- $1.1 billion transaction to
meaningfully diversify Innergex's asset portfolio in terms of
geography and energy sources
- Transaction to solidify Innergex's position as a leading
renewable energy independent power producer by adding eight
operating projects (net 364 MW), three projects under construction
(net 118 MW), three prospective projects at an advanced stage (net
686 MW), other U.S. PTC-qualified prospective projects (net 490
MW), and an extensive pipeline of prospective projects in
preliminary stages or in progress (net 4,350 MW)
- Transaction expected to be accretive to Innergex's
distributable cash flow per share upon completion of Alterra's
projects currently under construction and some of the
advanced-stage prospective projects
- Transaction to be fully funded and supported by a new
subordinated unsecured loan from Caisse de dépôt et placement du
Québec ("la Caisse"); commitments obtained from two leading
Canadian banks to backstop and upsize Innergex's existing credit
facility in order to maintain a strong and flexible balance sheet
and provide ample liquidity to fully fund Innergex's development
portfolio pro forma for the transaction
- Alterra shareholders to receive $8.25 per Alterra common share, payable in
$2.06 cash and 0.4172 of a common
share of Innergex, after the effect of full pro-ration, for a total
transaction value of $1.1 billion,
including the assumption of Alterra's debt
- Alterra shareholders to realize an immediate immediate
premium and an opportunity to continue to participate in the
go-forward growth of Innergex
LONGUEUIL, QC and VANCOUVER, Oct. 30,
2017 /CNW Telbec/ - Innergex Renewable Energy Inc.
(TSX: INE) ("Innergex") and Alterra Power Corp. (TSX: AXY)
("Alterra") are pleased to announce today that they have entered
into an arrangement agreement (the "Arrangement Agreement")
pursuant to which Innergex will acquire all of the issued and
outstanding common shares of Alterra (the "Alterra Common Shares")
for an aggregate consideration of $1.1
billion, including the assumption of Alterra's debt (the
"Transaction"). The Transaction is subject to approval by Alterra's
shareholders and other customary closing conditions. Pursuant to
the Transaction, Alterra shareholders will receive an aggregate
consideration which will consist of approximately 25% in cash and
75% in common shares of Innergex (the "Innergex Common Shares").
The price of $8.25 per Alterra Common
Shares implies a premium of 58% to Alterra's 20-day volume weighted
average price of $5.21 on the TSX as
of October 27, 2017.
"This transaction is highly strategic and accretive for Innergex
as we believe it significantly accelerates Innergex's growth
profile with a path to reach a net installed capacity of over 2,000
MW by 2020," said Michel Letellier,
President and Chief Executive Officer of Innergex. "The geographic
and energy sources profile of Alterra's portfolio further
diversifies Innergex's asset base by adding operating hydro and
wind projects in Canada, a large
number of operating, under construction and prospective wind
projects in the U.S. and operating geothermal assets in
Iceland. Further, we believe that
the addition of Alterra's seasoned and experienced team to
Innergex's team enhances our ability to concurrently develop
multiple projects across many geographies."
"This is an excellent transaction for Alterra shareholders,"
said Ross Beaty, Executive Chairman
of Alterra. "It offers a significant premium and the opportunity
for Alterra shareholders to remain exposed to Alterra's assets,
including our growth pipeline. Innergex is an outstanding Canadian
clean energy company with highly complementary renewable energy
assets to those of Alterra and a similar corporate culture. The
combined company will have a lower cost of capital, stronger
balance sheet, more diversified asset base and greater capacity to
grow rapidly and efficiently. I look forward to tendering my
Alterra shares into Innergex and remaining a significant
shareholder for many years to come."
OPERATIONAL AND FINANCIAL HIGHLIGHTS
Alterra will
complement Innergex's current operating, under construction and
prospective projects, resulting in increased geographic and
technological diversification through meaningful presence in
the United States and Icelandic
power markets as well as the addition of geothermal power
generation to Innergex's production mix. We believe that the
transaction significantly accelerates Innergex's growth
profile.
- Innergex's overall net power generation capacity will be of
1,606 MW, up over 40 %, pro forma the Transaction, including assets
under construction
- Addition of three advanced-stage prospective projects with
capacity of net 686 MW
- A number of other prospective U.S. renewable electricity
production tax credit ("PTC") qualified projects totalling
approximately 490 MW
- Extensive pipeline of prospective projects in preliminary
stages or in progress estimated at a net capacity of 4,350 MW to be
added to Innergex's pipeline of net capacity of approximately net
3,560 MW
Alterra's and Innergex's experienced management teams, with a
track record of successfully developing and operating renewable
energy projects in various jurisdictions, will play an important
role in developing the large growth pipeline of the combined
company.
The Transaction is expected to be accretive to Innergex's
distributable cash flow per share upon completion of Alterra's
projects currently under construction and some of the
advanced-stage prospective projects.
TRANSACTION DETAILS
Under the terms of the Arrangement
Agreement, Innergex is offering to acquire all of the issued and
outstanding Alterra Common Shares by way of a plan of
arrangement. Alterra shareholders will receive, at the
election of each such shareholder, either (i) $8.25 in cash or (ii) 0.5563 Innergex Common
Shares for each Alterra Common
Share, subject in each case to the pro-ration, such that the
aggregate consideration paid to all of Alterra shareholders will
consist of approximately 25% in cash and 75% in Innergex Common
Shares. Giving full effect to the proration, the consideration of
each Alterra Common Share represents
$2.06 in cash and 0.4172 Innergex
Common Shares. The share consideration is based on Innergex's
common share closing price of $14.83
on the TSX on October 27, 2017.
The price of $8.25 per
Alterra Common Share represents a
premium of 58% to Alterra's 20-day volume weighted average price of
$5.21 on the TSX as of October 27, 2017. The Transaction is valued at
approximately $1.1 billion, including
the assumption of Alterra's debt.
The Innergex Common Shares issuable to Alterra shareholders in
connection with the Transaction represent a pro forma ownership of
approximately 19% of the combined company. One member of the
current Board of Directors of Alterra will join the Board of
Directors of Innergex upon closing of the Transaction.
The Transaction is subject to approval of at least 66 ⅔% Alterra
Common Shares represented in person or by proxy at a special
meeting of Alterra shareholders to be called to consider the
Transaction – expected to be held in December 2017 (the "Special Meeting"). The Board
of Directors of Alterra, having received a unanimous recommendation
from a special committee comprised solely of independent directors
(the "Special Committee"), has unanimously approved the Transaction
and recommends that Alterra shareholders vote in favour of the
Transaction. The Special Committee of Alterra has received an
opinion from its financial advisor, Raymond James Ltd., that the
consideration to be received pursuant to the Arrangement Agreement
is fair, from a financial point of view, to the Alterra
shareholders.
In addition to Alterra shareholder approval, the Transaction is
subject to court and certain regulatory approvals in Canada and U.S., key third party consents and
other customary closing conditions. The Transaction is not subject
to approval by Innergex shareholders.
The Arrangement Agreement provides for customary
non-solicitation covenants on the part of Alterra and a right in
favour of Innergex to match any unsolicited superior proposal. If
Innergex does not exercise its right to match, Innergex would
receive a termination fee of approximately $18 million from Alterra in the event the
Arrangement Agreement is terminated as a result of a superior
proposal. Subject to the receipt of all required regulatory
approvals and key third-party consents, closing of the Transaction
is expected to occur in the first quarter of 2018.
SUPPORT OF KEY SHAREHOLDERS
Innergex has entered into
a support and voting agreement with Mr. Ross Beaty, Executive Chairman of Alterra, and
certain related entities who have control over approximately 31% of
Alterra's issued and outstanding common shares. Pursuant to the
support and voting agreement, Mr. Beaty, together with these
related entities, have agreed to: (i) vote all of their Alterra
Common Shares in favour of the Transaction at the Special Meeting
(ii) a 12-month holding period with respect to the Innergex Common
Shares to be received by them as a result of the Transaction; and
(iii) elect to receive Innergex Common Shares for the entirety of
the Alterra Common Shares held by them. In addition, directors and
senior officers of Alterra who beneficially own Alterra Common
Shares have also entered into support and voting agreements
pursuant to which they have agreed to vote all of their Alterra
Common Shares in favour of the Transaction at the Special Meeting.
Alterra's directors and senior officers, including Mr. Beaty and
related entities, hold approximately 32% of Alterra Common Shares
in the aggregate.
Further information regarding the Transaction will be contained
in a management proxy circular that Alterra will prepare, file and
mail to Alterra shareholders in advance of the Special Meeting.
Copies of the Arrangement Agreement, support and voting agreements
and management proxy circular will be available on SEDAR under
Alterra's profile at www.sedar.com.
FINANCING
Innergex has structured the financing of the
cash portion of the Transaction in order to maintain a strong and
flexible balance sheet that provides for ample liquidity to fully
fund Innergex's development portfolio pro forma for the
Transaction. To that end, la Caisse has made a commitment to
provide Innergex with a 5-year $150
million subordinated unsecured term loan at a competitive
interest rate to be fixed at closing.
"Through this new loan and its existing stake in the company, la
Caisse continues to support the development of major renewable
energy projects managed by Innergex. The acquisition announced
today accelerates Innergex's growth plan by opening doors to new
markets," says Marc Cormier,
Executive Vice-President, Fixed Income at la Caisse. "In addition
to supporting a Québec company's international expansion, this
transaction is in line with la Caisse's focus on increasing its
investments in low carbon assets."
Innergex has also obtained commitments from two leading Canadian
banks to backstop its existing credit facilities, to implement the
Transaction and to upsize its revolving credit facility to an
aggregate amount of up to $700
million, representing a $275
million increase from the principal amount of $425 million under its existing revolving credit
facility.
SUMMARY OF ALTERRA'S PROJECTS
Operating
|
Energy
|
Country
|
Gross
Installed
Capacity
(MW)
|
Ownership1
|
Net
Installed
Capacity
(MW)
|
COD
|
PPA2 Expiry
|
Projected
2018
Revenues ($M)4
|
Projected
2018 Gross
Adjusted
EBITDA3 ($M)45
|
Projected
2018 Net
Adjusted
EBITDA6 ($M)5
|
Shannon
|
Wind
|
U.S.
|
204
|
50%
|
102
|
2015
|
202911
|
$23.4
|
$12.7
|
$6.4
|
East Toba
|
Hydro
|
Canada
|
147
|
40%
|
59
|
2010
|
2045
|
$75.68
|
$58.28
|
$23.38
|
Montrose
Creek
|
Hydro
|
Canada
|
88
|
40%
|
35
|
2010
|
2045
|
Reykjanes
(1&2)
|
Geothermal
|
Iceland
|
100
|
54%
|
54
|
2006
|
various7
|
$72.19
|
$34.99
|
$18.89
|
Svartsengi
|
Geothermal
|
Iceland
|
74
|
54%
|
40
|
1978
|
various7
|
Dokie 1
|
Wind
|
Canada
|
144
|
26%
|
37
|
2011
|
2036
|
$36.6
|
$26.5
|
$6.8
|
Jimmie
Creek
|
Hydro
|
Canada
|
62
|
51%
|
32
|
2016
|
2056
|
$19.7
|
$15.6
|
$8.0
|
Kokomo
|
Solar
|
U.S.
|
6
|
90%
|
5
|
2016
|
2036
|
$1.0
|
$0.8
|
$0.7
|
Operating
|
|
|
825
|
|
364
|
|
|
|
|
$64.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expected
Full
Year One
Gross
Adjusted
EBITDA3 ($M)45
|
Expected
Full Year
One Net
Adjusted
EBITDA3 ($M)56
|
Under
Construction
|
Energy
|
Country
|
Gross
Installed
Capacity
(MW)
|
Ownership1
|
Net
Installed Capacity (MW)
|
Expected
COD
|
PPA2 Expiry
|
Projected Year One
Revenues
($M)45
|
Flat Top
|
Wind
|
U.S.
|
200
|
51%
|
102
|
2018
|
203111
|
$26.7
|
$11.9
|
$6.1
|
Spartan
|
Solar
|
U.S.
|
11
|
100%
|
11
|
2017
|
2042
|
$2.0
|
$1.6
|
$1.6
|
Brúarvirkjun
|
Hydro
|
Iceland
|
10
|
54%
|
5
|
2020
|
various7
|
$4.2
|
$3.2
|
$1.7
|
Under
Construction
|
|
|
221
|
|
118
|
|
|
|
|
$9.4
|
|
|
|
|
|
|
|
Prospective
projects10
|
Energy
|
Country
|
Gross
Capacity
(MW)
|
Ownership
|
Net
Capacity (MW)
|
|
Advanced-Stage
|
|
|
|
|
|
|
Foard City (PTC
Qualified)
|
Wind
|
U.S.
|
350
|
100%
|
350
|
|
Reykjanes
(4)
|
Geothermal
|
Iceland
|
30
|
54%
|
16
|
|
Boswell Springs
(PTC Qualified)
|
Wind
|
U.S.
|
320
|
100%
|
320
|
|
Advanced-Stage
|
|
|
700
|
|
686
|
|
Other PTC
Qualified
|
|
|
490
|
|
490
|
|
Other
Prospective
Projects
|
|
|
5,100
|
|
4,350
|
|
1
|
Shannon, Kokomo, Flat
Top and Spartan reflect Alterra's portion of sponsor equity
partnership
|
2
|
Power Purchase
Agreement, unless otherwise referred to in case of a power
hedge
|
3
|
Gross Adjusted EBITDA
is not a recognized measure by IFRS and therefore may not be
comparable to those presented by other issuers. Please refer to the
section "Non-IFRS Measures" of this press release for more
information.
|
4
|
Corresponding to 100%
of the facility
|
5
|
U.S. dollar and
Icelandic króna figures converted to Canadian dollars at USDCAD
rate of 1.289 and USDISK rate of 105
|
6
|
Net Adjusted EBITDA
is not a recognized measure by IFRS and therefore may not be
comparable to those presented by other issuers. It corresponds to
Gross Adjusted EBITDA multiplied by ownership percentage. Please
refer to the section "Non-IFRS Measures" of this press release for
more information.
|
7
|
Mix of short and
long-term industrial and retail contracts
|
8
|
Reflects combined
metrics for Toba Montrose (East Toba and Montrose Creek)
|
9
|
Reflects combined
metrics for HS Orka (Reykjanes 1/2 and Svartsengi)
|
10
|
There is no certainty
that these projects will materialize on time and on budget and the
number of MWs per project could vary
|
11
|
Reflects the tenor of
a hedge agreement
|
Alterra owns a 54% interest in a subsidiary which owns a 30%
stake of the Blue Lagoon Geothermal Spa and Resort located in
Iceland. Innergex intends to
review the future ownership of this non-core asset.
ADVISORS
BMO Capital Markets is acting as financial
advisor and McCarthy Tétrault LLP is acting as legal counsel to
Innergex.
National Bank Financial Inc. and Marathon Capital are acting as
financial advisors and Borden Ladner Gervais LLP is acting as legal
counsel to Alterra. Raymond James is
acting as a financial advisor and Blake, Cassels & Graydon
LLP are acting as legal counsel to the Special Committee.
CONFERENCE CALL
Innergex and Alterra will host a
conference call and a webcast accompanied by slides on October 30, 2017 at 5 PM
EDT. Analysts and institutional investors are invited to
access the conference call by dialing 1-888-231-8191 or
647-427-7450 and to access the webcast at http://bit.ly/2y7GSFn or
via Innergex's website at www.innergex.com. Journalists as well as
the public may access this conference call via a listen mode only.
A replay of the conference call will be available after the event
via the website www.innergex.com or www.alterrapower.ca.
ABOUT INNERGEX RENEWABLE ENERGY INC.
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 and British Columbia, Canada, France and Idaho, U.S. Its portfolio of assets currently
consists of: (i) interests in 52 operating facilities with an
aggregate net installed capacity of 1,078 MW (gross 1,781 MW),
including 31 hydroelectric facilities, 20 wind farms and one solar
farm; (ii) interests in two projects under construction with a net
installed capacity of 46 MW (gross 66 MW), for which power purchase
agreements have been secured; and (iii) prospective projects with
an aggregate net capacity totalling 3,560 MW (gross 3,940 MW).
Innergex 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.
Innergex trades on the Toronto Stock Exchange under the symbol
INE.
ABOUT ALTERRA POWER CORP.
Alterra Power Corp.
is a global renewable energy company that manages operations of
eight power plants totalling 825 MW of hydro, wind, geothermal and
solar generation capacity in Canada, the USA and Iceland. Alterra owns a 364 MW share of this
capacity, generating over 1,500 GWh of clean power annually.
Alterra is also constructing the 200 MW Flat Top wind project in
central Texas, which is expected
to be in operation by mid-2018 (51% owned by Alterra). Upon the
completion of Flat Top, Alterra will operate nine power plants
totalling 1,025 MW of capacity and will own a 465 MW share of this
capacity, generating almost 2,000 GWh of clean power annually.
Alterra also has an extensive portfolio of development projects and
a skilled team of developers, builders and operators to support its
growth plans.
Alterra trades on the Toronto Stock Exchange under the symbol
AXY.
NON-IFRS Measures Disclaimer
Readers are
cautioned that Gross Adjusted EBITDA and Net Adjusted EBITDA are
not measures recognized by IFRS and have no standardized meaning
prescribed by them, and therefore may not be comparable to those
presented by other issuers. Innergex and Alterra believe that this
indicator is important, as it provides management and the reader
with additional information about cash generation capabilities and
facilitates the comparison of results over different periods.
References in this press release to "Gross Adjusted EBITDA" are to
Projected Revenues less operating expenses, general and
administrative expenses and cost of power (if applicable). Readers
are cautioned that Gross Adjusted EBITDA should not be construed as
an alternative to revenues as determined in accordance with IFRS.
"Net Adjusted EBITDA" corresponds to Gross Adjusted EBITDA
multiplied by the ownership percentage.
References in this press release to "Projected Revenues" are to
expected gross production of a project multiplied by the price of
the associated power purchase agreement, the projected merchant
price of electricity or secured financial power hedge
contract. Any pricing mechanisms within these contracts which
stipulate price adjustment depending on merchant prices reflect
management's current views and expectations, subject to change, of
the merchant prices. HS Orka Projected Revenues are calculated from
total generation produced by HS Orka assets multiplied by a mix of
long- and short-term industrial and retail contracts, as well as
revenue from hot and cold water sales and other revenues. Projected
Revenues excludes revenue generated from purchased power
subsequently re-sold.
Forward-Looking Information Disclaimer
This
press release contains forward-looking statements within the
meaning of applicable securities laws, including, but not limited
to, statements relating to the anticipated completion of the
Transaction and timing for such completion, sources and impact of
funding of the Transaction, and strategic, operational and
financial benefits and accretion expected to result from the
Transaction, Innergex and/or Alterra's power production,
prospective projects, successful development, construction and
financing of the projects under construction and the advanced-stage
prospective projects, estimates of recoverable geothermal energy
resources, business strategy, future development and growth
prospects, business integration, governance, business outlook,
objectives, plans and strategic priorities, and other statements
that are not historical facts. Forward-looking information can
generally be identified by the use of words such as "may", "will",
"should", "estimate", "expect", "anticipate", "plan", "budget",
"scheduled", "forecasts", "intend", "believe", "projected",
"potential", or other comparable terminology that states that
certain events will or will not occur. It represents the estimates
and expectations of Innergex and Alterra relating to their future
results and developments as of the date of this press release.
Forward-Looking Information includes future-oriented financial
information or financial outlook within the meaning of securities
laws, such as expected production, projected revenues, Projected
Gross Adjusted EBITDA and Projected Net Adjusted EBITDA, to inform
readers of the potential financial impact of expected results, of
the expected commissioning of projects under construction and
prospective projects and of the potential financial impact of the
Transaction. Such information may not be appropriate for other
purposes.
Forward-looking statements are based on certain key expectations
and assumptions made by Innergex and Alterra, including
expectations and assumptions concerning availability of capital
resources; economic and financial conditions; project performance
and the timing of receipt of the requisite shareholder, court,
regulatory and other third-party approvals. Although Innergex and
Alterra believe that the expectations and assumptions on which such
forward-looking statements are based are reasonable, undue reliance
should not be placed on the forward-looking statements because
Innergex and Alterra can give no assurance that they will prove to
be correct.
Since forward-looking statements address future events and
conditions, they are by their very nature subject to inherent risks
and uncertainties. Actual results could differ materially from
those currently anticipated due to a number of factors and risks.
These include, but are not limited to, the risks associated with
the renewable energy industry in general such as execution of
strategy; ability to develop Innergex's and Alterra's projects on
time and within budget; capital resources; derivative financial
instruments; current economic and financial condition; hydrology
and wind regime; geothermal resources and solar irradiation;
construction, design and development of new facilities; performance
of existing projects; equipment failure; interest rate and
refinancing risk; currency exchange rates, variation in merchant
price of electricity, financial leverage and restrictive covenants;
and relationship with public utilities.
There are also risks inherent to the Transaction, including
incorrect assessments of the value of the other entity; failure to
satisfy the closing conditions; exercise of termination rights by
Innergex or Alterra; failure to obtain the requisite shareholder,
court, regulatory and other third-party approvals, including
approval by the Competition Bureau, the Federal Energy Regulatory
Commission (FERC), the Federal Trade Commission and similar
authorities in other jurisdictions, as well as the TSX.
Accordingly, there can be no assurance that the Transaction will
occur, or that it will occur on the terms and conditions, or at the
time, contemplated in this news release. The Transaction could be
modified, restructured or terminated. There can also be no
assurance that the strategic, operational or financial benefits
expected to result from the Transaction will be realized.
If the Transaction is not completed, and Innergex and Alterra
continue as separate entities, there are risks that the
announcement of the Transaction and the dedication of substantial
resources of Alterra and Innergex to the completion of the
Transaction could have an impact on their business and strategic
relationships (including with future and prospective employees,
customers, distributors, suppliers and partners), operating results
and businesses generally, and could have a material adverse effect
on the current and future operations, financial condition and
prospects of Alterra and Innergex. Furthermore, the failure of
Alterra to comply with the terms of the Arrangement Agreement may,
in certain circumstances, result in Alterra being required to pay a
fee to Innergex, the result of which could have a material adverse
effect on Alterra's financial position and results of operations
and its ability to fund growth prospects and current
operations.
Innergex and Alterra are relying on certain assumptions
that they believe are reasonable at this time, including
assumptions as to the time required to prepare meeting materials
for mailing, the timing of receipt of the shareholder, court,
regulatory and other third-party approvals and the time necessary
to satisfy the conditions to the closing of the Transaction. These
dates may change for a number of reasons, including unforeseen
delays in preparing meeting materials, inability to secure
necessary regulatory or court approvals in a timely manner or the
need for additional time to satisfy the conditions to the
completion of the Transaction. Accordingly, readers should not
place undue reliance on the forward-looking statements contained in
this press release concerning these times.
Readers are cautioned that the foregoing list of factors is not
exhaustive. Additional information on these and other factors that
could affect the operations or financial results of Innergex and
Alterra (including Innergex following closing of the Transaction)
are included in Innergex and Alterra' annual information forms
filed with applicable Canadian securities regulators and may be
accessed through the SEDAR website (www.sedar.com).
The forward-looking statements contained in this press release
are made as of the date hereof and Innergex and Alterra undertake
no obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future events
or otherwise, unless so required by applicable securities laws.
The following table outlines the future oriented financial
information contained in this press release, which Innergex and
Alterra consider important to better inform readers of the
financial impact of the Transaction, together with the principal
assumptions used to derive this information and the principal risks
and uncertainties that could cause actual results to differ
materially from this information.
Principal
Assumptions
|
Principal Risks and
Uncertainties
|
Expected
Production
For each project
listed in this press release, expected production is determined,
based on engineers' studies that take into consideration a number
of important factors: for hydroelectricity, the historically
observed flows of the river, the operating head, the technology
employed and the reserved aesthetic and ecological flows; for wind
energy, the historical wind and meteorological conditions and
turbine technology; for geothermal power, the historical geothermal
resources, natural depletion of geothermal resources over time, the
technology used and the potential of energy loss to occur before
delivery and for solar energy, the historical solar irradiation
conditions, panel technology and expected solar panel degradation.
Other factors taken into account include, without limitation, site
topography, 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
long-term average.
|
Improper assessment
of water, wind, geothermal and sun resources and associated
electricity production
Variability in
hydrology, wind regimes, geothermal resources and solar
irradiation
Natural depletion of
geothermal resources
Change in the
hydrological balance of the resource
Equipment failure or
unexpected operations and maintenance activity
Natural
disaster
|
Projected
Revenues
For each facility,
expected annual revenues estimated by multiplying expected
production by the price of the associated power purchase agreement
or secured financial power hedge contract. Any pricing mechanisms
within these contracts which stipulate price adjustment depending
on merchant prices reflect management's current views and
expectations, subject to change, of the merchant prices. HS Orka
Projected Revenues are calculated from total generation produced by
HS Orka assets multiplied by a mix of long- and short-term
industrial and retail contracts, as well as revenue from hot and
cold water sales and other revenues. Projected Revenues excludes
revenue generated from purchased power subsequently re-sold. U.S.
dollar and Icelandic króna figures converted to Canadian dollars at
USDCAD rate of 1.289 and USDISK rate of 105.
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Production levels
below the expected production caused mainly by the risks and
uncertainties mentioned above
Unexpected seasonal
variability in the production and delivery of
electricity
Lower-than-expected
inflation rate
Changes in the
purchase price of electricity upon renewal of a PPA
Negative change of
merchant price of electricity
Negative changes of
the currency exchange rates
|
Projected Gross
Adjusted EBITDA and Net Adjusted EBITDA
For each facility,
the annual operating earnings is estimated by subtracting from the
estimated Projected 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), and
cost of power (if applicable).
|
Lower revenues caused
mainly by the risks and uncertainties mentioned above
Variability of
facility performance and related penalties
Unexpected
maintenance expenditures
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SOURCE Innergex Énergie Renouvelable Inc.