Scotia commentsSeveral Developments Offset Poor Q2 Resource Availability
OUR TAKE: Mixed.
Q2 Adjusted EBITDA Proportionate of $149M was 14% behind our estimate of $173M and 10% below consensus of $165M on lower-than-expected contribution from the wind and solar generation segments.
Trailing-12-month FCF per share of $0.44 was well below our estimate of $0.74 resulting in a payout ratio of 164%.
Positively, the company executed on its growth strategy via the acquisition of an 18MW run-of-river hydro project in Chile, at a 19.4x EV/run-rate EBITDA multiple, and the commissioning of the 226 MW Griffin Trail wind project, located in Texas.
We maintain our Sector Perform rating and one-year target price of $23.50.
KEY POINTS
Footprint in Chile further extended. Recall, Innergex recently completed the acquisition of the remaining 50% of its Energia Llaima interest in a stock deal worth $89M. see our note for further details. Subsequent to the closing of that consolidation on July 9, INE acquired all outstanding shares of Licn, which owns and operates an 18 MW run-of-river plus reservoir hydro facility located in the region of Los Rios, in exchange for ~$50.5M, comprised of ~$20.6M cash and $19.9M of debt assumption. The facility has been in operation since 2011 and sells its power in the spot market. The company expects the project to generate an average of $2.6M of Adjusted EBITDA over the next five years.
Settlement reached in Phoebe hedge contract dispute. In mid-July INE reached an agreement to settle its outstanding balance that resulted from the facility's downtime during the severe weather experienced by Texas in February. The company paid out US $24M to settle the dispute.
200MW solar project essentially complete. The Hillcrest solar project, located in southern Ohio, has achieved commercial operation and is ~99% complete. Full commercial operation is scheduled in Q3 2021. Management has increased its capital cost estimate to reflect some cost overruns.