Dear valued Skyline Clean Energy Fund (SCEF) investor,
Thank you for your continued investment in SCEF (“the Fund”). The Fund has enjoyed a great start to 2020, with several accretive renewable energy assets under contract that we are working to close before the summer season, with the objective of maximizing solar generation.
At the same time, we recognize that we are all currently in the midst of public market and social turmoil, especially heightened with the global COVID-19 (coronavirus) pandemic. We want to explain the extent to which the Fund will be affected by these events and reassure you that regardless of the turbulent market environment, Skyline Energy’s1 team continues to spend 100% of its time optimizing and maximizing the Fund.
Every clean energy asset in SCEF’s portfolio is backed by the Ontario provincial government through the Independent Electricity System Operator (IESO). IESO is rated A (high) with a stable outlook by DBRS Morningstar, and Aa3 with a stable outlook by Moody’s, both global credit rating agencies that represent investment-grade ratings.
SCEF’s revenue is generated through fixed long-term government contracts where the only variables are downtime (due to general maintenance or equipment failure) and weather-related events. Neither of these variables are correlated in any way to public market performance.
The coronavirus outbreak has had a substantial impact on consumer habits. As consumers minimize their time in public places, they are spending less on both goods and services. The pandemic has also undoubtedly had a huge effect on the public markets, with governments implementing drastic monetary and fiscal policy measures across the globe (among which are cuts to interest rates). We have yet to see the virus’ impact on lagging macroeconomic indicators; this being said, falling interest rates are the only macroeconomic factor that could tangibly affect the Fund. In the case of the Fund, falling interest rates can be regarded as a positive, as this presents an opportunity to finance currently unleveraged assets, or even refinance currently leveraged assets at improved rates.
For now, the largest potential negative impact of coronavirus on the Fund would be from a delay in receiving materials (e.g. solar panels) from China and other countries. Delays in the delivery of materials could potentially delay our plans to optimize several assets in order to surface additional revenue, but by no means are we depending on these additional revenues to maintain our growth targets. In terms of general maintenance of the assets, SCEF has sufficient materials on hand through to the end of 2020.
With these very minimal factors causing a correlation between public market performance and your SCEF investment, Skyline Energy is confident that SCEF continues to be a safe and secure place for your investment. Growth is targeted at 7.5%+ year over year, with revenue tied to energy generation rather than market conditions. In other words, it’s “business as usual;” SCEF will continue to invest in accretive assets and ensure that they are operational when the sun is shining. As Jason Castellan, CEO of Skyline Group of Companies2 says, “We have to make hay when the sun is shining.” The sun continues to shine bright on SCEF.
Wishing you a happy and healthy spring,
Rob Stein
President, Skyline Energy
1. Skyline Energy is the legal trade name of Skyline Clean Energy Asset Management Inc.
2. Skyline Group of Companies is the umbrella term used to generally refer to all associated entities including Skyline Energy.
Commentary is disseminated by Skyline Wealth Management Inc. (“Skyline Wealth Management”) on behalf of Skyline Energy as at the date of publication for information purposes only. The opinions and statements expressed by Skyline Energy are their representations and do not necessarily reflect those of Skyline Wealth Management. Skyline Wealth Management has not taken any steps to verify the accuracy or completeness of the information provided herein. The opinions and statements expressed within are those of the author.