Golar financing, potential new utility addition and more ?4

15:45 30-Sep-21

One more note for today... it looks like a government default will be averted until at least December 3rd, which is giving the market some respite.  I still don't think it will happen at all, and note that this is different than raising the debt limit in that it only allows the government to pay existing bills, not spend more.  We'll see what happens with other matters next week, maybe.  In any case, a little further delay is not really what the market or anyone needs.

I also should have mentioned ABB's intention to IPO its charging division below.  In light of that, big promises are to be expected, yet its of little surprise to me that the stock has consistently declined since then.

On 9/30/21 12:26 PM, Esekla wrote:

BGC has affirmed its prior outlook.  This is unsurprising given the lead up to the recent FOMC meeting.  I'm also less enthusiastic about a corporate transition being a dramatic catalyst, given the taxation proposals that have been floated.  Nonetheless, we can look forward to the Corant closing in October, followed by more detail on the rate environment and guidance in the next report.

Orbital has also appointed a CEO for its Solar Services subsidiary.  Political connections seem to be a big part of the new regime here, which may work out, but I'm still not impressed with either the resume or the company's prospects in this labor market. 

Similarly, ABB has introduced what it calls the worlds fastest EV charger.  It will be available in Europe this year and elsewhere next.  I have to wonder how many sites have the infrastructure for installation, though.

The market has steadily faded early gains, which is being attributed to quarter end rebalancing.  I'm not seeing the whites of its eyes just yet.

On 9/30/21 7:46 AM, Esekla wrote:

Golar has expanded its credit by $177.6M and significantly reduced its interest payments on $204.4M of debt through refinancing.  The interesting part is that the company has only financed $200M against its NFE shares.  At current pricing just under $27 that represents about 40% of the 18.6M it received when selling Hygo.  I think this is a smart move that clears the way for new development, but doesn't give up the NFE shares, which I see as undervalued. 

I've also been getting questions on the recent dip in GMLPF pricing, which is now backed by New Fortress.  Originally I thought the market might be getting scared either about New Fortress gas supply for its terminals in Brazil in the face of gas prices, or else about Bolsonaro going completely over the edge and doing something like nationalizing infrastructure.  However, I now suspect most of the effect is from the SEC pressuring brokerages about pink sheets, which is how GMLPF trades following the completion of the sale to New Fortress.  We saw the same situation with XEBEF, which has started to recover as Xebec adds another private on-site hydrogen customer, this time in Turkey.  I like this sort of organic progress better than Schlumberger collaborating to push its digital management on oil and gas fields, and I note that the volume is gradually increasing over prior contracts.  For GMLPF, I warned liquidity was likely to be challenging, and the recent dip simply looks like a symptom of that in confluence with idiotic SEC mandates.  I'd pointed out previously how such dips represent a moderately attractive valuation but I also have to concede that the global risk is increasing.

Given that, it will be interesting to see what rate, if any, Golar can get on new 4-year USD unsecured senior bonds after management holds a series of calls with fixed income investors on October 4th.  I think the prospects are good, though.  By my calculations, the company should gain over $4M in pure profit, or almost 4 cents of EPS, from the Brent crude contract on the Hilli given the average commodity price in the neighborhood of $72.50 last quarter.  The current quarter is looking even better so far, with Brent having topped $80 and now at $78.20, though I can not provide any guarantees on how well that will hold up. 

Of course, the more important data point for the long term is natural gas pricing at or near highs in all regions.  (HH: $5.64, TTF: $29.72, JKM: $30.01)  This has forced more U.K. gas suppliers out of business, with their customers being shifted to new suppliers.  In this environment, I give fair warning that I'll be looking at adding National Grid to the website and my portfolios on the recent sharp decline.  The company trades as a sponsored ADR on NYSE under the symbol NGG, as well as on the London Stock exchange.  It has come off recent highs and should have another semi-annual interim dividend ex-date in late November.  At the historical rate and current price it sports a 5.3% yield.  Like most large utilities, National Grid is opaque and slow moving.  However, its debt profile looks manageable and its scale, including pending rate hikes in the American businesses, provides some degree of assurance against the extreme difficulties in the U.K.  Longer term, I expect it to benefit from necessary grid changes though operational incidents and the current supply chain issues caused by irrational vaccine distribution still represent short term problems.  Furthermore, I will be fairly cautious about scaling into positions simply because of our current early stage of market deterioration and news that