Valener announces its results for the third quarter of fiscal 2015: A quarter marked by excellent wind farm performance and Gaz Métro's solid results


HIGHLIGHTS 

Valener

  • At $0.32, normalized operating cash flows per common share increased 3.2% and are up 35.1% after the first nine months;
  • Excellent performance by the Seigneurie de Beaupré wind farms:
    • Generated over 275,000 megawatthours, up nearly 50%, owing to favourable wind conditions and additional capacity since December 2014.

Gaz Métro

  • Positive outlook for energy distribution activities in Quebec:
    • Régie de l'énergie's renewal of the 8.90% authorized rate of return on common equity for fiscal years 2016 and 2017;
  • A favourable impact of the appreciating U.S. dollar on the results of the U.S. subsidiaries;
  • Excellent performance turned in by the Energy Production segment;
  • Positive developments in the liquefied natural gas (LNG) activity:
    • Agreement with Hydro-Québec to supply LNG to the TransCanada Energy power plant;
    • 3.6 million cubic metres delivered during the quarter.

 

MONTREAL, Aug. 7, 2015 /CNW Telbec/ - Valener Inc. (Valener) (TSX: VNR), the public investment vehicle in Gaz Métro Limited Partnership (Gaz Métro), is announcing today its financial results.

For the third quarter of fiscal 2015, Valener recorded normalized operating cash flows(1) of $12.4 million, or $0.32 per common share, compared to $11.6 million and $0.31 per common share, in the third quarter of fiscal 2014, a $0.01 or 3.2% increase per common share. After nine months, normalized operating cash flows totalled $38.1 million, or $1.00 per common share, up $0.26 per common share or 35.1% compared to the same nine-month period last fiscal year. The nine-month increase is a result, among other factors, of the first distribution received, in February 2015, from Seigneurie de Beaupré Wind Farms 2 and 3, representing $4.7 million or $0.12 per common share for Valener.

"The first nine months of the fiscal year were marked by Gaz Métro's solid results and the excellent performance turned in by the Seigneurie de Beaupré wind farms, high-quality investments that generate solid, predictable distributions. It's with great confidence that Valener is reaffirming its annual dividend growth target of 4% for the next three fiscal years," said Pierre Monahan, Chairman of Valener's board of directors.

As usual at the start of the summer period, when heating needs are at their lowest, Valener recorded a recurring net loss attributable to common shareholders in the third quarter of fiscal 2015. However, the loss was only $0.1 million or $0.00 per common share compared to a recurring net loss of $1.7 million or $0.04 per common share for the same period last fiscal year. After nine months, Valener's recurring net income attributable to common shareholders totalled $50.3 million or $1.32 per common share, up $7.1 million or $0.18 per common share year over year. Overall, these results are up 16.4% year over year.


Summary of Valener's results



Three months ended
June 30


Nine months ended
June 30

(in millions of dollars, unless otherwise indicated)


2015


2014


2015


2014

Net income (loss) attributable to common shareholders 


1.4


(1.7)


48.9


43.2

Recurring net income (loss) attributable to common shareholders (1) 


(0.1)


(1.7)


50.3


43.2

Per common share (in $)


-


(0.04)


1.32


1.14

Normalized operating cash flows (1)

12.4


11.6


38.1


28.0

Per common share (in $)


0.32


0.31


1.00


0.74

(1)

These measures are financial measures not defined in Canadian generally accepted accounting principles (GAAP). The recurring net income attributable to common shareholders excludes Valener's non-recurring items and the share in the non-recurring items of Gaz Métro, net of income taxes. Normalized operating cash flows are cash flows related to operating activities less dividends paid to preferred shareholders.

 

Summary of Gaz Métro's financial results

"Of note this quarter was the Régie de l'énergie's decision to maintain our 8.90% rate of return for the next two fiscal years. This decision will help us preserve our financial integrity and attract additional capital at reasonable conditions," explained Sophie Brochu, President and Chief Executive Officer of Gaz Métro.

For the first nine months of fiscal 2015, Gaz Métro recorded net income attributable to Partners of $213.1 million, up $8.1 million or 4.0% from the same period last fiscal year. This increase came mainly from favourable contributions by the Energy Distribution and Energy Production segments.

As is usual at the start of the summer period, Gaz Métro recorded a net loss. For the third quarter of fiscal 2015, this loss stood at $3.2 million, which is comparable to the loss recorded for last fiscal year's third quarter.

Highlights for the first nine months – Valener and Gaz Métro

Seigneurie de Beaupré Wind Farms 


Wind Farms 2 and 3

Installed capacity

272 MW

Complete start-up

Dec. 2013

Total investment

~$750M

Valener

24.5%

Gaz Métro

25.5%

 

Wind Farms 2 and 3 generated 220,493 megawatthours (MWh) during the third quarter of fiscal 2015 and 736,459 MWh during the first nine months, year-over-year increases of 36,052 MWh or 19.5% and of 274,797 MWh or 59.5%, respectively. These increases were essentially driven by favourable wind conditions and by the fact that these wind farms started commercial operations at the end of the first quarter of fiscal 2014.

The wind farms generated operating cash flows of $23.0 million in the third quarter of fiscal 2015 and of $51.5 million in the first nine months. A first distribution of $19.1 million was paid in February 2015, with Valener and Gaz Métro receiving $4.7 million and $4.9 million, respectively. Another distribution is expected to be paid during the fourth quarter of fiscal 2015.


Wind Farm 4

Installed capacity

68 MW

Start-up

Dec. 2014

Total investment

~$190M

Valener

24.5%

Gaz Métro

25.5%

 

Wind Farm 4 generated 55,265 MWh during the third quarter of fiscal 2015 and 137,310 MWh since it began commercial operations on December 1, 2014. It generated operating cash flows of $4.5 million in the third quarter of fiscal 2015 and of $3.6 million in the first nine months. A first distribution will likely be paid to Valener and Gaz Métro during the fourth quarter of fiscal 2015.

Highlights for the first nine months – Gaz Métro

Quebec activities

Natural gas distribution in Quebec (Gaz Métro-QDA)

In May 2015, the Régie de l'énergie (Régie) approved the renewal, for fiscal years 2016 and 2017, of the 8.90% rate of return on deemed common equity that it had authorized for fiscal years 2013 to 2015.

Liquefied natural gas

Gaz Métro is continuing to market the LNG available at its Montreal-East liquefaction plant (LSR plant), the capacity of which is expected to triple by the end of 2016. During the third quarter of fiscal 2015, Gaz Métro, through one of its subsidiaries, delivered 3.6 million cubic metres, bringing the total for the current fiscal year to 19.6 million cubic metres compared to 6.0 million cubic metres in the same nine-month period last year, an increase that contributed favourably to net income.

Gaz Métro and its subsidiaries have entered into an agreement in principle with Hydro-Québec Distribution to supply, build and operate an LNG storage, treatment and regasification site near the TransCanada Energy (TCE) power plant in Bécancour, the goal being to supply the natural gas required to generate electricity in peak winter periods. In June 2015, the project notice was submitted to Quebec's Ministry of Sustainable Development, Environment and the Fight Against Climate Change, and the environmental assessment and review process will proceed in the coming months such that the required authorization certificate is obtained.

In May 2015, Hydro-Québec Distribution filed an application with the Régie seeking approval to use LNG from the LSR plant to meet peak demand for electricity starting in winter 2018. This innovative solution will transform the TCE power plant in Bécancour, which has not produced electricity for several years now, into a strategic tool for meeting the needs of Quebecers during very cold spells by supplying it with LNG for the equivalent of approximately 100 hours a year.

U.S. activities

Greater efficiency in Vermont electricity distribution operations

During the first nine months of fiscal 2015, Green Mountain Power (GMP) continued, as planned, to merge its operations with those of Central Vermont Public Service (CVPS) such that it and its customers may continue to benefit from the resulting efficiencies and synergies.

For fiscal 2015, GMP has already  reached the US$8.0 million in synergy savings attributable to its customers. Additional savings will be realized and retained by GMP, according to the sharing mechanism.

Development project for the natural gas distribution system in Vermont

The Vermont Gas Systems, Inc. (VGS) system development project consists of extending natural gas distribution service by 66 km to the communities of Vergennes and Middlebury in Addison County.

In December 2014, VGS submitted a project cost update to the Vermont Public Service Board (VPSB) showing that the estimated costs now stand at US$153.6 million. The VPSB held hearings in June 2015 to review the cost estimate and to reconfirm the Certificate of Public Good. A decision is expected later this fall. At this time, the project is expected to come into service towards the end of 2016. The project continues to be viewed as a beneficial solution for the State of Vermont and to enjoy the support of the government agencies. Aside from the environmental advantages, natural gas remains a competitive energy source compared to other sources of fossil fuel. As at June 30, 2015, US$66.5 million had been invested in the project.

Gaz Métro's financial results


Gaz Métro's segment results – Net income (loss) attributable to Partners, excluding non-recurring items


Three months ended June 30


Nine months ended June 30

(in millions of dollars)

2015


2014


Change


2015


2014


Change

Energy Distribution













Gaz Métro-QDA

(12.3)


(10.6)


(1.7)


154.9


156.3


(1.4)


GMP and VGS (1)

8.3


8.0


0.3


46.4


42.5


3.9


(4.0)


(2.6)


(1.4)


201.3


198.8


2.5

Natural Gas Transportation (1)

2.6


2.8


(0.2)


13.1


13.1


-

Energy Production (1)

0.3


(0.3)


0.6


2.7


0.5


2.2

Energy Services, Storage and Other (1)

(0.2)


(1.4)


1.2


1.5


(1.8)


3.3

Corporate Affairs (1)

(1.9)


(1.8)


(0.1)


(5.5)


(5.6)


0.1

Consolidated net income (loss) attributable to Partners, excluding non-recurring items (2)

(3.2)


(3.3)


0.1


213.1


205.0


8.1

Non-recurring items

-


-


-


-


-


-

Consolidated net income (loss) attributable to Partners 

(3.2)


(3.3)


0.1


213.1


205.0


8.1

(1)

Net of financing costs of investments in this segment. These costs consist of the interest on the long-term debt incurred by Gaz Métro to finance investments in the subsidiaries, joint ventures and entities subject to significant influence of each segment.

(2)

This measure is a financial measure not defined in Canadian generally accepted accounting principles.

 

Performance by the Energy Distribution segment


Natural gas distribution in Quebec (Gaz Métro-QDA)

Rate base

$1.9B

Authorized return

8.90%

Distribution network

~10,000 km

 Customers

~195,000

 

For the third quarter of fiscal 2015, Gaz Métro-QDA's net loss stood at $12.3 million, a $1.7 million higher loss than that of last fiscal year's third quarter. It stems mainly from a timing difference between the revenue recognition profile and that of costs, as anticipated in the 2015 rate case, which is expected to reverse at the end of fiscal 2015, partly offset by lower financial expenses.

After nine months, Gaz Métro-QDA's net income totalled $154.9 million, down $1.4 million from the same nine-month period in fiscal 2014. This decrease was mainly due to the same reasons as those provided above.

For the third quarter and first nine months of fiscal 2015, Gaz Métro-QDA's net income was up $0.8 million and $1.9 million, respectively, compared to the forecasts in the 2015 rate case.


Energy distribution in Vermont

GMP

VGS

Rate base

US$1.2B

Authorized return 9.60%

Customers

~260,000

Rate base

US$193M

Authorized return

10.20%

Customers

~45,000

 

Net income from Vermont energy distribution activities totalled $8.3 million in the third quarter of
fiscal 2015 and $46.4 million in the first nine months, year-over-year increases of $0.3 million and $3.9 million, respectively.

These increases were mainly due to a favourable exchange rate impact from the appreciating U.S. dollar against the Canadian dollar; the impact of GMP's higher rate base resulting, among other factors, from additional investments in Vermont Transco LLC; and an increase in return-generating non-rate-base investments in VGS's system development project. These favourable items were partly offset by a reduction in GMP's revenues, attributable, among other factors, to lower consumption related to energy efficiency measures and to consumption variances between peak and off-peak periods.

Performance by the other segments

Net income from the Natural Gas Transportation segment totalled $2.6 million for the third quarter of fiscal 2015 and $13.1 million for the first nine months, down $0.2 million and unchanged, respectively, from the same periods last year. The higher share in the earnings, net of income taxes, of Portland Natural Gas Transmission System (PNGTS), reflecting an increase in transported volumes resulting from the signing of new short-term contracts and from higher demand due to colder temperatures, was cancelled out by the unfavourable impact of the February 2015 decision on PNGTS's rates made by the Federal Energy Regulatory Commission.

The Energy Production segment consists of the non-regulated energy production business of wind farms 2 and 3 and wind farm 4, which are jointly owned by Gaz Métro, Valener and Boralex Inc. on the private lands of the Seigneurie de Beaupré.

The net income from this segment totalled $0.3 million for the third quarter of fiscal 2015 and $2.7 million for the first nine months, year-over-year increases of $0.6 million and $2.2 million, respectively. These increases were driven by favourable wind conditions, by higher revenues generated by wind farms 2 and 3, which were put into service at the end of the first quarter of fiscal 2014, and by the start-up of wind farm 4 in December 2014.

The Energy Services, Storage and Other segment recorded a net loss of $0.2 million for the third quarter of fiscal 2015 and net income of $1.5 million for the first nine months, representing favourable changes of $1.2 million and $3.3 million, respectively, compared to the same periods last year. These increases were mainly driven by higher net income from Gaz Métro LNG 2013 LP owing to the performance of short-term LNG supply contracts and by greater profitability at Climatisation et Chauffage Urbains de Montréal, s.e.c. given a drop in its supply costs.

Conference call

Valener will hold a conference call with financial analysts today at 2:00 pm (Eastern Time) to discuss its results and those of Gaz Métro for the third quarter ended June 30, 2015.

The call will be broadcast live and is accessible by dialling 647-427-7450 or toll-free 1-888-231-8191. For 30 days afterward, a rebroadcast will be accessible by dialling 416-849-0833 or toll-free
1-855-859-2056 (access code: 82254871). It will also be available via webcast on Valener's website in the Events and Presentations page of the Investors section and can be heard during the 90 days following the initial call.

Overview of Valener

Valener is a widely held public company that serves as the investment vehicle in Gaz Métro. Through its investment in Gaz Métro, Valener offers its shareholders a solid investment in a diversified and largely regulated energy portfolio in Quebec and Vermont. As a strategic partner, Valener, on one hand, contributes to Gaz Métro's growth, and on the other hand invests in wind power production in Quebec together with Gaz Métro. Valener favours energy sources and uses that are innovative, clean, competitive and profitable. Valener's common and preferred shares are listed on the Toronto Stock Exchange under the "VNR" symbol for common shares and under the "VNR.PR.A" symbol for Series A preferred shares. www.valener.com

Overview of Gaz Métro

With more than $6 billion in assets, Gaz Métro is a leading energy provider. It is the largest natural gas distribution company in Quebec, where its network of over 10,000 km of underground pipelines serves over 300 municipalities and more than 195,000 customers. Gaz Métro is also present in Vermont, producing electricity and distributing electricity and natural gas to meet the needs of more than 305,000 customers. Gaz Métro is actively involved in the development and operation of innovative, promising energy projects, including natural gas as fuel and liquefied natural gas as a replacement to higher emission-producing energies, the production of wind power, and the development of biomethane. Gaz Métro is a major energy sector player that takes the lead in responding to the needs of its customers, regions and municipalities, local organizations and communities while also satisfying the expectations of its Partners (Gaz Métro inc. and Valener) and employees. www.gazmetro.com

Cautionary note regarding forward-looking statements

This press release may contain forward-looking information within the meaning of applicable securities laws. Such forward-looking information reflects the intentions, plans, expectations and opinions of the management of Gaz Métro inc. (GMi), in its capacity as General Partner of Gaz Métro, acting as manager of Valener (the management of the manager), and is based on information currently available to the management of the manager and assumptions about future events. Forward-looking statements can often be identified by words such as "plans," "expects," "estimates," "seeks," "targets," "forecasts," "intends," "anticipates" or "believes" or similar expressions, including the negative and conjugated forms of these words. Forward-looking statements involve known and unknown risks and uncertainties and other factors beyond the control of the management of the manager. A number of factors could cause the actual results of Valener or of Gaz Métro to differ significantly from historical results or current expectations, as described in the forward-looking statements, including but not limited to the general nature of the aforementioned, terms of decisions rendered by regulatory agencies, uncertainty on whether Gaz Métro will obtain approvals from regulatory agencies and interested parties to carry out all of its business activities and the socio-economic risks associated with those activities, the competitiveness of natural gas in relation to other energy sources in the context of falling global oil prices, the reliability or costs of natural gas supply and electricity supply, the integrity of the natural gas and electricity distribution systems, the evolution and profitability of Seigneurie de Beaupré Wind Farms 2 and 3 General Partnership (Wind Farms 2 and 3) and Seigneurie de Beaupré Wind Farm 4 General Partnership (Wind Farm 4) and other development projects, the ability for Valener to generate sufficient cash to support its anticipated target annual dividend growth rate on its common shares, the ability to complete attractive acquisitions and the related financing and integration aspects, the ability to complete new development projects, the ability to secure future financing, general economic conditions, exchange rate and interest rate fluctuations, weather conditions and other factors described in the Risk Factors Relating to Valener section and in the Risk Factors Relating to Gaz Métro section of Valener's Management's Discussion and Analysis for the fiscal year ended September 30, 2014 and in Valener's and Gaz Métro's disclosure filings. Although the forward-looking statements contained herein are based on what the management of the manager believes to be reasonable assumptions, in particular assumptions to the effect that no unforeseen changes in the legislative and regulatory framework of energy markets in Quebec and in the New England states will occur; that the applications filed with the regulatory agencies will be approved as submitted; that natural gas prices will remain competitive; that the supply of natural gas and electricity will be maintained or will be available at competitive costs; that no significant event occurring outside the ordinary course of business, such as a natural disaster or other calamity, will occur; that Gaz Métro will be able to continue distributing substantially all of its net income (excluding non-recurring items); that Wind Farms 2 and 3 and Wind Farm 4 will be able to make distribution payments to their partners; that Valener will be able to generate sufficient cash to support its anticipated target annual dividend growth rate on its common shares; that GMP will be able to continue to quickly and effectively integrate CVPS's operations; that liquidity needs for Gaz Métro's development projects will be obtained through a combination of operating cash flows, borrowings on credit facilities, capital injections from Partners, and issuances of debt securities; and that the subsidiaries will obtain the required authorizations and funds needed to finance their development projects; in addition to the other assumptions described in Valener's Management's Discussion and Analysis for the quarter ended June 30, 2015, the management of the manager cannot assure investors that actual results will be consistent with these forward- looking statements. These forward-looking statements are made as of this date, and the management of the manager assumes no obligation to update or revise them to reflect new events or circumstances, except as required pursuant to applicable securities laws. These statements do not reflect the potential impact of any unusual item or any business combination or other transaction that may be announced or that may occur after the date hereof. Readers are cautioned to not place undue reliance on these forward-looking statements.

 

SOURCE Valener Inc.

For further information: Investors and Analysts: Mathieu Lepage, 514-598-3039, investors@valener.com; Media: Marie-Christine Demers 514-598-3449, communications@valener.com; www.twitter.com/gazmetro, www.gazmetro.com/salledepresse, Photos, videos (b-roll) and logos are available in Gaz Métro's Multimedia library.

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