Renewable Energy Powers Your Dividend Income…

Innergex is a leading Canadian independent renewable power producer that engages in the development, ownership, and operation of hydroelectric facilities, wind farms, and solar farms. The company has operations in Canada (67% of revenues), Iceland (17%), France (15%), and the U.S. (1%) which are also its geographic segments.

Innergex has interests in 68 operating facilities with a net installed capacity of more than 2,500 MW including 37 hydroelectric facilities, 26 wind farms, and five solar farms. The company has five operating segments: hydroelectric generation, wind power generation, geothermal power generation, solar power generation, and site development.

Investment Data

Revenue Growth & Market Exposure

Innergex has been a focused renewable energy player for the last three decades. The company’s asset portfolio is highly diversified by type and geographies. Its portfolio comprises high-quality and long-lasting assets within the hydro (accounting for 38% of gross capacity), wind (53%), solar (3%) and geothermal (6%) energy sectors. By revenues, hydro energy is the largest accounting for 41% of total revenues followed by wind (38%) and geothermal (16%).

Over the years, Innergex has amassed both the expertise and scale to successfully launch major projects. The company is currently building its biggest wind and solar projects Foard City (353 MW) wind farm and Phoebe (250 MW) solar farm. With rising concerns around climate change and global warming, renewable energy sources have become viable power sources for the future generation. Solar plus storage is also poised to grow by leaps and bounds given rising demand for power and the intermittent nature of renewable energy. Innergex is developing two photovoltaic solar energy projects with battery storage capacity in Hawaii.

Innergex sells the generated power under long-term power purchase agreements, power hedge contracts or short and long-term industrial and retail contracts to rated public utilities and other creditworthy counterparties. The PPAs have a weighted average remaining life of 15.6 years. Innergex’s assets are young with a weighted average age of approximately 9.6 years.

Innergex is growing organically as well as through acquisitions. It successfully completed seven acquisitions, including Alterra Power Corp., its largest acquisition to date. The company is expanding rapidly and entered two new countries Iceland and Chile in the last year. Innergex has successfully become a preferred partner of choice in the development of sustainable energy projects.

Dividends

Innergex Renewable has a history of dividend growth in the low single digit. The company has compounded its payout at more than 3% annually, over the last three years. It last raised its dividend by 2.9% and offers an attractive dividend yield of more than 4% currently. This year marked the sixth consecutive year of annual dividend increases.

Innergex Renewable has a proven track record of growing cash flows. Acquisitions remain an important component of the company’s business strategy. The company focuses on developing and acquiring high-quality renewable power production facilities that generate sustainable cash flows and create shareholder value in the long term. Accretive acquisitions and project development pave the way for consistent growth for the company. Innergex has a well-balanced capital structure and seeks attractive BBB investment-grade credit rating from a top rating agency. Innergex Renewable’s cash flows are derived from a diversified asset base consisting of wind, natural gas, hydro and solar facilities and are secured by long term power purchase agreements. Innergex’s assets under construction are poised to contribute $61 million in revenues and $44 million in adjusted EBITDA annually from 2020.

Growing demand for renewable energy, stable government policies for RE procurement, and powerful acquisitions act as strong tailwinds for Innergex. The company is positioned well to gain from the growing trends in renewable energy. Canada currently generates 80% of its electricity from clean and green energy sources and is targeting to increase this to 90% by 2030. Hawaii currently has the most ambitious target of generating 100% renewable energy by 2045 and California is on track to meet its goal of 50% renewable energy by 2030-end.

Competition

Innergex has developed an expertise to participate in the growing market of cutting-edge technologies that will support smart power grids and facilitate the deployment of renewable energy. A global presence with 68 projects in operation and more than eight in development grants it an edge over the competition. Innergex competes with the likes of Emera, Canadian Utilities, Brookfield Renewable Partners, Algonquin Power & Utilities Corp, Northland Power Inc., TransAlta Renewables, etc. It faces competitors ranging from large utilities to small independent power producers.

Bottom Line

With a net installed capacity of over 2,000 MW, a presence in new markets and novel technologies, Innergex is poised for future growth. It has a strong core business with a proven track record and is in a good position to leverage its knowledge and customer relationships to develop new sites. The company is known for its operational excellence and financial strength which positions it well for future growth opportunities. Given its huge infrastructure base and strong visibility from contracted cash flows, the company should continue its dividend growth streak in the high single-digit rate going forward.

Innergex is in a similar position as Northland Power TSE:NPI. The company grows organically and through acquisitions. The size of the company along with its green energy focus may very well lead to being acquired or to consolidate. In the short term, it has performed well based on the low interest environment and the interest in green energy.

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