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Northland will report its first-quarter results on May 13.

JOHNNY C.Y. LAM/The Globe and Mail

Despite a backdrop of soaring government deficits, plummeting economic activity and shockingly cheap fossil fuels, clean energy is looking remarkably resilient right now – underscoring that the sector is more than a destination for environmentally conscious investors.

Share prices for Algonquin Power & Utilities Corp., Brookfield Renewable Partners LP, Northland Power Inc. and Boralex Inc., all Toronto Stock Exchange-listed companies that generate solar, wind and hydroelectric power in Canada and abroad, have rebounded by more than 50 per cent from their recent lows in March, on average.

Perhaps more remarkable, the stocks are now just 10 per cent below their recent highs, implying that the renewables sector is sailing through a key viability test from the COVID-19 lockdown that has shaken the global economy.

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“I think coming out of this pandemic, the case for renewables will be stronger,” Sachin Shah, chief executive officer of Brookfield Renewable, said in an interview.

Clean energy generation has encountered a number of challenges in recent years, from political pushback in Ontario and the United States, to misconceptions about its cost and effectiveness relative to fossil fuels. The pandemic initially scared off investors, perhaps with the view that expansion plans would be thwarted. The sector plummeted more than 40 per cent during the bear-market downturn in February and March.

But upbeat first-quarter financial results released last week appeared to buttress the view that these are solid utilities with strong financial positions and will continue to expand.

“We are still in the very early stages of renewable build-out. I think COVID obviously puts a dent in short-term finances for all sorts of government entities and corporates, but I’d view it more as a hiccup,” Martin Grosskopf, a portfolio manager specializing in sustainable investing strategies at AGF Investments Inc., said in an interview.

Algonquin’s EBITDA (earnings before interest, taxes, depreciation and amortization) increased 5 per cent in the three months ended March 31, to US$242.2-million – and the company boosted its quarterly dividend by 10 per cent.

Brookfield Renewable’s funds from operations, a measure of cash flow, was 70 US cents a unit, down only slightly from 73 US cents last year.

Boralex beat analysts’ estimates with EBITDA that increased 10 per cent year-over-year, to $169-million.

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“In the face of COVID-19, Boralex reported an excellent quarter to start 2020, showing that the outbreak has not affected its operations,” Bill Cabel, an analyst at Desjardins Securities, said in a note.

Northland will report its first-quarter results on May 13.

Mr. Grosskopf pointed out that the European Union’s Green Deal, which aims for carbon neutrality by 2050, will drive further demand for greener enterprises. In the U.S., demand for green energy is coming from states and companies, even as the White House sends negative messages about the sector – and ultracheap oil is unlikely to change that.

“Very high oil prices used to drive significant investment in renewables, but I think that correlation has broken down," he said.

“I think the business models among the renewable players have proven to be so much more resilient than conventional energy that I don’t think you need that immediate link to oil prices to drive money into the space,” Mr. Grosskopf said.

Amelia Tsang, vice-president of investor relations at Algonquin, agreed. In an e-mailed response to questions, she said the marginal cost of wind has come down to the point where government subsidies are no longer required.

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“Without any government subsidies wind power is today the cheapest form of new electrical generation,” Ms. Tsang said.

Brookfield’s Mr. Shah agreed that renewable energy projects can be built without government subsidies, which means that today’s bloated government balance sheets – a byproduct of tremendous economic stimulus added during the pandemic-related lockdown – shouldn’t have an impact on clean energy expansion.

Indeed, the pandemic could underscore the need for further expansion as people recognize that exogenous shocks are real, and can be averted.

“This pandemic has shown people that there are risks out there, and therefore I think the debate on global warming will get stronger. The push to transition electricity grids around the world will continue, at a minimum, at the pace it was going at [previously],” Mr. Shah said.

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