Algonquin Power gives guidance for the next five years

Algonquin Power gave a press release on December1, 2015 that outlined it's five year investment program.They expanded their old program and stated that they would invest $4 billion over the next five years.It may not have gotten much attention because most investors will regard this as merely "pie in the sky".Or more clearly nobody will remember this promise five years from now.But this blog believe that this is an accurate prediction of what will happen.Algonquin also states in the same press release that they will be investing $180 million in a solar project called the Great Bay Solar project in Maryland.And a possible further $207 million for a 10% share of the North East Supply Path in U.S.A.
        Facts versus Fantasy
  Algonquin has already outlined  plans for another $400 million over the next two years.This is in addition to the investment in their two major projects coming up in the next two years.Their two large projects are the Park water System in United States and the O'dell wind farm in  Utah.These are both billion dollar projects;the Park water System will be in operation before the O'dell wind farm.But Algonquin has already lined up it's financing for both projects.In fact, Algonquin has just completed a $150 million equity issue and had another one completed for $150 million about two months ago. This diluted the stock price for a month or so but now investors appear to believe that Algonquin will carry out some of these investment plans.While investors are waiting for these projects to be completed Algonquin already has new solar operations coming onstream in the next quarter.In fact, Algonquin has a steady stream of projects coming onstream through 2015 and 2016.But their two big projects will have a major impact on their income stream.
        The Last five Years 
  The best indicator of whether Algonquin will be able to carry out these ambitious plans is the last five years.Did Algonquin show indications that it would be able to carry out these kind of plans in the last five years?In 2011 revenues were $270 million and in 2014 they were $943 million;operating income was $53 million in 2011 and were $137 million in 2014.Revenues increased to $900 million for the first nine months of 2015 and operating income increased to $180 million.This also is up from 2014.This pattern of rapidly increasing revenues and operating income is evident in the last five years.Management has done it in the past and should be able to do it again.Especially if their two big projects work out well.
       Possible Glitches
  This blog believes that Algonquin Power will be able to carry out this ambitious investment program in the next five years just as it has in the  past five years.However it is their tendency to buy distressed projects and renovate them in the jurisdiction of American regulators that has worried this blog.It has put itself in the hands of a few American regulators.And they cannot continue to count on quick and healthy rate decisions as they have received in the past.However Algonquin has invested recently in a number of wind and solar projects with power contracts as well as a joint venture in  a gas transmission projectThis blog finds this as a healthy trend and will help to diversify risks for it's shareholders..
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Another strange quarterly report by Chorus Aviation

 On November13, 2015 Chorus Aviation released another unorganized report.The form of Chorus' reports is always different than other listed stock.It includes costs under the CPA agreement with regular costs and CPA agreement revenues with regular revenues.Now it mixes in revenues from it's newly acquired subsidiary as well as leasing revenues and charter revenues.On the positive side the restructuring at Chorus that was talked about in Workathon for  three blogs(see Nov.18,2014 and Oct.23,2013) is starting to take shape.
      Operational Statistics
   Chorus' regulated operating revenues decreased from $433 million in Q3 2014 to $412 million in 2015.Chorus suffered a $28 million loss from foreign currency this quarter compared to a $18 million loss in 2014.However they earned revenue from newly acquired Voyageur Airways,and from leasing operations and from maintenance operations.In total, adjusted EBITDA was $65 million up 16% from $56 million in 2014.Adjusted net income was $31 million or $.26 per share.
    New revenues,new Reports and new CPA agreement


       Past quarterly reports have talked about revenues coming in from the Chorus maintenance operation.It had a maintenance operation in London, Ontario and one in Halifax.It sold the London operation and moved everything to Halifax.Then it invested more into the operation to increase it's size and complexity.Next it bought a maintenance operation called Telesys that is a specialized maintenance company.By all accounts the maintenance revenues should have increased.This report shows that other(maintenance ) revenues increased by $6.5 million in the quarter.This blog calls for increased revenues from this category in 2016.Chorus got big increases in revenue from aircraft leasing and chartering.This category has to increase more before it stabilizes; at the present time this revenue is hard to predict, both have shown large increases in this quarter.The wildcard here is the newly acquired Voyageur Airways.It gets foreign charters and medical contracts and other specialized contracts.It is likely that more investment in new equipment must be carried out before this operation is producing a steady revenue source.
  The original CPA agreement was only put in place to give Chorus(then Jazz) to get started.It was not expected to provide a major competitor for Air Canada.Chorus has done well within the old existing agreement but it was time for an amended version.Air Canada gave them a new one last year and it gives Chorus much more scope.So that it leased 10 new aircraft in this quarter to enable them to be prepared for the new business in 2018.Strangely Chorus gives no guidance on the revenues expected  from the amended CPA in 2018.This blog feels that the impact of the new CPA agreement will be felt even as early as the next quarter.Assuming new revenues from Voyageur this blog expects that EBITDA may hit $70 to $75 million in Q4.
   The last expected change is for Chorus to break down it's non-regulated income even more in future quarterly reports.This has got to come!Another change that must come is more of an overview on revenues and costs.Regulated costs must be grouped together as well as regulated revenues.Non regulated costs and revenues will soon be given more space and a separate category.This will all aid the restructuring of Chorus Aviation;the increase in the price will follow.            use Workathon for advice on Cdn jun ior listed companies;use Workathon for research on Cdn. junior companies;use Workathon for research on Cdn. small caps
 

Interrent buys more property

 On November 27, 2015 Interrent announced that it had an unconditional agreement to acquire a property in  the Le Plateau-Mont-Royal area of Montreal and it had an unconditional agreement to sell a property in Brampton.Interent is a reit with properties in  Quebec and Ontario.The property being acquired is 127 units and worth $21,550,000 while the property being disposed of had 44 units and worth $8.7 million.These actions are taken after it had a good third quarter report.Their dividend had just been raised by 5% and net operating income went from $10.2 million to $13.3 million for Q3 in 2015.Also their AFFO went from $4.6 million in 2014 to $6.4 million in the third quarter of 2015.More importantly their AFFO per share (earnings per share) went from $.08 per share to $.09 per share.
       Growth Strategy
 The first part of their strategy is to have good operational statistics.Their third quarter report showed that they indeed have good operating metrics.Gross rental income increased by $5 million or 30% while average monthly rentals increased by 6%.Net operating income increased by 31% over the same quarter in 2014.Their weighted average interest rate was down a few basis points from Q3 in 2014.And lastly their debt to gross book value of debt  only moved from 50.5% in 2014 to 51%.Interrent is watching it's debt ratios very closely.
 The second part of their strategy is to pare down properties with low growth possibilities and low capitalization rates.Their property in Brampton was a small one at 44 units and the capitalization rate (although it increased) was only 4.4% at the time of sale.This property brought in a small amount of net operating income but had accrued a significant amount of capital gains as the value at the time of sale was $197,000 per suite.This is a nice gain and the capital can be better deployed in a property with higher leverage and a higher capitalization rate.In addition, Brampton is an industrial town and not likely to have greater increases in rent nor valuation. The second property is in a quite good part of Montreal and has a low going- in cap rate of 4.6%.This shows good potential for increases in an influential part of town.
       Summary
          Interrent did report a good quarter as AFFO went up by almost 40% and AFFO per share went up from $.08 to $.09 per share.But they are also deploying their capital smartly.Too many other reits acquire properties and hold on to them;they don't divest when there is little growth potential left in them.Interrent shows itself to be an active rather than a passive manager and adept at improving their portfolio.This blog hopes that other reits are watching and learning from Interrent.                 

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