JotCast | 11/25/25 Capitalist Times Live Chat

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11/25/25 Capitalist Times Live Chat

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Roger Conrad

4:19

The key is power demand growth--it's happening in real time. And while there are some signs data centers may not suck down as much electricity as some people fear, we're still seeing contracts signed at high prices. The only question for Northern is if it can execute--fund and build its project pipeline--from a much lower stock price. I like the lower price. But I'm a little wary also.

Dan N.

4:26

I thought NPIFF's only semi-unique advantage was in offshore devo, where margins can be bigger precisely because it's so challenging. Your thoughts?

2. ...and just thinking of value propositions in beaten-down offshore wind, which would you prefer right now: betting on DNNGY or NPIFF? Looks to me like NPIFF cutting the div by 40% and proceding with all projects isn't nearly the multi-front crisis at DNNGY.

Roger Conrad

4:26

Northland Power--sorry--was calling it Northern Power--had appeared to be keeping its projects on time and budget--with a contract on the other end ready to produce cash flow. That still appears to be generally the case, though during the earnings call management said "commissioning of the turbines" at the Hai Long facility (Taiwan) has been "slower than anticipated." I still think execution is a strategic advantage in both onshore and offshore wind for the company. But the challenge with offshore wind is these are big multi-year power projects. And that means they're always at much greater risk to cost overruns than onshore wind and solar--which can go up in 12-18 months from design to commissioning.

I do think it's clear these machines work. And they're actually pretty reliable--the North Sea facilities have run consistently at mid-40s percentage rates for a decade. That includes Northland's 3 plants.

Roger Conrad

4:29

Orsted's development plan was built on getting facilities in the US up and running and generating cash flow to fund newer growth projects. When these were delayed and costs soared, the whole model came unglued and they've struggled since. The saving grace--why it won't go BK--is they're heavily owned by the Danish government and now the country's leading oil company Equinor--also an offshore wind investor. I think they've got a couple years to resume a dividend. But just getting Revolution up in the US will be a huge weight off Orsted's back.

4:31

Northland doesn't have the same magnitude of projects or financing needs as Orsted. And getting Baltic and Hai Long up and running next year will be huge. But it also doesn't have the backing of a national government. So I'm going to be a little cautious on management's new plan, which again with the dividend cut has likely taken equity finance out of the picture for now. Thanks for those in depth questions.

Dan N.

4:39

Hi Roger -

How long does it take for agencies to change their credit ratings in response to big changes in corporate cash flow policies? XPLR made a radical change in eliminating their dividend and routing cash flows toward debt repayments, and they've been diligently executing. Given that the ratings determine the borrowing rates available to XPLR, it's an important part of the recovery story. What's your perspective on how long this process takes? I would have thought the steps already taken would have already been enough to completely change calculations by the ratings agencies.

Roger Conrad

4:39

When a company makes as radical a change as XPLR (NYSE: XIFR) did earlier this year, it can pretty much count itself out of capital markets for a while. XPLR is as special case as basically an appendage of 51% owner NextEra Energy (NYSE: NEE), so it actually has been able to access the debt market this year.

The focus, however, has been on paying off debt--with a combination of free cash flow from operations and proceeds of asset sales, most recently the Meade Pipeline.

I highlighted XPLR's Q3 results and progress on its recovery plan in the November CUI. Since then, the company has announced a $740 mil offering of 7.75% notes due 2034, with proceeds retiring debt maturing in 2026. I think that's more progress. And the CEPFs are getting paid down as well. But I think it's going to be late 2026-27 before we start to see bargain hunters come back to the stock, or credit raters consider a higher bond rating.

Dan N.

4:46

Hi Roger -

I was surprised that ET declined to commit to moving forward with the Lake Charles LNG project (at least without selling off a greater ownership stake), but intrigued by their explanation: they said returns on domestic gas transport expansion projects are so much higher that it's just not worth it to devote so much capital to LNG and export. Your reaction? What does this say about midstream business space right now?

Roger Conrad

4:46

I have to say that I like it when a company looks at an investment boom that's getting a lot of hype through a bit of a jaundiced eye. And LNG projects take a lot longer to build than for example adding capacity to an existing natural gas pipeline system.

You just asked a question about offshore wind projects taking much longer to build and being therefore much more exposed to cost overruns than onshore wind or solar--which take may a quarter of the time to build. And it's pretty much the same comparison between building an actual LNG export facility and say the pipeline connecting to it.

Truth be told, Energy Transfer is telling us it has what amounts to an embarassment of riches of potential projects that will increase cash flow much faster than an investment in Lake Charles would. I still think this project will go forward. But the other projects mean higher dividends sooner.

Dudley

4:53

Afternoon guys. Based on 12 month timeframe, which offers more price appreciation……D or NEE ?

Roger Conrad

4:53

Both Dominion and NextEra Energy trade below my highest recommended entry points of 65 and 85, respectively. So both are buys in my view.

NextEra is on top of its game--with a rapidly expanding project backlog of onshore wind, solar and increasingly energy storage, as well as nuclear and potentially geothermal and power lines. The utility just won Florida regulators' approval of a 4-year rate deal that basically locks in return on investment as well.

I think as investors come to appreciate this company does not face an earnings cliff from the phase out of wind and solar tax credits, the stock will go quite a bit higher--though I would not pay more than 85 now.

Dominion is more of a comeback story. And the key is getting CVOW--Coastal Virginia Offshore Wind--fully operational next year as management is guiding to, without significant new cost overruns. I think it will. But there's still risk the Trump Administration may interfere. So until it does start producing, that's going to hold back the stock.

Roger Conrad

4:54

Once it does start producing, I think Dominion will be a 70 stock. And I think we'll also see a return to dividend growth a lot sooner than management is guiding to now. Ultimately, there's probably more upside to D than NEE--but I think we're going to have to wait longer.

Dan N.

5:02

Hi Roger -

Thinking about the huge (stupid) premium in some C-corp shares vs. equivalent MLP shares (BEP vs. BEPC), I have often thought that having C-corp shares would be an advantage for MLPs in financing investments: issuing C-corp shares would just be a way to leverage that premium when making buyout offers etc. But recently I wondered if I might have part of this narrative backward: is the C-corp share premium vs. MLP shares possibly a reflection that demand for MLP shares is lower when the market can buy C-corp shares? Is there any research on whether valuation of MLP shares gets depressed after a MLP makes C-corp shares available? (Looks like Sunoco is about to test this with creation of their C-corp units)

Roger Conrad

5:02

Yes, I think it's fair to say that C-Corps are a great deal more popular than MLPs currently. I don't know if it's true that having a C-Corp option at the same company will depress the MLP units' price. But that would follow that the more popular option would be priced higher than the less popular option.

What I would point out, however, is the situation was pretty much 180 degrees reversed early in the previous decade--at the top of the last energy upcycle. Then, there was intense Wall Street pressure on the remaining C-Corps like Williams Companies to convert into MLPs--to avoid taxes, pay higher dividends and yes, earn a higher valuation.

Back then, not one in 100 of the MLP fans would have conceived that 10-12 years later, MLPs would be mud and everyone would be clamoring for a C-Corp option. And I'll bet not one in 100 investors now could envision a flip back--where investors suddenly want a lower tax rate option for their dividends.

Roger Conrad

5:04

MLPs are cheaper than C-Corps now. Yields are far higher--with MLP dividends often growing faster as well. Unless you really, really hate K-1s, they're going to be the better option. And while I have no idea when it will happen, there will come a day when MLPs are the more popular again.

Dudley

5:05

Afternoon guys. Over 12 month timeframe which utility offers more price appreciation potential….D or NEE ?

Roger Conrad

5:05

Over a 12-month time frame it should be Dominion--though again that depends on getting CVOW up and running on the current budget and on management's current timeline.

Guest

5:10

New subscriber here. From your various portfolio suggestions, how does one distinguish between K-1 reporting names vs 1099 reports? Those denoted MLPs? Are the other names all 1099 reported? Not quite ready to take on the K-1s in my tax preperation. Thanks

Roger Conrad

5:10

MLPs will generally be noted by the word "Partners" or "LP" in their names. The exception in our coverage universes would be XPLR Infrastructure Partners--which general partner NextEra Energy treats as a partnership but is actually a "yieldco" for its other investors and we receive a 1099 at tax time.

I would say again that before you eschew MLPs consider this (1) The tax savings and yield advantage you receive on a decent sized position pays for any accounting help you might need many times over and (2) They're not nearly as complicated for most companies as their reputation suggests.

I would suggest giving it a try with one good MLP and see if you agree.

clathrop505@gmail.com

5:11

Anyway to easily determine whether your recommended names report via 1099s vs K-1s?

Roger Conrad

5:11

Yes. The names of the companies make that easy to distinguish. If you see the word "Partners" or "LP" then you're almost certainly going to get a K-1, with the exception of XPLR.

Frank

5:18

It seems that most of the new pipeline capex is going towards NG. I know a lot a MLP's (and C Corp's) move NG but if you had to pick one that will benefit the most in the future, what would you pick?

Roger Conrad

5:18

I think Energy Transfer LP is pretty much a super bargain now yielding a growing 8.2%--getting a share of the Parkland Fuels' cash flow by having affiliate Sunoco LP (NYSE: SUN) merge with it--and therefore not having to issue any stock or debt to get it--is something no other midstream can do right now. And I like all that Texas investment. That's where we're going to want out midstream long-term.

Alex M.

5:24

Hi Roger. I was looking at Comcast, and even though earnings are expected to be flat for the next year or two, it's got a PE of less than 7, a dividend approaching 5%, and it's sitting at a 10-year low. Is the market entirely focused on the declining broadband numbers?

Roger Conrad

5:24

Hi Alex. I agree people are focused on Comcast losing broadband customers and that's why the stock has come down so much. And I do think it's starting to look very interesting at a mid-20s price. What makes me hesitate is that it looks like they're going to keep losing broadband customers to the Big 3--AT&T, Verizon, T-Mobile US--just like the rest of the industry. And as a result, they're going to increasingly depend on more cyclical businesses like entertainment for cash flow. They're still going to earn a lot of free cash flow the next few years--and that means stock buybacks, debt reduction and dividend increases. But the fundamental business is shifting out from under them--and re-selling Verizon wireless service at low margins isn't going to make up the broadband customer losses at the bottom line.

Again. it's easy to get interested at this price. And there's always the potential for a merger--possibly with Charter as people talk about. But I do think this is not the Comcast of five years ago.

Cliff L.

5:29

Thanks for having these chats. What are your thoughts on the Metals and Mining sector? I know BHP and WPM are in several of the portfolios and curious about your thoughts.

Roger Conrad

5:29

Hi Cliff. I think the major mining companies like BHP are great buys now. BHP tends to trade in line with what people are thinking about China at any given time. That's their major market and the country's demand is the primary driver of global pricing and demand. But longer term, the company's growing plays in iron ore, potash and especially copper are all in the right spot to feed a big boost in global demand. I think we have to be patient now--the exception being gold companies like Newmont, which is up 135% year to date. But building positions while the stocks aren't expensive is a great long-term wealth building idea.

Alex M.

5:36

Hi Roger. T-mobile has a great long-term chart, but the last 12 months have seen the stock decline by over 13% even as the market approaches new highs. What do you think is holding it back? Thanks.

Roger Conrad

5:36

I think the burden of high expectations mainly has caught up with the stock. T-Mobile US has been the sector favorite--in fact the only US telecom big Wall Street firms have favored in recent years. And despite the dividend increases, stock buybacks and subscriber growth, it's just become too hard to beat expectations on a consistent basis. And ultimately, you have to ask whether it's worth it paying 20X earnings for a yield of less than 2% when you have VZ at less than 9X yielding nearly 7% in the same business.

I think the Big 3 are going to increasingly dominate the US telecom space. The threat of a viable fourth network is basically zero now--so there's plenty of room for all of them to thrive. But the cheaper stocks have had the gains this year. And I think that's a harbinger. If you do want some TMUS, I recommend buying its majority owner Deutsche Telekom (DTEGY) at 11X earnings.

Lorraine G.

5:40

Hi Roger,

A question for the chat today. ET seems to be in a slump, even when other MLPs (EPD) are doing okay. I noticed that Morningstar on Schwab consistently rates the fiscal management as "Poor". Any thoughts on what may be going on?

Thank you

Roger Conrad

5:40

Hi Lorraine. I can't begin to guess how Morningstar and Schwab determine that--other than perhaps a bias against MLP structure.

But we just saw Energy Transfer complete an acquisition of a major fuels company that will immediately boost its cash flow meaningfully--and without issuing any stock or debt to get it done. It was able to because it controls Sunoco LP (NYSE: SUN), and that company issued its stock.

That's how I would define good fiscal management--adding cash flow without issuing new capital.

Rick P

5:48

Why do some midstream C corps like HESM and PAGP have yields at 9%, whereas midstream C corps like Williams or Kinder at less then half that yield? Are companies like HESM and PAGP that much riskier?

Roger Conrad

5:48

HI Rick. I think Hess Midstream and Plains GP Holdings are pretty much lumped in with the MLP classification, despite not sending a K-1 at tax time.

In Plains GP's case, that makes sense. Its only asset is a big piece of Plains All American Pipeline (NYSE: PAA), which is an MLP. Hess Midstream is controlled by its major shareholder and biggest customer Chevron (NYSE: CVX)--and its share price went from a premium this summer to its current discount when Chevron announced it was cutting the number of rigs in the Bakken from 4 to 3. The company has since given pretty assuring guidance about locked in cash flow and dividend growth. And I still think CVX will eventually buy it out. But there's some uncertainty now and the stock price reflects it.

Is there really any more risk for investors buying HESM and PAGP versus Williams or Kinder? I actually think there's more risk with WMB and KMI because of price, especially WMB near 60. Dividends at HESM and PAGP are well covered by earnings--and both are still raising

Hans

5:51

Roger, What is your outlook now for NPIFF, now that they have cut their Div. Thanks

Roger Conrad

5:51

Hi Hans. I won't repeat the long winded answers I gave earlier in the chat concerning Northland Power. What I will say is they wanted to hold in more cash to fund their development program without having to borrow. And the dividend cut achieves that. They will not be able to issue stock on non-dilutive terms for now. So the big question is can they do what they need to without new equity issuance?

I think that depends on completing the project pipeline in line with the current timeline and budget. And I think we're just going to have to wait for future progress reports. I think they'll succeed. But I don't want to recommend anyone buy until it's clear the drop in share price was taken into account, even at this much lower price.

Jack A.

5:52

Hi Roger: With the anticipation of lower interest rates, you would think the stocks with a pretty secure and good yield, like utilities and the pipelines would do well. Yet today, as with many days, they seem to overall not do well. Are people still placing their money with the momentum players? Is this a product of the end of the year selling the lagards and buying the winners in order to make the investment advisers look good? What do you see in the future? Thanks

Elliott Gue

5:52

Thanks for the question. I wrote an article on this over on Substack maybe a month ago. I can find no stable correlation between interest rates and MLP performance or MLP alpha (MLP total returns vs. the S&P 500 Energy Index). And, I have tried every statistical trick I know of to try to mine a correlation and it's just not there. There are periods when MLPs are positively correlated to rates (usually when the economy is recovering from a soft patch) and there are periods of negative correlation also, though they're less frequent. I think there could be some end of year games underway along the lines you suggest. What's interesting to me is that some of the more aggressive commodity-sensitive groups like oil-focused producers and services names have been showing a ton of relative strength lately even on days when oil prices are weak. This suggests accumulation to me. Bears have been swirling around oil for over a year now, but it just can't drop below that support level -- low 60s Brent, high 50s WTI --

Elliott Gue

5:52

surveys like the BofA Global Fund Manager Survey show institutional managers are heavily underweight the group. I suspect that that underweight is starting to become uncomfortable and that the downside risks are priced in to the group. At any rate, I see this as a bullish set-up for energy into 2026 on the oil-levered side. Ultimately it's also good news for MLPs though they're less leveraged to oil and gas prices.

Frank

5:54

I don't know of anyone else that does these monthly chats. They are a great selling point for your services and I think I speak for everyone in saying Thank You!. Have a good Thanksgiving and open a good bottle of wine. "In vino veritas"

Elliott Gue

5:54

Thank you and Happy Thanksgiving! We actually find these chats very useful as well as they help us focus on what readers are most interested in or areas where we need to offer more coverage.

As for wine, I have a nice bottle of Barolo that has been taunting me from the wine rack for the last couple of months. I think Thursday is the day. Cheers!

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