The World's #1 Renewable Energy Network for News, Information, and Companies.
Untitled Document

Valuing Finavera's Wind Energy Deal With Pattern Reveals Buying Opportunity

On October 1st, following the failed sale of Finavera Wind Energy's (TSX-V:FVR, OTC:FNVRF) 77 MW Wildmare Wind Energy Project to Innergex Renewable Energy Inc (TSX:INE, OTC: INGXF), Finavera announced that it was in talks with three potential bidders and would review all offers for the company. Finavera did not have much choice in the matter: the proceeds of the Wildmare sale had been needed to repay an overdue note to GE.

While Finavera talked about its plans as a “Corporate Transaction,” most investors (including me) assumed the process would conclude with a sale of the company.  The stock promptly shot up approximately 70% from the 20-25 cent range where it had been trading to the 35-40 cent range in anticipation of a sale.

Market Reaction

As it happened, after reviewing the offers, Finavera decided to accept a financing deal and project purchase agreement from Pattern Renewable Energy Holdings Canada.   According to Finavera CEO Jason Bak in an interview, what sealed the deal was Pattern’s willingness to refinance the GE note immediately, and provide financing at 10% for project development going forward once shareholders approve the deal. While there were offers for outright purchase of the company on the table, none of the bidders would have been able to perform as quickly as Pattern and satisfy GE. As a result, Finavera’s board, which contains four of the company’s ten largest shareholders and collectively owns 35% of the company’s stock, chose to sign the deal with Pattern.

Since many investors had been anticipating an outright sale, the announcement of the deal sent some scurrying for the exit. Thin trading over the holidays compounded the problem, and Finavera’s stock plummeted from near $0.40, where it had been trading before the announcement, to the low 20 cent range, which created a tremendous buying opportunity. I personally nearly doubled my holdings on Thursday and Friday.


While the Pattern deal does not provide immediate liquidity for shareholders, it does make the company much easier to value. Over the last year, investors’ biggest concern about Finavera has been the lack of financing, a problem which the Pattern deal will solve. In addition, the deal sets a price for Finavera’s project portfolio in British Colombia, to be paid when the projects reach financial close (i.e. all permits are in place and the project is ready for construction). Bak estimates that this will be achieved for the more advanced projects in 2013, and the later projects in 2014.

Hence, Finavera should receive approximately C$40 million for its projects from Pattern before the end of 2014, in addition to C$9.3 million for reaching financial close on its Cloosh wind farm in Ireland in 2013. Offsetting this against Finavera’s existing liabilities of C$18.3 million (about C$2-3 million of which Bak says are likely to be renegotiated) we have a net cash value of Finavera at the end of 2014 of about $30 million.  This assumes that the renegotiated liabilities and the residual value of Finavera’s 10% stake in the Cloosh project mostly cover ongoing development costs. With roughly 40 million diluted shares outstanding, that places the value of a Finavera share at roughly C$0.75 at the end of 2014.

Some allowance needs to be made for the time value of money, as well as the possibility that site development will not go as smoothly as Bak expects.   If we use a 50% discount to cover that risk, we still arrive at a value of C$0.375 per share., or 67% more than the current price of C$0.225.  I expect Finavera to quickly rebound to at least the C$0.30 range over the next few days or weeks, as liquidity returns to the market, and investors revalue the stock based on the agreement with Pattern.

Update: On January 7th, Finavera announced a conference call to discuss the deal with investors and the financial community.  The call will be held today, January 9th, at 8am PST.

Disclosure: Long FVR

This article was first published on the author's blog, Green Stocks, on December 30th and AltEnergy Stocks and was republished with permission.

DISCLAIMER: Past performance is not a guarantee or a reliable indicator of future results.  This article contains the current opinions of the author and such opinions are subject to change without notice.  This article has been distributed for informational purposes only. Forecasts, estimates, and certain information contained herein should not be considered as investment advice or a recommendation of any particular security, strategy or investment product.  Information contained herein has been obtained from sources believed to be reliable, but not guaranteed.

Lead image: Wind turbines via Shutterstock

Untitled Document

Get All the Renewable Energy World News Delivered to Your Inbox - FREE!

Subscribe to Renewable Energy World Magazine and our award-winning e-Newsletter to stay up to date on current news and industry trends.

 Subscribe Now


US Senate Democrats Unveil Energy Bill That Restores PTC and Extends ITC

Brian Eckhouse, Bloomberg Senate Democrats unveiled a bill that would provide more tax credits for renewable energy while killing some tax ince...

Sage Grouse Removed as Threat to Biggest Wind Farm in U.S.

Christopher Martin, Bloomberg Billionaire Phil Anschutz’s plans to build a $5 billion wind farm in southeast Wyoming will no longer be stymied by t...

CEO Gilles: Challenge in Geothermal is to 'Level Playing Field' with Wind, Solar

Jennifer Delony The current challenge for the geothermal energy industry is what U.S. Geothermal CEO Dennis Gilles calls “leveling th...

NRG Energy to Form Renewable Unit, Sell Wind Assets to Yieldco

Mark Chediak and Matthew Monks, Bloomberg NRG Energy Inc., the worst-performing member of the S&P 500 Utilities Index this year, said it will form a renewa...


Array Technologies Finalizes Shipments to E.ON’s Maricopa West Solar Project

Array Technologies, Inc. (ATI) has completed DuraTrack® HZ shipments to the 20 MW (ac) ...

B.C. Energy Minister to provide keynote at renewables for mines summit.

BC Minister of Energy and Mines to address the challenges of providing alternative powe...

Mining leaders seek renewables solutions at Toronto Summit

The global mining sector is facing a tough business environment with low commodity pric...

American Renewable Energy Institute Gears Up for 12th Annual Summit

"Racing Climate Change: Green Bridge with China, The Road to Paris” is the theme of th...


New Mexico Attracts Jobs and Revenues with Renewable Energy Tax Credit

New Mexico has abundant fossil fuel resources: in 2013, it ranked sixth in the nation for crude oil production, seven...

The Vice President Stole My Show (Not Really)

When I finished my Solar Power International (SPI) panel discussing what future opportunities the panelists saw in so...

The Value Of The Building

If you’re selling efficiency solutions in the built environment, you may find yourself being asked by your pros...

Sewage provides energy through processing

Many nations are investing in new technology to turn sewage waste into usable energy. Japan has recently revised its ...


Tom Konrad is a private money manager and freelance writer focused on Peak Oil and Climate Change as investment themes. He manages portfolios for individual clients and is Head of Research for the JPS Green Economy Fund (http://jpsgreeneconomyfund...


Volume 18, Issue 4


To register for our free
e-Newsletters, subscribe today:


Tweet the Editors! @jennrunyon



Doing Business in Europe – in partnership with GWEC, the Global Win...

There is now 128.8 GW of installed wind energy capacity in the EU (appro...

JuiceBox Energy Certified Installer Class

JuiceBox Energy is rapidly building out its national certified installer...

Wind Operator Congress Europe

The UK’s only business-focused O&M event for the European wind...


Clean Energy Patents Maintain High Levels in First Quarter, Solar L...

U.S. patents for Clean Energy technologies from the first quarter of 201...

Koch Professor drops his Koch title, still makes same errors plus s...

The Koch Professor’s title isn’t the only thing that’s...

Fact Check: AWEA represents American wind power

The American Wind Energy Association (AWEA) is proud of its members for ...


Renewable Energy: Subscribe Now

Solar Energy: Subscribe Now

Wind Energy: Subscribe Now

Geothermal Energy: Subscribe Now

Bioenergy: Subscribe Now