Valener: 50% increase in normalized operating cash flows
Gaz Métro: Record net income and 3.6% increase in distributions to Partners announced
| FISCAL 2015 HIGHLIGHTS |
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| Valener |
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| Gaz Métro |
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MONTREAL, Nov. 27, 2015 /CNW Telbec/ - Valener Inc. (Valener) (TSX: VNR), the public investment vehicle in Gaz Métro Limited Partnership (Gaz Métro), today reported normalized operating cash flows of $58.6 million for fiscal 2015, or $1.53 per common share, up 50% from fiscal 2014, easily covering the dividend payment of $1.022 per common share.
"Fiscal 2015 was an excellent year for Valener. With the help of our partners, Gaz Métro and Boralex, we commissioned Wind Farm 4, adding 28 turbines and 68 MW of electric power generation capacity to the Seigneurie de Beaupré Wind Farms. What's more, Wind Farm 4 enjoyed favourable wind conditions throughout the year. Gaz Métro, our main investment, continues to grow and move forward with innovative initiatives," said Pierre Monahan, Chairman of Valener's board of directors. "It is this continued growth strategy that has allowed Gaz Métro to raise its distributions, benefitting Valener and allowing it to reaffirm its dividend increase with confidence."
For fiscal 2015, Valener recorded adjusted net income attributable to common shareholders of $45.3 million ($1.19 per common share) compared to $36.7 million ($0.97 per common share) in fiscal 2014. This $8.6 million increase ($0.22 per common share) stems from the excellent performance of the wind farms, which raised Valener's share in the net income of these operations by $4.5 million, as well as the increase in Gaz Métro's recurring net income.
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| 1 |
Non-Canadian-GAAP financial measures. |
| 2 |
$0.25 per common share paid on October 15, 2014 and on January 15, 2015, and $0.26 per common share paid on April 15, 2015 and on July 15, 2015. |
| Note: A reconciliation of non-Canadian-GAAP financial measures is presented below. |
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| Summary of Valener's results |
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| Fiscal years ended September 30 |
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| (in millions of dollars, unless otherwise indicated) |
2015 |
2014 |
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| Net income |
47.1 |
41.0 |
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| Net income attributable to common shareholders |
42.8 |
36.7 |
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| Adjusted net income attributable to common shareholders (1) |
45.3 |
36.7 |
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| Per common share (in $) |
1.19 |
0.97 |
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| Normalized operating cash flows (1) |
58.6 |
38.8 |
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| Per common share (in $) |
1.53 |
1.02 |
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| (1) |
These measures are non-Canadian-GAAP financial measures. A reconciliation of non-Canadian-GAAP financial measures is presented below. |
Financial initiatives
Valener subscribed to 4,482,188 Gaz Métro units for approximately $74 million as part of Gaz Métro's $255 million private placements of equity securities in fiscal 2015. Valener's economic interest in Gaz Métro remains unchanged.
For fiscal 2016, Valener is increasing its annualized dividend from $1.04 to $1.08 per common share and, as previously announced in February, expects to increase its annualized dividend by approximately 4% per year for the two subsequent years, that is, until 2018.
Seigneurie de Beaupré wind farms – Valener and Gaz Métro
| Phase |
Wind |
Installed |
In service date |
Total investment |
Valener |
Gaz Métro |
| I |
2 and 3 |
272 MW |
Dec. 2013 |
~$750M |
24.5% |
25.5% |
| II |
4 |
68 MW |
Dec. 2014 |
~$190M |
The commercial operation of these wind farms is moving ahead as planned, and as a result of favourable wind conditions, Seigneurie de Beaupré Wind Farms 2 and 3 General Partnership (Wind Farms 2 and 3) generated operating cash flows of $60.0 million in fiscal 2015. Wind Farms 2 and 3 paid a portion of these cash flows, and those accumulated last year, to its partners; it paid a first distribution of $19.1 million in February 2015 and another of $21.5 million in August 2015. Of these distributions, Valener and Gaz Métro received $9.9 million and $10.1 million, respectively, during fiscal 2015. Seigneurie de Beaupré Wind Farm 4 General Partnership (Wind Farm 4), which was commissioned in December 2014, generated $5.4 million in operating cash flows in fiscal 2015 and paid an initial distribution of $17.6 million in September on account of certain conditions surrounding its financing. Of that amount, Valener and Gaz Métro received $4.3 million and $4.5 million, respectively.
Wind Farms 2 and 3 generated 903,431 megawatthours (MWh) in 2015, a 40.0% increase from the 645,143 MWh produced last year, as a result of favourable wind conditions throughout the year and Wind Farms 2 and 3 running for a full 12 months, compared to just ten months in the previous year. Wind Farm 4 generated 180,214 MWh in fiscal 2015.
Finding opportunities to further develop the wind power potential of Seigneurie de Beaupré, for which Valener and Gaz Métro have a development agreement with Boralex, remains a priority as it represents an attractive avenue for growth.
Gaz Métro's results
Gaz Métro generated net income attributable to Partners, excluding non-recurring items, of $192.4 million, up $17.7 million, or 10.1%, as a result of the favourable effect of the stronger U.S. dollar compared to the Canadian dollar, solid results in our Quebec gas distribution operations and wind farms, as well as notable growth in liquefied natural gas shipments.
"Our transformative and innovative projects, focused on meeting our customers' needs, paid off this year: 2015 was an excellent year of consolidation and development for Gaz Métro," said Sophie Brochu, President and Chief Executive Officer at Gaz Métro. "We generated record net income for our Partners through our growth and diversification initiatives. The successful commissioning of Wind Farm 4 is a telling example: it has already paid out its first distribution in September. On the LNG side, sales continue to grow and our plant expansion project is moving forward according to plan. Our continued development rests on our ability to supply more natural gas and other forms of renewable energy in place of more emissive ones. "
| Gaz Métro's segment results – Net income attributable to Partners, excluding non-recurring items |
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| Fiscal years ended September 30 |
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| (in millions of dollars) |
2015 |
2014 |
Change |
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| Energy Distribution |
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| Gaz Métro-QDA |
115.5 |
111.0 |
4.5 |
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| GMP and VGS (1) |
57.3 |
58.2 |
(0.9) |
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| Allowance related to the costs of the Addison project |
8.0 |
- |
8.0 |
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| 180.8 |
169.2 |
11.6 |
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| Natural Gas Transportation (1) |
16.6 |
16.1 |
0.5 |
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| Energy Production (1) |
1.8 |
- |
1.8 |
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| Energy Services, Storage and Other (1) |
2.4 |
(2.9) |
5.3 |
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| Corporate Affairs (1) |
(9.2) |
(7.7) |
(1.5) |
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| Net income attributable to Partners, excluding non-recurring items (2) |
192.4 |
174.7 |
17.7 |
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| Non-recurring items |
(8.0) |
- |
(8.0) |
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| Net income attributable to Partners |
184.4 |
174.7 |
9.7 |
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| (1) |
Net of financing costs of investments. These costs consist of interest on long-term debt incurred by Gaz Métro to finance investments in subsidiaries, joint ventures and entities subject to significant influence in each of these segments. |
| (2) |
This measure is a non-Canadian-GAAP financial measure. A reconciliation of non-Canadian-GAAP financial measures is presented below. |
SEGMENT INFORMATION
Energy Distribution
| Natural gas distribution in Quebec (Gaz Métro-QDA) |
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| Rate base |
Authorized return |
Distribution network |
Customers |
| $2.0B |
8.90% |
~10,000 km |
~195,000 |
Gaz Métro-QDA recorded net income attributable to Partners of $115.5 million, a $4.5 million, or 4.1%, year-over-year increase resulting mainly from various parameters of the 2015 rate case, including:
- an increase in the average rate base of 3.2% to $2.0 billion; and
- higher capitalized interest on non-rate-base investments;
mitigated by a decrease in the share of the distribution service overearnings.
| Energy Distribution in Vermont |
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| Rate base |
Authorized return |
Distribution network |
Customers |
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| GMP |
US$1.2B |
9.60% |
~21,100 km1 |
~265,000 |
| VGS |
US$193M |
10.20% |
~1,300 km |
~50,000 |
| 1) |
GMP's system consists of over 1,500 km of overhead transmission lines, 18,000 km of overhead distribution lines and 1,600 km of underground distribution lines, mostly located in Vermont but also extending into New Hampshire and New York. |
The Energy Distribution Segment in Vermont, through its subsidiaries Green Mountain Power Corporation (GMP) and Vermont Gas Systems Inc. (VGS), recorded net income attributable to Partners of $57.3 million in fiscal 2015, down $0.9 million, or 1.5%, from fiscal 2014. This decrease stems mainly from an after-tax allowance of $8.0 million (US$10.3 million before tax) recorded by VGS in the fourth quarter relating to costs associated with Phase I of the Addison project, partly mitigated by:
- the favourable effect of the appreciation of the U.S. dollar against the Canadian dollar; and
- synergies generated by the operational efficiencies achieved from the integration of GMP and Central Vermont Public Service Corporation (CVPS).
The Addison project consists of extending the natural gas distribution service by 66 km to the communities of Vergennes and Middlebury in Vermont. Although much of the construction work is scheduled for fiscal 2016, VGS plans to complete the first 17 km of Phase I by the end of December 2015.
In October 2015, VGS and the Vermont Department of Public Service signed a memorandum of understanding under which VGS agreed to set a US$134.0 million cap on the amount of the total Phase I costs that could be recovered through rates, barring circumstances beyond its control. Following this memorandum, VGS recorded a before tax US$10.3 million allowance as at September 30, 2015 to recognize the uncertainty surrounding project costs that could eventually be disallowed. This memorandum of understanding is subject to the reconfirmation of the Certificate of Public Good by the Vermont Public Service Board.
Natural Gas Transportation
The Natural Gas Transportation segment generated net income attributable to Partners of $16.6 million in 2015 compared to $16.1 million in 2014, mainly because of higher volumes shipped by the Portland Natural Gas Transmission System (PNGTS), as a result of new short-term contracts and stronger demand caused by colder temperatures as well as the favourable effect of the depreciation of the Canadian dollar. This increase was partly offset by the Federal Energy Regulatory Commission's February decision on PNGTS's rates.
Energy Production
The Energy Production segment recorded net income attributable to Partners of $1.8 million in 2015, compared to no income in the year-ago period, due to:
- favourable winds;
- the operation of Wind Farms 2 and 3 throughout all of fiscal 2015 compared to only 10 months in 2014; and
- Wind Farm 4's commissioning in December 2014.
Energy Services, Storage and Other
The Energy Services, Storage and Other segment generated net income of $2.4 million in fiscal 2015, a $5.3 million improvement over last year driven by a notable increase in Gaz Métro LNG's sales, which delivered close to 7 million m3 more LNG to customers than in fiscal 2014, improved profitability at Gaz Métro Plus Limited Partnership and lower supply costs at Climatisation et Chauffage Urbains de Montréal, L.P.
Financial initiatives
Gaz Métro issued 15,454,545 new units through private placements during the year for total proceeds of $255 million. The Company also increased its credit facility from $600 million to $800 million and extended its maturity date out to 2020. "Our strong financial situation, solid balance sheet and enviable credit rating put us in an ideal situation to execute on our future growth strategies and have enabled us to increase our distributions to Partners. As of January 5, 2016, Gaz Métro's distributions will increase from $0.28 to $0.29 per unit, an increase of almost 4%," added Pierre Despars, Executive Vice President, Corporate Affairs and Chief Financial Officer of Gaz Métro.
Outlook – Gaz Métro
"Organic growth is and remains our primary channel for opportunities and we are pursuing our growth strategy in the LNG market. We're excited about the many possibilities this initiative may bring," added Sophie Brochu. "We're also looking to repeat the success stories of our acquisitions in Vermont, paying particular attention to the northeastern United States. However, with the high premiums in the regulated sector and a low Canadian dollar pushing up transaction costs, we must remain disciplined and patient in order to select the right opportunity, at the right price."
Reconciliation of non-Canadian-GAAP financial measures
| Valener Inc. |
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| Reconciliation of normalized operating cash flows |
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| Fiscal years ended September 30 (in millions of dollars) |
2015 |
2014 |
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| Cash flows related to operating activities |
62.9 |
43.1 |
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| Dividends paid to preferred shareholders |
(4.3) |
(4.3) |
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| Normalized operating cash flows |
58.6 |
38.8 |
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| Valener Inc. |
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| Reconciliation of adjusted net income attributable to common shareholders |
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| Fiscal years ended September 30 (in millions of dollars) |
2015 |
2014 |
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| Net income |
47.1 |
41.0 |
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| Non-recurring items of Valener |
4.0 |
- |
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| Share in the non-recurring items of Gaz Métro |
2.3 |
- |
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| Income taxes on the non-recurring items of Valener and on the share in |
(1.1) |
- |
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| Future income taxes related to the outside-basis temporary difference on the interest in Gaz Métro |
(2.7) |
- |
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| Net income, excluding the non-recurring items of Valener, the share |
49.6 |
41.0 |
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| Cumulative dividends on Series A preferred shares |
(4.3) |
(4.3) |
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| Adjusted net income attributable to common shareholders |
45.3 |
36.7 |
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| Gaz Métro Limited Partnership |
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| Reconciliation of net income attributable to Partners, excluding non-recurring items |
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| Fiscal years ended September 30 (in millions of dollars) |
2015 |
2014 |
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| Net income attributable to Partners |
184.4 |
174.7 |
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| Non-recurring items |
8.0 |
- |
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| Net income attributable to Partners, excluding non-recurring items |
192.4 |
174.7 |
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Conference call
Valener will hold a conference call today at 3:00 pm (Eastern Time) to discuss its results and those of Gaz Métro for the fiscal year ended September 30, 2015. The public is invited to join the call at 647-427-7450 or toll-free at 1-888-231-8191. A simultaneous webcast will also be available using the link provided under "Events and Presentations" in the "Investors" section of www.valener.com. A replay of the webcast will be archived on the Company's website for 90 days following the call; a phone replay will be available for 30 days by dialing 416-849-0833 or toll-free 1-855-859-2056 (access code: 61270296).
Overview of Valener
Valener Inc. is a widely held public company that serves as the investment vehicle in Gaz Métro. Through its investment in Gaz Métro, Valener offers its shareholders a solid investment in a diversified and largely regulated energy portfolio in Quebec and Vermont. As a strategic partner, Valener, on the one hand, contributes to Gaz Métro's growth, and on the other, invests in wind power production in Quebec alongside Gaz Métro. Valener favours energy sources and uses that are innovative, clean, competitive and profitable. Valener's common and preferred shares are listed on the Toronto Stock Exchange under the "VNR" symbol for common shares and the "VNR.PR.A" symbol for Series A preferred shares. www.valener.com
Overview of Gaz Métro
With more than $6 billion in assets, Gaz Métro is a leading energy provider. It is the largest natural gas distribution company in Quebec, where its network of over 10,000 km of underground pipelines serves over 300 municipalities and more than 195,000 customers. Gaz Métro is also present in Vermont, producing electricity and distributing electricity and natural gas to meet the needs of more than 310,000 customers. Gaz Métro is actively involved in the development and operation of innovative, promising energy projects, including natural gas as fuel and liquefied natural gas as a replacement for higher emission-producing energies, the production of wind power, and the development of biomethane. Gaz Métro is a major energy sector player that takes the lead in responding to the needs of its customers, regions and municipalities, local organizations and communities while also satisfying the expectations of its Partners (Gaz Métro inc. and Valener) and employees. www.gazmetro.com
Cautionary note regarding forward-looking statements
This press release may contain forward-looking information within the meaning of applicable securities laws. Such forward-looking information reflects the intentions, plans, expectations and opinions of the management of Gaz Métro inc. (GMi), in its capacity as General Partner of Gaz Métro, acting as manager of Valener (the management of the manager), and is based on information currently available to the management of the manager and assumptions about future events. Forward-looking statements can often be identified by words such as "plans," "expects," "estimates," "seeks," "targets," "forecasts," "intends," "anticipates" or "believes" or similar expressions, including the negative and conjugated forms of these words. Forward-looking statements involve known and unknown risks and uncertainties and other factors beyond the control of the management of the manager. A number of factors could cause the actual results of Valener or of Gaz Métro to differ significantly from historical results or current expectations, as described in the forward-looking statements, including but not limited to the general nature of the aforementioned: terms of decisions issued by regulatory agencies, uncertainty that approvals will be obtained by Gaz Métro from regulatory agencies and interested parties to carry out all of its activities and the socio-economic risks associated with such activities, the competitiveness of natural gas relative to other energy sources in the context of falling global oil prices, the reliability or costs of natural gas supply and electricity supply, the integrity of the natural gas and electricity distribution systems, the evolution and profitability of Wind Farms 2 and 3 and Wind Farm 4 and other development projects, Valener's ability to generate sufficient cash to support its anticipated target annual dividend growth rate on its common shares, the ability to complete attractive acquisitions and the related financing and integration aspects, the ability to complete new development projects, the ability to secure future financing, general economic conditions, exchange rate and interest rate fluctuations, weather conditions and other factors described in section E) Risk Factors Relating to Valener and in section S) Risk Factors Relating To Gaz Métro of Valener's MD&A for the year ended September 30, 2015 and in subsequent quarterly MD&As that could report on changes in these risk factors. Although the forward-looking statements contained herein are based on what the management of the manager believes to be reasonable assumptions, in particular assumptions to the effect that no unforeseen changes in the legislative and regulatory framework of energy markets in Quebec and in the New England states will occur; that the applications filed with various regulatory agencies will be approved as submitted; that natural gas prices will remain competitive; that the supply of natural gas and electricity will be maintained or will be available at competitive costs; that no significant event occurring outside the ordinary course of business, such as a natural disaster or other calamity, or threat to cybersecurity (or cyberattack), will occur; that Gaz Métro will be able to continue distributing substantially all of its net income (excluding non-recurring items); that Wind Farms 2 and 3 and Wind Farm 4 will be able to make distribution payments to their partners; that Valener will be able to generate sufficient cash to support its anticipated target annual dividend growth rate on its common shares; that GMP will be able to continue to quickly and effectively integrate CVPS's operations; that liquidity needs for Gaz Métro's development projects will be obtained through a combination of operating cash flows, borrowings on credit facilities, capital injections from Partners, and issuances of debt securities; and that the subsidiaries will obtain the required authorizations and funds needed to finance their development projects; in addition to the other assumptions described in Valener's Management's Discussion and Analysis for the year ended September 30, 2015, the management of the manager cannot assure investors that actual results will be consistent with these forward-looking statements. These forward-looking statements are made as of this date, and the management of the manager assumes no obligation to update or revise them to reflect new events or circumstances, except as required pursuant to applicable securities laws. These statements do not reflect the potential impact of any unusual item or any business combination or other transaction that may be announced or that may occur after the date hereof. Readers are cautioned to not place undue reliance on these forward-looking statements.
SOURCE Valener Inc.
Investors and Analysts, Mariem Elsayed, Investor Relations, 514-598-3253, www.valener.com; Media, Marie-Christine Demers, Public Affairs and Communications, 514-598-3449, www.twitter.com/gazmetro, www.gazmetro.com/salledepresse; Photos, videos (b-roll) and logos are available in Gaz Métro's Multimedia library.
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