Innergex to sell Icelandic assets to Macquarie Infrastructure for $409M

CPE Media News (3/25/2019) – Innergex Renewable Energy Inc. (TSX: INE) has reached an agreement to sell its wholly-owned subsidiary Magma Energy Sweden A.B. which owns an equity interest of approximately 53.9% in HS Orka hf for a purchase price of US $304.8 million or CDN $408.8 million to a Macquarie Infrastructure and Real Assets managed European infrastructure fund, subject to customary closing adjustments.

HS Orka owns two operating geothermal facilities (Reykjanes and Svartsengi) totaling 174 MW, the 10 MW Brúarvirkjun run-of-river hydro project which is under construction, a number of prospective renewable power projects, as well as a 30% equity interest in the Blue Lagoon Geothermal Spa and Resort in Iceland.

HS Orka is 53.9% owned by Innergex with the remaining interest owned by a group of Icelandic pension funds and Ross J. Beaty of Vancouver.

Innergex acquired Magma Energy Sweden as part of CDN $1.1 billion acquisition of Alterra Power Corp., formerly Magma Energy Corp., in Febrary 2018.

photo credit: Innergex

News Release

Innergex to sell its entire interest in Icelandic assets for US$304.8 million (CAN$408.8 million) Français

Crystalizes significant value for non-core assets in Iceland
Represents a premium over the carrying value of the assets
Proceeds to be used to reimburse CAN$228 million one-year credit facility, deleveraging and general corporate purposes
Updated 2019 Projections

LONGUEUIL, QC, March 25, 2019 /CNW Telbec/ – Innergex Renewable Energy Inc. (TSX: INE) (“Innergex” or the “Corporation”) is pleased to announce that an agreement has been reached to sell its wholly-owned subsidiary Magma Energy Sweden A.B. (“Magma Sweden”) which owns an equity interest of approximately 53.9% in HS Orka hf (“HS Orka) for a purchase price of US$304.8 million (CAN$408.8 million) to a Macquarie Infrastructure and Real Assets managed European infrastructure fund, subject to customary closing adjustments.

“This transaction is highly strategic and will create significant value for Innergex as it allows us to focus on our core markets, reimburse our one-year credit facility, deleverage our corporate credit facilities and reduce our exposure to foreign exchange,” said Michel Letellier, President and Chief Executive Officer of Innergex. “Given Innergex’s non-operatorship role in HS Orka, we viewed the sale of this non-core asset to be consistent with our long-term strategy of developing, owning and operating high quality renewable energy assets in our core markets and competencies.”

HS Orka owns two operating geothermal facilities (Reykjanes and Svartsengi) totaling 174 MW, the 10 MW Brúarvirkjun run-of-river hydro project which is under construction, a number of prospective renewable power projects, as well as a 30% equity interest in the Blue Lagoon Geothermal Spa and Resort in Iceland.

Net proceeds from the sale will be used to reimburse the CAN$228 million one-year credit facility contracted in October 2018 at the time of the acquisition of the remaining interest in the Cartier wind farms and operating entities, to deleverage corporate facilities and for general corporate purposes.

The fully funded transaction is subject to the satisfaction of certain closing conditions, including receipt of key third party consents, a right of first refusal in respect of the shares of Magma Sweden (exercisable for two months on the same terms and conditions), as well as other customary conditions. All required conditions are expected to be satisfied in the second quarter of 2019 with closing of the transaction to be completed after the satisfaction of such conditions.

2019 UPDATED PROJECTIONS
The Corporation is updating its 2019 financial projections made available in its latest Management’s Discussion and Analysis. Assuming a closing of the transaction at the end of the second quarter of 2019 and as a result of the disposal, the 2019 financial projections are revised and the Corporation expects power generated to increase by 10% instead of 20%, Revenues to increase by 7% instead of 15%, Adjusted EBITDA to increase by 11% instead of 15%, Adjusted EBITDA Proportionate to increase by 9% instead of 12% and Free Cash Flow to increase by 10% (same as previously projected). In addition, upon closing of the transaction, Innergex’s remaining weighted average term of power purchase agreements is expected to increase to 17.4 years and the weighted average age of facilities to lower to 7.2 years.

BMO Capital Markets and Stöplar Advisory are acting as financial advisors and McCarthy Tétrault LLP is acting as legal counsel to Innergex.

CONFERENCE CALL AND WEBCAST
Innergex will host a conference call and webcast on March 25, 2019 at 11 AM EDT. Analysts and institutional investors are invited to access the conference call by dialing 1-888-231-8191 or 647-427-7450 and to access the webcast at https://bit.ly/2CsCLZu or via Innergex’s website at www.innergex.com. Journalists as well as the public may access this conference call via a listen mode only. A replay of the conference call will be available after the event via the website www.innergex.com.

About Innergex Renewable Energy Inc.
The Corporation is an independent renewable power producer which develops, acquires, owns and operates hydroelectric facilities, wind farms, solar farms and geothermal power generation plants. As a global corporation, Innergex conducts operations in Canada, the United States, France, Chile and Iceland. Innergex manages a large portfolio of assets currently consisting of interests in 68 operating facilities with an aggregate net installed capacity of 2,082 MW (gross 3,062 MW), including 37 hydroelectric facilities, 25 wind farms, four solar farms and two geothermal facilities. Innergex also holds interests in eight projects under development with a net installed capacity of 900 MW (gross 983 MW), three of which are currently under construction and prospective projects at different stages of development with an aggregate gross capacity totaling 8,147 MW. Respecting the environment and balancing the best interests of the host communities, its partners, and its investors are at the heart of the Corporation’s development strategy. Its approach for building shareholder value is to generate sustainable cash flows, provide an attractive risk-adjusted return on invested capital and to distribute a stable dividend. Innergex Renewable Energy Inc. is rated BBB- by S&P.

Non-IFRS Measures
Some measures referred to in this press release are not recognized measures under IFRS and therefore may not be comparable to those presented by other issuers. Innergex believes that these indicators are important, as they provide management and the reader with additional information about the Corporation’s production and cash generation capabilities, its ability to sustain current dividends and dividend increases and its ability to fund its growth. These indicators also facilitate the comparison of results over different periods. Adjusted EBITDA, Adjusted EBITDA Proportionate and Free Cash Flow are not measures recognized by IFRS and have no standardized meaning prescribed by IFRS.

References in this document to “Adjusted EBITDA” are to net earnings (loss) to which are added (deducted) provision (recovery) for income tax expenses, finance cost, depreciation and amortization, other net expenses, share of (earnings) loss of joint ventures and associates and unrealized net (gain) loss on financial instruments. Innergex believes that the presentation of this measure enhances the understanding of the Corporation’s operating performance. Readers are cautioned that Adjusted EBITDA should not be construed as an alternative to net earnings, as determined in accordance with IFRS.

References in this document to “Adjusted EBITDA Proportionate” are to Adjusted EBITDA plus Innergex’s share of Adjusted EBITDA of the joint ventures and associates. Innergex believes that the presentation of this measure enhances the understanding of the Corporation’s operating performance. Readers are cautioned that Adjusted EBITDA Proportionate should not be construed as an alternative to net earnings, as determined in accordance with IFRS.

References to “Free Cash Flow” are to cash flows from operating activities before changes in non-cash operating working capital items, less maintenance capital expenditures net of proceeds from disposals, scheduled debt principal payments, preferred share dividends declared and the portion of Free Cash Flow attributed to non-controlling interests, plus or minus other elements that are not representative of the Corporation’s long-term cash generating capacity, such as transaction costs related to realized acquisitions (which are financed at the time of the acquisition), realized losses or gains on derivative financial instruments used to hedge the interest rate on project-level debt or the exchange rate on equipment purchases. Innergex believes that presentation of this measure enhances the understanding of the Corporation’s cash generation capabilities, its ability to sustain current dividends and dividend increases and its ability to fund its growth. Readers are cautioned that Free Cash Flow should not be construed as an alternative to cash flows from operating activities, as determined in accordance with IFRS.

SOURCE Innergex Renewable Energy Inc.

For further information: Jean-François Neault, Chief Financial Officer, 450 928-2550, ext. 1207, jfneault@innergex.com; Karine Vachon, Director – Communications, 450 928-2550, ext. 1222, kvachon@innergex.com

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