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Home Oil & Gas Electricity Metals Treasuries Stocks My Portfolios Forex
News - Full Story
 Related Quotes
 Innergex Renewable Ene  15   0.05  0.33%
 Innergex Renewable Ene  13.60   0.19  1.38%
 Innergex Renewable Ene  22.58   0.09  0.40%
 Enter Symbols: 
Innergex: Impressive Execution of all Strategic Initiatives

  • Revenues from continuing operations up 16% to $144.7 million in Q2 2019 compared with Q2 2018.
  • Revenues Proportionate up 18% to $169.8 million in Q2 2019 compared with Q2 2018.
  • Adjusted EBITDA for continuing operations rose 15% to $105.2 million in Q2 2019 compared with Q2 2018.
  • Adjusted EBITDA Proportionate rose 15% to $120.8 million in Q2 2019 compared with Q2 2018.
  • Closing of the construction loan and tax equity commitment for the Foard City wind project.
  • Closing of the initial tax equity funding operation for the Phoebe Solar project under construction in Texas.
  • Sale of the 53.9% interest in Icelandic assets completed, for a purchase price, after adjustments, of US$297.4 million ($400.9 million)

All amounts are in Canadian dollars, except as noted.

 

LONGUEUIL, QC, Aug. 13, 2019 /CNW Telbec/ - Innergex Renewable Energy Inc. (TSX: INE) ("Innergex" or the "Corporation") today released its operating and financial results for the second quarter ended June 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.

"This past quarter was highlighted by the completion of the sale of our Icelandic assets, and the significant progress made at our two projects currently under construction in Texas. These projects will grow our net installed capacity by 30% and we look forward to their respective commissioning in the coming months", said Michel Letellier, President and Chief Executive Officer of Innergex. "Also, we recently signed a 40-year power purchase agreement with Hydro-Québec Distribution on the Innavik hydro project in partnership with the Inuit Pituvik Landholding Corporation, which again proves that strategic investments can create long-term value to all stakeholders."

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 June 30

Six months ended June 30

2019

2018

2019

2018



Restated 2,3


Restated 2,3

Production (MWh)

1,741,953


1,509,599


3,050,458


2,453,050


Long-term average (MWh) ("LTA")

1,743,516


1,516,645


3,069,993


2,507,447


Revenues

144,693


124,914


271,112


226,702


Adjusted EBITDA1

105,248


91,660


198,491


165,226


Net (loss) earnings from continuing operations

(10,453)


11,105


(14,873)


1,410


Net earnings

7,345


16,861


6,491


2,021


Net (loss) earnings from continuing operations attributable to owners, $ per share - basic and diluted

(0.07)


0.06


(0.14)


0.03


Net earnings attributable to owners, $ per share - basic and diluted

0.07


0.09


0.01


0.03







Production Proportionate (MWh)1

2,136,983


1,903,778


3,726,810


2,950,890


Revenues Proportionate1

169,791


143,937


311,017


251,498


Adjusted EBITDA Proportionate1

120,841


105,015


220,516


181,755









Trailing twelve months ended
June 30




2019

2018




Restated 2

Restated 2

Free Cash Flow1



115,689


91,655


Payout Ratio1



79

%

88

%


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 second quarter of 2019.

3.

For more information, please refer to the "Discontinued Operations" section of the Management's Discussion and Analysis of the second quarter of 2019.

 

Three-month period ended June 30, 2019
Production increased 15% and Production Proportionate increased 12% compared with the same quarter last year.

  • Production was 100% of the LTA:
    • Hydroelectric facilities: 99% of their LTA;
    • Wind farms:  102% of their LTA; and
    • Solar farms: 95% of their LTA.

The 16% increase in revenues and 15% in Adjusted EBITDA mainly stem from the contribution of the 62% remaining interest in the Cartier Wind Farms acquired in October 2018.

The Adjusted EBITDA Margin decreased from 73.4% to 72.7% for the three-month period due mainly to a lower margin in the hydro segment due to higher operating costs in British Columbia and a lower margin from the French facilities explained mainly by higher operating costs.

The 18% increase in Revenues Proportionate and 15% increase in Adjusted EBITDA Proportionate are mainly due to the investment in Energía Llaima and to higher revenues from the Texas facilities stemming mainly from higher selling prices in 2019.

For the three-month period ended June 30, 2019, the Corporation recorded a net loss from continuing operations of $10.5 million (basic and diluted loss from continuing operations of $0.07 per share), compared with net earnings from continuing operations of $11.1 million (basic and diluted net earnings from continuing operations of $0.06 per share) for the corresponding period in 2018. The $21.6 million variation can be explained by a $16.6 million unfavourable variation in unrealized net (gain) loss on financial instruments, a $10.3 million increase in depreciation and amortization, a $9.3 million increase in finance costs and a $1.4 million increase in the expense of income taxes. These items were partly offset by a $13.6 million increase in Adjusted EBITDA, a $1.8 million decrease in the share of loss of joint ventures and associates and a $0.6 million decrease in other net expenses.

Six-month period ended June 30, 2019
Production increased 24% and Production Proportionate increased 26% compared with the same quarter last year.

  • Production was 99% of the LTA:
    • Hydroelectric facilities: 94% of their LTA;
    • Wind farms:  104% of their LTA; and
    • Solar farms: 95% of their LTA.

The 20% increase in revenues and 20% in Adjusted EBITDA mainly stem from the contribution of the 62% remaining interest in the Cartier Wind Farms acquired in October 2018.

The Adjusted EBITDA Margin increased from 72.9% to 73.2% for the six-month period mainly explained by changes in our 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. This item was partly offset by a lower margin in the hydro segment due to higher operating costs in British Columbia and a lower margin from the French facilities.

The 24% increase in Revenues Proportionate and 21% increase in Adjusted EBITDA Proportionate are mainly due to the investment in Energía Llaima and to higher revenues from the Texas facilities stemming mainly from higher selling prices in 2019.

For the six-month period ended June 30, 2019, the Corporation recorded a net loss from continuing operations of $14.9 million (basic and diluted net loss from continuing operations of $0.14 per share), compared with net earnings from continuing operations of $1.4 million (basic and diluted net earnings from continuing operations of $0.03 per share) for the corresponding period in 2018. The $16.3 million variation can be explained by a $20.5 million increase in depreciation and amortization, a $18.4 million increase in finance costs, a $9.0 million unfavourable variation in unrealized net (gain) loss on financial instruments and a $6.1 million increase in the share of loss of joint ventures and associates. These items were partly offset by a $33.3 million increase in Adjusted EBITDA, a $3.7 million decrease in other net expenses and a $0.7 million increase in the recovery of income taxes.

Free Cash Flow and Payout Ratio
For the trailing twelve-month period ended June 30, 2019, the Corporation generated Free Cash Flow of $115.7 million, compared with $91.7 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 recovery of maintenance capital expenditures and prospective project expenses, net of attribution to non-controlling interests, partly offset by greater scheduled debt principal payments, mainly from the acquisition of Cartier, and the French projects that reached term conversion in 2018.

For the trailing twelve-month period ended June 30, 2019, the dividends on common shares declared by the Corporation amounted to 79% of Free Cash Flow, compared with 88% for the corresponding period last year. This change results mainly from a $24.0 million increase in Free Cash Flow. This item was partly offset by 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").

SECOND QUARTER OPERATIONAL HIGHLIGHTS

Divestment of HS Orka
On May 23, 2019, Innergex announced completion of the sale of its wholly owned subsidiary Magma Sweden, which owns an equity interest of approximately 53.9% in HS Orka for US$297.4 million (CAN$400.9 million) after adjustments to Jarðvarmi slhf which exercised its right of first refusal.

Net proceeds were used to reimburse the $228 million one-year credit facility contracted on October 24, 2018 at the time of the acquisition of the remaining interest in the Cartier Wind Farms and Operating Entities and the utilized portion of the additional borrowing capacity that was obtained on April 23, 2019. The proceeds were also used to deleverage corporate facilities.

Solar Development in the United States
In the second quarter, the Corporation issued letters of credit to secure 150 MW of solar panels to qualify approximately 750 MW of future solar projects for the full 30% ITC, which will represent an investment of about US$50 million.

Construction Activities

Phoebe Solar Project (Texas)
On June 4, 2019, Innergex closed the initial tax equity funding operation in its Phoebe Solar project under construction in Texas. Wells Fargo Central Pacific Holdings, Inc. injected its initial contribution of approximately US$37.1 million (CAN$49.6 million) in Phoebe Solar.

Also in the second quarter, the civil work was nearly completed and the focus turned to electrical and module installations. The installation of the piles and trackers was completed, and the civil contractor commenced demobilization from site. All of the modules required for construction of the 250 MWAC solar project have now been delivered to the site as at the date of this press release. Substation construction was completed, and the substation was energized. Inverter delivery was also completed, and all of the inverters were placed in their final locations and are being energized as the Blocks are brought online. There are 7 "Blocks" of modules that make up the project. Blocks 5 and 7 were brought online in June, Blocks 2 and 3 came online in July and Block 4 commenced generation in early August. Electricity was produced and sold from the Blocks that were online. Revenues generated were applied toward reducing the construction costs. Construction costs are in line with the budget at this stage and stand at US$337.7 million (CAN$441.9 million) at the end of June. The project is expected to begin commercial operation in the third quarter of 2019.

Foard City Wind Project (Texas)
In the second quarter of 2019, the Federal Aviation Administration ("FAA") and the Corporation came to an agreement for 9 additional turbines, representing a total of 139 turbines or 350.3 MW. All 139 Determinations of No Hazard from the FAA were received in May 2019. Construction continued on site and it is expected that the project would achieve commercial operation in the fourth quarter of 2019. All 139 of the turbines have now been delivered to site and erected and mechanical completion and testing are proceeding on schedule. The substation has been energized and energization of the collector lines commenced in early August. Total project costs were revised upward to US$403.6 million (CAN$528.2 million). As at June 30, 2019, construction costs are aligned with expectations at US$335.7 million (CAN$439.4 million).

On May 8, 2019, the Corporation announced the closing of a construction loan and a tax equity commitment. The construction financing amounts to US$290.9 million (CAN$380.7 million), backed by a US$275.0 million (CAN$359.9 million) tax equity commitment and a US$23.3 million (CAN$30.5 million) 7-year term loan facility with a 10-year amortization period to be provided by lenders upon the commercial operation date.

SUBSEQUENT EVENT

New swap contracts signed
On July 18, 2019 and July 22, 2019 the Corporation entered into six hedge agreements to mitigate the risk of fluctuations in the interest rates on the revolving credit facilities held by the Corporation. The notional amounts of theses contracts total $125 million and will mature between 2029 and 2049. The fair value is based on Level 2 valuation techniques. The Corporation designated the interest rate swaps as a cash flow hedge for accounting purposes.

Favourable decision from the Environmental Appeal Board ("EAB")
In 2017, the Comptroller of Water Rights has sought to apply the higher water rights rates retroactively to Fire Creek, Lamont Creek, Stokke Creek, Tipella Creek and Upper Stave River for the years 2011 and 2012 and by doing so sought an additional $3.2 million in water rental for these two years. An appeal of this decision was filed with the EAB. On July 26, 2019, the EAB rendered its decision, granting the appeal and ordering the Comptroller of Water Rights to reimburse to each facility its proportionate share of the adjusted water rental amounts overcharged with interest. This decision is subject to appeal by the Comptroller.

DIVIDEND DECLARATION
The following dividends will be paid by the Corporation on October 15, 2019:







Date of
announcement

Record date

Payment date

Dividend per
common share

Dividend per
Series A

Preferred Share

Dividend per
Series C
Preferred Share

August 13, 2019

September 30, 2019

October 15, 2019

$0.1750

$0.2255

$0.359375

 


ADDITIONAL INFORMATION
Innergex's 2019 second 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 Wednesday August 14, 2019, at 10 AM (EDT). 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/2Z5opYr 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 66 operating facilities with an aggregate net installed capacity of 1,988 MW (gross 2,888 MW), including 37 hydroelectric facilities, 25 wind farms and four solar farms. Innergex also holds interests in eight projects under development with a net installed capacity of 978 MW (gross 896 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 six-month periods ended June 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.





Three months ended June 30

Six months ended June 30


2019

2018

2019

2018



Restated 1,2


Restated 1,2

Revenues

144,693


124,914


271,112


226,702


Innergex's share of Revenues of joint ventures and associates:





Toba Montrose (40%) 3

7,438


7,899


7,973


8,126


Shannon (50%) 3,5

2,422


1,771


4,545


3,278


Flat Top (51%) 4,5

3,126


2,570


5,723


2,753


Dokie (25.5%) 3

1,432


1,795


3,753


3,089


Jimmie Creek (50.99%)3

2,156


2,240


2,298


2,295


Umbata Falls (49%)

1,582


1,426


2,283


2,250


Viger-Denonville (50%)

1,167


1,322


3,158


3,005


Duqueco (50%)6

4,827



8,129



Guayacán (50%)6

408



1,011



Pampa Elvira (50%)6

540



1,032





25,098


19,023


39,905


24,796


Revenues Proportionate

169,791


143,937


311,017


251,498



1.

For more information, please refer to the "Accounting Changes" section of the Management's Discussion and Analysis of the second quarter of 2019.

2.

For more information, please refer to the "Discontinued Operations" section of the Management's Discussion and Analysis of the second quarter of 2019.

3.

For the period from January 1, 2019 to June 30, 2019 and February 6, 2018, to June 30, 2018.

4.

For the period from January 1, 2019 to June 30, 2019 and March 23, 2018, to June 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.

 

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 June 30

Six months ended June 30



2019

2018

2019

2018




Restated 1,2


Restated 1,2

Net (loss) earnings from continuing operations


(10,453)


11,105


(14,873)


1,410


Income tax expense (recovery of)


1,493


100


(2,585)


(1,887)


Finance costs


58,259


48,972


111,230


92,875


Depreciation and amortization


46,749


36,459


93,215


72,700


EBITDA


96,048


96,636


186,987


165,098


Other net expenses


552


1,118


1,278


5,006


Share of loss of joint ventures and associates


142


1,983


7,032


916


Unrealized net loss (gain) on financial instruments


8,506


(8,077)


3,194


(5,794)


Adjusted EBITDA


105,248


91,660


198,491


165,226


Adjusted EBITDA margin


72.7

%

73.4

%

73.2

%

72.9

%


1.

For more information, please refer to the "Accounting Changes" section of the Management's Discussion and Analysis of the second quarter of 2019.

2.

For more information, please refer to the "Discontinued Operations" section of the Management's Discussion and Analysis of the second 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 June 30

Six months ended June 30


2019

2018

2019

2018



Restated 1,2


Restated 1,2

Adjusted EBITDA

105,248


91,660


198,491


165,226


Innergex's share of Adjusted EBITDA of joint ventures and associates:





Toba Montrose (40%) 3

6,004


6,359


5,016


5,878


Shannon (50%) 3,5

1,149


569


2,108


1,328


Flat Top (51%) 4,5

1,194


925


1,925


903


Dokie (25.5%) 3

911


1,275


2,704


2,242


Jimmie Creek (50.99%)3

1,746


1,828


1,370


1,656


Umbata Falls (49%)

1,436


1,318


1,862


2,022


Viger-Denonville (50%)

898


1,081


2,551


2,500


Duqueco (50%)6

2,082



3,661



Guayacán (50%)6

149



553



Pampa Elvira (50%)6

24



275




15,593


13,355


22,025


16,529


Adjusted EBITDA Proportionate

120,841


105,015


220,516


181,755



1.

For more information, please refer to the "Accounting Changes" section of the Management's Discussion and Analysis of the second quarter of 2019.

2.

For more information, please refer to the "Discontinued Operations" section of the Management's Discussion and Analysis of the second quarter of 2019.

3.

For the period from January 1, 2019 to June 30, 2019 and February 6, 2018, to June 30, 2018.

4.

For the period from January 1, 2019 to June 30, 2019 and March 23, 2018, to June 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.

 

Adjusted Net Loss from continuing operations
References to "Adjusted Net 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 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 Loss from continuing operations should not be construed as an alternative to net earnings, as determined in accordance with IFRS.




Impact on net (loss) earnings of financial instruments

Three months ended June 30

Six months ended June 30

2019

2018

2019

2018



Restated 1,2


Restated1,2

Net (loss) earnings from continuing operations

(10,453)


11,105


(14,873)


1,410


Add (Subtract):





Unrealized net loss (gain) on financial instruments

8,506


(8,077)


3,194


(5,794)


Realized (gain) loss on financial instruments

(448)


2


(448)


(826)


Income tax expenses (recovery of) related to above items

247


(250)


(774)


2,397


Share of unrealized net gain on financial instruments of joint ventures and associates, net of related income tax

(508)


(3,191)


(1,127)


(7,814)


Adjusted Net Loss from continuing operations

(2,656)


(411)


(14,028)


(10,627)



1.

For more information, please refer to the "Accounting Changes" section of the Management's Discussion and Analysis of the second quarter of 2019.

2.

For more information, please refer to the "Discontinued Operations" section of the Management's Discussion and Analysis of the second 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
June 30

2019

2018


Restated 2

Restated 2

Cash flows from operating activities

222,999


240,022


Add (Subtract) the following items:



Changes in non-cash operating working capital items

17,294


(42,811)


Maintenance capital expenditures net of proceeds from disposals

(9,224)


(7,394)


Scheduled debt principal payments

(104,385)


(83,140)


Free Cash Flow attributed to non-controlling interests1

(22,335)


(19,216)


Dividends declared on Preferred shares

(5,942)


(5,942)


Transaction costs related to realized acquisitions

2,121


10,963


Realized loss (gain) on derivative financial instruments

6,919


(827)


Recovery of maintenance capital expenditures and prospective project expenses, net of attribution to non-controlling interests3

8,242



Free Cash Flow

115,689


91,655





Dividends declared on common shares

91,917


80,877


Payout Ratio

79

%

88

%




Adjust for the following items:



Prospective projects expenses

17,937


16,475


Adjusted Free Cash Flow

133,626


108,130





Dividends declared on common shares - DRIP adjusted

86,650


72,877


Adjusted Payout Ratio

65

%

67

%


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 second 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 June 30

Six months ended June 30

(in MWh)

2019

2018

2019

2018



Restated1,2


Restated 1,2

Production

1,741,953


1,509,599


3,050,458


2,453,050


Innergex's share of Production of joint ventures and associates:





Toba Montrose (40%) 3

87,168


98,986


91,638


100,492


Shannon (50%) 3,5

89,172


104,525


180,781


165,397


Flat Top (51%) 4,5

115,450


116,271


231,126


126,286


Dokie (25.5%) 3

14,311


18,296


30,887


28,418


Jimmie Creek (50.99%)3

25,456


29,122


26,221


29,434


Umbata Falls (49%)

20,905


18,190


30,149


27,832


Viger-Denonville (50%)

7,718


8,789


20,897


19,981


Duqueco (50%)6

27,498



47,298



Guayacán (50%)6

4,138



10,786



Pampa Elvira (50%)6

3,214



6,569




395,030


394,179


676,352


497,840


Production Proportionate

2,136,983


1,903,778


3,726,810


2,950,890



1.

For more information, please refer to the "Accounting Changes" section of the Management's Discussion and Analysis of the second quarter of 2019.

2.

For more information, please refer to the "Discontinued Operations" section of the Management's Discussion and Analysis of the second quarter of 2019.

3.

For the period from January 1, 2019 to June 30, 2019 and February 6, 2018, to June 30, 2018.

4.

For the period from January 1, 2019 to June 30, 2019 and March 23, 2018, to June 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.

 

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 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 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.

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.

View original content: http://www.newswire.ca/en/releases/archive/August2019/13/c3972.html

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