Innergex considered teaming up with Hydro-Québec to make the largest acquisition in the history of the state-owned company, but the bite was too big for the Longueuil company, which decided to pass its turn.
Updated yesterday at 1:14 p.m.
Hydro-Québec announced last October the acquisition of Great River Hydro, which owns 13 hydroelectric power stations in the northeastern United States, for US$2 billion.
Innergex has had discussions with the state-owned company for a potential participation in the transaction, revealed its president and chief executive officer, Michel Letellier, during a conference call aimed at discussing the company’s financial results.
Financing part of the acquisition would have represented a “quite big” investment for Innergex at a time when financing conditions are more difficult, he explained.
We worked with Hydro-Québec in the early days of the negotiations, but we decided, by mutual agreement, that this asset was too big for us.
Michel Letellier, President and CEO of Innergex
The big boss of the Quebec energy producer also said that Hydro-Quebec’s long-term export contract with New York State made it difficult to reach an agreement on the establishment of the value of electricity generated at Great River Hydro.
Although Innergex chose not to participate in the transaction, Mr. Letellier believes that it is a good transaction. “We are very happy for them. I believe they paid a good price, a high price, but I think they view this asset as a long-term investment. »
PHOTO FROM GREAT RIVER HYDRO SITE
Great River Hydro’s Vernon Generating Station located on the Connecticut River between Vermont and New Hampshire
At Hydro-Québec, we confirm that there have been discussions between the Crown corporation and Innergex, which announced the conclusion of a “strategic alliance” at the beginning of 2020. “The agreement [l’acquisition de Great River] presented more value for Hydro-Quebec than for Innergex, explains a spokesperson for Hydro-Quebec, Caroline Des Rosiers. Innergex therefore chose not to participate in this acquisition. The Strategic Alliance is always on the lookout for other opportunities that would be beneficial to both parties involved. »
The state corporation has not exchanged with other potential partners as part of the transaction, responds Mme Roses.
Hydro-Québec and Innergex had concluded a first joint acquisition in October of last year. The two partners had bought the Curtis Palmer complex, which contained two hydroelectric power stations in New York State, for 310 million US.
To finance the transaction, Innergex had issued the equivalent of 175 million in securities and had made a private placement of 43.5 million with Hydro-Québec. Market conditions were different last year. Innergex’s stock value was almost 35% higher and interest rates were lower.
Great potential in Quebec
There are still many business opportunities that could lead between Hydro-Quebec and Innergex, however, believes Mr. Letellier.
Hydro-Québec anticipates that Quebec electricity demand will increase by 25 terawatt hours (TWh), or 14%, from 2022 to 2032, according to an update of its 2022-2032 supply plan published at the beginning of November.
If you illustrate this in wind energy, at a utilization rate of 40%, you would need new installations of 7000 megawatts to meet this demand. I think Quebec will be a very attractive market for us.
Michel Letellier, President and CEO of Innergex
The company is preparing to take advantage of this windfall, adds the big boss of Innergex.
“We are in discussions with landowners and other stakeholders to expand our activities in Quebec. »
Good prices for electricity
Despite below-average production, Innergex unveiled, the day before, results that exceeded expectations thanks to higher selling prices in the third quarter. Production in the three months to the end of September was 91% of long-term average (LTA) production. The reduction in the production of hydroelectric power stations in British Columbia, due to dry weather, and less favorable winds in France partly explain this reduction, specifies Brent Stadler, of Desjardins Capital Markets. The analyst points out that the proportional adjusted profit before interest, taxes and amortization (EBITDA) at 215 million exceeded “by far” his forecast of 189 million and the average forecast of his colleagues at 197 million. “Higher prices for hydroelectricity and wind energy largely explain the difference. This more than compensates for the lower production. »
The Canadian Press