Vermont Business Magazine Valener Inc (TSX: VNR)(TSX: VNR.PR.A), the public investment vehicle in Gaz Metro Limited Partnership ("Gaz Metro"), today reported adjusted net income attributable to common shareholders of $32.9 million for the second quarter of fiscal 2017, up $0.8 million or 2.5% from the second quarter of fiscal 2016. This resulted in an adjusted net income of $0.85 per common share for the second quarter of fiscal 2017 compared to $0.83 per common share for the second quarter of fiscal 2016. Gaz Metro is the parent company of Green Mountain Power and Vermont Gas Systems.
Net income attributable to common shareholders was $31.5 million for the second quarter of fiscal 2017 compared to $28.4 million for the second quarter of fiscal 2016.
Normalized operating cash flows stood at $11.3 million ($0.29 per common share) in the second quarter of fiscal 2017, consistent with the second-quarter results of fiscal 2016.
In addition, Valener announced the extension, for four additional years, of the compound annual growth target of 4% on its common share dividends. "Given the quality of its underlying assets and their growing, predictable returns, not to mention the innovative non-regulated projects such as added capacity at the natural gas liquefaction plant in Montreal and the recent acquisition of Standard Solar in the United States, Valener will have increased, accordingly, its annual dividend for eight consecutive years from fiscal 2015 to fiscal 2022," said Pierre Monahan, Chairman of Valener's board of directors.
Dividend
Valener also announced that its Board of Directors declared, on May 10, 2017, a quarterly dividend of $0.28 per common share, payable on July 17, 2017, to shareholders of record at the close of business on June 30, 2017.
In addition, the board of directors announced the extension of the 4% compound annual growth target on common dividends for the next five fiscal years, i.e.; until fiscal 2022, four years later than initially planned.
The Board of Directors also declared a quarterly dividend of $0.271875 per Series A preferred share, payable on July 17, 2017, to shareholders of record at the close of business on July 10, 2017.
Both dividends are designated as eligible dividends for Canadian tax purposes.
Dividend Reinvestment Plan
Valener offers a Dividend Reinvestment Plan pursuant to which eligible common shareholders may elect, without brokerage and administration fees, to have the cash dividends paid on their common shares automatically reinvested into additional Valener common shares at a discount of 2% of the weighted average price during the five trading days immediately preceding the dividend payment date, as approved by the Board of Directors for the dividend payable on July 17, 2017.
Details of the Plan and the enrolment process are available in the "Investors" section of Valener's Web site under "Shares and dividends".
Gaz Metro's results
For the second quarter of fiscal 2017, net income attributable to the Partners of Gaz Metro totalled $142.5 million, a $2.0 million year-over-year increase owing mainly to higher net income generated by natural gas distribution activities in Quebec ("Gaz Metro-QDA") and Vermont.
In addition, Gaz Metro completed the construction of a second liquefaction train at its plant in Montreal East, effectively tripling its production capacity.
"Our plant's annual liquefaction capacity now exceeds 9 billion cubic feet of LNG," said Sophie Brochu, President and Chief Executive Officer of Gaz Metro. "It's the only facility of its kind in Eastern Canada. Together with our partner, Investissement Quebec, we can now more than ever fully leverage LNG's potential to meet the energy needs of industries that operate far from the gas network and to serve customers in the heavy road and marine transportation sectors."
"What's more, by acquiring Standard Solar, Gaz Metro is positioning itself to capitalize on the projected growth in solar energy in the U.S.," she continued. "This acquisition reflects Gaz Metro's commitment to further establishing its presence in the renewable energy sector while continuing to grow its current operations."
Valener
-- Adjusted net income(1,2) of $0.85 per common share in the second quarter
of fiscal 2017 compared to $0.83 per share in the second quarter of
fiscal 2016;
-- Normalized operating cash flows(1) per common share of $0.29 for the
second quarter of fiscal 2017, unchanged from the second quarter of
fiscal 2016; and
-- Extension of the dividend growth target for common shares
-- Compound annual growth of 4% for four additional years starting in
fiscal 2019.
Gaz Metro-- Adjusted net income(1,3) of $142.5 million for the second quarter of
fiscal 2017, up $2.0 million from the second quarter of fiscal 2016;
-- Adjusted net income(1,3) per unit of $0.85 compared to $0.84 for the
second quarter of fiscal 2016;
-- Standard Solar, Inc.: acquisition completed in April (following the
announcement in March);
-- Liquefaction, storage and regasification ("LSR"): commissioning of new
facilities tripling the plant's liquefaction capacity; and
-- Vermont Gas Systems, Inc.: full commissioning of the system development
project in Addison County.
( 1) Financial measures not defined by U.S. generally accepted accounting
principles ("GAAP").
(2) Adjusted net income attributable to common shareholders.
(3) Adjusted net income attributable to Partners.
A reconciliation of non-GAAP financial measures is presented hereafter.
Summary of Valener's results
For the three months For the six months
ended March 31 ended March 31
------------------------------------------------
(in millions of dollars,
unless otherwise indicated) 2017 2016 2017 2016
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Net income 32.6 29.5 56.7 70.0
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Net income attributable to
common shareholders 31.5 28.4 54.5 67.8
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Adjusted net income
attributable to common
shareholders (1) 32.9 32.1 53.2 48.9
Per common share (in $) (1) 0.85 0.83 1.37 1.27
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Normalized operating cash
flows (1) 11.3 11.3 23.5 21.7
Per common share (in $) (1) 0.29 0.29 0.61 0.56
============================================================================
(1) These financial measures are not defined by GAAP. A reconciliation of
non-GAAP financial measures is presented hereafter.
Seigneurie de Beaupre wind farms - Valener and Gaz Metro
For the three months For the six months
ended March 31 ended March 31
----------------------------------------------------------------------------
2017 2016 2017 2016
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Actual output of Wind Farms
2 and 3 (in MWh) 245,119 243,954 458,431 452,869
Actual output of Wind Farm 4
(in MWh) 62,180 60,373 117,412 112,514
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Cash flows related to the
operating activities of
Wind Farms 2 and 3 (in
millions of $) 11.1 8.9 24.6 24.1
Cash flows related to the
operating activities of
Wind Farm 4 (in millions of
$) 2.7 2.7 5.0 18.5
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Distributions paid by Wind
Farms 2 and 3 (in millions
of $) - - - -
Distributions paid by Wind
Farm 4 (in millions of $) - - 0.7 -
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(1) Includes a $12.9 million payment received from Hydro-Quebec in the first
quarter of fiscal 2016 relating to a note receivable for the
reimbursement of certain construction costs.
Seigneurie de Beaupre Wind Farms 2 and 3 General Partnership ("Wind Farms 2 and 3") and Seigneurie de Beaupre Wind Farm 4 General Partnership ("Wind Farm 4") generated a combined 307,299 MWh of electricity in the second quarter of fiscal 2017, a year-over-year increase of 2,972 MWh, or 1.0%, owing to stronger winds than those of second-quarter 2016. The resulting operating cash flows for the second quarter of 2017 totalled $13.8 million, up $2.2 million from the same quarter in fiscal 2016.
Wind Farms 2 and 3 and Wind Farm 4 used these cash flows to pay distributions of $7.4 million and $1.3 million, respectively, in April 2017.
Gaz Metro's segment results - Net income and adjusted net income
attributable to Partners(1)
For the three months For the six months
ended March 31 ended March 31
------------------------------------------------
(in millions of dollars) 2017 2016 2017 2016
----------------------------------------------------------------------------
Energy Distribution
Gaz Metro-QDA 114.4 112.9 178.5 166.3
Impact of recognizing
regulatory assets related
to employee future
benefits (Gaz Metro-QDA)
(2) - - - 79.3
Vermont (3) 22.4 20.5 42.8 38.8
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136.8 133.4 221.3 284.4
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Natural Gas Transportation
(3) 6.7 7.4 11.6 11.9
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Electricity Production (3) 1.5 1.5 2.3 2.0
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Energy Services, Storage and
Other (3) 1.6 0.9 2.6 1.9
Gain on remeasuring CDH
following the acquisition
(4) - - 12.5 -
----------------------------------------------------------------------------
1.6 0.9 15.1 1.9
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Corporate Affairs (3) (4.1) (2.7) (6.4) (5.1)
----------------------------------------------------------------------------
Net income attributable to
Partners 142.5 140.5 243.9 295.1
----------------------------------------------------------------------------
Adjustments (2) (4) - - (12.5) (79.3)
----------------------------------------------------------------------------
Adjusted net income
attributable to Partners
(1) 142.5 140.5 231.4 215.8
============================================================================
(1) This financial measure is not defined by GAAP. A reconciliation of non-
GAAP financial measures is presented hereafter.
(2) One-time adjustment to account for a regulatory asset related to
employee future benefits and resulting from the conversion to GAAP.
(3) Net of financing costs of investments in this segment. These costs
consist of the interest on long-term debt incurred by Gaz Metro to
finance investments in the subsidiaries, joint ventures and entities
subject to significant influence in each of these segments.
(4) $12.5 million gain on remeasuring, at fair value, Gaz Metro's ownership
interest in CDH Solutions & Operations Limited Partnership ("CDH")
(which holds 100% of the issued and outstanding units of CCUM) following
Gaz Metro's acquisition of an additional 50% interest.
SEGMENT INFORMATION
Energy Distribution
In Quebec
For the second quarter of fiscal 2017, Gaz Metro-QDA's net income attributable to Partners totalled $114.4 million, a $1.5 million year-over-year increase that was mainly due to:
-- growth of investments in the rate base; and
-- the favourable impact of recognizing a $2.8 million share in
overearnings during the second quarter of fiscal 2017;
partly offset by lower distribution revenues as a result of an overall average price decrease following changes in customer consumption.
Given this recognition of the share in overearnings, Gaz Metro expects that the fiscal 2017 net income generated by the Quebec Energy Distribution segment will slightly exceed the earnings projected in the 2017 rate case.
Biomethanation
The project to purchase renewable natural gas ("RNG") from the city of Saint-Hyacinthe continues to move forward, with the first injections of RNG scheduled for June 2017. The city will produce up to 13 million cubic metres of RNG per year, most of which will be injected into Gaz Metro's gas network. Quebec's natural gas consumers will therefore gain access to a locally produced source of clean, renewable energy.
In Vermont
Through Green Mountain Power Corporation ("GMP") and Vermont Gas Systems ("VGS"), the Energy Distribution segment in Vermont recorded net income attributable to Partners of $22.4 million in the second quarter of fiscal 2017, a $1.9 million or 9.3% year-over-year increase that was mainly due to:
-- an increase in GMP's rate base; and -- a timing difference between revenue and cost recognition.
Addison project
On April 12, 2017, VGS completed construction and put into service the extension to its natural gas distribution system in Addison County. The project is viewed as beneficial for the State of Vermont given that, aside from its environmental advantages, natural gas is a competitive energy solution compared to other fossil fuels. A 0.6 km segment is currently the subject of legal proceedings before the Supreme Court of Vermont. In December 2016, the Supreme Court of Vermont authorized VGS to continue the work without ruling on the merits of the appeal. The hearings before the Supreme Court of Vermont took place in April 2017 and a decision is expected to follow this year.
Solar power
As part of its commercial goal of continuing to offer sources of renewable energy generation to Vermont residents, GMP submitted three new solar farm projects, each having a capacity of 5 MW, to the Vermont Public Service Board ("VPSB") in March 2017. Each farm will also have the capacity to store 2 MW of energy. Located in the State of Vermont, these projects will be held in partnership and represent an investment of approximately US$26 million for GMP. VPSB approvals are expected in early 2018 and construction is scheduled for autumn 2018.
Natural Gas Transportation
For the second quarter of fiscal 2017, the Natural Gas Transportation segment generated net income attributable to Partners of $6.7 million, down $0.7 million year over year mainly because of a decrease in volumes transported by Portland Natural Gas Transmission System (a Gaz Metro entity subject to significant influence) given fewer short-term contracts.
Electricity Production
The Electricity Production segment recorded net income attributable to Partners of $1.5 million in the second quarter of fiscal 2017, unchanged from the net income of $1.5 million generated in the same quarter of fiscal 2016.
Acquisition of Standard Solar
In April 2017, Gaz Metro, through one of its subsidiaries, made a strategic acquisition by acquiring all of the issued and outstanding common shares of Standard Solar for a net cash consideration of US$16.3 million. Based in the State of Maryland, Standard Solar is a U.S. leader in the solar power sector and provides development, engineering, supply management, construction and solar power systems operations and maintenance services in the commercial, industrial and institutional sectors. Standard Solar operates in many U.S. states and currently has a large portfolio of construction-ready projects for a total capacity of nearly 80 MW, a significant project-development portfolio, and over 100 MW of solar generation capacity under management. With this acquisition, Gaz Metro is growing its presence and expertise in the solar power sector-one of the fastest growing sectors in the United States. In keeping with Gaz Metro's strategic vision, this acquisition will deepen Gaz Metro' s existing know-how in the solar power sector and build on its presence in the renewable energy segment, all while ensuring the long-term growth of its activities.
Energy Services, Storage and Other
For the second quarter of fiscal 2017, the Energy Services, Storage and Other segment recorded net income attributable to Partners of $1.6 million, a $0.7 million year-over-year increase that primarily reflects a $0.4 million favourable impact of acquiring an additional interest in CDH Solutions & Operations Limited Partnership ("CDH"), which owns Climatisation et Chauffage Urbains de Montreal, s.e.c.
LSR plant
In April 2017, Gaz Metro put into service new infrastructure at the LSR plant. The plant now has an annual production capacity of more than 9 billion cubic feet of liquefied natural gas. As a result, Gaz Metro can better meet the growing demand in road and marine transport markets and in areas located far from Gaz Metro-QDA's gas system, particularly the Nord-du-Quebec and Cote-Nord regions of Quebec and the Northeastern United States. As at March 31, 2017, Gaz Metro and its partner, Investissement Quebec, had invested $66.5 million and $48.2 million, respectively, in the project.
Corporate Affairs
The Corporate Affairs segment recorded a net loss of $4.1 million for the second quarter of fiscal 2017 compared to a net loss of $2.7 million for the second quarter of fiscal 2016, mainly because of higher development costs on various projects, in particular the Standard Solar acquisition.
Financial initiatives
On March 31, 2017, Gaz Metro issued 4,545,455 new units as part of a private placement for total proceeds of $100 million. The placement proceeds were used for general business purposes.
Valener subscribed to its proportional share of the outstanding units, i.e., 1,318,291 Gaz Metro units for approximately $29 million. Gaz Metro inc. also subscribed to its proportional share of these units.
Reconciliation of non-GAAP financial measures
For additional information on non-GAAP financial measures, refer to Valener's MD&A for the three-month and six-month periods ended March 31, 2017 and 2016.
Valener
Reconciliation of normalized operating cash flows
For the three months For the six months
ended March 31 ended March 31
----------------------------------------------------------------------------
(in millions of dollars) 2017 2016 2017 2016
----------------------------------------------------------------------------
Cash flows related to
operating activities 12.4 12.4 25.7 23.9
Dividends to preferred
shareholders (1.1) (1.1) (2.2) (2.2)
----------------------------------------------------------------------------
Normalized operating cash
flows 11.3 11.3 23.5 21.7
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Valener
Reconciliation of adjusted net income attributable to common shareholders
For the three months For the six months
ended March 31 ended March 31
----------------------------------------------------------------------------
(in millions of dollars) 2017 2016 2017 2016
----------------------------------------------------------------------------
Net income 32.6 29.5 56.7 70.0
Loss (gain) on derivative
financial instruments - 2.8 (0.8) 2.7
Income taxes on the gain
(loss) on derivative
financial instruments - (0.7) 0.2 (0.7)
Share in Gaz Metro's net
income adjustments - - (3.6) (23.0)
Income taxes related to Gaz
Metro's net income
adjustments - - 0.7 -
Deferred income taxes
related to the outside-
basis temporary difference
on the interest in Gaz
Metro 1.4 1.6 2.2 2.1
Cumulative dividends on
Series A preferred shares (1.1) (1.1) (2.2) (2.2)
----------------------------------------------------------------------------
Adjusted net income
attributable to common
shareholders 32.9 32.1 53.2 48.9
----------------------------------------------------------------------------
Gaz Metro Limited Partnership
Reconciliation of adjusted net income attributable to Partners
For the three months For the six months
ended March 31 ended March 31
----------------------------------------------------------------------------
(in millions of dollars) 2017 2016 2017 2016
----------------------------------------------------------------------------
Net income attributable to
Partners 142.5 140.5 243.9 295.1
Impact of the regulatory
treatment related to
employee future benefits
(Gaz Metro-QDA) - - - (79.3)
Gain on remeasuring CDH
following the acquisition - - (12.5) -
----------------------------------------------------------------------------
Adjusted net income
attributable to Partners 142.5 140.5 231.4 215.8
Per unit, basic and diluted
(in $) 0.85 0.84 1.38 1.28
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Overview of Valener
Valener is a widely held public company that serves as the investment vehicle in Gaz Metro. Through its investment in Gaz Metro, Valener offers its shareholders a solid investment in a diversified and largely regulated energy portfolio in Quebec and Vermont. As a strategic partner, Valener, on the one hand, contributes to Gaz Metro's growth, and on the other, invests in wind power production in Quebec alongside Gaz Metro. Valener favours energy sources and uses that are innovative, clean, competitive and profitable. Valener's common and preferred shares are listed on the Toronto Stock Exchange under the "VNR" symbol for common shares and the "VNR.PR.A" symbol for Series A preferred shares. www.valener.com
Overview of Gaz Metro
With more than $7 billion in assets, Gaz Metro is a leading energy provider. It is the largest natural gas distribution company in Quebec, where its network of over 10,000 km of underground pipelines serves more than 300 municipalities and over 205,000 customers. Gaz Metro is also present in Vermont, producing electricity and distributing electricity and natural gas to meet the needs of more than 315,000 customers. Gaz Metro is actively involved in the development and operation of innovative, promising energy projects, including natural gas as fuel and liquefied natural gas as a replacement to higher emission-producing energies, the production of wind and solar power, and the development of biomethane. Gaz Metro 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 (Gaz Metro inc. and Valener) and employees. www.gazmetro.com
MONTREAL, QUEBEC--(Marketwired - May 11, 2017) - Valener