Equity financing has been a key challenge for Quebec-based energy giant, Boralex, so going private will make it stronger while also attracting new talent, says the company’s CEO.
On Wednesday, Boralex Inc. announced it is being purchased for $9 billion, including debt, or about $3.8 billion in equity value.
The deal was made by two Canadian financial powerhouses, Brookfield Asset Management Ltd. and the Caisse de dépôt et placement du Québec (La Caisse).
“Essentially, what it is giving to the company is the certainty of being able to finance this project,” says CEO Patrick Decostre.
He says debt is not an issue for the company, which it can secure through predictable revenue through long-term, 30-year contracts with partners like Hydro-Québec. The question is more about securing equity.
“We need 500 million of equity, which is a huge amount,” says Decostre.
“And you’re never sure that the planet will be aligned at the time when you do this financing.”
Under the privatization agreement, La Caisse will increase its stake from 15 per cent to 30 per cent, while Brookfield and its partners will control the other 70 per cent of the company.
Good for stakeholders, shareholders
The buyers agreed to an all-cash deal of $37.25 per share.
The company’s stock surged 28 per cent this week, following Monday’s announcement of a strategic review, trading at $36.68 on the Toronto Stock Exchange by 11 percent late Wednesday morning.
“It’s good for all stakeholders. It’s the best valuation also for shareholders,” says Decostre.
He says the company began exploring options as it looked for the best tool to deliver their strategic plan, pointing to a large pipeline of projects across Canada, the U.S, the United Kingdom and France.
The company still has a pending shareholder vote to complete the buyout, but Decostre says the deal is a “very good outcome for them.”
“It will crystallize value and help the company to go further and maybe to accelerate from the already ambitious trap plan that we had.”
$7B investment pipeline
Boralex plans to invest approximately $7 billion over the next five years, according to Decostre.
Among its largest projects are two wind developments in Quebec of about 400 megawatts each, with total project costs of roughly $1.2 billion a piece. Boralex owns one-third of those projects and acts as developer and operator alongside partners including Hydro-Québec, he said.
The company also has projects underway or in development in Ontario, New York, the U.K. and France.
Decostre said the transaction will help ensure those projects can move forward.
No major operational changes expected
Decostre said the deal is not expected to bring changes to Boralex’s headquarters, leadership or broader team.
“There is no change on the head office that is in Montreal,” he said.
Strong demand outlook
Despite political pressure on clean energy in the U.S., Decostre says demand for renewable power remains strong.
“The demand in power is going up and up,” he said, adding that renewable energy remains competitive and that there have never been so many projects in the U.S.
He says the company continues to see opportunities across multiple jurisdictions.
“We’re already the leader in Ontario with battery storage. We have bid different projects. The award will be given in June,” says Decostre.
