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Valener and Énergir, L.P. Report Their Fiscal 2018 Third Quarter Results

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MONTRÉAL, Aug. 09, 2018 (GLOBE NEWSWIRE) -- Valener Inc. ("Valener") (TSX:VNR) (TSX:VNR), the public investment vehicle in Énergir, L.P., today reported its fiscal 2018 third quarter results. The results of Énergir, L.P., Valener's primary investment, are also presented in this press release.

Summary of Valener's results

FINANCIAL HIGHLIGHTS

  • Adjusted net income 1, 2 of $0.5 million for the third quarter of fiscal 2018 compared to $2.5 million in the third quarter of fiscal 2017.
    • Adjusted net income 1, 2 per share of $0.01 compared to $0.06 in the third quarter of fiscal 2017.
  • Normalized operating cash flows 1 of $12.8 million for the third quarter of fiscal 2018, down $1.6 million from the third quarter of fiscal 2017.
    • Normalized operating cash flows 1 per share of $0.33 compared to $0.37 in the third quarter of fiscal 2017.

"Notwithstanding the seasonal nature of Énergir's results, Valener generated normalized operating cash flows of $0.33 per common share, amply covering its quarterly dividend," said Pierre Monahan, Chairman of Valener's board of directors. "Énergir's regulated and diversified energy portfolio, as well as the performance of the Seigneurie wind farms since they came into service, are solid foundations for Valener, thanks to which we can reaffirm our goal of achieving a compound annual dividend growth rate of 4% until 2022."

  For the three months
ended June 30
For the nine months
ended June 30
         
(in millions of dollars, unless otherwise indicated) 2018 2017 2018 2017
Net income 1.7 2.9 51.1 59.6
Net income attributable to common shareholders 0.5 1.8 47.6 56.3
Adjusted net income attributable to common shareholders (1) 0.5 2.5 54.4 55.7
Per common share (in $) (1) 0.01 0.06 1.39 1.44
Normalized operating cash flows (1) 12.8 14.4 38.1 37.9
Distributions received from Énergir, L.P. 15.0 14.1 44.8 42.2
Distributions received from Beaupré Éole and Beaupré Éole 4 0.9 2.5 3.3 2.7
Per common share (in $) (1) 0.33 0.37 0.98 0.98

For the third quarter of fiscal 2018, Valener reported adjusted net income attributable to common shareholders of $0.5 million compared to $2.5 million in the third quarter of fiscal 2017. This result stems essentially from a decrease in Énergir, L.P.'s adjusted net income that was mainly due to regulatory timing differences, partly offset by an increase in the net income generated by wind power production in Québec. Énergir, L.P.'s activities are typically influenced downward by seasonal factors in the second half of the fiscal year.

In the third quarter of fiscal 2018, Seigneurie de Beaupré Wind Farms 2 and 3 General Partnership ("Wind Farms 2 and 3") and Seigneurie de Beaupré Wind Farm 4 General Partnership (collectively, the "SDB Wind Farms") generated a combined 268,921 MWh of electricity, a year-over-year increase of 12.3% owing to stronger winds than those of third quarter of 2017.

The SDB Wind Farms generated $19.3 million in operating cash flows during the third quarter of 2018, a comparable level to that of third quarter 2017, also owing to the stronger winds while being partly offset by changes in working capital.

Valener's third quarter normalized operating cash flows totalled $12.8 million, down $1.6 million year over year. The decrease is mainly the result of lower distributions received from Wind Farms 2 and 3 due to timing, as a fiscal 2018 distribution was paid out earlier than in the prior year (second quarter of fiscal 2018 vs. third quarter of fiscal 2017).

For the nine-month period ended June 30, 2018, Valener generated normalized operating cash flows of $38.1 million, a $0.2 million year-over-year increase that was mainly due to:

  • a $2.6 million increase in the distributions received from Énergir, L.P. given Valener's subscription, in proportion to its economic interest, to Énergir, L.P. units on March 31, 2017, and to an increase in Énergir, L.P.'s quarterly distribution from $0.29 to $0.30 per unit since the third quarter of fiscal 2017; and
  • a $0.6 million increase in the distributions received from the SDB Wind Farms;

partly offset by:

  • a $2.0 million increase in income taxes paid due to a timing difference in the payment of taxes payable; and
  • a $0.5 million increase in interest paid arising frm a higher interest rate on the credit facility.

Énergir, L.P.

FINANCIAL HIGHLIGHTS

  • Adjusted net income 1, 3, of $3.5 million for the third quarter of fiscal 2018 compared to $11.1 million in the third quarter of fiscal 2017.
    • Adjusted net income 1, 3 per unit of $0.02, down $0.04 from the third quarter of fiscal 2017.
  • Québec Energy Distribution ("QDA"): Fiscal 2018 net income expected to be approximately $9 million higher than the net income anticipated in the 2018 rate case, as volumes were up owing to a strong Québec economy.
(1) Financial measure not defined by U.S. generally accepted accounting principles ("GAAP"). A reconciliation of non-GAAP financial measures is presented hereafter.
(2)  Adjusted net income (loss) attributable to common shareholders.
(3)  Adjusted net income (loss) attributable to Partners.

"Our third quarter results reflect the seasonal nature of the Energy Distribution segment. Still, our sales volumes for the first nine months of the year are strong, posting year-over-year growth, notably driven by a robust Québec economy. We now expect net income to be $9 million higher than that projected in the 2018 rate case for our Québec energy distribution operations," said Sophie Brochu, President and Chief Executive Officer of Énergir. "What's more, we continue to diligently deploy our commercial offerings to both our Québec and U.S. customers, delivering an increasingly diversified array of competitive energy solutions."

BUSINESS HIGHLIGHTS

  • QDA: highest normalized delivery volumes since 2000 for the first nine months of the year.
  • Standard Solar Inc.: As at June 30, 2018, in-service projects totalling 20 MW (10 MW of which in Q3-2018) and under-construction projects totalling approximately 13 MW.
  • Natural Gas Transportation: $2.0 million year-over-year increase in net income, mainly due to new long-term contracts of Portland Natural Gas Transmission Systems ("PNGTS") coming into effect.
Énergir, L.P.'s segment results – Adjusted net income attributable to Partners (1)
 
(in millions of dollars, unless otherwise indicated)        
Segments Q3 2018   Q3 2017   9M-2018   9M-2017  
QDA (6.8 ) (0.5 ) 173.9   178.0  
Distribution in Vermont 15.5   19.8   78.7   76.7  
Natural Gas Transportation 4.5   2.5   15.5   15.4  
Electricity Production 2.4   (0.7 ) 4.4   1.7  
Energy Services, Storage and Other 1.9   1.3   5.7   4.5  
Corporate Affairs (14.0 ) (11.3 ) (40.2 ) (33.8 )
Total 3.5   11.1   238.0   242.5  
Basic and diluted weighted average number of units outstanding (in millions) 171.8   171.8   171.8   168.8  
Basic and diluted per unit (in $) 0.02   0.06   1.39   1.44  

For the third quarter of fiscal 2018, Énergir, L.P.'s adjusted net income attributable to Partners (which excludes one-time adjustments) totalled $3.5 million compared to $11.1 million in the same quarter of last year. This change stems mainly from the mitigating effect of the rate case parameters applicable to the Energy Distribution segment, for both Québec and Vermont, as well as from an unfavourable regulatory timing difference of $11.4 million from the Energy Distribution segment's regulated entities, partly offset by growth in QDA's normalized deliveries and the coming into effect of long-term contracts in the Natural Gas Transportation segment. Also having a positive impact on the third quarter results ($4.8 million) was the application of the hypothetical liquidation at book value method during the allocation of net income to Standard Solar Inc. when accounting for the Solar I Partnership, LLC.

As for Énergir, L.P.'s third quarter net income attributable to Partners, it totalled $5.3 million compared to $11.1 million in the third quarter of fiscal 2017, due to the above-mentioned factors as well as to the impact of the U.S. tax reform in effect since the first quarter of fiscal 2018.

QUÉBEC ENERGY DISTRIBUTION

Énergir, L.P.'s distribution activities, carried out through QDA, posted a net loss of $6.8 million in the third quarter of fiscal 2018 compared to a net loss of $0.5 million in the third quarter of fiscal 2017, mainly due to:

  • the partial reversal, as anticipated, of a favourable regulatory timing difference recorded during the first half of fiscal 2018; and
  • the impact of the parameters in the 2018 rate case, which had anticipated a $0.9 million decrease in the third quarter of fiscal 2018 related to the lower return on non-rate-base investments;

partly offset by an increase in normalized deliveries, driven mainly by economic growth in Québec, which, among other benefits, fuelled energy demand from residential and commercial customers, as well as by the maturation of new sales.

For the nine-month period of fiscal 2018, QDA generated net income of $173.9 million, down $4.1 million year over year. Fiscal 2018 net income is expected to be approximately $6 million less than that of fiscal 2017, mainly due to a decrease in return-generating non-rate-base investments, compared to an initially projected year-over-year decrease of $14.9 million.

Fiscal 2018 net income for QDA is expected to exceed the net income projected in the 2018 rate case by $9 million, as deliveries were up owing to a strong Quebec economy.

2019 rate case

In March and April 2018, QDA filed Phase 2 of its 2019 rate case with the Régie. It presents, among other items, an overall average decrease in rates of 4.1% and an average rate base of $2,154 million, up $36 million from the 2018 rate case. The Régie is expected to issue a decision in autumn 2018.

2018-2019 Québec Budget

In its 2018-2019 Budget, the Government of Québec introduced promising measures related to Québec's energy transition, including financial assistance for projects to extend the natural gas distribution system to the province's regions. An amount of $36.5 million, to be spread over the next three years, was announced to financially support new projects to extend QDA's natural gas distribution system to various regions of Québec, including the Montérégie, the Eastern Townships, and Chaudière-Appalaches. To that effect, the Government of Québec announced financial support for various projects and preparatory studies related to extending the natural gas distribution system in Québec. The funding is in addition to the $20.5 million amount that had been renewed in the 2017-2018 Budget to extend service to the Saint-Éphrem, Saint-Marc-des-Carrières and Thetford Mines regions.

Énergir, L.P. expects these extensions to have a minor impact on QDA's future rate base.

Also in its budget plan, the Government of Québec confirmed that it will issue a call for proposals with the aim of supplying liquefied natural gas to the province's Côte-Nord region.

ENERGY DISTRIBUTION IN VERMONT

Through Green Mountain Power Corporation ("GMP") and Vermont Gas Systems, Inc. ("VGS"), the Vermont Energy Distribution segment recorded adjusted net income attributable to Partners of $15.5 million in the third quarter of fiscal 2018 compared to $19.8 million in the same quarter of last year. Excluding the exchange rate impact, this change was mainly due to:

  • various parameters in GMP's 2018 rate case, which projected a decrease in adjusted net income attributable to Partners in Q3-2018; and
  • an unfavourable regulatory timing difference in Q3-2018 (US$2.3 million) that is expected to reverse, however, by the end of fiscal 2018.

As for the segment's third quarter net income attributable to Partners, it totalled $16.0 million compared to $19.8 million in the third quarter of fiscal 217 due to the above-mentioned factors as well as to the impact of the U.S. tax reform in effect since the first quarter of fiscal 2018.

GMP – Multiyear regulation plan

In June 2018, GMP filed with the Vermont Public Utility Commission ("VPUC") a proposal to adopt a new multiyear regulation plan, which would replace the former plan that is currently in effect. Expected to have a three-year term, the new plan would take effect on October 1, 2019. It contains a variety of components, the combination of which addresses all of GMP's cost-of-service elements. Work sessions are planned for autumn 2018, and the VPUC is expected to issue a decision in mid-2019.

To see the financial report, click here.

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 nine-month periods ended June 30, 2018 and 2017.

Valener
Reconciliation of normalized operating cash flows
  For the three months
ended June 30
For the nine months
ended June 30
(in millions of dollars) 2018   2017   2018   2017  
Cash flows related to operating activities 14.0   15.5   41.5   41.2  
Dividends to preferred shareholders (1.2 ) (1.1 ) (3.4 ) (3.3 )
Normalized operating cash flows 12.8   14.4   38.1   37.9  

 

Valener
Reconciliation of adjusted net income attributable to common shareholders
  For the three months
ended June 30
For the nine months
ended June 30
(in millions of dollars) 2018   2017   2018   2017  
Net income 1.7   2.9   51.1   59.6  
Gain on derivative financial instruments       (0.8 )
Income taxes on the gain (loss) on derivative financial instruments       0.2  
Share in Énergir, L.P.'s net income adjustments (0.5 )   5.2   (3.6 )
Income taxes on Énergir, L.P.'s net income adjustments     0.2   0.7  
Deferred income taxes related to the outside-basis temporary
 difference on the interest in Énergir, L.P.
0.5   0.7   1.4   2.9  
Cumulative dividends on Series A preferred shares (1.2 ) (1.1 ) (3.5 ) (3.3 )
Adjusted net income (loss) attributable to common
 shareholders
0.5   2.5   54.4   55.7  
Per common share (in $) 0.01   0.06   1.39   1.44  

 

Énergir, L.P.
Reconciliation of adjusted net income attributable to Partners
(in millions of dollars, unless otherwise indicated) Q3 2018
      Adjustments  
Segments Net income
attributable to
Partners
  Impact of the tax
reform (1)
  Other gains (2)   Adjusted net
income
attributable to
Partners (3)
 
QDA (6.8 )     (6.8 )
Distribution in Vermont 16.0   (0.5 )   15.5  
Natural Gas Transportation 4.5       4.5  
Electricity Production 2.4       2.4  
Energy Services, Storage and Other 1.9       1.9  
Corporate Affairs (12.7 ) (1.3 )   (14.0 )
Total 5.3   (1.8 )   3.5  
Basic and diluted weighted average number of units outstanding (in millions) 171.8       171.8  
Basic and diluted per unit (in $) 0.03       0.02  

 

(in millions of dollars, unless otherwise indicated) Q3 2017
    Adjustments  
Segments Net income
attributable to
Partners
  Other gains (2)   Adjusted net
income
attributable to
Partners (3)
 
QDA (0.5 )   (0.5 )
Distribution in Vermont 19.8     19.8  
Natural Gas Transportation 2.5     2.5  
Electricity Production (0.7 )   (0.7 )
Energy Services, Storage and Other 1.3     1.3  
Corporate Affairs (11.3 )   (11.3 )
Total 11.1     11.1  
Basic and diluted weighted average number of units outstanding (in millions) 171.8     171.8  
Basic and diluted per unit (in $) 0.06     0.06  

 

(in millions of dollars, unless otherwise indicated) 9M-2018
    Adjustments  
Segments Net income
attributable to
Partners
  Impact of the
tax reform (1)
  Other gains (2)   Adjusted net
income
attributable to
Partners (3)
 
QDA 173.9       173.9  
Distribution in Vermont 72.7   6.0     78.7  
Natural Gas Transportation 18.1   (2.6 )   15.5  
Electricity Production 4.4       4.4  
Energy Services, Storage and Other 10.1     (4.4 ) 5.7  
Corporate Affairs (59.2 ) 19.0     (40.2 )
Total 220.0   22.4   (4.4 ) 238.0  
Basic and diluted weighted average number of units outstanding (in millions) 171.8       171.8  
Basic and diluted per unit (in $) 1.28       1.39  

 

(in millions of dollars, unless otherwise indicated) 9M-2017
    Adjustments  
Segments Net income
attributable to
Partners
  Impact of the
tax reform (1)
  Other gains (2)   Adjusted net
income
attributable to
Partners (3)
 
QDA 178.0       178.0  
Distribution in Vermont 76.7       76.7  
Natural Gas Transportation 15.4       15.4  
Electricity Production 1.7       1.7  
Energy Services, Storage and Other 17.0     (12.5 ) 4.5  
Corporate Affairs (33.8 )     (33.8 )
Total 255.0     (12.5 ) 242.5  
Basic and diluted weighted average number of units outstanding (in millions) 168.8       168.8  
Basic and diluted per unit (in $) 1.51       1.44  

 

(1) For additional information, refer to the Q3-2018 MD&A.
(2)  In February 2018, Gaz Métro Plus realized a $4.4 million gain on the sale of server hosting assets. For additional information, refer to the Q3-2018 MD&A. In addition, in December 2016, Énergir, L.P., through its subsidiary Gaz Métro Plus, acquired an additional 50% ownership interest in CDH (CCUM), giving it control thereover and resulting in the recognition of a $12.5 million gain upon the remeasurement of assets already held.
(3) This financial measure is not defined by GAAP.

Conference call

Valener will hold a conference call today at 1:00 pm (Eastern Time) to discuss its results and those of Énergir, L.P. for the period ended June 30, 2018. 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: 7292588).

Overview of Valener

Valener is a public company held entirely by its shareholders and serves as the investment vehicle in Énergir, L.P. Through its investment in Énergir, L.P., Valener offers its shareholders a solid investment in a diversified and largely regulated energy portfolio in Québec and Vermont. As a strategic partner, Valener, on the one hand, contributes to the growth of Énergir, L.P., and on the other, invests in wind power production in Québec alongside Énergir, L.P. 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 Énergir, L.P.

With more than $7 billion in assets, Énergir, L.P. is a diversified energy company whose mission is to meet the energy needs of approximately 520,000 customers and the communities it serves in an increasingly sustainable way. Énergir, L.P. is the largest natural gas distribution company in Québec; through its subsidiaries, it also generates electricity from wind power. In the United States, through its subsidiaries, the company operates in nearly fifteen states, where it produces electricity from hydraulic, wind and solar sources, in addition to being the leading electricity distributor and the sole natural gas distributor in Vermont. Énergir, L.P. values energy efficiency and invests both resources and efforts in innovative energy projects such as renewable natural gas and liquefied and compressed natural gas. Through its subsidiaries, it also offers a wide range of energy services. Énergir, L.P. is seeking to become the partner of choice for those striving toward a better energy future. www.energir.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 Énergir Inc., in its capacity as General Partner of Énergir, L.P., 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 Énergir, L.P. to differ significantly from historical 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 Énergir, L.P. 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 the implementation of Québec's 2030 Energy Policy, the competitiveness of natural gas in relation to other energy sources in the context of fluctuating global oil prices, the reliability or costs of natural gas supply and electricity supply, the integrity of the natural gas and electricity distribution and transportation systems, the evolution and profitability of Seigneurie de Beaupré Wind Farms 2 and 3 General Partnership ("Wind Farms 2 and 3") and Seigneurie de Beaupré 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, uncertainty surrounding the December 2017 U.S. tax reform commonly referred to as Tax Cuts and Jobs Act, the weather conditions and other factors described in section E) RISK FACTORS RELATING TO VALENER and in section R) RISK FACTORS RELATING TO ÉNERGIR, L.P. (formerly Gaz Métro Limited Partnership) of Valener's MD&A for the fiscal year ended September 30, 2017 and in subsequent Valener quarterly MD&As that might address changes to these risks. Although the forward-looking statements contained in this press release 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 Québec and in the United 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 any other type of calamity, a major service interruption, or a threat to cybersecurity (or cyberattack); that Énergir, L.P. can continue to distribute substantially all of its adjusted net income; 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 sufficient 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 Énergir, L.P. will be able to present their information in accordance with U.S. GAAP beyond 2023 or, after 2023, will adopt International Financial Reporting Standards ("IFRS") that permit the recognition of regulatory assets and liabilities; that liquidity needs for Énergir, L.P.'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 MD&A for the quarter ended June 30, 2018, 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.

For additional information:

Investors and Analysts Media
Mariem Elsayed Maude Hébert-Chaput
Investor Relations Public Affairs and Communications
514-598-3253 514-598-3449
www.valener.com Twitter: @Energir_
  www.energir.com/en/about/media/news/
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