Valener Inc (TSX: VNR), the public investment vehicle in GazMétro Limited Partnership (GazMétro), has announced its fiscal year 2014 financial results.For FY2014, recurring net income attributable to common shareholders totalled$36.7million ($0.97per common share) versus$34.0million ($0.90per common share) in fiscal 2013. This increase of$2.7million ($0.07per common share) came from an increase in GazMétro's recurring net income owing to higher natural gas and electricity deliveries inQuebecandVermont, synergies from the operational integration of Green Mountain Power (GMP) and Central Vermont Public Service (CVPS), as well as a favourable impact of the depreciation of the Canadian dollar versus the USdollar on the results of its business activities inthe United States.
"For a third consecutive year, Valener has shown shareholders that it can deliver solid returns through its investment in GazMétro. GazMétro's performance has clearly shown that its growth strategy is both effective and profitable. We're confident that we'll be able to build on this momentum,"saidPierre Monahan, Chairman of Valener's board of directors.
For fiscal 2014, Valener recorded normalized operating cash flows of$38.8million or$1.02per common share, enough to cover the dividend payment of$1.00per common share even though Valener does not benefit, sinceOctober 1, 2013, from increased annual distributions otherwise payable by Gaz Métro, representing$0.13per common share, and the Seigneurie de Beaupré wind farms have not yet started to pay distributions to their partners.
For fiscal 2015, Valener expects to maintain the$1.00per common share dividend payment.
Seigneurie de Beaupré Wind Farms
Wind farms 2 and 3
Installed capacity
Complete start-up
Total investment
Valener
Gaz Métro
272 MW
Dec. 2013
~$750M
24.5%
25.5%
Since being commissioned, these wind farms have generated 645,143 megawatthours, exceeding expectations thanks to favourable wind conditions.
The commercial operation of these wind farms is going as planned, and, given the favourable winds experienced since the start of operations, Seigneurie de Beaupré Wind Farms 2 and 3 General Partnership (Wind Farms 2 and 3) generated operating cash flows in fiscal 2014, a portion of which is expected to be distributed, subject to certain conditions, to Valener and GazMétro in fiscal 2015.
Wind farm 4
Installed capacity
Expected start-up
Total investment
Valener
Gaz Métro
68 MW
Nov. 2014
~$190M
24.5%
25.5%
The commissioning of wind farm 4 is expected within the next few days, as scheduled and within budget.
In addition to substantial advantages of the Seigneurie de Beaupré site—namely, the wind and environmental conditions and existing infrastructure—this wind farm benefits from the logistical synergies achieved during construction and those to be achieved during operation.
Outlook
InNovember 2014, GazMétro and its partners participated in a new call for tenders issued by Hydro-Québec to purchase a block of wind power with a total installed capacity of 450 megawatts, i.e., 300megawatts in the Bas-Saint-Laurent and Gaspésie-Îles-de-la-Madeleine regions and 150megawatts from projects acrossQuebec. Under the terms and conditions of the call for tenders, these wind farms should be connected to Hydro-Québec's main grid in 2016 and 2017. The tenders are currently being examined by Hydro-Québec.
Summary of Valener's results
For the fiscal years ended September 30
(inmillions of dollars unless otherwise indicated)
2014
2013
Net income attributable to common shareholders
36.7
37.1
Recurring net income attributable to common shareholders(1)
36.7
34.0
Per common share(in $)
0.97
0.90
Normalized operating cash flows(1)
38.8
40.4
Per common share(in $)
1.02
1.07
(1)
These measures are financial measures not defined in Canadian generally accepted accounting principles (GAAP).
Recurring net income attributable to common shareholders excludes the share in the non-recurring items of GazMétro, net of income taxes. Normalized operating cash flows are cash flows related to operating activities less dividends paid to preferred shareholders.
Growth drivers for GazMétro
In addition to its joint wind power projects with Valener and Boralex Inc, GazMétro is pursuing growth in the following areas:
Liquefied natural gas
GazMétro recently announced that, in partnership with the Government ofQuebec, $118million will be invested to triple the production capacity of its natural gas liquefaction plant inEastern Montreal. The government's contribution, to be made through Investissement Québec, will be a maximum of $50million.
"Thanks to this strategic initiative, we will be able to provide, as of 2016, liquefied natural gas service to areas that are far removed from our gas network, in particular the Nord-du-Québec and Côte-Nord regions. We'll be able to do the same for the road and maritime transportation sectors, which are keen on using a cleaner, more cost-effective fuel than diesel," saidSophie Brochu, GazMétro's President and Chief Executive Officer.
"This initiative will also expand the commercial and geographic reach of natural gas inQuebec. It will help our new customers improve both their financial and environmental track record and helpQuebecsociety to prosper in an even more sustainable fashion,"continued Ms. Brochu.
Extension of the natural gas system inVermont
Vermont Gas Systems, Inc. (VGS), a wholly-owned subsidiary of GazMétro, has continued to expand its gas system to serve the communities ofVergennesandMiddleburyinAddison Countyas ofDecember 2015.
As for the distribution service extension to International Paper Company inNew York State, the Vermont Public Service Board (VPSB) will begin technical hearings inJanuary 2015.
The investments for this project will more than double VGS's current size.
Greater efficiency byVermont'selectricity distribution operations
In 2014, GMP, a wholly-owned subsidiary of GazMétro, continued integrating its operations with those of CVPS. With the synergies achieved, GMP was able to attribute US$5million to its customers, as had been planned, and retain the surplus as per the agreement reached with the VPSB upon the CVPS acquisition in 2012.
During fiscal 2015, GMP will continue merging its operations so that its customers and GMP itself can continue to benefit from the resulting efficiencies and synergies.
Investments in existing energy distribution and transportation systems
GazMétro applies a robust investment program to its natural gas and electricity distribution and transportation systems to ensure they remain safe, durable and reliable. Under this program, more than $325million was invested inQuebecandVermontin fiscal 2014.
GazMétro's results
For fiscal 2014, recurring net income attributable to the Partners of GazMétro totalled$174.7million, up$9.0million or 5.4% from$165.7million last year. This increase came mainly from strong performance by the Energy Distribution segment.
GazMétro's segment results – Net income attributable to Partners, excluding
non-recurring items
For the fiscal years ended September 30
(inmillions of dollars)
2014
2013
Change
Energy Distribution
Gaz Métro‑QDA
111.0
105.9
5.1
GMP and VGS(1)
58.2
45.7
12.5
169.2
151.6
17.6
Natural Gas Transportation(1)
16.1
16.1
-
Energy Production(1)
-
(1.1)
1.1
Energy Services, Storage and Other(1)
(2.9)
7.0
(9.9)
Corporate Affairs(1)
(7.7)
(7.9)
0.2
Net income attributable to Partners, excluding non-recurring items(2)
174.7
165.7
9.0
Net gain on the disposal of the interest in HydroSolution LP
-
14.7
(14.7)
Net income attributable to Partners
174.7
180.4
(5.7)
(1)
Net of financing costs of investments in this segment. These costs consist of the interest on the long-term debt incurred by GazMétro to finance investments in the subsidiaries, joint ventures and entities subject to significant influence of each segment.
(2)
This measure is a financial measure not defined in Canadian GAAP.
Performance in the Energy Distribution segment
Quebec Natural Gas Distribution (GazMétro-QDA)
Rate base
Authorized return
Distribution network
Customers
$1.9B
8.90%
~10,000 km
~195,000
For fiscal 2014, GazMétro‑QDA's net income attributable to the Partners of GazMétro totalled$111.0million, up$5.1million or 4.8% from last year. The increase came mainly from:
- the recognition of a$2.5million share in distribution service overearnings caused primarily by higher natural gas deliveries, particularly due to much colder-than-normal temperatures in winter 2014;
- attainment of the annual energy savings goal, which allowed GazMétro-QDA to obtain the Global Energy Efficiency Plan performance incentive; and
- the 2014 rate case parameters, which included an increase in the rate base.
Energy Distribution in Vermont
GMP
VGS
Rate base
Authorized return
Customers
Rate base
Authorized return
Customers
US$1.2B
9.58%
~260,000
US$144M
10.26%
~45,000
The net income attributable to the Partners of GazMétro generated byVermontenergy distribution activities (through subsidiaries GMP and VGS) totalled$58.2million for fiscal 2014, up$12.5million or 27.4% year over year.
The increase came mainly from synergy-related savings resulting from the operational integration of GMP and CVPS, favourable impacts from GMP's and VGS's 2014 rate cases, a favourable impact of colder temperatures in winter 2014 on GMP's deliveries, and the appreciation of the U.S. dollar versus the Canadian dollar, despite higher supply, production and transmission costs for GMP.
Performance in other segments
For fiscal 2014, net income from theNatural Gas Transportation segmenttotalled$16.1million, unchanged from fiscal 2013.
The higher share in the earnings, net of income taxes, of Portland Natural Gas Transmission System reflected an increase in transported volumes resulting from the signing of new short-term contracts and from higher demand due to colder temperatures. This increase was, however, cancelled out by the decrease in the net income of Trans Québec & Maritimes Pipeline resulting from higher pipeline maintenance costs.
TheEnergy Production segmentconsists of the non-regulated energy production activities of wind farms 2 and 3 and wind farm 4 developed by Valener in conjunction with GazMétro and Boralex Inc. on the private lands of Seigneurie de Beaupré.
The results generated since theDecember 2013commissioning of wind farms 2 and 3 explain the$1.1million decrease in the net loss recorded in fiscal 2014 compared to last year.
Recurring net income from theEnergy Services, Storage and Other segmentwas down$9.9million for fiscal 2014 compared to last year.
This decrease was mainly due to lower net income from Intragaz following the Régie de l'énergie'sMay 2013 decision, and to a decline in profitability of ClimatisationetChauffageUrbainsde Montréal,s.e.c. resulting from higher fuel supply costs given the cold temperatures in winter 2014.
Conference call
Valener's conference call on the results isavailable via webcast on Valener's website (www.valener.com) in the Events and Presentations page of the Investors section and can be heard during the 90 days following the initial call.
Overview of Valener
Valener Inc. is a public company that is 100% owned by the public investor and serves as the investment vehicle in Gaz Métro. Through its investment in GazMétro, Valener offers its shareholders a solid investment in a diversified and largely regulated energy portfolio inQuebecandVermont. As a strategic partner, Valener, on one hand, contributes to GazMétro's growth, and on the other hand invests in wind power production inQuebectogether with GazMétro. Valener favours energy sources and uses that are innovative, clean, competitive and profitable. Valener's common shares and preferred shares are listed on the Toronto Stock Exchange under the "VNR" symbol for common shares and under the "VNR.PR.A" symbol for Series A preferred shares.www.valener.com
Overview of GazMétro
With more than$6 billionin assets, GazMétro is a leading energy provider. It is the largest natural gas distribution company inQuebec, where its network of over 10,000 km of underground pipelines serves 300 municipalities and more than 195,000 customers. GazMétro is also present inVermont, producing electricity and distributing electricity and natural gas to meet the needs of more than 305,000 customers. GazMétro is actively involved in the development and operation of innovative, promising energy projects such as the production of wind power, the use of natural gas as a transportation fuel and the development of biomethane. GazMétro is a major energy sector player that takes the lead in responding to the needs of its customers, regions and municipalities, local organizations and communities while also satisfying the expectations of its Partners (GazMétro inc. and Valener) and employees.www.gazmetro.com
SOURCE:MONTREAL,Nov. 27, 2014/CNW Telbec/ -Valener Inc