Oppenheimer Starts Coverage on Clean Tech Stocks With Huge Upside

In a new research report, Oppenheimer initiates coverage on two companies and upgrades another that could all thrive in the clean-tech arena. While all three are much different in terms of the scope, strengths and the directions of the companies, they all should benefit from the continued push to clean energy. In addition, they are all rated Outperform at Oppenheimer.

8point3 Energy Partners

This company had a recent IPO that sputtered out of the gate, and the stock is initiated at Outperform. 8point3 Energy Partners L.P. (NASDAQ: CAFD) was formed by First Solar and SunPower to own and operate a portfolio of selected solar energy generation assets. While initial Wall Street reaction was less than enthusiastic, some analysts believe that there could be solid upside to the value of First Solar’s stake in 8Point3 Energy. The cost of capital benefits from the launch of the limited partnership is likely to add value to First Solar’s fully developed project backlog, with the monetization of the photovoltaic plants.

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Initially, analysts liked the deal and think that the company differentiates itself from other yieldcos with an outstanding portfolio of high-quality operating assets with strong creditworthy off-takers in the U.S. utility scale market. Many also believe that the company has strong growth visibility for more than three years and a solid business model that doesn’t depend on acquisitions. They also cite the strong backing from First Solar and SunPower as another good reason for investors to buy shares. Plus, as Oppenheimer points out, this is the only publicly traded pure-play solar yieldco.

The company has a very lean balance sheet with no project-level debt and a very lean operating expense structure that many feel offers investors increased downside protection for the future.

The current 8point3 Energy Partners distribution is listed at 4.82%. The Oppenheimer price target is started at $20, and the Thomson/First Call consensus target price is at $18. The shares closed trading most recently at $13.14.

Hannon Armstrong Sustainable Infrastructure Capital

This stock was also initiated at Outperform at Oppenheimer and is another solid value at current levels. Hannon Armstrong Sustainable Infrastructure Capital Inc. (NYSE: HASI) provides debt and equity financing to the energy efficiency and renewable energy markets. It is structured as a real estate investment trust (REIT) and focuses on providing preferred or senior level capital to established sponsors and high credit quality obligors for assets that generate long-term, recurring and predictable cash flows.

Oppenheimer views the company as a specialty finance play on the growth of energy efficiency and renewables with a very strong management team, a differentiated investment strategy, an impressive and increasing deal pipeline and a track record of earnings and dividend growth. The company also just added to its available capital with a 5 million share offering that was priced at $18.

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Hannon investors are paid a 5.85% distribution. The Oppenheimer price target is $27, and the consensus target is$22.42. The shares closed Wednesday at $18.08.

Amresco

This company was upgraded to Outperform at Oppenheimer. Amresco Inc. (NYSE: AMRC) is a leading independent provider of comprehensive services, energy efficiency, infrastructure upgrades, asset sustainability and renewable energy solutions for businesses and organizations throughout North America and Europe. The company’s sustainability services include upgrades to a facility’s energy infrastructure and the development, construction and operation of renewable energy plants.

The Oppenheimer team sees Amresco as very solid in its field and operating with significant engineering and financing capabilities. In addition, they view the shares at current levels as undervalued and cite the company’s growing renewable energy asset base and sizable $1 billion project backlog.

The Oppenheimer price target is a conservative $8, and the consensus target is higher at $8.50. The stock closed Wednesday at $6.58.

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We like to remind investors that distributions from yieldcos and REITs can contain return of capital. All these ideas from Oppenheimer make incredibly good sense at current trading levels for aggressive accounts. They seem to have minimum downside priced in from here, and a very sizable upside.