Innergex Renewable Energy Inc. released its operating and financial results for the fourth quarter and year ended December 31, 2017.
“Our list of achievements in 2017 is impressive. In addition to having reached commercial operation at two major hydro projects in British Columbia, we have significantly increased our presence in France through acquisitions and we have undertaken several development activities in Canada and internationally,” said Michel Letellier, President and Chief Executive Officer of Innergex.
“With the acquisition of Alterra Power Corp. in the first quarter of 2018 and the combination of both talented teams, we are a strong renewable power producer with solid capabilities to seize numerous opportunities concurrently and to accelerate our growth in the United States, Canada and Europe,” he added.
During the three-month period ended December 31, 2017, the Corporation’s facilities produced 1,106 GWh of electricity or 98% of the LTA of 1,133 GWh. Overall, the hydroelectric facilities produced 88% of their LTA due to challenging post-commissioning activities currently being addressed at the Upper Lillooet River facility and below-average water flows at most of the British Columbia facilities. The wind farms produced 108% of their LTA due to the above-average wind regime in Quebec and to compensation received from the manufacturer for non-availability of equipment at the Mesgi’g Ugju’s’n facility, partly offset by the below-average wind regime in France. The solar farm produced 97% due to the average solar regime.
In the fourth quarter, the Corporation recorded revenues of $108.0 million compared with $73.3 million for three-month period ended December 31, 2016. This increase is attributable mainly to the contribution of the recently commissioned Mesgi’g Ugju’s’n, Upper Lillooet River and Boulder Creek facilities as well as to the acquisition of the Montjean, Theil-Rabier, Yonne, Rougemont 1-2, Vaite, Plan Fleury and Les Renardières facilities. The increase was partly offset by lower production at most of the British Columbia hydro facilities. The Corporation recorded Adjusted EBITDA of $80.1 million compared with $50.3 million in 2016 mainly due to higher revenues net of expenses. The Corporation recorded Adjusted EBITDA Proportionate of $83.2 million compared with $51.5 million in 2016 due mainly to higher Adjusted EBITDA and a higher share of Adjusted EBITDA of joint ventures stemming from higher production and revenues at the Umbata Falls and Viger-Denonville facilities.
For the three-month period ended December 31, 2017, the Corporation recorded a net earnings of $3.5 million (basic and diluted net earnings of $0.05 per share), compared with net earnings of $8.8 million (basic and diluted net earnings of $0.08 per share) in 2016. The decrease is explained mainly by the $14.2 million increase in finance costs, the $8.9 million increase in depreciation and amortization and the $5.7 million decrease in income tax recovery. Net earnings were also impacted by the recognition of an unrealized net loss on derivative financial instruments compared with a gain for the three-months ended December 31, 2016, and to a lower share of earnings of joint ventures compared with the same quarter in 2016. These factors were partly offset by the $29.8 million increase in Adjusted EBITDA.
During the year ended December 31, 2017, the Corporation’s facilities produced 4,394 GWh of electricity or 92% of the LTA of 4,764 GWh. Overall, the hydroelectric facilities produced 93% of their LTA due mainly to lower production from challenging post-commissioning activities currently being addressed at the Upper Lillooet River facility and below-average water flows in British Columbia, partly offset by above-average water flows in Quebec and Ontario. The wind farms produced 91% of their LTA due to lower production from post-commissioning activities currently being addressed at the Mesgi’g Ugju’s’n facility and below-average wind regimes in France. Wind regimes in France have lately trended well below the historical average, which explains the lower production. The solar farm produced 106% of its LTA due to an above-average solar regime. The 25% production increase over the same period last year is due mainly to the contribution of the facilities commissioned in 2016 and 2017 and the wind farms acquired in France in 2016 and in 2017 and to higher production at some of our Quebec and Ontario hydro facilities, which was partly offset by lower production at our British Columbia hydro facilities.
For the year ended December 31, 2017, the Corporation recorded revenues of $400.3 million, compared with $292.8 million for the year ended December 31, 2016. This 37% increase is attributable mainly to the facilities commissioned in 2016 and 2017 and the wind facilities acquired in 2016 and 2017 in France as well as to higher production at all of our Ontario hydro facilities, which was partly offset by lower production at our British Columbia hydro facilities.
For the year ended December 31, 2017, the Corporation recorded Adjusted EBITDA of $298.7 million compared with $216.0 million last year. This increase of 38% is due mainly to production and revenues from new facilities, partly offset by higher operating expenses, general and administrative expenses and prospective project expenses. The Adjusted EBITDA Margin increased from 73.8% to 74.6% for the year due mainly to the increase in revenues net of expenses, partly offset by the payment related to water rights for 2011 and 2012 in British Columbia made in the first quarter of 2017.
- On January 31, 2017, the $197.2 million non-recourse construction and term project financing closed by Big Silver Creek Power Limited Partnership on June 22, 2015, for the Big Silver Creek River run-of-river hydroelectric project, was converted into a 39.5-year term loan.
- On February 10, 2017, Innergex and Desjardins Group Pension Plan (“Desjardins”) raised €8.5 million of subordinated debt from a French infrastructure fund through their French subsidiaries created for the acquisition of wind farms in France in April 2016. The subordinated loan carries an interest rate of 7.25% and has an eight-year tenor; its principal will be reimbursed at maturity.
- On February 21, 2017, Innergex completed the acquisition of the 44 MW Yonne wind farm located in northern France. This wind farm acquisition was announced simultaneously to the acquisition of seven wind farms in 2016. At the time, the facility was under construction and its acquisition was to be concluded once the commissioning was completed. The commissioning activities began in the fourth quarter of 2016 and were completed at the end of January 2017. The total purchase price amounts to €35.2 million ($49.0 million) subject to certain adjustments and includes €3.8 million ($5.3 million) of working capital. A €10.0 million ($13.9 million) deposit had already been provided by the Corporation when the acquisition was first announced in March 2016. Innergex owns a 69.55% interest in the wind farm and Desjardins owns the remaining 30.45%.
- On February 21, 2017, Innergex executed a Fifth Amended and Restated Credit Agreement of its then existing $425 million revolving credit facilities. These amendments give the Corporation flexibility in borrowing in euros using EURIBOR loans. The Corporation also extended its revolving term from 2020 to 2021 (except for one lender of $42.5 million, whose commitment remained in effect until 2020) to provide greater financing flexibility. Moreover, a Letter of Credit Facility of up to $30 million guaranteed by Export Development Canada (EDC) has been added and put in place.
On October 31, 2017, the Corporation announced that it had increased its revolving credit facilities by $50 million and added a new lender to the syndicate of lenders. It also extended the maturity of its revolving facility from December 2021 to December 2022 for all its lenders to provide greater flexibility.
- On May 24, 2017, Innergex completed the acquisition of three wind projects in France’s Bourgogne-Franche-Comté region with an aggregate capacity of 119.5 MW. The equity’s purchase price was approximately €51.4 million ($76.2 million), subject to certain adjustments. Innergex owns a 69.55% interest in the wind farms while Desjardins owns the remaining 30.45%.
- On August 15, 2017, Innergex announced that it has received approval from the Toronto Stock Exchange (TSX) to proceed with a normal course issuer bid on its common shares (the “Bid”). Under the Bid, the Corporation may purchase for cancellation up to 2,000,000 of its common shares, corresponding to approximately 1.84% of the 108,640,790 issued and outstanding common share of the Corporation as at August 14, 2017. The Bid commenced on August 17, 2017, and will terminate on August 16, 2018.
On November 14, 2017, the Corporation announced that it has received approval from the Toronto Stock Exchange (TSX) to implement an automatic purchase plan under the Bid. The Corporation has entered into an automatic purchase plan agreement with a designated broker to allow for purchases of its common shares during times when it would ordinarily not be permitted to do so due to self-imposed black-out periods or regulatory restrictions.
- On August 25, 2017, Innergex completed the acquisition of two wind projects in France’s Champagne-Ardenne region with an aggregate capacity of 43 MW. The equity’s purchase price was €27.4 million ($40.8 million), subject to certain adjustments. Innergex owns a 69.55% interest in the wind farms while Desjardins owns the remaining 30.45%.
- On October 30, 2017, the Corporation and Alterra Power Corp. announced that they had entered into an arrangement agreement pursuant to which Innergex would acquire at a price of $8.25 per share all of the issued and outstanding common shares of Alterra for an aggregate consideration of $1.1 billion, including the assumption of Alterra’s debt (the “Alterra Transaction”). The Alterra Transaction was subject to approval by Alterra’s shareholders and other customary closing conditions. Pursuant to the Transaction, Alterra shareholders would receive an aggregate consideration, which would consist of approximately 25% in cash and 75% in common shares of Innergex.
On February 6, 2018, Innergex completed the Alterra Transaction.
- On November 27, 2017, the $311.7 million non-recourse construction and term project financing closed by Mesgi’g Ugju’s’n (MU) Wind Farm, L.P. on September 24, 2015, for the Mesgi’g Ugju’s’n wind farm was converted into a 19.5-year term loan.
In the fourth quarter, the Corporation began commercial operation of the 21.0 MW Les Renardières wind facility located in Champagne-Ardenne, France. Construction began prior to its acquisition by Innergex and was completed in November 2017. The Declaration of COD under the purchase agreement with EDF shows an effective commissioning date of November 18, 2017. The Les Renardières facility’s average annual production is estimated to reach 52,427 MWh, enough to power more than 11,200 French households.
In its first full year of operation, it is expected to generate revenues and Adjusted EBITDA of approximately €4.4 million ($6.4 million) and €3.6 million ($5.3 million) respectively. All the electricity the facility produces is covered by an initial 15-year fixed-price power purchase agreement (“PPA”) with EDF, with a portion of the price being adjusted according to inflation indexes.
In the fourth quarter, the Corporation began commercial operation of the 44.5 MW Rougemont-2 wind facility located in Bourgogne-Franche-Comté, France. Construction began prior to its acquisition by Innergex and was completed in November 2017. The Declaration of COD under the purchase agreement with EDF shows an effective commissioning date of December 1, 2017. The Rougemont-2 facility’s average annual production is estimated to reach 100,340 MWh, enough to power more than 21,400 French households.
In its first full year of operation, it is expected to generate revenues and Adjusted EBITDA of approximately €8.4 million ($12.4 million) and €6.5 million ($9.6 million) respectively. All the electricity the facility produces is covered by an initial 15-year fixed-price PPA with EDF, with a portion of the price being adjusted according to inflation indexes.
The Flat Top wind project was acquired in the first quarter of 2018 as part of the Alterra acquisition. Construction was already under way at the time of the acquisition.
As of the date of this press release, construction for the 200 MW wind farm continues on time and on budget, with all road construction, turbine foundations and collector lines now completed. All 100 turbines have been delivered to site and the majority have been fully erected. Commissioning is under way to allow connection to the grid and the project has begun delivering limited test power. The Corporation expects commercial operations to commence in the first quarter of 2018.
The funding of the tax equity investment and retirement of the credit facility are expected to occur on or near the commercial operation date. The Corporation does not expect to make any further equity contributions towards the Flat Top project, which is currently being funded solely by the construction loan facility and equity contributions by our sponsor equity partner.
The Brúarvirkjun hydro project was acquired in the first quarter of 2018 as part of the Alterra acquisition. Site preparation work was already under way at the time of the acquisition.
As of the date of this press release, site preparation work, including laydown areas and access roads to the powerhouse and intake and supply of the owner’s site camp, had been completed. Construction of the project is scheduled to start in 2018 following receipt of the final construction permit with commissioning expected to occur in early 2020.