Vermont Business Magazine Valener Inc, the public investment vehicle in Gaz Metro Limited Partnership (Gaz Metro is the parent company of Vermont Gas Systems and Green Mountain Power), today reported adjusted net income attributable to common shareholders of $32.4 million for the second quarter of fiscal 2016, unchanged from the second quarter of fiscal 2015. However, the relatively warm winter and lighter winds drove down net income from the Vermont operations to $20.5 million, or 8.1 percent, from the same period last year.
GMP Lowell wind farm. GMP photo. VGS headquarters. VBM photo.
According to a statement released by Valener, the Canadian operation results showed an increase in Gaz Metro's net income, which were also tempered by more moderate winter winds at the Seigneurie de Beaupre wind farms in Quebec. Adjusted net income per common share for Valener stood at $0.84 in the second quarter of fiscal 2016 compared to $0.85 in the same quarter last year, as greater participation in the dividend reinvestment plan increased the number of common shares outstanding. For the first six months of fiscal 2016, Valener's adjusted net income attributable to common shareholders amounted to $48.9 million ($1.27 per common share) compared to $48.1 million ($1.26 per common share) for the first six months of last year.
Valener also announced that announced that its Board of Directors declared a quarterly dividend of $0.27 per common share, payable on July 15, 2016, to shareholders of record at the close of business on June 30, 2016. The Board of Directors also declared a quarterly dividend of $0.271875 per Series A preferred share, payable on July 15, 2016, to shareholders of record at the close of business on July 8, 2016. Both dividends are designated as eligible dividends for Canadian tax purposes. Valener offers a Dividend Reinvestment Plan (the "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 15, 2016.
Details of the Plan and the enrolment process are available in the "Investors" section of Valener's Web site under "Shares and dividends". On September 30, 2010, all the publicly held units of Gaz Métro were exchanged for common shares of Valener Inc.
Valener
--Adjusted net income(1,2) of $32.4 million in the second quarter of
fiscal 2016, unchanged from the second quarter of fiscal 2015
--Adjusted net income per common share of $0.84 compared to $0.85 for
the same quarter of fiscal 2015;
--Adjusted net income(1,2) of $48.9 million for the first six months of
fiscal 2016, up 2% year over year;
--Normalized operating cash flows per common share1 of $0.29 for the
second quarter of fiscal 2016 and $0.56 for the six-month period; and
--Refinancing of Seigneurie de Beaupre Wind Farms 2 and 3 in May,
contributing to a special distribution of $19.6 million.
Gaz Metro--Recurring net income1 of $140.5 million for the second quarter of fiscal
2016, up 4% ($4.9 million) from the second quarter of fiscal 2015;
--Recurring net income1 of $215.8 million for the first six months of
fiscal 2016, up 6% from the same period in fiscal 2015; Notable increase
in liquefied natural gas sales by Gaz Metro LNG; and Refinancing of
Seigneurie de Beaupre Wind Farms 2 and 3 in May, contributing to a
special distribution of $20.4 million.
For the second quarter of fiscal 2016, Valener recorded normalized operating cash flows of $11.3 million, or $0.29 per common share, compared to $15.8 million, or $0.41 per common share, in the second quarter of fiscal 2015. Last year, Seigneurie de Beaupre Wind Farms 2 and 3 General Partnership ("Wind Farms 2 and 3") paid a distribution of $4.7 million in the second quarter of fiscal 2015; this year, a distribution is expected in the second half of fiscal 2016. This was partly offset by an increase in the distributions received from Gaz Metro following a subscription of close to 4.5 million Gaz Metro units in the second half of fiscal 2015.
In addition, the Company continued to financially optimize the Seigneurie de Beaupre wind farms. "A week ago, Wind Farms 2 and 3 completed the refinancing of its debt, reducing its interest rate and raising the total financing. In so doing, it was able to pay a special distribution of $80 million to its partners, Valener, Gaz Metro and Boralex," said Pierre Monahan, Chairman of Valener's board of directors. "We're pleased with the confidence that the financial community has in our wind farms, which produce clean, renewable energy, and whose performance continue to support Valener's 4% dividend growth target up to 2018."
(1) Financial measures not defined by U.S. generally accepted accounting
principles (U.S. GAAP).
(2) Adjusted net income attributable to common shareholders.
A reconciliation of non-U.S.-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) 2016 2015 2016 2015
----------------------------------------------------------------------------
Net income 29.8 36.9 70.0 52.6
----------------------------------------------------------------------------
Net income attributable to common
shareholders 28.7 35.8 67.8 50.4
----------------------------------------------------------------------------
Adjusted net income attributable to
common shareholders(1) 32.4 32.4 48.9 48.1
Per common share(in $)(1) 0.84 0.85 1.27 1.26
----------------------------------------------------------------------------
Normalized operating cash flows (1) 11.3 15.8 21.7 25.7
Per common share(in $)(1) 0.29 0.41 0.56 0.67
============================================================================
(1) These financial measures are not defined by U.S. GAAP. A
reconciliation of non-U.S.-GAAP financial measures is presented
hereafter.
Seigneurie de Beaupre wind farms - Valener and Gaz Metro
The Seigneurie de Beaupre wind farms experienced less favourable wind conditions than in the same period of last year, when winds were particularly stronger than expectations.
Overall, the wind farms generated $11.6 million in operating cash flows during the second quarter of fiscal 2016 compared to $14.7 million during the second quarter of fiscal 2015.
Combined, the wind farms generated 304,327 megawatthours ("MWh") in the second quarter of fiscal 2016 compared to 347,729 MWh in the same quarter last year.
Financial initiatives
On May 4, as part of its $617.5 million refinancing, Wind Farms 2 and 3 paid a special distribution of $80 million to its partners, Valener, Gaz Metro and Boralex. Each partner received an amount commensurate with its share in Seigneurie de Beaupre; Valener will use its $19.6 million distribution to repay part of its credit facility, whereas Gaz Metro has already used its $20.4 million distribution to repay part of its debt.
Gaz Metro's results
Excluding non-recurring items, net income attributable to the Partners of Gaz Metro totalled $140.5 million in the second quarter of fiscal 2016, a $4.9 million, or 3.6%, year-over-year increase resulting from the favourable effect of the appreciation of the U.S. dollar on the results of U.S. operations, higher capitalized interest on Gaz Metro-QDA's non-rate-base investments, and a timing difference between Gaz Metro-QDA's revenue and cost recognition. This increase was partly offset by a decrease in GMP's power sales due to warmer weather.
"Despite the unusually warm temperatures and light winds that characterized the winter, Gaz Metro improved its performance in the second quarter, increasing its net income attributable to Partners by 4% year over year. This is the result of our diversification strategy, both operational and geographic. What's more, we are working tirelessly at developing our liquefied natural gas ("LNG") subsidiary, which allows us to serve more clients, in more industries, and in more regions-clients who want access to natural gas in order to replace more emissive forms of energy," said Sophie Brochu, President and Chief Executive Officer of Gaz Metro.
Gaz Metro's segment results - Net income attributable to Partners,
excluding non- recurring items (1)
----------------------------------------------------------------------------
For the three months For the six months
ended March 31 ended March 31
--------------------------------------------
(in millions of dollars) 2016 2015 2016 2015
----------------------------------------------------------------------------
Energy Distribution
Gaz Metro-QDA 112.9 105.7 166.3 154.4
Impact of the regulatory
treatment related to other
postretirement benefits (Gaz
Metro-QDA) (2) - - 79.3 -
GMP and VGS (3) 20.5 22.3 38.8 38.2
----------------------------------------------------------------------------
133.4 128.0 284.4 192.6
----------------------------------------------------------------------------
Natural Gas Transportation (3) 7.4 6.6 11.9 10.5
----------------------------------------------------------------------------
Electricity Production (3) 1.5 2.1 2.0 3.0
----------------------------------------------------------------------------
Energy Services, Storage and
Other (3) 0.9 0.4 1.9 1.9
----------------------------------------------------------------------------
Corporate Affairs (3) (2.7) (1.5) (5.1) (3.6)
----------------------------------------------------------------------------
Net income attributable to
Partners 140.5 135.6 295.1 204.4
----------------------------------------------------------------------------
Non-recurring items (2) - - (79.3) -
----------------------------------------------------------------------------
Net income attributable to
Partners, excluding non-
recurring items (1) 140.5 135.6 215.8 204.4
============================================================================
(1) Financial measure not defined by U.S. GAAP. A reconciliation of non-
U.S.-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 application of U.S.
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 subsidiaries, joint ventures and entities
subject to significant influence in each of these segments.
SEGMENT INFORMATION
Energy Distribution
IN QUEBEC
Excluding non-recurring items, Gaz Metro-QDA recorded second-quarter net income attributable to Partners of $112.9 million, a $7.2 million, or 6.8%, year-over-year increase that was mainly due to:
-- higher capitalized interest on non-rate-base investments; and
-- a timing difference between revenue and cost recognition. This
difference is expected to reverse in part by the end of fiscal 2016, as
provided for in the 2016 rate case.
IN VERMONT
The Energy Distribution segment in Vermont, through subsidiaries Green Mountain Power Corporation ("GMP") and Vermont Gas Systems Inc. ("VGS"), recorded net income attributable to Partners of $20.5 million for the second quarter of fiscal 2016, down $1.8 million, or 8.1%, compared to the prior-year period. This decrease was mainly due to:
-- lower power sales, mainly due to warmer weather; and
-- the unfavourable effect of no longer capitalizing the return on VGS's
non-rate-base investments related to the Addison project, in accordance
with the memorandum of understanding signed with the VPSB fixing project
costs at US$134.0 million;
partly offset by:
-- the favourable effect of the appreciation of the U.S. dollar against the
Canadian dollar; and
-- an increase in GMP's rate base.
Natural Gas Transportation
The Natural Gas Transportation segment generated second-quarter net income attributable to Partners of $7.4 million compared to $6.6 million for the second quarter of fiscal 2015. This increase was mainly the result of:
-- the favourable impact of an allowance that had been recognized in the
second quarter of fiscal 2015 following the Federal Energy Regulatory
Commission's decision on Portland Natural Gas Transmission System
("PNGTS") rates; and
-- the favourable effect of the appreciation of the U.S. dollar against the
Canadian dollar;
partly offset by a decrease in PNGTS's deliveries due to warmer temperatures.
Electricity Production
For the second quarter of fiscal 2016, the Electricity Production segment generated net income attributable to Partners of $1.5 million, down $0.6 million from $2.1 million in the same quarter last year, mainly due to less favourable winds.
Energy Services, Storage and Other
The Energy Services, Storage and Other segment generated net income attributable to Partners of $0.9 million for the second quarter of fiscal 2016, up $0.5 million from the second quarter of fiscal 2015. This increase was driven mainly by a notable increase in Gaz Metro LNG's shipments, as it delivered almost 4 million m3 more LNG to carry out short-term contracts.
Reconciliation of non-U.S.-GAAP financial measures
Valener Inc.
Reconciliation of normalized operating cash flows
For the three months For the six months
ended March 31 ended March 31
============================================================================
(in millions of dollars) 2016 2015 2016 2015
============================================================================
Cash flows related to operating
activities 12.4 16.9 23.9 27.9
Dividends paid to preferred
shareholders (1.1) (1.1) (2.2) (2.2)
----------------------------------------------------------------------------
Normalized operating cash flows 11.3 15.8 21.7 25.7
============================================================================
Valener Inc.
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) 2016 2015 2016 2015
============================================================================
Net income 29.8 36.9 70.0 52.6
Non-recurring items of Valener 2.8 2.4 2.7 3.9
Share in the non-recurring items
of Gaz Metro - - (23.0) -
Income taxes on the non-
recurring items of Valener and
on the share in the non-
recurring items of Gaz Metro (0.7) (0.6) (0.7) (1.0)
Deferred income taxes related to
the outside-basis temporary
difference on the interest in
Gaz Metro 1.6 (5.2) 2.1 (5.2)
----------------------------------------------------------------------------
Cumulative dividends on Series A
preferred shares (1.1) (1.1) (2.2) (2.2)
----------------------------------------------------------------------------
Adjusted net income attributable
to common shareholders 32.4 32.4 48.9 48.1
============================================================================
Gaz Metro Limited Partnership
Reconciliation of net income attributable to Partners, excluding non-recurring items
For the three months For the six months
ended March 31 ended March 31
===========================================================================
(in millions of dollars) 2016 2015 2016 2015
===========================================================================
Net income attributable to
Partners 140.5 135.6 295.1 204.4
Non-recurring items - - (79.3) -
---------------------------------------------------------------------------
Net income attributable to
Partners, excluding non-recurring
items 140.5 135.6 215.8 204.4
Per unit, basic and diluted(in $) 0.84 0.90 1.28 1.35
===========================================================================
Conference call
Valener will hold a conference call today at 1:00 pm (Eastern Time) to discuss its results and those of Gaz Metro for the quarter ended March 31, 2016. The public is invited to join the call at 647-788-4922 or toll-free at 877-223-4471. A simultaneous webcast will also be available using the link provided under "Events and Presentations" in the "Investors" section of www.valener.com. A replay of the webcast will be archived on the Company's website for 365 days following the call; a phone replay will be available for 30 days by dialing 416-621-4642 or toll-free 800-585-8367 (access code: 79158008).
Overview of Valener
Valener Inc 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 nearly $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 200,000 customers. Gaz Metro is also present in Vermont, producing and transporting electricity and distributing electricity and natural gas to meet the needs of more than 310,000 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 for higher emission-producing energies, the production of wind 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
Cautionary note regarding forward-looking statements
This press release may contain forward-looking information within the meaning of applicable securities laws. Such forward-looking information reflects the intentions, plans, expectations and opinions of the management of Gaz Metro inc. ("GMi"), in its capacity as General Partner of Gaz Metro, acting as manager of Valener ("the management of the manager"), and is based on information currently available to the management of the manager and assumptions about future events. Forward-looking statements can often be identified by words such as "plans," "expects," "estimates," "seeks," "targets," "forecasts," "intends," "anticipates" or "believes" or similar expressions, including the negative and conjugated forms of these words. Forward-looking statements involve known and unknown risks and uncertainties and other factors beyond the control of the management of the manager. A number of factors could cause the actual results of Valener or of Gaz Metro to differ significantly from hi storical results or current expectations, as described in the forward-looking statements, including but not limited to the general nature of the aforementioned, terms of decisions rendered by regulatory agencies, uncertainty that approvals will be obtained by Gaz Metro from regulatory agencies and interested parties to carry out all of its activities and the socio-economic risks associated with such activities, uncertainty related to Quebec's 2030 energy policy, the competitiveness of natural gas in relation to other energy sources in the context of falling global oil prices, the reliability or costs of natural gas supply and electricity supply, the integrity of the natural gas and electricity distribution systems, the evolution and profitability of Seigneurie de Beaupre Wind Farms 2 and 3 General Partnership ("Wind Farms 2 and 3") and Seigneurie de Beaupre Wind Farm 4 GP ("Wind Farm 4") and other development projects, Valener's ability to generate sufficient cash to support its anticipated target annual dividend growth rate on its common shares, the ability to complete attractive acquisitions and the related financing and integration aspects, the ability to complete new development projects, the ability to secure future financing, general economic conditions, exchange rate and interest rate fluctuations, weather conditions and other factors described in section E) Risk Factors Relating to Valener and in section R) Risk Factors Relating to Gaz Metro of Valener's MD&A for the fiscal year ended September 30, 2015 and in the MD&A for the quarter ended March 31, 2016 and in subsequent Valener quarterly MD&As that might address changes to these risks.
Although the forward-looking statements contained herein are based on what the management of the manager believes to be reasonable assumptions, in particular assumptions that no unforeseen changes in the legislative and regulatory framework of energy markets in Quebec and in the New England states will occur; that the applications filed with various regulatory agencies will be approved as submitted; that natural gas prices will remain competitive; that the supply of natural gas and electricity will be maintained or will be available at competitive costs; that no significant event will occur outside the ordinary course of business, such as a natural disaster or other calamity, or threat to cybersecurity (or cyberattack); that Gaz Metro can continue to distribute substantially all of its net income (excluding non-recurring items); that Wind Farms 2 and 3 and Wind Farm 4 will be able to make distribution payments to their partners; that Valener will be able to generate sufficien t cash to support its anticipated target annual dividend growth rate on its common shares; that Green Mountain Power Corporation will be able to continue achieving efficiency gains and synergies from the merger with Central Vermont Public Service Corporation; that Valener and Gaz Metro will be able to present their information in accordance with U.S. GAAP beyond 2018 or, after 2018, will adopt international financial reporting standards ("IFRS") that permit the recognition of regulatory assets and liabilities; that liquidity needs for Gaz Metro's development projects will be obtained through a combination of operating cash flows, borrowings on credit facilities, capital injections from partners, and issuances of debt securities; and that the subsidiaries will obtain the required authorizations and funds needed to finance their development projects; in addition to the other assumptions described in the Valener Management Discussion and Analysis for the quarter ended March 31, 2016, the management of the manager cannot assure investors that actual results will be consistent with these forward-looking statements. These forward-looking statements are made as of this date, and the management of the manager assumes no obligation to update or revise them to reflect new events or circumstances, except as required pursuant to applicable securities laws. These statements do not reflect the potential impact of any unusual item or any business combination or other transaction that may be announced or that may occur after the date hereof. Readers are cautioned to not place undue reliance on these forward-looking statements.