Montreal-based Boralex Inc is one of very few pure-play renewable energy companies in Canada. It has a diversified portfolio of hydro, wind and solar assets in France, Canada and the northeastern United States. CEO Patrick Lemaire is focusing the firm on projects that have long-term contracts to sell power at set prices. Recently he sold several plants in the United States that successfully generate power from wood waste, but don't have the fixed-price contracts that give added stability in a turbulent energy market.
Why did you sell your U.S. wood-residue plants?
There were two reasons for selling these biomass assets. The variation in the [price]of electricity in the United States was part of it. The price has been good in the past few years but we were seeing the market dropping.
But Boralex also wants to develop new projects. We can get a better return for our shareholders by selling those [old variable rate]assets and investing in new projects with long-term contracts.
What are your technological preferences – wind, solar or hydro?
It is a combination of all those. In France we are looking at wind first and solar second. In Quebec we are looking at wind and hydro. In Ontario we are looking at wind and also solar. And in B.C., we are looking at hydro. We are looking around in the United States and other European countries, and also other provinces in Canada. But the main focus is on France, Quebec, Ontario and B.C.
Is there a reason you are less enthusiastic about the U.S. at the moment?
The green energy programs in the States are not as lucrative as they were. And they are [geared toward]tax credits. But Boralex doesn't pay much tax in the States, so we never focused a lot on new projects there. Big U.S. utilities pay taxes, so they make a little bit of money with the project itself but the [main]benefit they get is the tax credit.
Is France still a growth market for renewables despite the economic problems in Europe?
Yes. France has a goal to increase [renewable energy]to 20 per cent, and they are currently standing around 10 per cent of total installed capacity. So they are steadily growing. We don't see any negative momentum.
We looked at Spain a few years back [but]we walked away from it. And we were developing a project in Italy, but we sold it to another company, because we are not confident in that country.
You recently bought a solar farm in France. The solar industry seems to be in such turmoil, but do you see it as still having great potential?
Solar is subsidized by a lot, [but]the rates have been going down because of the technology's evolution. Five years from now it could be competitive with other technologies. But as of now, the momentum for Boralex to invest in solar is not as strong as it was before. Instead of doing 100 or so megawatts for the next three or four years, we'll do 50 or 30 or 20.
I s Ontario's solar power price, which was recently reduced, high enough to get you interested in investing in solar in the province?
Yes. The rates are still [high enough that]we can get a fair return. Small projects – five or six megawatts – may not be feasible any more. But with larger projects there are synergies that let you get a fair return. Panel manufacturers are tightening their belts a little, to be able to supply equipment at a fair price, and that helps make projects viable.
Where are you thinking of building new hydro-electric projects?
There could be some projects in Ontario and Quebec [but]we think B.C. is the most promising place for hydro projects in the next five years. We are not looking at major power dams, but run-of-river projects.
What do you think about complaints that turbines look bad on the landscape?
To me, a wind turbine is beautiful.
Not everybody agrees with you on that.
There are certain areas where people are ready to accept [turbines] In other areas people are not. Let's focus on the areas where this type of technology is welcome.
Boralex tries to implement our projects in a respectful manner. We went to one community and installed a [test]metering tower, but as we talked to the population we saw a lot of people against it, so we walked away.
[One of our sites]is at Seigneurie de Beaupré, a private piece of land that is 100 kilometres long and 15-20 kilometres wide. It is far away from everybody, so the project is welcome there.
How do you respond to criticism that renewable power is just too expensive?
For sure if you compare [a wind project]to a hydro project that was built 20 years ago, it is more expensive. But if you build a hydro project today, it is going to be pretty close or in the same [cost]range as wind.
In a difficult economy I can understand [that people]don't want to pay a little more on their power bills. [But]there is a cost to going green. It is a start towards a better planet for our kids.
Are shareholders demanding a dividend yet?
We are getting pressure for dividends, but we're still saying to our shareholders that the best return for them is for us to invest in good projects. We have a lot of cash on hand – $160-million – and we will use part of that for projects to be built in the next few years. Our shareholders, and the market, will recognize the [value of this approach]over the next few years.
When would you consider issuing a dividend?
It would be after the start up of the Seigneurie de Beaupré project in Quebec. We started construction last year, and the first megawatt will be delivered at the end of 2013. This is phase one of a total of 366 MW by 2015. This is going to be the largest wind farm in one location in Canada. We could consider a dividend after the first phase is complete.