Business Focus

Northland Power Inc. (NPI)

NPI is a diversified Canadian utilities company specializing in developing offshore wind and onshore renewable energy projects. NPI was established in 1987 and is one of Canada’s first independent power producers and is now headquartered in Toronto with global offices in eight countries. NPI owns an economic interest in 3.4 GW (net 2.9 GW) of operating generating capacity and a significant inventory of early-to-mid-stage development opportunities encompassing approximately 15 GW of potential capacity. The company’s primary focus is on offshore wind, onshore renewable solar, wind, and battery storage.

Boralex Inc. (BLX)

BLX is a Canadian developer, owner, and operator of renewable energy power facilities in Canada, France the United States, and United Kingdom. BLX has been working in renewable energy for the past 30 years and has a workforce of over 790 people. The company operates primarily across three types of renewable energy: wind, solar, and hydroelectric (including energy storage). It has 102 Wind Farms, 13 Solar Power Stations, 15 Hydroelectric power stations and 2 storage units. This gives the company an installed capacity of 3,133 MW across 132 sites. BLX has 264 MW under construction expected to be commissioned in 2024 & 2025, and a pipeline of 587 MW.

Financial Performance

Looking at valuation, we can see that BLX is significantly more expensive, trading at 30.6x forward earnings vs. NPI at 13.0x forward earnings. This has been the case over the previous five-year period we have looked at and there are a few potential reasons why. BLX has evidently done a better job at creating value for shareholder over this period of time. We can see how in the recent year, total returns in the second panel, really started to diverge from 2022 onwards where BLX has returned almost 72% over the period vs NPI essentially being flat. NPI’s share price weakness is also correlated with what looks to be a much higher/more attractive yield, but this is likely just because the stock has traded at a lower price historically.

Financial Metrics and Forward Estimates

The table below compares financial metrics and stats between NPI and BLX. NPI is a bit larger considering the previous historical performance comparison we have done. Investor sentiment likely plays a factor here as NPI has a much larger growth pipeline and slightly bigger asset base. While neither company has overly exciting growth estimates, BLX does have the edge in terms of margins and ROE. Debt is another important point as we see both companies have high debt/equity ratios. This is due to the high degree of debt to finance growth and operations required in the industry.

Investment Outlook

The renewables industry has been beaten up in recent years due to unfavourable commodity pricing and the high interest rate environment paired and. NPI and BLX are two often discussed pure-play renewables companies available for Canadian investors. As we shift into a lower rate-environment, renewable stocks should begin to come back into investor favour, and we think these will be two popular names. While NPI has evidently had weaker performance, we have identified that its market cap is larger than BLX’s. This is due to its scale through a larger asset base as well as a pipeline of growth projects, with multiple currently under construction. NPI also attracts investors through its high dividend yield. While both companies do not look overly exciting right now, with the right market conditions both have the potential to perform better.

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