MB notes on Altenergy’s BDO TradeTalk

The following are notes that we took from the TradeTalks webinar with Alternergy [ALTER 0.87 unch; 81% avgVol], hosted by Jonathan Latuja of BDO Securities. Representing ALTER were Vince Perez (Chairman), Gerry Magbanua (President), and Maria Carmen Diaz (CFO). The first part of the talk was an overview of ALTER’s growth plan to reach 500 MW of installed capacity by 2026, with some financial highlights like its 167% increase in cash reserves driven by various fundraising efforts. The question and answer part of the talk was the most interesting, as it allowed viewers to get a better feel for ALTER’s approach and its pitch to investors.

> Shared risk with investors:  When Mr. Perez was asked what ALTER does differently compared to other renewable energy developers, his answer was, “We’re not part of a conglomerate; we are the founders. Everyone of the public float of 34%, the other 66% are the management team, so we’re very focused on shareholder value.” He also said that while ALTER is not a massive corporation, it’s big enough to contain all the important moving parts of one (engineers, scientists, project management, bankers, lawyers, etc) which allows ALTER to “do an entire project from design, concept, to construction and operation” while retaining the sense that ALTER is “mobile” and responsive to change.

> Life beyond 500 MW:  When asked about how close ALTER is to achieving its 500 MW goal, Mr. Perez said that they’re “easily two-thirds on our way to the 500 MW [goal]”, but that ALTER’s goal is to “actually reach far more than that.” Mr. Perez said that ALTER has had “multiple inquiries from others whether we could partner with them, joint venture with them, and those are approaches that we’re closely entertaining.” Mr. Perez added later that its management team has considerable experience in investment banking, and has already had “closed-door sessions” on how to fund the next 500 to 1000 MW of development, including “actively talking to folks both locally and overseas.” 

> Development challenges:  A common theme of ALTER’s responses was in how it values LGU outreach as part of its competitive advantage. Mr. Perez said that one of ALTER’s differentiators is in how active it is with policymakers and regulators, and how well it works with “local government units, with the governors and the mayors.” Mr. Magbanua echoed this later when talking about how interfacing with LGUs is one of the common challenges that all of ALTER’s projects face, but that ALTER’s prioritization of this relationship with LGUs is critical to the long-term success of the project.

> Project sizing:  ALTER raised transmission lines as another high-priority variable. Mr. Magbanua said, “We don’t want to build very large projects because we know that transmission lines are going to be a challenge, so we stay within a bite size, just over 100 MW, because we believe that is the sweet spot where our existing infrastructure facilities can easily accommodate.”

> International development:  When asked about ALTER’s project in Palau, Mr. Perez responded that ALTER is interested in having some projects with power purchase agreements denominated in US Dollars, but only where ALTER’s project is “one of the largest infrastructure projects in the country”. ALTER said that its focus is on “smaller island nations suffering from very expensive diesel fuel”, especially where ALTER has pre-existing relationships with the President or Minister of Finance of those nations to solve any issues that might arise.

MB BOTTOM-LINE:  On some level, running a business is like trading in that it’s just about deciding how to allocate your available resources and using whatever strategies and tactics you can to maximize the return of those resources. This talk gave me the impression of ALTER as the seasoned trader, waiting for the setups that it knows will work the best, but aggressive with those opportunities when they actually arise. Perhaps the team was afraid to highlight Mr. Perez’s past as the Department of Energy boss, but this talk underlines how the team leverages its experience in government and the relationships that it has built to do quick business on the margins, and it (to me) showed that they’ve embraced this as a key competitive advantage. I was a big fan of ALTER’s 100% primary IPO. Right from the start, the interests of the management team and the IPO buyers were aligned. I’m still a fan of this configuration now, and I’m very interested to see what ALTER has planned beyond that original 500 MW target.

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