Watch the Clean Energy Fund – Fund President Q2 2024 Update
Transcript
00:18.650 — Ray Punn:
I’m pleased to provide you with Skyline Clean Energy Fund’s update for Q2 2024. Joining me here today is Rob Stein, President of Skyline Clean Energy Fund. Rob, thanks for joining.
00:27.590 — Rob Stein:
Thanks for having me.
00:28.310 — Ray Punn:
As usual, I’m going to give you the same question as always. Can you provide our investors with an overview of the Fund’s performance from the last quarter?
00:35.180 — Rob Stein:
Yes, for sure. So, Q2 was a phenomenal quarter for us. You know, we worked really hard in Q1 to make sure the systems are operational for going into Q2 and Q3, because it’s when we get the most irradiance in the year. So, we have to make sure the systems are fully running when Q2 hits. And so, you know, the team did a really good job. We performed to about 5% of our budget. And that’s in a really good node for us.
The assets changed in Unit Value [as of] July 1, 2024, from $16.49 to $16.98. For our Class A investors, [they] saw a 9.45% annualized return, which we’re happy with, and we’re continuing to perform at that level, if not more, going into Q3.
01:17.760 — Ray Punn:
Thanks for sharing that, Rob. I’m going to throw a question at you that I’ve also asked the other Presidents in their recordings, and that’s simply that in 2024, we’ve seen two rate cuts. Economists are now forecasting additional rate cuts throughout the rest of the year, potentially Q3, maybe Q4. How do these rate cuts impact the Fund?
01:35.430 — Rob Stein:
Well, you know, from a Skyline Group of Companies perspective, rate cuts have been great for us. You know, we’re seeing a sentiment in the market that, you know, we’re back into investing into new opportunities.
As rates come down, people have more capital to put into the market, and that’s just a great thing for Skyline Group of Companies. As for the Fund, from an operational perspective, the solar assets we have are all on fixed-term, long-term contracts, and we get really good coterminous debt on a fixed rate. So, we sort of “set and forget” the solar side of our business, which is all operating really well.
On the biogas side of our business, we’re really underleveraged. We have about $120 million of assets, with $20 million of a variable floating loan that really doesn’t cost us anything. So, going through 2024, one of our major mandates is to put debt on our biogas assets. And so where this is great [is] as rates come down, we’re going to get more competitive rates.
We’re going to be able to syndicate all of our assets together. We’re going to go back out to the market. We’ll probably end up getting a bond rating on our biogas assets and get the most competitive debt. And we’ll set that coterminous with the life of the assets. And so from that perspective, [we’re] really keen on rates continuing to move down.
It’s great to see capital move into the market. And it’s really a great time for us to renegotiate debt on our biogas assets, [which] will be a direct benefit for our Unitholders. As soon as we have more capital, we’ll see, you know, the value of our assets increase.
02:58.110 — Ray Punn:
Rob, we continue to see volatility in the public markets. 2024 hasn’t been any different. Only a few days ago, we saw the single largest drop in public equities that we have [seen] since 2022. People panic. Things rebound. Things go down. So, we’ve always seen that volatility in the public market. What’s your take on that?
03:17.950 — Rob Stein:
Well, it really goes to, you know, the whole mantra at Skyline: you know, we invest into products that we’re really comfortable [with], in markets we understand, that aren’t tied to the public markets. We’re buying real estate and energy assets that aren’t correlated to public markets, [and] that underlying value of those assets [is] true whether, you know, the TSX is up 300 points or down 300 points.
It’s irrelevant to how our assets are going to perform and how we value our assets. You know, from the Fund’s perspective, we’re in the clean energy space, and there’s a couple of large, publicly traded clean energy companies that are phenomenal companies. But, you know, through that big decrease the other day, they all went down 15 to 20 points.
Well, that’s really hard business to run when you’re doing that. Well, we just sort of continue to chug along. Our Unit Value continues to increase year over year because we have fixedcontracts backed by really good creditworthy counterparts on long-term debt. And so, it just bodes really well to the whole philosophy -the whole reason we set up the [REITs and the Fund] – which was [that] we buy really [high] quality assets in markets we understand, and we’re going to continue to operate them to the best of our ability, which is gaining in value every single year.
So, you know, it’s a great product to run. [I’m] really thankful to be a part of it. And our Unitholders benefit from our whole strategy around that.
04:36.260 — Ray Punn:
Well said, Rob. Let’s wrap this up. Let’s talk about your upcoming transactions in the Fund.
04:41.420 — Rob Stein:
Yeah, we talked about it in the last quarterly update. We’re going to stick to our knitting this year. So, on the biogas side of the business, we’re working through changing our Elmira [Ontario] facility from generating electricity to a renewable natural gas (RNG) plant. So, we’re ongoing in that project. That’s going to be a year, a year and a half, two year project. And [we’re] right in the midst of that. So, we’re continuing on with that. Out in Lethbridge [Alberta], we completed our depack (depackaging) facility.
So, we’re now taking the packaging off organic materials and we’re processing that. So, we’re starting to see the fruits of that come into fruition. We’re seeing, you know, increase in generation of [renewable natural] gas and revenue from that project in Q2, which has been great. The team has been working hard on a couple new transactions, two in the biogas space and two in the solar space. And really all we’re doing is timing when new capital comes in with these transactions and making sure those pair really well, that they dovetail together, so we can close those transactions in a meaningful way.
They’re core assets to the Fund and should be great for our Unitholders. So, we’re going to continue to do that through Q3 and hopefully have those closed before the end of the year. But other than that, we’re sticking to our knitting. We’re having fun doing it, and we’re going to continue to focus on operations through the year and hopefully add a couple new opportunities for our Unitholders.
05:56.960 — Ray Punn:
Rob, thanks for joining us today.
05:58.370 — Rob Stein:
Thanks for having me.
05:59.390 — Ray Punn:
Skyline Clean Energy Fund is open for new investment. If you have any questions, please reach out to your Relationship Manager. Thanks for joining.