Strategy Execution
- Increased portfolio diversification and added complementary
storage capabilities via a 60 MW solar portfolio acquisition in
Ontario and the deployment of
Innergex's first battery energy storage project in Chile
- Advanced on the construction of the 330 MW Boswell Springs wind
project in Wyoming
- Demonstrated ability to grow in core markets by signing a
long-term PPA with Hydro-Québec for a 102 MW wind project, and
subsequent to the quarter end, being selected by Hydro-Québec for
400 MW of wind capacity
- Started delivering power at the 7.5 MW Innavik hydro project in
the north of Quebec, adding a key
hydroelectric asset to the portfolio
Funding Initiatives
- Executed partnership with Crédit Agricole Assurances for a 30%
non-controlling interest in the portfolio in France. This transaction allowed to
crystallize value for shareholders and was a validation of the
Corporation's growth strategy, bringing in a long-term strategic
partner to accelerate development in France and increase financial flexibility
- Closed on the financing of the 330 MW Boswell Springs wind
project, allowing Innergex to continue executing on its organic
growth strategy
- Concluded the financing of three unlevered hydro assets, which
represents a new attractive internal funding lever to support
growth
Capital Allocation Strategy Update
- Announced updated capital allocation strategy to accelerate
organic growth (see press release issued on February 21, 2024)
Q4 2023 Financial Results (compared to prior year
results)
- Production Proportionate was at 94% of LTA, up from 82%
- Adjusted EBITDA Proportionate1 reached $186.4 million, up 30%
Fiscal year 2023 Financial Results (compared to prior
year results)
- Production Proportionate was at 90% of LTA, flat compared to
the prior year
- Adjusted EBITDA Proportionate1 reached $735.3 million, up 12%
2025 Targets and 2024 Financial Guidance
- As a result of recent macroeconomic trends, Innergex is
withdrawing its previously provided 2025 financial targets
- Full year 2024 Adjusted EBITDA Proportionate1 is
expected to be in the range of $725.0
million to $775.0 million
- Full year 2024 Free Cash Flow per share1 is expected
to be in the range of $0.70 to
$0.85
Appointment to the Board of Directors
- Marc-André Aubé joined the Board as of December 1, 2023
All amounts are in
thousands of Canadian dollars, unless otherwise
indicated.
|
LONGUEUIL, QC, Feb. 21,
2024 /CNW/ - Innergex Renewable Energy Inc.
(TSX: INE) ("Innergex" or the "Corporation") a leading global
independent renewable power producer, today reported financial
results for the fourth quarter and fiscal year ended
December 31, 2023.
Michel Letellier, President and
Chief Executive Officer, said, "We are very pleased to
deliver better results for the fourth quarter and fiscal year
2023, while also progressing on our strategic growth initiatives.
During the fourth quarter, we commissioned our 50 MW/250 MWh (5
hours) Salvador battery energy
storage facility in Chile and
started delivering energy at the Innavik hydro facility, providing
further portfolio diversification, and allowing us to generate
attractive risk-adjusted returns on invested capital."
"We took proactive steps to strengthen our financial position
and ensure that we have the necessary financial flexibility
required to execute our growth strategy. With the financing for the
Boswell Springs project, our partnership with Crédit Agricole
Assurances in France, and our
financing of three unlevered hydro assets, we are well positioned
to continue to invest in greenfield development across our key
markets. While making progress with our construction projects, we
continue to win new project awards, which serve to validate our
value proposition and ultimately support our growth
trajectory."
FINANCIAL HIGHLIGHTS
|
Three months
ended
December 31
|
Year ended
December 31
|
2023
|
2022
|
2023
|
2022
|
Production
(MWh)
|
2,703,285
|
2,357,039
|
10,621,478
|
10,254,005
|
Production as a
percentage of LTA
|
94 %
|
81 %
|
90 %
|
90 %
|
|
|
|
|
|
Revenues and Production
Tax Credits
|
261,526
|
220,212
|
1,041,574
|
935,223
|
Operating
Income
|
(36,494)
|
(6,504)
|
219,575
|
263,366
|
Adjusted
EBITDA1
|
175,421
|
135,376
|
687,743
|
612,165
|
Net Loss
|
(121,964)
|
(52,575)
|
(105,814)
|
(91,115)
|
Adjusted Net
Loss1
|
(7,166)
|
(27,469)
|
(2,052)
|
(32,503)
|
Net Loss Attributable
to Owners, $ per share - basic and diluted
|
(0.57)
|
(0.23)
|
(0.51)
|
(0.43)
|
Production
Proportionate (MWh)1
|
2,808,877
|
2,448,629
|
11,160,580
|
10,792,064
|
Revenues and Production
Tax Credits Proportionate1
|
276,225
|
231,576
|
1,102,655
|
995,758
|
Adjusted EBITDA
Proportionate1
|
186,447
|
143,399
|
735,261
|
658,883
|
|
|
|
|
|
|
|
Year ended
December 31
|
|
|
|
2023
|
2022
|
Cash Flow from
Operating Activities
|
|
|
297,853
|
430,243
|
Free Cash
Flow1,2
|
|
|
214,930
|
171,988
|
Payout
Ratio1,2
|
|
|
68 %
|
85 %
|
Normalized Payout
Ratio1
|
|
|
69% - 75%
|
|
Note: On January 1,
2023, the Corporation amended the presentation of its consolidated
statements of earnings (refer to Section 8- ACCOUNTING POLICIES AND
INTERNAL CONTROLS | Material Accounting Policies of the
Management's Discussion and Analysis for the three- and twelve-
months ended December 31, 2023 ("MD&A") for more information).
Concurrently, certain Non-IFRS measures have been amended (refer to
Section 6- NON-IFRS MEASURES of the MD&A for more
information).
|
1.
|
These measures are not
recognized measures under IFRS and therefore may not be comparable
to those presented by other issuers. Production and Production
Proportionate are key performance indicators for the Corporation
that cannot be reconciled with an IFRS measure. Please refer to the
section 6- NON-IFRS MEASURES for more information.
|
2.
|
For more information on
the calculation and explanation, please refer to 4- CAPITAL AND
LIQUIDITY | Free Cash Flow and Payout Ratio of the
MD&A.
|
OPERATING PERFORMANCE
FOURTH QUARTER 2023
Production for the quarter was marked by higher levels reached
by the hydro facilities, partially offset by below average wind and
solar resources. The increase in Revenues and Production Tax
Credits compared to the same period last year was mainly due to
higher production in the hydro segment in British Columbia, at the Curtis Palmer
facilities in the United States
and in the wind segment in France,
as well as the acquisition of the Sault
Ste. Marie solar facilities. Adjusted EBITDA
Proportionate1 was favourably impacted by the same
factors noted above, partially offset by higher operating, general
and administrative expenses, as well as higher prospective projects
expenses.
FISCAL YEAR 2023
Overall production for the year ended on December 31, 2023, reached 90% of LTA, flat
compared to prior year, as higher hydro production was offset by
below average wind and solar generation. The increase is mainly
explained by the Aela and Sault Ste.
Marie acquisitions, the higher production at the Curtis
Palmer hydro facilities in the United
States and increased wind regime and revenues from new PPAs
in place at facilities in France.
The increase is partly offset by lower wind regimes at the
Quebec facilities, lower spot
prices at the Chilean hydro facilities and unfavourable pricing and
lower production at the Griffin Trail wind facility. Adjusted
EBITDA Proportionate1 was favourably impacted by the
same factors noted above, partially offset by higher operating,
general and administrative expenses, as well as higher prospective
projects expenses.
TRAILING TWELVE MONTHS CASH FLOW FROM OPERATING ACTIVITIES,
FREE CASH FLOW1 AND PAYOUT RATIO1
Cash flows from operating activities decreased to $297.9 million, compared with $430.2 million in the prior year period. Main
contributors were the realized gain on the settlement of the
interest rate swaps as part of Innergex's refinancing of the
non-recourse debt of its Chilean facilities in Q3 2022 and the
foreign exchange forward contracts concurrent with the French
Acquisition.
Free Cash Flow1 Increased to $214.9 million, compared with $172.0 million for the corresponding period last
year. The increase is mainly due to the gain realized with the sale
of a 30% non-controlling interest in Innergex's portfolio in
France. The gain crystallizes
value to Innergex's shareholders, mainly derived from the
development portfolio, and from certain operational improvements,
showcasing the ability of the development and operational teams to
create tangible value.
The dividends on common shares declared by the Corporation
amounted to 68% of Free Cash Flow1, compared with 85%
for the corresponding period last year.
Had production levels been equal to their long-term average
during the year ended December 31,
2023, excluding Chile and
the gain realized in the French portfolio, Free Cash
Flow1 and Payout Ratio1 would have been in a
range of $197 million to $212 million and 69% to 75%,
respectively.
PROJECTS UNDER CONSTRUCTION
Name
(Location)
|
Type
|
Ownership
(%)
|
Gross
installed
capacity
(MW)
|
Gross
estimated
LTA (GWh)
|
PPA term
(years)
|
Expected
COD
|
|
|
|
San Andrés Battery
Energy Storage (Chile)
|
Storage
|
100
|
|
Note
|
3
|
—
|
|
—
|
|
2024
|
|
Lazenay
(France)
|
Wind
|
25
|
|
9.0
|
|
27.8
|
|
—
|
|
2024
|
|
Hale Kuawehi (Hawaii,
U.S.)
|
Solar and
storage
|
100
|
|
30.0
|
1
|
87.4
|
2
|
25
|
|
2024
|
|
Boswell Springs
(Wyoming, U.S.)
|
Wind
|
100
|
|
329.8
|
|
1,262.0
|
|
30
|
|
2024
|
|
1. Solar project with a
battery storage capacity of 30 MW/120 MWh (4 hours).
|
2. PPA is a fixed lump
sum capacity payment for the availability of dispatchable
energy.
|
3. Battery storage
capacity of 35 MW/175 MWh (5 hours).
|
Innergex continues to advance its projects under construction.
The San Andrés battery energy storage project will represent its
second investment in storage technology in Chile, further supporting its portfolio
strategy in the country. Following the close of the financing of
Boswell Springs, the project construction activities continued and
remain on budget and on schedule.
CAPITAL ALLOCATION STRATEGY
On February 21, 2024, Innergex
announced an update to its capital allocation strategy,
specifically regarding its dividend policy, as it seeks to increase
funding for long-term growth. Key highlights from the announcement
include:
- Calibrating Innergex's target dividend payout ratio to 30% to
50% of Free Cash Flow1 to support its long-term growth
objectives
- Based on the annual dividend for 2024 of $0.36 per common share, the Corporation expects
to free up approximately $75 million
annually for reinvestment purposes
- Increasing investments in greenfield development and
prioritizing organic growth in Innergex's four markets, with
specific focus on North
America
- Capital allocation choices designed to enable self-funding of
organic investments while delivering sustainable growth
Michel Letellier, President and
Chief Executive Officer, commented, "At this time and with our eye
to the future, we have proactively decided to pivot our strategy
toward accelerated growth by unlocking capital to support
greenfield development opportunities. Innergex has a robust
development portfolio of over 10 GW and will remain disciplined in
directing the additional capital toward projects that meet our
risk-adjusted return objectives."
2025 TARGETS AND 2024 GUIDANCE
As a result of recent macroeconomic trends, Innergex is
withdrawing its previously provided 2025 financial targets.
Innergex is establishing guidance with full year 2024 Adjusted
EBITDA Proportionate1 expected to be in the range of
$725.0 million to $775.0 million, and full year 2024 Free Cash
Flow1 per share expected to be in the range of
$0.70 to $0.85. These projections assume production
at 100% LTA target at our operating facilities; as well as 95%
asset availability2.
Jean Trudel, Chief Financial
Officer, commented, "Innergex is well-positioned to benefit from
rapidly increasing demand for renewable energy, and our portfolio
diversification strategy should help mitigate resource variability
over the long-term. We maintain an optimistic outlook as we are
managing our operations and development efforts to optimize
performance. We remain focused on delivering sustainable and
profitable growth to create value on a per share basis."
SUBSEQUENT EVENTS
On January 26, 2024, Innergex
announced that it was selected by Hydro-Québec for two projects: a
100 MW community wind project in partnership with the regional
county municipality of Lotbinière and the Abenaki Councils of
Odanak and Wôlinak, and a 300 MW
community wind project led by the Innu Council of Pessamit, with
the participation of the regional county municipality of
Manicouagan. Commercial operation is scheduled for 2028 and 2029,
respectively. The power purchase agreements, to be signed in 2024
with Hydro-Québec, are expected to be structured as 30-year
take-or-pay contracts, indexed to a predefined percentage of the
Consumer Price Index ("CPI").
DIVIDEND DECLARATION
On February 21, 2024, the Board of
Directors approved an update to its capital allocation strategy and
revised its annual dividend for 2024 to $0.36 per common share to support its growth
ambitions.
The following dividends will be paid by the Corporation on
April 15, 2024:
Date of
announcement
|
Record date
|
Payment date
|
Dividend per
common share
|
Dividend per Series
A
Preferred
Share
|
Dividend per Series
C
Preferred Share
|
February 21,
2024
|
March 28,
2024
|
April 15,
2024
|
$0.0900
|
$0.2028
|
$0.3594
|
APPOINTMENT TO THE BOARD OF DIRECTORS
Innergex is pleased to announce the appointment of Marc-André
Aubé on its Board of Directors, effective December 1, 2023.
Mr. Aubé is the President and Chief Executive Officer of Walter
Surface Technologies, a Canadian company providing innovative
solutions for the global metal working industry. The company was
founded in 1952 and is established in 7 countries throughout
North America, South America and Europe. Prior to joining Walter Surface
Technologies, Mr. Aubé was President and Chief Operating Officer of
GardaWorld Security Solutions – Canada. He also cumulates many years of
experience in various industry sectors, including chemicals with
Nalco Canada, oil and gas with Petro-Canada and finance with the
Caisse de dépôt et placement du Québec and Scotia Capital Inc. Mr.
Aubé has completed his CFA designation and holds an MBA from HEC
Montréal and an engineering degree from École Polytechnique de
Montréal.
"We are pleased to welcome Mr. Aubé to our Board of Directors,"
said Mr. Daniel Lafrance, Chairman
of the Board of Directors of Innergex. "We are confident that his
impressive professional background, his deep management knowledge
of multinational companies and his expertise in financing and
investments activities will enhance the overall proficiency of the
Board. We are confident in his ability to contribute significantly
to the discussions in the interest of our shareholders."
1.
|
This is not a
recognized measure under IFRS and therefore may not be comparable
to those presented by other issuers. Please refer to the "Non-IFRS
Measures" section for more information.
|
2.
|
These assumptions are
based on information currently available to the Corporation and
this list of assumptions is not exhaustive. Please refer to the
Section 5 - OUTLOOK | 2024 Growth Targets of the MD&A for more
information.
|
NON-IFRS MEASURES
Some measures referred to in this press release are not
recognized measures under IFRS and therefore may not be comparable
to those presented by other issuers. Innergex believes these
indicators are important, as they provide management and the reader
with additional information about Innergex's production and cash
generation capabilities, its ability to pay a dividend and its
ability to fund its growth. These indicators also facilitate the
comparison of results over different periods. Revenues and
Production Tax Credits Proportionate, Adjusted EBITDA, Adjusted
EBITDA Proportionate, Adjusted Net Loss, Free Cash Flow and Payout
Ratio are not measures recognized by IFRS and have no standardized
meaning prescribed by IFRS.
Revenues and Production Tax Credits Proportionate, Adjusted
EBITDA and Adjusted EBITDA Proportionate
Changes in the Non-IFRS measures effective January 1, 2023
On January 1, 2023, the
Corporation amended the presentation of its consolidated statements
of earnings to enhance relevance of the financial statements. As a
result, production tax credits ("PTCs"), previously recognized in
other net income (expenses), have been reclassified directly below
revenues to better represent the nature of PTCs as income arising
in the course of the Corporation's ordinary activities through the
generation of electricity. In addition, certain subtotals have been
removed from the consolidated statements of earnings, which now
includes an operating income subtotal.
As a result of these changes to the consolidated statements of
earnings, certain Non-IFRS measures have been amended as
follows:
- PTCs are presented directly in Revenues and Production Tax
Credits (a subtotal presented in the primary financial statements
of the Corporation, thus excluded from the Non-IFRS Measures);
- PTCs are presented directly in Adjusted EBITDA, along with the
realized portion of the change in fair value of power hedges;
- Other income related to PTCs has been retreated from the
Revenues Proportionate and Adjusted EBITDA Proportionate measures;
and
- Proportionate measures include only Innergex's share of
Revenues and Production Tax Credits, and Adjusted EBITDA, of the
joint ventures and associates.
The comparative figures have also been adjusted to conform with
the revised measures. The above amendments seek to improve the
clarity of the measures, and to enhance comparability with current
industry practices. In addition, the inclusion of the realized
portion of the change in fair value of power hedges to the Adjusted
EBITDA measure enhances comparability of the Corporation's
performance over time.
Description of the measures
References in this document to "Revenues and Production Tax
Credits Proportionate" are to Revenues and Production Tax Credits,
plus Innergex's share of Revenues and Production Tax Credits of the
joint ventures and associates.
References in this document to "Adjusted EBITDA" are to
operating income, to which are added (deducted) depreciation and
amortization, ERP implementation, impairment charges, and the
realized portion of the change in fair value of power hedges.
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 these measures
enhances the understanding of the Corporation's operating
performance. Adjusted EBITDA is used by investors to evaluate the
operating performance and cash generating operations, and to derive
financial forecasts and valuations. Revenues and Production Tax
Credits Proportionate and Adjusted EBITDA Proportionate measures
are used by investors to evaluate the contribution of the joint
ventures and associates to the Corporation's operating performance
and cash generating operations, and the contribution of such for
financial forecasts and valuations purposes. Readers are cautioned
that Revenues and Tax Credits Proportionate, should not be
construed as an alternative to Revenues and Production Tax Credits,
as determined in accordance with IFRS. Readers are also cautioned
that Adjusted EBITDA and Adjusted EBITDA Proportionate, should not
be construed as an alternative to operating income, as determined
in accordance with IFRS. Please refer to Section 3- Financial
Performance and Operating Results of the MD&A for more
information.
Below is a reconciliation of the non-IFRS measures to their
closest IFRS measures:
|
|
Three months ended
December 31, 2023
|
Three months ended
December 31, 2022
|
|
|
Consolidation
|
Share of joint
ventures
|
Proportionate
|
Consolidation
|
Share of joint
ventures
|
Proportionate
|
|
|
|
|
|
|
|
|
Revenues and
Production Tax Credits
|
|
261,526
|
14,699
|
276,225
|
220,212
|
11,364
|
231,576
|
|
|
|
|
|
|
|
|
Operating
income
|
|
(36,494)
|
6,681
|
(29,813)
|
(6,504)
|
3,870
|
(2,634)
|
Depreciation and
amortization
|
|
87,927
|
4,345
|
92,272
|
93,756
|
4,153
|
97,909
|
ERP
implementation
|
|
3,558
|
—
|
3,558
|
1,815
|
—
|
1,815
|
Impairment of long-term
assets
|
|
118,857
|
—
|
118,857
|
47,868
|
—
|
47,868
|
Realized loss on power
hedges
|
|
1,573
|
—
|
1,573
|
(1,559)
|
—
|
(1,559)
|
Adjusted
EBITDA
|
|
175,421
|
11,026
|
186,447
|
135,376
|
8,023
|
143,399
|
|
|
Year ended
December 31, 2023
|
Year ended
December 31, 2022
|
|
|
Consolidation
|
Share of joint
ventures
|
Proportionate
|
Consolidation
|
Share of joint
ventures
|
Proportionate
|
|
|
|
|
|
|
|
|
Revenues and
Production Tax Credits
|
|
1,041,574
|
61,081
|
1,102,655
|
935,223
|
60,535
|
995,758
|
|
|
|
|
|
|
|
|
Operating
income
|
|
219,575
|
30,962
|
250,537
|
263,366
|
29,919
|
293,285
|
Depreciation and
amortization
|
|
361,292
|
16,556
|
377,848
|
336,053
|
16,799
|
352,852
|
ERP
implementation
|
|
12,651
|
—
|
12,651
|
2,357
|
—
|
2,357
|
Impairment of long-term
assets
|
|
118,857
|
—
|
118,857
|
47,868
|
—
|
47,868
|
Realized loss on power
hedges
|
|
(24,632)
|
—
|
(24,632)
|
(37,479)
|
—
|
(37,479)
|
Adjusted
EBITDA
|
|
687,743
|
47,518
|
735,261
|
612,165
|
46,718
|
658,883
|
Adjusted Net Loss
References to "Adjusted Net Loss" are to net earnings or losses
of the Corporation, to which the following elements are added
(subtracted): unrealized portion of the change in fair value of
derivative financial instruments, realized loss on the termination
of interest rate swaps, realized gain on foreign exchange forward
contracts, impairment charges, items that are outside of the normal
course of the Corporation's cash generating operations, the net
income tax expense (recovery) related to these items, and the share
of loss (earnings) of joint ventures and associates related to the
above items, net of related income tax.
The Adjusted Net Loss seeks to provide a measure that eliminates
the earnings impacts of certain derivative financial instruments
and other items that are outside of the normal course of the
Corporation's cash generating operations, which do not represent
the Corporation's operating performance. Innergex
uses derivative financial instruments to hedge its
exposure to various risks. Accounting for derivatives requires that
all derivatives are marked-to-market. When hedge accounting is not
applied, changes in the fair value of the derivatives is recognized
directly in net earnings (loss). Such unrealized changes have no
immediate cash effect, may or may not reverse by the time the
actual settlements occur and do not reflect the Corporation's
business model toward derivatives, which are held for their
long-term cash flows, over the life of a project. In addition, the
Corporation uses foreign exchange forward contracts to hedge its
net investment in its French subsidiaries. Management therefore
believes realized gains (losses) on such contracts do not reflect
the operations of Innergex.
Innergex believes that the presentation of this measure enhances
the understanding of the Corporation's operating performance.
Adjusted Net (Loss) Earnings is used by investors to evaluate and
compare Innergex's profitability before the impacts of the
unrealized portion of the change in fair value of derivative
financial instruments and other items that are outside of the
normal course of the Corporation's cash generating operations.
Readers are cautioned that Adjusted Net Loss should not be
construed as an alternative to net earnings, as determined in
accordance with IFRS. Please refer to the section 3 - Adjusted Net
Loss section of the MD&A for reconciliation of the Adjusted Net
Loss.
Below is a reconciliation of Adjusted Net Loss to its closest
IFRS measure:
|
Three months ended
December 31
|
Year ended
December 31
|
|
2023
|
2022
|
2023
|
2022
|
|
|
|
|
|
Net loss
|
(121,964)
|
(52,575)
|
(105,814)
|
(91,115)
|
Add
(Subtract):
|
|
|
|
|
Share of unrealized
portion of the change in fair value of financial instruments of
joint ventures and associates, net of related income
tax
|
(1,186)
|
(76)
|
(1,917)
|
(1,381)
|
Unrealized portion of
the change in fair value of financial instruments
|
6,141
|
25,336
|
(9,649)
|
141,859
|
Impairment of
long-term assets
|
118,857
|
47,868
|
118,857
|
47,868
|
Realized gain on
settlement of foreign exchange forwards (French
Acquisition)
|
—
|
(43,458)
|
—
|
(43,458)
|
Realized loss (gain)
on termination of interest rate swaps
|
2,405
|
(59)
|
(1,307)
|
(71,735)
|
ERP
implementation
|
3,558
|
1,815
|
12,651
|
2,357
|
Realized gain on
foreign exchange forward contracts
|
(71)
|
—
|
(449)
|
(3,214)
|
Income tax (recovery)
expense related to above items
|
(14,906)
|
(6,320)
|
(14,424)
|
(13,684)
|
Adjusted Net
loss
|
(7,166)
|
(27,469)
|
(2,052)
|
(32,503)
|
Free Cash Flow and Payout Ratio
Changes in the Non-IFRS measures effective
January 1, 2023
On January 1, 2023, the
Corporation revised the calculation of its Free Cash Flow and
Payout Ratio measures to exclude the prospective project expenses.
The comparative figures have been adjusted to conform with the
revised measures.
On October 26, 2023, Innergex
disposed of a non-controlling 30% participation in its French
portfolio. Until recently, Innergex relied on leverage and equity
issuance to fund its capital requirements. The Corporation amended
the presentation of its Free Cash Flow and Payout Ratio to include
the gains realized on strategic transactions, which allow the
Corporation to finance its growth without having to increase
leverage or dilute shareholders. The change was applied
retrospectively with no impact on comparative information.
The amendments are aimed at increasing relevance of the measure,
allowing investors to understand how the operations contribute to
funding the Corporation's growth and its dividend. The revised
measure also enhances comparability with current industry
practices.
Description of the measures
References to "Free Cash Flow" are to cash flows from operating
activities before changes in non-cash operating working capital
items, less prospective projects expenses, maintenance capital
expenditures net of proceeds from dispositions, scheduled debt
principal payments, the portion of Free Cash Flow
attributed to non-controlling interests, preferred share
dividends declared, and gains realized on strategic transactions,
plus or minus other elements that are not representative of the
Corporation's long-term cash-generating capacity, such as gains and
losses on the Phoebe basis hedge due to their limited occurrence,
realized gains and losses on contingent considerations related to
past business acquisitions, transaction costs related to realized
acquisitions, expenses related to the implementation of a
cloud-based ERP solution, realized losses or gains on refinancing
of certain borrowings or derivative financial instruments used to
hedge the interest rate on certain borrowings or the exchange rate
on equipment purchases, and tax payments related to fiscal
strategies for the purpose of improving the long-term cash
generating capacity of Innergex.
Free Cash Flow is a measure of the Corporation's ability to pay
a dividend and its ability to fund its growth from its cash
generating operations, in the normal course of business, and
through strategic transactions.
Innergex believes that the presentation of this measure enhances
the understanding of the Corporation's cash generation
capabilities, its ability to pay a dividend and its ability to fund
its growth. Free Cash Flow is used by investors in this regard.
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 "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 pay a dividend and its ability to fund
its growth. Payout Ratio is used by investors in this regard.
References to "Normalized Payout Ratio" are to dividends
declared on common shares divided by the estimated Free Cash Flow
had production levels been equal to their long-term average in all
jurisdictions, excluding Chile,
and excluding gains realized on strategic transactions. Innergex
believes that this is a measure of its ability to pay a dividend
and its ability to fund its growth, free from circumstantial
impacts on production and the immediate benefits of strategic
transactions. Normalized Payout Ratio is used by investors in this
regard.
Free Cash Flow and
Payout Ratio calculation
|
Year ended
December 31
|
2023
|
2022
|
|
|
|
Cash flows from
operating activities1
|
297,853
|
430,243
|
Add (Subtract) the
following items:
|
|
|
Changes in non-cash
operating working capital items
|
33,401
|
14,518
|
Prospective projects
expenses
|
27,162
|
24,740
|
Maintenance capital
expenditures, net of proceeds from dispositions
|
(25,316)
|
(11,051)
|
Scheduled debt
principal payments
|
(186,458)
|
(156,862)
|
Free Cash Flow
attributed to non-controlling interests2
|
(38,377)
|
(29,271)
|
Dividends declared on
Preferred shares
|
(5,632)
|
(5,632)
|
Chile portfolio
refinancing - hedging impact4
|
4,578
|
2,578
|
Add (subtract) the
following specific items3:
|
|
|
Realized loss on
contingent considerations
|
—
|
—
|
Realized (gain) loss
on termination of interest rate swaps4
|
2,405
|
(71,735)
|
Realized gain on
termination of foreign exchange forwards5
|
—
|
(43,458)
|
Principal and interest
paid related to pre-acquisition period
|
1,312
|
—
|
Acquisition,
integration and ERP implementation expenses
|
15,948
|
17,918
|
Realized gain on the
Phoebe basis hedge
|
—
|
—
|
Gain on disposition of
non-controlling interests6
|
88,054
|
—
|
Free Cash
Flow
|
214,930
|
171,988
|
|
|
|
Dividends declared on
common shares
|
147,058
|
146,957
|
Payout Ratio
|
68 %
|
85 %
|
Normalized Payout
Ratio1
|
69% - 75%
|
|
1.
|
Cash flows from
operating activities for the year ended December 31, 2022, include
the one-time BC Hydro Curtailment Payment received during Q1
2022.
|
2.
|
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.
|
3.
|
Certain items are
excluded from the Free Cash Flow and Payout Ratio calculations as
they are deemed not representative of the Corporation's long-term
cash-generating capacity, and include items such as gains and
losses on the Phoebe basis hedge due to their limited occurrence
(maturity attained on December 31, 2021), realized gains and losses
on contingent considerations related to past business acquisitions,
transaction costs related to realized acquisitions, ERP
implementation expenses, realized losses or gains on refinancing of
certain borrowings or derivative financial instruments used to
hedge the interest rate on certain borrowings or the exchange rate
on equipment purchases, and tax payments related to fiscal
strategies for the purpose of improving the long-term cash
generating capacity of Innergex. Gains realized on strategic
transactions, which allow the Corporation to finance its growth
without having to increase leverage or dilute shareholders, are
also added to the Free Cash Flow and Payout Ratio.
|
4.
|
The Free Cash Flow for
the year ended December 31, 2022, excludes the $71.7 million
realized gain on settlement of the interest rate hedges entered
into to manage the Corporation's exposure to the risk of increasing
interest rates during the negotiations surrounding the refinancing
of the non-recourse debt assumed in the Aela Acquisition and at
Innergex's existing Chilean projects. Instead, the gain is
amortized in the Free Cash Flow using the effective interest rate
method over the period covered by the unwound hedging
instruments.
|
5.
|
The Free Cash Flow for
the year ended December 31, 2023, excludes the $43.5 million
realized gain on settlement of the foreign exchange forward
contracts concurrent with the closing of the French
Acquisition.
|
6.
|
The Free Cash Flow for
the year ended December 31, 2023, includes a gain realized
following the disposition of a 30% non-controlling participation in
Innergex's French operating and development portfolio. This amount
represents a gain over funds invested in operations and
development, including the historical prospective project expenses,
net of the current income tax payable following the transaction. As
such, this amount is not comparable to the gain recognized in
equity attributable to owners of the Corporation.
|
ADDITIONAL INFORMATION
Innergex's 2023 fourth quarter and year-end audited 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
Thursday, February 22, 2024 at
9 AM (EST). Investors and financial
analysts are invited to access the conference by dialing 1 888
390-0605 or 416 764-8609 or via bit.ly/48yJ76Q or the Corporation's
website at www.innergex.com. Journalists, as well as the public,
can 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.
For over 30 years, Innergex has believed in a world where
abundant renewable energy promotes healthier communities and
creates shared prosperity, which led to Innergex being recognized
as Canada's best corporate citizen
in 2023 by Corporate Knights. As an independent renewable power
producer which develops, acquires, owns and operates hydroelectric
facilities, wind farms, solar farms and energy storage facilities,
Innergex is convinced that generating power from renewable sources
will lead the way to a better world. Innergex conducts operations
in Canada, the United States, France and Chile and manages a large portfolio of
high-quality assets currently consisting of interests in 87
operating facilities with an aggregate net installed capacity of
3,600 MW (gross 4,234 MW) and an energy storage capacity of
409 MWh, including 41 hydroelectric facilities, 35 wind facilities,
9 solar facilities and 2 battery energy storage
facilities. Innergex also holds interests in 10 projects under
development with a net installed capacity of 728 MW (gross 826 MW)
and an energy storage capacity of 295 MWh, 4 of which are
under construction, as well as prospective projects at different
stages of development with an aggregate gross installed capacity
totaling 10,071 MW. Its approach to building shareholder value
is to generate sustainable cash flows and provide an attractive
risk-adjusted return on invested capital. To learn more, visit
innergex.com or connect with us on LinkedIn.
Cautionary Statement Regarding 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 growth targets, 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 (including expected growth opportunities under the
Strategic Alliance with Hydro-Québec), 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 terms 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, including information regarding the Corporation's targeted
production, the estimated targeted revenues and production tax
credits, targeted Revenues and Production Tax Credits
Proportionate, targeted Adjusted EBITDA and targeted Adjusted
EBITDA Proportionate, targeted Free Cash Flow, targeted Free Cash
Flow per Share and intention to pay dividend quarterly, the
estimated project size, costs and schedule, including obtainment of
permits, start of construction, work conducted and start of
commercial operation for Development Projects and Prospective
Projects, the Corporation's intent to submit projects under
Requests for Proposals, the qualification of U.S. projects for PTCs
and ITCs and other statements that are not historical facts. Such
information is intended 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 pay a dividend 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 the Corporation, including, without restriction, those
concerning hydrology, wind regimes and solar irradiation;
performance of operating facilities, acquisitions and commissioned
projects; availability of capital resources and timely performance
by third parties of contractual obligations; favourable economic
and financial market conditions; average merchant spot prices
consistent with external price curves and internal forecasts; no
material changes in the assumed U.S. dollar to Canadian dollar and
Euro to Canadian dollar exchange rate; no significant variability
in interest rates; the Corporation's success in developing and
constructing new facilities; no adverse political and regulatory
intervention; successful renewal of PPAs; sufficient human
resources to deliver service and execute the capital plan; no
significant event occurring outside the ordinary course of business
such as a natural disaster, pandemic or other calamity; continued
maintenance of information technology infrastructure and no
material breach of cybersecurity.
For more information on the 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 or on the principal assumptions used to derive this
information, please refer to the "Forward-Looking Information"
section of the Management's Discussion and Analysis for the year
ended December 31, 2023.
SOURCE Innergex Renewable Energy Inc.