- Acquisition of 7 operating wind power projects with an installed capacity of 87 MW
- Agreement to purchase, once commissioned, a 44 MW wind power project currently under construction
- Exclusive agreement to develop a portfolio of wind power projects in France
- Private placement of Innergex common shares for a total value of $50 M
- Increase in free cash flow per share
LONGUEUIL, QC, March 21, 2016 /CNW Telbec/ - Innergex Renewable Energy Inc. (TSX: INE) ("Innergex" or the "Corporation") is pleased to announce that final agreements have been signed with a German company, wpd europe GmbH (the "Seller"), for the acquisition of a portfolio of 8 wind power projects located in France, that is, 7 operating projects with a combined installed capacity of 87 MW and another project currently under construction with an installed capacity of 44 MW, for a total of 131 MW. Simultaneously, the Corporation announced a private placement of $50 M with three Desjardins Group affiliated entities.
"Establishing a foreign foothold is the cornerstone for the next growth stage at Innergex," explains Michel Letellier, President and Chief Executive Officer. "This acquisition represents not only the outcome of a long process during which we laid the foundations for a new phase in the evolution of the Corporation, but also the achievement of an ambitious objective—our desire to export our expertise and know-how to Europe. Furthermore, the transactions announced today lay the basis for the future development of Innergex in France, a highly attractive growth market."
As part of this new growth stage, Innergex has also reached an exclusive agreement with the French firm Société Environnement Minéraux SARL ("S.E.M.") and the consulting firm DRC SARL ("DRC") to develop a portfolio of wind power projects in France totalling over 100 MW.
DETAILS ON THE ACQUISITION OF EIGHT WIND POWER PROJECTS
The purchase price for the eight wind power projects will be approximately €93 M (equivalent to C$137 M), subject to certain adjustments. Of this amount, €60 M (or C$88 M) will be paid for the seven operating projects while €10 M (or C$15 M) will serve as a deposit for the project currently under construction. After the project's commercial commissioning, the Corporation will pay to the Seller an additional amount of €23 M (or C$34 M), subject to certain adjustments; the deposit is refundable should the project not be completed as planned. Non-recourse debt related to the eight projects, which will total €121 M in 2017 (equivalent to C$178 M), will remain at the acquired project level. The Corporation intends to reduce exposure to exchange rate fluctuations by entering into long-term currency hedging instruments.
Innergex expects to complete the acquisition of the seven operating projects by April 30, 2016, and the acquisition of the project under construction during the first quarter of 2017, subject to regulatory authorizations and other customary closing conditions.
DESCRIPTION OF THE ACQUIRED ASSETS
The 8 wind farms are located in northern France. The aggregated installed capacity of all 8 farms is 131 MW and the average annual power generation is expected to reach 270,000 MWh when the final wind farm will be commissioned in 2017. All the electricity produced by these wind farms is sold under power purchase agreements ("PPAs") at fixed prices, for an initial term of 15 years, with Électricité de France (7 wind farms) and S.I.C.A.E Oise (1 wind farm). Innergex is expecting annualized revenues in the order of C$35 M and an adjusted EBITDA in the order of C$28 M for the 131 MW portfolio.
Each wind farm has between 4 and 22 turbines, for a total of 52 Enercon turbines and 10 Nordex turbines. The average age of the facilities is two years and the average remaining term of the PPAs is 13 years. All assets are operated by the respective wind turbine manufacturers under the terms of long-term operation and maintenance contracts. Commercial and technical management will be under the responsibility of wpd windmanager GmbH & Co. KG, in accordance with their actual long-term contracts. Innergex intends to maintain the existing contracts until they expire.
The purchase price of €93 M (equivalent to C$137 M) will be financed in part by a private placement of $50 M.
A Canadian pension fund has also signed a letter of intent to acquire an ownership interest in the projects for a potential investment totalling C$50 M, following the closing of the acquisition of the operating assets.
In addition, Innergex has obtained a commitment from a French infrastructure fund for a €10 M financing through subordinated debt via its new French subsidiaries created for the acquisition.
"With our partners' capital contribution structured in terms of assets, we are increasing our shareholders' return while optimizing the investment structure. This financial structure combined with the private placement of common shares allows Innergex to secure the required funds to complete the transaction," asserts Jean Trudel, Chief Investment Officer.
PRIVATE PLACEMENT OF INNERGEX COMMON SHARES
To finance the acquisition, Innergex is also announcing that three Desjardins Group affiliated entities have collectively agreed to subscribe to a private placement of 3,888,750 common shares of Innergex at a price of $12.8576 per share, for gross proceeds of C$50 M. This sum will be paid at the closing of the acquisition of the operating assets.
Issuance of the common shares for this private placement is subject to the customary regulatory approvals by the applicable securities regulatory authorities, including the TSX. Moreover, the common shares issued under the private placement will be subject to a statutory four-month sale restriction period after their issuance.
DETAILS ON THE DEVELOPMENT AGREEMENT BETWEEN INNERGEX, S.E.M. AND DRC
The French firms S.E.M. and DRC have agreed to work exclusively with Innergex for a period of five years in order to continue the development of a portfolio of over 100 MW developed by S.E.M. in recent years and to which other projects may eventually be added. Any project identified and developed by S.E.M. and DRC will be wholly-owned by Innergex.
This agreement allows Innergex to combine its technical and financial knowledge and to share its know-how in the development of wind power projects with two renowned and experienced French stakeholders in wind power project development.
BENEFITS OF THE TRANSACTION FOR INNERGEX
- First step to gaining a foothold in Europe
- Immediate increase in the gross installed capacity from 1,232 MW to 1,319 MW
- Increase in the gross capacity under development from 297 MW to 341 MW
- Increase in free cash flow per share
Conference call and webcast 11 a.m. EST, Monday, March 21, 2016
The Corporation will hold a conference call and webcast at 11 a.m., EST, on Monday, March 21. Michel Letellier, President and CEO for Innergex, Jean Trudel, Chief Investment Officer and Jean Perron, Chief Financial Officer, will present the details regarding the acquisition and the private placement of common shares.
Date and time: 11 a.m. EST, Monday, March 21, 2016
Telephone numbers: 1-888-231-8191 / 1-647-427-7450
About Innergex Renewable Energy Inc.
Innergex Renewable Energy Inc. (TSX: INE) is a leading Canadian independent renewable power producer. Active since 1990, the Corporation develops, owns, and operates run-of-river hydroelectric facilities, wind farms, and solar photovoltaic farms and carries out its operations in Quebec, Ontario, British Columbia, and Idaho, USA. Its portfolio of assets currently consists of: (i) interests in 35 operating facilities with an aggregate net installed capacity of 716 MW (gross 1,232 MW), including 28 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 3,280 MW (gross 3,530 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 caution
Readers are cautioned that Adjusted EBITDA is not a measure recognized by International Financial Reporting Standards (IFRS) and has no meaning prescribed by it, and therefore may not be comparable to those presented by other issuers. Innergex believes that these indicators are important, as they provide management and the reader with additional information about the Corporation's production and cash generation capabilities and also facilitate the comparison of results over different periods. References to "Adjusted EBITDA" are to operating revenues less operating expenses, general and administrative expenses and prospective project expenses. Readers are cautioned that Adjusted EBITDA should not be construed as an alternative to net earnings, in accordance with IFRS.
In order to inform readers of the Corporation's future prospects, this press release contains forward-looking information that can generally be identified by the use of words such as "projected", "potential", "expect", "will", "should", "estimate", "forecasts", "intends", or other comparable terminology that states that certain events will or will not occur. It represents the estimates and expectations of the Corporation relating to future results and developments as of the date of this press release. It includes future-oriented financial information, such as estimated electricity production, revenues and Adjusted EBITDA, to inform readers of the potential financial impact of the acquisition and the private placement. Such information may not be appropriate for other purposes.
The material risks and uncertainties that may cause actual results and developments to be materially different from current expressed Forward-Looking Information are referred to in the Corporation's Annual Information Form in the "Risk Factors" section and include, without limitation: failure to complete the transactions; the ability of the Corporation to implement its strategy; its ability to access sufficient capital resources; liquidity risks related to derivative financial instruments; the exchange rate fluctuations; the growth and development of foreign markets; changes in hydrology, wind regimes and solar irradiation; delays and cost overruns in the design and construction of projects; the ability to develop new facilities; variability of facilities performance and related penalties; failure to perform from main counterparties; potential undisclosed liabilities associated with the acquisition; the ability to integrate the acquired facilities; and failure to realize the benefits of this acquisition.
Forward-Looking Information in this press release is based on certain principal 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 Risks and Uncertainties
Estimated Production, Revenues and Adjusted EBITDA
For each facility, the Corporation determines an annual long-term average level of electricity production (LTAP) over the expected life of the facility, based on several factors that include, without limitation, historically observed water flows or wind or solar irradiation conditions, turbine or panel technology, installed capacity, energy losses, operational features and maintenance. Although production will fluctuate from year to year, over an extended period it should approach the estimated LTAP. The Corporation then estimates expected annual revenues for each facility by multiplying its LTAP by a price for electricity stipulated in the power purchase agreement entered into with a public utility or other creditworthy counterparty. These agreements stipulate a base price and, in some cases, a price adjustment depending on the month, day and hour of delivery. In most cases, power purchase agreements also contain an annual inflation adjustment based on a portion of the Consumer Price Index. The Corporation then estimates annual operating earnings (Adjusted EBITDA of the portfolio) by subtracting from the estimated revenues the budgeted annual operating costs, which consist primarily of operators' salaries, insurance premiums, operations and maintenance expenditures, property taxes, and royalties; these are predictable and relatively fixed, varying mainly with inflation except for maintenance expenditures.
Improper assessment of water, wind and sun resources and associated electricity production
Projected Free Cash Flow and Payout Ratio
The Corporation estimates Free Cash Flow as projected cash flow from operations before changes in non-cash operating working capital items, less estimated maintenance capital expenditures net of proceeds from disposals, scheduled debt principal repayments, preferred share dividends and the portion of Free Cash Flow attributed to non-controlling interests, plus cash receipts by Harrison Hydro L.P. for the wheeling services to be provided to other facilities owned by the Corporation over the course of their power purchase agreement. It also adjusts for other elements, which represent cash inflows or outflows that are not representative of the Corporation's long-term cash generating capacity, such as adding back transaction costs related to acquisitions (which are financed at the time of the acquisition) and adding back realized losses or subtracting realized gains on derivate financial instruments used to fix the interest rates on project-level debt.
Adjusted EBITDA below expectations caused by the risks and uncertainties mentioned above and by higher prospective project expenses
Expected Closing of the Acquisition, of the Private Placement and of the Investments by a Canadian Pension Plan and by a French Infrastructure Fund
The Corporation reasonably expects to complete and comply with all the closing conditions within the deadlines, considering that no termination right has been exercised and that governmental approvals should be obtained. The signed letter of intent as well as the commitment by the French infrastructure fund constitute the key assumptions on which the Corporation bases itself with respect to the proposed investments by a Canadian pension plan and a French infrastructure fund.
Availability of the capital
Although the Corporation believes that the expectations contained in the Forward-Looking Information are based on reasonable and valid assumptions, readers of this press release are cautioned not to unduly rely on this Forward-Looking Information since no assurance can be given that it 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 or following unexpected events, unless so required by legislation.
SOURCE Innergex Renewable Energy Inc.
For further information: Martine Benmouyal, Senior Advisor - Communications, 450 928-2550, ext. 335, [email protected]; www.innergex.com