Transalta Renewables (RNW) is a Canadian utility with a major project in Australia which is where the koala in the caption lives;this project is in the area called South Hedland,The project will be finished in mid-2017.Until then it is a drain on it's capital.The return on equity will be substantial but it is a rather large investment.They have spent $224 million and have another $87 million planned for the remainder of 2016.This will be done with debt as their payout ratio is now around the 100% mark.That aside earnings and comparable EBITDA will be ahead for 2016.This indicates that the assets handed down from Transalta have been a nice mix of profitable assets.RNW goes on to say that "performance is tracking towards the upper end of guidance for 2016".
What Do the Numbers Say?
Both Qtrade (an independent broker) and Yahoo Finance put their estimate of earnings at around $.56 to $.60 per share.But that figure is out of date as the new figures put the best estimate of annual EBITDA at around $300 million based on the 9 month earnings.EBITDA (comparable EBITDA) is according to this blog the best estimate of earnings and earnings per share (e.p.s).So using these numbers this blog predicts e.p.s. of about $1.35 per share.This is a substantial increase over 2015 and without any revenues from South Hedland yet.
Conclusion
It is possible that Transalta Renewables is being a little too optimistic when it gives guidance of $300 million EBITDA for the year.Yahoo Finance forecasts only around $200 million.But RNW shows comparable EBITDA of $200 million for 9 months so it is more likely that Yahoo is low here.This blog cannot see e.p.s. of less than $.80 for 2016;this means that earnings will increase by at least 33%.The third quarter is not a hugely important milestone for RNW but 2016 as a whole is.It is a transitional year as 2017 will start to bring in earnings from it's Australian assets.It does have some revenues from a natural gas pipeline in Australia now but South Hedland is much bigger.In other words, 2017 will be the first year that RNW has significant earnings from assets not downloaded from Transalta,it's parent.This blog believes,by the way, that Transalta may download more assets in 2017 as it still needs cash as has a significant amount of assets.Also the transfer of shares that comes with a download ensures that Transalta keeps a significant percentage of Transalta Renewables.On top of that we will soon see who has forecasted more accurately - RNW or the financial websites. use Workathon for financial analysis of utilities
Use Workathon to check financial information in the financial websites such as Yahoo and Google Finance
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