Infigen Energy

First half revenue for wind farm owner Infigen Energy fell 1% to $126m. Lower production (due to lower average windiness) in both its US and Australian operations and adverse currency movements were mostly offset by higher electricity and renewable energy certificate prices on uncontracted production, as well as production from the new Woodlawn facility.

Costs, however, didn’t fail to grow, partly as a result of the increased capacity but also increased maintenance costs at some US wind farms where the turbines came off warranty. So operating earnings before interest, tax, depreciation and amortisation (EBITDA) fell 9% to $70.1m. Net operating cash flow increased 205% to $21.1m, or 2.8 cents per security.

Unencumbered cash sat at $112m at 31 December 2011, versus our estimate of $105m at the time of Downdraught prompts Infigen upgrade of 30 Nov 11 (Speculative Buy – $0.22). This cash pile forms a pivotal part of our downside protection, as expanded on in the aforementioned review, as well as Infigen an energetic spec buy of 19 Sep 11 (Speculative Buy – $0.24).

As expected, no dividend was declared. Management seems well aware that husbanding cash and building equity value in the portfolio makes more sense at this stage. Infigen is not a stock for income investors today. The share price is down a touch since 2 Feb 12 (Hold – $0.28) but, consistent with previous reviews and recommendation guides, isn’t currently cheap enough for us to upgrade. We want a dirt cheap price where our downside is more adequately protected. A few more cents ought to do it. For now, HOLD.