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CUI Reach final, CWEN 1Q20 schedule, plus CVA & COVID thoughts ?3
CUI Global has closed on Reach as of April 1, 2020 and provided the following details:
- 2M shares of Restricted Common Stock, worth $1.7 million, were issued. These become unrestricted 1 year from that date.
- A $5M subordinated promissory note, yielding 6% payable quarterly, maturing 18 months following the Closing.
- A $30M pre-payable subordinated promissory note, yielding 6% payable quarterly, with $15M due in 2 years, and the remainder due 3 years.
- Up to $30M in Earn-Outs, payable over the 10 years following the repayment of the $30M note above at a rate of 50% of the Adjusted EBITDA above $20 million.
CUI will also be paying certain key employees of Reach base salaries of up to $250K annually. CUI's CEO says the transaction "will be immediately accretive, providing increased revenues, operating margins, net earnings and significantly enhancing our ability to penetrate the renewable (solar) energy market." I can see this working, but have to note that CUI has bet the company on performance over the next three years.
With the current state of energy markets, that's going to be an
interesting path. I note that natural gas, currently at $1.78,
has been steadier and more resilient than oil as of late.
Although the continued crash
in rig counts shows the impact to shale, it still seems possible
that gas and solar could both be winners in a restructured energy
That's the $131.4M question for Covanta. I have acknowledged
that there will be a lot of pressure on the company to cut the
dividend, and I think the market is already pricing that in to a
large extent after a downgrade from Brian Lee, at Goldman. I have
little respect for most analysts, but he is one of the few who
actually understood UDC's strengths, weaknesses, and technology.
Still, the long development cycle and reliable income for
Covanta's business may enable management to continue looking
beyond even the current financial crunch. All I can say is that
CVA stock has always been vulnerable to bad press and
manipulation. If that's all this is, we're looking at 100% or
We'll probably know in a little over a month, and with new COVID-19 cases possibly beginning to top-out, a lot can still change in that time. Actual treatments will take much longer, and restrictions should be here for at least another month or so. Here's my table of selections on how the virus is playing out so far:
|Country||Pop.||Cases||Case%||Deaths||Pop Mortality||Case Mort||Density||Med. Age||Urban|
Cases and deaths are from 7-Apr-2020 from here and population data from here, except NYC. Those who wish to
keep up to date can view this page,
though it lacks some of the population characteristics. However,
important to recognize that financial
and real world recoveries are on different schedules in different
I can only reiterate that there is no escaping the
debt, and to be prepared for an up-hill roller
A lengthy COVID-19 scenario makes AES & CWEN(A) amongst the
safest options out there, provided nothing blows up with the
PG&E deal over the next two months. I've intentionally
ignored the noise
on that front. Clearway will
report first quarter earnings on May 7th, against average
analyst expectations for 7 cents of EPS from $260M of revenue
increasing to $350M this quarter. As a reminder, assuming the
PG&E deal goes through by the June 30 deadline, Clearway's
dividend should rebound to at least 32 cents in the second half,
implying a $21.33 price target for CWEN(A). The company would
also have an extra $70M or so of cash freed for new growth. There
are potentially more profitable investments out there, but
increased reward comes with higher risk.