Innergex Power Income Fund (IEF.un) is a renewable power producer that generates clean energy via hydro and wind. Innergex offers investors exposure to the Canadian clean energy sector and a stable income stream. Innergex owns interests in 10 hydroelectric power plants in Quebec (7), Ontario (1), British Columbia (1) and Idaho (1), as well as stakes in two wind farms in Quebec. Current power production is split 73% hydro and 27% wind.
Innergex is well positioned with long-life assets, low cost structures, long-term contracts and a strong track record of operational success. Innergex's 10 hydroelectric power plants have long-term power purchase agreements (PPAs) that average 15 years. The two wind farms have 20 year purchase agreements with Hydro-Quebec.
Innergex plans to continue as an income trust after Ottawa starts taxing trusts in 2011, but may have to cut its distribution by 10-15%. Even with a potential cut, the units are still attractively valued. Given its small size, Innergex remains a takeout target for a larger player in the renewable power space (Brookfield) or by a larger institutional investor, such as a large pension plan, looking for long-term stable cash flows.
Bottom Line: Innergex currently yields around 10% (87% payout ratio) and can be relied on as a source of stable income once its distribution is adjusted in 2011.
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