With world leaders and an increasing number of people becoming concerned about climate change, clean, renewable energy consumption is expected to grow into the future. Canadian company Boralex Inc. (TSX: BLX) seems to be well positioned to capitalize on this trend, showed its confidence by raising its dividend recently.
Samus Prasla | Green Investing and Sustainability Writer | March 22, 2016: Recent declines in crude oil prices, decommissioning of coal power plants and rising climate change issues are beginning to shift investors’ confidence and investing strategies away from the non-renewable energy sector. When it comes to generating electricity, sustainable sourcing is the ultimate option to reduce risk and volatility in the raw material supply chain as well as the overall carbon footprint. It also creates opportunities for innovation, such as wind farms and solar panels, which are operated using renewable sources like wind and sun. These new projects are capital intensive with relatively low maintenance costs but generates stable sources of revenue for the companies involved.
Boralex Inc. (TSX: BLX) has been producing electricity using these renewable sources by building and operating renewable energy power plants in Canada, France and United States. The Company is also France’s largest independent producer of onshore wind power. Its current installed capacity generates 1,094MW of electricity and it expects to reach 1,650MW by the end of 2020. Boralex produces 40% of its energy in Canada, 51% in France, and 9% in United States, out of which 98% of its energy is sold on a fixed, long-term contract basis and the remaining 2% at market price. The long-term contract pricing system gives the Company a stable and predictive future revenue stream. And, the fact that wind power is Boralex’s largest renewable energy source (78% as of March 31, 2015, and growing) should give investors confidence, as wind energy is considered to be the lowest cost option for any new power supply without subsidies, this according to a 2015 report from U.S. investment firm Lazard.
Recently, Boralex has been awarded a contract for a wind power plant along with Renewable Energy Systems Canada Inc. as a partner in the project. This project is known as the “Otter Creek Wind Farm Project,” and Boralex holds a 38.5% partnership stake. This wind farm will be constructed on private lands in the Municipality of Chatham-Kent Ontario, with a capacity of 50MW, and is expected to be fully operational by the end of 2019.
Another huge add on to Boralex’s portfolio is the acquisition of 350MW wind power projects from a private developer in northern France. This acquisition comprises of 79MW ready-to-build projects, 159MW of projects at an advanced stage, and 118MW of projects at preliminary stages of development, giving Boralex access to a major pipeline of projects in that country. The Company expects to benefit from the prevailing energy rate in France by completing its ready-to-build and advanced stage projects in 2017 and 2018, boosting its energy generation capacity by approximately 30%. Overall, the acquisition will increase Boralex’s French portfolio of development projects to nearly 850MW.
Currently, Boralex has a market cap of about $1 billion. In its recent Q4/2015 financial and operating results, Boralex saw an increase of 50.8% in revenues from energy sales to $81 million.
Its bottom line has been flipped from a $6.3 million net loss to a $5.6 million net profit as compared to Q4/2014 results. Such strong growth in its financials is driven primarily by the commissioning of 113MW wind power projects in Canada and France, 10MW solar power projects in France, and also by the acquisition of a 350MW wind power project in France.
Currently, the Company is increasing its debt level by financing these projects but its long-term prospects seem brighter because revenues are generated from a sustainable stream, sufficient long-term projects in the pipeline, and by maintaining the 10% growth threshold in its installed capacity. Furthermore, Boralex has raised its annual dividend to shareholders by 7.7% recently to $0.56 per share (giving it a current yield of 3.5%), sending its stock price to a near 52-week high of $16.07.
Boralex Inc. is a component company of the benchmark-beating Ubika Sustainability 20 index (See the other top-performing stocks here).