Innergex Acquisition, LM Wind Power Builds Enercon Blades

We discuss the recent acquisition of Innergex by CDPQ for $3.6
billion, highlighting its implications on the wind industry. We
also delve into LM Wind Power producing blades for ENERCON from its
factory in Turkey and feature the Buffalo Mountain Wind Farm, a
unique project on a reclaimed coal mine in Tennessee. Fill out our
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today. Now here's your hosts, Allen Hall, Joel Saxum, Phil Totaro,
and Rosemary Barnes. Allen Hall: Big news, Innergex Renewable
Energy has announced that it will be acquired by CDPQ. A major
community and pension fund manager for about $13 and 75 cents per
share. I've seen a couple different numbers about that. This
transaction represents a total enterprise value of approximately
3.6 billion US dollars, and marks a really a substantial
consolidation in the wind industry. The deal offers about a 40%
premium on interjects closing share. Of a couple months ago. So
that's a pretty good premium that CDPQ put on interjects value. And
now Phil, this is part of a larger play of a lot of consolidation.
This one in particular, interject is going to become a private
company after this acquisition. Why? Phil Totaro: It, that's an
interesting question because normally when a company gets taken
private by a large institutional investor, it's to restructure. I
am not sure that. Innergex needs that much restructuring per se.
It's not like they've got a huge team to begin with. But a
reasonably competent team in terms of the pedigree of their
developments, obviously in Canada and throughout Europe as well.
And they've been trying to venture off and dip their toe in other
markets as well. The reality of this is that it, it's a fantastic
thing for CDPQ to strengthen their position and it comes at a point
in time when a lot of these Canadian pension funds are looking at
the profitability and the returns that they're seeing on their
investments globally, including the US right now with all the trade
tensions and everything we've got. And I think you're gonna see
more of these Canadian. Pension funds and investors pulling back
and doing things that are ignoring the US at this point. Looking at
deals in Canada, looking at deals in Europe, looking at deals in
Southeast Asia and South America for that matter. Joel Saxum: I
think it makes sense for me like CDPQ keeping their Canadian money
mostly in Canada. However, I know Innergex has a hand small handful
of wind farms in the United States as well. Did you see a reality
where just because of geopolitical reasons, they might just. Sell
those couple of wind farms off. Phil Totaro: Let's put it this way,
Brookfield's not going anywhere and they're always on the hunt for,
good assets. But there's other people that could want to gobble up
wind assets right now, especially if, the assets that Enerex owns
in the US they're not quite ready for repowering yet. But maybe
that's part of the play. Joel Saxum: Moving forward. Yeah, I know,
like you said, you mentioned Brookfield. Brookfield, same thing.
We're talking about market consolidation. They just bought National
Grid renewables not too long ago, and I know National Grid
renewables in the States. A couple, A handful of wind farms and
some solar assets, some other things. So yes, continuing to see
that trend. Allen Hall: I still wonder though if taking them
private is a better long-term play. Because of the turbulence
that's gonna happen over the next couple of years. It gets rid of
all the shareholder complaints and the back and forth and where to
save money and whatnot. If you're really trying to look for a
longer play, doesn't taking renewable assets, especially large
scale renewable assets off the public markets, the better long-term
play. I just think that. There's so much turbulence in renewable
energy, and it's getting bashed so much that the value was still
there, but in the public eye, it's like it doesn't have as much
value. But when you're producing power and you're delivering it and
getting paid, you're still making money. Phil Totaro: Maybe to
answer that question. I think again, the reason that you would take
something private is if you wanna avoid the scrutiny in general.
And the reason to wanna avoid the scrutiny at this point is partly
what you just described, but I think mainly if you're looking to
own and operate for a longer term, this is something, and look,
CDPQ is putting money into something that they're not making a
short-term play themselves either. This isn't just, Hey, let's buy
Inex to flip it in a year and a half or something. They're, if
they're. Going in like they did with a minority stake that they've
got in energy or any other investments that they've got and
partnerships they've got around the world on individual projects or
with development and owner operator companies then, they're very
deliberate about what they've done. So again, taking it private. To
me feels like they want to, just go about their business for the
time being. Allen Hall: Would the Canadian US tariff exchanges
influence that decision Phil Totaro: A little bit. I. Not
necessarily a take private deal specifically, but you've got a
scenario where, again, there, the Canadian pension funds and
institutional investors, which is also gonna include, the likes of
CDPQ and Brookfield. They are going to make it a point to
de-emphasize investments in the US for the time being, because
there's, it's, and it's really not even, 'cause look, we talked
about this on the show before. If we end up in a recession and
interest rates end up coming down, that's actually really good for
investors because they wanna plow money in when the cost of money's
cheap, if interest rates are low. But the reality of it is we're
not quite there yet. We're not, all the way into a recession yet
there's, everybody's still on the fence. The what they're, what
everyone's trying to avoid right now is the chaos that's ensuing
from the uncertainty around. The tariffs that are either in place,
not in place, now they're in place again. We had Ontario trying to
impose tariffs on the energy exports. Now they're not, because
there was a conversation with the commerce department. So I, who
knows what's gonna happen. This is the problem. Nobody knows what
the hell's gonna happen tomorrow. So how the hell can you plan
financially? Allen Hall: Don't let blade damage catch you off
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today. LM Windpower has announced an extension of its partnership
with Evolv. Company's Intercon leading wind turbine provider,
obviously. Through a new contract that'll supply LM 78.3 meter
blades for intercom's, E one 60, EP five, E two wind turbines.
This, these blades are gonna be manufactured over in Turkey at the
end of this year and it. It seems like LM is moving away from
manufacturing GE equipment to picking up some work for other
manufacturers. I, we've been noticing this trend for several months
now. It does seem like this alliance falls into that bucket of
maybe LM is moving on a little bit, but Turkey, the thing about
this is LM getting work in Turkey because it did seem like a lot
of. Companies were starting to pull out a Turkey. Intercon is
starting to fill the void. Isn't that what it looks like, Phil?
Phil Totaro: Yes. Although this is slightly confusing. 'cause if
you remember last year they were talking about laying everybody off
in Turkey at LM and shutting the whole factory because I thought
Intercon was working with TPI, who also has a facility there on the
manufacturing of blades. So did something happen? And if so, what?
I don't think we know. But also this, this deal, while it's
obviously not necessarily bad news for lm, keep in mind there's
only five or so gigawatts of order book for these intercon
turbines. That's specific model of turbine. So it's not like this
is game changing for lm and it's not oh, this is gonna save the
company, it'll keep a factory in Turkey operational for. 18 months
while they produce these things. And then after that, I don't know
what happens. 'cause intercom's not been like the strongest in
terms of their global sales lately. So we'll see. Joel Saxum: Yeah.
So Rosemary, you worked at lm as part of some special projects. Of
course you had one that was your general remit, but when things
came through the door from other manufacturers of turbines,
intercon being one of 'em, Intercon builds the turbine itself. They
don't build their own blades. How was that handled within lm? Do
you, did you have any experience with that? Rosemary Barnes: So
when I started at lm, there was nothing but other companies blades,
right? LM Wind Power didn't make turbines and so the blades they
made were exclusively for other manufacturers to put another
manufacturers turbines. And then a couple of years. Into my time at
lm, I think must have been about 2018 or something. They got bought
by ge who had been one of their main customers,