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 (56% of 2019 net installed capacity), France (8.5%), the U.S. (32%) and Chile (3%) which are also its geographic segments.

The company has a well-balanced diversified portfolio through both location and technology. Innergex has interests in 69 operating facilities with a net installed capacity of more than 2,600 MW including 37 hydroelectric facilities, 26 wind farms, and six solar farms. Its operating segments are hydroelectric (30% of net installed capacity in 2019), wind (58%), and solar (12%) power generation.

Investment Data

Revenue Growth & Market Exposure

Innergex has been a focused renewable energy player for the last three decades and is a preferred partner of choice in the development of sustainable energy projects. The company’s asset portfolio is highly diversified by type and geographies. By revenues, hydro energy is the largest accounting for nearly 50% of total revenues followed by wind (46%) and solar (4%).

Over the years, Innergex has amassed both the expertise and scale to successfully launch major projects. The company commissioned its biggest wind and solar projects Foard City (350 MW) wind farm and Phoebe (250 MW) solar farm in 2019. It also signed a long-term PPA for the Hillcrest solar project in Ohio which should come online by the end of 2020. 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 the rising demand for power and the intermittent nature of renewable energy. Innergex is also developing two 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 15.1 years. Innergex’s assets are young with a weighted average age of approximately 7.3 years.

Innergex’s quarterly production was 28% higher due to the contribution of the Foard City wind farm and the Phoebe solar facility and higher production in France. Its industry is classified as essential services and the company’s operations continued even during the crisis. It continued developing its two projects in Hawaii. Innergex has a 100 megawatts of development pipeline for battery storage. The company is focusing on solar development in the US and is making good progress in Pennsylvania, and Ohio. It is also expanding its footprint in wind and storage space in France. Innergex is further diversifying its renewable energy portfolio in Chile with the acquisition of a 68 MW solar farm.

Dividends

Innergex Renewable has a history of decent dividend growth. The company has compounded its payout at more than 3% annually, over the last three years. It last raised its dividend by 2.8% and offers a dividend yield of 3.7% currently. Innergex Renewable is a Canadian Dividend Aristocrat and this year marked the seventh consecutive year of annual dividend increases. It recently announced an NCIB for its common as well as preferred shares. It declared more than $95 million in dividends in 2019.

Innergex Renewable has a proven track record of growing cash flows derived from a diversified asset base consisting of wind, natural gas, hydro, and solar facilities and are secured by long term power purchase agreements. It generated significant free cash flow of $91 million for the first quarter. Acquisitions have remained an important component of the company’s business strategy and the company focuses on developing and acquiring high-quality renewable power production facilities generating sustainable cash flows and creating shareholder value in the long term. Accretive acquisitions and project development pave the way for consistent growth for the company. The strategic alliance with Hydro-Quebec will help Innergex to tap a bigger industrial customer base with investments in larger and diversified projects. This alliance will be a key driver of growth for Innergex with Hydro-Quebec already committing an initial $500 million for co-investment projects with Innergex. The company has a well-balanced capital structure and attractive investment-grade credit rating that also supports convenient capital financing.

The company is targeting a 10% EBITDA growth. 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 facilities in operation, six projects in development, and interests in numerous prospective projects grants it an edge over the competition. Innergex competes with the likes of 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.

TickerKeyTickerCompanySectorIndustryScoreQuoteMarket CapP/EFPEEPSYield RawYieldPayoutRatioPaymentsDividendChowderGrowthRatingIncomeRatingTollboothAmbassadorAchieverAristocratKingCountryGraph
TSE:AQNAQNAlgonquin Power & Utilitties CorpUtilitiesUtilities - Renewable0.7418.4810.8718.6424.790.990.04504.500.840540.620.131778Tollbooth - UnregulatedNONOYESNOCanada1
TSE:BEP.UNBEP.UNBrookfield Renewable Partners L.P.UtilitiesUtilities - Renewable0.4857.5810.370.0024.79-0.360.05055.051.000042.170.079846Tollbooth - UnregulatedNONONONOCanada1
TSE:NPINPINorthland Power Inc.UtilitiesUtilities - Renewable0.4836.707.1219.2024.791.910.03273.270.6283121.200.043335Tollbooth - UnregulatedNONONONOCanada1
TSE:RNWRNWTransAlta Renewables Inc.UtilitiesUtilities - Renewable0.5115.604.1538.8924.790.400.06026.022.3490120.940.082334Tollbooth - UnregulatedNONOYESNOCanada1
TSE:INEINEInnergex Renewable Energy IncUtilitiesUtilities - Renewable0.4122.994.010.0024.79-0.520.03133.131.000040.720.031346Tollbooth - UnregulatedNONOYESNOCanada1
TSE:BLXBLXBoralex Inc.UtilitiesUtilities - Renewable0.3934.943.370.0024.79-0.320.01891.891.000040.660.067754Tollbooth - UnregulatedNONOYESNOCanada1

Bottom Line

With a net installed capacity of over 2,000 MW, a presence in new markets and novel technologies, Innergex is poised for rapid 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. Innergex is now backed by Hydro-Quebec, a large government-owned corporation owning a 20% stake in the company. The company should also gain from its various new development initiatives which will come online later this year. It has a development pipeline of nine projects.

DISCLOSURE: Please note that I may have a position in one or many of the holdings listed. For a complete list of my holdings, please see my Dividend Portfolio.

DISCLAIMER: Please note that this blog post represents my opinion and not an advice/recommendation. I am not a financial adviser, I am not qualified to give financial advice. Before you buy any stocks/funds consult with a qualified financial planner. Make your investment decisions at your own risk – see my full disclaimer for more details.
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