Innergex refused to participate in a historic acquisition of Hydro-Québec

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Innergex refused to participate in a historic acquisition of Hydro-Québec

Hydro-Québec has bought Great River Hydro, owner of 13 hydroelectric power stations in the United States, for two billion dollars.

Innergex considered teaming up with Hydro-Québec to make the largest acquisition in the history of the Crown corporation, but the bite was too big for the Longueuil company, which decided to pass.

Hydro-Québec announced last October the acquisition of Great River Hydro, which owns 13 hydroelectric power stations in northern -eastern United States, for 2 billion US dollars.

Innergex has been in discussions with the state-owned company for potential participation in the transaction, its president and chief executive officer, Michel Letellier, revealed during a conference call to discuss the company's financial results. #x27;company.

Financing part of the acquisition would have represented a “quite big” investment for Innergex at a time when financing conditions are more difficult, said he explained.

“We worked with Hydro-Quebec in the early days of negotiations, but we decided, by mutual agreement, that this asset was too big for us. »

— Michel Letellier, President and CEO

The big boss of the Quebec energy producer also said that Hydro-Quebec's long-term export contract with New York State made it difficult to find sources of energy. an agreement to establish the value of electricity produced at Great River Hydro.

Even if the Quebec energy producer chose not to participate in the transaction, Mr. Letellier believes that it is a question of a good transaction. We are very happy for them. I believe they paid a good price, a high price, but I think they view this asset as a long-term investment.

It doesn't x27;was not possible to get an immediate reaction from Hydro-Quebec.

Hydro-Québec and Innergex had concluded a first joint acquisition in October of last year. The two partners had purchased the Curtis Palmer complex, which contained two hydroelectric power plants in New York State, for US$310 million.

To finance the transaction, Innergex had issued the equivalent of $175 million in securities and had completed a private placement of $43.5 million with Hydro-Québec. Market conditions were different last year. Innergex's stock value was almost 35% higher and interest rates were lower.

There is still plenty of money left. x27;business opportunities that could result between Hydro-Québec and Innergex, however, believes Mr. Letellier.

Hydro-Québec anticipates that Quebec electricity demand will increase by 25 terawatt hours (TWh), or 14%, from 2022 to 2032, according to an update of its 2022-2032 supply plan published at the beginning of the month. month of November.

If you illustrate this in wind energy, at a utilization rate of 40%, you would need new installations of 7000 megawatts to meet this demand, gives as an example M . Letellier.

“I think Quebec will be a very attractive market for us. »

— Michel Letellier, President and CEO

The company is preparing to take advantage of this windfall, adds the big boss of Innergex. We are in discussions with landowners and other stakeholders to expand our operations in Quebec.

The shareholders will however have to wait before the electricity of these possible projects is sold. Allow about two years for permits and another two years for construction.

It is difficult in Quebec to go through all the steps to obtain permits. In some areas it is difficult to build in the winter. Commissioning a project before 2026 would be a challenge. There will be, but I think we will see more in 2027-2028.

Despite below-average production, Innergex unveiled, the day before, results that exceeded expectations thanks to higher selling prices in the third quarter.

Production in the three months to the end of September was 91% of long-term average production.

The reduction in the production of hydroelectric power stations in British Columbia due to dry weather and less favorable winds in France partly explain this reduction, specifies Brent Stadler, of Desjardins Marché des capital.

The analyst points out that the proportionate adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) of $215 million “significantly” exceeded his forecast of $189 million and the average forecast of his colleagues at $197 million.

Higher hydro and wind prices largely explain the gap. This more than compensates for the lower production.

On inflation, Mr. Letellier said that rising energy prices largely offset increased production costs, including labor and parts.

The company reported net profit of 21 million in the third quarter, compared to a net loss of $23.5 million in the same period last year.

The stock gained $0.81 , or 5.43%, to $15.73 on the Toronto Stock Exchange in the morning.

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