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  • geoequities geoequities Jan 28, 2012 5:37 PM Flag

    It's not all doom and gloom

    All of these count in the positives as you mention. However, they will have to issue new units to finance the new projects and that will be much more expensive now. It will lower the returns on these projects and probably also their execution. I would not expect very much from NRGY in the next two years. Most of the new projects would be done by NRGM, which can still issue equity at a good rate and that will eventually help NRGY with their IDR revenue. However, it will be a long arduous ascend, not the quick turn-around that one would like to see.

    Also: with the cost of issuing new equity so high, I now expect NRGY to cut distribution much more than I originally estimated. My original estimate was for $1.75/year, based on the same calculations you've done and a typical 1.1X coverage. I read a rumor of cutting to $1.40/year, which I dismissed as too low. I now think this makes more sense. The stock price is not likely to be affected short-term by yield rate; it will be affected by growth, natural gas/propane prices and how cold next winter is going to be. This winter was unfortunately a bust.

    I predict the stock to fluctuate between $15-17 for a while before picking up. That won't be for at least another year. As good as the management is, it cannot turn things on a dime. Let's be patient.

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