After almost a one-year lull in acquisition activity, Pattern Energy said it will be acquiring the 324MW Broadview wind project in New Mexico and associated 35-mile 345kV transmission line from Pattern Development.
"The acquisition is consistent with our view that Pattern Development (Riverstone) will be motivated to reduce drop-down valuations and support the PEGI shares," analyst Ben Pham wrote in a note.
"[W]hile near-term dividend growth may not hit the mid-teens, it should remain meaningful," Pham added.
Further, the analyst noted the recent decline in long Treasurys not only improves the valuation on the company's operating assets (2.6GW), but could also increase accretion and growth from potential drop-down acquisitions. This creates more shareholder value.
"The Broadview drop-down was already in our estimates, but is more accretive than we anticipated. Our CAFD/sh is now US$1.80 (unchanged) in 2016, and US$2.04 (vs. $2) in 2017," Pham continued.
The analyst also raised his price target to $25 from $23 on higher CAFD (cash available for distribution) estimates and the decline in bond yields.
At time of writing, shares of Pattern Energy rose 2.26 percent to $23.49.
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