Boralex Announces Good Performance in Third Quarter 2007

    MONTREAL, Nov. 7 /CNW Telbec/ - Boralex Inc. ("Boralex" or the
"Corporation") increased its revenue from energy sales by 28.9% in the third
quarter of 2007 and laid the groundwork for its move into solar power

    (in millions of dollars, except per share data)
                                 Three-Month Periods      Nine-Month Periods
                                  Ended September 30      Ended September 30

                                    2007        2006        2007        2006
    Revenue from energy sales       34.3        26.6       117.4        84.6
    EBITDA                           9.1         8.4        40.4        30.9
    Net earnings                     1.0         1.1        15.6        10.1
      per share                    $0.03       $0.04       $0.47       $0.34
    Cash flows from operations       8.8         3.3        35.5        16.6
      per share                    $0.23       $0.11       $1.06       $0.55

    For the three-month period ended September 30, 2007, Boralex recorded
revenue of $34.3 million, compared to $26.6 million for the same period in
2006. Growth came mainly from the wood-residue segment, where revenue rose
$7.7 million, and from the wind-power segment, where revenue increased
$1.3 million. Earnings before interest, taxes, depreciation and amortization
(EBITDA) rose 8.3% to $9.1 million in the third quarter of 2007, compared to
EBITDA of $8.4 million for the third quarter of 2006. Boralex closed the
quarter with net earnings of $1.0 million, or $0.03 per share, comparable to
net earnings of $1.1 million year-over-year.
    Patrick Lemaire, President and Chief Executive Officer of Boralex, noted
that "Boralex had a very satisfactory quarter, thanks to the REC market,
higher electricity prices and growth in the wind-power segment, in particular,
all of which offset higher wood-residue supply costs and unfavourable
hydrology. The Corporation plans to capitalize on the growing interest in
renewable energy and pursue its development in areas where it already has
expertise, but also in new energy production segments."
    To that end, Boralex acquired a 50% interest in the Spanish development
company, Compania Electrosolar Onubense S.L. ("CESOn"). Patrick Lemaire stated
that "Spain has the sunniest climate in Europe, which makes it a strategic
location for the development of solar technology and for Boralex's positioning
in the solar energy field. The Corporation plans to take advantage of the
competitive prices Spain is offering to diversify its portfolio of activities
and gain a foothold in this promising segment." The purchase of an interest in
CESOn will allow Boralex to evaluate various development opportunities
estimated at 25 MW to 100 MW over the next five years.
    Revenue for the wind power segment rose to $6.0 million for the third
quarter of 2007, up 27.7% over 2006. More than half this increase is due to
the July 18 start-up of the Citadelle site. Growth in revenue was the main
factor in the increase of quarterly EBITDA to $4.9 million.
    The hydroelectric segment recorded revenue of $0.7 million, versus
$1.8 million for the same period a year earlier. The decrease is due to lower
hydrology, with power generation being 45.3% lower than historical averages.
    For the three months ended September 30, 2007, revenue from the
wood-residue segment amounted to $25.7 million, up 42.8% over the same period
in 2006. Excluding the negative impact of the rise in the Canadian dollar,
revenue would have risen close to 50%. EBITDA for this segment more than
doubled in the third quarter of 2007, from $2.9 million in 2006 to
$6.9 million. These highly satisfactory results are due to the strength of the
REC market and higher levels of power generation by the wood-residue thermal
power stations.
    In addition, on September 18, Boralex and its partner Gaz Métro submitted
three wind power projects totalling 375.2 MW in response to Hydro-Québec's
call for tenders for 2000 MW in wind power. The proposed sites have many
advantages, including significant wind power potential, proximity to
interconnection lines and distance from urban and residential areas. Note also
that on July 9, 2007 Boralex announced that it had signed an agreement to
develop 90 MW of wind power in Ontario, of which 30 MW is slated for
completion by late 2008 and 60 MW by late 2009.
    Thus, for the nine-month period ended September 30, revenue from energy
sales totalled $117.4 million, compared to $84.6 million for the same period
in 2006. EBITDA for the first nine months of 2007 rose to $40.4 million, up
30.7% compared to 2006. This good performance stems from an increase in total
power generation by power stations, the start-up of the Citadelle wind farm,
an increase in revenue from the sale of RECs and higher average electricity
selling prices.

    About Boralex

    Boralex is a major private electricity producer whose core business is the
development and operation of power stations that run on renewable energy.
Employing close to 300 people, the Corporation owns and operates 22 power
stations with a combined installed capacity of 347 MW in Quebec, the
northeastern United States and France. Boralex is distinguished by its leading
expertise and long experience in four types of power generation - wind power,
hydroelectric power, thermal and cogeneration power from natural gas or wood
residue. The Boralex shares trade on the Toronto stock exchange under the
ticker symbol BLX.
    In addition, Boralex holds a 23% interest in Boralex Power Income Fund
which owns 10 power stations in Quebec and the United States with an installed
capacity of close to 190 MW. Management of the Fund's assets is provided by

    Certain statements in this release, including statements regarding future
results and performance, are forward-looking statements based on current
expectations. The accuracy of such statements is subject to a number of risks,
uncertainties and assumptions that may cause actual results to differ
materially from those projected, including, but not limited to, the effect of
general economic conditions, decreased demand for Boralex's products,
increases in raw material costs, fluctuations in currency exchange rates,
fluctuations in sales prices and adverse changes in general market and
industry conditions. The financial statements included in this press release
also contain certain financial measurements that are not recognized as
generally accepted accounting principles.
    To assess the operating performance of its assets and reporting segments,
the Corporation uses Earnings before interest, taxes, depreciation and
amortization (EBITDA) as a performance measurement. EBITDA is not defined
under Generally Accepted Accounting Principles (GAAP) and does not have a
standardized meaning prescribed by GAAP. Therefore, this measure may not be
comparable to similar measures presented by other enterprises. EBITDA is
defined in note 12 of the financial statements included with this press
release, as well as in the latest annual report of the Corporation. Boralex
also uses cash flows from operations, which corresponds to cash flow from
operating activities before changes in non-cash working capital balances in
the consolidated statement of cash flows, as a useful financial indicator to
measure cash flows provided by operations. Cash flows from operations per
share are calculated using the weighted average number of class A shares

    Consolidated balance sheets

    (in thousands of dollars)

                                                           As at       As at
                                                       September    December
                                                Note    30, 2007    31, 2006
                                                                    - note 2)

    Current assets
    Cash and cash equivalents                             81,884      13,899
    Accounts receivable                                   26,110      26,964
    Inventories                                            7,927       5,342
    Prepaids                                               2,122       2,776
                                                         118,043      48,981

    Investment                                            68,966      75,553
    Property, plant and equipment                  2     256,122     280,136
    Electricity sale contracts                            18,594      20,631
    Future income taxes                                        -       6,249
    Other assets                                   6      39,864      44,480
                                                         501,589     476,030


    Current liabilities
    Accounts payable and accrued liabilities              18,446      20,005
    Income taxes                                               -       1,786
    Current portion of long-term debt              7      30,022      41,835
                                                          48,468      63,626

    Long-term debt                              2, 7     143,681     192,493
    Future income taxes                            2      17,975      20,780
    Deferred revenue                               9      11,177      16,368
    Fair value of derivatives                                326           -
    Non-controlling interests                                572         730
                                                         222,199     293,997
    Shareholders' equity
    Capital stock                                        223,330     112,451
    Retained earnings                              2     109,874      97,649
    Accumulated other comprehensive income      2, 8     (53,814)    (28,067)
                                                         279,390     182,033
                                                         501,589     476,030
    See accompanying notes

    Consolidated statements of earnings
    (in thousands of dollars, except per-share amounts and number of shares)

                                                               For the
                                    For the quarters      nine-month periods
                                  ended September 30      ended September 30
                        Note        2007        2006        2007        2006
                                           (restated               (restated
                                            - note 2)               - note 2)

    Revenue from energy
     sales                        34,276      26,643     117,432      84,563
    Renewable energy
     tax credits           9       2,551       3,138       7,841       8,361
    Operating costs               25,784      22,074      83,841      68,053
                                  11,043       7,707      41,432      24,871

    Share in earnings
     of the Fund                     878       1,995       5,537       7,779
    Management revenue
     from the Fund                 1,427       1,369       4,208       4,080
    Other revenue                     91         259       1,717       3,580
                                  13,439      11,330      52,894      40,310
    Other expenses
    Management and
     operation of
     the Fund                      1,094       1,021       3,407       3,139
    Administration costs           3,284       1,937       9,052       6,309
                                   4,378       2,958      12,459       9,448
    Earnings before
     amortization                  9,061       8,372      40,435      30,862

    Amortization           2       6,307       5,202      17,634      14,784
     instruments          10        (369)          -      (6,243)          -
    Financial expenses             2,394       3,125       8,720       8,803
                                   8,332       8,327      20,111      23,587
    Earnings before
     income taxes                    729          45      20,324       7,275
    Income tax expense
     (recovery)            2        (130)     (1,084)      4,796      (2,936)
                                     859       1,129      15,528      10,211
     interests                       158          11         104        (126)
    Net earnings                   1,017       1,140      15,632      10,085

    Net earnings per
     class A share
     (in dollars)                   0.03        0.04        0.47        0.34
    Net earnings per
     class A share
     (in dollars)                   0.03        0.04        0.46        0.33

    Weighted average number
     of class A shares
     outstanding (basic)      37,454,625  30,049,586  33,374,658  30,028,594

    Consolidated statements of retained earnings
    (in thousands of dollars)

                                                  For the nine-month periods
                                                          ended September 30
                        Note                                2007        2006
                                                                    - note 2)
    Balance - beginning
     of period,
     as previously
     reported                                             99,208      84,188
    Modification of
     accounting policy     2                              (1,559)     (1,260)
    Balance - beginning
     of period, restated                                  97,649      82,928
    Share issue costs,
     net of related
     income taxes                                         (3,407)          -
    Net earnings for
     the period                                           15,632      10,085
    Balance - end
     of period                                           109,874      93,013

    Consolidated Statements of Comprehensive Income
    (in thousands of dollars)
    (unaudited)                                                For the
                                    For the quarters      nine-month periods
                                  ended September 30      ended September 30
                        Note        2007        2006        2007        2006

    Net earnings for
     the period                    1,017       1,140      15,632      10,085
    Other components
     of comprehensive
         losses on
         of the
         of self-
         operations               (8,901)       (220)    (23,311)     (5,326)
        Share of
         of the Fund                (575)        (95)     (1,994)       (935)
         on components
         of comprehensive
         income                      (34)          -        (196)          -
      Cash flow hedges
        Change in fair
         value of
         derivatives                (847)          -       1,944           -
        Realized hedging
         items reclassed
         to net earnings            (580)          -      (1,704)          -
        Termination of
         relationships    10           -           -      (5,874)          -
        Income tax
         expense                     457           -       1,803           -
                                 (10,480)       (315)    (29,332)     (6,261)
     income of the
     period                       (9,463)        825     (13,700)      3,824
    See accompanying notes

    Consolidated statements of cash flows
    (in thousands of dollars)

                                                                For the
                                    For the quarters      nine-month periods
                                  ended September 30      ended September 30
                        Note        2007        2006        2007        2006
                                           (restated               (restated
                                            - note 2)               - note 2)
    Operating activities
    Net earnings                   1,017       1,140      15,632      10,085
     received from
     the Fund                      3,097       3,097       9,293       9,293
    Adjustment for
     non-cash items
      Share in earnings
       of the Fund                  (878)     (1,995)     (5,537)     (7,779)
      Amortization                 6,307       5,202      17,634      14,784
       of deferred
       financing costs               227         100         567         371
      Renewable energy
       tax credits                (1,078)     (3,138)     (3,361)     (8,361)
      Future income
       taxes                           1      (1,228)      5,958      (2,366)
       instruments        10        (369)          -      (6,243)          -
      Other                          428         130       1,589         549
                                   8,752       3,308      35,532      16,576
    Net change in
     non-cash working
     capital balances             (2,707)     (4,646)     (6,496)     (8,354)
                                   6,045      (1,338)     29,036       8,222
    Investing activities
    Purchase of
     minority interests                -      (2,165)          -      (3,162)
    Purchase of property,
     plant and equipment          (4,081)     (1,849)    (16,273)    (17,715)
    Variation in
     restricted funds
     held for the
     debt service                      1         (27)      6,216      (6,007)
    Other                         (2,079)       (718)     (5,296)     (1,945)
                                  (6,159)     (4,759)    (15,353)    (28,829)
    Financing activities
    Bank loans and
     advances                          -           -           -     (42,012)
    Increase in
     long-term debt                    -       4,691     151,437      68,252
    Payments of
     long-term debt               (1,427)     (4,125)   (196,986)    (10,918)
    Financing costs                 (145)     (1,240)     (2,011)     (2,521)
    Net proceeds on
     share issuance                    -           -     105,307         274
    Fees related to the
     monetization program            (47)          -        (541)          -
    Other                            (50)          -         (50)          -
                                  (1,669)       (674)     57,156      13,075
     adjustments on cash
     and cash equivalents           (826)        247      (2,854)        588
    Net change in cash
     and cash equivalents         (2,609)     (6,524)     67,985      (6,944)

    Cash and cash
     equivalents -
     beginning of period          84,493      10,195      13,899      10,615

    Cash and cash
     equivalents -
     end of period                81,884       3,671      81,884       3,671

    Cash and cash
     paid for:
      Interests                    3,113       3,010       9,116       8,420
      Income taxes                   388         176       1,414         820
    See accompanying notes

    Notes to interim consolidated financial statements
    (tabular amounts in thousands of dollars, unless otherwise specified)

    Note 1 - Accounting policies

    These unaudited interim consolidated financial statements were prepared in
accordance with the same accounting policies as the ones used in the latest
audited consolidated financial statements, except for the new policies
described in note 2. These unaudited interim consolidated financial statements
and notes should be read in conjunction with the Boralex inc. ("Boralex" or
the "Corporation") audited consolidated financial statements as at December
31, 2006.

    Note 2 - Change in accounting policy and new accounting policies adopted
    in 2007


    In the first quarter of 2007, the Corporation modified the amortization
method it uses for its natural gas cogeneration power station and two wind
power sites. These sites, which were the Corporation's first investments in
these areas in France, were amortized based on the duration of their power
sales contracts. Following a technical analysis of these facilities, it was
determined that an amortization method based on the useful life of the various
components would better reflect the consumption of future benefits related to
these assets. The fixed assets of these units were therefore separated into
their major components and amortized on a straight-line basis according to
their expected useful lives, which range from five to 20 years. This change in
accounting policy was applied retroactively, with restatement of prior years.

    The impact of these changes on previously reported financial statements
    is as follows:

                                                   At December 31, 2006
                                      (as previously      Amorti-
                                            reported)     zation   (restated)
    Balance sheet
    Property, plant and equipment            282,489      (2,353)    280,136
    Future income taxes liabilities           21,564        (784)     20,780
    Retained earnings                         99,208      (1,559)     97,649
    Cumulative translation adjustments       (28,057)        (10)    (28,067)

                                    For the quarter ended September 30, 2006
                                      (as previously      Amorti-
                                            reported)     zation   (restated)

    Statement of earnings
    Amortization                               5,090         112       5,202
    Income tax recovery                       (1,047)        (37)     (1,084)
    Net earnings                               1,215         (75)      1,140
    Net earnings per class A
     share (basic and diluted)
     (in dollars)                               0.04           -        0.04

                          For the nine-month period ended September 30, 2006
                                      (as previously      Amorti-
                                            reported)     zation   (restated)

    Statement of earnings
    Amortization                              14,451         333      14,784
    Income tax recovery                       (2,825)       (111)     (2,936)
    Net earnings                              10,307        (222)     10,085
    Net earnings per class A share
     (basic) (in dollars)                       0.34           -        0.34
    Net earnings per class A share
     (diluted) (in dollars)                     0.33           -        0.33

    The restatements had no impact on cash flows related to operating,
investing and financing activities.

    Comprehensive income, Equity, Financial instruments and Hedges

    On January 1, 2007, Boralex adopted the new recommendations of Section
1530 "Comprehensive Income", of Section 3251 "Equity", of Section 3855
"Financial Instruments - Recognition and Measurement", and Section 3865
"Hedges", from the handbook of the Canadian Institute of Chartered Accountants
(CICA). The retroactive application of the new standards does not require
restatement of prior periods.
    Section 1530 "Comprehensive Income" describes standards for disclosing and
presenting comprehensive income and its components. Comprehensive income is
the change in a company's net assets which results from transactions and
events from sources not related to a company's shareholders. These
transactions and events include changes in the currency translation adjustment
relating to self-sustaining foreign operations and unrealized gains and losses
resulting from changes in fair value of certain financial instruments.
    Section 3251 "Equity" describes the standards for presenting equity and
changes in equity. Due to the adoption of Section 3251 and Section 1530
described above, Boralex's financial statements now include information on
comprehensive income and its components. On January 1st, 2007, an amount of
$28,067,000, previously recorded as Cumulative translation adjustments, was
reclassified in Accumulated other comprehensive income.
    Section 3855 "Financial Instruments - Recognition and Measurement"
establishes standards for recognizing and measuring financial assets,
financial liabilities and derivatives. This standard prescribes when to
recognize a financial instrument in the balance sheet and at what amount as
well as the basis of presentation for gains and losses on financial
instruments in the consolidated financial statements.

    Boralex has made the following classifications:

    - Cash and cash equivalents and CO2 quotas are classified as "Assets held
      for trading". They are measured at fair value and the gains or losses
      resulting from the remeasurement at the end of the period are
      recognized in net income.

    - Accounts receivable are classified as "Loans and receivables". They are
      recorded at cost, which upon their initial measurement is equal to
      their fair value. Subsequent measurements are recorded at amortized
      cost using the effective interest method.

    - Restricted funds and other funds held in trust and investments are
      classified as "Assets available for sale" and are measured at fair
      value. Gains and losses resulting from periodic remeasurement are
      recognized in comprehensive income.

    - Accounts payable and accrued liabilities and long-term debt are
      classified as "Other financial liabilities". They are initially
      recorded at fair value. Subsequent measurements are recorded at
      amortized cost using the effective interest method.

    Section 3855 also provides guidelines for the recognition of fees and
costs incurred on the issuance of debt instruments. Transaction costs are now
deducted from financial liabilities and are amortized using the effective
interest method over the expected life of the liability in question. Following
the application of Section 3855, non-amortized financing expenses of
$3,011,000 as at January 1, 2007, previously recognized under Other assets,
have been reclassified under Long-term debt.
    Boralex chose January 1, 2003 as the transition date for embedded
    Section 3865 "Hedges" specifies the manner in which hedge accounting is
applied. Boralex decided, in accordance with its risk management strategy, to
continue to apply hedge accounting for its interest rate swaps and its
electricity swaps as cash flows hedges. These derivatives are now recognized
at their fair value and the gains and losses resulting from their periodic
remeasurement are recognized in comprehensive income, to the extent that the
hedging is deemed effective.
    The adoption of these new standards translated, as at January 1, 2007,
into a $3,585,000 decrease in accumulated other comprehensive income, a
$5,272,000 increase in financial instruments reported in Other assets and by a
$1,687,000 increase in future income tax liabilities. The adoption of these
new standards had no impact on the Corporation's cash flows.

    Note 3 - Measurement uncertainty

    Boralex records renewable energy tax credits when it possesses a
reasonable assurance that they can be used. In order to establish the
recoverability of these credits, Boralex forecasted its taxable income on the
carry-forward period of the credits. This forecast is based on assumptions
that could vary considerably in the future.
    The key assumptions are mainly: the future selling price of electricity
and its other associated revenues, the price of other energy sources,
particularly those of oil and natural gas, future costs of wood-residue
procurement, and finally the remaining useful life of the energy producing
assets, considering the investments and maintenance planned over the period.
    On a three-year horizon, there exists some liquidity in the electricity
open market, making it possible to project the future price curve. Beyond
three years, prices can be negociated with specific parties, but often at a
significant discount considering a lack of liquidity for such a period.
Therefore, the assumption made is that for years four and after, the price
will vary according to inflation rates. Assumptions related to the other
sources of energy are made using a similar method because there exists a
correlation between their price and that of electricity.
    In regards to wood-residue costs, this raw material is not part to an
organized open market. Purchases are made based on specific agreements
negotiated with each supplier. Most of the agreements are renewable on an
annual basis, therefore the prices are subject to some volatility. In that
context, the assumption for wood-residue costs is based on next year's
contracts, adjusted for inflation in the remaining years of the forecast
    Finally, the remaining useful life of the assets will vary with the amount
of maintenance work realized each year. When the power stations are
sufficiently well maintained, their useful life can be very long and limited
mostly by changes in technology which could make their production less
competitive. Consequently, the forecasts consider sufficient maintenance
expenses to ensure that the power stations' life will last, at a minimum, as
long as the forecast period.

    Note 4 - Share information

    As at September 30, 2007 the capital stock issued and outstanding
consisted of 37,454,625 Class A shares (30,049,586 as at December 31, 2006).
During the nine-month period ending September 30, 2007, 71,705 options were
exercised, 7,333,334 shares were granted under a public offering and
151,745 options were granted. Cost related to the public offering amounted
to $4,968,000 were recorded against retained earnings, net of future taxes
of $1,561,000.
    As at November 6, 2007 the number of share purchase options outstanding
was 1,256,146 of which 680,131 could be exercised.

    Note 5 - Share purchase option plan

    The Corporation applies the fair value method of accounting for
stock-based compensation awards granted to employees and officers.
Accordingly, an amount of $603,000 has been recorded as administration cost to
account for the cost of stock options, for the nine-month period ended
September 30, 2007 ($360,000 in 2006).

    The following assumptions were used to estimate the fair value, at the
    date of grant, for the options issued in 2007:

    Risk-free interest rate                                             4.16%
    Expected dividend yield                                                0%
    Expected life of options                                         7 years
    Expected volatility                                                   37%

    Note 6 - Other assets

                                                       September    December
                                                Note    30, 2007    31, 2006

    Renewable energy tax credits                 6 b)     17,509      20,231
    Deferred financing costs                       2           -       3,011
    Monetization program expenses                  9       3,993       5,673
    Restricted funds and other funds
     held in trust                               6 c)      1,490       8,280
    Net investment in lease financings                     6,571       5,420
    Fair value of derivative instruments           2       5,664           -
    Deferred costs                                           516         355
    CO2 quota                                                 73          71
    Other investment                                          73          79
    Project development costs                              3,975       1,360
                                                          39,864      44,480

    a) Amortization of deferred costs was $72,000 for the nine-month period
       ended September 30, 2007 ($65,000 for the year ended December 31,
       2006). Amortization of the costs related to the monetization program
       was $1,491,000 for the nine-month period ended September 30, 2007
       ($153,000 for the year ended December 31, 2006).

    b) The renewable energy credits represent tax credits earned by the
       Corporation before it set up the monetization program as well as tax
       credits attributable to power stations acquired subsequently. Tax
       credits earned will be used against future income taxes. Financial
       projection indicate that the amount recorded may be realized in the
       next 5 to 10 years.

    c) Under the financial agreements for the Massif Central and Plouguin
       projects, in 2006 the Corporation established cash reserves for debt
       servicing. Under the refinancing dated on June 25, 2007, some of those
       reserves were released.

    Note 7 - Long-term debt

                                                       September    December
                                    Note      Rate(1)   30, 2007    31, 2006
    Revolving credit bearing
     interest at a variable rate       a)          -           -      49,493
    Bridge loan with a balance of
     (euro)6,800,000 as at
     September 30, 2007
     ((euro)15,873,000 in 2006),
     bearing interest at a
     variable rate and maturing
     January 4, 2008                   b)       4.43%      9,633      24,408
    Secured senior credits with
     a balance of (euro) 95,365,000
     as at September 30, 2007
     ((euro)83,938,000 in 2006),
     repayable in semi-annual
     instalments and maturing
     between 2017 and 2022             c)       4.95%    135,094     129,071
    Secured junior credit with a
     balance of (euro)7,050,000
     as at September 30, 2007
     ((euro)3,734,000 in 2006),
     repayable in semi-annual
     instalments and maturing
     in 2017                           c)       6.20%      9,987       5,742
    Project leases with a balance
     of (euro)10,760,000 as at
     September 30, 2007
     ((euro)12,096,000 in 2006),
     repayable in quarterly
     instalments and maturing
     between 2012 and 2015             d)       5.68%     15,243      18,600
    Term loan bearing interest
     at a variable rate with
     a balance of US$3,696,000
     as at September 30, 2007
     (US$4,296,000 in 2006),
     repayable in quarterly
     instalments and maturing
     July 31, 2010                              8.18%      3,683       5,006
    Others                                                 4,839       2,008
                                                         178,479     234,328
    Current portion of long-term debt                     30,022      41,835
    Deferred financing costs           2                   4,776           -
                                                         143,681     192,493
    (1) Average weighted annual rates, adjusted to reflect the impact of
        interest rate swaps.

    a) This financing, for a total authorized of $85,000,000, is guaranteed
       by Boralex's investment in the Fund, based on the following formula:
       amounts advanced may not exceed 60% of the market value of the
       investment. If the market value of the investment were to drop below
       this limit, creditors would be entitled to demand repayment of a
       portion of the amounts advanced in order to reestablish the coverage
       ratio. As at September 30, 2007, no amount was used but letters of
       credit for a total of $10,523,000 (including the letter of credit
       discussed in b) were issued against this operating credit. Lastly, the
       market value of a unit was $8.85 and the repayment threshold was $1.28
       (including all letters of credit in circulation issued on the
       operating credit).

    b) A letter of credit in the amount of $9,633,000 as at September 30,
       2007 ($25,269,000 as at December 31, 2006) drawn on the revolving
       credit was issued to guarantee the secured credits. As discussed
       below, the Corporation closed a major refinancing of some secured
       credits. This transaction allowed to reimburse part of the bridge loan
       and consequently its corresponding letter of credit.

    c) During the second quarter of 2007, the Corporation concluded the
       refinancing of secured senior and junior credits related to the wind
       power sites of Ally, Cham de Cham Longe, Plouguin and La Citadelle.
       This refinancing was achieved through the implementation of a new
       master credit agreement comprised of a senior credit facility of a
       maximum of 250 million euros and a junior credit facility of a maximum
       of 15 million euros. The previous secured credits, some of which were
       included under the previous master credit agreement, were reimbursed
       by amounts drawned on the new agreement. The set up of this new master
       agreement also allowed to extend the term until December 31, 2010.

       Because of the increased diversification of the portfolio of assets,
       the Corporation was able to increase its loan capacity, as well as
       reduce the amount of cash reserves required to support debt service.
       As a result, the Corporation negotiated two new credit facilities that
       will serve to cover temporarily eventual cash requirements to service
       the debts. Those credit facilities are authorized at $7,128,000
       ((euro)5,032,000) and $796,000 ((euro)562,000) respectively.

       Senior and junior credits are secured with the assets of the
       associated projects, with the junior credit being subordinate to the
       senior credit.

    d) Project leases consist of capital leases on assets located in France.
       The net book value of property, plant and equipment covered by these
       leases is $20,907,000 ($26,245,000 as at December 31, 2006).

    Interest rate swaps

    Except for the Nibas wind farm financing, all senior and junior secured
credit together with a portion of certain leases bear interest at a variable
rate. To offset the interest rate risk, the Corporation has entered into
interest rate swaps to obtain fixed interest charges on portions varying from
58% to 89% of the corresponding credit. These agreements involve the periodic
exchange of interest payments without any exchange of the principal on which
they are calculated. Under these agreements, the Corporation receives a
variable amount based on the EURIBOR rate and pays fixed amounts based on
rates of between 3.30% and 5.16%. Since some credits are drawn progressively
and the loans are periodically repaid when sites are commissioned, the swaps
have been structured to mirror the terms of the underlying credit arrangements
and to always cover a significant portion of these arrangements. By using
these swap instruments, the Corporation has reduced the proportion of its
variable-rate debt from 86% to 18%.


    In addition to capital assets associated with capital leases and the
investment in the Fund securing the revolving bank credit, the property, plant
and equipment of one U.S. power station, one Quebec power station and French
power stations, with a net book value totalling $166,478,000 as at
September 30, 2007 ($172,396,000 as at December 31, 2006), together with the
related working capital, have been pledged as collateral on the debts
associated to those projects.

    The estimated aggregate amount of repayments on long-term debt in each of
    the next five years is as follows:

                        2008        2009        2010        2011        2012
                      30,022      14,801      16,872      13,194      11,392

    Note 8 - Accumulated other comprehensive income

                                                                September 30,
    Cumulative translation adjustments reclassified in
     accordance with the new accounting policies (note 2)            (28,067)
    Cumulative impact of accounting changes relating to
     financial instruments as at January 1st, 2007 (note 2)            3,585

    Other comprehensive income for the period                        (29,332)
    Balance end of period                                            (53,814)

    Note 9 - Renewable energy tax credit monetization program

    The Corporation closed a transaction that allows it to immediately receive
a cash portion of the value of the renewable energy tax credits to be earned
by some of its wood-residue thermal power stations in the United States. The
investor must be the legal owner of the power stations in order to take
advantage of these credits. The transaction thus also included the transfer of
power station ownership. However, the Corporation continues to consolidate
these facilities under AcG-15, which defines the rules for consolidating
variable interest entities. Although the Corporation no longer holds the
majority voting rights for these operations, it is still the primary
beneficiary since it will receive all of the cash flow generated by these
facilities and is responsible for any operating losses. In addition, the
Corporation continues to operate the facilities under a service agreement that
allows it to define strategic and operating parameters.
    On December 1, 2006, the Corporation received $16,719,000 (US$14,500,000),
or about 50% of the value of the tax credits that will be generated between
the transaction date and December 31, 2009, the date when the program ends.
The balance of the credit amount will be paid by the investor as the credits
are earned. If the Corporation cannot produce enough to absorb the value of
the amount initially paid by the investor, the contract requires the
Corporation to repay that portion. The Corporation believes that future
production will be sufficient to cover all its commitments.
    The agreements state that by the end of the program, the Corporation's
share of the profits generated by the power stations will automatically be
adjusted to a minimum of 80% and that it will have call rights to buy the
assets at their market value at that date. Based on current estimates, the buy
back option would cost about US$5 million.
    Due to the implementation of this program, the nature of the amounts
recorded after December 1, 2006 has been modified. Although the payments are
equivalent to a proportion of the value of the renewable energy tax credit,
the amounts recorded cannot be posted against tax expenses as they become a
taxable item. The Corporation decided that it would not modify the
presentation of the items and that it would continue to indicate them
separately given their relative materiality.

    Note 10 - Financial instruments

    The Corporation is carrying long-term debts bearing interest at variable
rates. As at September 30, 2007, approximately 86% of the long-term debt
issued bears interest at variable rates as do the Corporation's bank loans. A
sharp increase in interest rates in the future, could affect the liquid assets
available for the Corporation's development projects. As discussed in note 7,
the Corporation has used interest rate swaps to reduce its risk by reducing
its exposure to interest rate fluctuations to 18% of total debt. As at
September 30, 2007, the notional amount of those swaps was $120,548,000
((euro)85,097,000) and their favourable fair value stood at $4,547,000
    Because of the refinancing closed on June 25, 2007 (see note 7c), the
Corporation failed to maintain the hedging relationships that had been
established between its interest rate swaps and the previous debts. As such,
it had to terminate the hedging relationship it had established using the
critical term match criteria, which provide an exemption from the performance
of periodic efficiency testing. Based on a mathematical demonstration of their
high efficiency, these swaps were redesignated as hedges of the new debts. The
fair value of those instruments as at the date of designation was $6,243,000
    As at September 30, 2007, the Corporation had entered into six electricity
swaps for the deliveries of 227,064 MWh over periods of one to 18 months. All
these financial electricity swaps as at September 30, 2007 were designed as
hedges of future variable cash flows related to the delivery of electricity
and their favourable fair value amounted to $790,000 ($US793,000). These
contracts qualify for hedge accounting.
    The Corporation has entered into collar options that enable it to set an
exchange rate ceiling and floor for its purchases. The exchange rate should
range between 1.41 and 1.37 per euro purchase. As at September 30, 2007, the
favourable fair value of these options was negligible.

    Note 11 - Seasonality

    The Corporation's power generation follows a seasonal cycle. Generally,
consumption increases in the winter and summer, which correspond to Boralex's
first and third quarters. This means that, for those two periods, facilities
that sell on the open market usually have higher average electricity sales
prices. Given this, and because the wood-residue power stations can control
their level of production, they operate at a higher level during such periods.
Their regular maintenance is then done in the spring or fall, which affects
their operating results.
    Hydroelectric generation depends on water flows, which in Québec and the
northeastern US are at their maximum in the spring and are generally good in
the fall, which correspond to Boralex's second and fourth quarters. Flows tend
to decrease in the winter and summer. Note that Boralex's hydroelectric
facilities do not have reservoirs with which they could regulate the water
    In other respects, certain power stations have long-term fixed-price power
sales contracts. This is the case for the two hydroelectric stations in
Québec, one hydroelectric in the US and all of the Corporation's facilities in
    The natural gas power station is also subject to a seasonal cycle because
its electricity sales contract favours the production during winter, where the
demand in France is higher. Thus, during the 3 last years, the Corporation
produced electricity only during the months of November to March.
    The investment of Boralex in the Boralex Power Income Fund (the "Fund") is
also subject to a seasonal cycle. In fact, about 50% of the Fund's production
is hydroelectric, and therefore subject to comparable fluctuations as those
affecting the power stations owned directly by Boralex in that segment.
    In conclusion, Boralex is affected by seasonal cycles, however, its
diversification in production sources reduces the seasonal variations in its

    Note 12 - Segmented information

    The Corporation's power stations are grouped under four distinct segments:
wind power, hydroelectric power, wood-residue thermal power and natural gas
thermal power, and are engaged mainly in the production of energy. The
classification of these segments is based on the different cost structures
relating to each type of power station. The accounting policies that apply to
the individual segments are the same policies used for the consolidated
financial statements as described in note 1.
    The Corporation analyzes the performance of its operating segments based
on their EBITDA which is defined as earnings before interest, taxes,
depreciation and amortization. EBITDA is not a measure of performance under
Canadian generally accepted accounting principles; however, management uses
this performance measure for assessing the operating performance of its
reportable segments. Earnings for each segment are presented on the same basis
as those of the Corporation.

    The following table reconciles EBITDA to net earnings:
                                                                     For the
                                    For the quarters      nine-month periods
                                  ended September 30      ended September 30
                                    2007        2006        2007        2006
                                           (restated               (restated
                                            - note 2)               - note 2)

    Net earnings                   1,017       1,140      15,632      10,085
    Non-controlling interests       (158)        (11)       (104)        126
    Income tax expense (recovery)   (130)     (1,084)      4,796      (2,936)
    Financial expenses             2,394       3,125       8,720       8,803
    Financial instruments           (369)          -      (6,243)          -
    Amortization                   6,307       5,202      17,634      14,784
    Consolidated EBITDA            9,061       8,372      40,435      30,862

    Information by segment
                                                                     For the
                                     For the quarters     nine-month periods
                                   ended September 30     ended September 30
                                    2007        2006        2007        2006

    Wind power stations           47,413      38,082     148,118     128,042
    Hydroelectric power
     stations                      8,705      22,863      74,875     100,653
    Wood-residue thermal
     power stations              318,323     279,311     915,206     738,106
    Natural gas thermal
     power station                     -          78      22,202      22,757
                                 374,441     340,334   1,160,401     989,558
    Wind power stations            5,974       4,652      19,176      15,447
    Hydroelectric power stations     681       1,785       6,617       8,072
    Wood-residue thermal
     power stations               25,688      17,986      81,887      51,235
    Natural gas thermal
     power station                 1,933       2,220       9,752       9,809
                                  34,276      26,643     117,432      84,563
    Wind power stations            4,876       4,016      15,813      12,984
    Hydroelectric power stations    (485)        815       3,784       5,507
    Wood-residue thermal
     power stations                6,886       2,939      20,652       4,419
    Natural gas thermal power
     station                        (219)        236       1,557       4,083
    Corporate and eliminations    (1,997)        366      (1,371)      3,869
                                   9,061       8,372      40,435      30,862
    Wind power stations            2,330       1,558      12,858       9,153
    Hydroelectric power stations     688         232         817         379
    Wood-residue thermal power
     stations                      1,014           -       2,340       7,945
    Natural gas thermal power
     station                           -          59           2         153
    Corporate and eliminations        49           -         256          85
                                   4,081       1,849      16,273      17,715

                                                       September    December
                                                        30, 2007    31, 2006
    ASSETS                                                         (restated
                                                                    - note 2)

    Wind power stations                                  192,372     194,634
    Hydroelectric power stations                          32,843      34,284
    Wood-residue thermal power stations                  122,772     147,099
    Natural gas thermal power station                     15,814      21,944
    Corporate and eliminations                           137,788      78,069
                                                         501,589     476,030

    Note 13 - Comparative figures

    Certain reclassifications have been made to the prior year's consolidated
financial statements to conform to the current year's presentation.

For further information:

For further information: Patricia Lemaire, Director, Communications,
Boralex Inc., (514) 985-1353,

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