Altus Power: Valuable Partnerships And Competitive Advantage To Outperform

Core Viewpoint - Altus Power (NYSE:AMPS) is positioned as a hybrid player in the solar energy sector, focusing on the development, construction, and management of photovoltaic systems for commercial and industrial customers, with a capacity of 896MW as of December 2023. The company has demonstrated strong financial performance and growth potential, making it an attractive investment opportunity despite recent stock price volatility [2][19]. Business Overview - Altus Power operates in two main segments: the construction and management of photovoltaic systems for corporate clients, and the development of systems for energy communities, serving approximately 450 corporate customers and 20,000 residential customers respectively [4][5]. - The company benefits from net metering contracts that allow it to sell excess electricity back to the grid, as well as from the sale of Solar Renewable Energy Certificates (SRECs) based on its electricity production [4][5]. Financial Performance - In FY23, Altus Power reported total revenues of $155.16 million, a 53.38% increase from FY22, driven by a 114.87% rise in power sales under Power Purchase Agreements (PPAs) [5][6]. - The revenue per MWh for Altus Power in FY23 was $199, significantly higher than the median of $92 for comparable companies, indicating a strong pricing strategy [3][6]. - The company experienced a net loss of $9 million in FY23, primarily due to increased operational costs and non-cash items, but achieved a breakeven result when excluding these items [11][12]. Growth Strategy - Altus Power's growth strategy includes a mix of in-house development and acquisitions, with 74MW installed in-house and 352MW acquired in FY23. The company aims to increase its in-house capacity while continuing to leverage acquisitions for growth [7][12]. - The recent acquisition of Vitol's 84MW solar portfolio for $119 million exemplifies the company's commitment to expanding its operational footprint [7]. Partnerships and Funding - Strategic partnerships with Blackstone and CBRE, each holding approximately 15% of the company, provide significant advantages in capital raising and operational support, enhancing Altus Power's growth prospects [8][10]. - The company has a financial structure that allows for 60-70% of project capital to be raised through debt, minimizing the need for equity financing in the short term [10][19]. Market Outlook - The renewable energy market targeted by Altus Power is currently valued at $5 billion, with potential growth to $46 billion, indicating substantial future revenue opportunities [10]. - The company's unique business model and strong revenue per MWh position it favorably against competitors, suggesting continued growth and market share expansion [19]. Valuation - A Discounted Cash Flow (DCF) analysis estimates Altus Power's intrinsic value at $7.23 per share, representing a 55-60% upside from the current market price, reinforcing the bullish investment thesis [16][19].