Boralex keeps “Buy” rating at IA Capital

Following an update on two of its wind farms, IA Capital analyst Naji Baydoun has maintained his “Buy” rating on Boralex (Boralex Stock Quote, Chart, News, Analysts, Financials TSX:BLX).

On August 8, Boralex announced a $608-milllion financing for its Apuiat wind farm in Quebec.

“The financing announced today shows the strength of our company, as well as attesting to the quality of the Apuiat project,” said CFO Bruno Guilmette. “I am immensely proud of the work done by Boralex’s teams, supported by our Innu and financial partners, to put in place this innovative financing that allows Boralex increased financial flexibility. The construction of the Apuiat project marks the beginning of a period of strong growth for Quebec’s wind power, in which Boralex intends to strongly contribute by leveraging its vast experience as an energy asset developer and operator.”

The same day, BLX announced that a contract for difference has been secured for its Limekiln wind farm in Scotland.

Baydoun broke down the developments.

“The updates BLX provided on its ongoing organic growth projects highlight the Company’s steady execution of its overall growth and financial priorities,” the analyst said.  “BLX’s development pipeline also provides support for continued growth in Canada and the UK, with the Apuiat and Limekiln projects expected to provide additional diversification benefits and lengthen the Company’s overall contracted profile (~11-year weighted average operating portfolio contract life vs. 30 years for Apuiat and 15 years for Limekiln). From a financial perspective, our estimates remain unchanged for Apuiat =(~$20M of net EBITDA per year once completed); meanwhile, the contract pricing for Limekiln was above our expectations, leading to higher-than-forecast potential financial contributions from the project (~$30-35M/year of potential EBITDA vs. preliminary estimates for ~$25M/year of EBITDA previously). However, the shorter-than-expected contract length offsets the higher estimates for Limekiln, therefore we expect a net neutral impact to overall DCF valuation from this update. We have already incorporated both projects into our estimates/valuation, and expect BLX to fund its equity portion for both from internal sources (~$150M of net combined equity).”

In a research update to clients September 11, the analyst maintained his “Buy” rating and one-year price target of $46.00 on BLX, implying a return of 46.9 per cent at the time of publication.