"The $57m of platform valuation relates to a development pipeline that is at the VERY LEAST $94m higher (otherwise why ask for an extended $260m credit facility?" I'm not sure that's necessarily the case. I would expect them to build in some headroom, as the last thing a lender wants is to be asked to reopen an analysis because the borrower has come back for a second bite - suggestive that the borrower didn't do its sums right first time. (Speaking as a former corporate lending official!)
But a really helpful analysis OB, thank you. I think the possibility of investing in storage is strategically right as it's increasingly apparent from Grid charts that spot power prices can frequently hit NIL at mid day when solar gain is at max: the time to be supplying power is late afternoon/evening, and the risk is that there could eventually be a glut of solar energy. (Hence the attaction of Gore Street et al.)
I would stay well clear of SEIT / Onyx. Even if you could maybe maybe maybe make a case for its current valuation as an ongoing, growing business, the amount of DD and risk-taking a buyer would need to do on dozens of tiny assets is prohibitive --> so that results in lowball bids.
Large stand-alone solar farms in the desert are fine. It's the "distributed solar" of putting panels on warehouses, etc. that I think isn't worth what these funds say it is. I'm certainly nursing substantial loses on Ecofin US Renewables because they had to sell their distributed solar at a large discount to NAV.
Yes I looked at RNEW but they are in a very, very different situation - smaller fund, highly geared and a forced sale on unfavourable terms. Lacked spare parts for their solar so lost income as broken invertors disrupted income; Tornado disrupted its wind asset. Lots of bad luck. Or a lack of planning and preparation and over extended themselves. RNEW suffered a loss in 2024 partly due to a discount rate of just 7.4% which grew to 8.4% at 31/12/24. Even after years of losses it is today on a 44% discount to its last NAV.
Onyx meanwhile is not in that situation. SEIT is already at a larger and more conservative 9.4% discount rate. It has a higher discount to NAV than RNEW even today (incredibly I think) where historic losses have been predominantly due to the growing 9.4% discount rate.
So you're comparing a small, limping basket case vs a larger, stronger fund with options (including the freedom to not sell Onyx at all). Your past, single negative experience with RNEW doesn't determine or explain the wider US Solar market nor particularly the future prospects for Onyx.
I might write an article about this at some point.
Fair points, but I'm under the impression that SEIT needs to sell Onyx because it needs to de-lever. Even if it doesn't "need" to de-lever, it can't afford to fund the growth. Of course, if it can find the capital then things might be different. But I don't think there are bidders right now willing to pay what SEIT is asking for a clean sale.
"68,317 MWh to September 2024 annualised is 136.6TWh"
I'm not sure that you can simply double the HY generation to get the full year generation, given that the HY generation included Northern Hemisphere summer.
I was interested to see a note from Tennyson on DEC this morning, dismissing recent SP falls in relation to Trump's 'big beautiful bill' and punitive taxes on UK companies operating in the US ("DEC is HQd in the US and already pays taxes in the US"). Even if this proves to be the case, this set me wondering whether the concern might apply for other OB-covered companies such a SDCL, for which the trust is run from the UK, but has many US holdings. Presumably these US holdings are all paying US tax, but Im not sure if this excludes them from section 899. Checking the GrantThorton article below it sounds like its all about whether the company in question is majority owned by US citizens (neither DEC or SDCL are). What's your view on this risk?
I agree with Tennyson that it is unlikely to apply to DEC (as in the Corporation), or if it does then once the primary listing moves later in 2025 it wouldn't.
More broadly section 899 in its current form would torpedo US inwards investment so it's nearly inconceivable that it would pass into law since attracting inward investment is a cornerstone Trump policy.
Section 899 would remove all incentive for UK pension funds etc from investing in the US since it applies to them as much as it would to Corporations. To individuals too. The current W-8 would be history and UK DEC-hands would likely sell DEC and anything else US due to the tax disincentive.
Fingers crossed we get some good news: I hold both SEIT and NESF on the basis that it's cheaper to own these at a discount to NAV than buy my own rooftop array and deal with the roofers and scaffolders .....
"The $57m of platform valuation relates to a development pipeline that is at the VERY LEAST $94m higher (otherwise why ask for an extended $260m credit facility?" I'm not sure that's necessarily the case. I would expect them to build in some headroom, as the last thing a lender wants is to be asked to reopen an analysis because the borrower has come back for a second bite - suggestive that the borrower didn't do its sums right first time. (Speaking as a former corporate lending official!)
But a really helpful analysis OB, thank you. I think the possibility of investing in storage is strategically right as it's increasingly apparent from Grid charts that spot power prices can frequently hit NIL at mid day when solar gain is at max: the time to be supplying power is late afternoon/evening, and the risk is that there could eventually be a glut of solar energy. (Hence the attaction of Gore Street et al.)
I would stay well clear of SEIT / Onyx. Even if you could maybe maybe maybe make a case for its current valuation as an ongoing, growing business, the amount of DD and risk-taking a buyer would need to do on dozens of tiny assets is prohibitive --> so that results in lowball bids.
Craig, the market for US Solar energy assets is alive and well I can assure you.
Refer to this S&P global article for example:
https://www.spglobal.com/market-intelligence/en/news-insights/research/orsteds-solar-battery-portfolio-sale-indicates-growing-generating-asset-values
OB
Large stand-alone solar farms in the desert are fine. It's the "distributed solar" of putting panels on warehouses, etc. that I think isn't worth what these funds say it is. I'm certainly nursing substantial loses on Ecofin US Renewables because they had to sell their distributed solar at a large discount to NAV.
Craig,
Yes I looked at RNEW but they are in a very, very different situation - smaller fund, highly geared and a forced sale on unfavourable terms. Lacked spare parts for their solar so lost income as broken invertors disrupted income; Tornado disrupted its wind asset. Lots of bad luck. Or a lack of planning and preparation and over extended themselves. RNEW suffered a loss in 2024 partly due to a discount rate of just 7.4% which grew to 8.4% at 31/12/24. Even after years of losses it is today on a 44% discount to its last NAV.
Onyx meanwhile is not in that situation. SEIT is already at a larger and more conservative 9.4% discount rate. It has a higher discount to NAV than RNEW even today (incredibly I think) where historic losses have been predominantly due to the growing 9.4% discount rate.
So you're comparing a small, limping basket case vs a larger, stronger fund with options (including the freedom to not sell Onyx at all). Your past, single negative experience with RNEW doesn't determine or explain the wider US Solar market nor particularly the future prospects for Onyx.
I might write an article about this at some point.
OB
Fair points, but I'm under the impression that SEIT needs to sell Onyx because it needs to de-lever. Even if it doesn't "need" to de-lever, it can't afford to fund the growth. Of course, if it can find the capital then things might be different. But I don't think there are bidders right now willing to pay what SEIT is asking for a clean sale.
"68,317 MWh to September 2024 annualised is 136.6TWh"
I'm not sure that you can simply double the HY generation to get the full year generation, given that the HY generation included Northern Hemisphere summer.
Caught my eye while looking for oil price.
https://oilprice.com/Energy/Energy-General/US-Battery-Energy-Storage-Market-Sees-Significant-Growth.html
I was interested to see a note from Tennyson on DEC this morning, dismissing recent SP falls in relation to Trump's 'big beautiful bill' and punitive taxes on UK companies operating in the US ("DEC is HQd in the US and already pays taxes in the US"). Even if this proves to be the case, this set me wondering whether the concern might apply for other OB-covered companies such a SDCL, for which the trust is run from the UK, but has many US holdings. Presumably these US holdings are all paying US tax, but Im not sure if this excludes them from section 899. Checking the GrantThorton article below it sounds like its all about whether the company in question is majority owned by US citizens (neither DEC or SDCL are). What's your view on this risk?
Thanks for your great articles!
Jim
https://www.grantthornton.com/insights/alerts/tax/2025/insights/unpacking-section-899-the-unfair-foreign-tax-rule
Jim,
I agree with Tennyson that it is unlikely to apply to DEC (as in the Corporation), or if it does then once the primary listing moves later in 2025 it wouldn't.
More broadly section 899 in its current form would torpedo US inwards investment so it's nearly inconceivable that it would pass into law since attracting inward investment is a cornerstone Trump policy.
Section 899 would remove all incentive for UK pension funds etc from investing in the US since it applies to them as much as it would to Corporations. To individuals too. The current W-8 would be history and UK DEC-hands would likely sell DEC and anything else US due to the tax disincentive.
See: https://blog.twentyfouram.com/insights/section-899-a-big-beautiful-source-of-uncertainty-for-foreign-investors
OB
NESF is currently valued on 4x EBITDA. (2024 reported £99m)
Onyx at 16x seems, well a lot more pricey?
Nyamen, on the face of it yes.
But when I last looked at NESF the “too good to be true” 4X EBITDA was err too good to be true.
Have a read of “Considering the temptation..”:
https://theoakbloke.substack.com/p/considering-the-temptation-of-nesf
I see NESF have results out on Monday - perhaps my concern will be addressed - NESF nearly was in the OB25 for 25.
OB
Fingers crossed we get some good news: I hold both SEIT and NESF on the basis that it's cheaper to own these at a discount to NAV than buy my own rooftop array and deal with the roofers and scaffolders .....
Ha Ha ... my thinking exactly ....