Boralex Inc T.BLX

TD 2

[retiredcf]

POSITIVE REACTION TO Q1 BEAT; WELL POSITIONED TO FUND ORGANIC GROWTH

THE TD COWEN INSIGHT

BLX shares rallied 7% yesterday; IPP peers also had a strong day, but BLX's Q1/24 results exceeded expectations and the company remains well-funded for organic growth. We view BLX as well-positioned in growth-oriented markets with strong government support for renewables (ON, QC, NY, France) with upcoming RFPs. We believe BLX has a robust organic growth pipeline and a robust balance sheet.

Event

Boralex (BLX) reported Q1/24 results on May 15 before the market opened. Adjusted EBITDA of $218 million was above both our estimate of $199 million and the consensus forecast of $195 million. Discretionary cash flow (AFFO) of $0.76/share (before development expenses) was above our forecast of $0.61/share.

Impact: SLIGHTLY POSITIVE

BLX outperformed most Canadian IPP peers yesterday, which we attribute to a combination of encouraging Q1 results, strong tailwinds for expansion in Canada, and the company's solid balance sheet.

Strong realized pricing in France, due to BLX's optimization strategy, supported Q1 operating results that were ahead of both our forecast and consensus expectations. Overall generation was 1% below management expectations (a proxy for long-term average), but cash flows were supported by better-than-forecast price realizations in the wind segment (resulting from previous PPA optimization in France).

BLX was not successful in New York's recent expedited RFP; we believe that shareholders are well-served by a disciplined approach to bidding. Detailed results are not yet available; we believe BLX's prospects in future RFPs remain strong given New York's targets (70% of electricity from renewables by 2030). BLX was recently successful in Ontario's storage RFP (125 MW for a 50% stake) and suggested Canada is less competitive than other markets given the relative complexity of local partnership requirements and the draw of the U.S. for larger global developers.

BLX ended Q1/24 with $575 million in available liquidity (up modestly from $547 million at the end of 2023). Management indicated on the call it did not see a need to consider equity issuances to fund its organic growth pipeline for the next 18 months (i.e., through late 2025). The company has upcoming or potential RFP opportunities across its core markets (New York, Ontario, Quebec, France, and the U.K) that we believe could offer attractive opportunities to augment its 298 MW construction pipeline. Updates to our forecasts primarily consist of reconciling the Q1/24 results.