Canadian renewable energy company Boralex Inc. BLX-T is considering a deal to go private as part of a strategic review process, ramping up speculation that Quebec’s largest pension fund manager could emerge as a suitor.
Boralex confirmed in a statement its board formed a special committee, which will review options, after Bloomberg News reported Monday that the company is weighing strategic alternatives.
Boralex shares rose 7.5 per cent to $33 on the Toronto Stock Exchange on Tuesday, giving it a market value of $3.16-billion.
The Caisse de dépôt et placement du Québec, which manages $517-billion, is Boralex’s largest shareholder, with a 15-per-cent stake currently worth about $474-million.
Last year, the Caisse acquired one of Boralex’s rivals, Innergex Renewable Energy Inc., in a deal worth $10-billion including assumed debt. Pension plans and other institutional investors are acquiring renewable power producers because they value the predictable cash that flows from long-term contracts with dependable customers such as utilities.
Innergex and Boralex are clean energy leaders in Canada, and “there has been much investor discussion over the years” about whether the two companies could merge, Scotia Capital Inc. analyst Robert Hope said in a note to clients.
“The question has become whether [Boralex] could also be taken private to create a larger, Quebec-based renewable power developer,” he said.
National Bank Financial Inc. analyst Baltej Sidhu said the Caisse “stands out as a candidate,” and a merger could yield significant cost savings.
But he also said it could be “tough to digest” for the pension fund manager, which has a mandate that includes contributing to Quebec’s economic development, given that some of those savings would likely come from cutting jobs.
Caisse spokesperson Conrad Harrington declined to comment.
Boralex said in its statement that there is no assurance the review will result in a transaction and that the company “remains focused on its stated business strategy.”
Mr. Sidhu said broader interest in Innergex last year raises the prospect of a consortium deal, with potential interest from major pension funds or infrastructure investors such as New York-based Brookfield Asset Management Ltd., Global Infrastructure Partners LLC or KKR & Co. Inc., Stockholm-based asset manager EQT Group, and Sydney-based Macquarie Group Ltd.
Earlier this month, a consortium made up of Global Infrastructure Partners and EQT agreed to buy U.S. power company AES Corp. for US$33.4-billion, including debt, in one of the largest acquisitions ever seen in the sector.
BlackRock, EQT-led group to buy AES in $33.4-billion deal
Boralex builds and runs renewable energy projects in Canada, France, the United Kingdom and the U.S. Those include wind and solar farms, as well as battery energy storage systems.
The company is aiming to add 7 gigawatts of capacity by 2030, and has an 8.2 gigawatt pipeline of wind, solar and battery storage projects in development or construction.
That would add to its current installed capacity of nearly 3.8 megawatts, which is up more than 50 per cent over the last five years.
Bank analysts predict that Boralex could fetch $39 a share or more in a deal. Mr. Sidhu said that price could be “a reasonable anchor for potential valuation” in a transaction.
In an optimistic case, if Boralex gets a similar multiple to what Innergex received when the Caisse acquired the company last year, Mr. Hope said Boralex could fetch as much as $39.50 to $43.50 a share, or upwards of $4-billion in a potential sale.
Multiples for renewable energy companies have come down since the Innergex deal was struck last year, as the industry has faced political and supply chain headwinds.
Boralex and its renewable power peers have faced stock market headwinds since U.S. President Donald Trump won re-election and began cancelling permits for windfarms and endorsing coal and natural gas-fired plants. Governments in many European and Asian countries continue to back renewable projects.
Boralex’s share price has languished since 2022, when it surpassed $50. But war in Iran could rekindle interest in renewables, providing “a tailwind for European renewables as fuel security concerns increase,” Mr. Hope said.
Some analysts such as Mr. Sidhu say its stock is now undervalued.
Mr. Hope said Boralex’s growth plans put it in “a position of strength” in negotiations, which would allow its board to “be patient.”