Hi Sanjay,
Regarding power generation companies…Renewable energy
CERC has considered 14% normal return on levered equity. So, if a business has captured the whole vertical value chain, can stretch it up to 17-18%.
Over the top, we have a lot more room for growth in that sector. Now if, someone can compound capital at 15-17% for long period of time, with explosive growth in revenues, can generate good cash flows + there is very little maintenance capex attached to it. And, top of that, very low competition with quite stable cash flows, it is like contractual cash flows.
In reference I am talking about Adani Green
PS: Not invested
Even, Buffett praised Mid-Western energy for this trait. He has too much capital, and Mid-Western has unsatiable needs of cash, and they can deploy it at above market returns for long periods…Which is our cost of capital.
Correct me, If I am lacking spots in my understanding.
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