Back in 2006, when I first started covering the solar industry—and making a decent chunk of change with companies like First Solar (NASDAQ: FSLR) and SunPower (NASDAQ: SPWR)—the industry's biggest obstacles were dinosaur energy analysts who hadn't yet received the memo that solar was quickly becoming a legitimate, and profitable, addition to the global energy economy.
Those analysts have since changed their tunes or retired, while the solar industry has chugged along quite aggressively. But now, a new obstacle faces the solar industry, leaving solar investors wondering how to proceed.Despite the threat of import controls and frivolous lawsuits that really only benefit lawyers and accountants, there are still some solid opportunities for investors looking to profit from the continued development of the solar industry.
"Greenbriar already has the necessary $305 million financing in place to construct the 100 MW solar farm."
There's Hannon Armstrong Sustainable Infrastructure Capital Inc. (HASI:NYSE), which is a REIT holding both solar and wind assets. This stock doesn't tend to rise and fall with every new solar tariff announcement.
There's also Vivint Solar Inc. (VSLR:NYSE), which has also fared pretty well this year in defiance of trade wars and tariffs. This is a company that operates as a solar installer, but also provides home battery solutions and electric car charging portals.
Now both of these companies operate primarily in the United States mainland, but the solar industry is a global one, so solar investors should definitely look to capitalize on what's going on in other parts of the world, too.
Take Puerto Rico, for instance.
Puerto Rico Governor Ricardo Rossello recently announced that he's moving to privatize the assets of the island's electric company.
Following Hurricane Maria, residents of Puerto Rico are still without power. The entire place is in shambles, and Rossello thinks privatization is the solution.
Truth be told, I love the concept of privatization, but the governor is trying to unload a system that is severely damaged and sitting atop a mountain of debt. I can't honestly see how any company would take on such a mess. The cost to get this thing back up and running—plus the debt that's still on the books (about $9 billion worth)—is so massive, it would serve as a major liability for any company that has the ability to take on such a project. And there aren't many.
I suspect the governor is fed up at this point and wants action. And he's going to get it, but not in the way he wants right now.
I have been following developments in Puerto Rico for a long time now, and I'm convinced that the Feds are going to take everything over, rebuild the island's infrastructure, and then unload it. But they can't do it alone, and have been actively working with a few companies that can provide the necessary infrastructure development to get the island's grid back in working order.
One of those companies is called Greenbriar Capital Corp. (GRB:TSX.V; GEBRF:OTC), which includes among its many projects a 100MW solar farm in Puerto Rico, known as the Montalva Solar Project.
This project was approved a few years back, but after a major scandal was discovered within the Puerto Rico Electric Power Authority (PREPA), PREPA tried to back out.
This was a major speed bump for Greenbriar, but the law was on its side. And last month, Greenbriar filed an action against PREPA, as requested by the U.S. Federal Court, for $951 million. To give you an idea of what this means for shareholders (for information only purposes), this amount translates into $US951 million X 1.28 CDN FX = $1,217,028,000 / 22 Million shares out = $55.33 CDN per share for shareholders.
Right now, Greenbriar is trading for about $1.23.
This is Critical
On page 20 of the Federal Court filing made on May 29, 2018, the company is asserting in its claim a distinct action against PREPA for Criminal Racketeering under Federal RICO statues. And this claim is in addition to the U.S. Federal Oversight and Management Board recommending the company's 100MW Montalva Solar Project be deemed a Critical Project to rebuild the power infrastructure.
This board was established by Congress to recommend and expedite critical energy and infrastructure projects, and on April 25, it announced that Greenbriar's Montalva Solar Farm had been approved to proceed to the next stage of the process, which is review by the appropriate government agencies.
Here's the bottom line: The Feds know they have to take this operation over, and it looks like Greenbriar is on the short list. Which should come as no surprise when you consider what Greenbriar brings to the table.
In addition to the fact that PREPA is unlikely to win the case brought forth by Greenbriar, the company also already has the necessary $305 million financing in place to construct the 100 MW solar farm. It's coming to the table without needing a handout. This puts Greenbriar in the front of the line.
As well, this project is already well underway in terms of pre-construction and has already crossed every possible hurdle.
- There's already an existing PREPA 115 kV line traversing the Guanica Site for ease of possible 115 kV on-site interconnection of the project.
- If required to interconnect to an existing PREPA substation, there is existing space on a 115 kV bus available at PREPA's Guanica Substation for Montalva interconnection.
- There's already 18 months of one-minute solar data available for compliance analysis to meet operating guidelines.
- Municipality mayors and senators from Ponce and Mayaguez are on board and support the project.
- The project can also be expanded to 150 MW if desired, lowering capital cost per unit. A permit has been filed for 130 MW.
Now the CEO of Greenbriar is a guy by the name of Jeff Ciachurski. Jeff created Western Wind Energy in 2002 with $250k in startup capital, and sold the company in 2013 for $420 million to Brookfield Asset Management, which is a $281 billion Canadian asset manager. Shareholders, many of whom were early members of my Green Chip Stocks community, made a small fortune from that deal.
Interestingly, however, today, Greenbriar has greater value contracts than Western Wind, but with only 18 million shares outstanding, instead of 77 million it had with Western Wind.
Greenbriar has actually been in our Green Chip Ventures portfolio for a while, because when I first added it, the risk level was a bit higher. But a lot has changed since then:
- PREPA is backed up against a wall in terms of honoring its deal with Greenbriar.
- Greenbriar's lawsuit is solid, and survives bankruptcy. The Feds are also a counterparty by default as they are looking after the financial affairs of PREPA.
- The necessary funding is already in place for Greenbriar's solar project.
- The U.S. Federal Oversight and Management Board has recommended to Congress that Greenbriar's solar project be deemed a "critical project to rebuild the island's electric infrastructure."
- As you read this, the Feds are drafting legislation to federalize the utility.
My take on this is simple: When all is said and done, the Feds are going to take over, and they're bringing Greenbriar's 100MW solar project with them. This is pretty much a no-brainer, not just for solar investors, but for any investor looking to make a few bucks.
Jeff Siegel is the publisher and managing editor of Green Chip Stocks, an independent investment research service that focuses primarily on alternative energy and transportation markets, sustainability, cannabis, and agriculture.
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1) Jeff Siegel: I, or members of my immediate household or family, own shares of the following companies mentioned in this article: None. I personally am, or members of my immediate household or family are, paid by the following companies mentioned in this article: None. My company currently has a financial relationship with the following companies mentioned in this article: None. I determined which companies would be included in this article based on my research and understanding of the sector.
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5) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their immediate families are prohibited from making purchases and/or sales of those securities in the open market or otherwise from the time of the interview or the decision to write an article, until one week after the publication of the interview or article. As of the date of this article, officers and/or employees of Streetwise Reports LLC (including members of their household) own shares of Greenbriar Capital, a company mentioned in this article.