Innergex is selling 188 million for what it paid 96 million 10 months ago, except that this time the buyer is also buying stakes in a large portfolio of assets at different stages of development.
Innergex renewable energy has reached an agreement with Crédit Agricole Assurances to sell it 30% of its business portfolio in France, for 188.4 million.
The transaction involves 17 wind farms in operation representing a total installed capacity of 324 MW and 9 MW/9 MWh of battery storage capacity, as well as a portfolio of assets under development.
This transaction is positive for the renewable energy producer, according to Naji Baydoun, financial analyst at iA Capital Markets.
“Innergex had bought back its assets in France at a price equivalent to 11 times EBITDA [earnings before interest, taxes and amortization] on average since 2016, it is reselling this stake at 16 times EBITDA,” he said.
According to the analyst’s calculations, the revaluation of the French portfolio, about 5% of the company, adds $1.50 of net worth to Innergex stock.
With the Toronto Stock Exchange closed on Monday due to the holiday in the rest of Canada, the analyst expects a positive reaction from the stock when markets open on Tuesday.
In October 2022, Innergex had paid 96 million to the Desjardins Group Pension Plan for its 30.45% stake in the wind turbine portfolio in France that it did not already hold.
In addition, Crédit Agricole Assurances undertakes to contribute to the capital of future Innergex projects in France.
In an interview with La Presse Canadienne, the president and CEO of Innergex, Michel Letellier, argues that the two transactions are not perfectly comparable. Last fall’s transaction only included wind farms in operation, while Crédit Agricole additionally buys a stake in development projects.
During the same interview, Mr. Letellier maintains that his company is in the process of raising more than 400 million in cash, which will be used to finance its future growth, in particular by mortgaging debt-free assets.
In the press release announcing the transaction. Mr. Letellier welcomed this “long-term partnership [which] provides Innergex with additional financial flexibility to continue and accelerate its wind and solar project development activities for years to come.”
“This investment in Innergex France is fully in line with Crédit Agricole Group’s climate commitments in favor of a low-carbon economy,” said Philippe Dumont, CEO of Crédit Agricole Assurances, in the same press release. “This operation will also contribute to the achievement of Crédit Agricole Assurances’ objectives in renewable energies as well as to the achievement of an installed capacity of 14,000 MW by 2025.”
Innergex will continue to control the management of the wind turbines and those to come.
The transaction will be completed in the second half of 2023, after obtaining regulatory approvals.
It comes at the right time for the highly indebted Quebec society, which was faced with the challenge of creating growth without risking diluting its shareholders. In addition, dividends paid have exceeded distributable income over the past 12 months.
“With this transaction, Innergex is reducing its leverage in the short term,” explains Mr. Baydoun. It also demonstrates to the market that it has the ability to access capital in different ways to finance its growth without diluting shareholders. As for the distributable income payout ratio, this will fall with the future growth of the asset portfolio, but we do not expect an increase in the dividend. »
However, any increase in the number of shares in circulation would accentuate the imbalance between dividends paid and distributable income.
Innergex pays a dividend of $0.72 per share, representing a running yield of 5.56% at a share price of $12.38. The stock has lost 36% of its value in one year.
Recently, analysts, from CIBC and National Bank in particular, lowered their target price for Innergex. The next quarterly results will be disappointing due to weak wind resources during the period. Given the sharp appreciation in the value of the French portfolio, Mr. Baydoun would not be surprised to see them adjust their target price upwards soon.
Activities: Renewable energy generation through 87 assets with a net installed capacity of 3692 MW
Headquarters: Longueuil
Markets: Canada, United States, Chile and France
Revenue (12 months ending March 31, 2023): 900 million
Net loss (12 months ending March 31, 2023): -61.6 million
Market value (as of August 3): 2.54 billion
Main shareholders: Hydro-Quebec (19.1%), 1832 Asset Management (8.6%), Caisse de depot et placement du Quebec (6.5%)
