Boralex’s ROCE Slide: A Storm Brewing in Renewable Energy’s Calm?

The renewable energy sector has been a beacon of growth for investors, but beneath the surface of Boralex Inc. (TSE:BLX) lies a brewing storm. Let’s dive into the red flags: a declining Return on Capital Employed (ROCE), sky-high debt, and a dividend payout ratio that’s unsustainable. This isn’t just a hiccup—it’s a warning sign that Boralex’s golden days may be over.

ROCE: The Canary in the Coal Mine

ROCE measures how efficiently a company generates profits from its capital investments. For Boralex, this metric has been in freefall.

• 2022: ROCE peaked at 3.6%—a high-water mark.
• 2023: Dropped to 3.4% as production sputtered.
• 2024: Plunged further to 2.9%—a 20% decline from its peak.

Why does this matter? ROCE under 5% signals poor capital allocation. Boralex is investing in projects that aren’t paying off. For example, its Q4-2024 wind and hydropower output was 16% below expectations, gutting EBITDA by $33 million. Even with $1.2 billion in new financing, the company can’t turn the tide.

Debt: A House Built on Sand

Boralex’s debt-to-equity ratio is a staggering 198.3%—nearly twice its equity. That’s a red flag.

High leverage is risky in volatile industries like renewable energy. Boralex’s cash flow from operations cratered from $496 million in 2023 to $215 million in 2024, leaving it reliant on debt to fund projects. Worse, its dividend payout ratio hit 617% in 2024—meaning it’s paying out 617% of its net earnings in dividends.

What’s the catch? The company is either raiding cash reserves or borrowing to sustain payouts. That’s a Ponzi scheme in the making.

Dividend Danger Zone

A 617% payout ratio is a flashing neon sign. Let’s break it down:

• 2024 Net Earnings: $74 million.
• Dividends Paid: $456 million (based on the payout ratio).

Boralex is hemorrhaging cash to prop up dividends. Even as net earnings fell $41 million year-over-year, it kept paying out. This isn’t leadership—it’s desperation.

The Write-Off Wake-Up Call

The company booked a $6 million impairment charge in 2024—proof that some projects aren’t living up to expectations. Meanwhile, its project pipeline, while growing to 8,005 MW, is stuffed with assets in high-risk markets like France and Canada, where weather volatility can cripple output.

The Bottom Line: Sell Now Before the Storm Breaks

Boralex’s stock has risen recently, but fundamentals are crumbling. The ROCE slide, crushing debt, and unsustainable dividends are a triple threat.

• ROCE < 3%: Capital is being wasted.
• Debt/Equity > 200%: One bad quarter could trigger a liquidity crisis.
• 617% Payout Ratio: Dividends will be slashed, sending the stock reeling.

This isn’t a “value trap”—it’s a time bomb. Investors should hit the exits before the market catches on.

Action Plan:
1. Sell your shares immediately.
2. Avoid the dividend “illusion”—it’s not sustainable.
3. Stay away until ROCE, debt, and payout ratios stabilize (if ever).

Boralex’s story is no longer about clean energy—it’s about a company clinging to growth at any cost. Don’t be left holding the bag when reality hits. Sell now, and take your losses.