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Marks an important milestone in the progression of this project
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First wind farm in Gaspésie to be developed in partnership with First
Nations communities
LONGUEUIL, QC, March 24, 2014 /CNW Telbec/ - Innergex Renewable Energy
Inc. (TSX: INE) ("Innergex" or the "Corporation") announces that the
Mesgi'g Ugju's'n (MU) Wind Farm, L.P. has signed a 20-year power
purchase agreement with Hydro-Québec Distribution for a 150 MW wind
energy project located in the Gaspé Peninsula, in Quebec. This entity
is controlled 50-50 by Innergex and by the three Mi'gmaq communities of
Quebec - Gesgapegiag, Gespeg and Listuguj. Innergex is responsible for
the management of the construction and the operation of the wind farm.
"We are honoured and proud to have been chosen by the Mi'gmaq
communities of Quebec to jointly develop this wind energy project, and
the signing of a power purchase agreement marks an important milestone
in the progression of its development", states Michel Letellier,
President and Chief Executive Officer of Innergex.
"This project is significant to the socio-economic development of the
Mi'gmaq communities of Gesgapegiag, Gespeg and Listuguj. It will create
wealth and jobs not only for our members, but also for our neighbours
in Gaspésie and elsewhere in Quebec. We see great opportunities for the
future", declares Chief Claude Jeannotte, Chairperson of the Mi'gmawei
Mawiomi.
The 150 MW Mesgi'g Ugju's'n wind project is located on public lands in
the Avignon Regional County Municipality in Quebec. The environmental
impact assessment for the project has been completed and submitted to
the Ministry of Sustainable Development, Environment, Wildlife and
Parks. Open houses have been conducted and an information session was
held in February as part of the information-gathering portion of the
province's environmental review process. Negotiations with potential
turbine suppliers are underway. The partners expect to begin
pre-construction activities, such as wood clearing, in late 2014 once
all authorizations have been received, and to begin construction in
2015. They expect to begin commercial operation of the wind farm at the
end of 2016. The cost of the project is currently estimated at
approximately $365.0 million and will be financed in a proportion of
approximately 80% with non-recourse, fixed-rate project-level debt. To
this end, the partners have begun a hedging program to fix the base
interest rate through the use of derivative financial instruments,
until a project financing is closed.
The wind farm is expected to have a long-term average annual production
of approximately 515,000 MWh, enough to power more than 30,000 Quebec
households each year. In its first full year of operation, it is
expected to generate revenues and Adjusted EBITDA of approximately
$55.0 million and $45.0 million respectively. The 20-year power
purchase agreement signed with Hydro-Québec Distribution is now in
effect and requires no further approvals. This contract stipulates a
selling price of $0.1012 per kWh in 2014 dollars, with an annual
adjustment based on 100% of the Consumer Price Index until the end of
2016 and on 20% thereafter. This is equivalent to a price of $0.089 per
kWh in 2014 dollars, with an annual adjustment based on 100% of the
Consumer Price Index, thereby respecting the maximum of $0.09 per kWh
established by the Government of Quebec.
The partners will share in the distributions from the project in varying
proportions, based in part on their initial equity investment.
Initially, the Corporation expects to fund a majority of the equity
investment required for this project; as a result, it expects to
receive approximately 75% of the project's cash flows during the first
year. However, during the first 15 years of operation, the Mi'gmaq
communities of Quebec will have the right to gradually increase their
equity investment in the project up to 65% (by purchasing portions of
the Corporation's equity at a price based on the present value of
future cash flows using a predetermined rate of return) and therefore
receive a higher proportion of cash flows. In any event, starting in
the 16th year, the Corporation will receive no less than 35% and no
more than 40% of the project's annual cash flows for the remaining life
of the project.
About the Mi'gmawei Mawiomi
The Mi'gmawei Mawiomi is an Assembly comprising the three Mi'gmaq
communities located in Gespe'gewa'gi: Gesgapegiag, Gespeg and
Listuguj. The Assembly ensures, among other things, the Mi'gmaq Nation
has access to its resources, the purpose of which is to support the
political and social objectives of the Mi'gmaq governments. The
Assembly has established a secretariat, the Mi'gmawei Mawiomi
Secretariat (MMS), whose focus is creating an independent Mi'gmaq
government based on a Constitution that promotes and protects the
rights, freedoms and well-being of the Mi'gmaq.
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 and British Columbia and in Idaho, USA. Its portfolio
of assets currently consists of: (i) interests in 32 operating
facilities with an aggregate net installed capacity of 672 MW (gross
1,164 MW), including 25 hydroelectric operating facilities, six wind
farms, and one solar photovoltaic farm; (ii) interests in five projects
under development or under construction with an aggregate net installed
capacity of 210 MW (gross 321 MW), for which power purchase agreements
have been secured; and (iii) prospective projects with an aggregate net
capacity totaling 2,900 MW (gross 3,125 MW). 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 that generate sustainable cash flows
and provide a high return on invested capital, and to distribute a
stable dividend.
Non-IFRS Measures
Readers are cautioned that Adjusted EBITDA is not a measure recognized
by IFRS and has no meaning prescribed by it, and therefore may not be
comparable to those presented by other issuers. Innergex believes that
this indicator is important, as it provides management and readers with
additional information about its cash generation capabilities and
facilitates the comparison of results over different periods.
References to "Adjusted EBITDA" are to revenues less operating
expenses, general and administrative expenses and prospective project
expenses. Readers 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
In order to inform readers of the Corporation's future prospects, this
press release contains forward-looking information that can generally
be identified by the use of words such as "projected", "potential",
"expect", "will", "should", "estimate", "forecasts", "intends", or
other comparable terminology that states that certain events will or
will not occur. It represents the estimates and expectations of the
Corporation relating to future results and developments as of the date
of this press release. It includes future-oriented financial
information, such as estimated electricity production, revenues,
Adjusted EBITDA, project costs and financing, to inform readers of the
potential financial impact of developing the Mesgi'g Ugju's'n wind
energy project. Such information may not be appropriate for other
purposes.
The material risks and uncertainties that may cause actual results and
developments to be materially different from current expressed
Forward-Looking Information are referred to in the Corporation's Annual Information Form in the "Risk Factors" section and include, without limitation: the
ability of the Corporation to execute its strategy; its ability to
access sufficient capital resources; liquidity risks related to
derivative financial instruments; changes in hydrology, wind regimes
and solar irradiation; delays and cost overruns in the design and
construction of projects; the ability to develop new facilities; and
variability of installation performance and related penalties.
Forward-Looking Information in this press release is based on certain
principal assumptions made by the Corporation. The following table
outlines Forward-Looking Information contained in this press release,
the principal assumptions used to derive this information and the
principal risks and uncertainties that could cause actual results to
differ materially from this information.
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Principal Assumptions
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Principal Risks and Uncertainties
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Estimated production, revenues and Adjusted EBITDA
For each facility, the Corporation determines an annual long-term average level of electricity production (LTA) over the expected life of the facility, based on several factors that
include, without limitation, historically observed water flows or wind
or solar irradiation conditions, turbine or panel technology, installed
capacity, energy losses, operational features and maintenance. Although
production will fluctuate from year to year, over an extended period it
should approach the estimated long-term average. The Corporation then
estimates expected annual revenues for each facility by multiplying its LTA by a price for electricity
stipulated in the power purchase agreement secured with a public
utility or other creditworthy counterparty. These agreements stipulate
a base price and, in some cases, a price adjustment depending on the
month, day and hour of delivery. In most cases, power purchase
agreements also contain an annual inflation adjustment based on a
portion of the Consumer Price Index. The Corporation then estimates
annual operating earnings by subtracting from the estimated revenues
the budgeted annual operating costs, which consist primarily of
operators' salaries, insurance premiums, operations and maintenance
expenditures, property taxes, and royalties; these are predictable and
relatively fixed, varying mainly with inflation except for maintenance
expenditures.
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Improper assessment of water, wind and sun resources and associated
electricity production
Variability in hydrology, wind regimes and solar irradiation
Equipment failure or unexpected operations & maintenance activity
Unexpected seasonal variability in the production and delivery of
electricity
Variability of facility performance and related penalties
Changes to water and land rental expenses
Number of prospective projects in activity
Unexpected maintenance expenditures
Lower inflation rate than expected
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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, the Corporation provides an estimate of
project costs based on its extensive experience as a developer,
directly related incremental internal costs, site acquisition costs and
financing costs, which are eventually adjusted for projected costs
provided by the engineering, procurement and construction (EPC)
contractor retained for the project. The Corporation provides
indications regarding scheduling and construction progress for its
development projects and indications regarding its prospective
projects, based on its extensive experience as a developer.
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Performance of counterparties, such as the EPC contractors
Delays and cost overruns in the design and construction of projects
Obtainment of permits
Equipment supply
Interest rate fluctuations and availability of financing
Relationships with stakeholders
Regulatory and political risks
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Expected project financing
The Corporation provides indications of its intention to secure
non-recourse project-level debt financing for its development projects,
based on the expected LTA production and expected costs of each
project, the expected remaining power purchase agreement term, a
leverage ratio of approximately 75%-85%, as well as the Corporation's
extensive experience in project financing and knowledge of the capital
markets.
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Interest rate fluctuations and availability of financing
Financial leverage and restrictive covenants governing current and
future indebtedness
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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 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 of this
press release, unless so required by legislation.
SOURCE Innergex Renewable Energy Inc.
