Aug. 17 at 4:56 PM
$HNRG weak fundamentals. EPS and revenue gains mask the solvency issues. Their burn rate is about
$270 million a year, but they’re only on track to have
$200 million revenue assuming they hit their targets—they have a
$150 million prepaid obligation due in 2H. They count delivery on those contracts as “revenue” in earnings but it’s just accounting, not money coming in.
Where is that
$70 million going to come from to keep them afloat? Not enough liquidity to borrow. Perhaps an ATM offering or prepaid contracts both are bad. ATM offering dilutes current shareholder and prepaid contracts are for well below market value. The one they just signed was in the
$30S per MWH, so about 2/3 of the going rate. So the bottom line is they won’t be able to benefit from rising power costs without substantial maneuvering.
There’s also the problem of what happens after Merom has to retire. They’re facing like
$1 billion in capex over the next 10 years.
Going back down to
$5
