Innergex Power Income Fund: Q4 and FY2009 results
- $58.6 million in gross operating revenues, $46.8 million EBITDA in 2009
- Declared cash distributions total $29.4 million, or $1.00 per unit
- 98% distribution payout ratio in 2009, versus 102% in 2008
- Fund proposes a strategic combination with Innergex Renewable
Energy Inc.
LONGUEUIL, QC, March 10 /CNW Telbec/ - Innergex Power Income Fund (TSX: IEF.UN; "the Fund") announces its financial results for the fourth quarter and 12-month period ended December 31, 2009.
OPERATING RESULTS
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Three-month Twelve-month
For periods ended ------------------------------------------------------
December 31 2009 2008 2009 2008
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Production (MW-hr) 189,011 220,299 823,989 862,394
Long-term average
(MW-hr) 201,911 834,768
Gross operating
revenues $13.2 M $14.7 M $58.6 M $59.4 M
EBITDA $10.2 M $11.0 M $46.8 M $47.1 M
Adjusted net
earnings $ 2.7 M $ 3.2 M $12.7 M $12.5 M
Adjusted net
earnings per
unit $0.09 $0.11 $0.43 $0.42
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OPERATING RESULTS AND EBITDA
Production, gross operating revenues and EBITDA for the fourth quarter and fiscal year 2009 were down from the same periods in 2008. This is mainly attributable to less favourable hydrological conditions in Quebec and British Columbia, as well as to a less favourable wind regime at the Baie-des-Sables wind farm. Reduced production is also explained by a 13-day shutdown at three power plants in Portneuf, in June 2009, and a 7-day shutdown in December 2009 at the L'Anse-à-Valleau wind farm, due to work by Hydro-Québec on its transmission lines.
As asserted by Michel Letellier, President and Chief Executive Officer of Innergex Renewable Energy Inc., the Fund's manager: "The Fund has posted highly stable results for fiscal 2009. Performance by its hydroelectric facilities and wind farms has enabled a substantial return on our unitholders' investments. The Fund has once again achieved its objectives, by reporting a 98% annual distribution payout ratio, which translates to a 5% increase in net distributable cash over 2008. Its results have demonstrated very high stability since 2003, enabling the distribution of more than $153 million to unitholders, which represents $6.17 per unit."
ADJUSTED NET EARNINGS
The manager believes that adjusted net earnings represent important additional information for the reader because they provide a profitability measure that excludes certain elements that have no impact on cash on hand. Adjusted net earnings exclude unrealized foreign exchange gain/loss and unrealized gain/loss on derivative financial instruments as well as any future income tax associated. Adjusted net earnings also exclude some non-recurring items such as the impact on future income taxes emanating from modifications to fiscal laws or from changes in tax rates.
The Fund calculates adjusted net earnings as shown below:
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Three-month Three-month Twelve-month Twelve-month
Adjusted Net period ended period ended period ended period ended
Earnings December 31, December 31, December 31, December 31,
2009 2008 2009 2008
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Net earnings
(loss) $7,036,890 $(13,758,646) $26,243,310 $(3,238,170)
Add/(deduct):
Unrealized
(gain) loss
on derivative
financial
instruments (4,819,995) 19,498,499 (15,798,039) 21,192,791
Unrealized
foreign
exchange
(gain) loss (21,725) 265,590 (319,529) 426,585
(Decrease)
increase in
future
income
tax rates (428,971) - (428,971) (2,680,653)
Future income
taxes relating
to unrealized
gains (losses)
on foreign
exchange and
on derivative
financial
instruments 976,735 (2,764,595) 2,988,587 (3,222,054)
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Adjusted net
earnings $2,742,934 $3,240,848 $12,685,358 $12,478,499
Adjusted net
earnings
per unit $0.09 $0.11 $0.43 $0.42
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Net earnings are subject to significant variations primarily caused by unrealized gains or losses on derivative financial instruments. Adjusted net earnings for the three-month period that ended December 31, 2009 decreased, when compared to the same period in 2008, due primarily to a decrease in electricity production.
The Fund posted slightly higher adjusted net earnings for 2009 versus 2008. This increase was primarily due to a lower provision for income taxes payable in 2009, resulting from a corporate reorganization of some of the Fund's subsidiaries.
Per-unit results for the fourth quarter and the 2009 and 2008 twelve-month periods are based on a weighted average of 29,404,276 units in circulation.
NET DISTRIBUTABLE CASH AND CASH DISTRIBUTIONS
The Fund generated $30.1 million in net distributable cash over the course of 2009, compared to $28.7 million in 2008. Declared cash distributions totalled $29.4 million, or $1.00 per unit - similar to 2008. The Fund's distribution payout ratios in 2009 and 2008 came in at 98% and 102% respectively.
For the fourth quarter 2009, the Fund generated $6.6 million in net distributable cash and declared cash distributions totalled $7.4 million or $0.25 per unit. In the same quarter of 2008, the Fund had generated $6.9 million in net distributable cash and declared cash distributions totaled $7.3 million or $0.25 per unit. In 2009, the fourth-quarter distribution payout ratio was 112%, versus 107% for the same quarter in 2008.
SUBSEQUENT EVENTS
Strategic Combination
On February 1, 2010, Innergex Renewable Energy Inc. (TSX: INE) ("INE") and the Fund jointly announced that they had entered into a definitive agreement to undertake a strategic combination of the two entities, INE and the Fund ("Combined Innergex"). Finalization of this transaction ("the Combination") will result in the Fund's acquisition of INE through a reverse takeover, thus also effecting conversion of the Fund into a corporation.
Under the terms of this Combination, which was proposed by the Fund, the latter's unitholders will exchange their units for shares in INE, on the basis of an exchange ratio of 1.46 shares per Fund unit. Upon completion of this Combination, current Fund unitholders (except INE, which holds a 16.1% interest in the Fund) will own 61% of Combined Innergex. Current INE shareholders will then hold the remaining 39% interest.
Finalization of the Combination is subject to the requisite Fund unitholder and INE shareholder approvals, as well as to other customary conditions. Fund unitholders and INE shareholders have received the joint information circular, filed on February 18, 2010, regarding Special Meetings of March 24, 2010. The Combination is expected to close on March 29, 2010.
"We are pleased to recommend this transaction, which will prove beneficial to our unitholders," declared Jean La Couture, Chairman of the Board of Trustees and Chairman-elect of the Board of Combined Innergex. "This transaction will greatly benefit investors in both entities. The resulting pure play corporation will be one of Canada's largest renewable energy producers."
Upon completion of the Combination, Combined Innergex is expected to adopt a dividend policy of $0.58 per share per annum, payable on a quarterly basis (equivalent to $0.85 per Fund unit, based on an exchange ratio of 1.46 shares per Fund unit).
Debenture Offering
As the INE acquiring company, the Fund is party to the subordinated debentures offering announced by INE on February 12, 2010, and completed on March 8, 2010. INE has entered into an agreement whereby a syndicate of underwriters agreed to purchase, on a bought deal basis, extendible convertible unsecured subordinated debentures in the aggregate principal amount of $70 million ($80.5 million if the over-allotment option is exercised).
The initial debenture maturity date - April 30, 2010 - will be extended automatically to April 30, 2017 upon closing of the Combination. The debentures bear interest at an annual rate of 5.75%, payable semi-annually, and are convertible at the holder's option to shares in INE at a conversion rate of $10.65 per share in INE.
Audited consolidated financial statements and the management discussion and analysis can be downloaded from the Innergex website at www.innergex.com or from the SEDAR site at www.sedar.com.
NON-GAAP MEASURES
Some indicators referred to in this press release are not recognized measures under Canadian Generally Accepted Accounting Principles ("GAAP"). Consequently, they may not be comparable to measures presented by other issuers. The Fund believes that these indicators are important since they provide the reader with additional information about production, available cash and the Fund's ability to meet its cash distribution objectives to unitholders. The Fund also believes that they facilitate the comparison of results over different periods.
Innergex Power Income Fund is an open-ended income trust that indirectly owns interests in 10 hydroelectric power-generating facilities and two wind farms. The Fund's installed capacity is 340 MW (net interest of 210 MW). Approximately 27% of total annual production comes from wind energy. The Fund's units are traded on the Toronto Stock Exchange under the symbol IEF.UN. The hydroelectric facilities and wind farms are managed by INE under long-term agreements with the Fund.
FORWARD- LOOKING STATEMENTS
In order to inform the Fund's unitholders as well as potential investors on future prospects of the Fund, this press release may contain forward-looking statements within the meaning of securities legislation. Forward-looking Statements can generally be identified by the use of words and phrases, such as "may", "will", "estimate", "anticipate", "plans", "expects" or "does not expect", "is expected", "budget", "scheduled", "forecasts", "intends" or "believes", or variations of such words and phrases that state that certain events will occur. Forward-looking Statements represent, as of the date hereof, the estimates, forecasts, projections, expectations or opinions of the Manager relating to future events or results. Forward-looking Statements involve known and unknown risks, uncertainties and other important factors which may cause the actual results or performance to be materially different from those expressed, or implied, including: (i) operations-related risk, (ii) hydrology and wind regime risk, (iii) reliance on major customers, (iv) tax treatment of distributions, (v) level of production from Fund's facilities, (vi) the cost of production of the Fund's facilities, (vii) interest rates as they bear on the Fund's indebtedness. Although the Fund believes that the expectations instigated by the Forward-looking Statements are based on reasonable and valid hypotheses, there is a risk that the Forward-looking Statements may be incorrect. The readers are cautioned not to rely unduly on these Forward-looking Statements. The Forward-looking Statements are expressly qualified by this cautionary statement. The Fund does not undertake any obligation to update or revise any Forward-looking Statements, whether as a result of events or circumstances occurring after the date hereof, unless required by legislation.
%SEDAR: 00018706EF
For further information: or interviews: Ms. Edith Ducharme, LL.L., Director - Financial Communications and Investor Relations, Innergex Renewable Energy Inc., Manager of the Fund, (450) 928-2550, ext. 222, [email protected]; Mr. Jean Trudel, MBA, Vice President - Finance and Investor Relations, Innergex Renewable Energy Inc., Manager of the Fund, (450) 928-2550, ext. 252, [email protected]; www.innergex.com
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