You may very well be right. And at the end of my research I said that there is a world where NEW reverts back to it's NAV.
The issue I have is that with the operational challenges (-14% of production this year), these are going to continue for some time. That fire may take 2-3 years to clean up. And there have been other operational challenges too. Are NEW really good at managing solar assets? Seems they are having more troubles than others despite their outsourcing of O&M. Therefore, I think that the discount to NAV of ~10% for operational issues will be in place for some time.
The other comment is that they are so highly leveraged. And the impact of the AUD/USD hits them more than others as a result. They report they are only ~60% leveraged, but it's a very tricky set of accounting to get to that. Based on the *FAIR* value of debt that they report, it's ~70% leveraged. And so small movements in the AUD/USD has a disproportionate impact. Actually, it's a 3:1 ratio whereby every $1 in asset impairments they make is a $3 impact to their NAV. Great on the way up, horrible on the way down.
The US Solar Fund trades at a 5% premium. It has some of the same assets, and the same management. So I understand why it may seem that the discount to NAV could revert. But they are also earlier in the process of the fund. NEW traded close to it's NAV for the first years, and the NAV just kept dropping. Maybe USF will follow suit? I personally feel that the NAV has an equal chance of declining towards the price, as the price has of increasing to the NAV.
Final point - management. I completely understand the issue with Dixon is not reflective of NEW. Buuuuut. Take a look at the management fees and the incentives. None are aligned to shareholder returns, none. There's $2.2m in management fees (excluding operational costs, aquisition/divestment costs, etc) and all incentive payments are short term and cash based. So, will they really return excess cash to shareholders, or will they simply look to leverage up further and put more assets under management to line their own pockets? Hmm.
To reiterate, I have no horse in this race. I think it's a coin flip if it goes up or down. My only opinion is that I do not feel this is an asymmetric bet on asset values.
NEW Price at posting:
77.0¢ Sentiment: None Disclosure: Not Held
