Valener Inc (Valener) (TSX: VNR), the public investment vehicle in Gaz Métro Limited Partnership (Gaz Métro), has reported its financial results for the second quarter of fiscal 2014. Gaz Métro owns Green Mountain Power and Vermont Gas systems. Recurring net income attributable to common shareholders totalled$29.1 million ($0.77 per common share), up $5.1 million or 21.3% compared with the same period last year. For the first six months of fiscal 2014, it totalled $44.9 million ($1.19 per common share), up $6.6 million or 17.2% year over year.
These increases reflect the strong operational and financial performance of Gaz Métro, as it benefited from higher natural gas and electricity deliveries in Quebec and Vermont, synergies from the operational integration of Green Mountain Power (GMP) and Central Vermont Public Service (CVPS), and a favourable impact of the depreciation of the Canadian dollar versus the U.S. dollar on the results of its activities in the United States.
"Gaz Métro's higher results show that the targeted geographic and commercial diversification of our operations since 2006 is paying off. This is something we intend to continue in the coming years," said Sophie Brochu, President and Chief Executive Officer of Gaz Métro.
Seigneurie de Beaupré wind power projects
|Wind power projects 2 and 3|
As initially scheduled, these projects began commercial operations at the end of 2013, and the 126 wind turbines of the first phase are now in service.
"Since it began operations last December, the 272-megawatt first phase of the Seigneurie de Beaupré wind power projects has generated more than 277,000 MWh of electricity, exceeding our expectations thanks to favourable winds. This is encouraging news for Valener's shareholders, as the cash flows from these projects will support the current dividend level, as planned," said Pierre Monahan, Chairman of Valener's board of directors.
|Wind power project 4|
As planned, construction work on the second phase resumed in May 2014.
To date, the land has been cleared, the foundations and the road construction allowing concrete mixers to pass have been completed, and the collector systems are about 60% complete. Project start-up is still scheduled forDecember 2014.
|Consolidated net income attributable to common shareholders, excluding the share in the non-recurring items of Gaz Métro, net of income taxes|
ended March 31
ended March 31
|(in millions of dollars, unless otherwise indicated)||2014||2013||2014||2013|
|Consolidated net income||30.2||25.1||47.1||43.7|
|Share in the non-recurring items of Gaz Métro||-||-||-||(4.3)|
|Income taxes on the share in the non-recurring items of Gaz Métro||-||-||-||1.1|
|Consolidated net income, excluding the share in the non-recurring items of Gaz Métro, net of income taxes||30.2||25.1||47.1||40.5|
|Less: Cumulative dividends on Series A preferred shares||1.1||1.1||2.2||2.2|
|Consolidated net income attributable to common shareholders, excluding the share in the non-recurring items of Gaz Métro, net of income taxes (1)||29.1||24.0||44.9||38.3|
|Basic and diluted weighted average number of common shares outstanding(in millions of common shares)||37.9||37.6||37.8||37.6|
|Consolidated net income attributable to common shareholders, excluding the share in the non-recurring items of Gaz Métro, net of income taxes, per common share (in $) (1)||0.77||0.64||1.19||1.02|
|(1)||These measures are financial measures that are not defined in Canadian generally accepted accounting principles (GAAP). For additional information, refer to the Non-GAAP Financial Measures section in Valener's MD&A for the quarter ended March 31, 2014.|
For the second quarter of fiscal 2014, normalized operating cash flows1 stood at $9.7 million ($0.26 per common share), which was enough to cover the dividend payment to common shareholders during the quarter.
Gaz Métro's results
Recurring net income attributable to the Partners of Gaz Métro totalled $132.5 million in the second quarter of fiscal 2014, up $16.7 million or 14.4% from $115.8 million in the same quarter last year. For the first six months of fiscal 2014, Gaz Métro recorded recurring net income attributable to Partners of $208.3 million, up$24.7 million or 13.5% from $183.6 million in the same period last year.
1 Cash flows related to operating activities less dividends paid to preferred shareholders
|Quebec natural gas distribution (Gaz Métro-QDA)|
|Rate base||Authorized return||Distribution network||Customers|
Pending a new incentive mechanism, the 2014 rate case filed in October 2013 was developed on a cost-of-service basis. As part of that rate case, the Régie de l'énergie (Régie) approved a renewal of the 8.90% rate of return on deemed common equity. To avoid delays in applying the rates based on the 2014 rate case, in November 2013 the Régie approved the application of interim rates starting December 1, 2013 but limited the increase in the distribution cost of service to inflation rather than based on Gaz Métro-QDA's request. Hearings on the 2014 rate case were held in March 2014, and a final decision by the Régie is expected before summer 2014. Based on those interim rates, the 2014 rate case translates into a $0.8 million increase in net income attributable to Partners compared to the net income realized in fiscal 2013.
Gaz Métro-QDA's net income attributable to Partners totalled $110.1 million for the second quarter and$166.9 million for the first six months of fiscal 2014, respective increases of $15.1 million and $22.4 million year over year.
These increases were essentially due to:
- a timing difference between the revenue recognition profile, which follows the customers' consumption profile, and that of costs; this difference should largely reverse by the end of fiscal 2014; and
- higher deliveries to the commercial market given considerably colder-than-normal temperatures in the first six months of fiscal 2014, as the temperature normalization mechanism had a certain degree of inaccuracy and because a portion of the deliveries is not normalized.
|Energy Distribution in Vermont|
|Green Mountain Power (GMP)||Vermont Gas Systems (VGS)|
The net income attributable to the Partners of Gaz Métro from Vermont energy distribution activities totalled $18.4 million2 for the second quarter and $34.5 million2 for the first six months of fiscal 2014, respective year-over-year increases of $3.8 million and $7.2 million.
These increases were mainly due to:
- the favourable impact from the 2014 rate cases of GMP and VGS;
- the favourable impact on GMP's deliveries of colder temperatures in the second quarter and first six months of fiscal 2014 compared with the same periods of fiscal 2013;
- synergy savings achieved from the operational integration of GMP and CVPS; and
- the favourable impact of an appreciation of the U.S. dollar against the Canadian dollar.
GMP continues to integrate its operations with those of CVPS by way of a three-year plan, the aim being to deliver to its customers and itself, as quickly as possible, efficiencies and synergies resulting from the CVPS merger. For fiscal 2014, GMP expects to be able to achieve sufficient synergies to reach the US$5.0 millionattributable to its customers. GMP is currently ahead of schedule.
1 Projected rate base in the 2014 rate case filed with the Régie de l'énergie
2 Net of financing costs of investments in this segment
VGS continues to work on its system development project to serve the communities of Vergennes andMiddlebury in Addison County (Phase I) and International Paper Company in New York state (Phase II).
With respect to Phase I, in December 2013 VGS received authorization from the Vermont Public Service Board (VPSB) to begin construction, and work is expected to begin in summer 2014. However, before beginning the work, VGS must await certain construction and environmental permits from the Vermont Agency of Natural Resources and sign certain agreements with citizens affected by the pipeline route. Although VGS is confident that it will be able to sign agreements with these parties, the possibility remains that some work could be delayed. As at March 31, 2014, US$19.4 million had been invested in the project.
In November 2013, VGS filed an application with the VPSB seeking regulatory approval to begin Phase II of the project. A decision is expected by December 2014. While Phase II is currently being examined by the VPSB, it is being contested by certain municipalities that will be affected by the project. In February 2014, VGS also filed an application with the Federal Energy Regulatory Commission seeking authorization to cross the Vermont / New York border. VGS's goal is to supply gas to this customer by the end of 2015.
Natural Gas Transportation
In the Natural Gas Transportation segment, net income attributable to the Partners of Gaz Métro totalled$6.2 million1 for the second quarter and $10.3 million1 for the first six months of fiscal 2014, a year-over-year increase of $0.2 million for the quarter and a year-over-year decrease of $0.1 million for the six-month period.
For the second quarter, the higher net income came mainly from an increase in the share in the income of Portland Natural Gas Transmission System (PNGTS), as short-term sales were up given the signing of new short-term contracts and demand was higher given the colder temperatures compared to the same quarter last year, offset by an increase in income tax expense related to PNGTS and by the higher maintenance costs of Trans Québec & Maritimes Pipeline (TQM). For the six-month period, the change in net income was due to the same reasons provided for the quarter, although in different proportions.
This segment consists of non-regulated energy production activities, in particular wind power projects 2 and 3 and wind power project 4 jointly developed by Valener, Gaz Métro and Boralex Inc. on the private lands of Seigneurie de Beaupré.
Since commercial commissioning in November and December 2013, Seigneurie de Beaupré Wind Farms 2 and 3, General Partnership (Wind Farms 2 and 3) has generated 277,241 megawatthours (233,080 megawatthours for the second quarter). According to the terms of the 20-year electricity supply contracts with Hydro-Québec, the average price at the start-up date had been set at $107.85 per megawatthour. On January 1, 2014, this price was indexed to $107.90 per megawatthour. It will subsequently be indexed over the term of the contracts on January 1 of each year.
The net income attributable to the Partners of Gaz Métro from energy production activities was nil for the second quarter and $0.8 million1 for the first six months of fiscal 2014, up $0.1 million and $1.0 million, respectively, compared with the same periods last year. These increases were mainly due to the net income generated by Wind Farms 2 and 3, as the projects were put into service during the first quarter of fiscal 2014, offset by the ineffective portion of the Wind Farms 2 and 3 swaps, designated for hedge accounting, recognized in the second quarter of fiscal 2014. For the first six months of fiscal 2014, the net impact of the changes in the ineffective portion of these swaps was rather favourable compared to the same period last year.
Energy Services, Storage and Other
In the Energy Services, Storage and Other segment, aside from the $14.7 million net gain that had been realized on the disposal of the interest in HydroSolution, L.P. (HydroSolution) in the first quarter of fiscal 2013, the net loss attributable to the Partners of Gaz Métro was $0.2 million1 in the second quarter of fiscal 2014 and$0.4 million1 for the first six months of fiscal 2014, decreases of $2.2 million and $5.0 million, respectively, from the same periods last year.
These decreases were mainly due to lower net income from Intragaz, as storage revenues decreased following the Régie's May 2013 decision, and to a decline in profitability at Climatisation et Chauffage Urbains de Montréal, s.e.c. resulting from higher fuel costs given the cold temperatures in winter 2014.
1 Net of financing costs of investments in this segment
|Gaz Métro's segment results - Consolidated net income attributable to Partners, excluding non-recurring items|
|3 months ended March 31||6 months ended March 31|
|(in millions of dollars)||2014||2013||Change||2014||2013||Change|
|GMP and VGS||24.3||19.1||5.2||45.7||36.7||9.0|
|Financing costs of investments in this segment (1)||(5.9)||(4.5)||(1.4)||(11.2)||(9.4)||(1.8)|
|Natural Gas Transportation|
|TQM, PNGTS and Champion||6.7||6.3||0.4||11.2||11.1||0.1|
|Financing costs of investments in this segment (1)||(0.5)||(0.3)||(0.2)||(0.9)||(0.7)||(0.2)|
|Gaz Métro Éole and Gaz Métro Éole 4||0.1||(0.1)||0.2||0.9||(0.2)||1.1|
|Financing costs of investments in this segment (1)||(0.1)||-||(0.1)||(0.1)||-||(0.1)|
|Energy Services, Storage and Other|
|Energy and storage||-||2.2||(2.2)||-||19.9||(19.9)|
|Financing costs of investments in this segment (1)||(0.2)||(0.2)||-||(0.4)||(0.6)||0.2|
|Net gain on the disposal of the interest in HydroSolution||-||-||-||-||(14.7)||14.7|
|Consolidated net income attributable to Partners, excluding non-recurring items (2)||132.5||115.8||16.7||208.3||183.6||24.7|
|Consolidated net income attributable to Partners||132.5||115.8||16.7||208.3||198.3||10.0|
|(1)||These costs consist of the interest on the long-term debt incurred by Gaz Métro 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. For additional information, refer to the Non-GAAP Financial Measures section in Valener's MD&A for the quarter ended March 31, 2014.|
Valener will hold a conference call with financial analysts today, Wednesday, May 14, 2014 at 3 pm (Eastern Time) to discuss its results and those of Gaz Métro for the second quarter ended March 31, 2014.
The call will be broadcast live and is accessible by dialling 647-427-7450 or toll-free 1-888-231-8191. It will also be available via webcast on Valener's website (www.valener.com) in the Events and Presentations page of the Investors section.
For 30 days afterward, a rebroadcast will be accessible by dialling 416-849-0833 or toll-free 1-855-859-2056 (access code: 27624773). For 90 days afterward, the call can be played back on the above-mentioned website.
Overview of Valener
Valener owns an economic interest of approximately 29% in Gaz Métro. Valener therefore has a stake in the energy industry and benefits from Gaz Métro's diversified profile, both in terms of geography and business segment. Valener also owns a 24.5% indirect interest in the Seigneurie de Beaupré Wind Farms developed with Gaz Métro and Boralex Inc., with the 272-megawatt Phase I in service since December 2013. 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 Gaz Métro
With more than $5 billion in assets, Gaz Métro 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 300 municipalities and more than 190,000 customers. Gaz Métro is also present in Vermont, producing electricity and distributing electricity and natural gas to meet the needs of more than 305,000 customers. Gaz Métro is actively involved in the development 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. Gaz Métro 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 Métro inc. and Valener) and employees. www.gazmetro.com
SOURCE MONTREAL, May 14, 2014 /CNW Telbec/ - Valener Inc.