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Solar Power Co. Focused on Sustainable Growth, Profit
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The Quick Take

  • IA Capital Markets initiated coverage on UGE International, a provider of solar energy solutions, with a Speculative Buy rating and a CA$3.25 per share target price, reported analyst Naji Baydoun in a Jan. 12 research note.
  • UGE continues its shift to a more traditional independent power producer, focusing on contracted solar project development and expanding its portfolio of operating assets.
  • The current project backlog and development pipeline will allow UGE to grow and achieve its goals.
  • Favorable industry fundamentals bode well for investments in renewable energy resources.
  • With the right financing for its development projects, UGE could generate attractive internal rates of return.
  • The company is trading at a discount to its peers.

With its repositioning into an independent power producer, UGE International Ltd. (UGE:TSX.V; UGEIF:OTCQB) is heading toward "more sustainable growth and profitability," wrote iA Capital Markets analyst Naji Baydoun.

Several external and internal factors are supporting its efforts. The U.S. must increase solar capacity to decarbonize electricity and meet carbon emissions objectives, Baydoun noted.

The country's solar energy market is expected to grow about 20% through 2035 and greater than 10% through 2050, added Baydoun. Projected growth for community solar is potentially even greater.

Because UGE finances its projects through a mix of debt and equity, Baydoun wrote, "the expected clean power tax incentives in the U.S. should provide policy certainty and support for UGE's investment outlook."

The company's backlog comprises projects totaling about 145 megawatts (145 MW) of solar power and its development pipeline, about 790 MW.

"We see significant upside potential to the current share price from continued execution on the current growth strategy and a potential positive valuation rerating over time," Baydoun wrote.

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Disclosures for iA Capital Markets, UGE, Jan. 12, 2022

The research analyst and or associates who prepared this report are compensated based upon the overall profitability of iA Capital Markets, which may include the profitability of investment banking and related services. iA Capital Markets may buy from or sell to customers the securities of issuers mentioned in this report on a principal basis.
Analyst's Certification: Each iA Capital Markets research analyst whose name appears on the front page of this research report hereby certifies that (i) the recommendations and opinions expressed in this research report accurately reflect  the research analyst's personal views about the issuer and securities that are the subject of this report and all other companies and securities mentioned in this report that are covered by such research analyst and (ii) no part of the research analyst's compensation was, is, or will be directly or indirectly, related to the specific recommendations or views expressed by such research analyst in this report.
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