Renewable Power Plant Developer to Miss YE21 Guidance, Analyst Says Time for Investors to Sell

Source: Streetwise Reports   10/02/2021

Several external factors have hampered Scatec’s ability to deliver projects in its backlog, a problem discussed in a Pareto Securities report.

In an Oct. 1 research note, Pareto Securities analyst Tom Erik
Kristiansen reported that Scatec ASA (SCATC:Oslo; STECF:OTCPK; 66T:FRA) will not reach its target of 5.9 gigawatts in operation or under construction by year-end 2021 because of permitting delays, inflation, and supply chain disruptions. Thus, Pareto recommends investors sell Scatec at the current price, NOK141.

“We continue to find the pricing of Scatec rich at a run rate price:earnings of 118 times, based on earnings thus far in 2021,” Kristiansen added.

Kristiansen described the current problems and how they are affecting Scatec’s project backlog. This company is a Norway-based solar, wind and hydro power plant developer, builder, owner and operator.  

Regarding Kenhardt in South Africa, a project to encompass 540 megawatts (540 MW) plus 225 MW of storage, financing has been pushed out to the end of January 2022 and, thus, construction start, to mid to late Q1/22 from year-end 2021. Ultimate connection of the project to the grid will no longer take place around year-end 2022 but instead in H1/23. These delays are due to slower-than-usual permit approval.

As for two other of Scatec’s projects, 65 MW Kherson in Ukraine and the 101 MW Sao Pedro and Paolo in Brazil, the company opted to cease further development of them. Scatec made this decision, Kristiansen noted, because “margins/returns fell short of hurdles” as a result of increasing costs and supply chain disruptions.

“This [project cancellation] will lower the backlog to 1,1915 MW and result in a NOK40–50 million impairment in Q3/21,” Kristiansen noted. This scenario for Scatec could even worsen, impacting other projects in the backlog or pipeline, if the current challenges persist.

Further, Kristiansen wrote, “We expect the market to increasingly question the value of parts of the backlog (Mali has been there since 2016) and the ability to create excess value in an increasingly competitive market.”

Sign up for our FREE newsletter at: www.streetwisereports.com/get-news

Disclosures:

1) Doresa Banning compiled this article for Streetwise Reports LLC and provides services to Streetwise Reports as an independent contractor. She or members of her household own securities of the following companies mentioned in the article: None. She or members of her household are paid by the following companies mentioned in this article: None.

2) The following companies mentioned in this article are billboard sponsors of Streetwise Reports: None. Click here for important disclosures about sponsor fees. 

3) Comments and opinions expressed are those of the specific experts and not of Streetwise Reports or its officers. The information provided above is for informational purposes only and is not a recommendation to buy or sell any security.

4) The article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports’ terms of use and full legal disclaimer. This article is not a solicitation for investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company mentioned on Streetwise Reports.

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 decision to publish an article until three business days after the publication of the article. The foregoing prohibition does not apply to articles that in substance only restate previously published company releases.

Disclosures from Pareto Securities AS, Scatec ASA, Oct. 1, 2021

Pareto Securities AS, Pareto Securities AB and Pareto Securities LTD will not be responsible for the consequence of reliance upon any opinion or statement contained in this report.

Pareto Securities and/or their employees may have positions in the securities discussed.

Please see specific disclaimer by country on our web site www.paretosec.com/disclaimer for further representations regarding the content of this message and obligations.

( Companies Mentioned: SCATC:Oslo; STECF:OTCPK; 66T:FRA, )