- Crystalizes significant value for non-core assets in
Iceland
- Represents a premium over the carrying value of the assets
- Proceeds to be used to reimburse CAN$228 million one-year
credit facility, deleveraging and general corporate purposes
- Updated 2019 Projections
LONGUEUIL, QC, March 25, 2019 /CNW Telbec/ - Innergex
Renewable Energy Inc. (TSX: INE) ("Innergex" or the "Corporation")
is pleased to announce that an agreement has been reached to sell
its wholly-owned subsidiary Magma Energy Sweden A.B. ("Magma
Sweden") which owns an equity interest of approximately 53.9% in HS
Orka hf ("HS Orka) for a purchase price of US$304.8 million (CAN$408.8 million) to a
Macquarie Infrastructure and Real Assets managed European
infrastructure fund, subject to customary closing adjustments.
"This transaction is highly strategic and will create
significant value for Innergex as it allows us to focus on our core
markets, reimburse our one-year credit facility, deleverage our
corporate credit facilities and reduce our exposure to foreign
exchange," said Michel Letellier,
President and Chief Executive Officer of Innergex. "Given
Innergex's non-operatorship role in HS Orka, we viewed the sale of
this non-core asset to be consistent with our long-term strategy of
developing, owning and operating high quality renewable energy
assets in our core markets and competencies."
HS Orka owns two operating geothermal facilities (Reykjanes and
Svartsengi) totaling 174 MW, the 10 MW Brúarvirkjun run-of-river
hydro project which is under construction, a number of prospective
renewable power projects, as well as a 30% equity interest in the
Blue Lagoon Geothermal Spa and Resort in Iceland.
Net proceeds from the sale will be used to reimburse the CAN$228
million one-year credit facility contracted in October 2018 at
the time of the acquisition of the remaining interest in the
Cartier wind farms and operating
entities, to deleverage corporate facilities and for general
corporate purposes.
The fully funded transaction is subject to the satisfaction of
certain closing conditions, including receipt of key third party
consents, a right of first refusal in respect of the shares of
Magma Sweden (exercisable for two months on the same terms and
conditions), as well as other customary conditions. All required
conditions are expected to be satisfied in the second quarter of
2019 with closing of the transaction to be completed after the
satisfaction of such conditions.
2019 UPDATED PROJECTIONS
The Corporation is updating
its 2019 financial projections made available in its latest
Management's Discussion and Analysis. Assuming a closing of the
transaction at the end of the second quarter of 2019 and as a
result of the disposal, the 2019 financial projections are revised
and the Corporation expects power generated to increase by 10%
instead of 20%, Revenues to increase by 7% instead of 15%, Adjusted
EBITDA to increase by 11% instead of 15%, Adjusted EBITDA
Proportionate to increase by 9% instead of 12% and Free Cash Flow
to increase by 10% (same as previously projected). In addition,
upon closing of the transaction, Innergex's remaining weighted
average term of power purchase agreements is expected to increase
to 17.4 years and the weighted average age of facilities to lower
to 7.2 years.
BMO Capital Markets and Stöplar Advisory are acting as financial
advisors and McCarthy Tétrault LLP is acting as legal counsel to
Innergex.
CONFERENCE CALL AND WEBCAST
Innergex will host a
conference call and webcast on March 25,
2019 at 11 AM 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 https://bit.ly/2CsCLZu 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.
About Innergex Renewable Energy Inc.
The
Corporation is an independent renewable power producer which
develops, acquires, owns and operates hydroelectric facilities,
wind farms, solar farms and geothermal power generation plants. As
a global corporation, Innergex conducts operations in Canada, the United
States, France,
Chile and Iceland. Innergex manages a large portfolio of
assets currently consisting of interests in 68 operating facilities
with an aggregate net installed capacity of 2,082 MW (gross 3,062
MW), including 37 hydroelectric facilities, 25 wind farms, four
solar farms and two geothermal facilities. Innergex also holds
interests in eight projects under development with a net installed
capacity of 900 MW (gross 983 MW), three of which are currently
under construction and prospective projects at different stages of
development with an aggregate gross capacity totaling 8,147 MW.
Respecting the environment and balancing the best interests of the
host communities, its partners, and its investors are at the heart
of the Corporation's development strategy. Its approach for
building shareholder value is to generate sustainable cash flows,
provide an attractive risk-adjusted return on invested capital and
to distribute a stable dividend. Innergex Renewable Energy Inc. is
rated BBB- by S&P.
Non-IFRS Measures
Some measures referred to in this
press release are not recognized measures under IFRS 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, its
ability to sustain current dividends and dividend increases and its
ability to fund its growth. These indicators also facilitate the
comparison of results over different periods. Adjusted EBITDA,
Adjusted EBITDA Proportionate and Free Cash Flow are not
measures recognized by IFRS and have no standardized meaning
prescribed by IFRS.
References in this document to "Adjusted EBITDA" are to net
earnings (loss) to which are added (deducted) provision (recovery)
for income tax expenses, finance cost, depreciation and
amortization, other net expenses, share of (earnings) loss of joint
ventures and associates and unrealized net (gain) loss on financial
instruments. Innergex believes that the presentation of this
measure enhances the understanding of the Corporation's operating
performance. Readers are cautioned that Adjusted EBITDA should not
be construed as an alternative to net earnings, as determined in
accordance with IFRS.
References in this document to "Adjusted EBITDA Proportionate"
are to Adjusted EBITDA plus Innergex's share of Adjusted EBITDA of
the joint ventures and associates. Innergex believes that the
presentation of this measure enhances the understanding of the
Corporation's operating performance. Readers are cautioned that
Adjusted EBITDA Proportionate should not be construed as an
alternative to net earnings, as determined in accordance with
IFRS.
References to "Free Cash Flow" are to cash flows from operating
activities before changes in non-cash operating working capital
items, less maintenance capital expenditures net of proceeds from
disposals, scheduled debt principal payments, preferred share
dividends declared and the portion of Free Cash Flow attributed to
non-controlling interests, plus or minus other elements that are
not representative of the Corporation's long-term cash generating
capacity, such as transaction costs related to realized
acquisitions (which are financed at the time of the acquisition),
realized losses or gains on derivative financial instruments used
to hedge the interest rate on project-level debt or the exchange
rate on equipment purchases. Innergex believes that presentation of
this measure enhances the understanding of the Corporation's cash
generation capabilities, its ability to sustain current dividends
and dividend increases and its ability to fund its growth. Readers
are cautioned that Free Cash Flow should not be construed as an
alternative to cash flows from operating activities, as determined
in accordance with IFRS.
Forward-Looking Information Disclaimer
To inform
readers of the Corporation's future prospects, this press release
contains forward-looking information 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, and strategic,
operational and financial benefits and effects expected to result
from the transaction, Innergex's business strategy, future
development and growth prospects, business outlook, objectives,
plans and strategic priorities, and other statements that are not
historical facts ("Forward-Looking Information"). Forward-Looking
Information can generally be identified by the use of words such as
"approximately", "may", "will", "could", "believes", "expects",
"intends", "should", "plans", "potential", "project",
"anticipates", "estimates", "scheduled" or "forecasts", or other
comparable terminology that state that certain events will or will
not occur. It represents the projections and expectations of the
Corporation relating to future events or results 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
Adjusted EBITDA and projected Adjusted EBITDA Proportionate, to
inform readers of the potential financial impact of expected
results, of the expected commissioning of Development Projects, of
the potential financial impact of completed and future acquisitions
and of the Corporation's ability to sustain current dividends and
to fund its growth. Such information may not be appropriate for
other purposes.
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 projects on time and within budget;
capital resources; derivative financial instruments; current
economic and financial conditions; hydrology and wind regimes,
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
relationships with public utilities. 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 are included in Innergex's annual
information form available on SEDAR at www.sedar.com.
There are also risks inherent to the transaction, including
failure to satisfy the closing conditions; exercise of termination
rights by Innergex or the purchaser; failure to obtain the
requisite third party consents. 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
press release. The transaction could be modified, restructured or
terminated. There can also be no assurance that the strategic,
operational or financial benefits and effects expected to result
from the transaction will be realized.
Forward-Looking Information in this press release is based on
certain key expectations and 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
Assumptions
|
Principal Risks and
Uncertainties
|
Expected
production
For each facility,
the Corporation determines a long-term average annual level of
electricity production ("LTA") over the expected life of the
facility, 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 solar energy, the historical
solar irradiation conditions, panel technology and expected solar
panel degradation and for geothermal power facilities, the
historical geothermal resources, natural depletion of geothermal
resources over time, the technology used and the potential of
energy loss to occur before delivery. 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 LTA.
On a consolidated
basis, the Corporation estimates its LTA by adding together the
expected LTAs of all the facilities in operation, for the
facilities that it consolidates. This consolidation excludes
however the facilities which are accounted for using the equity
method (Dokie, East Toba, Flat Top, Guayacan, Jimmie Creek, Mampil,
Montrose Creek, Pampa Elvira, Peuchén, Shannon, Umbata Falls and
Viger-Denonville).
|
Improper assessment
of water, wind, solar and geothermal resources and associated
electricity production
Variability in
hydrology, wind regimes, solar irradiation and geothermal
resources
Risks inherent in
geothermal resource
Equipment
supply
Equipment failure or
unexpected operations and maintenance activity
Natural disasters and
force majeure
Regulatory and
political risks affecting production
Health, safety and
environmental risks affecting production
Variability of
installation performance and related penalties
Availability and
reliability of transmission systems
Litigation
|
Projected
revenues
For each facility,
expected annual revenues are estimated by multiplying the LTA by a
price for electricity stipulated in the PPA secured with a
public utility or other creditworthy counterparty mainly. In
most cases these PPAs stipulate a base price for electricity
produced and, in some cases, a price adjustment depending on
the month, day and hour of its delivery. This excludes
facilities, which receive revenues, based on the market (or spot)
price for electricity, including the Miller Creek
hydroelectric facility, which receives a price based on
a formula using the Platts Mid-C pricing indices, the
Horseshoe Bend hydroelectric facility, for which 85% of the
price is fixed and 15% is adjusted annually as determined by the
Idaho Public Utility Commission. Revenues at the HS Orka
facilities also fluctuate with the price of aluminum, as
certain of those PPAs are linked to such price. In most cases,
power purchase agreements also contain an annual inflation
adjustment based on a portion of the Consumer Price Index. On
a consolidated basis, the Corporation estimates annual revenues by
adding together the projected revenues of all the facilities
in operation that it consolidates This consolidation excludes
however the facilities which are accounted for using the equity
method (Dokie, East Toba, Flat Top, Guayacan, Jimmie Creek,
Mampil, Montrose Creek, Pampa Elvira, Peuchén, Shannon, Umbata
Falls and Viger-Denonville).
|
See principal
assumptions, risks and uncertainties identified under "Expected
Production"Reliance on various forms of PPAs
Revenues from certain
facilities will vary based on the
market (or spot) price of electricity
Fluctuations
affecting prospective power prices
Changes in general
economic conditions
Ability to secure new
Power Purchase Agreements or renew
any Power Purchase Agreement
|
Projected Adjusted
EBITDA
For each facility,
the Corporation estimates annual operating earnings by adding
(deducting) to net earnings (loss) provision (recovery) for
income tax expenses, finance cost, depreciation and
amortization, other net expenses, share of (earnings) loss of joint
ventures and associates and unrealized net (gain) loss on
financial instruments. The Adjusted EBITDA
consolidated excludes however the facilities which are
accounted for using the equity method (Dokie, East Toba, Flat
Top, Guayacan, Jimmie Creek, Mampil, Montrose Creek, Pampa Elvira,
Peuchén, Shannon, Umbata Falls and Viger-Denonville). Innergex
believes that the presentation of this measure enhances the
understanding of the Corporation's operating
performance. Readers are cautioned that Projected Adjusted
EBITDA should not be construed as an alternative to net
earnings, as determined in accordance with IFRS.
|
See principal
assumptions, risks and uncertainties identified under "Expected
Production" and "Projected Revenues"
|
Projected Adjusted
EBITDA Proportionate
On a consolidated
basis, the Company estimates annual Adjusted EBITDA Proportionate
by adding to the projected Adjusted EBITDA Innergex's share of
Adjusted EBITDA of the joint ventures (Dokie, East Toba, Flat
Top, Guayacan, Jimmie Creek, Mampil, Montrose Creek, Pampa
Elvira, Peuchén, Shannon, Umbata Falls and
Viger-Denonville).
|
See principal
assumptions, risks and uncertainties identified under "Expected
Production" and "Projected Revenues"
|
Projected Free
Cash Flow and intention to pay dividend quarterly
The Corporation
estimates Projected Free Cash Flow as projected cash flows, from
operating activities before changes in non-cash operating
working capital items, less estimated maintenance capital
expenditures net of proceeds from disposals, scheduled debt
principal payments, preferred share dividends declared and the
portion of Free Cash Flow attributed to non-controlling
interests, plus or minus other elements that are not representative
of the Corporation's long-term cash generating capacity, such
as transaction costs related to realized acquisitions (which
are financed at the time of the acquisition), realized losses
or gains on derivative financial instruments used to hedge the
interest rate on project-level debt or the exchange rate on
equipment purchases. The Corporation estimates the
annual dividend it intends to distribute based on the
Corporation operating results, cash flows, financial
conditions, debt covenants, long-term growth prospects,
solvency, test imposed under corporate law for declaration of
dividends and other relevant factors.
|
See principal
assumptions, risks and uncertainties identified under "Expected
Production" and "Projected Revenues"
Interest rate fluctuations and financing risk
Financial leverage
and restrictive covenants governing current and future
indebtedness unexpected maintenance capital
expenditures
Foreign exchange
fluctuations
A credit rating that
may not reflect actual performance of the Corporation or a lowering
(downgrade) of the credit rating
Possibility that the
Corporation may not declare or pay a dividend
|
Expected closing of the
transaction
The Corporation
reasonably expects that the closing conditions will be completed
within the deadlines
|
Satisfaction of
closing conditions
Third party consents
and right of first refusal
|
Although the Corporation believes that the expectations and
assumptions on which Forward-Looking Information is based are
reasonable, readers of this press release are cautioned not to rely
unduly on this Forward-Looking Information since no assurance can
be given that they will prove to be correct. The forward-looking
statements contained in this press release are made as of the date
hereof and Innergex undertakes 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.
SOURCE Innergex Renewable Energy Inc.