Likely Required To Meet 2025 Targets Our Conclusion
Whether or not BLX hits its 2025 targets (did assume more M&A), it shouldn’t
detract from the strong execution (through turbulent times) and impressive
development pipeline (well on track for the organic growth component of its
targets). Existing projects are advancing well, and BLX is having success in
RFPs and is well positioned for additional contracts in key growth markets.
We expect an active 2024 and BLX is well funded for now. We reiterate our
Outperformer rating and BLX is a preferred name in our coverage. Our price
target moves to $40 (was $41).
Key Points
Progress On Advanced Development. BLX made strong progress on
development in 2023, commissioning four wind farms and a storage facility in
France. Its construction pipeline is busy (including the 200MW Apuiat wind
project in Quebec and 106MW Limekiln project in the U.K.). The growth
pipeline (secured & under construction/ready to build) has increased 135MW
(now stands at 906MW), while BLX also progressed 338MW from its mid-
stage to its advanced-stage pipeline and added some more early-stage
projects. Further, the identified growth path doesn’t include the 315MW
awarded under Hydro-Quebec’s recent wind power call for tenders and other
advanced projects in France and other key markets.
Ample Opportunities For Future Growth. 2024 should be another productive
year for BLX, with ample opportunities to secure more growth with BLX recently
submitting 525MW across two storage projects in Ontario and 240MW (five
projects) under NYSERDA’s expedited RFP in January. Plus, BLX will likely bid
into the subsequent RFP in NY later this year (has >500MW of bid-ready
projects) and should bid into additional upcoming RFPs in Quebec. Discussions
for additional corporate PPAs in France are also underway. Overall, BLX
believes it is well positioned for more contract wins over the next few years.
BLX needs ~400MW to meet its 2025 capacity target, but will likely need M&A
to meet this target within the required timeline given that some recent and future
RFPs won’t yield operating projects for a few years.
Relatively Strong Funding Position. BLX’s funding position is solid with
$550MM of available liquidity for growth following a $100MM upsizing of its
credit facility. Factoring anticipated cash flows, BLX should be well funded
through 2024, but at some point will need to think about funding of future
growth. We expect equity will be required at some point (M&A will impact
equity needs), but project costs are spread out and partnerships and sell-
downs are still an option if and when it makes sense. ITCs in Canada will
also be a net benefit. Overall, we continue to have confidence that BLX can
navigate its funding requirements.
Estimate & Valuation Update. Our 2024/25 estimates increase on assumed
realized pricing in France and updated interest expense assumptions, while
our long-term forecast is largely unchanged. Our DCF-based price target
rounds down to $40 (was $41) after our model/valuation update.