Many of the blogs in Workathon and all in my other blog called Blogdaleupsome have gotten their data from company press releases and their quarterly reports.At first the data did jive with other data such as the price of the stock and other corporate information.But gradually the information was not coroborating as much with other external data.Other press releases started to show less and less logic;in fact,they became confusing in some cases.Their forecasts of revenues and earnings were hard to believe.
It is hard to shake the tendency for companies to tell their shareholders that things are going well and earnings will be 10 to 25% better next quarter.Especially when writers like me believe them and tell the same story.It is ,of course,incumbent on writers to check their data and make sure it is as correct as possible.Sometimes all companies have to estimate certain values;this will always be the case.
Experience is worth a 1000 words
The Chinese proverb is that a picture is worth 1000 words.But every writer knows that experience is also worth 1000 words.I used to work in the federal government and I am used to the situation where the data in one department does not jive with that of another department.It was always better to use Statistics Canada data when you could get it;it was always more reliable.When you could not get Statistics Canada data you had to blend data from two uncertain sources.This is what I must do here is blend data from broker's database and from company press releases.Where possible check data in a quarterly report against company data.However now Workathon will likely have less reporting of company press releases and quarterly reports.That will be the domaine of my other blog called Blogdaleupsome.
The Crocodile Gold Syndrome
Sometimes it is possible to get data or information in a press release that is nowhere else found.This situation I saw several times.The first time I came across it was for Crocodile Gold.This stock trades on the TSX.They had purchased two mines that they had estimated to get two years production from.They did some exploratory work and found(supposedly) a huge ore body.No final estimate was given but it could have been as big as 4 to 5 million ounces.The stock was trading at about$.20 per share and once I reported this I expected the share price to move towards $1.00 per share.But it now trades at only $.35 per share.Still this situation has not been clarified.Is the ore body as described or is it not.No other news source has reported the actual size of the discovery.
This situation also occurred to other companies such as Twin Butte and Chorus Aviation.News reported only in press releases and nowhere else reported.Often the news is beneficial to the stock but rarely does the share price react.Twin Butte ,for example, bought a company with light oil resources.They found multi-layering of oil pools and oil pools not discovered by the previous company.The stock should have moved up considerably but it moved down to it's present level of about $.85 per share.Was the quarterly report wrong or did something else explain this behaviour?So,in conclusion, always check the data in a company's press releases,if you can.
Wednesday 27 May 2015
Tuesday 12 May 2015
Atlantic Power reports first quarter results
On May7,2015 Atlantic Power reported it's first quarter 2015 results.It was a lukewarm report.Atlantic Power is an electric utility with 28 operating power generating projects;some are in Canada and some are in United States.It produces 2945 MW of power and has it's headquarters in Boston.
Highlights of the quarter
The big item for this quarter is the sale of 5 wind asset facilities for $350 million which is 13 times it's expected cash distribution.This is considered a good price as developing business will often sell for 5 to 6 times operating income.Some of these facilities (like the Rockland plant) are quite recent acquisitions.The proceeds of the sale will be used to redeem a $311 million 9% unsecured note.It also repaid $24 million of a term loan and $16 million from discretionary debt.None of the proceeds will be included in EBITDA.Other utilities might have included a portion in the EBITDA calculations as there will be a loss of EBITDA for the rest of the year from disposing of these facilities.
Quarterly project adjusted EBITDA
Project adjusted EBITDA was reported as $59 million - an increase of $2.2 million over Q1 last year.This was partly due to project generation availabiltity rising from 92.7% to 97.6% Atlantic is an efficient generator of power.But adjusted EBITDA from the 5 wind assets was excluded(although income was earned for 3 months) as was income from one other facility.Also $9.6 million of general and administrative expenses(G&A) were taken from adjusted EBITDA.So the reported EBITDA figure should have been $68 million.It also is not clear whether the payment of the discretionary debt was taken from EBITDA or from the sale of the wind assets.Most utilitites use the term comparable adjusted EBITDA but ATP's figure is not comparable to other periods or other utilities.However this blog takes the position that ATP may be getting closer to discarding their project adjusted EBITDA methodology.
EBITDA Calculations
Atlantic Power does not own 8 or 9 facilities;it owns large parts of 28 facilities.Also it(like most utilities) reports it's earnings on an adjusted EBITDA basis.However it does not use what is called comparable adjusted EBITDA.Instead it uses project adjusted EBITDA methodology.It includes the percentage of earnings that it has of total equity in it's EBITDA calculations.In one case it owns only 50% of the total equity;this however is the exception.It also excludes G&A expenses from EBITDA, so it's EBITDA is smaller than other utilities.It is not clear if they do include payments on discretionary debt and amortization of some loans also.These are items that Atlantic must clear up in the future.But it is clear that ATP's project adjusted EBITDA is less than what it is called total adjusted EBITDA.And it is not comparable adjusted EBITDA.
Guidance for 2015
Atlantic Power gave guidance in it's annual report of project adjusted EBITDA of $265 to $285 million.In this quarterly report it changed it's guidance to $200 to $220 million.This is after 5 wind assets have been sold.But this might be as high as $285 to $300 million if ATP used a comparable adjusted EBITDA.
Highlights of the quarter
The big item for this quarter is the sale of 5 wind asset facilities for $350 million which is 13 times it's expected cash distribution.This is considered a good price as developing business will often sell for 5 to 6 times operating income.Some of these facilities (like the Rockland plant) are quite recent acquisitions.The proceeds of the sale will be used to redeem a $311 million 9% unsecured note.It also repaid $24 million of a term loan and $16 million from discretionary debt.None of the proceeds will be included in EBITDA.Other utilities might have included a portion in the EBITDA calculations as there will be a loss of EBITDA for the rest of the year from disposing of these facilities.
Quarterly project adjusted EBITDA
Project adjusted EBITDA was reported as $59 million - an increase of $2.2 million over Q1 last year.This was partly due to project generation availabiltity rising from 92.7% to 97.6% Atlantic is an efficient generator of power.But adjusted EBITDA from the 5 wind assets was excluded(although income was earned for 3 months) as was income from one other facility.Also $9.6 million of general and administrative expenses(G&A) were taken from adjusted EBITDA.So the reported EBITDA figure should have been $68 million.It also is not clear whether the payment of the discretionary debt was taken from EBITDA or from the sale of the wind assets.Most utilitites use the term comparable adjusted EBITDA but ATP's figure is not comparable to other periods or other utilities.However this blog takes the position that ATP may be getting closer to discarding their project adjusted EBITDA methodology.
EBITDA Calculations
Atlantic Power does not own 8 or 9 facilities;it owns large parts of 28 facilities.Also it(like most utilities) reports it's earnings on an adjusted EBITDA basis.However it does not use what is called comparable adjusted EBITDA.Instead it uses project adjusted EBITDA methodology.It includes the percentage of earnings that it has of total equity in it's EBITDA calculations.In one case it owns only 50% of the total equity;this however is the exception.It also excludes G&A expenses from EBITDA, so it's EBITDA is smaller than other utilities.It is not clear if they do include payments on discretionary debt and amortization of some loans also.These are items that Atlantic must clear up in the future.But it is clear that ATP's project adjusted EBITDA is less than what it is called total adjusted EBITDA.And it is not comparable adjusted EBITDA.
Guidance for 2015
Atlantic Power gave guidance in it's annual report of project adjusted EBITDA of $265 to $285 million.In this quarterly report it changed it's guidance to $200 to $220 million.This is after 5 wind assets have been sold.But this might be as high as $285 to $300 million if ATP used a comparable adjusted EBITDA.
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