- Revenues from continuing operations up 23% to $142.8 million in Q3 2019 compared with Q3
2018.
- Revenues Proportionate up 19% to $179.8
million in Q3 2019 compared with Q3 2018.
- Adjusted EBITDA for continuing operations rose 28% to
$107.4 million in Q3 2019 compared
with Q3 2018.
- Adjusted EBITDA Proportionate rose 24% to $135.8 million in Q3 2019 compared with Q3
2018.
- Commissioning of the Foard
City wind farm.
- Ramp-up of sales at the Phoebe solar project ahead of full
commissioning.
|
All amounts are in
Canadian dollars, except as noted.
|
LONGUEUIL, QC, Nov. 12, 2019 /CNW Telbec/ - Innergex
Renewable Energy Inc. (TSX: INE) ("Innergex" or the
"Corporation") today released its operating and financial results
for the third quarter ended September 30, 2019. The increases
in revenues and Adjusted EBITDA for continuing operations are
mainly due to the acquisition of the remaining 62% in the Cartier
Wind Farms in October 2018.
"We completed the commissioning of our largest wind farm to-date
in less than a year and are poised to commission the largest solar
project in Texas for which sales
of energy have already begun. Additionally, construction activities
have commenced at the Innavik hydroelectric site in northern
Quebec that will provide renewable
energy to this remote Inuit community for at least 40 years," said
Michel Letellier, President and
Chief Executive Officer of Innergex. "With our strong financial
position and large portfolio of development and prospective
projects, we remain on track to continue pursuing our growth
organically as well as through acquisition opportunities."
OPERATING RESULTS
On May 23, 2019, Innergex
announced completion of the sale of 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"), owner
of two geothermal facilities in operations, one hydro project
in development and prospective projects in Iceland, which are now treated as discontinued
operations. As a result, the comparative figures have been
restated. The figures presented in this press release are for the
continuing operations unless otherwise indicated.
|
|
Amounts shown are in
thousands of Canadian dollars except as noted
otherwise.
|
Three months
ended
September 30
|
Nine months
ended
September 30
|
2019
|
2018
|
2019
|
2018
|
|
|
Restated
2,3
|
|
Restated
2,3
|
Production
(MWh)
|
1,665,362
|
1,236,722
|
4,715,820
|
3,689,774
|
Long-term average
(MWh) ("LTA")
|
1,765,093
|
1,390,458
|
4,835,085
|
3,897,904
|
Revenues
|
142,814
|
116,464
|
413,926
|
343,166
|
Adjusted
EBITDA1
|
107,351
|
83,683
|
305,842
|
248,909
|
Net earnings (loss)
from continuing operations
|
9,896
|
5,989
|
(4,977)
|
7,399
|
Net
earnings
|
9,703
|
9,456
|
16,194
|
11,477
|
Net earnings (loss)
from continuing operations attributable to owners, $ per share -
basic and diluted
|
0.10
|
0.06
|
(0.04)
|
0.09
|
Net earnings
attributable to owners, $ per share - basic and diluted
|
0.09
|
0.07
|
0.10
|
0.10
|
|
|
Production
Proportionate (MWh)1
|
2,149,151
|
1,652,413
|
5,875,960
|
4,603,304
|
Revenues
Proportionate1
|
179,816
|
151,151
|
490,830
|
402,651
|
Adjusted EBITDA
Proportionate1
|
135,796
|
109,553
|
356,311
|
291,311
|
|
|
|
|
|
|
|
Trailing twelve
months ended
September 30
|
|
|
|
2019
|
2018
|
|
|
|
Restated
2
|
Restated
2
|
Free Cash
Flow1
|
|
|
100,455
|
98,502
|
Payout
Ratio1
|
|
|
93%
|
87%
|
|
|
1.
|
Please refer to the
Non-IFRS Measures Disclaimer for the definition of Production
Proportionate, Revenues Proportionate, Adjusted EBITDA, Adjusted
EBITDA Proportionate, Free Cash Flow and Payout Ratio.
|
2.
|
For more information
on the restatement, please refer to the "Accounting Changes"
section of the Management's Discussion and Analysis of the third
quarter of 2019.
|
3.
|
For more information,
please refer to the "Discontinued Operations" section of the
Management's Discussion and Analysis of the third quarter of
2019.
|
Three-month period ended September
30, 2019
Production increased 35% and Production
Proportionate increased 30% compared with the same quarter last
year.
- Production was 94% of the LTA:
-
- Hydroelectric facilities: 87% of their LTA;
- Wind farms: 104% of their LTA; and
- Solar farms: 101% of their LTA.
The 23% increase in revenues and 28% in Adjusted EBITDA mainly
stem from the contribution of the 62% remaining interest in the
Cartier Wind Farms acquired in October
2018, the higher revenues at the French facilities and to
ramp-up of production at the Phoebe solar project.
The Adjusted EBITDA Margin increased from 71.9% to 75.2% for the
three-month period due mainly to a higher margin in the hydro
segment due to lower operating costs at most facilities and higher
revenues in British Columbia and a
higher margin in the wind segment explained mainly by lower
operating costs.
The 19% increase in Revenues Proportionate and 24% increase in
Adjusted EBITDA Proportionate are mainly due to higher revenues
from the British Columbia and
Chile facilities stemming from
higher production, partly offset by lower revenues at the Shannon
and Flat Top wind facilities in Texas.
For the three-month period ended September 30, 2019, the
Corporation recorded net earnings from continuing operations of
$9.9 million (basic and diluted
net earnings from continuing operations of $0.10 per share), compared with net earnings from
continuing operations of $6.0 million
(basic and diluted net earnings from continuing operations of
$0.06 per share) for the
corresponding period in 2018. The $3.9
million variation can be explained by a $23.7 million increase in Adjusted EBITDA, a
$5.0 million increase in the
share of earnings of joint ventures and associates and a
$4.2 million increase in other net
revenues. These items were partly offset by a $12.1 million increase in depreciation and
amortization, a $11.5 million
increase in finance costs, a $4.1
million unfavourable variation in unrealized net loss (gain)
on financial instruments and a $1.3 million increase in income tax
expenses.
Nine-month period ended September
30, 2019
Production increased 28% and Production
Proportionate increased 28% compared with the same quarter last
year.
- Production was 98% of the LTA:
-
- Hydroelectric facilities: 91% of their LTA;
- Wind farms: 104% of their LTA; and
- Solar farms: 100% of their LTA.
The 21% increase in revenues and 23% in Adjusted EBITDA mainly
stem from the contribution of the 62% remaining interest in the
Cartier Wind Farms acquired in October
2018, higher production at the Mesgi'g Ugju's'n facility and
ramp-up of production at the Phoebe solar project.
The Adjusted EBITDA Margin increased from 72.5% to 73.9% for the
nine-month period mainly explained by changes in the mix of
segments as wind generation now represents a higher proportion of
Adjusted EBITDA. Wind activities typically have a better return on
revenues than hydro due to lower operating costs. The increase can
also be explained by a higher margin from the Quebec wind facilities explained mainly by
lower operating costs. These items were partly offset by a lower
margin from the French facilities.
The 22% increase in Revenues Proportionate and 22% increase in
Adjusted EBITDA Proportionate are mainly due to the investment in
Energía Llaima and to higher revenues from the British Columbia facilities.
For the nine-month period ended September 30, 2019, the
Corporation recorded a net loss from continuing operations of
$5.0 million (basic and diluted net
loss from continuing operations of $0.04 per share), compared with net earnings from
continuing operations of $7.4 million
(basic and diluted net earnings from continuing operations of
$0.09 per share) for the
corresponding period in 2018. The $12.4
million variation can be explained by a $32.6 million increase in depreciation and
amortization, a $29.9 million
increase in finance costs, a $13.1
million unfavourable variation in unrealized net loss (gain)
on financial instruments, a $1.1
million increase in the share of loss of joint ventures and
associates and a $0.6 million
increase in income tax expenses. These items were partly offset by
a $56.9 million increase in Adjusted
EBITDA and a $8.0 million increase in
other net revenues.
Free Cash Flow and Payout Ratio
For the
trailing twelve-month period ended September 30, 2019, the
Corporation generated Free Cash Flow of $100.5 million, compared with $98.5 million for the corresponding period
last year. The increase in Free Cash Flow is due mainly to higher
cash flows from operating activities before changes in non-cash
working capital items and the income tax paid towards the taxable
gain realized following an intercompany transaction related to the
introduction of a tax equity investor in the Phoebe solar project;
and the recovery of maintenance capital expenditures and
prospective project expenses, net of attribution to non-controlling
interests. These items were partly offset by greater scheduled debt
principal payments, mainly from the acquisition of the Cartier Wind
Farms and the French projects that reached term conversion in
2018.
For the trailing twelve-month period ended September 30,
2019, the dividends on common shares declared by the Corporation
amounted to 93% of Free Cash Flow, compared with 87% for the
corresponding period last year. This change results mainly from
higher dividend payments as a result of the issuance of
24,327,225 shares on February 6, 2018, related to the
Alterra acquisition; an increase in the quarterly dividend and
additional shares issued under the Dividend Reinvestment Plan
("DRIP"). This item was partly offset by a $2.0 million increase in Free Cash Flow.
THIRD QUARTER OPERATIONAL HIGHLIGHTS
Debenture Redemption
On September 5, 2019, the
Corporation issued a notice of redemption and expiry of conversion
privilege regarding the aggregate outstanding principal amount of
$100 million of the 4.25% convertible
unsecured subordinated debentures that were due to mature on
August 31, 2020 (the "4.25%
Convertible Debentures"). Of that principal amount, $45.7 million was converted at the holders'
request into 3,049,530 common shares of the Corporation at a
conversion price of $15 per
share.
Debenture Offering
On September
30, 2019, the Corporation completed its bought deal offering
of convertible unsecured subordinated debentures (the "Debentures")
for an aggregate principal amount of $125
million at a price of $1,000
per $1,000 principal amount of
Debenture, bearing interest at a rate of 4.65% per annum, payable
semi-annually, in arrears on October
31 and April 30 each year,
commencing on April 30, 2020 (the
"4.65% Debentures").
The net proceeds of the 4.65% Debenture offering was used to
initially prepay indebtedness under the Corporation's revolving
term credit facility, which was then available to be drawn, as
required, to finance the redemption of all outstanding 4.25%
Debentures. The remaining net proceeds will be available to be
drawn, as required, to fund development projects and other growth
opportunities or as general corporate purposes.
Construction Activities
Phoebe Solar Project (Texas)
In the third quarter of
2019, the contractor completed project construction and the
facility reached its full output. The operation and maintenance
building was completed and the First Solar operations team assumed
operation of the facility. Project demobilization commenced with
project clean-up of the site laydown and office areas and final
deficiency work. ERCOT Part 3 testing commenced in September and
was completed in November. The project is expected to begin
commercial operation in November
2019.
Innavik Hydro Project (Quebec)
In the third quarter of
2019, the Ministère de l'Environnement et de la Lutte contre les
changements climatiques issued the project's authorization
certificate. A Limited Notice to Proceed was signed in August 2019. The first construction equipment
were delivered in September and construction is planned to start in
Q2 2020. Worker's camp on-site is being finalized. A 40-year PPA
was signed with Hydro-Quebec Distribution on May 27, 2019, which is expected to begin in the
fourth quarter of 2022. The PPA is pending approval by the Régie de
l'énergie of Quebec expected in Q1
2020.
Commissioning Activities
Foard City Wind Project (Texas)
In the third quarter of
2019, the Corporation completed commercial operation of the 350.3
MW Foard City wind farm, that benefits from a 12-year power
purchase agreement with Vistra Energy for 300 MW of its installed
capacity. The remainder of the project's output will receive a
merchant market price.
Foard City is expected to
produce a gross estimated long-term average of 1,303 GWh, annual
projected revenues of approximately US$19.7
million (CAN$26.1 million) and annual projected Adjusted
EBITDA of approximately US$9.1 million (CAN$12.1 million),
excluding PAYGO payment. Annual projected revenues and annual
projected Adjusted EBITDA were reviewed to take into consideration
revised assumptions regarding transmission congestion. Previous
projections were revenues of US$21.8
million (CAN$28.9 million) and Adjusted EBITDA of
US$14.1 million
(CAN$18.7 million).
SUBSEQUENT EVENT
Over-Allotment Option
On October 2, 2019, the Corporation announced that
it has issued an additional $18.75
million aggregate principal amount of 4.65% Debentures
following the exercise in full of the over-allotment option granted
(the "Over-Allotment Option") to the underwriters in connection
with the 4.65% Debentures offering.
After taking into account the Over-Allotment Option, the
Corporation raised aggregate gross proceeds of $143.75 million under the offering, of which
$13.3 million was used to redeem the
4.25% Convertible Debentures.
Debenture Redemption
Subsequent to September 30, 2019, and up to October 7, $40.9
million of the remaining outstanding principal amount of the
4.25% Convertible Debentures was converted at the holders' request
into 2,727,265 common shares of the Corporation at a conversion
price of $15 per share. The remaining
principal amount of $13.3 million was
redeemed at par on October 8, 2019,
at a price of a thousand dollars per convertible debenture, plus
accrued and unpaid interest up to, but excluding, October 8, 2019. The redemption was financed with
drawings under the Corporation's revolving term credit facility. On
October 8, 2019, the 4.25%
Convertible Debentures were delisted from the TSX.
Yonne Project Loan Refinancing
Subsequent to
September 30, 2019, Innergex
refinanced the Yonne project loan facilities.
DIVIDEND DECLARATION
The following dividends will be
paid by the Corporation on January 15, 2020:
|
Date of
announcement
|
Record
date
|
Payment
date
|
Dividend per
common share
|
Dividend per
Series A
Preferred
Share
|
Dividend per
Series C
Preferred Share
|
November 12,
2019
|
December 31,
2019
|
January 15,
2020
|
$0.1750
|
$0.2255
|
$0.359375
|
ADDITIONAL INFORMATION
Innergex's 2019 third quarter
unaudited condensed interim consolidated financial statements, the
notes thereto and the Management's Discussion and Analysis can be
obtained on SEDAR at www.sedar.com and in the "Investors" section
of the Corporation's website at www.innergex.com.
CONFERENCE CALL AND WEBCAST
The Corporation will hold
a conference call and webcast on Tuesday
November 12, 2019, at 2:30 PM
(EST). Investors and financial analysts are invited to
access the conference by dialing 1 888 231-8191 or
647 427-7450 or via https://bit.ly/329Dh9q or the
Corporation'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
on the Corporation's website.
About Innergex Renewable Energy Inc.
The
Corporation is an independent renewable power producer which
develops, acquires, owns and operates hydroelectric facilities,
wind farms and solar farms. As a global corporation, Innergex
conducts operations in Canada,
the United States, France and Chile. Innergex manages a large portfolio of
assets currently consisting of interests in 67 operating facilities
with an aggregate net installed capacity of 2,338 MW (gross
3,238 MW), including 37 hydroelectric facilities, 26 wind
farms and four solar farms. Innergex also holds interests in seven
projects under development with a net installed capacity of 546 MW
(gross 628 MW), two of which are currently under construction
and prospective projects at different stages of development with an
aggregate gross capacity totaling 7,767 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 disclaimer
The unaudited condensed
interim consolidated financial statements for the three- and
nine-month periods ended September 30, 2019, have been
prepared in accordance with International Financial Reporting
Standards ("IFRS"). However, 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. Production
Proportionate, Revenues Proportionate, Adjusted EBITDA, Adjusted
EBITDA Margin, Adjusted EBITDA Proportionate, Free Cash Flow,
Adjusted Free Cash Flow, Payout Ratio and Adjusted Payout Ratio are
not measures recognized by IFRS and have no standardized meaning
prescribed by IFRS.
Revenues Proportionate
References in this document to
"Innergex's share of Revenues of joint ventures and associates" are
to Innergex's ownership interest in the equity or in the sponsors'
equity, when applicable, of the Revenues of the joint ventures and
associates. Readers are cautioned that Innergex's share of Revenues
of joint ventures and associates should not be construed as an
alternative to Revenues, as determined in accordance with IFRS.
References in this document to "Revenues Proportionate" are to
Revenues plus Innergex's share of Revenues 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 Revenues Proportionate
should not be construed as an alternative to Revenues, as
determined in accordance with IFRS. Please refer to the "Operating
Results" section for more information.
|
|
|
Three months
ended
September 30
|
Nine months ended
September 30
|
|
2019
|
2018
|
2019
|
2018
|
|
|
Restated
1,2
|
|
Restated
1,2
|
Revenues
|
142,814
|
116,464
|
413,926
|
343,166
|
Innergex's share of
Revenues of joint ventures and associates:
|
|
|
|
|
Toba Montrose (40%)
3
|
17,197
|
15,136
|
25,170
|
23,263
|
Shannon (50%)
3,5
|
1,013
|
1,556
|
5,558
|
4,834
|
Flat Top (51%)
4,5
|
582
|
2,376
|
6,305
|
5,129
|
Dokie (25.5%)
3
|
1,712
|
1,589
|
5,465
|
4,679
|
Jimmie Creek
(50.99%)3
|
7,677
|
6,271
|
9,974
|
8,567
|
Umbata Falls
(49%)
|
490
|
705
|
2,773
|
2,954
|
Viger-Denonville
(50%)
|
1,017
|
1,195
|
4,175
|
4,200
|
Duqueco
(50%)6,7
|
6,370
|
5,123
|
14,499
|
5,123
|
Guayacán
(50%)6,7
|
469
|
323
|
1,479
|
323
|
Pampa Elvira
(50%)6,7
|
475
|
413
|
1,506
|
413
|
|
37,002
|
34,687
|
76,904
|
59,485
|
Revenues
Proportionate
|
179,816
|
151,151
|
490,830
|
402,651
|
|
|
1.
|
For more information,
please refer to the "Accounting Changes" section of the
Management's Discussion and Analysis of the third quarter of
2019.
|
2.
|
For more information,
please refer to the "Discontinued Operations" section of the
Management's Discussion and Analysis of the third quarter of
2019.
|
3.
|
For a complete
three-month period in 2019 and 2018 and for the period from January
1, 2019 to September 30, 2019 and February 6, 2018, to
September 30, 2018.
|
4.
|
For a complete
three-month period in 2019 and 2018 and for the period from January
1, 2019 to September 30, 2019 and March 23, 2018, to
September 30, 2018.
|
5.
|
Ownership interest is
in the sponsor equity of Shannon and Flat Top. However, tax equity
partners hold 100% of the tax equity interests.
|
6.
|
Innergex owns a 50%
interest in Energía Llaima which owns the Guayacán (69.47%
interest) and the Pampa Elvira (55% interest) facilities and
Duqueco which includes the Mampil (100% interest) and Peuchén (100%
interest) facilities.
|
7.
|
For the period from
July 1, 2019 to September 30, 2019 and for the period from July 3,
2018 or July 5, 2018 to September 30, 2018 and for the period
from January 1, 2019 to September 30, 2019 and from July 3, 2018 or
July 5, 2018 to September 30, 2018.
|
Adjusted EBITDA and Adjusted EBITDA Margin
References
in this document to "Adjusted EBITDA" are to net earnings (loss)
from continuing operations 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 Margin" are to
Adjusted EBITDA divided by revenues. Innergex believes that the
presentation of this measure enhances the understanding of the
Corporation's operating performance.
|
|
|
Three months
ended
September 30
|
Nine months ended
September 30
|
|
2019
|
2018
|
2019
|
2018
|
|
|
Restated
1,2
|
|
Restated
1,2
|
Net earnings (loss)
from continuing operations
|
9,896
|
5,989
|
(4,977)
|
7,399
|
Income taxes
expenses
|
3,749
|
2,466
|
1,164
|
579
|
Finance
costs
|
59,474
|
47,939
|
170,704
|
140,814
|
Depreciation and
amortization
|
48,343
|
36,271
|
141,558
|
108,971
|
EBITDA
|
121,462
|
92,665
|
308,449
|
257,763
|
Other net (revenues)
expenses
|
(3,917)
|
313
|
(2,639)
|
5,319
|
Share of earnings of
joint ventures and associates
|
(16,225)
|
(11,192)
|
(9,193)
|
(10,276)
|
Unrealized net loss
(gain) on financial instruments
|
6,031
|
1,897
|
9,225
|
(3,897)
|
Adjusted
EBITDA
|
107,351
|
83,683
|
305,842
|
248,909
|
Adjusted EBITDA
margin
|
75.2%
|
71.9%
|
73.9%
|
72.5%
|
|
|
1.
|
For more information,
please refer to the "Accounting Changes" section of the
Management's Discussion and Analysis of the third quarter of
2019.
|
2.
|
For more information,
please refer to the "Discontinued Operations" section of the
Management's Discussion and Analysis of the third quarter of
2019.
|
Adjusted EBITDA Proportionate
References in this
document to "Innergex's share of Adjusted EBITDA of the joint
ventures and associates" are to Innergex's ownership interest in
the equity or in the sponsors' equity when applicable of the
Adjusted EBITDA of the joint ventures and associates.
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.
|
|
|
|
Three months
ended
September 30
|
Nine months ended
September 30
|
|
2019
|
2018
|
2019
|
2018
|
|
|
Restated
1,2
|
|
Restated
1,2
|
Adjusted
EBITDA
|
107,351
|
83,683
|
305,842
|
248,909
|
Innergex's share of
Adjusted EBITDA of joint ventures and associates:
|
|
|
|
|
Toba Montrose (40%)
3
|
15,030
|
13,004
|
20,046
|
18,883
|
Shannon (50%)
3,5
|
(872)
|
492
|
1,237
|
1,820
|
Flat Top (51%)
4,5
|
(1,213)
|
909
|
711
|
1,813
|
Dokie (25.5%)
3
|
1,095
|
1,062
|
3,799
|
3,305
|
Jimmie Creek
(50.99%)3
|
6,908
|
5,738
|
8,278
|
7,395
|
Umbata Falls
(49%)
|
315
|
609
|
2,178
|
2,630
|
Viger-Denonville
(50%)
|
868
|
946
|
3,418
|
3,446
|
Duqueco
(50%)6,7
|
5,454
|
3,134
|
9,115
|
3,134
|
Guayacán
(50%)6,7
|
469
|
38
|
1,022
|
38
|
Pampa Elvira
(50%)6,7
|
391
|
(62)
|
665
|
(62)
|
|
28,445
|
25,870
|
50,469
|
42,402
|
Adjusted EBITDA
Proportionate
|
135,796
|
109,553
|
356,311
|
291,311
|
|
|
1.
|
For more information,
please refer to the "Accounting Changes" section of the
Management's Discussion and Analysis of the third quarter of
2019.
|
2.
|
For more information,
please refer to the "Discontinued Operations" section of the
Management's Discussion and Analysis of the third quarter of
2019.
|
3.
|
For a complete
three-month period in 2019 and 2018 and for the period from January
1, 2019 to September 30, 2019 and February 6, 2018, to
September 30, 2018.
|
4.
|
For a complete
three-month period in 2019 and 2018 and for the period from January
1, 2019 to September 30, 2019 and March 23, 2018, to
September 30, 2018.
|
5.
|
Ownership interest is
in the sponsor equity of Shannon and Flat Top. However, tax equity
partners hold 100% of the tax equity interests.
|
6.
|
Innergex owns a 50%
interest in Energía Llaima which owns the Guayacán (69.47%
interest) and the Pampa Elvira (55% interest) facilities and
Duqueco which includes the Mampil (100% interest) and Peuchén (100%
interest) facilities.
|
7.
|
For the period from
July 1, 2019 to September 30, 2019 and for the period from July 3,
2018 or July 5, 2018 to September 30, 2018 and for the period
from January 1, 2019 to September 30, 2019 and from July 3,
2018 or July 5, 2018 to September 30, 2018.
|
Adjusted Net Earnings (Loss) from continuing
operations
References to "Adjusted Net Earnings (Loss) from
continuing operations" are to net earnings or losses from
continuing operations of the Corporation, to which the following
elements are added (subtracted): unrealized net (gain) loss on
financial instruments; realized (gain) loss on financial
instruments; income tax expense (recovery) related to the above
items; and the share of unrealized net (gain) loss on derivative
financial instruments of joint ventures and associates, net of
related tax. Innergex uses derivative financial
instruments to hedge its exposure to various risks. Accounting
for derivatives under IFRS requires that all derivatives
are marked-to-market with changes in the mark-to-market of the
derivatives for which hedge accounting is not applied being taken
to the profit and loss account. The application of this
accounting standard results in a significant amount of profit and
loss volatility arising from the use of derivatives that are not
designated for hedge accounting. The Adjusted Net Earnings (Loss)
from continuing operations of the Corporation aims to eliminate the
impact of the mark-to-market rules on derivatives on the profit and
loss of the Corporation. Innergex believes that the analysis and
presentation of net earnings or loss on this basis enhances
understanding of the Corporation's operating performance. Readers
are cautioned that Adjusted Net Earnings (Loss) from continuing
operations should not be construed as an alternative to net
earnings, as determined in accordance with IFRS.
|
|
|
Impact on net
earnings (loss) of financial instruments
|
Three months
ended
September 30
|
Nine months ended
September 30
|
2019
|
2018
|
2019
|
2018
|
|
|
Restated
1,2
|
|
Restated1,2
|
Net earnings (loss)
from continuing operations
|
9,896
|
5,989
|
(4,977)
|
7,399
|
Add
(Subtract):
|
|
|
|
|
Unrealized net loss
(gain) on financial instruments
|
6,031
|
1,897
|
9,225
|
(3,897)
|
Realized (gain) loss
on financial instruments
|
(1,973)
|
4
|
(2,421)
|
(822)
|
Income tax expenses
(recovery of) related to above items
|
84
|
(342)
|
(690)
|
2,055
|
Share of unrealized
net (gain) loss on financial instruments of joint ventures and
associates, net of related income tax
|
(453)
|
7,670
|
(1,580)
|
(144)
|
Adjusted Net Earnings
(Loss) from continuing operations
|
13,585
|
15,218
|
(443)
|
4,591
|
|
|
1.
|
For more information,
please refer to the "Accounting Changes" section of the
Management's Discussion and Analysis of the third quarter of
2019.
|
2.
|
For more information,
please refer to the "Discontinued Operations" section of the
Management's Discussion and Analysis of the third quarter of
2019.
|
Free Cash Flow and Payout Ratio
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.
References to "Adjusted Free Cash Flow" are to Free Cash Flow
excluding prospective project expenses and non-recurring items.
References to "Payout Ratio" are to dividends declared on common
shares divided by Free Cash Flow. Innergex believes that this is a
measure of its ability to sustain current dividends and dividend
increases as well as its ability to fund its growth.
References to "Adjusted Payout Ratio" are to dividends declared
on common shares divided by Adjusted Free Cash Flow after the
impact of the DRIP.
|
|
Free Cash Flow and
Payout Ratio calculation
|
Trailing twelve
months ended
September 30
|
2019
|
2018
|
|
Restated 2
|
Restated 2
|
Cash flows from
operating activities
|
213,585
|
246,761
|
Add (Subtract) the
following items:
|
|
|
Changes in non-cash
operating working capital items
|
6,956
|
(35,736)
|
Maintenance capital
expenditures net of proceeds from disposals
|
(10,282)
|
(8,667)
|
Scheduled debt
principal payments
|
(112,604)
|
(85,230)
|
Free Cash Flow
attributed to non-controlling interests1
|
(18,601)
|
(22,722)
|
Dividends declared on
Preferred shares
|
(5,942)
|
(5,942)
|
Transaction costs
related to realized acquisitions
|
1,593
|
10,866
|
Realized losses
(gains) on derivative financial instruments
|
6,914
|
(828)
|
Recovery of
maintenance capital expenditures and prospective project expenses
on sale of HS Orka, net of attribution to non-controlling
interests
|
8,242
|
—
|
Income tax paid on
realized intercompany gain
|
10,594
|
—
|
Free Cash
Flow
|
100,455
|
98,502
|
|
|
Dividends declared on
common shares
|
93,258
|
85,527
|
Payout
Ratio
|
93%
|
87%
|
|
|
Adjust for the
following items:
|
|
Prospective projects
expenses
|
16,945
|
17,145
|
Adjusted Free Cash
Flow
|
117,400
|
115,647
|
|
|
Dividends declared on
common shares - DRIP adjusted
|
90,856
|
75,598
|
Adjusted Payout
Ratio
|
77%
|
65%
|
|
|
1.
|
The portion of Free
Cash Flow attributed to non-controlling interests is subtracted,
regardless of whether an actual distribution to non-controlling
interests is made, in order to reflect the fact that such
distributions may not occur in the period they are
generated.
|
2.
|
For more information,
please refer to the "Accounting Changes" section of the
Management's Discussion and Analysis of the third quarter of
2019.
|
3.
|
The sale of HS Orka
has allowed for the recovery of maintenance capital expenditures
and prospective project expenses incurred thereon since the
acquisition of the project in February 2018, totaling $5.7 million
and $9.6 million, respectively. An amount of $7.1 million was
deducted from the total recovery as it pertains to non-controlling
interests.
|
Production Proportionate
References in this document
to "Innergex's share of Production of the joint ventures and
associates" are to Innergex's ownership interest in the equity or
in the sponsors' equity when applicable of the Production of the
joint ventures and associates.
References in this document to "Production Proportionate" are to
Production plus Innergex's share of Production of the joint
ventures and associates. Innergex believes that the presentation of
this measure enhances the understanding of the Corporation's
operating performance.
|
|
|
|
Three months
ended
September 30
|
Nine months ended
September 30
|
(in MWh)
|
2019
|
2018
|
2019
|
2018
|
|
|
Restated1,2
|
|
Restated
1,2
|
Production
|
1,665,362
|
1,236,722
|
4,715,820
|
3,689,774
|
Innergex's share of
Production of joint ventures and associates:
|
|
|
|
|
Toba Montrose (40%)
3
|
152,144
|
137,547
|
243,782
|
238,039
|
Shannon (50%)
3,5
|
72,155
|
60,796
|
252,936
|
226,192
|
Flat Top (51%)
4,5
|
101,347
|
79,263
|
332,474
|
205,549
|
Dokie (25.5%)
3
|
13,912
|
13,983
|
44,799
|
42,401
|
Jimmie Creek
(50.99%)3
|
61,723
|
51,935
|
87,944
|
81,369
|
Umbata Falls
(49%)
|
6,486
|
9,360
|
36,635
|
37,192
|
Viger-Denonville
(50%)
|
6,729
|
7,942
|
27,626
|
27,923
|
Duqueco
(50%)6,7
|
61,864
|
47,579
|
109,161
|
47,579
|
Guayacán
(50%)6,7
|
4,199
|
3,990
|
14,985
|
3,990
|
Pampa Elvira
(50%)6,7
|
3,230
|
3,296
|
9,798
|
3,296
|
|
483,789
|
415,691
|
1,160,140
|
913,530
|
Production
Proportionate
|
2,149,151
|
1,652,413
|
5,875,960
|
4,603,304
|
|
|
1.
|
For more information,
please refer to the "Accounting Changes" section of the
Management's Discussion and Analysis of the third quarter of
2019.
|
2.
|
For more information,
please refer to the "Discontinued Operations" section of the
Management's Discussion and Analysis of the third quarter of
2019.
|
3.
|
For a complete
three-month period in 2019 and 2018 and for the period from January
1, 2019 to September 30, 2019 and February 6, 2018, to
September 30, 2018.
|
4.
|
For a complete
three-month period in 2019 and 2018 and for the period from January
1, 2019 to September 30, 2019 and March 23, 2018, to
September 30, 2018.
|
5.
|
Ownership interest is
in the sponsor equity of Shannon and Flat Top. However, tax equity
partners hold 100% of the tax equity interests.
|
6.
|
Innergex owns a 50%
interest in Energía Llaima which owns the Guayacán (69.47%
interest) and the Pampa Elvira (55% interest) facilities and
Duqueco which includes the Mampil (100% interest) and Peuchén (100%
interest) facilities.
|
7.
|
For the period from
July 1, 2019 to September 30, 2019 and for the period from July 3,
2018 or July 5, 2018 to September 30, 2018 and for the period
from January 1, 2019 to September 30, 2019 and from July 3,
2018 or July 5, 2018 to September 30, 2018.
|
Forward-Looking Information
To inform readers of the
Corporation's future prospects, this press release contains
forward-looking information within the meaning of applicable
securities laws ("Forward-Looking Information"), including the
Corporation's power production, prospective projects, successful
development, construction and financing (including tax equity
funding) of the projects under construction and the advanced-stage
prospective projects, sources and impact of funding project
acquisitions, execution of non–recourse project level financing
(including the timing and amount thereof), and strategic,
operational and financial benefits and accretion expected to result
from such acquisitions, 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
"approximately", "may", "will", "could", "believes", "expects",
"intends", "should", "would", "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.
Forward-looking Information is based on certain key assumptions
made by Innergex, including, without restrictions, assumptions
concerning project performance, economic, financial and
financial market conditions, expectations and assumptions
concerning availability of capital resources and timely performance
by third-parties of contractual obligations, receipt of regulatory
approvals and the divestiture of select assets. Although Innergex
believes that the expectations and assumptions on which such
forward-looking information is based are reasonable, under the
current circumstances, readers are cautioned not to rely unduly on
this forward-looking information as no assurance can be given that
they will prove to be correct. The forward-looking information
contained in this press release is made as of the date hereof and
Innergex 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 hereof, unless so required
by law.
Since forward-looking information addresses future events and
conditions, it is by its very nature subject to inherent risks and
uncertainties. Forward-looking information involves risks and
uncertainties that may cause actual results or performance to be
materially different from those expressed, implied or presented by
the forward-looking information. These include, but are not limited
to, the risks associated with the ability of Innergex to execute
its strategy for building shareholder value (including through the
potential divestiture of selected assets), its ability to raise
additional capital and the state of the capital markets, liquidity
risks related to derivative financial instruments, variability in
hydrology, wind regimes and solar irradiation, uncertainties
surrounding the development of new facilities, interest rate
fluctuations and refinancing risks, financial leverage and
restrictive covenants governing current and future indebtedness,
failure to realize the anticipated benefits of such acquisitions,
variability of installations performance and related penalties,
foreign exchange fluctuations and the fact that revenues from
certain facilities will vary based on the market (or spot) price of
electricity.
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; 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 LTA.
|
Improper assessment
of water, wind and solar resources and associated electricity
production
Variability in
hydrology, wind regimes and solar irradiation
Equipment supply
risk, including 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. In most cases, power purchase agreements also contain
an annual inflation adjustment based on a portion of the Consumer
Price Index.
|
See principal
assumptions, risks and uncertainties identified under "Expected
Production"
Reliance on
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.
|
See principal
assumptions, risks and uncertainties identified under "Expected
Production" and "Expected Revenues"
Variability of
facility performance and related penalties
Unexpected
maintenance expenditures
|
Estimated project
costs, expected obtainment of permits, start of construction,
work conducted and start of commercial operation for
Development Projects or Prospective Projects
For each Development
Project and Prospective Project, the Corporation may provide (where
available) an estimate of potential installed capacity, estimated
project costs, project financing terms and each project's
development and construction schedule, based on its extensive
experience as a developer, in addition to information directly
related to incremental internal costs, site acquisition costs and
financing costs, which are eventually adjusted for the projected
costs and construction schedule provided by the engineering,
procurement and construction ("EPC") contractor retained for the
project.
The Corporation
provides indications based on assumptions regarding its current
strategic positioning and competitive outlook, as well as
scheduling and construction progress, for its Development Projects
and its Prospective Projects, which the Corporation evaluates based
on its experience as a developer.
|
Uncertainties
surrounding development of new facilities
Performance of major
counterparties, such as suppliers or contractors
Delays and cost
overruns in the design and construction of projects
Ability to secure
appropriate land
Obtainment of
permits
Health, safety and
environmental risks
Relationships with
stakeholders
Equipment
supply
Interest rate
fluctuations and financing risk
Risks related to U.S.
PTCs and ITCs, changes in U.S. corporate tax rates and availability
of tax equity financing
Regulatory and
political risks
Higher-than-expected
inflation
Natural
disaster
Foreign market growth
and development risks
Outcome of insurance
claims
|
Qualification for
PTCs and ITC and Expected Tax Equity Investment Flip
Point
For certain
Development Projects in the United States, the Corporation has
conducted on- and off-site activities expected to qualify its
Development Projects for PTCs or ITC at the full rate and to obtain
tax equity financing on such a basis. To assess the potential
qualification of a project, the Corporation takes into account the
construction work performed and the timing of such work. The
expected Tax Equity Flip Point for tax equity investment is
determined according to the LTAs and revenues of each such project
and is subject in addition to the related risks mentioned
above.
|
Risks related to U.S.
PTCs and ITC, changes in U.S. corporate tax rates and availability
of tax equity financing
Regulatory and
political risks
Delays and cost
overruns in the design and construction of projects
Obtainment of
permits
|
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.