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Innergex and Hydro-Quebec announce strategic alliance, private placement

Innergex Renewable Energy Inc. and Hydro-Québec today announced the creation of a strategic alliance that “will allow both corporations to accelerate their respective growth strategies and mutually benefit from their complementary skills and knowledge.”

This alliance between Innergex and Hydro-Québec will target specific strategic investments, including wind and solar projects with battery storage or transmission, distributed generation, off-grid renewable energy networks and other sectors as may be agreed by both parties. Hydro-Québec has committed an initial $500 million to the strategic alliance, which will be entirely and exclusively dedicated to co-investment projects with Innergex.

Innergex is an independent renewable power producer that operates in Canada, the U.S., France and Chile and manages a portfolio of assets consisting of interests in 68 operating facilities with an aggregate net installed capacity of 2,588 MW (gross 3,488 MW), including 37 hydroelectric facilities, 26 wind farms and five solar farms. Innergex also holds interests in six projects under development, two of which are under construction, with a net installed capacity of 296 MW (gross 378 MW), and prospective projects at different stages of development with an aggregate gross capacity of 7,767 MW.

To strengthen Hydro-Québec’s commitment to Innergex, to finance Innergex’s strong development and acquisition portfolio, and to position the corporation for accelerated growth, Hydro-Québec has made a $661 million investment through a private placement of Innergex common shares at a price of $19.08 per share. Hydro-Québec is now a key strategic investor in the corporation, holding 19.9% of the issued and outstanding common shares on a non-diluted basis.

The alliance will leverage the combined expertise of both companies in renewable energy and build on their strengths to accelerate their development in North America, Latin America and Europe. According to a press release, Hydro-Québec’s expertise, solid reputation and financial strength combined with Innergex’s entrepreneurial culture, wind and solar development expertise, operational agility and knowledge of international markets will enable the alliance to capitalize on opportunities to develop and grow in the renewable energy sector. Each party will present investment opportunities in targeted sectors outside of Quebec to each other exclusively for an initial three-year period.

Pursuant to the private placement, Innergex has issued 34.6 million common shares to Hydro-Québec. Innergex also agreed to provide Hydro-Québec with the right to nominate two candidates to Innergex’s board of directors as long as Hydro-Québec owns at least 15% of the outstanding Innergex common shares.

Of the $661 million proceeds from the private placement, Innergex expects to use $50 million to fund cash equity requirements to continue the development of its 200-MW Hillcrest solar photovoltaic project located in Brown County, Ohio. Innergex will also use $70 million to finance its previous acquisition of 125 MW of solar photovoltaic panels to allow about 650 MW of projects to fully qualify for the 30% U.S. federal investment tax credit.

Innergex expects to use about $275 million to fund the equity requirements related to the potential acquisition of two operating projects, in the U.S. and Chile, for which the corporation is in exclusive negotiations. The corporation expects to execute definitive acquisition agreements by the end of the first quarter of 2020, although there is no certainty these acquisitions may occur nor as to the timing thereof.

Innergex will use the remaining $266 million, and any other remaining proceeds in the event the foregoing potential acquisitions are not completed, to fund working capital requirements and repay outstanding debts pending deployment in advanced-stage development projects, future acquisitions and other value enhancing opportunities. This includes repaying the $118 million outstanding term loan in Innergex’s Alterra subsidiary which bears interest at 7.9%.

“Today’s announcement fits perfectly with our vision of leveraging our skills and investing in companies or projects with high potential for synergy with our business. The targets for these investments are sectors in which we excel, and this alliance will allow our know-how and our innovations to shine on a global scale,” said Éric Martel, president and chief executive officer of Hydro-Québec. “We look forward to supporting Innergex’s long-term growth plans through future co-investment opportunities.”

Hydro-Québec is Canada’s largest electricity producer and is among the world’s largest hydropower producers. Its sole shareholder is the Québec government.