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

Why Did Finavera Wind Energy's Stock Crash?

A month ago, I was convinced that Finavera Wind Energy's (TSX-V:FVR, OTC:FNVRF) stock was only temporarily trading at depressed levels in the low 20 cent range because investors were disappointed at the deal with Pattern Energy. Many shareholders had been hoping for an outright sale, and were selling into the thinly traded holiday markets. I predicted that Finavera stock would "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." (My valuation based on the Pattern deal put the present value of a Finavera share at C$0.375, and its value at the end of 2014 at C$0.75.)

My valuation has not changed significantly, but the stock has fallen, after an initial rally. Yesterday, I was able to add to my Finavera position for a mere $0.18 a share.  What happened?

There have been only two news items over the last month.

Conference Call

First, Finavera held an investor conference call on January 9th to explain the Pattern deal.  My takes from the conference were first, that the Pattern deal would definitely win shareholder support, since there was not going to be any buy-out offers forthcoming, and the consequences of rejecting the deal would be dire.

Second, I had misunderstood the Pattern deal originally.  Finavera will be getting funds from Pattern in the form of $9M in debt forgiveness as soon as the deal is approved by shareholders, and many of Finavera’s development costs will be charged to the projects (and hence, effectively, to Pattern.)  This increased my expected value of Finavera slightly.

Option Grant

Last week, Finavera cancelled all outstanding employee and director options (most of which had strike prices of C$1 or above), and re-issued them with new options exercisable at C$0.205 per share.  The grant (1,783,800 options or 4.5% of outstanding shares) seemed large to me, and may have also turned off other shareholders, contributing to the heavy selling this week.

I asked Jason Bak, Finavera’s CEO, to give his justification of the option grants by email.  He responded with the following points:

  1. Finavera is operating within its registered stock option plan, which was approved by shareholders in September of last year.
  2. There have been no significant option grants in three and a half years.
  3. Finavera’s directors have been working entirely without compensation since 2007, and have been significant investors in the company over that time.
  4. The option grants are in line with similar Toronto Venture listed companies.

I thought he made good points, especially regarding director compensation, and so my governance concerns were alleviated.  The option grants do change my per diluted share valuation of the company marginally (see below.)

New Valuations

My new understanding of the Pattern deal means that a significant portion of the deal’s value will be realized sooner than expected. The debt forgiveness along with the expected $9.3 million payment for bringing the Cloosh wind farm to financial close should be sufficient to substantially eliminate all Finavera’s liabilities by the end of the year.  This will give Finavera a book value per diluted share of C$0.45 after the receipt of the Cloosh payment.

If Finavera is then able to bring its Canadian projects to financial close by the end of 2014, as expected, the payments for those projects should give Finavera C$0.77 worth of net assets, most of which will be in the form of cash (the balance will be their remaining 10% stake in the Cloosh wind farm.)

Given these valuations, I continue to see Finavera stock as an easy double over the next year, with the potential to double again in 2014.

That is why I’m buying more.  I still have no idea why anyone is selling.

Disclosure: Long Finavera

This article was first published on the author's Forbes.com blog, Green Stocks on January 31st 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.

Untitled Document

RELATED ARTICLES

LG Chem: Storage Battery Leader

Debra Fiakas The post “Energy Storage Restart,” which was published last week, discussed the efforts by General Electric (GE: NYSE...

Solar Making Big Gains in the Land of the Rising Sun

Vince Font The Land of the Rising Sun is living up to its nickname. According to a new report from the SolarSuperState Associati...

States Already Seek To Delay Clean Power Plan

Andrew Harris, Bloomberg Fifteen states led by coal-rich West Virginia asked a federal court to stall Obama administration rules intended to c...

Stolen Solar Panels and Sabotage A Challenge for Powering India With Renewable Energy

Anindya Upadhyay, Bloomberg Disappointment spread across Tarun Singh’s face when he saw that parts of his solar power microgrid in eastern India’...

PRESS RELEASES

Intersolar AWARD „Solar Projects in India“ – Applications being accepted until September 18

The Intersolar AWARD in the category Solar Projects in India honors projects in the fie...

OFS Announces Commercial Availability of InvisiLight® MDU Optical Solution for Multiple Dwelling Units

OFS, a leading-edge designer, manufacturer and supplier of innovative fiber optic netwo...

New local energy partnership brings innovative solar tracker to Washington State

A new partnership will bring the innovative AllEarth Solar Tracker solar electric syste...

30 days to GRC Annual Meeting & GEA Geothermal Energy Expo

The Geothermal Resources Council (GRC) has announced that it is only 30 days to go to t...

FEATURED BLOGS

Washington, DC Bridges the Solar Gap

The District of Columbia has enjoyed 15 years of strong economic growth. But prosperity is spread unevenly across the...

Cronimet / THEnergy study: In solar for mines size does not always matter - Reducing CAPEX with energy efficiency and load shifting

Munich, September 2015. Mining companies are constantly gaining interest in solar solutions because frequently solar ...

Final Program Now Available for GRC Annual Meeting & GEA Geothermal Energy Expo

GRC Annual Meeting & GEA Geothermal Energy Expo - Final Program from

Vacancy? No Problem!

Have you ever tried to sell an efficiency product or service to a prospect that owns or manages a building with high ...

FINANCIAL NEWS

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...

CURRENT MAGAZINE ISSUE

Volume 18, Issue 4
1507REW_C11

STAY CONNECTED

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

SOCIAL ACTIVITY

Tweet the Editors! @jennrunyon

FEATURED PARTNERS



EVENTS

Doing Business in South Africa – in partnership with GWEC, the Glob...

Wind Energy in South Africa has been expanding dramatically, growing fro...

International Energy and Sustainability Conference 2015

The fourth International Energy and Sustainability Conference will be he...

Wind Operator Congress Europe

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

COMPANY BLOGS

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 ...

NEWSLETTERS

Renewable Energy: Subscribe Now

Solar Energy: Subscribe Now

Wind Energy: Subscribe Now

Geothermal Energy: Subscribe Now

Bioenergy: Subscribe Now  

 

FEATURED PARTNERS