Algonquin Power continues Independent Venture outside of Liberty Utilities

Algonquin Power has shown good increases in earnings since 2015  but it's price has not reflected this growth.Consequently it's price/earnings ratio is around 8 times and much lower than the average P/E ratio for the industry.This although revenues and earnings  have shown good growth. One of the main reasons for this dichotomy is that many investors find that their earnings are locked in to the American regulatory system.Much of it is tied up in their largest American investment called Liberty Utilities which is a huge utility mostly in Kansas and Missouri.AQN has wrapped many of it's other American utilities (both regulated and non-regulated) into Liberty which I think has a listing on the NYSE.This blog has called for Algonquin to float a large secondary issue of Liberty shares and use the funds to make investments and move out from under the American regulatory umbrella.

Outside of the Umbrella           

To be fair AQN has made a number of moves outside of the umbrella recently.First it has acquired a number of  American wind farms which are not regulated;they have a power purchase agreement (PPA)But in comparison to Liberty Utility and the AQN regulated assets these properties make up only a small percentage.But Algonquin has made another move by raising money in a secondary AQN equity issue and investing it in a Spanish utility called Atlantica Yield.In fact, it owns about 35% of this quite large European utility.And in a rather strange event a regulator has allowed Liberty Utilities to pursue the development of up to 600 MW of wind power which usually is unregulated.

A Higher P/E ratio

AQN's adjusted EBITDA(earnings) has almost tripled since 2015.But their stock price increased by only 33% from $9 to $12 a share.This kind of growth  in earningsshould produce an above average P/E ratio and then a higher price.But AQN's P/E ratio has remained at about 8 times which is below the industry average of 15.As AQN moves out from under the regulated umbrella it's P/E ratio will rise perhaps to 11 or 12 in 2019.

https://www.fairfax.ca/

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Transalta lost money in Australia;now is a good time to buy

                                                    Introduction
                        Australia has beautiful,quiet beaches like the one in the picture above and Transalta built 2 power projects near the beach in Australia in 2017.They built the South Hedland gas transmission project and the Solomon Power Station.But they lost the contract to supply power from the Solomon Power Station and had to sell the power station at a loss in 2018.They took a small loss in the first quarter and a very large loss ($105 million) in Q2.There may be a another small loss in Q3 but it appears that the worst is over.In addition, prices for power and other  Transalta services have moved up in Alberta. In total,Q2 showed mixed results as although free cash flow was higher by $66 million over 2017 adjusted EBITDA was down by almost 20% over 2017.
                                              Q2 and 6 Months   
    The second quarter showed funds from operations at $188 million almost the same as in 2017.But free cash flow showed a 220% increase from $30 million to $96 million.And for 6  months free cash flow increased from $209 million to $334 million.While net debt decreased by $345 million resulting in a debt/equity ratio of 3.0.At the same time TA acquired two construction ready wind projects in United States.TA also purchased and cancelled 587,300 common shares.And TA's interest in Transalta Renewables reduced from 64 to 61%. TA exercised the early redemption of 6.40% debentures due November,2019 for $425 million funded from a coal bond offering of $345 million at a lower interest rate.These pretty good results were somewhat marred by the charge against income from The Solomon Power Station sale.         

                                                   Overall Results
    Transalta Power has improved  it's finances considerably since 2015.For example, it has acquired  3 or 4 wind projects which have been transfrerred to Transalta Renewables which kept it's majority interest in RNW.And it has produced a steady cash flow that has been used to reduce it's debt and was up this quarter.Transalta was trading higher until the first quarter of 2016 when it reduced it's dividend and the stock fell to the $4 area (see workathon 22/02/2017 and 25/10/2016).It has gradually climbed back to the $7.50 level.The cash flow used to pay it's dividend has been used to pay down debt  for which  in total $1.2 billion has been eliminated since 2015.Transalta Power will continue it's steady climb back to $8.50.The loss on the Solomon power plant will slow it down temporarily.But more importantly this climb will be helped by the increase in oil prices and power prices in Alberta.
                                                   https://www.otpp.com/home  https://www.canadianbusiness.com/                                              

Intrinsync Technology sees no End to Revenue from Open-Q Computing Modules

Intrinsyc Technology keeps  piling up sales for it's main product,Open-Q computing modules.In fact revenues were up 40% over Q2in 2017 and it's backlog was equal to a year's sales.EBITDA was US $450,000 in comparison to US$95,000 in Q2 2017.And for 6 months  EBITDAwent from CDN.$276,000 to CDN.$970,000.But unlike many junior technology companies it's growth rate over the last 5 years has been relatively ordinary.And it is not expanding it's product line very much.Although it has taken a small position in a company called Stream TV Networks.

A Connected Product Line

This blog has suggested to ITC several times that it cannot afford to rely solely on it's Open-Q computing modules.Although this product has done well and is growing.Can they count on Qualcom to continue to invest in and improve this line that apparently has few customers.What they need is complimentary product lines to augment this relatively successful technology product.With this in mind this blog has suggested it look at small telcos that have an online business.No news has been forthcoming here.If this has happened then expect revenues to start to grow even faster than in the past.However margins may be lower and earnings will take more time.             

Conclusion 

Intrinsyc is a very interesting company and it is at a crossroads.It will face more and more risk 2 and 3 years down the road from it's  present relationship with Qualcom.At the same time there is some risk from investing in a new area.ITC is trading in the $1.50 area now and could easily hit $2.50 with news of a new product line.Another strategy is to add expertise so that they do not rely so much on Qualcom.Either way ITC is dependent on technical news to move past the $2.00 level now.

https://www.fool.com/  ;  https://www.omers.com/