INVESTOR PRESENTATION. August 2016

Transcription

1 INVESTOR PRESENTATION August 2016

2 CAUTIONARY NOTE Certain statements contained in this presentation may be forward-looking within the meaning of applicable securities laws. Such forward-looking statements reflect the intentions, plans, expectations and opinions of the management of Gaz Métro inc., acting in its capacity as General Partner of Gaz Métro Limited Partnership ( Gaz Métro ), (the Management ) and are based on information currently available to Management and assumptions about future events. Forward-looking statements involve known and unknown risks and uncertainties and other factors beyond Management s control. A number of factors could cause actual results of Gaz Métro to differ materially from the current expectations as expressed in the forward-looking statements. Although these forward-looking statements are based upon what Management believes to be reasonable assumptions, Management cannot assure investors that actual results will be consistent with these forward-looking statements. These forward-looking statements are made as of the date of this presentation, and Management assumes no obligation to update or revise them to reflect new events or circumstances, except as required pursuant to applicable securities laws. You are cautioned not to place undue reliance on these forward-looking statements. The complete version of the cautionary note regarding forward-looking statements as well as a description of the relevant assumptions and risk factors likely to affect Gaz Métro s actual results are included in the Management s Discussion and Analysis (MD&A) of Gaz Métro inc. for the fiscal year ended September 30, 2015 and in the subsequent MD&As for the first and second quarters of the fiscal year These MD&As are available on SEDAR under Gaz Métro inc. s profile at Non-GAAP Financial Measures In the opinion of the management of the manager, certain financial measures provide readers with information considered useful for analyzing Valener's financial performance. However, certain financial measures are not defined by GAAP and should not be considered in isolation or as substitutes for other financial measures that are in accordance with GAAP. The results obtained might not be comparable with similar measures used by other issuers and should therefore be considered only as complementary information. 2

3 VALENER HIGHLIGHTS Created October 1, 2010 to replace the Gaz Métro Limited Parternship public investment vehicle (TSX: GZM.UN-T) TSX: VNR TSX: VNR.PR.A Steady, rising dividend Feb 12, 2015: annualized dividend increased from $1.00 to $1.04 per share ~4% dividend growth target set for the next 3 fiscal years Nov 27, 2015: 2 nd dividend increase announced VNR dividends paid, per fiscal year 38.6 million shares outstanding (as of August 8, 2016) C$855 million market cap (as of August 12, 2016) Strategy: to support Gaz Métro in its growth objectives Valener holds: o a 29% interest in Gaz Métro o a 24.5% interest in the Seigneurie de Beaupré Wind Farms 3

4 OWNERSHIP STRUCTURE Corporate Structure * TRENCAP 100% 61.11% Principal Interest Owners Caisse de dépôt et placement du Québec ( CDPQ ) 25.9% indirect ownership in Gaz Métro 38.89% PUBLIC 100% NOVERCO 100% GAZ MÉTRO INC. (THE ISSUER) Enbridge Inc. 27.6% indirect ownership in Gaz Métro 71% Valener (TSX: VNR) 29% Publicly-traded company whose main assets consist of a: 24.5% SEIGNEURIE DE BEAUPRÉ WIND FARMS (ELECTRICITY PRODUCTION) 25.5% (THE GUARANTOR) o 29.0% direct interest in Gaz Métro, providing Gaz Métro with potential access to public equity markets as required ENERGY DISTRIBUTION TRANSPORTATION OF NATURAL GAS ENERGY SERVICES, STORAGE & OTHER o 24.5% interest in the Seigneurie de Beaupré Wind Farms (340 MW contracted) * CDPQ is Trencap s controlling shareholder (59.64%) 4

5 GAZ MÉTRO QUICK FACTS Diversified public utility founded in 1955 Overview of main activities in Québec and Vermont MORE THAN JUST A NATURAL GAS COMPANY $7 billion in assets #1 natural gas distributor in Québec Sole natural gas distributor and largest electricity distributor in Vermont Over 500,000 distribution customers Over 2,000 employees Data as of September 30,

6 STRONG FINANCIAL PERFORMANCE Adjusted net income (in millions of CAN$) (1) Record 2015 for Gaz Métro Fiscal year (1) 2015 data presented in accordance with U.S. GAAP. As of October 1, 2015, Valener and Gaz Métro have retrospectively adopted U.S. GAAP. Data for previous years presented in Canadian GAAP. 6

7 GAZ MÉTRO BUSINESS SEGMENTS Energy Distribution Natural Gas Transportation Electricity Production Energy Services, Storage and Other 100% 50% 100% 25.5% 100% 100% 100% 38.3% 58% 100% 100% 50% 50% Regulated Non-regulated Storage: regulated Others: non-regulated 89.7% 8.2% 0.9% 1.2% % of net income F2015* * Excludes Corporate Affairs segment and non-recurring items 7

8 ASSET BASE DIVERSIFICATION SINCE 2006 In 2005, adoption of development and diversification strategy to reduce exposure to the Québec natural gas distribution activity and become a diversified energy provider Entry into the Vermont electricity distribution market Participation in the Seigneurie de Beaupré Wind Farms (340 MW) Declining exposure to QC natural gas As a result of the successful execution of this strategy, Gaz Métro reduced its asset exposure to Québec natural gas distribution from 72.5% in 2006 to 42.2% in 2015 $2.8 billion in assets ,000 customers 2015 $7.2 billion in assets 500,000 customers Natural gas distribution in Québec Natural gas distribution in Vermont Natural gas transportation Energy services, Storage and Other Natural gas distribution in Québec Natural gas and electricity distribution in Vermont Natural gas transportation Electricity production Energy services, Storage and Other Data for fiscal years ended September 30, 2006 and

9 GAZ MÉTRO: HIGHLIGHTS & PROJECT UPDATES Asbestos approved by Régie de l énergie in March 2016 = expected commissioning (1) Energy Distribution VGS (2) Energy Distribution Gaz Métro-QDA (3) Energy Services, Storage and Other (4) Energy Distribution Gaz Métro-QDA (renewable natural gas to be injected into Gaz Métro-QDA network) (5) Energy Distribution GMP Note: all dates presented on a calendar basis 9

10 2016 CAPEX BREAKDOWN (in millions of CAN$) GAZ MÉTRO VALENER Valener does not expect to make a capital injection in Gaz Métro in fiscal 2016 as such, Valener will use all excess cash to pay down its credit facility 10

11 FINANCIAL HIGHLIGHTS Strong credit rating Ample liquidity for the fiscal year ended September 30, 2015, except where otherwise indicated GAZ MÉTRO VALENER EBITDA 1 $662.4 M $62.1 M Adjusted net income 1 $189.0 M $45.3 M Adjusted EPS 1 n/a $1.19 Normalized operating cash flow 1 n/a $58.6 M Payout ratio 1,2 91.1% 74.6% Long-term debt interest coverage ratio/interest coverage ratio 1 5.0x 38.8x Total debt 1 $3,140.2 M $121.0 M Debt/total capitalization % 14.4% Unused portion of credit facilities 3 $764.5 M $106.7 M S&P corporate credit rating A n/a DBRS corporate credit rating A n/a 1) Non-GAAP financial measures. Refer to Appendix D for a reconciliation of non-gaap measures. 2) Based on distributions and dividends paid over adjusted net income 3) As of June 30, 2016 Note: data presented in accordance with U.S. GAAP 11

12 ENERGY DISTRIBUTION

13 Distributes 97% of natural gas in Québec NATURAL GAS DISTRIBUTION IN QUEBEC Over 10,000 km of pipeline 300 municipalities served over 200,000 customers Regulated assets: $2.0billion 1 Authorized ROE: 8.90% 2 1 Projected rate base in the 2016 rate case filed with the Régie de l énergie. 2 Approved ROE for fiscal

14 NATURAL GAS DISTRIBUTION IN QUEBEC: OUR CUSTOMERS 1 RESIDENTIAL COMMERCIAL INDUSTRIAL Customers 139, % Customers 49, % Customers 7, % Volume 20.0 Bcf 9.9% Volume 61.0 Bcf 30.2% Volume Bcf 59.9% % of distribution revenues 20% % of distribution revenues 45% % of distribution revenues 35% 1 Fiscal year

15 NATURAL GAS DISTRIBUTION IN VERMONT Wholly-owned since 1986 Sole gas distributor in Vermont with 50,000 customers Regulated assets: US$200M 1 Authorized ROE: 10.09% 1 Projects to extend distribution network 2 Phase I to service Vergennes and Middlebury completed in February 2016 Estimated project costs: US$165.6M for Phase I 1 Based on 2016 rate case as approved by Vermont Public Service Board (VPSB). Regulated assets include US$89M related to investments for Phase I. 2 Phase I approved by VPSB in December

16 ELECTRICITY DISTRIBUTION IN VERMONT Acquisition of Green Mountain Power (GMP) in 2007 Acquisition of Central Vermont Public Service (CVPS) in % of electricity distribution market in Vermont 265,000 customers Regulated assets: US$1.3B 1 Authorized ROE: 9.44% 1 1 Based on 2016 rate case as approved by Vermont Public Service Board (VPSB) 16

17 NATURAL GAS TRANSPORTATION

18 NATURAL GAS TRANSPORTATION 50% interest in TQM operates a gas pipeline in Québec that connects: upstream with TCPL downstream with PNGTS and the Gaz Métro-QDA network Regulated by the NEB % interest in PNGTS Starts at the Québec border and extends into the suburbs of Boston Regulated by the FERC 2 Wholly-owned Operates two pipelines that cross the Ontario border and supply Gaz Métro-QDA s distribution network in northwest Québec Regulated by the NEB 3 1 National Energy Board (Canada) 2 Federal Energy Regulatory Commissions (United States) 3 With respect to revenue determination, tolls, construction and the operation of its network 18

19 ELECTRICITY PRODUCTION

20 SEIGNEURIE DE BEAUPRÉ WIND FARMS A QUÉBEC CONSORTIUM Gaz Métro (25.5%) / Valener (24.5%) and Boralex Inc. (50%) Developed on the Seigneurie de Beaupré private property 20-year lease with Séminaire de Québec Very good wind regime Long-term cash flows supported by 20-year Power Purchase Agreements with Hydro-Québec 20-year firm price with indexation Expected annual distributable cash of $30M to $35M (100%) May 2016 Refinancing of Wind Farms 2 and 3 On May 4, closing of a $617.5 million refinancing for Wind Farms 2 and 3 Special distribution of $80 million was paid to the partners Gaz Métro and Valener received $20.4 million and $19.6 million, respectively INSTALLED CAPACITY NUMBER OF TURBINES INVESTMENT START-UP Wind Farms 2 & MW 126 $750M 1 Dec Wind Farm 4 68 MW 28 $190M 1 Dec TOTAL 340 MW 154 $940M 1 Including financing costs. Non-recourse financing in place for both wind farms. 20

21 ENERGY SERVICES, STORAGE AND OTHER

22 LIQUIEFIED NATURAL GAS Supplying LNG to a Stornoway diamond mine over 1,000km from Montreal Partnership with Government of Quebec through Investissement Québec (IQ) o $119M investment in which IQ will contribute up to $50M Project to triple the liquefaction capacity of Gaz Métro s LSR 1 plant located in Eastern Montreal Capacity expected to be available by end of 2016 Québec s leader in alternative fuel, in both an advisory role to clients and with respect to its deployment of refuelling stations o Now 8 refuelling stations on the Blue Road, a natural gas refuelling network for heavy transportation vehicles in Québec and Ontario Created to develop the market for natural gas (both compressed and liquefied) as a fuel in the heavy transport market and as a cleaner alternative to diesel fuel Created to ensure LNG storage, treatment and regasification to meet the peak energy needs of the TransCanada Energy power plant in Bécancour and similar projects 1 Gaz Métro s natural gas liquefaction, storage and re-gasification plant 22

23 OTHER ACTIVITES Leader in supplying energy products and services Services include installation, sale, rental, maintenance and repair of natural gas equipment Active in the residential, commercial and institutional markets partnership between Gaz Métro and Dalkia Owns and operates three distinct steam, hot water and cold water networks used to heat and cool commercial buildings 3km network serves 1.8 mm m 2 of varied facilities, meeting the energy needs of 1/3 of the commercial space in downtown Montréal Main activity consists of underground natural gas storage partnership between Gaz Métro and ENGIE (formerly GDF SUEZ) Regulated by the Régie de l Énergie 23

24 Appendix A Regulatory Framework

25 REGULATORY AUTHORITIES Natural gas distribution and storage activities in Quebec: the Régie de l énergie (Gaz Métro-QDA and Intragaz) Natural gas transportation activities in Canada that cross provincial boundaries: National Energy Board (Trans Québec & Maritimes Pipeline and Champion Pipe Line) and activities of Gaz Métro s primary transportation supplier (TransCanada PipeLines) Natural gas and electricity distribution and transportation activities in the United States: the Federal Energy Regulatory Commission and the Vermont Public Service Board (Portland Natural Gas Transmission System, Vermont Gas Systems and Green Mountain Power) Transportation activities in Ontario of one of Gaz Métro s suppliers, i.e. Union Gas: the Ontario Energy Board 25

26 GAZ MÉTRO-QDA S DEEMED WEIGHTED AVERAGE COST OF CAPITAL Forward looking rates Capital structure Annual rate Weighted rate* Annual rate Weighted rate* Total debt 54.0% % 2.96% 4.79 % 2.59% Preferred equity 7.5% 5.60% 0.42% 5.36% 0.40% Common equity 38.5% 8.90% 3.43% 8.90% 3.43% Deemed capital structure 100.0% 6.81% 6.42% * Source: 2016 rate case, approved by the Régie de l énergie on Dec 23, 2015 (D ) 26

27 GAZ MÉTRO-QDA S REGULATED INCOME ON COMMON EQUITY Deemed common equity (fixed) Authorized base ROE (linked to interest rates) Regulated income on common equity RATE BASE $2.0 B * 38.5% * 8.90% = $67.0 M 1 NON-RATE BASE $310 M * 38.5% * 8.90% = $10.6 M 1 1 Source: 2016 rate case, approved by the Régie de l énergie on Dec 23, 2015 (D ) Note: some differences due to rounding 27

28 GAZ MÉTRO-QDA S AUTHORIZED NET INCOME Regulated income on common equity Dividends on deemed preferred equity Deemed income taxes Base authorized net income $67.0 M (rate base) + $9.5 M + $36.6 M = $123.7 M 1 $10.6 M (non-rate base) 1 Based on 2016 rate case as approved by the Régie de l énergie on Dec 23, 2015 (D ). 28

29 GAZ MÉTRO ADJUSTED NET INCOME (1) (in millions of CAN$) Q Q Energy distribution (Gaz Métro-QDA and Vermont) 7.9 (1.3) Gaz Métro-QDA 2016 net income now expected to exceed $123.7M Gaz Métro-QDA capitalized interests on non-rate base investments natural gas deliveries Q Q in share of overearnings compared to fiscal 2015 (1) Net income attributable to partners, excluding specific items. Refer to Appendix D for a reconciliation of non-gaap measures. 29

30 POSITIVE OUTLOOK FOR THE ENERGY DISTRIBUTION SEGMENT AUTHORIZED ROE ON COMMON EQUITY 10.25% 9.93% 9.69% 10.26% 10.20% 10.09% 9.75% 9.58% 9.60% 9.44% 8.90% 8.84% 8.90% 8.90% 8.90% 8.90% (1) FISCAL YEAR (2) (2) Gaz Métro-QDA GMP VGS (1) Gaz Métro-QDA s authorized ROE includes 0.79% in productivity gain (2) Gaz Métro-QDA s authorized ROE for fiscal 2016 and VGS s ROE for fiscal 2016 as approved by Vermont Public Service Board (VPSB) in November. GMP s ROE for fiscal 2016 as approved by VPSB in September

31 Appendix B Dividends & Distributions

32 DISTRIBUTIONS & DIVIDENDS Nov : increase in Gaz Métro distribution & Valener dividend announced New Previous New Previous 4% 4% 32

33 QUARTERLY DIVIDENDS Dividends declared August 10, 2016 Current annualized dividend of $1.08 per common share Dividend per share Record date Payable DRIP Discount Common shares $0.27 September 30, 2016 October 17, % on newly issued shares Series A preferred shares $ October 7, 2016 October 17, 2016 Not applicable 33

34 DIVIDENDS PER COMMON SHARE (1) Target increase of ~4% per year over the next 2 years Target annualized level: $1.16 Current annualized level: $1.08 (1) Based on dividends paid. Fiscal year 34

35 Appendix C Wind Farms

36 WIND FARMS UPDATE 100% (in millions of CAN$, unless otherwise indicated) Wind Farms 2 and 3 Wind Farm 4 Q Q Q Q Production (MWh) 175, ,493 46,593 55,265 Utilization factor (1) (%) Cash flows relating to operating activities Total distributions paid Q Q Revenues from power sales EBITDA (3) EBITDA (3) margin (%) (2) VALENER : 24.5% GAZ MÉTRO : 25.5% (1) Utilization factor is calculated as electricity produced divided by installed capacity (in MWh) (2) Includes the $80 million special distribution received on May 4, 2016 as a result of the refinancing of Wind Farms 2 and 3. (3) EBITDA is a non-u.s. GAAP financial measure. Valener defines it as income (loss) before interest on long-term debt, income taxes, depreciation and amortization. Management considers EBITDA to be useful for measuring the financial performance of the wind farms, as this measure is commonly used in the industry and focuses on operational performance. 36

37 WIND FARMS UPDATE 100% (in millions of CAN$, unless otherwise indicated) Wind Farms 2 and 3 Wind Farm 4 Q1-Q Q1-Q Q1-Q Q1-Q Production (MWh) 628, , , ,310 Utilization factor (1) (%) Cash flows relating to operating activities (2) Total distributions paid Q1-Q Q1-Q Revenues from power sales EBITDA (4) EBITDA (4) margin (%) (3) VALENER : 24.5% GAZ MÉTRO : 25.5% (1) Utilization factor is calculated as electricity produced divided by installed capacity (in MWh) (2) Includes a $12.9 million payment received from Hydro-Québec related to a note receivable for the reimbursement of certain construction costs. (3) Includes the $80 million special distribution received on May 4, 2016 as a result of the refinancing of Wind Farms 2 and 3. (4) EBITDA is a non-u.s. GAAP financial measure. Valener defines it as income (loss) before interest on long-term debt, income taxes, depreciation and amortization. Management considers EBITDA to be useful for measuring the financial performance of the wind farms, as this measure is commonly used in the industry and focuses on operational performance. 37

38 Appendix D Reconciliation of non-gaap measures

39 GAZ MÉTRO Reconciliation of adjusted net income attributable to Partners For the fiscal years ended September 30, (in millions of CAN$) Net income attributable to Partners Specific items (14.7) 7.8 (16.5) Adjusted net income attributable to Partners (1) Adjusted net income attributable to Partners: is the net income attributable to Partners, net of items arising from specific circumstances that, in management s opinion, are not part of Gaz Métro s ongoing operations. The Partnership uses this measure to assess and compare, between periods, net income or net loss generated from ongoing operations. (1) 2015 data presented in accordance with U.S. GAAP. As of October 1, 2015, Valener and Gaz Métro have retrospectively adopted U.S. GAAP. Data for previous years presented in Canadian GAAP. * Differences due to rounding 39

40 GAZ MÉTRO Reconciliation of EBITDA For the fiscal years ended September 30, (in millions of CAN$) Net income Income taxes Interest on long-term debt Amortization (includes amortization in direct costs) Financial and other expenses 2.9 (5.6) (3.7) Impairment on non-current assets EBITDA (1) EBITDA: is income (loss) before amortization (excluding the amortization of GHG emission allowances), interest on longterm debt, financial and other expenses, and income taxes. (1) 2015 data presented in accordance with U.S. GAAP. As of October 1, 2015, Valener and Gaz Métro have retrospectively adopted U.S. GAAP. Data for previous years presented in Canadian GAAP. * Differences due to rounding 40

41 GAZ MÉTRO Reconciliation of long-term debt interest coverage ratio As at September 30, (in millions of CAN$, unless otherwise indicated) 2015 EBITDA Interest on long-term debt Long-term debt interest coverage ratio 5.0x (1) Total debt to capitalization ratio: is obtained by dividing total interest on long-term debt by net income before interest on long-term debt and income taxes. (1) 2015 data presented in accordance with U.S. GAAP. As of October 1, 2015, Valener and Gaz Métro have retrospectively adopted U.S. GAAP. Data for previous years presented in Canadian GAAP. * Differences due to rounding 41

42 GAZ MÉTRO Reconciliation of debt to total capitalization ratio As at September 30, (in millions of CAN$, unless otherwise indicated) Bank loans Current portion of long-term debt Long-term debt, net of financing costs 3, ,140.8 Total debt 3, ,167.8 Partner s equity 1, ,482.4 Total capitalization 4, ,650.2 Debt / total capitalization ratio 64.5% 68.1% (1) Total debt to capitalization ratio: This ratio consists of total debt divided by capitalization. Total debt is the sum of bank loans, the current portion of long-term debt, and long-term debt net of financing costs. Capitalization is the sum of total debt and Partners equity. The Partnership uses this ratio to measure its accessibility to debt financing that enables it to seize future growth opportunities. (1) 2015 data presented in accordance with U.S. GAAP. As of October 1, 2015, Valener and Gaz Métro have retrospectively adopted U.S. GAAP. Data for previous years presented in Canadian GAAP. * Differences due to rounding 42

43 VALENER Reconciliation of EBITDA For the fiscal years ended September 30, (in millions of CAN$) Distributions received from entities subject to significant influence Operating expenses (2.1) (2.5) (2.1) (2.0) (2.4) EBITDA (1) EBITDA: is actual cash distributions received from Gaz Métro Limited Partnership and from Valener Éole, net of operating expenses and excluding any distribution received on the preferred shares. (1) 2015 data presented in accordance with U.S. GAAP. As of October 1, 2015, Valener and Gaz Métro have retrospectively adopted U.S. GAAP. Data for previous years presented in Canadian GAAP. 43

44 VALENER Reconciliation of adjusted net income attributable to common shareholders For the fiscal years ended September 30, (1) (in millions of CAN$) Net income Non-recurring items of Valener Share in the non-recurring items of Gaz Métro (4.3) 2.3 (4.8) Income taxes on the non-recurring items of Valener and on the share in the non-recurring items of Gaz Métro (1.1) (0.1) 1.0 Future income taxed related to the outside-basis temporary difference on the interest in Gaz Métro (4.8) Net income, excluding the non-recurring items of Valener, the share in the non-recurring items of Gaz Métro, net of income taxes, and the future income taxes related to the outside-basis temporary difference on the interest in Gaz Métro Cumulative dividends on Series A preferred shared (4.3) (4.3) (4.3) (1.6) - Adjusted net income attributable to common shareholders Basic and diluted weighted average number of common shares outstanding (in millions) Adjusted net income attributable to common shareholders, per common share $1.19 $0.97 $0.90 $0.81 $0.71 Adjusted net income attributable to common shareholders: The consolidated net income attributable to common shareholders, net of (i) the non-recurring items of Valener, (ii) the share in the non-recurring items of Gaz Métro, (iii) Valener s income taxes on these items, and (iv) the future income tax expense (benefit) related to the outside-basis temporary difference on its interest in Gaz Métro. Non-recurring items are those that are unlikely to recur in the next two fiscal years or did not occur in the two fiscal years preceding the fiscal year during which they were realized. The future income tax expense (benefit) related to the outside-basis temporary difference is the excess of the carrying value of its interest in Gaz Métro over the tax basis assuming an eventual disposal of the investment. The management of the manager believes this assumption is not reflective of Valener's mission given the lasting nature of its investment in Gaz Métro. This measure is used by the management of the manager to measure Valenerʼs profitability from ongoing operations and to exclude the items that could alter analyses of business performance trends. Adjusted net income attributable to common shareholders, per common share: The adjusted net income attributable to common shareholders, divided by the basic and diluted weighted average number of common shares outstanding of Valener. This measure is used by the management of the manager to measure Valenerʼs profitability from ongoing operations and to exclude the items that could alter analyses of business performance trends. (1) 2015 data presented in accordance with U.S. GAAP. As of October 1, 2015, Valener and Gaz Métro have retrospectively adopted U.S. GAAP. Data for previous years presented in Canadian GAAP. 44

45 VALENER Reconciliation of normalized operating cash flows per common share For the fiscal years ended September 30, (1) (in millions of CAN$) Cash flows related to operating activities Dividends to preferred shareholders (4.3) (4.3) (4.8) - - Normalized operating cash flows Weighted average number of common shares outstanding (in millions) Normalized operating cash flows per common share $1.53 $1.02 $1.07 $0.63 $0.93 Normalized operating cash flows: Normalized operating cash flows corresponds to cash flows related to operating activities less cumulative dividends paid to preferred shareholders. This measure is used by the management of the manager to evaluate the Company s financial performance and ability to pay dividends to common shareholders. Normalized operating cash flows per common share: Normalized operating cash flows per common share corresponds to normalized operating cash flows divided by the weighted average number of common shares outstanding of Valener. This measure is used by the management of the manager to evaluate the Company s financial performance and ability to pay dividends to common shareholders. (1) 2015 data presented in accordance with U.S. GAAP. As of October 1, 2015, Valener and Gaz Métro have retrospectively adopted U.S. GAAP. Data for previous years presented in Canadian GAAP. 45

46 VALENER Reconciliation of interest coverage ratio As at September 30, (in millions of CAN$, unless otherwise indicated) 2015 Distributions received from entities subject to significant influence 64.2 Operating expenses (2.1) EBITDA 62.1 Interest on long-term debt 1.6 Interest coverage ratio 38.8x (1) Interest coverage ratio: is obtained by dividing total interest on long-term debt by EBITDA. (1) 2015 data presented in accordance with U.S. GAAP. As of October 1, 2015, Valener and Gaz Métro have retrospectively adopted U.S. GAAP. Data for previous years presented in Canadian GAAP. 46

47 VALENER Reconciliation of debt / total capitalization ratio As at September 30, (in millions of CAN$, unless otherwise indicated) Long-term debt, net of financing costs Shareholders equity Total capitalization Debt / total capitalization ratio 14.4% 8.6% (1) Debt / total capitalization ratio: is the total amount of long-term debt, net of financing costs, divided by capitalization. Capitalization is equal to the total amount of long-term debt, net of financing costs, and shareholder s equity. The management of the manager uses this ratio to measure Valener s accessibility to debt financing for purposes of participating in Gaz Métro s development and seizing future growth opportunities. (1) 2015 data presented in accordance with U.S. GAAP. As of October 1, 2015, Valener and Gaz Métro have retrospectively adopted U.S. GAAP. Data for previous years presented in Canadian GAAP. 47