Renewable energy stocks have been beaten up over the past while, enough that valuations are looking attractive, including that of Northland Power (Northland Power Stock Quote, Charts, News, Analysts, Financials TSX:NPI). That’s the scoop from portfolio manager Andrew Pyle, who just named Northland one of his top picks for the 12 months ahead.
“The clean energy segment of the market obviously went through a lot of challenges. Northland, to us, is really, really attractive, especially in terms of free cash flow generation,” said Pyle, investment advisor at CIBC Wood Gundy, who spoke on BNN Bloomberg on Tuesday.
“There’s a likelihood that we will see some sell out of assets, which I think will be positive for the company going in 2023,” he said.
It’s been a bumpy ride for the renewable energy and cleantech sectors recently, with market interest having peaked almost two years ago in early 2021. The iShares Global Clean Energy ETF (iShares Global Clean Energy ETF Stock Quote, Charts, News, Analysts, Financials NASDAQ:ICLN), for example, is down by about a third since February, 2021.
The same goes for Canadian companies in the space, including NPI, which rallied over the summer only to drop back again over the past few months. Year-to-date, the stock is currently at even.
Northland has offshore wind assets along with onshore renewables and natural gas, with an ownership or economic interest in 3.0 GW of operating capacity, and the company has been expanding its stable of energy production assets. Northland’s most recent quarterly report showed third quarter electricity production go from 1,815 GWh for the Q3 2021 to 2,129 GWh, while sales went from $432.0 million to $555.9 million. Adjusted EBITDA also rose from $210.7 million to $289.8 million.
Management also reiterated its full 2022 guidance, calling for adjusted EBITDA in the range of $1.25 billion to $1.35 billion, while adjusted free cash flow is expected to end up in the range of $1.85 to $2.05 per share.
Pyle said the outlook for renewable energy into the new year is positive and that goes for NPI, as well.
“I think valuations right now are very attractive. [Northland Power’s] dividend, it’s not the best dividend on the planet, but still very sustainable, and we do see dividend growth going into 2023,” he said.
“We’re really now starting to piece back into that clean [energy] space where we exited from based on the challenges that were presented in 2022,” Pyle said.