Sprott Power Corp.
Renewables Developer Punching Above Its Weight
? As of October 3 we initiate coverage of Sprott Power with a SO rating and
$1.35 price target. In our view , Sprott represents solid value as a growing
developer in the clean power sector, one that offers many of the large
development benefits in a slightly smaller (but growing) package.
? Sprott operates 62 net MW of wind facilities in Ontario and Nova Scotia, and
projects under construction/advanced development are expected to grow
this total by 80%. The company's pending acquisition of the Shear Wind
assets could expand its operational power base by a further 50%.
? Despite its comparatively small size, Sprott brings large company benefits
to investors, including deep management expertise and an ability to secure
low-cost debt. It has also instituted a dividend (current yield of 5.4%) and
has proven its willingness to increase distributions as cash flows improve.
? In 2012 we expect Sprott to deliver 67%/141% revenue/EBITDA growth
over its inaugural year. Our forecasts include 27.3 MW (55%) of its underconstruction/near-term development projects to contribute to 100% EBITDA growth, for expected EBITDA of $18.1 million exiting 2014.