Vermont Business Magazine Valener Inc (TSX: VNR), the public investment vehicle in GazMétro Limited Partnership based in Montreal, which owns Green Mountain Power and Vermont Gas Systems reported last week an increase in net income and normalized operating cash flows of$58.6million for fiscal 2015, or$1.53per common share, up 50% from fiscal 2014, easily covering the dividend payment of$1.022per common share. The Energy Distribution Segment inVermontrecorded net income of$57.3million in fiscal 2015, down$0.9million, or 1.5%, from fiscal 2014. This decrease stems mainly from an after-tax allowance of$8.0million (US$10.3million before tax) recorded by VGS in the fourth quarter relating to costs associated with PhaseIof the Addison project. However, the strength of the US dollar and the synergies of GMP's acquisition of Central Vermont Public Service in 2012 partly mitigated the decrease.
Valener alsoannounced that its Board of Directors has declared a quarterly dividend of$0.27per common share, payable onJanuary 15, 2016, to shareholders of record at the close of business on December 31,2015.The Board of Directors also declared a quarterly dividend of$0.271875per Series A preferred share, payable on January 15,2016, to shareholders of record at the close of business on January 11,2016.Both dividends are designated as eligible dividends for Canadian tax purposes.
"Fiscal2015 was an excellent year for Valener. With the help of our partners, GazMétro and Boralex, we commissioned WindFarm4, adding 28 turbines and 68 MW of electric power generation capacity to the Seigneurie de Beaupré Wind Farms.What's more, WindFarm4 enjoyed favourable wind conditions throughout the year. GazMétro, our main investment, continues to grow and move forward with innovative initiatives,"said Pierre Monahan, Chairman of Valener's board of directors."It is this continued growth strategy that has allowed Gaz Métro to raise its distributions, benefitting Valener and allowing it to reaffirm its dividend increase with confidence."
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FISCAL 2015HIGHLIGHTS |
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Valener |
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GazMétro |
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For fiscal 2015, Valener recorded adjusted net income attributable to common shareholders of$45.3million ($1.19per common share) compared to$36.7million ($0.97per common share) in fiscal2014. This$8.6million increase ($0.22per common share) stems from the excellent performance of the wind farms, which raised Valener's share in the net income of these operations by$4.5million, as well as the increase in GazMétro's recurring net income.
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1 |
Non-Canadian-GAAP financial measures. |
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2 |
$0.25 per common share paid on October 15, 2014 and on January 15, 2015, and $0.26 per common share paid on April 15, 2015 and on July 15, 2015. |
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Note: A reconciliation of non-Canadian-GAAP financial measures is presented below. |
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Summary of Valener's results |
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Fiscal years ended September 30 |
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(inmillions of dollars, unless otherwise indicated) |
2015 |
2014 |
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Net income |
47.1 |
41.0 |
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Net income attributable to common shareholders |
42.8 |
36.7 |
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Adjusted net income attributable to common shareholders(1) |
45.3 |
36.7 |
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Per common share(in $) |
1.19 |
0.97 |
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Normalized operating cash flows(1) |
58.6 |
38.8 |
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Per common share(in $) |
1.53 |
1.02 |
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(1) |
These measures are non-Canadian-GAAP financial measures.A reconciliation of non-Canadian-GAAP financial measures is presented below. |
Financial initiatives
Valener subscribed to 4,482,188 GazMétro units for approximately $74million as part of GazMétro's $255million private placements of equity securities in fiscal 2015. Valener's economic interest in GazMétro remains unchanged.
For fiscal 2016, Valener is increasing its annualized dividend from$1.04 to $1.08per common share and, as previously announced in February, expects to increase its annualized dividend by approximately 4% per year for the two subsequent years, that is, until 2018.
Seigneurie de Beaupré wind farms – Valener and GazMétro
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Phase |
Wind |
Installed |
In service date |
Total investment |
Valener |
GazMétro |
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I |
2 and 3 |
272 MW |
Dec. 2013 |
~$750M |
24.5% |
25.5% |
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II |
4 |
68 MW |
Dec. 2014 |
~$190M |
The commercial operation of these windfarms is moving ahead as planned, and as a result of favourable wind conditions, Seigneurie de Beaupré WindFarms2and3General Partnership (Wind Farms 2and3) generated operating cash flows of$60.0million in fiscal 2015. Wind Farms 2 and 3 paid a portion of these cash flows, and those accumulated last year, to its partners; it paid a first distribution of$19.1million inFebruary 2015and another of$21.5million inAugust 2015. Of these distributions, Valener and GazMétro received$9.9million and$10.1million, respectively, during fiscal2015. Seigneurie de Beaupré Wind Farm 4General Partnership (Wind Farm 4), which was commissioned inDecember 2014, generated$5.4million in operating cash flows in fiscal2015 and paid an initial distribution of$17.6million in September on account of certain conditions surrounding its financing. Of that amount, Valener and GazMétro received$4.3million and$4.5million, respectively.
Wind Farms 2and3 generated 903,431megawatthours (MWh) in 2015, a 40.0% increase from the 645,143MWh produced last year, as a result of favourable wind conditions throughout the year and Wind Farms 2 and 3 running for a full 12months, compared to just ten months in the previous year. Wind Farm 4 generated 180,214 MWh in fiscal 2015.
Finding opportunities to further develop the wind power potential of Seigneurie de Beaupré, for which Valener and GazMétro have a development agreement with Boralex, remains a priority as it represents an attractive avenue for growth.
GazMétro's results
GazMétro generated net income attributable to Partners, excluding non-recurring items, of$192.4million, up$17.7million, or 10.1%, as a result of the favourable effect of the stronger U.S. dollar compared to the Canadian dollar, solid results in ourQuebecgas distribution operations and wind farms, as well as notable growth in liquefied natural gas shipments.
"Our transformative and innovative projects, focused on meeting our customers' needs, paid off this year: 2015 was an excellent year of consolidation and development for Gaz Métro," saidSophie Brochu, President and Chief Executive Officer at Gaz Métro."We generated record net income for our Partners through our growth and diversification initiatives. The successful commissioning of Wind Farm 4 is a telling example: it has already paid out its first distribution in September. On the LNG side, sales continue to grow and our plant expansion project is moving forward according to plan. Our continued development rests on our ability to supply more natural gas and other forms of renewable energy in place of more emissive ones."
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GazMétro's segment results – Net income attributable to Partners, excluding non-recurring items |
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Fiscal years ended September 30 |
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(inmillions of dollars) |
2015 |
2014 |
Change |
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Energy Distribution |
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Gaz Métro-QDA |
115.5 |
111.0 |
4.5 |
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GMP and VGS(1) |
57.3 |
58.2 |
(0.9) |
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Allowance related to the costs of the Addison project |
8.0 |
- |
8.0 |
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180.8 |
169.2 |
11.6 |
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Natural Gas Transportation(1) |
16.6 |
16.1 |
0.5 |
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Energy Production(1) |
1.8 |
- |
1.8 |
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Energy Services, Storage and Other(1) |
2.4 |
(2.9) |
5.3 |
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Corporate Affairs(1) |
(9.2) |
(7.7) |
(1.5) |
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Net income attributable to Partners, excluding non-recurring items(2) |
192.4 |
174.7 |
17.7 |
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Non-recurring items |
(8.0) |
- |
(8.0) |
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Net income attributable to Partners |
184.4 |
174.7 |
9.7 |
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(1) |
Net of financing costs of investments. These costs consist of interest on long-term debt incurred by GazMétro to finance investments in subsidiaries, joint ventures and entities subject to significant influence in each of these segments. |
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(2) |
This measure is a non-Canadian-GAAP financial measure. A reconciliation of non-Canadian-GAAP financial measures is presented below. |
SEGMENT INFORMATION
Energy Distribution
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Natural gas distribution in Quebec (GazMétro-QDA) |
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Rate base |
Authorized return |
Distribution network |
Customers |
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$2.0B |
8.90% |
~10,000 km |
~195,000 |
GazMétro-QDA recorded net income attributable to Partners of$115.5million, a$4.5million, or 4.1%, year-over-year increase resulting mainly from various parameters of the 2015 rate case, including:
- an increase in the average rate base of 3.2% to$2.0billion; and
- higher capitalized interest on non-rate-base investments;
mitigated by a decrease in the share of the distribution service overearnings.
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Energy Distribution in Vermont |
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Rate base |
Authorized return |
Distribution network |
Customers |
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GMP |
US$1.2B |
9.60% |
~21,100km1 |
~265,000 |
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VGS |
US$193M |
10.20% |
~1,300km |
~50,000 |
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1) |
GMP's system consists of over 1,500 km of overhead transmission lines, 18,000 km of overhead distribution lines and 1,600 km of underground distribution lines, mostly located in Vermont but also extending into New Hampshire and New York. |
The Energy Distribution Segment inVermont, through its subsidiaries Green Mountain Power Corporation (GMP) and Vermont Gas SystemsInc. (VGS), recorded net income attributable to Partners of$57.3million in fiscal 2015, down$0.9million, or 1.5%, from fiscal 2014. This decrease stems mainly from an after-tax allowance of$8.0million (US$10.3million before tax) recorded by VGS in the fourth quarter relating to costs associated with PhaseIof the Addison project, partly mitigated by:
- the favourable effect of the appreciation of the U.S. dollar against the Canadian dollar; and
- synergies generated by the operational efficiencies achieved from the integration of GMP and Central Vermont Public Service Corporation (CVPS).
The Addison project consists of extending the natural gas distribution service by 66 km to the communities ofVergennesandMiddleburyinVermont. Although much of the construction work is scheduled for fiscal 2016, VGS plans to complete the first 17 km of PhaseI by the end ofDecember 2015.
InOctober 2015, VGS and the Vermont Department of Public Service signed a memorandum of understanding under which VGS agreed to set aUS$134.0million cap on the amount of the total PhaseI costs that could be recovered through rates, barring circumstances beyond its control. Following this memorandum, VGS recorded a before taxUS$10.3million allowance as atSeptember 30, 2015to recognize the uncertainty surrounding project costs that could eventually be disallowed. This memorandum of understanding is subject to the reconfirmation of the Certificate of Public Good by the Vermont Public Service Board.
Natural Gas Transportation
The Natural Gas Transportation segment generated net income attributable to Partners of$16.6million in 2015 compared to$16.1million in 2014, mainly because of higher volumes shipped by the Portland Natural Gas Transmission System (PNGTS), as a result of new short-term contracts and stronger demand caused by colder temperatures as well as the favourable effect of the depreciation of the Canadian dollar. This increase was partly offset by the Federal Energy Regulatory Commission's February decision on PNGTS's rates.
Energy Production
The Energy Production segment recorded net income attributable to Partners of$1.8million in 2015, compared to no income in the year-ago period, due to:
- favourable winds;
- the operation of Wind Farms 2 and 3 throughout all of fiscal 2015 compared to only 10 months in 2014; and
- WindFarm4's commissioning in December 2014.
Energy Services, Storage and Other
The Energy Services, Storage and Other segment generated net income of$2.4million in fiscal 2015, a$5.3 millionimprovement over last year driven by a notable increase in GazMétro LNG's sales, which delivered close to 7million m3more LNG to customers than in fiscal 2014, improved profitability at GazMétro Plus Limited Partnership and lower supply costs at Climatisation et Chauffage Urbains de Montréal, L.P.
Financial initiatives
GazMétro issued 15,454,545 new units through private placements during the year for total proceeds of $255million. The Company also increased its credit facility from $600million to $800million and extended its maturity date out to 2020."Our strong financial situation, solid balance sheet and enviable credit rating put us in an ideal situation to execute on our future growth strategies and have enabled us to increase our distributions to Partners. As ofJanuary 5, 2016, Gaz Métro's distributions will increase from$0.28to$0.29per unit, an increase of almost 4%,"addedPierre Despars, Executive Vice President, Corporate Affairs and Chief Financial Officer of GazMétro.
Outlook – GazMétro
"Organic growth is and remains our primary channel for opportunities and we are pursuing our growth strategy in the LNG market. We're excited about the many possibilities this initiative may bring,"addedSophie Brochu."We're also looking to repeat the success stories of our acquisitions inVermont, paying particular attention to the northeasternUnited States. However, with the high premiums in the regulated sector and a low Canadian dollar pushing up transaction costs, we must remain disciplined and patient in order to select the right opportunity, at the right price."
Reconciliation of non-Canadian-GAAP financial measures
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Valener Inc. |
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Reconciliation of normalized operating cash flows |
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Fiscal years ended September 30 (inmillions of dollars) |
2015 |
2014 |
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Cash flows related to operating activities |
62.9 |
43.1 |
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Dividends paid to preferred shareholders |
(4.3) |
(4.3) |
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Normalized operating cash flows |
58.6 |
38.8 |
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Valener Inc. |
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Reconciliation of adjusted net income attributable to common shareholders |
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Fiscal years ended September 30 (inmillions of dollars) |
2015 |
2014 |
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Net income |
47.1 |
41.0 |
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Non-recurring items of Valener |
4.0 |
- |
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Share in the non-recurring items of GazMétro |
2.3 |
- |
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Income taxes on the non-recurring items of Valener and on the share in |
(1.1) |
- |
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Future income taxes related to the outside-basis temporary difference on the interest in GazMétro |
(2.7) |
- |
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Net income, excluding the non-recurring items of Valener, the share |
49.6 |
41.0 |
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Cumulative dividends on Series A preferred shares |
(4.3) |
(4.3) |
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Adjusted net income attributable to common shareholders |
45.3 |
36.7 |
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Gaz Métro Limited Partnership |
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Reconciliation of net income attributable to Partners, excluding non-recurring items |
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Fiscal years ended September 30 (inmillions of dollars) |
2015 |
2014 |
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Net income attributable to Partners |
184.4 |
174.7 |
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Non-recurring items |
8.0 |
- |
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Net income attributable to Partners, excluding non-recurring items |
192.4 |
174.7 |
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Conference call
Valener will hold a conference call today at3:00 pm (Eastern Time)to discuss its results and those of GazMétro for the fiscal year endedSeptember 30, 2015. The public is invited to join the call at647-427-7450or toll-free at1-888-231-8191. A simultaneous webcast will also be available using the link provided under "Events and Presentations" in the "Investors" section ofwww.valener.com.A replay of the webcast will be archived on the Company's website for 90 days following the call; a phone replay will be available for 30 days by dialing 416-849-0833 or toll-free 1-855-859-2056 (accesscode:61270296).
Overview of Valener
Valener Inc. is a widely held public company that serves as the investment vehicle in GazMétro. 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 the one hand, contributes to Gaz Métro's growth, and on the other, invests in wind power production inQuebecalongside Gaz Métro. 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 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 over 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 310,000 customers. GazMétro 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. 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, 2015 /CNW Telbec/ -Valener Inc.