PRESS RELEASE. (366 days of operations)

Transcription

1 PRESS RELEASE FOR IMMEDIATE PUBLICATION A YEAR OF GROWTH FOR INNERGEX POWER LONGUEUIL, QUEBEC March 16, 2005 Innergex Power Income Fund (IEF.UN) ( Innergex Power or the Fund ) today announced its financial results for the twelvemonth period and the fourth quarter ended December 31, For the 2004 fiscal year, gross revenues from hydroelectric power plants increased 134%, while earnings before income taxes, depreciation and amortization, investment income, foreignexchange gains and noncontrolling interests ( EBITDA ) increased 140%, and distributions to Unitholders increased 118%, compared to the 2003 fiscal period, which comprised 181 days of operation since the Fund began its operation on July 4, HIGHLIGHTS FOR THE YEAR ENDED DECEMBER 31, 2004 (366 days of FOR THE YEAR ENDED DECEMBER 31, 2003 (181 days of VARIATION Power Generated (MWhr) 377, , % Gross Revenues $25,209,052 $10,785, % EBITDA $20,213,907 $8,416, % Net Income $8,955,152 $4,507, % Distributable Cash from Operating Activities $17,877,775 $7,359, % Release from Levelization Reserve $1,749,313 $1,426, % Net Distributable Cash $19,627,088 $8,786, % Net Distributable Cash per Unit $ $ % Distributions Declared $18,119,192 $8,297, % Distributions Declared per Unit $ $ % Distribution Payout Ratio 92% 94% OPERATING RESULTS, gross revenues amounted to $25.2 million: 134% more than the gross revenues for Regardless of the fact that the 2004 fiscal year comprises more days than that of 2003, the increase in gross revenues may be explained by favourable hydrological conditions, which allowed production to be 3% higher than the historical average, and by the 3% minimum increase in the selling price of electricity, as per our longterm Power Purchase Agreements with HydroQuébec. The acquisition of the Windsor facility in April 2004 also increased production by 5.8% from the date of its acquisition to. NET INCOME EBITDA stood at $20.2 million, which was 140% higher than for the 2003 fiscal year. Net income increased by 99% to $9.0 million, or $0.46 per Trust Unit. Net income for 2004 surpassed that of 2003 even though depreciation and amortization expenses were higher than in 2003 as a result of a change in accounting policies. DECLARED DISTRIBUTIONS The amount of distributable cash declared to Unitholders increased by 118% to $18.1 million or $0.93 per Unit, which represents 92% of the net distributable cash, which was $1.01 per Unit. The acquisition of two facilities allowed the Fund to twice announce a 1 increase in the annual distribution to Unitholders. As of January 2005, the Fund s annual distribution level is at $0.945 per Unit, representing a 2.2% increase since the Fund s creation. For 2004, 76% of the distributions are not taxable in the hands of the Unitholders.

2 INCREASE IN RESERVE ACCOUNTS At, the total amount in the Fund s reserve accounts, allocated between the hydrology, levelization, major maintenance and Horseshoe Bend site work reserve accounts, stood at $15.8 million, compared to a total of $8.8 million in the reserve accounts in During the year, no amount was released from the hydrology and major maintenance reserve accounts. FOURTH QUARTER For the quarter, the EBITDA totalled $5.5 million, which is 5% more than the EBITDA for the fourth quarter of 2003, and distributions increased by 1% to $ Gross revenues amounted to $6.5 million, which was 2% lower than in the fourth quarter of 2003 due to lower hydrological conditions. The impact of low hydrology on the Fund s gross revenues was mitigated by the fact that 35% of our production is not affected by annual hydrological variations because of the virtual energy from our three Portneuf facilities, and by the addition of the Windsor facility to the Fund s hydroelectric power stations. In addition, the average electricity selling price increased, as per our longterm power purchase agreements with HydroQuébec. The net income for the threemonth period totalled $2.8 million or $0.14 per Unit, which is lower than for 2003, when the net income was $3.2 million or $0.18 per Unit. This result is mainly due to depreciation and amortization expenses, which were $1.1 million higher than in 2003 as a result of a change in accounting policies. The net distributable cash was $5.1 million, compared to $4.7 million in 2003, representing an increase of 7%. OUTLOOK The 2004 fiscal year continues to reflect the strength of Innergex Power, which can be summarized in two words: stability and growth, says Mr. Gilles Lefrançois, President and Chief Executive Officer of Innergex Management Inc., the Manager of the Fund. The stability stems from many factors, such as our diversification to seven different watersheds, our revenues based on virtual energy from the three Portneuf River facilities, which mitigate the effects of lower hydrology, and the quality of our longterm power purchase agreements. Our growth stems from our efforts to execute transactions that are accretive to the Fund. PROFILE Innergex Power Income Fund is an openended income trust that indirectly owns nine hydroelectric power generating facilities with a total installed capacity of 80MW. The facilities are operated and managed by Innergex Management Inc., the Manager, under longterm agreements with the Fund. FORWARDLOOKING STATEMENTS Investors should take note that certain statements in this press release are forwardlooking and may not give full weight to all of the potential risks and uncertainties. Forwardlooking statements are subject by their nature to risks and uncertainties, and actual results, actions or events could differ materially from those set forth in the forwardlooking statements. Any forwardlooking statements speak only as of the date made. The Fund is not undertaking to update any forwardlooking statements. This document can also be downloaded from the SEDAR Website at or from the Innergex site, at The Annual Report for 2004 fiscal year will be issued and distributed at the end of March For additional information, please contact: Mr. Jean Trudel VicePresident Finance Innergex Management Inc. (450) , ext info@innergex.com Website: Mr. Michel Letellier Executive VicePresident and CFO Innergex Management Inc. (450) , ext. 227

3 INNERGEX POWER INCOME FUND C ONSOLIDATED BALANCE SHEETS (unaudited) (audited) ASSETS Current assets Cash and cash equivalents Receivables Current portion of reserve accounts Future income taxes asset Other current assets $ 9,077,432 3,580,118 3,427, , ,306 $ 3,530,457 2,939,933 1,096, ,275 $ 17,226,608 $ 8,125,665 Funds held in trust (Note 4) Reserve accounts Capital assets Intangible assets Future income taxes asset $ 12,324, ,773,133 71,053,029 3,849,799 $ 439,778 7,727, ,435,601 66,627,906 $ 268,227,506 $ 232,356,781 LIABILITIES AND UNITHOLDERS EQUITY Current liabilities Operating loan Accounts payable and accrued liabilities Distribution payable to Unitholders $ 465,152 10,954,878 1,608,391 $ 2,478,573 1,413,510 Current portion of longterm debt 496,566 $ 13,524,987 $ 3,892,083 Longterm debts (Note 5) Other liabilities (Note 4) Future income taxes liability Noncontrolling interest $ 58,692,076 2,545,437 10,505,681 $ 50,000, ,778 2,298,239 10,089,925 Unitholders equity 182,959, ,636,756 $ 268,227,506 $ 232,356,781 See accompanying Notes to Unaudited Consolidated Financial Statements. p. 1

4 C ONSOLIDATED S TATEMENTS OF INCOME Three month period ended Three month period ended (366 days of (181 days of (Audited) Gross revenues $ 6,538,421 $ 6,676,349 $ 25,209,052 $ 10,785,628 Operating expenses 581,775 1,030,040 3,390,254 1,714,796 Operating income $ 5,956,646 $ 5,646,309 $ 21,818,798 $ 9,070,832 General and administrative expenses 407, ,290 1,604, ,338 Earnings before interest, taxes, depreciation, amortization, investment income, exchange gains, and noncontrolling interest («EBITDA») $ 5,548,656 $ 5,287,019 $ 20,213,907 $ 8,416,494 Interest on longterm debt 742, ,701 2,633,925 1,121,257 Depreciation and amortization 2,255,252 1,141,188 8,704,169 2,663,350 Investment income ( 142,468 ) ( 89,668) ( 398,814 ) ( 194,188 ) Exchange gains ( 332,989 ) ( 332,989 ) Income before provision for income taxes and noncontrolling interest $ 3,026,116 $ 3,656,798 $ 9,607,616 $ 4,826,075 Provision for income taxes Current income taxes Future income taxes Income before noncontrolling interest ( 10,490 ) 84,452 52, ,198 56,083 $ 84,452 $ 52,083 $ 236,708 $ 56,083 $ 2,941,664 $ 3,604,715 $ 9,370,908 $ 4,769,992 Income allocated to noncontrolling interest 168, , , ,912 Net income $ 2,773,464 $ 3,237,258 $ 8,955,152 $ 4,507,080 Weighted average number of Trust Units outstanding 19,434,844 18,357,267 19,373,880 18,357,267 Net income per Trust Unit $ 0.14 $ 0.18 $ 0.46 $ 0.25 See accompanying Notes to Unaudited Consolidated Financial Statements p. 2

5 C ONSOLIDATED STATEMENTS OF UNITHOLDERS EQUITY Unitholders capital account, beginning of period Issued Trust Units October 18, 2004 private issuance Three month period ended Number of Units 19,407,267 1,239,600 Amount $ 181,362,284 14,999,160 Number of Units 18,357,267 Three month period ended Amount $ 169,427,161 Issuance costs ( 447,674 ) Unitholders capital account, end of period 20,646,867 $ 195,913,770 18,357,267 $ 169,427,161 Deficit, beginning of period $ ( 10,902,736 ) $ (2,787,134 ) Net Income 2,773,464 3,237,258 Distributions declared to Unitholders ( 4,825,173 ) ( 4,240,529 ) Deficit, end of period $ ( ) $ ( 3,790,405 ) Unitholders equity, end of year 20,646,867 $ 182,959,325 18,357,267 $ 165,636,756 Number of Units (366 days of Amount Number of Units (181 days of (Audited) Amount Unitholders capital account, beginning of year Issued Trust Units July 4 th, 2003 public issuance July 4 th, 2003 private issuance April 8, 2004 private issuance October 18, 2004 private issuance 18,357,267 1,050,000 1,239,600 $ 169,427,161 12,337,500 14,999, ,602,267 3,755,000 $ ,022,670 37,550,000 Redeemed Trust Units (2) ( 20 ) Issuance costs ( 850,051) ( 14,145,509 ) Unitholders capital account, end of year 20,646,867 $ 195,913,770 18,357,267 $ 169,427,161 Balance, beginning of year $ ( 3,790,405 ) $ Net Income 8,955,152 4,507,080 Distributions declared to Unitholders ( 18,119,192 ) ( 8,297,485 ) Deficit, end of year $ ( ) $ ( 3,790,405 ) Unitholders equity, end of year 20,646,867 $ 182,959,325 18,357,267 $ 165,636,756 See accompanying Notes to Unaudited Consolidated Financial Statements. p. 3

6 C ONSOLIDATED STATEMENTS OF CASH FLOWS _ Cash flows from operating activities: Net income Adjustments for: Depreciation of capital assets Amortization of intangible assets Future income taxes Noncontrolling interest Unrealized exchange gain Changes in noncash working capital Three month period ended $ 2,773,464 1,064,887 1,190,365 84, ,200 ( 147,000 ) ( 1,238,226 ) Three month period ended $ 3,237, , ,155 52, ,457 ( 2,017,936 ) (366 days of $ 8,955,152 4,128,837 4,575, , ,756 ( 147,000 ) ( 1,532,227 ) (181 days of (Audited) $ 4,507,080 1,032,180 1,631,170 56, ,912 ( 2,802,272 ) $ 3,896,142 $ 2,780,050 $ 16,643,048 $ 4,687,153 Cash flows from financing activities: Distributions paid to Unitholders Net proceeds from issuances of Trust Units Proceeds from issuance of longterm debt Borrowing from operating loan Reimbursement of longterm debt $ ( 4,728,608 ) 14,551,486 13,456, ,514 ( 13,774,893 ) $ ( 4,240,529 ) $ ( 17,924,311 ) 26,486,609 13,456, ,152 ( 14,003,539 ) $ ( 6,883,975 ) 169,427,141 50,000,000 $ 9,741,094 $ ( 4,240,529 ) $ 8,480,506 $ 212,543,166 Cash flows from investing activities: Acquisition of capital assets Business acquisitions, net of acquired cash Investment in reserve accounts Release from (investment in) Levelization reserve account $ ( 90,623 ) ( 5,551,244 ) ( 4,649,859 ) ( 8,013 ) $ ( 9,643 ) ( 125,783 ) 4,973 $ ( 102,123 ) ( 13,208,910 ) ( 8,014,859 ) 1,749,313 $ ( 9,643 ) ( 204,866,408 ) ( 10,250,622 ) 1,426,791 $ ( 10,299,739 ) $ ( 130,453 ) $ ( 19,576,579 ) $ ( 213,699,882 ) Net increase in cash and cash equivalents $ 3,337,497 $ ( 1,590,932 ) $ 5,546,975 $ 3,530,437 Cash and cash equivalents, beginning of year 5,739,935 5,121,389 3,530, Cash and cash equivalents, end of year $ 9,077,432 $ 3,530,457 $ 9,077,432 $ 3,530,457 Supplemental cash flow disclosure: Interest expense paid Unpaid capital assets additions $ 738,761 $ 164,680 $ 653,989 $ $ 2,689,000 $ 164,680 $ 1,235,418 $ See accompanying Notes to Unaudited Consolidated Financial Statements. p. 4

7 N OTES TO C ONSOLIDATED F INANCIAL S TATEMENTS F OR THE YEAR ENDED D ECEMBER 31, 2004 (UNAUDITED) Innergex Power Income Fund (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 ( Innergex LP ) which owns the three Portneuf facilities, the Chaudière facility and the SaintPaulin facility; (ii) TrentSevern Power, Limited Partnership ( Trent LP ) which owns the Batawa facility; (iii) Innergex Montmagny, Limited Partnership ( Innergex Montmagny LP ) which owns the Montmagny facility; (iv) HydroWindsor, Limited Partnership («HydroWindsor LP») which owns the Windsor facility; and (v) Horseshoe Bend Hydroelectric Company («Horseshoe Bend») which owns the Horseshoe Bend facility. Innergex Management Inc. (the Manager ) administers the Fund and manages Innergex Power Trust ( IPT ), 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 consolidated financial statements included in this report are unaudited and reflect normal and recurring adjustments which are, in the opinion of the Fund s management, considered necessary for a fair presentation. These financial statements have been prepared in conformity with Canadian Generally Accepted Accounting Principles. The same accounting policies as described in the Fund s latest annual report have been used, with the exception of the new accounting change described in note 3. 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 business is seasonal 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. 2. Significant accounting policies: The Fund has adopted the following accounting policies for foreign currency. Foreign currency: Accounts and operations concluded in foreign currency Transactions denominated in foreign currency are accounted at the prevailing exchange rate at the date of the transaction. The monetary assets or liabilities denominated in foreign currency are converted at the prevailing exchange rate at the balance sheet date. Unrealized exchange gains or losses on monetary assets or liabilities are included in the net result of the period. Foreign subsidiary: The Funds converts its selfsustaining subsidiary at current exchange rate. Under this method, every asset and liability denominated in foreign currency is converted at the prevailing exchange rate as of the balance sheet date. The revenues and expenses are converted at average rate during the period. The gains and losses are reported and presented separately on the balance sheet within the Unitholders equity. 3. Change of an accounting policy: In order to comply with the Generally Accepted Accounting Principles as promulgated by the Accounting Standards Board, the following change of accounting policy became effective on January 1, The sinking fund method of depreciation and amortization is no longer considered acceptable under the Generally Accepted Accounting Principles. The Fund had been using this method of depreciation and amortization for its capital and intangibles assets. The Fund had changed its depreciation and amortization method starting January 1, 2004 to the straight line method over the same useful life as before. This resulted in an additional amount of depreciation and amortization of $2.7 million on the assets owned as at January 1, 2004, for the year ended. p. 5

8 4. Funds held in trust: A subsidiary of the Fund had placed an amount in trust to settle claims and counterclaims related to the construction of a hydroelectric power generating facility. An equal amount had been recorded as a liability and presented as other liabilities on the balance sheet. These funds have been released since a settlement was reached during the year. 5. Longterm debts: Facility 1 and 2 Facility 1 consists of a term loan in an initial amount of $ 50,000,000 with a July 4, 2007 maturity date. Collateral for the facility is provided by a first ranking hypothec covering assets of IPT and various security interests granted by some of its subsidiaries. The utilization of this facility is subject to certain financial and nonfinancial covenants. Advances under the facility are made in the form of Banker s Acceptances, Prime Rate or LIBOR Advances increased by an applicable margin based on IPT s ratio of consolidated total debt to consolidated earnings before interest, taxes, depreciation and amortization. During the year, IPT converted $ 6,157,000 of the facility 1 into US$ 5,000,000 LIBOR advances and reduced the facility permanently by $ 7,500,000 concurrently with new borrowings under facility 2. Facility 2 consists of a term loan with a July 4, 2007 maturity date granted to an American subsidiary of the Fund. Collateral for the facility is provided by a surety of IPT and consequently benefits from the same security interest as facility 1. Also, the borrower has granted a first ranking hypothec covering shares held by it on its American subsidiary. The utilization of this facility is subject to certain financial and nonfinancial covenants. Advances under the facility are made in the form of LIBOR Advances increased by an applicable margin based on IPT s ratio of consolidated total debt to consolidated earnings before interest, taxes, depreciation and amortization. The amount borrowed in accordance with the terms of this facility is US $ 6,072,875. Interests are paid on a monthly basis on Prime Rate Advances and Banker s Acceptances and quarterly on LIBOR Advances. The total amount outstanding under both facility 1 and 2 is limited to a maximum of $ 52,500,000 Canadian dollars equivalent. As at, the Canadian dollar equivalent total amount of the two facilities was $ 49,652,595. Facilities 1 and 2 comprise cross default clauses with each other. Term loan: As part of the acquisition of HydroWindsor Inc. and Windsor LP, the Fund assumed a $ 8,312,500 debt bearing interest at a fixed rate of 11.7% and maturing in December The debt was accounted for at its fair market value of $ 9,882,586 on April 27, 2004 using an effective interest rate of 8.25%. The debt is payable by monthly blended payments of principal and interest of $ 105,399. Facility 1: Prime Rate Advances (4.63%) $ 143,000 $ Banker s Acceptances (2.56%) maturing on January 24, ,200,000 50,000,000 LIBOR Advances (3.91%) US $ 5,000,000 maturing on March 24, ,010,000 Facility 2: LIBOR Advances (3.93%) US $ 6,072,875 maturing on March 30, ,299,595 Term Loan: 8.25 % Fixed Rate Term Loan maturing in ,536,047 $ 59,188,642 $ 50,000,000 Current portion of long term debt ( 496,566 ) $ 58,692,076 $ 50,000,000 IPT entered into a swap contract and pays a fixed rate of 3.95% increased by a commission until September 2007 for a notional amount of $ 15,000,000. The effective interest rate on the total consolidated debts of the Fund for the year ended was 4.64% (4.52% in 2003). p. 6

9 5. Longterm debt (continued): The principal repayments for the next years are as follows : Year ending December 31, 2005 $ 496,566 December 31, ,118 December 31, ,237,911 December 31, ,433 December 31, ,928 Thereafter 6,589,686 $ 59,188, Distribution to Unitholders: The Fund pays, on or about the 25th day of each month, distributions of distributable cash that are made payable to Unitholders of the record on the record date in the preceding month. 7. Business acquisition: a) Acquisition of HydroWindsor Inc. and HydroWindsor LP: Pursuant to an underwriting agreement, the Fund issued 1,050,000 Trust Units on April 8, 2004, at a price of $11.75 per Trust Unit for net proceeds totalling $11,935,123. An amount of $11,387,900 was used for the following purposes: Acquisition of HydroWindsor Inc. and HydroWindsor LP $ 8,381,491 Funding of the Levelization reserve account 2,356,409 Funding of the Hydrology reserve account 650,000 $ 11,387,900 As part of the acquisition plan, the Fund will make repairs and improvements to the Windsor facility estimated at $450,000 over the next 24 months, which amount has been raised by the issuance of the Trust Units and is included in the cash and cash equivalents account in the current assets of the Fund. The acquisitions of HydroWindsor Inc. and HydroWindsor LP are accounted for using the purchase method at their respective acquisition costs on April 27, The earnings of HydroWindsor Inc. and HydroWindsor LP have been consolidated with the Fund's results since the date of acquisition. The total purchase price was allocated as follows: Cash and cash equivalents $ 723,825 Net working capital (excluding longterm debt) ( 1,066,660 ) Capital assets 11,976,673 Intangible assets 6,630,239 Longterm debt ( 9,882,586 ) $ 8,381,491 b) Acquisition of Horseshoe Bend: Pursuant to an underwriting agreement, the Fund issued 1,239,600 Trust Units on October 18, 2004 at a price of $ per Trust Unit for net proceeds totalling $ 14,551,486. An amount of $ 13,423,837 was used for the following purposes: Acquisition of Horseshoe Bend $ 8,923,837 Funding of the Hydrology reserve account 1,500,000 Funding of the Horseshoe Bend Site Work reserve account 3,000,000 $ 13,423,837 As part of the acquisition plan, the Fund will add equipment for an amount of $ 592,000 over the next 24 months. The work will be paid partly with the Horseshoe Bend Site Work reserve account and with the cash and cash equivalents available for the difference. p. 7

10 b) Acquisition of Horseshoe Bend (continued): The acquisition of Horseshoe Bend was accounted for using the purchase method at the acquisition cost on. The total purchase price was preliminarily allocated as follows: Cash and cash equivalents $ 3,372,593 Net working capital (excluding current future income taxes asset) ( 7,940,976 ) Horseshoe Bend Site Work reserve account 662,962 Capital assets 6,222,893 Intangible assets 2,370,216 Future income taxes asset 4,236,149 $ 8,923,837 The purchase price of Horseshoe Bend will be adjusted, as an increase or decrease, following the increase or decrease of the cost of some repairs and maintenance foreseen at the time of the acquisition. Horseshoe Bend will also be compensated by the vendor for the loss of revenues during a portion of the work. As part of the acquisition, Horseshoe Bend booked an amount of $ 4,600,000 payable to vendor, which is included in the net working capital, for work to be done by the vendor. The purchase price paid for the work could be adjusted downward, in case the performance of the work on production capacity of the facility is less than expected, as certified by an independent engineer. 8. Related party transactions: Innergex Management Inc.: Amounts payable under following Agreements are included into general and administrative expenses in the statement of income except for amounts totalling $ 135,000 (quarter 2004) and $ 264,523 (year 2004) which are included into the business acquisition costs: Three months ended Three months ended (366 days of (181 days of (i) Management Agreement $ 462,951 $ 146,000 $ 950,491 $ 292,000 (ii) Administration Agreement 25,553 25, ,606 50,500 (iii) Services Agreement $ 488,504 $ 171,250 $ 1,052,097 $ 342, Commitments : a) Under the provisions of the Power Purchase Agreement maturing in 2016, HydroQuébec has agreed to purchase all of the electrical energy made available to it from HydroWindsor LP, as of commissioning, up to the agreed maximum quantity for the hydroelectric generating facility. HydroWindsor LP, in return, is obliged to supply a minimum quantity of energy during each period of 12 consecutive months beginning the 1 st day of December in each year of the contract. b) Horseshoe Bend is committed to sell all of its electricity production to Idaho Power Company under a longterm contract maturing in c) Horseshoe Bend is committed to acquiring equipments for an amount of $ 592,000 within the next 24 months. p. 8