Member Info for parkside13

Goldy I think if you cant afford to lose the lot now then you need to think about this. It has always been a very high risk investment as the debt was so large but I fear now it will submerge the equity. Anything with a market cap of £750m and debt of £6.6bn with interest cover of 1.1x is clearly very high risk and the equity holders could lose the lot. So it is either going to, somehow, recover else it'll have to restructure and equity holders will get stuffed. So now very very high risk punting money.

Oh and don't tell me it isn't their fault! They have overgeared the thing!!

Bhajan you need to pop down to their office in India and give the Brothers a letter from their overjoyed UK shareholders who put money in at 420p. Honestly it is unbelievable. What an IPO disaster.

Yes it is absolutely grim. It feels like a big and hugely dilutive debt for equity swap is looming in which case equity holders will get virtually nothing. New CEO is apparently not great.

Most of the Infinis debt is project financed and thus will be non recourse to the parent. So whilst on a consolidation it is significant on and individual project basis the gearing will typically be 60-75% of the book value. Non recourse financing on wind generates little "profit" in the first few years due to heavy depreciation and finance charges but will deliver a lot of cash to geared equity. Then as the financing cost falls the profits start to flow and catch up with EBITDA. That is how most wind developers work - Infinis, WIND etc. That is not a model that is at all to do with speed of execution. It is simply making sure that the parent has enough liquidity and equity to be able to fund new projects and Infinis has plenty of capacity as after dividends it still generates free cash to equity. Infinis currentlt trades on around 8x EBITDA and that falls fairly quickly. The "going rate" for a new windfarm in the UK is around 9x EBITDA or a ungeared IRR of around 8-8.5%. So sum of parts Infinis is cheap as it is on a free cash flow yield. certainly significantly a better investment than Greencoat. But as I say sentiment is poor right now.

Just been reading the latest forecasts for Essar and it makes very grim reading. Forecast interest cover in 2014 is 1.1x which is very skinny and in 2015 assuming they hit targets it moves to 1.4x. And they always miss targets. So I've sold the shares I bought last week at 71p at 71p and am holding the balance as I think they are on very thin ice and might be in trouble now. They have clearly significantly overreached themselves and economic conditions have deteriorated and the debt is killing them or at least killing the equity. No knife edge. It might go up a lot but similarly there may be little left for equity holders if they screw it up again.

What indications are these?? You must be psychic! The gov has reduced the CfD feed in tariff rate from £100/MWh to £95 and then to £90. At present Infinis can put projects into the RO or from next year the CfD. In 2017 the RO will be replaced fully by the CfD. From 2014 to 2017 they run in parallel. So the announcement last week has a very limited NPV impact on Infinis but its all about the sentiment. The dps for 2014/15 will be 104% of eps, the payout the next year will be around 80%. The shares are cheap but sentiment at present is poor. So a good buying opportunity.

GKO has been a very poor share to own over the last few years but it doesn't have Essar's huge debt burden and minority shareholding issues.

You have to be philosophical sometimes. You'd go mad if you didn't! Hey ho onwards and who knows where!

Well I don't hold one it is for a trust fund. But still annoying. Anyhow, lets hope they start proving value.

Yes I know it is a gloomy Tuesday and I'm fitting in with the weather!! but they continue to snatch defeat from the jaws of victory. It should be starting to turn around in power but Mahan is awful and the fire at Stanlow has hit that part of the business. The trouble is they are just terrible at communicating, reflecting the fact that it is a private company in effect. Absent some balance sheet horror there is real value there now but the catalyst is absent at least for now. Aargh!!

Blimey are the Bozos going down the proverbial toilet? I have reverted back to Bozos as the share price merits that again. It is a truly spectacular collapse and I wonder when it is going to end, if at all. The slashing of the Deutsche price target by £1 was a telling sign I guess.

Well it is either going to go bust under its debts - it shouldn't as there is okay interest cover albeit presupposing no other disasters, or it'll start selling assets or it'll do nothing and work its way out. It seems to have okay liquidity though. But a complete disaster. I have lost quite a bit buying at 89p but the institutions that bought at 480p when it floated must be livid!

I'm completely mystified as to why this thing still trades at above NAV when it offers a 6% yield, is a declining annuity and has no discount control mechanism. Infinis offers a 7% yield, some growth and a better management team and trades at 8x EBITDA. I wont be mystified for long as it will definitely fall to a discount in due course. When it hits 20% I might buy it. The analogy of you give them 100p and they will give you back 70p in due course is not too far removed from reality.

Erm thanks for your insightful analysis on Essar shares. I particularly like your "take whatever you can get..sell, sell, sell" which must have taken you days with a spreadsheet to put together. Is it a sort of discounted BS methodology? Is there anything else I should know?

Infinis is an income and a bit of growth play with wind revenues either via the RO (Renewables Obligation) and the UK power price or from landfill gas. The landfill gas will decline over several years whilst the gap in revenues and profits will be compensated for by the growth of the wind portfolio. Unlike Greencoat the dividend is well underpinned by EBITDA and EPS (although it is paying out all the EPS as a dividend this year). The yield on the shares is around 7% so if you buy a share at 260p you will get around a 18p dividend (I cant remember the exact p for the year but around 18p). That should grow slowly and above inflation. If you invested your money hoping for a quick Royal Mail then you don't know what you are doing I'm afraid. This stock is trading on around 8x EBITDA which is okay but not outrageously cheap. I have invested for a really good dividend backed by stable RO and landfill revenues growing over time and a good management team. I think I may make a few £ capital growth over the next few years but this is mainly income.

I think it needs a strong CEO and FD and some perceived remoteness from the founders and execution. They simply seem unable to deliver to shareholder/analysts expectations. They make the cardinal error of over promising and under delivering. The opening line in the CEOs report is lamentable as if that is some believable independent verification of the solidity of the company and its business plan. The annoyance is that this could work but simply isn't. At least not for now.

Who knows? All you can do is value the equity and then if it is trading at a big discount to intrinsic value, then buy it. I normally buy less geared equities (and better management teams in truth) but 5x EBITDA is ok as long as they, famous last words, deliver!

Well all I am hoping is that they are less stupid than I give them credit for.

Ah well great minds and all that even if you did buy yours below mine! Sadly I'm old fashioned and buy shares through Hargreaves with cash!! All this CfD stuff confuses me. Ah well I will keep quiet now and drop all references to the Brothers. They are messianic and brilliant and can do no wrong in my book. Genuises!