Innergex expands presence in France with the acquisition of 3 wind projects

  • Accretive acquisition of 3 wind farms with an aggregate installed capacity of 119.5 MW
  • Projected increase to revenues, Adjusted EBITDA and Free Cash Flow of C$34.8M, C$26.9M and C$4.4M, respectively for the first twelve months of operations
  • All the energy produced to be sold under long-term power purchase agreements with Electricité de France ("EDF") (S&P: A-)
  • Total enterprise value acquired of C$335M.

LONGUEUIL, QC, May 3, 2017  /CNW Telbec/ - Innergex Renewable Energy Inc. (TSX: INE) ("Innergex") is pleased to announce that a final agreement has been signed with Velocita Energy Developments (France) Limited (an affiliate of Riverstone Holdings LLC) to purchase three wind projects in France with a total aggregate installed capacity of 119.5 MW. As of today, 97.3 MW out of 119.5 MW (or 81%) have already reached mechanical completion and the remaining turbines are in the late stage of construction with full commissioning expected in phases until the end of the year. Innergex will have a 69.55% interest in the wind farms and Desjardins Group Pension Plan will own the remaining 30.45%.

"Following our strategic plan, our expansion continues in international markets with the acquisition of these three projects. France is an exciting market as it has adopted vigorous climate change targets and has a potential to double its onshore wind capacity by 2023," said Michel Letellier, President and Chief Executive Officer of Innergex. "With our proven track record of developing successful wind projects, we are confident that these new acquisitions will be delivered on time, on budget, and strengthen our growing portfolio of assets."

The purchase price of the equity is approximately €51.4 million (or C$76.2 million), subject to certain adjustments. Innergex's net share of the purchase price will amount to about €31.3 million (or C$46.4 million) and will be paid through available funds under its corporate revolving credit facility. Non-recourse debts related to the projects, which are already in place, will amount to €174.3 million (or C$258.4 million) at the end of construction and will remain at the project level.

The Corporation will reduce its exposure to exchange rate fluctuations by entering into long-term currency hedging instruments.

Innergex expects to complete the acquisition of the three wind projects by the end of the second quarter of 2017, subject to customary closing conditions.

DESCRIPTION OF THE ACQUIRED ASSETS
The three wind farms are located in the Bourgogne-Franche-Comté region of France. The aggregated installed capacity will be 119.5 MW and the average annual power generation is expected to reach 278,200 MWh at commercial operation, enough to power about 58,400 French households. All the electricity produced by these wind farms will be sold under power purchase agreements (PPAs) at fixed prices of which a portion is adjusted according to inflation indexes, for an initial term of 15 years, with EDF.

Innergex is expecting revenues of approximately €23.5 million (or C$34.8 million) and Adjusted EBITDA of approximately €18.2 million (or C$26.9 million) for the first twelve months of operations.

The projects consist of 43 GE wind turbines (each with a gross capacity of 2.78 MW) that will be operated by the wind turbine manufacturer under an 18-year operation and maintenance contract.

 

Project name


Gross capacity (MW)

Expected COD (100%)

PPA expiry

Rougemont-1


36.1

Q3 2017

2032

Rougemont-2


44.5

Q4 2017

2032

Vaite


38.9

Q2 2017

2032


Total

119.5



 

BENEFITS OF THE TRANSACTION

  • Consolidates Innergex's growth platform in France with 274 MW in operations / construction in addition to a pipeline of more than 120 MW of prospective wind projects in development.
  • Increases geographical and technological diversification of assets.
  • First twelve months of operations projected increase to Free Cash Flow of C$4.4M.

 

CONFERENCE CALL

The Corporation will hold a conference call to discuss the details regarding the acquisition.

 

Date and time:               

Thursday, May 4, 2017


11 AM EDT

Phone-in numbers:        

1 888 231-8191


or 647 427-7450

Speakers:                      

Michel Letellier, President and Chief Executive Officer


Jean Perron, Chief Financial Officer


Jean Trudel, Chief Investment Officer

 

About Desjardins Group Pension Plan
The mission of the Desjardins Group Pension Plan, acting through its Retirement Committee, is to provide a defined benefit pension plan to more than 50,000 beneficiaries. With $11.4 billion in net assets under management, it ranks among the top 10 private pension plans in Canada.

About Innergex Renewable Energy Inc.
The Corporation develops, owns and operates run-of-river hydroelectric facilities, wind farms and solar photovoltaic farms and carries out its operations in Quebec, Ontario and British Columbia, Canada, France and Idaho (USA). Its portfolio of assets currently consists of: (i) interests in 48 operating facilities with an aggregate net installed capacity of 994 MW (gross 1,658 MW), including 30 hydroelectric facilities, 17 wind farms and one solar farm; (ii) interests in one project under construction with a net installed capacity of 17 MW (gross 25 MW), for which a power purchase agreement has been secured; and (iii) prospective projects with an aggregate net capacity totalling 3,560 MW (gross 3,940 MW). Innergex Renewable Energy Inc. is rated BBB- by S&P.

The Corporation's strategy for building shareholder value is to develop or acquire high-quality facilities that generate sustainable cash flows and provide an attractive risk-adjusted return on invested capital and to distribute a stable dividend.

Non-IFRS measures disclaimer.
Readers are cautioned that Adjusted EBITDA and Free Cash Flows are not measures recognized by IFRS and have no standardized meaning prescribed by it, and therefore may not be comparable to those presented by other issuers. Innergex believes that these indicators are important, as they provide management and the reader with additional information about its cash generation capabilities and facilitates the comparison of results over different periods. References in this press release to "Adjusted EBITDA" are to revenues less operating expenses, general and administrative expenses and prospective project expenses. Readers are cautioned that Adjusted EBITDA should not be construed as an alternative to net earnings as determined in accordance with IFRS. References to "Free Cash Flow" are to cash flows from operating activities before changes in non-cash operating working capital items, less maintenance capital expenditures net of proceeds from disposals, scheduled debt principal payments, preferred share dividends declared and the portion of Free Cash Flow attributed to non-controlling interests, plus cash receipts by the Harrison Hydro L. P. for the wheeling services to be provided to other facilities owned by the Corporation over the course of their power purchase agreement, plus or minus other elements that are not representative of the Corporation's long-term cash generating capacity, such as transaction costs related to realized acquisitions (which are financed at the time of the acquisition), realized losses or gains on derivative financial instruments used to hedge the interest rate on project-level debt or the exchange rate on equipment purchases. 

Forward-Looking Information Disclaimer
In order to inform readers of the Corporation's future prospects, this press release contains forward-looking information within the meaning of applicable securities laws ("Forward-Looking Information"). Forward-Looking Information can generally be identified by the use of words such as "projected", "potential", "expect", "will", "should", "estimate", "forecasts", "intends", or other comparable terminology that states that certain events will or will not occur. It represents the estimates and expectations of the Corporation relating to future results and developments as of the date of this press release. It includes future-oriented financial information, such as expected production, revenues, Adjusted EBITDA and projected Free Cash Flow, to inform readers of the potential financial impact of the acquisition. Such information may not be appropriate for other purposes.

Forward-Looking Information in this press release is based on certain key expectations and assumptions made by the Corporation. The following table outlines Forward-Looking Information contained in this press release, the principal assumptions used to derive this information and the principal risks and uncertainties that could cause actual results to differ materially from this information.

 

Principal Assumptions

Principal Risks and Uncertainties

Expected production

For each facility, the Corporation determines a long-term average annual level of
electricity production ("LTA") over the expected life of the facility, based on engineers'
studies that take into consideration a number of important factors: for wind energy, the
historical wind and meteorological conditions and turbine technology. Other factors
taken into account include, without limitation, site topography, installed capacity,
energy losses, operational features and maintenance. Although production will
fluctuate from year to year, over an extended period it should approach the estimated
long-term average.

Improper assessment of wind resources
and associated electricity production

Variability in wind regime

Equipment failure or unexpected
operations and maintenance activity

Natural disaster

Projected Revenues

For each facility, expected annual revenues are estimated by multiplying the LTA by a
price for electricity stipulated in the power purchase agreement secured with a public
utility or other creditworthy counterparty. These agreements stipulate a base price and,
in some cases, a price adjustment depending on the month, day and hour of delivery.
In most cases, power purchase agreements also contain an annual inflation
adjustment based on a portion of the Consumer Price Index.

Production levels below the LTA caused
mainly by the risks and uncertainties
mentioned above

Unexpected seasonal variability in the
production and delivery of electricity

Lower-than-expected inflation rate

Projected Adjusted EBITDA

For each facility, the Corporation estimates annual operating earnings by subtracting
from the estimated revenues the budgeted annual operating costs, which consist
primarily of operators' salaries, insurance premiums, operations and maintenance
expenditures, property taxes and royalties; these are predictable and relatively fixed,
varying mainly with inflation (except for maintenance expenditures).

Variability of facility performance and related penalties

Unexpected maintenance expenditures

Changes in the purchase price of electricity upon renewal of a PPA

Projected Free Cash Flow

The Corporation estimates Projected Free Cash Flow as projected cash flows from
operating activities before changes in non-cash operating working capital items, less
estimated maintenance capital expenditures net of proceeds from disposals, scheduled
debt principal payments, preferred share dividends declared and the portion of Free
Cash Flow attributed to non-controlling interests, plus cash receipts by the Harrison
Hydro L.P. for the wheeling services to be provided to other facilities owned by the
Corporation over the course of their power purchase agreement, plus or minus other
elements that are not representative of the Corporation's long-term cash generating
capacity, such as transaction costs related to realized acquisitions (which are financed
at the time of the acquisition), realized losses or  gains on derivative financial
instruments used to hedge the interest rate on project-level debt or the exchange rate
on equipment purchases.           

 

Adjusted EBITDA below expectations
caused mainly by the risks and uncertainties
mentioned above and by higher prospective
project expenses

Projects costs above expectations caused
mainly by the performance of counterparties
and delays and cost overruns
in the design and construction of projects

Regulatory and political risk

Interest rate fluctuations and financing risk

Financial leverage and restrictive covenants
governing current and future indebtedness

Unexpected maintenance capital
expenditures

Possibility that the Corporation may not
declare or pay a dividend

 

Estimated project start of commercial operation for Development Projects or
Prospective Projects

For each development project, the Corporation provides indications regarding
scheduling and construction progress for its Development Projects and indications
regarding its Prospective Projects, based on its extensive experience as a developer.

 

Performance of counterparties, such as the
EPC contractors

Delays and cost overruns in the design and
construction of projects

Relationships with stakeholders

Regulatory and political risks

Natural disaster

Expected Closing of the Acquisition and of the Investments by a Desjardins
Group Pension Plan

The Corporation reasonably expects that the closing conditions will be completed
within the deadlines.

Availability of the capital

Regulatory and political risks

Performance of the counterparties

 

Material risks and uncertainties
The material risks and uncertainties that may cause actual results and developments to be materially different from current expressed Forward-Looking Information are referred to in the Corporation's Annual Information Form in the "Risk Factors" section and include, without limitation: failure to complete the transactions; the ability of the Corporation to implement its strategy; its ability to access sufficient capital resources; liquidity risks related to derivative financial instruments; the exchange rate fluctuations; the growth and development of foreign markets; changes in hydrology, wind regimes and solar irradiation; delays and cost overruns in the design and construction of projects; the ability to develop new facilities; variability of facilities performance and related penalties; failure to perform from main counterparties; potential undisclosed liabilities associated with the acquisition; the ability to integrate the acquired facilities; and failure to realize the benefits of this acquisition.

Although the Corporation believes that the expectations and assumptions on which Forward-Looking Information is based are reasonable, readers of this press release are cautioned not to rely unduly on this Forward-Looking Information since no assurance can be given that they will prove to be correct. The Corporation does not undertake any obligation to update or revise any Forward-Looking Information, whether as a result of events or circumstances occurring after the date of this press release, unless so required by legislation.

 

SOURCE Innergex Renewable Energy Inc.

For further information: Karine Vachon, Director - Communications, 450 928-2550, ext. 1222, kvachon@innergex.com, innergex.com

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