How Boralex Overcame the Downturn of 2008

Eight steps the renewable-energy developer and CFO Jean-François Thibodeau took to stay afloat

Boralex is a Canadian leader in the development and operation of renewable-energy power stations in North America and Europe. With more than 20 years of experience in this sector, the firm employs more than 200 people, and 45 percent of its production capacity is located in France. A CPA by trade, Jean-François Thibodeau became vice president and CFO of Boralex in 2003. Since then, he has helped quintuple the firm’s assets to $1.2 billion while increasing Boralex’s market capitalization to approximately $375 million. Thibodeau has also negotiated over $2 billion in various project and corporate financial dealings, and he is happy to be celebrating his 10th anniversary with the company. Thanks in part to his help, Boralex is now poised to double its size in terms of capacity before the end of 2016.
Boralex is a Canadian leader in the development and operation of renewable-energy power stations in North America and Europe. With more than 20 years of experience in this sector, the firm employs more than 200 people, and 45 percent of its production capacity is located in France. A CPA by trade, Jean-François Thibodeau became vice president and CFO of Boralex in 2003. Since then, he has helped quintuple the firm’s assets to $1.2 billion while increasing Boralex’s market capitalization to approximately $375 million. Thibodeau has also negotiated over $2 billion in various project and corporate financial dealings, and he is happy to be celebrating his 10th anniversary with the company. Thanks in part to his help, Boralex is now poised to double its size in terms of capacity before the end of 2016.

1. Increase financial consciousness

According to vice president and CFO Jean-François Thibodeau, the business model of renewable-energy power station developer and manager Boralex is capital-intensive, and the firm requires constant access to capital markets to pursue its strategy and growth objectives. “When the first part of the financial crisis started back in 2008,” he says, “it became obvious to us that we needed to limit any equity issuance to raise cash, and we became even more financially disciplined than ever.”

The goal was to keep as much of the cash generated from Boralex’s operations and use it toward the development of the company’s pipeline of projects. “Consequently, we decided to temporarily reduce our growth targets and, at the same time, increased our returns for new projects,” Thibodeau says.

2. Fund projects individually

While knuckling down fiscally, Boralex continued using a nonrecourse project-financing strategy so that each of its projects was funded on a stand-alone basis, the objective being to maximize the debt leverage and the duration of the loans in line with the life of the contracts. “This also protected the shareholders against the risk of a single project greatly affecting the value of our stock,” Thibodeau says. Then, in 2011, it became apparent that the traditional banks that used to lend long-term money for renewable projects were leaving the market, so Boralex also had to look for new institutions that were still willing to finance projects.

3. Seek out creative ROI strategies

Around the same time, Boralex and its partner Gaz Métro were developing their largest wind station ever. The project, which should be in operation by the end of 2013, represents investments of approximately $725 million. Boralex’s target was to raise roughly $600 million in debt to pursue the construction, but it also wanted to achieve the return it had communicated to the market. “So we needed to become more creative and evaluated every possible financing option available to us,” Thibodeau says.

4. Self-arrange project financing

Boralex decided to become the arranger of the financing, which is not necessarily done by developers when normal markets exist. “This is because you need to negotiate with a large group of financial institutions,” Thibodeau says, “and it takes a lot more time from your resources to make everyone happy and close a deal.” The firm won two international prizes, from Project Finance Magazine and Project Finance International, for its creative solutions and for closing such a large amount of financing in a deteriorating environment.

5. Explore new funding markets

The firm then looked at new markets for banks, including Japanese and German. “The real positive factor is that we decided to use the export agency from the country [Germany] of our manufacturer,” Thibodeau says.

In exchange for a premium, Boralex was guaranteeing a portion of the loans with a Triple-A rating. “So it helped bringing more banks into the deal but also nontraditional institutions [such as pension funds] that never in the past loaned under a project-finance structure,” Thibodeau says. In other words, the measure increased the liquidity available for the noncovered portion of the loans. “We were then able to raise the full amount we needed at a total cost that was below our initial objectives,” Thibodeau adds.

6. Dump unwanted assets

Boralex also reviewed its portfolio and decided to exit a certain asset class, which translated into the sale of all its US biomass facilities. “It helped us generate a net amount of approximately $80 million, which is now used towards the development of less risky and more profitable projects in the wind and hydroelectric sectors,” Thibodeau says.

7. Maximize operational revenues

Thibodeau believes that, in addition to exercising financial discipline, companies must also make sure people are focused on maximizing the results and cash generated from current operations. “Also, I reviewed all options open to the company with the objective to raise cash without the need to go to the equity market,” he says.

8. Watch for timely opportunities

Thibodeau contends that the renewable-energy sector offers many opportunities and you need to catch them at the right moment for the right price. “That means you need the lowest cost of funds possible so that you can redeploy towards high-return projects,” he says.

Thibodeau says his sale of US biomass facilities is now looking more and more like the sound strategy Boralex needed to raise some cash. “While the environment was not the best for an asset sale, I kept pushing towards that solution because it was the lowest cost for new cash, and these assets did not fit anymore in our targeted risk-reward profile,” he says. “We were finally able to find a strategic buyer for these assets that paid the right price, and we were able to achieve our goal.”