thank your for sharing your thoughts on MPCES. Nice Job. I knew lots of them, but not all. Well, I have also some thoughts, which might be interesting for you:
Hurricane risk and communication:
I thought a lot about the company and the risks behind. After a while I identified hurricanes as a critical major risk for the company. As we learned from New Orleans in 2005 or from Puerto Rico in 2017 hurricanes can eliminate whole landscapes, cities and for sure solar plants. I read the risk section of the latest annual report and there was only something very general:
"Operational risks include, without being limited to, adverse weather and resource volatility, mechanical breakdowns, spare part shortages, or failure to perform in accordance with specifications. While operational risks are usually insured by the Group through a third party, there is no assurance that all operational risks are borne by the insurer or that such parties will meet their obligations. In addition, the availability of insurance on commercially reasonable terms is not guaranteed for all projects.“
This is far too general for a risk, which can eliminate huge parts of their assets within hours. Because of this, I wrote an e-mail to investor relations and after 2 months I did not get an answer. Yesterday I wrote a friendly reminder. Looking ahead.
So here is a great mismatch between me and my risk awareness and the communication from the company. Although I really like this company and came to almost the same conclusion as you, this prevents a high engagement from my side. Nevertheless I could find some third party information about this. NuWays wrote in its analysis:
"Environmental risks: The Caribbean region, one of MPCES’ target locations, is often exposed to cyclones and hurricanes, which could heavily affect installed PV parks. Not only are those parks insured against such events, but structures are built increasingly more resilient, which should notably reduce down-times follow ing cyclones and hurricanes."
As you wrote, they are looking for Co-Investors. This leads to derisk also.
Something like this should be the answer from IR/Meichsner and has to be put in the annual report. Otherwise institutional investors will not come in flocks.
Another thought is about CEO / CFO. In the first videos with Martin Vogt and Stefan Meichsner, Martin was not the guy, I like to be an CEO. He had a reversed and not focussed mindset in my eyes. Stefan was the opposite and I am really glad that he has become the CEO.
I wrote two emails to IR with a lot of questions and Stefan Meichsner answered them on the same day. It might have helped that I mentioned I will be talking in a podcast and write a blog post about the company.
I agree that hurricanes pose a significant risk. I neglected it a bit as I read in the NuWays report that they are insured and in the Caribbean, the region with the highest hurricane risk, they only have one CHP plant which should be less vulnerable than PV plants. However, I agree that they should describe this risk in more detail in their annual report. It's very difficult to assess the potential impact without more information. I hope you receive a response from IR and share your insights here.
I agree about the CEO transition. Stefan Meichsner seems to have adapted well to the current market conditions, while Martin Vogt has been less flexible in his approach.
after a friendly reminder, I've got an answer, which I would like to share with you:
"
We insure our plants in the Caribbean against hurricane risks. Such insurances, as you can imagine, are significantly more expensive than "normal" insurance for such projects, but the potential risks make it prudent to bear the extra costs to be protected. In addition, solar plants are protected against hurricane risks by using sturdier structures and extra protection frames. This increases the upfront construction costs, but again provides greater safety.
It should, however, be noted that we currently have no solar projects in the Caribbean and therefore the risk is limited. Our existing CHP plant is adequately insured.
"
The next thing is, that the hurricane is there and is currently in the south of puerto rico.
Hi Roman,
thank your for sharing your thoughts on MPCES. Nice Job. I knew lots of them, but not all. Well, I have also some thoughts, which might be interesting for you:
Hurricane risk and communication:
I thought a lot about the company and the risks behind. After a while I identified hurricanes as a critical major risk for the company. As we learned from New Orleans in 2005 or from Puerto Rico in 2017 hurricanes can eliminate whole landscapes, cities and for sure solar plants. I read the risk section of the latest annual report and there was only something very general:
"Operational risks include, without being limited to, adverse weather and resource volatility, mechanical breakdowns, spare part shortages, or failure to perform in accordance with specifications. While operational risks are usually insured by the Group through a third party, there is no assurance that all operational risks are borne by the insurer or that such parties will meet their obligations. In addition, the availability of insurance on commercially reasonable terms is not guaranteed for all projects.“
This is far too general for a risk, which can eliminate huge parts of their assets within hours. Because of this, I wrote an e-mail to investor relations and after 2 months I did not get an answer. Yesterday I wrote a friendly reminder. Looking ahead.
So here is a great mismatch between me and my risk awareness and the communication from the company. Although I really like this company and came to almost the same conclusion as you, this prevents a high engagement from my side. Nevertheless I could find some third party information about this. NuWays wrote in its analysis:
"Environmental risks: The Caribbean region, one of MPCES’ target locations, is often exposed to cyclones and hurricanes, which could heavily affect installed PV parks. Not only are those parks insured against such events, but structures are built increasingly more resilient, which should notably reduce down-times follow ing cyclones and hurricanes."
As you wrote, they are looking for Co-Investors. This leads to derisk also.
Something like this should be the answer from IR/Meichsner and has to be put in the annual report. Otherwise institutional investors will not come in flocks.
Another thought is about CEO / CFO. In the first videos with Martin Vogt and Stefan Meichsner, Martin was not the guy, I like to be an CEO. He had a reversed and not focussed mindset in my eyes. Stefan was the opposite and I am really glad that he has become the CEO.
Hope this was helpful for you too.
Martin
Hi Martin,
thank you for your comment!
I wrote two emails to IR with a lot of questions and Stefan Meichsner answered them on the same day. It might have helped that I mentioned I will be talking in a podcast and write a blog post about the company.
I agree that hurricanes pose a significant risk. I neglected it a bit as I read in the NuWays report that they are insured and in the Caribbean, the region with the highest hurricane risk, they only have one CHP plant which should be less vulnerable than PV plants. However, I agree that they should describe this risk in more detail in their annual report. It's very difficult to assess the potential impact without more information. I hope you receive a response from IR and share your insights here.
I agree about the CEO transition. Stefan Meichsner seems to have adapted well to the current market conditions, while Martin Vogt has been less flexible in his approach.
best regards,
Roman
Hi Roman,
after a friendly reminder, I've got an answer, which I would like to share with you:
"
We insure our plants in the Caribbean against hurricane risks. Such insurances, as you can imagine, are significantly more expensive than "normal" insurance for such projects, but the potential risks make it prudent to bear the extra costs to be protected. In addition, solar plants are protected against hurricane risks by using sturdier structures and extra protection frames. This increases the upfront construction costs, but again provides greater safety.
It should, however, be noted that we currently have no solar projects in the Caribbean and therefore the risk is limited. Our existing CHP plant is adequately insured.
"
The next thing is, that the hurricane is there and is currently in the south of puerto rico.
Hi Martin, thank you for the update!