Clearway 3Q20 schedule and LUMN tax considerations ?3

17:47 13-Oct-20

One additional update: Lumen is redeeming the rest of its CTZ baby bonds.  Presumably, management wouldn't be doing so if there were some disaster in store for the upcoming earnings report.

Xebec has just announced two VP hires.  I see the Legal Affairs & Corporate Secretary role as a positive which signals greater market and M&A exposure for the company.  On the other hand, hiring a VP to manage the Cleantech service in North Carolina could signal growth pains.

The pandemic-inspired changes to the energy landscape discussed below (and all along) also need to be considered.  In other reports yesterday, the IEA cites carbon capture technology as being indispensable for long-term sustainability, but acknowledges what I've said about the need for improvement on the current state of the technology.  It also pegs solar as the fastest growth renewable growth segment under any scenario, which requires massive grid upgrades (from the likes of AMSC) whereas renewable natural gas does not.  America and Canada could manage the grid upgrades, but the politics of E.U. nations make it a tougher prospect.  I've also referenced how Latin America is coming up with its own competitive solutions, which also have foothold in Europe.  Accordingly, I see a shorter window for Xebec growth on its home turf, and a longer more likely, albeit challenged, one abroad.  We'll have to see what policy makers manage to decide, but in the meantime, I'm very happy with the profit on my current Xebec positions, yet unwilling to add to them anywhere near the current pricing above $4.

On 10/13/20 7:59 AM, Esekla wrote:

Clearway has scheduled its third quarter report for the morning of Thursday, November 5th.  The average of analyst estimates comes to 62 cents of EPS from $378M of revenue, declining seasonally to $308M to end the year.  CWEN.A has recently topped $28 before pulling back a little, in-line with my discussion of the dividend restoration last report. 

I suspect the market is also pricing a blue election sweep in a bit, but failing to account for some of the climate change challenges.  I also doubt that Clearway will get much of the tax giveaways that oil companies were granted under the current administration, unless it changes its financial operating structure, which seems highly unlikely.  For more color, search for " NOL" in the last earnings call transcript, where management puts a good face on not much impact.

However, when we look at the post-pandemic accounting treatment of Net Operating Losses, they seem much more beneficial to an M&A-bound company like Lumen (search for "deals").  Thus, while there is certainly still business growth ahead for Clearway, especially if IEA recommendations are taken to heart, I'm reducing my CWEN.A positions ahead of earnings at these prices.  I'm also continuing to watch OEG shares, which have remained spiky and could be helped by such developments, but if there's one thing that the disparity an American and European car sales shows, it's that policy matters.  So I'm waiting on Orbital, while building LUMN positions now, since all of its options are improved, even if we can't yet say which choices will be made.  Finally, even though none of this will show up in this quarter's reports, I will still give Clearway's post-election call at least brief coverage, since there is often analytical value available from smart management.