Finavera to Sell Wind Project for Three Times Its Market Cap

Tom Konrad CFA

On July 23rd, Finavera Wind Energy (TSXV:FVR, OTC:FNVRF) announced a deal to sell its 77 megawatt Wildmare Wind Energy Project to Innergex Renewable Energy (TSX:INE, OTC:INGXF.)  The sale will come as a great releif to Finavera’s long-suffering shareholders, who have seen the stock halve in value since the start of the year.

I included Finavera in my annual list of clean energy stocks this January because, even at the time, Finavera was trading at a fraction of the value of its wind projects, despite a weak balance sheet.  Since then, Finavera has moved its projects forward, receiving important environmental andconstruction permits, but limping along on the finance side with a small (but dilutive) private placement and loan with more dilutive warrants, with the two deals totalling only a little more than $1 million.

The $22 million received from Innergex for Wildmare should put an end to shareholder dilution, since it is sufficient to pay off Finavera’s entire $11 million debt burden and allow Finavera to advance the company’s other projects.  As CEO Jason Bak said, “This transaction illustrates the significant asset value Finavera has created for shareholders and provides a strong return on our investment in the development of wind energy for British Columbia. This transaction creates a stable platform for long term growth and allows Finavera to recycle capital and fund the ongoing development of its remaining portfolio of projects.”

The money, along with another $8.8 million which the company expects from its partnership in an Irish wind farm moves Finavera out of the asset-rich and cash poor renewable developers which have been languishing for the lack of funds, and firmly into the camp of asset rich firms with strong balance sheets able to profit from the availability of cut-price development projects.

Disclosure: Long FNVRF

This article was first published on the author’s Forbes.com blog, Green Stocks.

DISCLAIMER: Past performance is not a guarantee or a reliable indicator of future results.  This article contains the current opinions of the author and such opinions are subject to change without notice.  This article has been distributed for informational purposes only. Forecasts, estimates, and certain information contained herein should not be considered as investment advice or a recommendation of any particular security, strategy or investment product.  Information contained herein has been obtained from sources believed to be reliable, but not guaranteed.