Innergex reports third quarter 2015 results

  • Adjusted EBITDA increases 11% to $144.9 million for the nine-month period despite decreasing 6% to $48.6 million for the quarter
  • $311.7 million fixed-rate, non-recourse debt financing closes for the 150 MW Mesgi'g Ugju's'n wind project in Quebec
  • $100.0 million of convertible debentures bearing interest at 4.25% are issued and the $79.6 million outstanding of convertible debentures bearing interest at 5.75% are redeemed or converted
  • 706,297 common shares are purchased for cancellation under the normal course issuer bid
  • In October, a memorandum of understanding is signed with the Federal Electricity Commission of Mexico to jointly study a number of renewable energy project opportunities

LONGUEUIL, QC, Nov. 10, 2015 /CNW Telbec/ - Innergex Renewable Energy Inc. (TSX: INE) ("Innergex" or the "Corporation") releases its operating and financial results for the third quarter ended September 30, 2015.

"We remain on track, both in terms of operating results for the first nine months of the year and in terms of project development", declares Michel Letellier, President and Chief Executive Officer of the Corporation. "We have completed the major capital funding program of more than one billion dollars that we began a year ago in order to finance five development projects. We are extremely pleased to have commissioned the 21.2 MW Tretheway Creek hydroelectric facility, on time and under budget. And our memorandum of understanding with Mexico's Federal Electricity Commission marks the first step in establishing a long-term presence in this market", adds Mr. Letellier.

OPERATING RESULTS

 




Amounts shown are in thousands of Canadian dollars except as noted otherwise.

Three months ended September 30

Nine months ended September 30

2015


2014


2015


2014


Power generated (MWh)

777,975


826,617


2,340,575


2,142,547


Long-term average (MWh)

849,747


849,838


2,363,711


2,283,675


Revenues

62,680


66,371


190,578


173,619


Adjusted EBITDA1

48,550


51,668


144,920


130,814


Net earnings (loss)

1,316


(4,518)


(13,988)


(56,812)


Net earnings (loss), $ per share - basic2

0.04


(0.02)


(0.06)


(0.42)










Trailing 12 months ended

September 30




2015


2014


Free Cash Flow1



84,217


51,674


Payout Ratio1



74

%

113

%

1 Please refer to the "Non-IFRS measures disclaimer" for the definition of Adjusted EBITDA, Free Cash Flow and Payout Ratio.
2 Net earnings (loss) per share is calculated as net earnings (loss) attributable to owners of the parent, less dividends declared on preferred shares, divided by the weighted average number of common shares outstanding

 

Electricity Production

During the three-month period ended September 30, 2015, the Corporation's facilities produced 778 GWh of electricity or 92% of the LTA of 850 GWh. Overall, the hydroelectric facilities produced 87% of their LTA, due mainly to below-average water flows in British Columbia, partially offset by above-average water flows in Quebec and Ontario. Overall, the wind farms produced 119% of their LTA, due mainly to above-average wind regimes. The Stardale solar farm produced 103% of its LTA, due mainly to above-average solar regimes. The production decrease of 6% compared with the same period last year is attributable mainly to lower water flows in all markets except Quebec and to lower wind regimes.

During the nine-month period ended September 30, 2015, the Corporation's facilities produced 2,341 GWh of electricity or 99% of the LTA of 2,364 GWh. Overall, the hydroelectric facilities produced 96% of their LTA, due mainly to below-average water flows in all markets except Quebec. Overall, the wind farms produced 111% of their LTA, due mainly to above-average wind regimes. The Stardale solar farm produced 103% of its LTA, due mainly to above-average solar regimes. The production increase of 9% compared with the same period last year is attributable mainly to higher water flows in Quebec and British Columbia, higher wind regimes and the contribution of the SM-1 hydroelectric facility acquired in June 2014.

Revenues

For the three-month period ended September 30, 2015, the Corporation recorded revenues of $62.7 million, compared with $66.4 million in 2014. This 6% decrease is attributable mainly to lower water flows in all markets except Quebec and to lower wind regimes.

For the nine-month period ended September 30, 2015, the Corporation recorded revenues of $190.6 million, compared with $173.6 million in 2014. This 10% increase is attributable mainly to higher water flows in Quebec and British Columbia, higher wind regimes and the contribution of the SM-1 hydroelectric facility acquired in June 2014.

Adjusted EBITDA

For the three-month period ended September 30, 2015, the Corporation recorded Adjusted EBITDA of $48.6 million, compared with $51.7 million for the same period last year. This 6% decrease is in line with the 6% decrease in production and revenues. As a result, the Adjusted EBITDA Margin remained stable at 77.5% as opposed to 77.8%.

For the nine-month period ended September 30, 2015, the Corporation recorded Adjusted EBITDA of $144.9 million, compared with $130.8 million for the same period last year. This 11% increase is in line with the increase in production and revenues explained above and also reflects the smaller increase in operating expenses. As a result, the Adjusted EBITDA Margin rose from 75.3% to 76.0%.

Net Earnings (Loss)

Excluding the realized loss on derivative financial instruments ("Derivatives") and the unrealized net gain or loss on Derivatives and the related income taxes, the net earnings for the three- and nine-month periods ended September 30, 2015, would have been $3.9 million and $17.5 million respectively, compared with net earnings of $7.1 million and $5.1 million respectively in 2014. The decrease in net earnings during the three-month period would be due mainly to the decrease in production, while the increase in earnings for the nine-month period would be due mainly to the increase in production, the smaller increase in operating expenses and the lower compensation interest expense on the real return bonds.

For the three-month period ended September 30, 2015, the Corporation recorded net earnings of $1.3 million (basic and diluted net earnings of $0.04 per share), compared with a net loss of $4.5 million (basic and diluted net loss of $0.02 per share) in 2014. It is attributable mainly to the smaller negative impact of derivative financial instruments, namely a $27.0 million realized loss on Derivatives partly offset by a $24.3 million unrealized gain on Derivatives, compared with a $8.4 million realized loss and a $6.9 million unrealized net loss on Derivatives last year.

For the nine-month period ended September 30, 2015, the Corporation recorded a net loss of $14.0 million (basic and diluted net loss of $0.06 per share), compared with a net loss of $56.8 million (basic and diluted net loss of $0.42 per share) in 2014. It is attributable mainly to a smaller negative impact of Derivatives, namely a $119.6 million realized loss on Derivatives partly offset by a $79.4 million unrealized gain on Derivatives, compared with a $8.4 million realized loss and a $72.1 million unrealized loss on Derivatives last year.

Free Cash Flow and Payout Ratio

For the trailing 12 months ended September 30, 2015, the Corporation generated Free Cash Flow of $84.2 million, compared with $51.7 million for the same period last year. This increase is due mainly to greater cash flows from operating activities before changes in non-cash operating working capital items and realized losses on Derivatives, partly offset by greater scheduled debt principal payments.

The Payout Ratio represents the dividends declared on common shares divided by Free Cash Flow. For the trailing 12 months ended September 30, 2015, the dividends on common shares declared by the Corporation corresponded to 74% of Free Cash Flow, compared with 113% for the corresponding period last year. This positive change is due mainly to the increase in Free Cash Flow explained above, which more than offset the increase in dividends resulting from the higher number of common shares outstanding by virtue of the DRIP, the issuance of 4,027,051 common shares of the Corporation in June 2014 to pay for the acquisition of the SM-1 hydroelectric facility and the issuance of 3,653,422 common shares of the Corporation upon conversion, at the holders' request, of convertible debentures bearing interest at 5.75%.

DEVELOPMENT PROJECTS

Tretheway Creek hydroelectric project

The construction of this hydroelectric facility began in October 2013. Over the last few months, construction and commissioning activities were completed on time and approximately $7.0 million under budget. The facility began commercial operations with an effective commissioning date of October 27, 2015.

Upper Lillooet River and Boulder Creek hydroelectric projects (the "Upper Lillooet Hydro Project" or "ULHP")

The construction of the Upper Lillooet River and Boulder Creek hydroelectric facilities began in October 2013. On March 17, 2015, the Corporation announced the closing of $491.6 million non-recourse construction and term project financing for both these projects. Construction activities have fully resumed as of mid-September after being halted for two months due to a forest fire that swept through the area on July 4. Fortunately, damage to the site from the fire was very limited and all structures and equipment remained intact, except for a portion of the transmission line between the two powerhouses. Currently, the installation of the joint transmission line, powerhouses, intakes and tunnels are progressing well. The Corporation and its contractors are working closely to adjust construction schedules, possibly keeping the construction site active throughout the winter, to make up for some of the lost time. The insurance claims process is ongoing and will take time to complete. In any case, the Corporation expects to be indemnified and to suffer no significant adverse financial consequences from the forest fire.

Big Silver Creek hydroelectric project

Construction of this hydroelectric facility began in June 2014. Excavation of the tunnel and installation of the penstock have been completed and construction of the powerhouse and procurement of electrical equipment and turbines are all progressing as planned. On June 22, 2015, the Corporation announced the closing of $197.2 million non-recourse construction and term project financing for this project.

Mesgi'g Ugju's'n ("MU") wind project

Construction of this wind farm began in May 2015. Access roads have been completed or upgraded, and foundation excavation and concrete pouring have also been completed at all the turbine sites. On September 28, 2015, the Corporation and its partner announced the closing of $311.7 million non-recourse construction and term project financing for this project.

SUBSEQUENT EVENT

Memorandum of understanding with the Comisión Federal de Electricidad of Mexico

On October 13, 2015, the Corporation signed a memorandum of understanding with the Comisión Federal de Electricidad (CFE) of Mexico to jointly study a number of renewable energy project opportunities in Mexico, with the aim to jointly develop selected projects in the future. The main purpose of this agreement is to coordinate efforts and develop activities allowing Innergex and CFE to define their joint participation in the development of prospective renewable energy projects, in particular of small hydroelectric plants of less than 200 MW.

DIVIDEND DECLARATION

The following dividends will be paid by the Corporation on January 15, 2016:

 







Date of
announcement

Record date

Payment date

Dividend per
common share

Dividend per
Series A
Preferred Share

Dividend per
Series C
Preferred Share

November 10, 2015

December 31, 2015

January 15, 2016

$0.1550

$0.3125

$0.359375

 


CONFERENCE CALL REMINDER

The Corporation will hold a conference call today, Tuesday November 10, 2015 at 4:00 p.m. ET. Its 2015 third quarter results will be presented by Mr. Michel Letellier, President and Chief Executive Officer of Innergex and by Mr. Jean Perron, Chief Financial Officer. Investors and financial analysts are invited to access the conference call by dialing 647 427-7450 or 1 888 231-8191. Media and the public may also access this conference call on a listen-only mode. A replay of the conference call will be available later the same day on the Corporation's website.

About Innergex Renewable Energy Inc.

Innergex Renewable Energy Inc. (TSX: INE) is a leading Canadian independent renewable power producer. Active since 1990, the Company develops, owns, and operates run-of-river hydroelectric facilities, wind farms, and solar photovoltaic farms and carries out its operations in Quebec, Ontario, British Columbia, and Idaho, USA. Its portfolio of assets currently consists of: (i) interests in 34 operating facilities with an aggregate net installed capacity of 708 MW (gross 1,216 MW), including 27 hydroelectric operating facilities, six wind farms, and one solar photovoltaic farm; (ii) interests in four projects under development or under construction with an aggregate net installed capacity of 187 MW (gross 297 MW), for which power purchase agreements have been secured; and (iii) prospective projects with an aggregate net capacity totaling 3,190 MW (gross 3,330 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

The consolidated financial statements for the three- and nine-month periods ended September 30, 2015 have been prepared in accordance with International Financial Reporting Standards ("IFRS"). However, some measures referred to in this press release are not recognized measures under IFRS, 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 the Corporation's production and cash generation capabilities, its ability to sustain current dividends and dividend increases and its ability to fund its growth. These indicators also facilitate the comparison of results over different periods. Adjusted EBITDA, Free Cash Flow and Payout Ratio are not measures recognized by IFRS and have no standardized meaning prescribed by IFRS. References in this document to "Adjusted EBITDA" are to revenues less operating expenses, general and administrative expenses and prospective project expenses. 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 Limited Partnership for the wheeling services to be provided to other facilities owned by the Corporation over the course of their PPA, 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) and realized losses or gains on derivative financial instruments used to hedge the interest rate on project-level debt or the foreign exchange rate on equipment purchases. References to "Payout Ratio" are to dividends declared on common shares divided by Free Cash Flow. Readers are cautioned that Adjusted EBITDA should not be construed as an alternative to net earnings and Free Cash Flow should not be construed as an alternative to cash flows from operating activities, as determined in accordance with IFRS.

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, to inform readers of the potential financial impact of development projects. 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

Estimated project costs, expected obtainment of permits, start of construction, work conducted and start of commercial operation for Development Projects or Prospective Projects

For each development project, the Corporation provides an estimate of project costs based on its extensive experience as a developer, directly related incremental internal costs, site acquisition costs and financing costs, which are eventually adjusted for projected costs provided by the engineering, procurement and construction (EPC) contractor retained for the 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

Obtainment of permits

Equipment supply

Interest rate fluctuations and financing risk

Relationships with stakeholders

Regulatory and political risks

Higher-than-expected inflation

Natural disaster

 

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: the ability of the Corporation to execute its strategy for building shareholder value; its ability to raise additional capital and the state of capital markets; liquidity risks related to derivative financial instruments; variability in hydrology, wind regimes and solar irradiation; delays and cost overruns in the design and construction of projects; uncertainty surrounding the development of new facilities; variability of installation performance and related penalties; foreign market growth and development risks; sufficiency of insurance coverage limits and exclusions; and the ability to secure new power purchase agreements or to renew existing ones.

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: Marie-Josée Privyk, CFA, SIPC, Director - Communications and Sustainable Development, 450 928-2550, ext. 222, mjprivyk@innergex.com; www.innergex.com

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