Innergex Renewable’s French wind acquisition sound, says Industrial Alliance

The acquisition of 131 megawatts of wind assets in France is a small but solid step for Innergex Renewable (Innergex Stock Quote, Chart, News: TSX:INE), says Industrial Alliance Securities analyst Jeremy Rosenfield.

Yesterday, Innergex announced it had signed a deal with Germany’s wpd europe GmbH to acquire of a portfolio of eight wind power projects in France for approximately $137-million.

“Establishing a foreign foothold is the cornerstone for the next growth stage at Innergex,” said CEO Michel Letellier. “This acquisition represents not only the outcome of a long process during which we laid the foundations for a new phase in the evolution of the corporation, but also the achievement of an ambitious objective — our desire to export our expertise and know-how to Europe. Furthermore, the transactions announced today lay the basis for the future development of Innergex in France, a highly attractive growth market.”

Rosenfield says the French assets are low-risk and are expected to generate stable cash flows for Innergex immediately. He says this adds to appealing mix of stable assets.

“We continue to like INE for its low-risk investment profile, supported by (1) the stability and longevity of its fully contracted renewable power portfolio, (2) significant near-term contracted growth through 2017, (3) longer-term development-oriented growth potential, and (4) potential dividend upside within the next two years,” says Rosenfield. “We attribute $0.50/share to the pending French wind acquisition based on our current valuation methodology, and continue to see INE as a solid long-term investment. However, we note that INE’s recent share price outperformance (up ~17% year-to-date vs. ~8% for the sector average) and its high relative valuation multiples could impede the shares from moving significantly beyond our target over the near term.”

In a research update to clients today, Rosenfield maintained his “Buy” rating, but raised his one-year target price on Innergex Renewable from $14.00 to $14.50, implying a return of 14.0 per cent at the time of publication.