Power Income Fund. Renewable energy. Sustainable presence.

Transcription

1 Power Income Fund Renewable energy. Sustainable presence. Fourth Quarter

2 CONSOLIDATED BALANCE SHEETS (Audited) ASSETS Current assets Cash and cash equivalents Receivables Funds held in trust (Note 4) Current portion of reserve accounts Current portion of future income taxes Other current assets $ 4,320,526 7,645,249 1,547, ,925 67,700 2,463,665 $ 9,077,432 3,580,118 3,427, , ,306 $ 16,946,535 $ 17,226,608 Reserve accounts Capital assets Intangible assets Future income taxes $ 13,093, ,749,675 97,535,707 3,489,649 $ 12,324, ,773,133 71,053,029 3,849,799 $ 358,814,872 $ 268,227,506 LIABILITIES AND UNITHOLDERS EQUITY Current liabilities Operating loan Accounts payable and accrued liabilities Distribution payable to Unitholders Balance of acquisition price Current portion of long term debt $ 7,554,527 1,943,540 2,642, ,118 $ 465,152 10,954,878 1,608, ,566 $ 12,679,222 $ 13,524,987 Longterm debt (Note 5) Future income taxes Noncontrolling interest Unitholders equity $ 107,727,516 2,771,603 10,989, ,647,096 $ 58,692,076 2,545,437 10,505, ,959,325 See accompanying Notes to Unaudited Consolidated Financial Statements. $ 358,814,872 $ 268,227,506

3 CONSOLIDATED STATEMENTS OF INCOME F OR THE T HREEMONTH AND Y EARS E NDED D ECEMBER 31 ThreeMonth ThreeMonth (Audited) Gross revenues $ 8,771,375 $ 6,538,421 $ 30,015,805 $ 25,209,052 Operating expenses 1,326, ,775 4,949,717 3,390,254 Operating income $ 7,445,234 $ 5,956,646 $ 25,066,088 $ 21,818,798 General and administrative expenses 488, ,990 1,969,858 1,604,891 Earnings before interest, provision for income taxes, depreciation and amortization, other revenues and expenses, and noncontrolling interest ( EBITDA ) $ 6,957,068 $ 5,548,656 $ 23,096,230 $ 20,213,907 Interest on longterm debt 960, ,745 3,251,131 2,633,925 Depreciation and amortization 2,465,362 2,255,252 9,463,070 8,704,169 Other (revenues) and expenses (Note 7) ( ) (475,457 ) (1,000,703 ) (731,803 ) Income before provision for income taxes and noncontrolling interest $ 4,075,106 $ 3,026,116 $ 11,382,732 $ 9,607,616 Provision for income taxes Current (Recoverable) Future (35,126 ) 65,830 84, , ,636 (10,490 ) 247,198 $ 30,704 $ 84,452 $ 899,603 $ 236,708 Income before noncontrolling interest $ 4,044,402 $ 2,941,664 $ 10,483,129 $ 9,370,908 Income allocated to noncontrolling interest 432, , , ,756 Net income $ 3,612,055 $ 2,773,464 $ 9,999,375 $ 8,955,152 Weighted average number of trust units outstanding 24,460,682 20,404,337 21,608,157 19,373,880 Net income per trust unit $ 0.15 $ 0.14 $ 0.46 $ 0.46 See accompanying Notes to Unaudited Consolidated Financial Statements. Fourth Quarter 3

4 CONSOLIDATED STATEMENTS OF CHANGES IN UNITHOLDERS EQUITY F OR THE Y EARS E NDED D ECEMBER 31 (Audited) Unitholders capital account, at the beginning of period Issued trust units April 8, Private placement October 18, Private placement October 5, Public placement Issuance costs Number of Units Amount Number of Units Amount 20,646,867 4,033,000 $ 195,913,770 55,857,050 (3,700,451 ) 18,357,267 1,050,000 1,239,600 $ 169,427,161 12,337,500 14,999,160 (850,051 ) Unitholders capital account, at the end of period 24,679,867 $ 248,070,369 20,646,867 $ 195,913,770 Cumulative foreign currency translation adjustment, beginning of period Foreign currency translation adjustment $ (4,118 ) $ Cumulative foreign currency translation adjustment, end of period $ (4,118 ) $ Deficit, beginning of period $ (12,954,445 ) $ (3,790,405 ) Net income 9,999,375 8,955,152 Distributions declared to unitholders (20,464,085 ) (18,119,192 ) Deficit, end of period $ (23,419,155 ) $ (12,954,445 ) Unitholders equity, end of period 24,679,867 $ 224,647,096 20,646,867 $ 182,959,325 See accompanying Notes to Unaudited Consolidated Financial Statements. Fourth Quarter 4

5 CONSOLIDATED STATEMENTS OF CASH FLOWS F OR THE T HREEMONTH AND Y EARS E NDED D ECEMBER 31 ThreeMonth ThreeMonth (Audited) CASH FLOWS FROM OPERATING ACTIVITIES: Net income Adjustments for: Depreciation of capital assets Amortization of intangible assets Provision for future income taxes Writeoff of capital assets Unrealized (gain) on derivative instruments Income allocated to noncontrolling interest Unrealized exchange loss (gain) Changes in noncash working capital $ 3,612,055 1,181,274 1,284,088 65, ,338 (262,316 ) 432,347 1,188 (10,329,009 ) $ 2,773,464 1,064,887 1,190,365 84, ,200 (147,000 ) (1,238,226 ) $ 9,999,375 4,536,921 4,926, , ,338 (262,316 ) 483,754 (70,420 ) (13,579,436 ) $ 8,955,152 4,128,837 4,575, , ,756 (147,000 ) (1,532,227 ) $ (3,902,205 ) $ 3,896,142 $ 6,938,001 $ 16,643,048 CASH FLOWS FROM FINANCING ACTIVITIES: Distributions paid to Unitholders Net proceeds from issuance of trust units Proceeds from issuance of longterm debt Borrowing (Reimbursement) of operating loan Reimbursement of longterm debt $ (5,513,019 ) 52,156,599 3,256,400 (3,377,995 ) $ (4,728,608 ) 14,551,486 13,456, ,514 (13,774,893 ) $(20,128,936 ) 52,156,599 3,256,400 (465,152 ) (3,746,566 ) $ (17,924,311 ) 26,486,609 13,456, ,152 (14,003,539 ) $ 46,521,985 $ 9,741,094 $31,072,345 $ 8,480,506 CASH FLOWS FROM INVESTING ACTIVITIES: Acquisition of capital assets Business acquisition, net of cash acquired (Note 3) Net cash released from (invested in) levelization reserve Release from (Investment in) other reserves accounts $ (431,653 ) (44,984,954 ) 257,227 $ (90,623 ) (5,551,244 ) (8,013 ) $ (867,603 ) (44,984,954 ) 920,446 $ (102,123 ) (13,208,910 ) 1,749,313 2,442,224 (4,649,859 ) 2,164,859 (8,014,859 ) $ (42,717,156) $ (10,299,739 ) $ (42,767,252) $ (19,576,579 ) Net (decrease) increase in cash and cash equivalents $ (97,376 ) $ 3,337,497 $ (4,756,906 ) $ 5,546,975 Cash and cash equivalents, beginning of period 4,417,902 5,739,935 9,077,432 3,530,457 Cash and cash equivalents, end of period $ 4,320,526 $ 9,077,432 $ 4,320,526 $ 9,077,432 Supplemental cash flow disclosure : Interest paid Transfer of capital assets to inventory Unpaid capital assets additions $ 1,036,796 $ 200,000 $ 115,873 $ 738,761 $ $ 164,680 $ 3,450,848 $ 200,000 $ 115,873 $ 2,689,000 $ $ 164,680 See accompanying Notes to Unaudited Consolidated Financial Statements. Fourth Quarter 5

6 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS F OR THE T HREEMONTH P ERIOD AND Y EARS E NDED D ECEMBER 31 (the ''Fund'') is an unincorporated openended trust established on October 25, 2002, under the laws of the Province of Québec. An unlimited number of Trust Units may be issued pursuant to the trust indenture. The Fund began its operations on July 4, 2003 and has been established to indirectly acquire and own interests in renewable power generating facilities (the ''Facilities'') and to indirectly acquire loans relating to some of the Facilities. As at, the Fund indirectly owned interests in: i. Innergex, Limited Partnership which owns the three Portneuf facilities, the Chaudière facility and the SaintPaulin facility; ii. TrentSevern Power, Limited Partnership which owns the Batawa facility; iii. Innergex Montmagny, Limited Partnership which owns the Montmagny facility; iv. HydroWindsor, Limited Partnership which owns the Windsor facility; v. Horseshoe Bend Hydroelectric Company which owns the Horseshoe Bend facility; vi. Rutherford Creek Power, Limited Partnership which owns the Rutherford Creek facility. Innergex Management Inc. (the Manager ) administers the Fund and manages Innergex Power Trust, a whollyowned subsidiary of the Fund, which indirectly owns the assets and investments of the Fund. The Manager also provides management services to the operators of the Fund Facilities. 1. Basis of Presentation: The interim consolidated financial statements included in this report reflect normal and recurring adjustments which are, in the opinion of the Fund s Manager, considered necessary for a fair presentation. These financial statements have been prepared in conformity with Canadian Generally Accepted Accounting Principles. The same accounting policies and methods of their application as described in the Fund s latest annual report have been used. However, these consolidated financial statements do not include all disclosures required under Canadian Generally Accepted Accounting Principles and accordingly should be read in conjunction with the consolidated financial statements and the notes thereto included in the Fund s latest annual report. The Fund s revenues are variable with each season and as a result, earnings of any one interim period should not be considered as indicative of results for an entire year. These interim financial statements have neither been audited nor reviewed by our external auditors. Some of the comparative figures have been reclassified to conform to the current year s presentation. 2. Accounting Policy: Accounts and operations concluded in foreign currency Transactions denominated in a foreign currency are accounted for at the exchange rate prevailing at the transaction date. Monetary assets or liabilities denominated in a foreign currency are converted at the exchange rate prevailing at the balance sheet date. Unrealized exchange gains or losses on monetary assets or liabilities are included in net income for the period. The Fund designates a portion of its US $ denominated debt as a hedge of its investment in its selfsustaining foreign subsidiary. The gain and loss on conversion on the portion of the debt designated as a hedge are deferred and included in the foreign currency translation adjustment on the balance sheet as part of the Unitholder s equity. The Fund maintains the appropriate documentation with respect to this hedge. On a quarterly basis, the Fund reviews the hedging relationship to ensure that it effectively offsets the gain or loss on conversion arising from its investment in the selfsustaining foreign subsidiary. Fourth Quarter 6

7 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) F OR THE T HREEMONTH P ERIOD AND Y EARS E NDED D ECEMBER Business acquisition: Acquisition of Rutherford Creek Power LP and Rutherford Creek Power Ltd. Pursuant to an underwriting agreement, the Fund issued 4,033,000 subscription receipts on October 5,, at a price of $13.85 per receipt for net proceeds totalling $52,156,599. On December 15,, the subscription receipts were exchanged into 4,033,000 Trust Units of the Fund. An amount of $51,561,311 was used for the following purposes: Acquisition of Rutherford Creek Power LP and Rutherford Creek Power Ltd. $ 50,361,311 Funding of the hydrology reserve account 1,200,000 $ 51,561,311 The acquisition of Rutherford Creek Power LP and Rutherford Creek Power Ltd. have been accounted for using the purchase method at their respective acquisition costs on December 15,. The earnings of Rutherford Creek Power LP and Rutherford Creek Power Ltd. have been consolidated with the Fund s result since the date of acquisition. The total purchase price was preliminary allocated as follows: Cash and cash equivalents $ 2,734,320 Net working capital (3,384,321 ) Reserve accounts 1,350,000 Capital assets Intangible assets 68,179,297 31,482,015 Longterm debt (50,000,000 ) $ 50,361,311 A balance of $2,642,037 remains payable to Innergex II Income Fund, one of the vendors, which owned 50% of Rutherford Creek Power LP and Rutherford Creek Power Ltd. 4. Funds held in trust: Rutherford Creek Power LP has deposited $1,547,470 in trust to pay holdbacks related to the construction of the Rutherford Creek Facility. 5. LongTerm Debt During the year, the longterm debt credit facilities 1 and 2 were renegotiated to extend their maturity by two years to July 4, 2009 and reduce their applicable margins. As part of the acquisition of Rutherford LP, the Fund assumed a $50,000,000 debt bearing interest at a fixed rate of 6.88% and maturing in June The debt is repayable by monthly interest payments of $286,473 and effective July 1, 2012, by blended monthly payments of principal and interest of $510,916. The debt is secured by all assets of Rutherford LP having a book value of approximately $106,000,000. As at, 82% of the Fund long term debt was effectively fixed at a weighted average yield of 6.38% including the effective applicable margin. 6. Financial Instruments: During the year, the Fund entered into three swap contracts maturing in June This mitigates the Fund s exposure to variable interest rates on additional amounts of $15,000,000 of long term debt, bringing the total amount of swap contracts in force to $30,000,000. The three contracts, each for notional amount of $5,000,000 allow the Fund to pay interest at fixed rates equivalent to 4.08%, 3.96% and 4.09% plus a margin until maturity. As at, the unrealized gain of $262,316 on the variation of the fair market value of these three swap contracts, for which hedge accounting was not applied, was included in income. Fourth Quarter 7

8 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) F OR THE T HREEMONTH P ERIOD AND Y EARS E NDED D ECEMBER Other revenues and expenses: The following items are included under Other (revenues) and expenses: ThreeMonth ThreeMonth Investment income $ (391,867 ) $ (142,468 ) $ (779,219 ) $ (398,814 ) Unrealized gain on derivative instruments (262,316) (262,316 ) Writeoff of capital assets Exchange gain 112,338 (1,732 ) (332,989 ) 112,338 (71,506 ) (332,989 ) $ (543,577) $ (475,457 ) $ (1,000,703) $ (731,803 ) 8. Commitments a) Rutherford Creek Power LP is committed to sell all of its electricity production to British Columbia Hydro and Power Authority under a longterm contract maturing in b) Rutherford Creek Power LP has agreed, following the expiry or termination of the Rutherford Creek power purchase agreement, to pay an amount based on the difference between the then selling price of electricity and 50% of the last increase or decrease in the CPI during the last twelve months. Such amount shall be equal to 70% of the gross revenues attributable to such difference for the 20 year period following the expiry of the power purchase agreement. It will accrue annually and be paid quarterly in the following year. After the 20 year period, that portion of the payment will be equal to 60% of the gross revenues attributable to such difference. This commitment is secured by the Rutherford Creek Power LP facility but subordinated to the $50,000,000 term loan of Rutherford Creek Power LP. 9. Segmented Information: The Fund has operations in Canada and the United States. The information by geographic region is as follows: ThreeMonth ThreeMonth GROSS REVENUES: Canada $ 8,481,613 $ 6,538,421 $ 26,678,935 $ 25,209,052 United States 289,762 3,336,870 $ 8,771,375 $ 6,538,421 $ 30,015,805 $ 25,209,052 CAPITAL ASSETS: Canada $ 221,761,693 $ 157,550,240 United States 5,987,982 6,222,893 $ 227,749,675 $ 163,773,133 INTANGIBLE ASSETS: Canada $ 95,332,328 $ 68,682,813 United States 2,203,379 2,370,216 $ 97,535,707 $ 71,053,029 Fourth Quarter 8

9 INVESTOR INFORMATION Transfer Agent, Registrar and Trustee: National Bank Trust Inc. 1100, University Street, 9th floor, Montreal, Quebec H3B 2G7 Investor Relations: Jean Trudel, Vice President, Finance and Investor Relations, or Michel Letellier, Executive Vice President and Chief Financial Officer Innergex Management Inc. Exchange Listing: s units are listed on the Toronto Stock Exchange ( TSX ) and trade under the symbol IEF.UN. POWER INCOME FUND 1111, SaintCharles Street West East Tower, Suite 1255 Longueuil, Quebec J4K 5G4 Telephone : (450) Fax : (450) info@innergex.com