Boralex Earnings: Strong Balance Sheet Positions Company Well for Development Activities

We maintain our CAD 39 fair value estimate for Boralex BLX following the company’s first-quarter results. We view the shares as fairly valued.

There were few surprises in Boralex’s first quarter. The company’s total generation was in line with expectations, as stronger wind generation in France and the United States offset weaker production in Canada. Financially, the company reported a slight decline in adjusted EBITDA year on year, but this was driven by exceptional results in the prior year due to high French power prices. We expect Boralex’s 2023 to be less exposed to upside in power prices following government intervention late last year to limit generators’ ability to capture high prices.

Boralex’s development pipeline ended the quarter at 4.3 gigawatts of wind and solar projects along with 1 gigawatt of storage projects. The company remains active in its core development markets of France, the U.S., and Canada, with a continued shift toward the U.S. and solar development relative to its history. In addition to organic activities, we believe the company remains on the lookout for further acquisitions beyond its December 2022 purchase of a U.S. wind portfolio. We view the U.S. and Europe (excluding France) as the two most likely geographies for further deals. In general, we prefer organic development to acquisitions, given its superior returns.

Boralex’s balance sheet remains in sound condition. In addition, a payout ratio of 44%—among the lowest of the peer group—positions the company to funnel excess cash flow toward future development. Boralex continues to target an investment-grade rating by 2025.