Summary
- Sol-Wind presents investors a low-risk option for exposing their portfolio to green energy growth.
- Sol-Wind has a strong proposed dividend making a great investment and return.
- Long-term growth and energy prices will further bolter Sol-Wind’s balance sheet and income statement.
Overview
Sol-Wind Renewable Power (Pending:SLWD) is set for their initial public offering on the New York Stock Exchange to begin trading on February 11, 2015. The company manages a portfolio of solar and wind energy generating assets. The current share price is valued in the range of $19-21 per share, the resulting market value of Sol-Wind would be about $400 million. Sol-Wind will be a great dividend investment that presents an excellent income opportunity with solid growth prospects. The unique investment will allow income seeking investors to peg dividend growth to the prices in the energy sector.
Operations and Cash Flow
Sol-Wind's operations are basic, the sign long-term power purchase agreements with utility and commercial customers to deliver power from their generating assets, which in turns creates long-term stable cash flows. The current business is to operate about 185 megawatts of generating capacity and to sell that energy which is expected to create $26 million in excess cash flows. At the mid-range of the IPO price, $20, this would generate a $1.30 annual dividend a yield of 6.5%.
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Source: Sol-Wind S1 Filing
Over the past year Sol-Wind has made significant investments in generating assets, and carries over $11 million in annualized depreciation. The resulting cash flow is still positive and will be directly converted into growth and dividend.
Additionally, the company's income will be partially pegged to the price of electricity. Projections indicate steady growth in the price of energy over the next 5 years:
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Source: Sol-Wind S1 Filing
Dividend income pegged to electricity costs can be very attractive in light of continued interest in renewables and declining prospects for traditional coal and natural gas energy generation.
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Source: Sol-Wind S1 Filing
Strategic Growth
Sol-Wind, had a strategic growth advantage compared to most existing energy suppliers. They will be positioned to solely purchase new or recently installed renewable energy assets, compare this to the traditional energy supplier that is facing aging infrastructure and increasing costs.
Sol-Wind, is well positioned to invest in assets to take advantage of governmental green-energy incentive programs. Furthermore the company is well positioned to take advantage of non-utility customer demands for direct supply of 100% green energy power. The proceeds of the IPO will allow Sol-Wind to further invest in Energy generating assets. The prospect of growing green energy demand and supply will benefit the Sol-Wind investor. As the sector grows so will the size of Sol-Wind which will directly translate to share price inflation and dividend growth.
Diversified Portfolio
One final prospect making Sol-Wind an excellent investment is a highly diversified portfolio of assets and customers. Customer's credit is very highly rated giving the individual investor security in default risk. Additionally, Sol-Wind's portfolio is exposed to two kinds of green energy enabling growth opportunities in two sectors. A variety of contract durations will expose investors to growing energy prices without exposing their dividend to intermittent fluctuations in price. Finally, Sol-Wind has ventured into some assets outside of the US in order to gain exposure and reduce regulation risks from single country exposure.
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Source: Sol-Wind S1 Filing
Summary
Sol-Wind is an excellent dividend and growth investment for many investors looking for the green-energy sector's growth but the utility industry dividend. Positioned as a well-organized business, Sol-Wind, is a solid opportunity for many investors to enter into the green energy sector without exposing portfolios to the traditional green energy risks. The healthy projected dividend at $20 per share may quickly push up the per share price. Investors should consider getting in early, before being priced out of an attractive dividend yield.
By APBK Capital
Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
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