Power producer Boralex expects wind, hydro growth will offset wood losses

Boralex solar panels are shown in an undated handout photo. THE CANADIAN PRESS/HO, Boralex

Boralex solar panels are shown in an undated handout photo. THE CANADIAN PRESS/HO, Boralex

MONTREAL – Power producer Boralex expects its growing wind and hydroelectric operations will continue to offset protracted weakness in its U.S. wood residue business.

“Despite the recent short-term volatility in wind speed (in France), we strongly believe we are in a position to show great results over the long-term in this sector, along with hydro,” president and CEO Patrick Lemaire said Friday during a conference call.

The Quebec-based power producer has curtailed production of several wood facilities during the quarter because of low spot electricity prices.

It has taken extensive downtime in the United States to build inventories and take advantage of typically higher electricity prices in the summer.

Wood residue production decreased by 33 per cent, mostly because of the closure of its Ashland facility in Maine. Overall sector revenues decreased by 45 per cent, while operating earnings fell $2.2 million.

“Until the outlook improves, we intend to closely monitor the U.S. wood residue facilities and operate them only when it makes business sense,” Lemaire told analysts.

Boralex (TSX:BLX) lost $5.1 million or 14 cents a share for the three months ended June 30. That was up from a loss of $4.7 million or 12 cents a year earlier.

The increased net loss reflected a drop in operating income from U.S. wood-residue power stations and higher financing costs from issuing convertible debentures.

It booked the wider loss even though the company generated a near 50 per cent jump in revenues as it grew its wind power business and expanded through the acquisition of Boralex Power Income Fund and its 10 power stations last year.

Revenues rose to $54 million from $36.7 million — a gain of 47 per cent during the traditionally weakest quarter of the year.

“From an operational standpoint, Boralex’s wind and hydro operations are running very smoothly,” Lemaire said.

He said the relative importance of the wood residue business will decrease over time as new wind projects are developed.

Wind power production increased by 62 per cent from last year because of new facilities in Canada and France.

Boralex is looking to add 40MW to 50MW of wind power in France and is developing a large project on Quebec Seminary land that could be expanded through further contracts with Hydro-Quebec.

It recently commissioned its first solar power plant, a 4.5MW facility in France.

“Boralex has a quality pipeline of projects of close to 200MW of net contracted capacity scheduled to be deployed before the end of 2015, along with the potential of another 40-50MW of wind cap (in France).”

Pierre Lacroix of Desjardins Capital Markets said the second quarter results were slightly below expectations.

Wind operations were weaker, once again due to lower production in France.

The hydro segment significantly surpassed expectations on strong hydrology, particularly in the United States. The natural gas segment was slightly better on relatively good production numbers.

“The company continued to show solid year-over-year growth in most of its key metrics, largely as a result of the acquisition of the income fund and start-up of new wind capacity,” Lacroix wrote in a report.

“Nonetheless, the bleak performance of the wood residue segment and the lower-than-average numbers from the wind operations in France will concern some investors.”

Boralex, with 350 employees, is a power producer which operates in Canada, the northeastern United States and France.

On the Toronto Stock Exchange, its shares were down 43 cents, or 5.45 per cent to $7.46 in afternoon trading.

Winnipeg Free Press


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