020/05/2020-Q1-Press-Release-FINAL.pdf

 

Q1 transcript: https://seekingalpha.com/article/4349428-polaris-infrastructure-inc-rampf-ceo-marc-murnaghan-on-q1-2020-results-earnings-call?part=single

 

Honestly quite annoyed I didn't read the call until today because I would have bought more. Some very interesting stuff going on.

[petec]

I’m a happy holder. They may have two refinancing going on - Nicaragua and Peru. Nicaragua would be a huge win because if they can get a bullet maturity, rather than an amortising bond, it frees up a huge amount of cash flow.

 

Peru could also be a huge win - rates are low there because the central bank is excellent and pension fund demand is strong, so they can refinance the hydro assets long term at good rates and extract a big block of cash up front.

 

If both happen they’ll be wallowing in cash.

 

They also mentioned a good pipeline of investment opportunities including one which sounds very “live”.

[Philbert77]

"TORONTO, ON (June 16, 2020) – Polaris Infrastructure Inc. (TSX:PIF) ("Polaris" or the “Company”), a Toronto-based company engaged in the operation, acquisition and development of renewable energy projects in Latin America, announced today that it signed a Memorandum of Understanding (“MOU”) to acquire 100% of the equity of a Panama-based 10 MW run-of-river hydro project called Chuspa (the “Project”) from Navitas Holdings Inc. (“Navitas”)."

 

https://polarisinfrastructure.com/wp-content/uploads/2020/06/Chuspa-MOU-Press-Release-June-2020.pdf

[SafetyinNumbers]

"TORONTO, ON (June 16, 2020) – Polaris Infrastructure Inc. (TSX:PIF) ("Polaris" or the “Company”), a Toronto-based company engaged in the operation, acquisition and development of renewable energy projects in Latin America, announced today that it signed a Memorandum of Understanding (“MOU”) to acquire 100% of the equity of a Panama-based 10 MW run-of-river hydro project called Chuspa (the “Project”) from Navitas Holdings Inc. (“Navitas”)."

 

https://polarisinfrastructure.com/wp-content/uploads/2020/06/Chuspa-MOU-Press-Release-June-2020.pdf

 

So they just borrowed money at 8.5% to invest at 15%. That’s a decent spread. Hopefully it gets better over time, then it has a chance to compound nicely.

[Philbert77]

From the most recent earnings call:

 

"And the last comment I'll make before we turn it over to questions is given the Brookfield loan and the cash flow generation, I think we are sitting here with a very strong balance sheet with cash of over $50 million consolidated, which I think is a great asset in this time. So even though Panama might take a little bit longer for instance to get started, I think given this environment, I think in the medium to long term, having the cash but also a relatively underlevered balance sheet should enable us to take advantage of even more opportunities in the market. And I think in the medium term, that will be a big benefit to shareholders. Because at current sort of debt and cash levels, we're at net debt of between 2 to 2.2 to 2.5x, depending on how you treat the convertible. But even if you treat that as debt at 2.46x -- and that's a trailing EBITDA number, not a go-forward EBITDA number, that is very conservatively financed. So I think we will be able to continue to grow through this and take advantage of a lot of the opportunities that we are still seeing in the market."

 

https://app.tikr.com/stock/transcript?cid=105606124&ts=2063404&e=682373156

[petec]

Well this has been fun. Anyone else still following? I think there is a good chance of a refinancing in Nicaragua soon. Starting to wonder when to sell.

[Philbert77]

I’m still a holder. I plan to hold until we get bought out. It’s really just a matter of time.

[petec]

Interesting. I can't decide whether I am delighted with progress or unhappy.

 

I bought a single asset company in a questionable jurisdiction on a silly free cash flow multiple.

 

Now it's got several assets in (soon) three jurisdictions, a longer contract on its main asset, but lower free cash flow because the cost of a longer contract was a lower price, and a higher free cash multiple because the share price is up. I think it's on about 7x once the binary unit is built although I am not sure that fully captures tax, which kicks in in 2025. Also the new Nicaragua contract is not indexed, so the cash flows will drop slowly as costs inflate.

 

Execution on the whole has been good. Every asset seems to have had issues so they've come onstream a bit late or delivered slightly less cash flow than initially promised. But nothing major.

 

M&A activity has been half/half. They've bought some good assets at decent returns - I think they're targeting about a 15% ROE which is a healthy return if things go well but seems a little low to me given the leverage plus construction and jurisdiction risks. But some things have not worked out as I had hoped. I don't think there have been any new power auctions in Peru so they haven't been able to develop the pipeline there, and have basically gone silent on it. And initially they hoped for a big local refinancing in Peru which is a very attractive debt market, but in the end all they could deliver was $27m from Brookfield at 8%.

 

My guess is the next step will be an expansion of that Brookfield relationship to refinance the $120 gross debt they have in Nicaragua. On the December call they discussed 15y amortising debt at 7-7.5%. That would push out their repayment schedule and free up significant cash for reinvestment over the next 5 years. That would be NPV positive but I am struggling to tell whether it is in the price.

 

I am not sure who would buy this. It's basically one decent sized asset with a bunch of other things that are too small for a big company to care about. On the other hand there must be a huge number of small undercapitalised projects for them to buy. With additional resources they could become a big player in this niche and I have idly wondered if they'd make an interesting platform investment for BEP, which is otherwise concerned with larger things. But I doubt it.

 

PIF made a comment on the 3q call that they thought they needed to be looking at bigger assets to really open up opportunities. I think they might be a buyer not a seller, as it were.