Innergex completes acquisition of 40.6 MW Magpie hydro facility in Quebec
-- 8% increase in consolidated long-term average annual production
to 2,592 MWh
-- 7% increase in net installed capacity to 617 MW
-- Purchase price of $28.6M paid cash, plus assumption of all
LONGUEUIL, QC, July 25, 2013 /CNW Telbec/ - Innergex Renewable Energy Inc.
(TSX:INE) ("Innergex" or the "Corporation") has completed the previously
announced acquisition from Hydromega Group of Companies ("Hydromega") of the
Magpie run-of-river hydroelectric facility located in Quebec, Canada.
Summary of asset acquired
Magpie is a 40.6MW run-of-river hydroelectric facility located on Crown
lands in the Minganie Regional County Municipality, in Northeastern Quebec.
This facility began commercial operations in 2007, and all of the electricity
it produces is sold to Hydro-Québec under a 25-year fixed-price power
purchase agreement, which provides for an annual increase to the selling price
of 1%. Magpie has an average annual production of approximately 185,000MWh,
enough to power almost 11,000 Quebec households each year.
The addition of this facility increases the Corporation's net installed
capacity by 7% to 617MW and its consolidated long-term average annual
production by almost 8% to 2,592MWh. Magpie is expected to generate
annualized revenues of approximately $10.6million in 2013 (including
payments received under the ecoENERGY program) and Adjusted EBITDA of
"We are very pleased with the acquisition of Magpie, which further strengthens
our presence in hydro with a new, long-term facility, and further diversifies
our hydro operations", states Mr. Michel Letellier, President and Chief
Executive Officer of the Corporation. "We look forward to developing our
relationship with a new partner, the Minganie Regional County Municipality",
adds Mr. Letellier.
Terms of the acquisition
The Corporation has acquired 99.999% of the common units of the facility.
However, the Minganie Regional County Municipality holds 30% of the voting
units, as well as a convertible debenture with a nominal value of
$3.0million, which carries an annual interest payment of approximately
$465,000, and a $2.0million non-interest bearing debenture repayable over
the next five years. The convertible debenture entitles the municipality to a
30% interest in the facility upon conversion of the debenture on January 1,
2025; once the non-interest bearing debenture has been repaid, the Corporation
will have the option to trigger the conversion of this debenture at any time
prior to this date.
The Corporation has paid the final purchase price of $28.6 million in cash and
assumes project-level debt totalling $55.4million, which includes $50.4
million in non-recourse financing with blended monthly payments of
approximately $406,000 until 2017, and approximately $379,000 thereafter until
2031, for a blended fixed interest rate of 6.35%, as well as the two
debentures held by the Minganie Regional County Municipality mentioned above.
These debts will be adjusted to fair value upon consolidation by the
Corporation. Net cash flows from the facility which have been accruing to the
Corporation since August 31, 2012 are included in the cash balance transferred
to the Corporation upon closing.
Letter of intent and deposit agreement
Concurrent with the announcement of the Magpie acquisition in July 2012, the
Corporation signed an exclusive letter of intent with Hydromega to acquire its
ownership interest in several other assets, including one 30.5 MW
hydroelectric facility in Quebec, four hydroelectric projects under
construction totaling 22.0 MW in Ontario, and one 10.0 MW hydroelectric
project under development, also in Ontario.
The Corporation continues to advance negotiations under this letter of intent
with Hydromega to acquire other assets, while at the same time taking into
consideration the impact of the recent increase in long-term interest rates
and the decline in the Corporation's share price, in order to ensure that
these acquisitions will be accretive. Given current market conditions, the
Corporation does not intend to do a public offering of common shares at this
Also concurrent with the announcement of the Magpie acquisition in July 2012,
the Corporation had entered into a $25million deposit agreement with
Hydromega, bearing interest at a rate of 7% annually, to be applied against
the purchase price of any Hydromega asset. This deposit was not used to fund
the acquisition of Magpie and remains in place to fund the eventual purchase
of other Hydromega assets. The deposit agreement also contains a right of
first offer for, as well as an option to acquire, the 30.5 MW operating
facility in Quebec.
Risk exposure associated with the recent increase in long-term interest rates
The recent increase in long-term interest rates has little impact on the
Corporation's current operating performance, since the project-level debts and
most of its revolving term credit facility have fixed interest rates, and
therefore fixed interest expenses. Furthermore, two of the Corporation's
projects under construction (Kwoiek Creek and Northwest Stave River) already
have project-level financing in place with fixed interest rates, and the third
(Viger-Denonville) is protected from higher interest rates through the use of
derivative instruments. As at March 31, 2013, 95% of the Corporation's
outstanding debt was fixed or hedged against interest rate fluctuations.
However, the Corporation currently has five other projects under development,
for which project-level financing has not yet been secured. As it has done in
the past, the Corporation will seek to lock-in interest rates for their
financing through the use of derivative instruments, and enter into
negotiations with potential lenders for project-level financing. Until then,
the rate of return on these projects could be adversely affected by higher
interest rates. At this time, the Corporation estimates the impact of the
recent increase in interest rates on the expected rates of return of the
projects under development to be modest.
Projects that do not yet have a power purchase agreement will reflect higher
interest rate assumptions in their modelling; in this case, higher interest
rates are associated with the possibility of higher selling prices for
About Innergex Renewable Energy Inc.
Innergex Renewable Energy Inc. (TSX: INE) is a leading Canadian independent
renewable power producer. Active since 1990, the Company develops, owns, and
operates run-of-river hydroelectric facilities, wind farms, and solar
photovoltaic farms and carries out its operations in Quebec, Ontario, British
Columbia, and Idaho, USA. Its portfolio of assets currently consists of: (i)
interests in 29 operating facilities with an aggregate net installed capacity
of 617MW (gross 1,072MW), including 23 hydroelectric operating facilities,
five wind farms, and one solar photovoltaic farm; (ii) interests in eight
projects under development or under construction with an aggregate net
installed capacity of 265MW (gross 413MW), for which power purchase
agreements have been secured; and (iii) prospective projects with an aggregate
net capacity totaling 2,900 MW (gross 3,125MW). Innergex Renewable Energy
Inc. is rated BBB- by S&P and BB (high) by DBRS (unsolicited rating).
The Corporation's strategy for building shareholder value is to develop or
acquire high-quality facilities generating sustainable cash flows and
providing a high return on invested capital, and to distribute a stable
Non-IFRS Measures Disclaimer
Adjusted EBITDA is not a measure recognized by IFRS and has no standardized
meaning prescribed by IFRS. References in this press release to "Adjusted
EBITDA" are to operating revenues less operating expenses, general and
administrative expenses and prospective project expenses. Investors are
cautioned that this non-IFRS measure should not be construed as an alternative
to net earnings as determined in accordance with IFRS.
Forward-Looking Information Disclaimer
This press release contains forward-looking information within the meaning of
securities legislation. All information and statements other than statements
of historical facts contained in this press release are forward-looking
information. Such statements and information may be identified by looking for
words such as "about", "approximately", "may", "believes", "expects", "will",
"intend", "should", "plan", "predict", "potential", "project", "anticipate",
"estimate", "continue" or similar words or the negative thereof or other
comparable terminology. Such forward-looking information includes, without
limitation, statements with respect to the benefits which may accrue to
Innergex and its shareholders as a result of the acquisition of Magpie, the
potential acquisition of additional hydroelectric sites from Hydromega,
benefits which may accrue to Innergex and its shareholders as a result of the
contemplated acquisitions, average annual electricity production, business
strategy, and plans and objectives of or involving Innergex.
The forward-looking information includes forward-looking financial information
or financial outlook, such as estimated electricity production, projected
revenues and EBITDA, debt payments, and future investments, to inform
investors of the potential financial impact of the acquisition on the
Corporation's results. Such information may not be appropriate for other
The forward-looking information is based on certain key expectations and
assumptions made by Innergex as of the date of this press release, including
expectations and assumptions concerning the availability of capital resources,
performance of operating facilities, as well as estimates, forecasts and
opinions of the Corporation. Although Innergex believes that the expectations
and assumptions on which such forward-looking information is based are
reasonable, undue reliance should not be placed on the forward-looking
information since no assurance can be given that they will prove to be
correct. Actual results could differ materially from those currently
anticipated due to a number of factors and risks. These include, but are not
limited to, potential undisclosed liabilities associated with the acquisition
of Magpie, failure to realize the benefits of the acquisition (including cost
synergies and operational efficiencies), energy generation, equipment failure,
performance of third-party suppliers and other risks generally attributable to
the business of Innergex. For additional information with respect to risks
and uncertainties, refer to the Annual Information Form of Innergex filed on
SEDAR's website at www.sedar.com. The forward-looking information contained
herein is made as of the date of this press release and the Corporation does
not undertake any obligation to update or revise any forward-looking
information, whether as a result of events or circumstances occurring after
the date hereof, unless required by legislation.
SOURCE INNERGEX RENEWABLE ENERGY INC.
Marie-Josée Privyk, CFA, SIPC Director - Investor Relations 450-928-2550,
ext. 222 email@example.com
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-0- Jul/25/2013 13:03 GMT
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