Innergex Renewable Energy: A Growth Story With A Dividend

| About: Innergex Renewable (INGXF)

Innergex Renewable Energy's (OTC:INGXF) stock made a 52-week high in September 2012 at $10.80. The stock is currently trading at $8.67 or 19.7% below the 52-week high.

(Click to enlarge)

I believe the stock could be a good pick from the current level based on the intensive insider buying, which started in June and has continued this month. Four different insiders have been buying the shares since June 6:

  • John Hanna purchased 5,000 shares on July 16-18 and currently holds 5,000 shares or less than 0.1% of the company. John Hanna serves as a director of the company.
  • Michel Letellier purchased 2,500 shares on June 13-21 and currently holds 2,500 shares or less than 0.1% of the company. Michel Letellier is President and Chief Executive Officer of the company.
  • Jean Perron purchased 7,000 shares on June 6-25 and currently controls 118,798 shares or 0.1% of the company. Jean Perron is Chief Financial Officer and Senior Vice President of the company.
  • Nathalie Théberge purchased 500 shares on June 6 and currently holds 939 shares or less than 0.1% of the company. Nathalie Théberge is a senior officer of the company.

(Click to enlarge)

(Click to enlarge)

The company

Innergex Renewable Energy is a Canadian independent renewable power producer. The company develops, owns, and operates run-of-river hydroelectric facilities, wind farms, and solar photovoltaic farms and carries out its operations in Quebec, Ontario, British Columbia, and Idaho, USA.

Its portfolio of assets currently consists of:

  1. Interests in 28 operating facilities with an aggregate net installed capacity of 577 MW (gross 1,031 MW), including 22 hydroelectric operating facilities, five wind farms, and one solar photovoltaic farm.
  2. Interests in eight projects under development or under construction with an aggregate net installed capacity of 265 MW (gross 413 MW), for which power purchase agreements have been secured.
  3. Prospective projects with an aggregate net capacity totaling 2,900 MW (gross 3,125 MW).

(Click to enlarge)

Why Canada?

Canada enjoys a unique abundance of hydrological resources. With an estimated installed hydroelectric capacity of more than 70,000 MW, it is the second largest hydroelectric energy producer in the world. Furthermore, according to the Canadian Hydropower Association, the country has an undeveloped, technically feasible potential estimated at 163,000 MW. Despite the competition for appropriate sites and the challenges associated with power transmission over great distances, the low operational costs and long project lives of these facilities suggest that hydroelectric power generation will remain a major affordable supply source for many years.

(Click to enlarge)

Over the last few years, according to the National Energy Board, wind power has become commercially viable and emerged as the fastest growing segment of the renewable power industry in Canada. The Canadian Wind Energy Association ranks Canada as the ninth largest producer of wind energy in the world, with an installed wind power capacity of 6,201 MW at the end of 2012, an 18% increase from the preceding year.

A solar energy industry has emerged in Canada in recent years, especially in Ontario. At March 31, 2012, the Ontario Power Authority reported 482 MW of solar PV installed capacity in commercial operation, with an additional 1,536 MW of capacity under development.


The company reported the first quarter financial results on May 14 with the following highlights:

Revenue $35.7 million
Net loss $0.2 million
Cash $25.2 million
Debt $1.4 billion


The company has seven projects scheduled to begin commercial operation between 2013 and 2016. Construction is ongoing at three of the projects and is expected to begin on the remaining four projects in 2013.

(Click to enlarge)


Innergex Renewable Energy operates mainly in the Canadian power sector, which is affected by the supply of and demand for power in the provinces in which it operates being Québec, British Columbia and Ontario, the availability of transmission lines and overall economic conditions in Canada and the United States. Within this sector, Innergex Renewable Energy faces competition from large utilities, other independent power producers and other institutions such as investment management funds. Innergex Renewable Energy depends upon the sale of its power to provincially owned utilities through long-term PPAs, which are generally obtained through a Request for Proposals process or an acquisition, which can attract proposals from many of Innergex Renewable Energy's competitors. Innergex Renewable Energy manages the risk posed by such competitive conditions through its annual and ongoing strategic planning process. In addition, Innergex Renewable Energy's geographically diverse portfolio of projects, its strategy of focusing on low-impact renewable projects, its proven track record and the experience of its management team mitigate this risk.


There have been four different insiders buying the shares and there have not been any insiders selling the shares during the last 45 days. There are eight analyst buy ratings, three neutral ratings and zero sell ratings with an average target price of $11.05.

The stock has a dividend yield of 6.69% and the company has a book value of $4.68 per share. The company has been able to grow its adjusted EBITDA steadily since 2010 and has been paying quarterly dividends of $0.145 per share since 2010. I believe the stock's high dividend yield combined with the recent intensive insider buying will put a floor to the stock price around the current level.

(Click to enlarge)

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.